<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
HOMESTEAD.COM INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 77-0384549
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
Incorporation or Organization)
</TABLE>
3375 EDISON WAY
MENLO PARK, CA 94025
(650) 549-3100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JUSTIN S. KITCH
CHIEF EXECUTIVE OFFICER
3375 EDISON WAY
MENLO PARK, CA 94025
(650) 549-3100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES C. KITCH JEFFREY D. SAPER
BRETT D. WHITE KAREN A. DEMPSEY
Cooley Godward LLP Wilson Sonsini Goodrich & Rosati
Five Palo Alto Square Professional Corporation
3000 El Camino Real 650 Page Mill Road
Palo Alto, CA 94306-2155 Palo Alto, CA 94304
(650) 843-5000 (650) 493-9300
</TABLE>
--------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 number for the same offering. / / ______
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. / / ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.001 par value............................... $70,000,000 $18,480
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act of
1933.
--------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 8, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SHARES
[HOMESTEAD.COM LOGO]
COMMON STOCK
-----------------
HOMESTEAD.COM INCORPORATED IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND
$ PER SHARE.
-------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK FOR QUOTATION ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "HMST."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS HOMESTEAD
-------- ------------- -----------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL.............................................. $ $ $
</TABLE>
HOMESTEAD HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN ADDITIONAL
SHARES TO COVER OVER-ALLOTMENTS.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS ON
, 2000.
-------------------
MORGAN STANLEY DEAN WITTER DONALDSON, LUFKIN & JENRETTE
, 2000
<PAGE>
[INSIDE COVER:
Title: "Homestead pioneered the first online drag and drop technology that
empowers individuals and small businesses to build their own web sites"
A diagram depicts the integration of elements onto four example web sites from
the element palette to demonstrate Homestead's drag and drop web building
technology.
Caption below the diagram: "Homestead provides a proprietary platform that
enables individuals and small businesses to easily build a feature-rich web site
by integrating and customizing building blocks, called elements, containing
content, services and technology provided by our business partners"
SPREAD:
Two-page spread title: "Homestead's technology and services create a new
Internet Distribution Channel"
A column along the left side reads as follows: "Representative list of business
partners, Element Partners, AccuWeather, Amazon, Ancestry.com, Ask.com,
AudioBookClub, AutoAccessory, Barnes & Noble, Beyond.com, Blink, C4,
Camcitysearch, CBS MarketWatch, CMP, Comet Cursor, Coolboard, DesktopLive,
Disney, eBay, eToys, HearMe, First Look, Fogdog, GiftPoint, I-Escrow,
iSyndicate, PageTalk, Pets.com, PETsMART, Pogo, Reel.com, Rolling Stone,
StockMaster, SuperStats, TheDial, Voila, vStore, Wunderground, YellowOnline,
Zapa, Zy Graphics, Sponsorships and Services, AllDomains, CardBlast.com,
Commtouch, Gator.com, Gooey.com, Go!Zilla, MyPlay.com, NetFlip, YesMail,
Stock-up.com, Co-brand Partnerships, AltaVista, Babystyle.com, CollegeClub,
Deja.com, Dell, iCAST, Internet Sportstations, Juno Online Services, Net Zero,
Starwars.com, The Black World Today, UGO Networks, USATODAY.com, Virtual
Communities"
To the right, next to a row of buildings are visual representations of the three
types of business partners: element partners, sponsorship and service partners,
and co-brand partners.
Under a picture of Homestead's element palette, the text reads "Element
Partners: Technology, Content and Commerce" followed by "Homestead earns
revenues from business partners that provide content, services and
technology that become web site building blocks (elements). Homestead
elements provide a cost-efficient distribution channel for Homestead
partners."
Under a screen shot of the services section of www.homestead.com, the
text reads, "Sponsorship and Service Partners" followed by "Companies
provide sponsorships and services to take advantage of Homestead's member
base and the strength of www.homestead.com as an Internet destination."
Under a few logos of co-brand partners, the text reads, "Co-brand
Partners" followed by "Co-branded versions of Homestead's service are
currently integrated into over twenty Internet communities."
Underneath this section, the text reads, "Homestead generates revenue from its
business partners."
From the three types of partnerships are the beginnings of arrows which flow
into a depiction of a row of four servers, which are placed above the Homestead
logo. The associated text reads, "Packaging the Web" followed by "Homestead
takes a business partner's technology or service and wraps it within an element
for use on a member's site."
Out of the Homestead servers flow one arrow to a depiction of four Homestead web
sites. The associated text reads, "Homestead Web Sites" followed by "Small
businesses and individuals use Homestead to create and customize web sites, such
as e-commerce sites, family sites, club sites or personal sites." At the very
bottom, the text reads, "Homestead empowers members to build feature-rich web
sites."]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 7
Special Note Regarding Forward-Looking
Statements.......................... 13
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 25
Management............................ 34
Certain Relationships and Related
Party Transactions.................. 44
Principal Stockholders................ 46
Description of Capital Stock.......... 49
Shares Eligible for Future Sale....... 52
Underwriters.......................... 54
Legal Matters......................... 56
Experts............................... 56
Where You Can Find More Information... 56
Index to Financial Statements......... F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or of any sale of the common stock.
UNTIL , 2000, 25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING,
ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE ENTIRE PROSPECTUS,
INCLUDING THE MORE DETAILED INFORMATION IN OUR FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD CAREFULLY
CONSIDER, AMONG OTHER THINGS, THE MATTERS SET FORTH IN "RISK FACTORS."
We empower individuals and small businesses to become active participants on
the Internet by enabling them to build their own web sites using third-party
content, services and technology as building blocks. We derive our revenue
primarily from business partners that provide these building blocks in order to
distribute their content, services and technology. In doing so, they seek to
acquire new customers, to generate repeat sales, to build brand loyalty and to
drive traffic to their web sites. We believe this approach is creating an
important new distribution channel for businesses trying to reach individuals
and small businesses on the Internet.
We pioneered the first online drag and drop technology for building web
sites. We provide a proprietary platform that enables individuals and small
businesses, or Homestead "members," to easily build a feature-rich web site by
integrating and customizing building blocks, called "elements," containing
content and services provided by our business partners. We currently have over
150 elements, including stock tickers, guest books for visitor registration,
chat rooms, headline news, commerce links and audio and video capabilities.
As we introduce new and innovative third party elements, we enhance the
functionality and reputation of the Homestead service, which attracts more
members to build web sites. Additional Homestead web sites attract more visitors
to our service, which further accelerates the growth of our member base and in
turn increases the value of our distribution channel to new and existing
business partners. We believe this self-reinforcing cycle reduces the
expenditures otherwise required for customer acquisition, content generation and
new technology development, while accelerating the growth of the Homestead
platform and creating additional revenue opportunities.
Since launching our web site service, we have been one of the fastest
growing sites on the Internet in terms of registered members and unique
visitors. The total number of registered Homestead members has grown from
300,000 in March 1999 to 4.2 million in March 2000. During March 2000, an
average of over 20,000 new members registered each day with our service compared
to an average of under 3,000 in March 1999. According to PC Data, in March 2000,
we had 7.4 million unique visitors to www.homestead.com compared to 894,000 in
March 1999. Our site was ranked by PC Data as the 42nd most visited site on the
Internet in March 2000, as compared to 321st in March 1999.
Our objective is to build a major distribution channel for the Internet's
best content, services and technology and to enable active Internet
participation by the mass market. The key elements to our strategy are as
follows:
- capitalize and expand on multiple revenue opportunities;
- increase our technology and usability advantages;
- support continued viral growth of our member base;
- establish new business partnerships with high-quality element, service and
co-brand partners;
- build brand loyalty; and
- extend the Homestead platform to new market opportunities.
We were incorporated in Kansas in September 1994 and reincorporated in
Delaware in May 1998. Our principal executive offices are located at
3375 Edison Way, Menlo Park, California 94025 and our telephone number is
(650) 549-3100. Our Internet address is www.homestead.com. The information on
our web site is not part of, or incorporated by reference into, this prospectus.
Homestead, the Homestead logos and MoneyMaker are our trademarks. Other
trademarks used in this prospectus are the property of their respective owners.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered....................................... shares
Common stock to be outstanding after this offering......... shares
Use of proceeds............................................ We intend to use the net proceeds from
this offering for general corporate
purposes, including capital expenditures
and working capital. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol..................... HMST
</TABLE>
The number of shares of common stock to be outstanding immediately after the
offering is based on the number of shares outstanding as of March 31, 2000. This
number does not take into account:
- 5,171,094 shares of common stock issuable upon exercise of outstanding
options; and
- 747,343 shares of common stock issuable upon exercise of outstanding
warrants.
Unless otherwise indicated, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option and gives effect to the
conversion of all outstanding shares of preferred stock into common stock upon
the closing of this offering.
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Web site.................................... $ -- $ -- $ 504 $ 4 $ 1,142
Consulting.................................. 3,068 974 -- -- --
------- ------- -------- ------- --------
Total net revenues........................ 3,068 974 504 4 1,142
------- ------- -------- ------- --------
Gross profit (loss)........................... 2,304 365 (1,410) (153) 7
Operating income (loss)....................... 139 (3,206) (14,106) (1,702) (14,913)
Net income (loss)............................. 207 (3,082) (13,705) (1,693) (14,602)
Basic and diluted net income (loss) per share
available to common stockholders............ .02 (.23) (1.01) (.13) (2.11)
Shares used in computing basic and diluted net
income (loss) per share available to common
stockholders................................ 13,200 13,256 13,541 13,326 14,502
Pro forma basic and diluted net loss per
share....................................... $ (.56) $ (1.01)
Shares used in computing pro forma basic and
diluted net loss per share.................. 24,596 30,206
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $33,395 $
Working capital............................................. 30,145
Total assets................................................ 42,341
Long-term debt, less current portion........................ 1,951
Convertible preferred stock and warrants.................... 58,144
Total stockholders' equity (deficit)........................ (22,398)
</TABLE>
The pro forma as adjusted column of the balance sheet data reflects the
conversion of our preferred stock into common stock and the sale of shares
of our common stock in the public offering at an assumed initial public offering
price of $ per share, after deducting the estimated underwriting discounts
and commissions and offering expenses.
6
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, TOGETHER WITH ALL
OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE MAKING AN
INVESTMENT DECISION. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS
WILL BE HARMED. IN THIS CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
IF WE ARE UNABLE TO DEVELOP OUR NEW AND UNPROVEN BUSINESS MODEL, OUR
BUSINESS MAY FAIL.
We were incorporated in September 1994, and through 1998, we generated
substantially all of our revenue from software development consulting contracts.
We terminated the last of these contracts in 1998 and began to develop our web
site service. Our new business model is unproven and depends upon our ability to
develop and market our products and services for widespread acceptance by
Internet users and potential business partners. If we are unable to develop our
business model successfully, we may be unable to generate profits and our
business may fail. We did not begin to generate revenue from our web site
operations until late 1999.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO INCUR NET LOSSES.
We have not yet achieved profitability under our current revenue model. We
expect to incur losses for the foreseeable future and may never become
profitable. We incurred a net loss of approximately $13.7 million for the year
ended December 31, 1999 and $14.6 million for the three months ended March 31,
2000. Our limited operating history under our current revenue model makes it
difficult for us to forecast future operating results. We cannot guarantee that
we will achieve profitability or that our losses will not increase. Even if we
are able to achieve profitability, we cannot guarantee that we can sustain or
increase profitability. If our revenue grows more slowly than we anticipate or
if our operating expenses exceed our expectations and cannot be adjusted
accordingly, our business will not be successful.
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS COULD CAUSE OUR STOCK PRICE
TO DECLINE.
Our operating results may vary significantly from quarter to quarter as a
result of a variety of factors, many of which are outside of our control. These
factors include:
- the number of members who create new Homestead web sites and the degree of
activity on current Homestead web sites;
- the ability to maintain current and establish new business partnerships;
- the cost and success of our marketing efforts and our ability to develop
brand loyalty;
- the introduction of new services, or the enhancement of services, by
competitors; and
- the acceptance of our web site as a distribution channel for Internet
content, services and technology.
Because of these and other factors, our operating results may not meet
investor expectations in some future quarters, which could cause our stock price
to decline.
IF WE DO NOT MAINTAIN AND DEVELOP NEW RELATIONSHIPS WITH BUSINESS PARTNERS,
WE WILL NOT BE ABLE TO GROW OUR BUSINESS.
Our success depends upon our ability to establish and maintain relationships
with business partners that develop Internet content, services and technology
and are willing to use Homestead as a distribution channel. Our revenue is
derived from our business partners who pay us to integrate their content,
services and technology into our members' web sites. We cannot guarantee that
other businesses will accept
7
<PAGE>
Homestead as a distribution channel. If we are unable to establish and maintain
relationships with business partners, we will be unable to generate revenue and
grow our business.
CAPACITY CONSTRAINTS AND SYSTEM FAILURES COULD DAMAGE OUR REPUTATION AND
LIMIT OUR ABILITY TO ATTRACT NEW MEMBERS, VISITORS AND PARTNERS.
Our business depends substantially on the performance of our servers,
networking hardware and software infrastructure. Substantial increases in the
number of Homestead members and visitors could strain the capacity of our
systems, which could lead to slower response times or systems failures. If
interruptions in service are long or if there are repeated interruptions in
service, we could lose members and partners and our reputation and brand could
be damaged. We have experienced occasional service interruptions, which may
occur from time to time in the future. These interruptions have stemmed from a
variety of causes, including third party hardware and software problems and
human error. We are currently in the process of migrating to a new database
system. This migration could result in temporary disruption of service, and we
cannot assure you that this new system will provide the scalability necessary
for the business. Furthermore, we could experience a system failure which could
cause an interruption in service or a decrease in the responsiveness of our
service.
In the event that there is a failure of our disk storage systems and backup
systems on which our member web sites are stored, we could lose the data for
some or all of the Homestead web sites which would interrupt our business and
damage our reputation. The servers hosting our web site at www.homestead.com and
our co-branded partner sites are located in Northern California at a third party
hosting center. This hosting center provides routing and communication lines
with a variety of Internet backbone providers. If our server or networking
systems fail to handle current or future volumes of traffic, our members could
be unable to access or interact with their Homestead web sites, which would
cause us to lose revenue from our elements and services.
Our servers and network infrastructure are vulnerable to damage from human
error, fire, flood, telecommunications or power failure, sabotage, acts of
vandalism and similar events. In addition, all of our servers and network
infrastructure are located in Northern California, an area susceptible to
earthquakes. Despite our precautions, natural disasters or other unanticipated
problems at our third party facilities could interrupt our service and damage
our equipment. If any of these events were to occur, our service could be
interrupted, delayed or terminated, which would harm our ability to generate
revenue and would harm our reputation and brand.
UNAUTHORIZED BREAK-INS OR DISRUPTIONS COULD RESULT IN LOSS OF DATA OR
SERVICE DISRUPTIONS.
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability of members to access and modify their web sites.
In addition, unauthorized persons may improperly access our data. Any break-ins
or disruptions may be expensive to remedy and could damage our reputation and
discourage new or current members from using our service. We have experienced
attempts to disrupt our system, a few of which have resulted in short
interruptions in our service. While we have implemented precautionary security
measures, there can be no assurance that these measures will be effective in the
future.
IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS COULD SUFFER.
We have experienced and may continue to experience rapid growth, which has
placed and may continue to place strain on our management and operational
resources. For example, we grew to 116 employees as of March 31, 2000 from 54
employees as of March 31, 1999. Difficulties in managing our growth and
expansion could strain our management and operational resources, which would
harm our future prospects. We expect that the number of our employees, including
management-level employees, will continue to increase for the foreseeable
future. We must continue to improve our operational and
8
<PAGE>
financial systems and managerial controls and procedures, and we will need to
continue to expand, train and manage our personnel. We cannot guarantee that we
will be able to manage our growth effectively or that our systems, procedures or
controls will be adequate to support our operations.
THE DEVELOPMENT AND MARKETING OF COMPETITIVE INTERNET SERVICES AND
TECHNOLOGIES COULD LIMIT OR PREVENT ACCEPTANCE OF OUR SERVICES AND REDUCE
OUR REVENUE.
The market for Internet services and technologies is new, rapidly evolving
and intensely competitive. If we are unable to compete successfully, our revenue
may decline and our business and results of operations would be harmed. We
expect competition for visitors, members and business partners to increase
significantly. Barriers to entry in our market are relatively insubstantial and
current and new competitors may be able to provide new Internet services at a
relatively low cost. We believe that our success will depend heavily upon our
ability to achieve market acceptance and brand loyalty. We believe that the
principal competitive factors in our industry are size and scale, functionality,
brand recognition and member affinity and loyalty.
We believe our current major competitors are providers of shrink-wrapped
software, home page hosting communities and Internet sites focused on specific
vertical markets. We will likely also face competition from other Internet
distribution channels such as search engines, content sites, commercial online
services, sites maintained by Internet service providers and other entities that
attempt to establish their own distribution channels on the Internet directly or
by acquiring one of our competitors. In addition, we may face competition from
traditional media and other large companies. Furthermore, we cannot guarantee
that competitors will not develop equal or superior services or achieve greater
market acceptance than we do.
Many of our existing and potential competitors have longer operating
histories in the Internet market, greater name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than we do. Such competitors are able to undertake more extensive marketing
campaigns for their brands and services, adopt more aggressive pricing policies
and make more attractive offers to potential business partners.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL COULD LIMIT THE GROWTH OF OUR BUSINESS AND HARM OUR OPERATIONS.
We are highly dependent on the services of our management and development
staff. The loss of the services of any of our executive officers or key
developers may harm our business and results of operations. We depend in
particular on the services of Justin Kitch, our Chief Executive Officer and
Chairman, Elizabeth Burr, our President and Chief Marketing Officer, and David
Wu, our Senior Vice President and Chief Product Officer. We also rely on the
services of skilled programmers and software development personnel for which the
competition is particularly intense in the San Francisco Bay area. We may not be
able to attract and retain personnel on acceptable terms given the intense
competition for these resources.
IF OUR INVESTMENT IN BRAND DEVELOPMENT IS NOT SUCCESSFUL, WE MAY BE UNABLE
TO EXTEND OUR PRODUCT LINE OR EXPAND OUR SERVICES.
The development of the Homestead brand and favorable customer perception of
Homestead is central to our future success. If our brand recognition strategy is
unsuccessful, we may be unable to extend our product line or expand our
services. Our brand recognition strategy includes advertising in both television
and print media targeted at key customer groups, targeted consumer
communications and editorials on the Homestead web site. We cannot guarantee
that the expenditures for our marketing efforts will result in an increase in
revenues sufficient to cover the marketing and advertising expenditures. In
addition, we cannot guarantee that these marketing efforts will create an
increase in brand recognition or the number of new member web sites.
9
<PAGE>
THIRD PARTIES MAY ASSERT THAT WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY
RIGHTS. THESE ASSERTIONS MAY DEVELOP INTO LITIGATION THAT COULD BE COSTLY
AND COULD IMPAIR OUR INTELLECTUAL PROPERTY RIGHTS.
We cannot be certain that our products do not, or will not, infringe upon
patents, trademarks, copyrights or other intellectual property rights held by
third parties. In addition, we may have disputes with third parties relating to
trademarks. We cannot assure you that these assertions and disputes will not
develop into litigation with those third parties. If they do, we may incur
substantial expenses in defending against these claims, regardless of whether we
ultimately prevail in the litigation. Successful claims against us may result in
substantial monetary liability and/or our inability to continue to use the
infringing material, which could hurt our business.
WE MAY BE LIABLE FOR CONTENT ON OUR MEMBERS' WEB SITES.
We could be exposed to liability with respect to the content or links on our
members' Homestead web sites. Such claims may include, among others, that our
hosting of our members' web sites may make us liable for copyright or trademark
infringement or other unauthorized actions by our members or third parties
linked through our members' web sites. Other claims may be based on member web
sites that display or link to web sites that contain offensive content. We may
incur costs in investigating and defending against such claims, even if these
claims do not ultimately result in liability. Implementation of measures to
reduce our exposure to this liability may also require us to spend substantial
resources.
DISPUTES OVER INTELLECTUAL PROPERTY RIGHTS MAY ARISE WITH OUR BUSINESS
PARTNERS THAT COULD BE EXPENSIVE AND DISRUPT OUR BUSINESS.
We rely on third parties, including our business partners, to help us
develop, market and support our product and service offerings. This may result
in disputes arising over ownership of any intellectual property developed. We
cannot assure you that litigation will not arise from these disputes. We may
incur substantial expenses in defending against these claims, regardless of
their merit. Successful claims against us may result in substantial monetary
liability, may significantly impact our results of operations in one or more
quarters or may materially disrupt the conduct of our business.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO ACHIEVE OUR BUSINESS OBJECTIVES.
We may require substantial amounts of additional financing to continue or
expand our operations. As of March 31, 2000, we had an accumulated deficit of
$30.5 million. We anticipate that our existing capital resources, together with
the proceeds of this offering, will be adequate to fund our currently planned
operations for at least two years. However, we base this expectation on our
current operating plan, which may change as a result of many factors.
Consequently, we may need additional funding. Our future capital requirements
will depend on many factors, including:
- infrastructure investment to support our growth;
- the rate at which we can generate revenue;
- the cost of developing new services; and
- other factors which may not be within our control.
To the extent operating and capital resources are insufficient to meet
future requirements, we will have to raise additional funds to continue the
development and commercialization of our services. These funds may not be
available on favorable terms, or at all. Without additional funding, we may be
required to delay, reduce the scope of or eliminate one or more of our
development programs, or to curtail our operations.
10
<PAGE>
RISKS RELATED TO OUR INDUSTRY
CONTINUED ADOPTION OF THE INTERNET IS NECESSARY FOR OUR FUTURE GROWTH.
The failure of the Internet to continue to develop as a communications
medium would harm our business. We depend on the development of new Internet
technology and services by potential business partners to grow our business and
generate revenue. The continued growth of the Internet depends on various
factors, many of which are outside our control. These factors include:
- the ability of the Internet infrastructure to support the demands placed
on it;
- the continued performance and reliability of the Internet as usage grows;
- the security and authentication of Internet transmission of confidential
information such as credit card numbers, and attempts by unauthorized
computer users to penetrate online security systems; and
- the ability to address privacy concerns, including those related to the
ability of web sites to gather user information without the user's
knowledge or consent.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES REGARDING THE INTERNET COULD
HARM OUR BUSINESS.
Federal and state governments have only recently begun to regulate the
Internet and have not yet imposed fees or taxes. Changes in laws to impose such
fees or taxes could add significant new costs to our operations, and we are not
certain how those increased costs could affect demand for our services.
Any new law or regulation pertaining to Internet-based communication
services, or the application or interpretation of existing laws, could decrease
the demand for our services, increase our cost of doing business or otherwise
harm our business. There is, and will likely continue to be, an increasing
number of laws and regulations pertaining to the Internet. These laws or
regulations may relate to taxation and the quality of products and services.
Furthermore, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. In addition, we are not certain how our business may
be affected by the application of existing laws governing issues such as
property ownership, copyrights, encryption and other intellectual property
issues, taxation, and export or import matters. The vast majority of these laws
were adopted prior to the advent of the Internet. As a result, they may not
contemplate or address the unique issues of the Internet and related
technologies. Changes in laws intended to address these issues could create
uncertainty in the Internet market. These uncertainties could reduce demand for
our services or increase the cost of doing business through litigation costs or
increased service delivery costs.
The Child Online Protection Act and the Child Online Privacy Protection Act,
referred to as "COPPA," were enacted in October 1998. COPPA imposes civil and
criminal penalties on persons distributing material harmful to minors over the
Internet to persons under the age of 17 or collecting personal information from
children under the age of 13 without the consent of a parent or legal guardian.
We have not been able to fully determine the manner in which COPPA may be
interpreted and enforced or the effect it may have on our business. Future
legislation or regulations under COPPA might subject us to liability or result
in significant compliance costs which could harm our business.
RISKS RELATED TO THIS OFFERING
DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED
ENTITIES OWN A SIGNIFICANT PORTION OF OUR CAPITAL STOCK AND WILL HAVE
SUBSTANTIAL CONTROL OVER OUR ACTIVITIES.
Upon completion of this offering, our directors, executive officers,
principal stockholders and affiliated entities will beneficially own, in the
aggregate, approximately % of our outstanding
11
<PAGE>
common stock. These stockholders, if acting together, will be able to
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. Some of these persons or entities may have
interests or objectives different from yours.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW MAY
MAKE AN ACQUISITION OF US MORE DIFFICULT.
Provisions in our certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders.
These provisions:
- provide for a classified board of directors of which approximately one
third of the directors will be elected each year;
- allow the authorized number of directors to be changed only by resolution
of the board of directors;
- require that stockholder actions must be effected at a duly called
stockholder meeting and prohibit stockholder action by written consent;
- establish advance notice requirements for nominations to the board of
directors or for proposals that can be acted on at stockholder meetings;
and
- limit who may call stockholder meetings.
In addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law which may
prohibit large stockholders from consummating a merger with or acquisition of
us.
IF OUR STOCKHOLDERS SELL SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK AFTER THE
OFFERING, THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE.
The number of shares of common stock available for sale in the public market
is limited by restrictions under federal securities law and under lockup
agreements with our underwriters. Holders of approximately % of our
outstanding shares after this offering will be subject to these lockup
agreements. These lockup agreements restrict some of our stockholders from
disposing of their shares for 180 days after the date of this prospectus without
the prior written consent of Morgan Stanley & Co. Incorporated. However, Morgan
Stanley & Co. Incorporated may release all or any portion of the common stock
from the restrictions in the lockup agreements with or without prior notice. Any
sales of substantial amounts of common stock after the offering, including
shares issued upon the exercise of outstanding options and warrants, may cause
the market price of our common stock to decline.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU COULD LOSE SOME OR ALL OF YOUR
INVESTMENT.
Prior to this offering there has been no public market for our common stock.
An active public market for our stock may not develop or be sustained after the
offering. The initial public offering price will be determined by negotiations
between us and our underwriters and may not be indicative of future market
prices. The market prices for securities of information technology and
Internet-related companies in general have been highly volatile and our stock
may be subject to volatility. In the past, securities class action litigation
has often been instituted against companies following periods of volatility in
the market price of their securities.
12
<PAGE>
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The initial public offering price is substantially higher than the book
value per share of our common stock. You will therefore incur immediate dilution
in the net tangible book value per share of common stock in an amount of
$ , based upon an assumed initial public offering price of $ per
share. In addition, the number of shares available for issuance under our stock
option and employee stock purchase plans will automatically increase without
stockholder approval. Investors will incur additional dilution upon the exercise
of outstanding stock options and warrants.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. In some cases, you can identify forward-looking
statements by terms such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential," or "continue," or
the negative of such terms or other comparable technology. The forward-looking
statements contained in this prospectus involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These factors include
those listed under "Risk Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.
13
<PAGE>
USE OF PROCEEDS
Our proceeds from the sale of shares of common stock we are offering
are estimated to be approximately $ million, assuming a public offering
price of $ per share and after deducting estimated underwriting discounts
and commissions and offering expenses. If the underwriters' over allotment
option is exercised in full, we estimate that our net proceeds will be
approximately $ .
We intend to use the net proceeds of the offering primarily for general
corporate purposes, including working capital to fund anticipated operating
losses, capital expenditures related to the growth in our web site operations
and brand marketing expenses. We may also use a portion of the proceeds for the
acquisition of, or investment in, companies, technologies or assets that
complement our business. However, we have no present understandings, commitments
or agreements to enter into any potential acquisitions or investments. Pending
these uses, we intend to invest the net proceeds of the offering in short-term,
interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable future.
Our ability to pay any future dividends will depend on our earnings, operating
and financial condition, projected capital requirements and restrictions under
our credit facilities. Our credit facility prohibits the payment of dividends
without the consent of the lender.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
- on an actual basis;
- on a pro forma basis to reflect the conversion of 16,265,421 shares of
Series A, B and C preferred stock; and
- on a pro forma, as adjusted basis to further reflect the sale of shares
of common stock offered by us at an assumed initial public offering price
of $ per share, less the estimated underwriting discounts and commissions
and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Long-term debt, less current portion........................ $ 1,951 $ 1,951 $ 1,951
-------- -------- --------
Convertible preferred stock and warrants.................... 58,144 -- --
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock, issuable in series, $.001 par value,
17,200,000 shares authorized, 16,265,421 shares of
convertible preferred stock issued and outstanding,
actual, and no shares issued and outstanding, pro forma;
and 5,000,000 authorized, no shares issued and
outstanding, pro forma as adjusted...................... -- -- --
Common stock, $.001 par value; 50,800,000 shares
authorized; 16,005,835 shares issued and outstanding,
actual, and 32,271,256 shares issued and outstanding,
pro forma; and 100,000,000 shares authorized,
shares issued and outstanding, pro forma as adjusted.... 16 32
Additional paid-in capital................................ 40,943 99,071
Notes receivable.......................................... (1,750) (1,750)
Unearned stock-based compensation......................... (31,148) (31,148)
Accumulated deficit....................................... (30,459) (30,459)
-------- -------- --------
Total stockholders' equity (deficit).................... (22,398) 35,746
-------- -------- --------
Total capitalization.................................. $ 37,697 $ 37,697 $
======== ======== ========
</TABLE>
The share numbers in the table above do not include:
- 5,171,094 shares of common stock issuable upon exercise of outstanding
options at an average exercise price of $.53 per share; and
- 747,343 shares of common stock issuable upon exercise of outstanding
warrants at an average exercise price of $4.25 per share.
15
<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 2000 was
$35.7 million, or $1.11 per share, after giving effect to the conversion of all
outstanding shares of preferred stock into an aggregate of 16,265,421 shares of
common stock which will occur upon the closing of this offering. Pro forma net
tangible book value per share before the offering has been determined by
dividing total tangible assets less total liabilities by the pro forma number of
shares of common stock outstanding at March 31, 2000. After giving effect to the
sale of shares of common stock in this offering, at an assumed public
offering price of $ per share, and after deducting estimated underwriting
discounts and commissions and expenses of the offering, the pro forma, as
adjusted, net tangible book value as of March 31, 2000, is $ million, or
$ per share. This represents an increase in pro forma net tangible book
value per share of $ to existing stockholders and dilution in pro forma net
tangible book value per share of $ to new investors who purchase shares in
the offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before
offering................................................ $1.11
Increase per share attributable to new investors..........
-----
Pro forma, as adjusted, net tangible book value per share
after offering............................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 2000,
the differences between the number of shares of common stock issued by
Homestead, the total consideration paid and the average price per share paid by
the existing stockholders and by new investors, before deducting estimated
underwriting discounts and commissions and offering expenses, at 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..................... 32,271,256 % $60,660,000 % $1.88
New investors
---------- ----- ----------- -----
Total................................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
These tables do not assume exercise of stock options and warrants
outstanding at March 31, 2000.
At March 31, 2000, there were 5,171,094 shares of common stock issuable upon
exercise of outstanding stock options at a weighted average exercise price of
$.53 per share and 747,343 shares of common stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $4.25 per share. To
the extent these options and warrants are exercised, there will be additional
dilution to new investors.
16
<PAGE>
SELECTED FINANCIAL DATA
This section presents our historical financial data. You should read
carefully the financial statements included in this prospectus, including the
notes to the financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected data in this
section is not intended to replace the financial statements and related notes.
The statement of operations data for the years ended December 31, 1997, 1998
and 1999 and the balance sheet data as of December 31, 1998 and 1999 have been
derived from our financial statements that have been audited by
PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere
in this prospectus. The statement of operations data for the years ended
December 31, 1995 and 1996 and the balance sheet data as of December 31, 1995,
1996 and 1997 have been derived from unaudited financial statements prepared by
management not included in this prospectus. The statement of operations data for
the three months ended March 31, 1999 and 2000 and the balance sheet as of
March 31, 2000 are derived from the unaudited financial statements included
elsewhere in this prospectus. The unaudited financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our financial position and results of operations for these
periods. The diluted net income (loss) per share computation excludes potential
shares of common stock, namely preferred stock, restricted common stock and
options and warrants to purchase common stock, since their effect would be
antidilutive. Historical results are not necessarily indicative of future
results. See the notes to the financial statements for an explanation of the
method used to determine the number of shares used in computing pro forma basic
and diluted loss per share.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Web site........................................... $ -- $ -- $ -- $ -- $ 504 $ 4 $ 1,142
Consulting......................................... 460 1,768 3,068 974 -- -- --
------- ------- ------- -------- -------- -------- --------
Total net revenues............................... 460 1,768 3,068 974 504 4 1,142
------- ------- ------- -------- -------- -------- --------
Cost of revenues:
Web site (excluding $0, $0, $0, $0, $87, $0 and $90
of stock-based compensation)..................... -- -- -- 220 1,486 112 936
Member support..................................... -- -- -- 79 428 45 199
Consulting......................................... 194 841 764 310 -- -- --
------- ------- ------- -------- -------- -------- --------
Total cost of revenues........................... 194 841 764 609 1,914 157 1,135
------- ------- ------- -------- -------- -------- --------
Gross profit (loss).................................. 266 927 2,304 365 (1,410) (153) 7
------- ------- ------- -------- -------- -------- --------
Operating expenses:
Web site development and operations (excluding $0,
$0, $0, $0, $998, $10 and $1,082 of stock-based
compensation).................................... 3 1 1,381 1,987 3,909 630 1,773
Sales and marketing (excluding $0, $0, $0, $0,
$965, $7 and $1,877 of stock-based
compensation).................................... 5 18 129 641 3,647 496 8,058
General and administrative (excluding $0, $0, $5,
$90, $1,190, $74 and $911 of stock-based
compensation).................................... 143 291 650 853 1,900 332 1,129
Stock-based compensation........................... -- -- 5 90 3,240 91 3,960
------- ------- ------- -------- -------- -------- --------
Total operating expenses......................... 151 310 2,165 3,571 12,696 1,549 14,920
------- ------- ------- -------- -------- -------- --------
Operating income (loss).............................. 115 617 139 (3,206) (14,106) (1,702) (14,913)
Interest income, net................................. 3 46 68 124 401 9 311
------- ------- ------- -------- -------- -------- --------
Net income (loss).................................... 118 663 207 (3,082) (13,705) (1,693) (14,602)
Deemed preferred stock dividend...................... -- -- -- -- -- -- (16,020)
------- ------- ------- -------- -------- -------- --------
Net income (loss) available to common stockholders... $ 118 $ 663 $ 207 $ (3,082) $(13,705) $ (1,693) $(30,622)
======= ======= ======= ======== ======== ======== ========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Basic and diluted net income (loss) per share
available to common stockholders................... $ .01 $ .05 $ .02 $ (.23) $ (1.01) $ (.13) $ (2.11)
Shares used in computing basic and diluted net income
(loss) per share available to common
stockholders....................................... 13,200 13,200 13,200 13,256 13,541 13,326 14,502
Pro forma basic and diluted net loss per share....... $ (.56) $ (1.01)
Pro forma basic and diluted weighted average
shares............................................. 24,596 30,206
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- MARCH 31,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 32 $ 820 $ 629 $2,702 $ 7,050 $ 33,395
Working capital............................................. 44 951 962 2,447 8,829 30,145
Total assets................................................ 103 1,236 1,486 3,631 16,199 42,341
Long-term debt, less current portion........................ -- -- -- 392 2,089 1,951
Convertible preferred stock and warrants.................... -- -- -- 4,496 22,601 58,144
Total stockholders' equity (deficit)........................ 103 1,236 1,486 (1,539) (11,858) (22,398)
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WITH THE FINANCIAL STATEMENTS AND THE NOTES TO THE
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND
ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES
AND ASSUMPTIONS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THOSE
SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We empower individuals and small businesses to become active participants on
the Internet by enabling them to build their own web sites using leading
Internet content, services and technology as building blocks. To achieve this,
we pioneered the first online drag and drop technology to create web sites. Our
revenue is derived from contracts with business partners who wish to use our
service as a distribution channel to acquire new customers, to distribute new
content, services and technologies, to create and build brand loyalty and to
drive traffic to their own web sites.
From 1994 to 1998, we generated substantially all of our revenue under
software development consulting contracts with a limited number of customers. We
terminated the last of these contracts in 1998 and have recorded no consulting
revenue since June 1998. We then redeployed our development efforts to define,
design and develop the Homestead web site service, which we initially launched
in June 1998. Until the fourth quarter of 1999, we focused on growing our member
base and on demonstrating the viability and market acceptance of our service as
a distribution channel. In the fourth quarter of 1999, we began to focus on
generating revenue from Internet content, services and technology providers who
wanted to reach our member base.
ACCOUNTING POLICIES
NET REVENUES. We derive our revenues from multiple sources, including
sponsored elements, promotions to our members, banner advertising and co-branded
partnerships.
- SPONSORED ELEMENTS. Elements are the building blocks of a member's web
site. Sponsored elements incorporate technology from our business partners
and include dynamic features such as stock tickers, chat rooms, e-commerce
links, online stores and search boxes. Element sponsorship contracts
typically range from three to 24 months in duration. We charge our
business partners for these elements in a variety of ways, including:
- DROPS. The placement of elements on sites by Homestead members;
- IMPRESSIONS. The elements are seen by visitors to the site;
- CLICKS. The use of the elements' functionalities by visitors; and
- COMMISSIONS. The click-throughs on e-commerce elements resulting in
sales.
We recognize element revenue, other than commissions, in the period that
the drop, impression or click occurs. We recognize this revenue based on
the greater of minimum guaranteed fees or drops, impressions or clicks
delivered. We recognize commission revenue upon notification from our
partners of commissionable sales.
- PROMOTIONS AND BANNER ADVERTISING. We recognize revenue from promotional
placements and banner advertising ratably in the period in which the
advertisement is displayed or the promotion occurs. We use a third party
to sell or service some of our ads. Since we do not act as the principal
in the transaction with the customer, we record revenue resulting from
advertisements which are sold or served by a third party net of any fees
due to the third party.
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<PAGE>
- CO-BRANDED PARTNERSHIPS. We also enter into contracts to develop and host
co-branded, customized versions of our service for third party web sites.
These contracts typically range from 12 to 36 months in duration. We
recognize revenue from these contracts ratably over the term of the
contract, beginning at launch. We may share with our co-brand partner a
portion of the element revenue generated by web sites created using the
co-branded service. Since we are not the principal in the transaction with
the customer, we record all our revenue net of any amounts payable to the
partner.
In all cases, we recognize revenue when a written contract exists or we
receive an insertion order, delivery of services has occurred, no remaining
obligations exist and collection of the resulting receivable is reasonably
assured. Many of our business partners make up-front development payments or
minimum monthly payments over some portion of their contract. We recognize
revenue from these payments on a straight line basis over the entire life of the
contract, beginning upon launch. We record cash received in advance of revenue
recognition as deferred revenue.
COST OF REVENUES. Cost of revenues consists of costs for web site hosting
and member support operations, including compensation and related costs for
member support personnel, Internet connectivity and co-location charges,
personnel and related costs for consulting services and depreciation of the
equipment required for our web site hosting operations.
WEB SITE DEVELOPMENT AND OPERATIONS. Web site development and operations
costs include expenses related to the operation of our web site and the cost of
ongoing development of new or improved functionality, features and architecture
of our web site service when the developed software has an expected life of
three months or less. These expenses consist of compensation and related costs
for our engineering, research and development, and product design personnel, as
well as related consulting, facilities and equipment expenses.
SALES AND MARKETING. Sales and marketing expenses consist of direct
marketing and advertising expenses and compensation and related expenses for our
marketing, sales and business development departments. Sales and marketing
expenses also include fees associated with distribution agreements, including
expenses associated with warrants issued in association with distribution
agreements.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
personnel and related expenses and professional fees related to our management,
legal, finance, accounting and other administrative functions.
STOCK-BASED COMPENSATION. Stock-based compensation includes the
amortization of unearned employee stock-based compensation and expenses for
options granted to consultants in exchange for services. Employee stock-based
compensation expense is amortized over the vesting period of the options, which
is generally four years, using the multiple-option approach.
INTEREST INCOME, NET. Interest income consists of earnings on our cash,
cash equivalents and marketable securities. Interest expense consists of
interest expenses on equipment financings accounted for as capital leases, on
bank term debt, and on our revolving line of credit.
RESULTS OF OPERATIONS
In 1998, we ceased all activity in our consulting business and refocused our
efforts on the Homestead web site service. Accordingly, comparisons among the
periods discussed below are less meaningful than if we had been in primarily the
same line of business throughout these periods.
NET REVENUES. Web site revenue was $504,000 for the year ended
December 31, 1999 and $1.1 million for the three months ended March 31, 2000,
compared to $0 for the year ended December 31, 1998 and $4,000 for the three
months ended March 31, 1999. Our three largest customers during the quarter
ended
20
<PAGE>
March 31, 2000 accounted for 14%, 11% and 11%, respectively, of our total net
revenue for the period. We launched the Homestead web site service in June 1998.
In the fourth quarter of 1999, we began to focus on generating revenue from
Internet content, services and technology providers. Consulting revenue was
$974,000 in 1998, the last year in which we were in this business, compared to
$3.1 million in 1997. During 1999, two business partners each accounted for 11%
of our net revenues. During 1998 and 1997, a related party consulting customer
accounted for essentially all of our revenue.
COST OF REVENUES. Cost of revenues, exclusive of consulting, grew to
$1.9 million in 1999 from $299,000 in 1998. Cost of revenues, exclusive of
consulting, grew to $1.1 million for the three months ended March 31, 2000 from
$157,000 for the three months ended March 31, 1999. Costs increased primarily
due to significant growth in our site and our member base, resulting in
increased hosting costs. Cost of consulting revenue decreased to $310,000 in
1998 from $764,000 in 1997 as a result of our exiting the consulting business.
We expect costs of revenues to increase as a result of increased hosting
charges, equipment depreciation charges and member support costs as our web site
business grows. Although increasing on an absolute basis, we expect costs of
revenues to decrease as a percentage of revenues due to the relatively fixed
nature of many of the components of site hosting costs, and due to economies of
scale in the member support costs.
WEB SITE DEVELOPMENT AND OPERATIONS. Web site development and operations
expense increased to $3.9 million in 1999 from $2.0 million in 1998 and from
$1.4 million in 1997. Web site development and operations expense increased to
$1.8 million for the three months ended March 31, 2000 from $630,000 for the
three months ended March 31, 1999. These increases were primarily due to
increases in personnel and other related costs associated with our development
efforts to define, design and develop the Homestead web site service, which we
initially launched in June 1998. We expect that web site development and
operations expense will increase due to increased personnel and related costs
associated with the ongoing development and monthly enhancement of our service.
SALES AND MARKETING. Sales and marketing expenses grew to $3.6 million in
1999 from $641,000 in 1998 and from $129,000 in 1997. These increases consisted
primarily of personnel and related expenses associated with building our sales
and marketing organization. Sales and marketing expenses grew to $8.1 million
for the three months ended March 31, 2000 from $496,000 for the three months
ended March 31, 1999. This increase consisted primarily of expenses related to
brand development activities, including an offline advertising campaign. We
included in sales and marketing an expense of $323,000 during 1999 and $281,000
for the three months ended March 31, 2000 related to warrants issued in
conjunction with distribution agreements. We expect sales and marketing expenses
to vary in the future based on the timing of advertising and other brand
development activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses grew to
$1.9 million in 1999 from $853,000 in 1998 and from $650,000 in 1997. General
and administrative expenses grew to $1.1 million for the three months ended
March 31, 2000 from $332,000 for the three months ended March 31, 1999. These
increases consisted primarily of personnel and related costs, facility costs,
fees for outside professional services and other costs to support the growth of
our web site service. We expect general and administrative expenses to increase
as we continue to expand our administrative infrastructure to support the
anticipated growth of our business, including costs associated with being a
public company.
STOCK-BASED COMPENSATION. In connection with the grant of employee stock
options, we recorded aggregate unearned stock-based compensation of
$13.9 million through December 31, 1999 and additional unearned stock-based
compensation of $23.0 million for stock options granted through March 31, 2000.
We recorded employee stock-based compensation expense of $2.3 million for the
year ended December 31, 1999, $17,000 for the three months ended March 31, 1999
and $3.5 million for the three months ended March 31, 2000. We currently expect
to record employee stock-based compensation expenses of $16.8 million for the
year ending December 31, 2000 and $10.1 million for the year ending
December 31, 2001. We anticipate that these expenses will decrease in future
periods. Unearned
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stock-based compensation expense will be reduced in future periods to the extent
that options are terminated prior to full vesting. We recorded expenses of
$983,000 for the year ended December 31, 1999, $74,000 for the three months
ended March 31, 1999 and $460,000 for the three months ended March 31, 2000 in
connection with the vesting of stock options issued for consulting services.
Expenses related to options granted to consultants may increase in future
periods if we grant additional options to consultants in exchange for services
or the fair value of our stock increases during the vesting period of the
options.
INTEREST INCOME, NET. Interest income, net, increased in each period due to
higher cash, cash equivalents and marketable securities balances.
PROVISION FOR INCOME TAXES. We incurred operating losses for all periods
with the exception of 1997, when we had net income of $207,000. Our 1997 tax
liability, however, was reduced due to the utilization of net operating loss
carryforwards. Our deferred tax assets primarily consist of net operating loss
carryforwards, nondeductible allowances and research and development tax
credits. We have recorded a valuation allowance for the full amount of our net
deferred tax assets, as the future realization of the tax benefit is not
currently likely.
As of December 31, 1999, we had net operating loss carryforwards for federal
and state tax purposes of approximately $11.2 million. These federal and state
tax loss carryforwards are available to reduce future taxable income and expire
at various dates through fiscal 2019. Under the provisions of the Internal
Revenue Code, some substantial changes in our ownership may limit the amount of
net operating loss carryforwards that could be utilized annually in the future
to offset taxable income.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statements of
operations data for the five quarters ended March 31, 2000. This information has
been derived from our unaudited financial statements, which, in our management's
opinion, have been prepared on the same basis as the audited financial
statements, and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for the
quarters presented. This information should be read in conjunction with our
audited financial statements and the notes thereto included elsewhere in this
prospectus. The operating results for any quarter are not necessarily indicative
of the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31,
1999 1999 1999 1999 2000
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Web site revenue............................... $ 4 $ 34 $ 65 $ 401 $ 1,142
Cost of revenue:
Web site..................................... 112 265 364 745 936
Member support............................... 45 56 149 178 199
------- ------- ------- ------- --------
Total cost of revenue...................... 157 321 513 923 1,135
------- ------- ------- ------- --------
Gross profit (loss)............................ (153) (287) (448) (522) 7
Operating expenses:
Web site development and operations.......... 630 767 1,183 1,329 1,773
Sales and marketing.......................... 496 568 1,099 1,484 8,058
General and administrative................... 332 372 500 696 1,129
Stock-based compensation..................... 91 248 966 1,935 3,960
------- ------- ------- ------- --------
Total operating expenses................... 1,549 1,955 3,748 5,444 14,920
Operating loss................................. (1,702) (2,242) (4,196) (5,966) (14,913)
Interest income, net........................... 9 127 178 87 311
------- ------- ------- ------- --------
Net loss....................................... $(1,693) $(2,115) $(4,018) $(5,879) $(14,602)
======= ======= ======= ======= ========
</TABLE>
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NET REVENUES. Net revenues increased in each of the five quarters ended
March 31, 2000. The increase in net revenues in these periods primarily reflects
an increased number of revenue generating business partnerships.
COST OF REVENUES. Cost of revenues increased in each of the five quarters
ended March 31, 2000. These quarterly increases related to significant growth in
our site and our member base, resulting in increased hosting and member support
costs.
OPERATING EXPENSES. Web site development and operations, sales and
marketing and general and administrative expenses all increased in each of the
five quarters ended March 31, 2000. Web site development and operations and
general and administrative expenses increased primarily to support growth in our
business. The increases during the four quarters of 1999 for sales and marketing
were primarily the result of the formation and staffing of our marketing,
business development and sales departments. The large increase is sales and
marketing during the quarter ended March 31, 2000 was the result of expenses
related to brand development activities, including an offline advertising
campaign.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations in recent years primarily through private
placements of equity securities. Through March 31, 2000, we had received net
proceeds of approximately $56.9 million from these financings. As of March 31,
2000, we had cash, cash equivalents and short-term investments of
$33.4 million, compared to $7.1 million as of December 31, 1999.
Net cash used by operating activities was $5.1 million for the three months
ended March 31, 2000 and $12.9 million for the year ended December 31, 1999.
Cash used by operating activities for the three months ended March 31, 2000
resulted from a net loss of $14.6 million, as well as a $1.0 million increase in
accounts payable and other current liabilities, and $4.6 million of non-cash
charges included in net income.
Net cash used in investing activities was $21.2 million for the three months
ended March 31, 2000 and $5.4 million for the year ended December 31, 1999. Cash
used in investing activities for the three months ended March 31, 2000 consisted
of $17.7 million to purchase marketable securities, net of sales and maturities
and $3.4 million to purchase property and equipment.
Net cash provided by financing activities was $34.9 million for the three
months ended March 31, 2000 and $17.9 million for the year ended December 31,
1999, primarily from the net proceeds from our issuance of our Series C
preferred stock in January 2000 and Series B preferred stock in April 1999.
We have a credit agreement with a bank that provides for a $750,000 line of
credit, all of which was available as of March 31, 2000, and a $1.5 million
equipment loan. The line of credit bears interest at the bank's prime rate plus
one percent and expires in March 2001. The equipment loan bears interest equal
to the bank's basic rate and matures in March 2002. We also have an outstanding
term loan in an amount of $286,000 as of March 31, 2000. The term loan bears
interest equal to the prime rate and will be repaid in installments through
January 2002. Under the terms of the loan and equipment facility agreements, we
must meet certain financial covenants. We were in compliance with all financial
covenants as of March 31, 2000.
In January 2000, we issued our Series C preferred stock resulting in net
cash proceeds of approximately $35.0 million. Upon the closing of this offering,
all outstanding shares of Series C preferred stock will be converted on a
one-for-one basis into shares of common stock. For the quarter ended March 31,
2000, we have recorded a non-cash preferred stock dividend of $16.0 million to
reflect the beneficial conversion feature granted to holders of the Series C
preferred stock.
We have committed expenditures under capital and operating leases of
$6.7 million during the next five years.
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We anticipate that we will experience significant increases in our capital
and operating expenditures consistent with our anticipated growth in operations,
infrastructure and personnel. Nevertheless, we believe that our existing cash,
cash equivalents and short-term investments, together with the net proceeds from
this offering, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 24 months.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents and investments. We invest our cash
and cash equivalents and investments in short-term, interest-bearing securities.
We anticipate investing our net proceeds from this offering in similar
investment grade investments pending their use as described in this prospectus.
See "Use of Proceeds." Our transactions are generally conducted, and our
accounts are denominated, in United States dollars. Accordingly, we believe we
are not exposed to significant interest rate and foreign currency risks.
24
<PAGE>
BUSINESS
INDUSTRY BACKGROUND
MASS MARKET INTERNET USAGE
The Internet has emerged as a mass medium which enables millions of people
and businesses worldwide to communicate, share information, conduct business and
otherwise interact electronically. The relatively low costs required to
distribute content, services and technology through Internet web sites compared
to traditional means and the global reach of the Internet have given rise to an
ever increasing array of new services addressing a broad consumer market. To
date, Internet web sites have been created primarily by two groups:
- corporations, who invest significant resources in the development and
maintenance of web sites to promote their products and services. These
sites usually focus on delivering content or selling products and services
to the consumer.
- technically inclined individuals, who apply their knowledge of programming
languages such as HTML, CGI and Java or use specialized software tools to
build web sites for themselves, friends or small business clients. These
pages are typically hosted on home page hosting communities or on the
servers of Internet service providers.
Although these two groups constitute only a small percentage of Internet users,
they have created almost all web sites.
The vast majority of Internet users do not create web sites but spend their
time on the Internet browsing portal content sites, shopping at e-commerce sites
or occasionally visiting an amateur or small business site. These individuals,
because of the existing barriers to establishing their own Internet presence,
largely miss out on one of the most promising aspects of the Internet: utilizing
it as a personalized, interactive communications environment.
THE CONSUMER'S NEED TO CREATE AN INTERNET PRESENCE
A majority of current and potential Internet users has neither the
programming knowledge to design nor the financial incentive to hire a consultant
to build a web site. Yet, this group consists of millions of people who have
many reasons to create their own Internet presence. These people include:
- individuals who are looking to stay in touch with family, share
photographs or communicate with friends;
- members of a club or organization who want to plan events, share
information, raise money, create an e-mail list or recruit new members;
- small businesses that want to build an online presence, take orders and
receive payments over the Internet, reach prospective customers around the
globe, build customer loyalty or recruit new employees;
- anyone who is planning a wedding, having a baby or celebrating a holiday;
- people who are passionate about a hobby or interest; and
- teens or students who want to socialize with friends, post resumes or
publish research projects on the Internet.
Historically, these people have been forced to choose from a limited number
of web site building solutions. Technical programming tools and shrink-wrapped
software are time consuming and difficult to use. Online hosting communities
offer templates with limited functionality and usability. Specialized online
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services, such as mailing lists, photo albums, family trees or event planners,
only provide solutions for certain of their needs and may be hard to find or
difficult to integrate into a web site.
THE DIFFICULTY OF CUSTOMER ACQUISITION AND RETENTION
Consumers are frustrated by the difficulty of creating an Internet presence.
Likewise, businesses providing content, services and technology are frustrated
by the difficulty of effectively reaching these consumers. The cost for a new
Internet company to acquire a critical mass of customers on the Internet using
traditional advertising and marketing is increasing, as more companies attempt
to reach customers in an already crowded marketplace.
Once an Internet business has acquired customers, it faces the additional
challenge of retaining them and winning their loyalty. Its competitors, who may
be only one click or a few keystrokes away on the Internet, are constantly
enticing these customers with lower prices or new features. As a result, online
companies are looking for ways to lower customer acquisition costs and increase
customer retention by building brand loyalty, encouraging repeat visits and
integrating their content, services and technology into each customer's daily
Internet experience.
MARKET OPPORTUNITY
Small businesses and individuals need a powerful but non-technical way to
create an Internet presence by integrating their own content with existing
Internet content and services. Internet content, service and technology
providers need a way to reach individuals or small businesses who want to create
such an Internet presence. As a result, there is a demand for an easy-to-use and
economical platform that enables individuals and small businesses to create,
communicate and collaborate online and which simultaneously provides a
cost-effective and efficient way for these Internet content, service and
technology providers to acquire and retain customers. We believe this creates an
opportunity to bring individuals and small businesses together with content,
service and technology providers on the Internet.
THE HOMESTEAD SOLUTION
We empower individuals and small businesses to become active participants on
the Internet by enabling them to build their own web sites at no cost using
leading Internet content, services and technology as building blocks. To achieve
this, we pioneered the first online drag and drop technology to create web
sites. Our platform, which is built on our proprietary Homestead element
architecture, enables any Internet user to build a feature-rich web site by
integrating and customizing elements containing content, services and technology
provided by third parties. We believe our approach is creating an important new
distribution channel for these third-party businesses trying to reach
individuals and small businesses on the Internet.
Our members build personalized, interactive web sites to use in many aspects
of daily life. For example, our members build web sites to promote their small
businesses, interact with family members, manage clubs and teams, create an
Internet presence for non-profit organizations, operate online shops, share
personal interests and organize events. When new members join Homestead and
begin to build a web site, they use our proprietary technology to drag and drop
elements onto their web site. We currently have over 150 elements, including
customizable stock tickers, guest books for visitor registration, chat rooms,
headline news, commerce links and audio and video capabilities.
Since launching our web site service, we have been one of the fastest
growing sites on the Internet in terms of registered members and unique
visitors. The total number of registered Homestead members has grown from
300,000 in March 1999 to 4.2 million in March 2000. During March 2000, an
average of over 20,000 new members registered each day with our service compared
to an average of under 3,000 in March 1999. According to PC Data, in March 2000,
we had 7.4 million unique visitors to the www.homestead.com
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site compared to 894,000 in March 1999 and were ranked as the 42nd most visited
site on the Internet, as compared to 321st in March 1999.
We believe that the key differentiators of our solution are as follows:
EASY AND INNOVATIVE WAY FOR CONSUMERS TO CREATE AN INTERNET PRESENCE
We provide one of the easiest and most effective means for anyone to create
an Internet presence. Our innovative solution enables any Internet user to build
high-quality, customizable web sites. Members publish their web sites on the
Internet with a single mouse click and can easily maintain and expand their web
site by modifying existing elements, adding new elements or creating additional
pages. To enable our members to retain full control over the look and feel of
their web sites, we do not place any banner or pop-up ads on their sites. We
also provide other helpful resources to our members including pre-built
templates, online tutorials, member support and third party services.
NEW CHANNEL FOR INTERNET CUSTOMER ACQUISITION AND RETENTION
We provide a new channel which enables Internet businesses to acquire and
retain customers in a cost-effective manner. By working with our business
partners to integrate selected features of their content, service or technology
into Homestead elements and enabling our members to embed those elements into
their web sites, we provide a distribution channel through which online
businesses and consumers can interface efficiently. Our business partner
acquires a new customer and promotes its brand each time a member incorporates
the partner's element into a web site. Visitors to this web site provide the
partner with additional opportunities to acquire new customers.
When members choose to incorporate the content, service or technology
elements of our business partners into their web sites, stronger business
relationships are created. For example, a chat service becomes a family reunion
and a message board becomes a link between a small business and its customers.
This not only increases customer retention, but also builds loyalty to the
business and its brand. Unlike online advertising or promotional links, the
content, service or technology of our partner actually becomes a functional and
integral part of the web site. Furthermore, visitors to that web site often have
a pre-existing relationship with the builder of the web site and may be affected
by the builder's implied endorsement of those elements. As a result, we believe
Homestead elements have a significantly higher average click-through rate than
traditional banner advertising.
VIRAL NATURE OF MEMBER GROWTH
Our members encourage family, friends, colleagues and customers to visit
their web sites, which in turn promotes the Homestead service and builds member
loyalty. We believe that most of our new members come to us in this manner,
which accelerates our growth without the need to advertise to acquire new
members. We include several features in our service which encourage this viral
growth, including buttons at the bottom of every Homestead member page which
allow visitors to "Create your own web site" and "Send this URL to a friend."
LEADING WEB FUNCTIONALITY
We provide our members with access to high quality content, services and
technology through our business partners. We actively search the marketplace for
unique, innovative and useful functionality that we can distribute to our
members and of which they might otherwise not be aware. Our members can then
easily integrate and customize those services using the consistent interface of
the Homestead service, eliminating the need to find, register, download, install
and customize each additional service individually.
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PROPRIETARY ELEMENT ARCHITECTURE
Our proprietary element architecture provides a powerful and flexible
framework for Internet businesses to distribute their content, service or
technology. Elements can be created from almost any content, service or
technology that exists on the Internet, whether based on HTML, Java, CGI, a
proprietary plug-in or another technology. A business selects the component or
service that it desires to turn into an element and then conforms it to the
Homestead element architecture guidelines. We help the partner design and
integrate the element effectively and test it for scalability and performance
prior to release. When the new element is released, it is immediately available
to all Homestead members.
SCALABLE AND EFFICIENT BUSINESS MODEL
We believe our solution supports a scalable and efficient business model by
reducing the expenditures otherwise required for customer acquisition, content
generation and new technology development. As we introduce new and innovative
third party elements, we enhance the functionality and reputation of the
Homestead service, which attracts more members to build web sites. Additional
Homestead web sites attract more visitors to our service, which further
accelerates the growth of our member base and in turn increases the value of our
distribution channel to new and existing business partners.
THE HOMESTEAD STRATEGY
Our objective is to build a major distribution channel for the Internet's
best content, services and technology and to enable active Internet
participation by the mass market. The key elements to our strategy are as
follows:
CAPITALIZE AND EXPAND ON MULTIPLE REVENUE OPPORTUNITIES
We currently derive revenue during the lifetime of a web site when members
integrate third-party elements into their web site, when members utilize
third-party services that are promoted by Homestead and when visitors buy
something from or through a member's web site. We generate additional revenue
when we co-brand our service for another Internet company.
We intend to enhance these revenue opportunities by:
- increasing the number and range of elements that we offer and improving
our ability to identify, develop and deliver elements that are relevant to
our members;
- expanding the types of services that we offer to our members, including
premium services that can be purchased directly from us;
- enhancing the direct commerce capabilities that can be integrated into a
Homestead web site and refining our MoneyMaker program, which allows our
members to sell products of other companies; and
- increasing the number of our co-brand partners, which extends the reach of
the Homestead service.
INCREASE OUR TECHNOLOGY AND USABILITY ADVANTAGES
We believe that providing our members with leading web site functionality
and performance is critical to our continued growth and leadership. We intend to
update our core technologies, expand our services and enhance the ease-of-use of
our products. We typically integrate new elements and services into our platform
on a monthly basis. In addition, we regularly improve the user-interface and
features of our service in order to make it even easier to use. We intend to
continue developing and launching new features, technology and services in order
to enhance and improve what an individual or small business can do on the
Internet.
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SUPPORT CONTINUED VIRAL GROWTH OF OUR MEMBER BASE
We believe that viral growth in our member base provides us with an
efficient means of growing our business. We intend to continue to support that
growth through loyalty and retention programs that we believe will increase our
members' enthusiasm and affiliation with our service. We will continue to
develop ways to help members drive traffic to their sites, provide easy ways for
visitors to build their own web sites and encourage members to "tell a friend"
about Homestead.
ESTABLISH NEW BUSINESS PARTNERSHIPS
We believe that we have created competitive advantages due to our business
partnerships with high quality element, services and co-brand partners that we
have attracted to date. We intend to build more of these partnerships in the
future, both with established Internet media, content and commerce brands and
with emerging technology companies. We also intend to pursue strategic
distribution partnerships internationally to expand the reach of our current
Homestead service globally.
BUILD BRAND LOYALTY
We intend to establish Homestead as the leading brand for individuals and
small businesses to create an Internet presence. We believe that building a
well-recognized, trusted brand will create a long-term asset that we can
leverage as we enter related markets, develop new products and expand our member
base. We intend to continue investing in marketing campaigns and activities such
as email newsletters, contests and co-marketing promotions, public relations,
personalized member support and advertising to build awareness of the Homestead
brand.
EXTEND THE HOMESTEAD PLATFORM TO NEW MARKETS
We intend to develop additional offerings which expand the ways we can
distribute the Internet's best content, services and technologies. We believe
our technology may be applicable to other areas, such as medium sized
businesses, online stores, corporate intranet publishing, wireless devices and
personal productivity.
THE HOMESTEAD EXPERIENCE
BUILDING A WEB SITE
The Homestead service provides an easy way for individuals and small
businesses to create and publish web sites. No software needs to be installed
and no programming is required. Our web site service provides a wide range of
customizable features yet is easy and intuitive enough for a novice to use.
The first step in building a Homestead web site is for the member to select
the category of web site he or she wants to build. There are currently six
categories to choose from--personal, teens, hobbies and interests, events and
holidays, clubs and organizations and small business--or, the member can begin
with a blank page. We offer customizable templates within these categories to
help members get started. Once a template has been chosen, members can begin to
customize their site through the addition of their own content or the
incorporation of elements.
ELEMENTS
Homestead elements are the building blocks of a member's web site. They are
added to a Homestead web site simply by selecting a graphical icon from a
palette of elements. We currently offer more than 150 of these pre-programmed
elements that include everything from basic features, such as text boxes,
buttons and photos, to dynamic features, such as stock tickers, chat rooms,
guest books, search boxes and e-commerce shopping carts. Almost any type of
functionality that can be included on a web site can be
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made into an element, no matter how complex. The properties of each element,
such as its size, color, style and various other parameters, can also be
customized by the member.
ONE-CLICK PUBLISHING
Once a member creates a web site, publishing it on the Internet is as simple
as clicking the "Save" button. The new page is generated automatically into
standard HTML, hosted at www.homestead.com, and is available for immediate
viewing on the Internet. The entire publishing process takes just a few seconds.
Homestead members can choose to increase the visibility of their site by
listing it in the Homestead directory or automatically sending email invitations
to family, friends and associates. Alternatively, they can choose password and
permission options to restrict the viewing and editing of their web sites to
specified individuals.
MAINTAINING AND IMPROVING A WEB SITE
We offer a range of resources to help members maintain and improve their web
sites, such as a weekly online column which provides updates on new elements,
ideas for new web sites and ways to improve existing web sites. We also provide
easy-to-follow tutorials and a section that highlights creative, well-designed
sites so members can share their ideas. New features and capabilities typically
are added every month and are made available to all members upon release.
HOMESTEAD BUSINESS PARTNERSHIPS
We develop and maintain three types of revenue-generating business
partnerships: sponsored elements, promotions and advertising, and co-brands.
ELEMENT PARTNERS
Homestead elements provide a unique opportunity for companies seeking to
build their brand, attract new customers or distribute their technology or
service to a large user base. We work with our business partners to integrate
their content, service or technology into an element for inclusion on a member's
web site. All elements add some degree of functionality to a web site. In some
instances, elements go beyond what most professional programmers could do within
the context of HTML programming.
CONTENT AND SERVICES ELEMENTS. Content and services elements deliver
real-time information, such as news, weather reports, maps, horoscopes or search
results, to members' web sites. Service elements provide even greater
functionality than just content alone. Examples of service elements include
online storage, custom graphic creation and games. The following is a list of
the top 15 content and service element partners whose elements were most
frequently dropped on members' sites during the first quarter of 2000:
<TABLE>
<S> <C> <C>
AccuWeather.com Ask Jeeves CBS MarketWatch
Cyber Networks Deja.com FirstLook.com
iSyndicate MyFamily.com pogo.com
RollingStone.com StockMaster Surveyor
Voila The Weather Underground YellowOnline.com
</TABLE>
COMMERCE ELEMENTS. Homestead commerce elements allow a member to use their
web site to earn money. Members can sell their own products or realize
commissions on products provided by commerce element partners. Our commerce
element partners include e-commerce companies seeking to increase sales and
reach a broader base of customers though links across members' web sites.
Homestead MoneyMaker elements allow a user to easily join an e-commerce
company's affiliate program, build a graphical link to the partner's web site
and earn money through the use of the element. Homestead
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members earn money whenever a click-through on these links results in a sale on
the element partner's web site. Our members can also build an e-commerce web
site by dragging and dropping elements that provide the member with the
functionality necessary to make his or her own store, including payment
processing and shopping cart technology. The following is a list of the top 15
commerce element partners whose elements were most frequently dropped on
members' sites during the first quarter of 2000:
<TABLE>
<S> <C> <C>
Amazon.com Audio Book Club barnesandnoble.com
Beyond.com The Disney Store Online eBay
eToys Fogdog Sports Hickory Farms
I-Escrow More.com Pets.com
PETsMART.com Reel.com vStore.com
</TABLE>
TECHNOLOGY ELEMENTS. These elements are provided by companies that want to
offer their technology to our members. Examples of technology elements include
voice chat, guest books, web cams and message boards. Our technology partners
gain a highly effective and efficient channel to distribute their products to
potential customers because we seamlessly integrate each technology element into
our service and overcome the complexity of locating, registering, downloading,
installing and customizing each technology individually. The following is a list
of the top 10 technology element partners whose elements were most frequently
dropped on members' sites during the first quarter of 2000:
<TABLE>
<S> <C> <C>
Blink.com (bookmarks) Comet Systems (custom cursors) CoolBoard.com (message board)
Desktop Live (audio/video) Gizmoz (horoscope) HearMe (voice chat)
MyComputer.com (site PageTalk (audio) theDial (online radio)
statistics)
ZY.com (graphics)
</TABLE>
PROMOTION AND ADVERTISING
We also offer promotion and advertising services for companies that want to
access our member base. Examples include domain name registration, email
services and software downloads. In addition, some partners provide sponsorship
for highly trafficked areas of the site in order to get exposure for their
brand. The following is the list of our promotion and advertising partners as of
May 1, 2000:
<TABLE>
<S> <C> <C>
Alldomains.com CardBlast.com Commtouch Software
Gator.com Go!Zilla myplay
NetFlip NorthPoint Communications Preference Technologies
RealNames yesmail.com
</TABLE>
CO-BRAND PARTNERSHIPS
We have also built co-branded versions of our service that are integrated
into over 20 communities on the Internet on an outsourced application service
provider, or ASP, basis. This enables our partners to build traffic, retain
customers and increase the stickiness of their own web sites. The partner
receives the primary branding and we maintain a "Powered By Homestead" secondary
branding on both the partner's site and on user pages. The following is the list
of our co-brand partners using a customized version of our service as of
March 31, 2000:
<TABLE>
<S> <C> <C>
AltaVista audiohighway.com CollegeClub.com
Cybereps Deja.com Dellnet.com
eStyle Harris Online Communities iCAST
Internet SportStations Juno Online Services Lucasfilm Ltd.
Nerve.com Net Revolution NetZero
UGO Networks USA TODAY Virtual Communities
</TABLE>
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<PAGE>
SALES AND MARKETING
We employ a variety of sales and marketing programs to increase our member
base, attract business partners and build brand loyalty. We have a sales team
dedicated to identifying possible business partners and developing long-term
strategic relationships with these partners. We currently outsource our other
sales efforts to a third party provider.
We have a marketing team dedicated to designing and implementing brand
development programs. These programs include email newsletters, contests and
co-marketing promotions, public relations and personalized member support. In
addition, we employ television, print and online advertising to build awareness
of the Homestead brand.
MEMBER AND PARTNER SUPPORT
We have an in-house member support team which provides email support to our
members. Our member support personnel handle general member inquiries and
technical questions. We have automated many of the tools used by our member
support staff.
In addition, we have an in-house account management team dedicated to
supporting our business partners. The relatively long-term nature of our partner
contracts provides us with an opportunity to build strong business relationships
with our partners.
TECHNOLOGY AND OPERATIONS
We have developed a proprietary production system which enables us to
integrate new technologies into the Homestead platform on a monthly basis. This
provides us with the responsiveness and flexibility to adapt and integrate new
technologies quickly, unlike traditional shrink-wrapped software which is
upgraded typically once every 12 to 18 months. Because our service is hosted on
our web site with no client software to install, every time the member logs in
to www.homestead.com and begins the editing process, they are able to use the
newest version without having to install or upgrade any software.
Member web sites are stored on redundant disk arrays and served using a
suite of industry-standard, load-balanced web servers. Member profile
information is maintained using highly scalable database technology. We intend
to upgrade and expand our server, database, and networking infrastructure in
order to ensure fast and reliable access to the Homestead service. The servers
hosting www.homestead.com, and our co-branded partner sites, are located at a
third-party provider in Northern California. All systems are monitored 24 hours
a day, seven days per week, by our on-call engineers, using internally
developed, proprietary monitoring and notification software. We maintain
significant over-capacity with our provider so that if a server fails, the
remaining servers can support continued operation of our service.
COMPETITION
We believe that the principal competitive factors in our industry are size
and scale, functionality, brand recognition and member affinity and loyalty. We
believe our current major competitors are providers of shrink-wrapped software,
home page hosting communities and Internet sites focused on specific vertical
markets.
We will likely also face competition for business partners from other
Internet distribution channels such as search engines, content sites, commercial
online services, sites maintained by Internet service providers and other
entities that attempt to establish their own distribution channels on the
Internet. In addition, we may face competition from traditional media and other
established companies.
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<PAGE>
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We rely on trademark, service mark, copyright and trade secret laws to
protect our intellectual property and proprietary information. We hold a
registered trademark for "Homestead" and have applications pending for our
logos. We currently have no patents or patent applications pending. Effective
trademark, copyright and trade secret protection may not be available in every
country in which our services are made available through the Internet. We have
entered into confidentiality and invention assignment agreements with our
employees and consultants and nondisclosure agreements with parties with whom we
conduct business in order to limit access to and disclosure of our proprietary
information. The contractual arrangements and other steps we have taken to
protect our intellectual property may not prevent the misappropriation of our
technology or deter independent third-party development of similar technologies.
EMPLOYEES
As of March 31, 2000, we had 116 full-time employees. We consider our
relations with our employees to be excellent.
FACILITIES
We are currently leasing three office and research and development
facilities in Menlo Park, California, which provide approximately 20,000, 18,000
and 6,000 square feet, respectively. The 20,000 and 18,000 square foot leases
both expire September 30, 2014 and the 6,000 square foot lease expires
December 31, 2000. We believe that these facilities are adequate to meet our
needs for the immediate future and that future growth can be accommodated by
leasing additional or alternative space near our current facilities.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth information regarding our executive officers,
directors and key employees as of March 31, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Justin S. Kitch............................ 27 Chairman of the Board and Chief Executive
Officer
Elizabeth H. Burr.......................... 38 President and Chief Marketing Officer
Mark S. Garrett............................ 42 Senior Vice President, Chief Financial Officer
and Secretary
David J. Wu................................ 32 Senior Vice President and Chief Product Officer
Timothy C. Draper.......................... 41 Director
Timothy M. Haley(1)(2)..................... 45 Director
David A. Heap.............................. 56 Director
James C. Kitch............................. 52 Director
Linda Fayne Levinson(1)(2)................. 58 Director
Paul Matteucci(2).......................... 44 Director
KEY EMPLOYEES:
Mona Bergevin.............................. 28 Vice President, Administration and Human
Resources
Thai D. Bui................................ 25 Vice President, Software Development
E. Michael Geller.......................... 31 Vice President, Strategic Partnerships
Paul G. Johnson............................ 32 Vice President, Business Development
Samuel R. Schorr........................... 52 Vice President, Systems
</TABLE>
- ------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
JUSTIN S. KITCH is a co-founder of Homestead and has served as our Chief
Executive Officer and Chairman of the Board since our inception and our
President from inception through March 2000. Mr. Kitch previously worked as
program manager for new product creation in the Kid's Software Group at
Microsoft Corp. Mr. Kitch is also a director of Virtual Village Inc., an online
training and consulting company. Mr. Kitch holds a B.S. from Stanford
University. Mr. Kitch is a nephew of James C. Kitch, a director of Homestead.
ELIZABETH H. BURR has served as our President since March 2000 and Chief
Marketing Officer since January 2000. From May 1992 to December 1999, Ms. Burr
was employed by Gap Inc., a clothing retailer, in various positions, most
recently as vice president, global brand management. Prior to that, Ms. Burr
held various positions at Morgan Stanley & Co. Incorporated, an investment
banking firm, most recently as an associate in the high technology group.
Ms. Burr holds an A.B. from Smith College and an M.B.A. from the Stanford
Graduate School of Business.
MARK S. GARRETT has served as our Senior Vice President and Chief Financial
Officer since March 2000 and Secretary since April 2000. He joined Homestead
from Fogdog, Inc., an online retailer of sporting goods, where he served as vice
president and chief financial officer from November 1999 to March 2000. Prior to
joining Fogdog, Mr. Garrett served as chief financial officer at
Documentum Inc., an Internet based software application development company,
from January 1997 to November 1999. Mr. Garrett served as vice president of
finance at Cadence Design Systems, an electronic design automation company, from
June 1991 to January 1997. Prior to that Mr. Garrett held a senior management
position at IBM Corporation. He holds a B.A. from Boston University and an
M.B.A. from Marist College.
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<PAGE>
DAVID J. WU has served as our Senior Vice President and Chief Product
Officer since November 1999. From June 1997 to November 1999, he served as our
Vice President of Development. From October 1991 to March 1996, Mr. Wu served as
a member of the business solutions group at Scitor Corporation, a business
software company. He holds a B.S. and an A.B. from Stanford University.
TIMOTHY C. DRAPER has served as a director of Homestead since May 1998.
Mr. Draper is a managing director of Draper Fisher Jurvetson, a venture capital
investment firm, which he founded in January 1986. Mr. Draper currently serves
on the boards of GoTo.com, Inc., PLX Technology and Tumbleweed Communications.
He also serves on the boards of several private companies. Mr. Draper holds a
B.S. from Stanford University and an M.B.A. from Harvard Business School.
TIMOTHY M. HALEY has served as a director of Homestead since April 1999.
Mr. Haley is a founding partner of Redpoint Ventures, a venture capital
investment firm, and has been a managing director since November 1999. He has
been a managing director of Institutional Venture Partners, a venture capital
investment firm, since February 1998. From June 1986 to February 1998,
Mr. Haley was the president of Haley Associates, an executive recruiting firm in
the high technology industry. He also serves on the boards of several private
companies. Mr. Haley holds a B.A. from Santa Clara University.
DAVID A. HEAP has served as a director of Homestead since March 1996.
Mr. Heap currently serves as Chairman and Chief Executive Officer of ISA
International plc, a computer supplies distributor. He served as chairman of the
board of directors of Daisytek International Corporation from January 1982 to
September 1999, as chief executive officer of Daisytek from January 1982 to
April 1997 and president from September 1982 to April 1990. Mr. Heap is a
director of Virtual Village, Inc. and several privately-held companies.
Mr. Heap holds a B.A. from Manchester University.
JAMES C. KITCH has served as a director of Homestead since October 1994. He
is a partner at Cooley Godward LLP, a law firm which provides legal services for
Homestead. He is also a director of Lynx Therapeutics, Inc. Mr. Kitch holds an
A.B. from Harvard University and a J.D. from Stanford University. Justin Kitch
is Mr. Kitch's nephew.
LINDA FAYNE LEVINSON has served as a director of Homestead since April 1999.
Ms. Levinson is a partner of Global Retail Partners, L.P., a private equity
investment fund financing early stage companies, which she joined in April 1997.
From 1994 to 1997, she served as president of Fayne Levinson Associates, a
management consulting firm. Earlier in her career, Ms. Levinson was a senior
vice president at American Express Travel Related Services Co., Inc.,
responsible for its leisure travel business, and a partner at McKinsey & Co.
Ms. Levinson serves on the board of directors of AdminiStaff, Inc.,
CyberSource, Inc., Exactis.com, Inc., GoTo.com, Inc., Jacobs Engineering
Group, Inc., lastminute.com, plc, and NCR Corporation, as well as several
private companies. Ms. Levinson holds an A.B. from Barnard College, an M.A. from
Harvard University and an M.B.A from New York University.
PAUL MATTEUCCI has served as a director of Homestead since March 2000. He
has been chief executive officer and chairman of the board of HearMe, an online
communications company, since May 1995. From December 1994 to May 1995,
Mr. Matteucci was a resident entrepreneur at Institutional Venture Partners, a
venture capital investment firm. Mr. Matteucci holds a B.A. from the University
of the Pacific, an M.A. from Johns Hopkins School of Advanced International
Studies and an M.B.A. from the Stanford Graduate School of Business.
MONA BERGEVIN has served as our Vice President of Administration and Human
Resources since July 1999. From May of 1997 to June 1999, she served as our
Director of Human Resources. Prior to joining Homestead, Ms. Bergevin worked in
the legal department of Diba, Inc., an Internet software company. She holds a
B.A. from San Jose State University and a J.D. from the University of
California, Hastings College of the Law.
THAI D. BUI is a co-founder of Homestead and has served as our Vice
President of Software Development since November 1999. From October 1994 to
November 1999, he served as our Vice
35
<PAGE>
President of Technology. From June to September 1994, Mr. Bui worked as a
software engineer with the consulting division at Trilogy Development Group, an
e-business software company. Mr. Bui holds a B.S. and M.S. from Stanford
University.
E. MICHAEL GELLER has served as our Vice President of Strategic Partnerships
since December 1999 and as our Vice President of Sales and Marketing from
October 1997 to November 1999. From May 1996 to October 1997, Mr. Geller served
as a product manager and director of business development at Infoseek
Corporation, an online search engine and Internet portal. Prior to that, he
worked as a management consultant for Grant Thornton, an accounting and
management consulting firm, from August 1990 to August 1994. Michael holds a
B.S.E. degree from the University of Pennsylvania and an M.B.A. from the Harvard
Business School.
PAUL G. JOHNSON has served as our Vice President of Business Development
since March 1999. Mr. Johnson joined Homestead from A.T. Kearney, Inc., a
management consulting firm, where he worked from 1994 to 1999 and was a
principal in the high technology practice. Prior to A.T. Kearney, he worked as a
marketing representative for IBM from 1989 to 1992. Mr. Johnson holds a B.S.
from the University of Illinois and a Master of Management from the J.L. Kellogg
Graduate School of Management.
SAMUEL R. SCHORR has served as our Vice President of Systems since April
1998. From January to March 1998, Mr. Schorr was a consultant for Virtual
Village, Inc. He served as director of client/server computing for Ingram Micro,
a global distributor of technology and services from October 1995 to December
1997. Prior to that, Mr. Schorr served as vice president, management information
systems for WorldCom/IDB Communications, a telecommunications company.
BOARD COMMITTEES
The board of directors has established an audit committee consisting of
Mr. Haley, Ms. Levinson and Mr. Matteucci. The audit committee reviews with our
independent accountants the scope and timing of their audit services and any
other services that they are asked to perform, the independent accountants'
report on our financial statements following completion of their audit, and our
policies and procedures with respect to internal accounting and financial
controls. In addition, the audit committee makes annual recommendations to our
board of directors for the appointment of independent accountants for the
upcoming year.
The board of directors has established a compensation committee consisting
of Mr. Haley and Ms. Levinson. The compensation committee makes recommendations
to the board concerning salaries and compensation for our officers and
administers our employee benefit plans.
BOARD COMPOSITION
We currently have seven directors. Upon the closing of this offering the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year.
- The class I directors will be Mr. Draper and Mr. Heap and their term will
expire at the annual meeting of stockholders to be held in 2001.
- The class II directors will be James C. Kitch and Ms. Levinson and their
term will expire at the annual meeting of stockholders to be held in 2002.
- The class III directors will be Justin S. Kitch, Mr. Haley and
Mr. Matteucci and their term will expire at the annual meeting of
stockholders to be held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose term will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. The authorized number of directors may be changed only by
36
<PAGE>
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 directors. This classification of the board of directors may have the effect
of delaying or preventing changes in control or management of Homestead.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation for services on
the board of directors or any committee of our board, but directors may be
reimbursed for certain expenses in connection with attendance at board of
directors and committee meetings. All directors are eligible to participate in
our 1996 Stock Option Plan. In June 1997, James C. Kitch was granted an option
to purchase 100,000 shares of our common stock at an exercise price of $.11 per
share. In September 1999, Mr. Matteucci was granted an option to purchase 10,000
shares of our common stock at an exercise price of $.75 per share, and in April
2000, Mr. Matteucci was granted an option to purchase 40,000 shares of our
common stock at an exercise price of $2.50 per share. We expect our directors to
be eligible to participate in our 2000 Equity Incentive Plan and our employee
directors to be eligible to participate in our 2000 Employee Stock Purchase
Plan. See "Employee Benefit Plans" for additional information relating to these
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee was, at any time since our
formation, an officer or employee of Homestead. None of our executive officers
currently serves, or in the past has served, as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers who serve as a member of our compensation committee.
EXECUTIVE COMPENSATION
The following table presents information regarding the compensation paid to
our chief executive officer and our other executive officer whose salary and
bonus exceeded $100,000 during the fiscal year ended December 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Justin S. Kitch .................................. $100,000 $ -- -- $ --
Chief Executive Officer
David J. Wu ...................................... 101,000 -- 250,100 --
Senior Vice President and Chief Product Officer
</TABLE>
37
<PAGE>
OPTION GRANTS IN 1999
The following table sets forth each grant of stock options granted during
1999 to each of the named executive officers. The exercise price per share of
each option granted was equal to the fair market value of the common stock as
determined by the board of directors on the date of the grant.
Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by the assumed initial public
offering price per share of $ , (b) assuming that the aggregate stock value
derived from that calculation compounds at the annual 5% or 10% rates shown in
the table for the entire ten year term of the option and (c) subtracting from
that result the aggregate option exercise price. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission. We can provide no assurance to any executive
officer or any other holder of our securities that any stock price appreciation
over the option term will be at the assumed 5% and 10% levels or at any other
defined level.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE (PER EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR SHARE) DATE 5% 10%
- ---- ---------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Justin S. Kitch................ -- --% $ -- -- $ -- $ --
David J. Wu.................... 100 * .75 10/01/09
250,000 8.3 .75 11/16/09
</TABLE>
- ------------------------
* Less than one percent.
AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END VALUES AT DECEMBER 31, 1999
The following table sets forth, as to the named executive officers,
information concerning stock options exercised during the fiscal year ended
December 31, 1999 and the value of their options at December 31, 1999.
The information regarding the value realized reflects the fair market value
of our common stock underlying the option on the date of exercise, as determined
in good faith by our board of directors, minus the aggregate exercise price of
the option. The information regarding the value of unexercised in-the-money
options is based on a value of per share, the assumed initial public
offering price, minus the per share exercise price, multiplied by the number of
shares underlying the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED VALUE --------------------- ---------------------------
NAME ON EXERCISE REALIZED VESTED UNVESTED EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Justin S. Kitch................. -- $ -- -- -- $ -- $ --
David J. Wu..................... 75,000 47,925 147,808 527,292
</TABLE>
38
<PAGE>
BENEFIT PLANS
2000 EQUITY INCENTIVE PLAN
Our board of directors adopted the 2000 Equity Incentive Plan, or "2000
Plan," in May 2000 and our stockholders approved it in 2000. The 2000 Plan
will be effective on the effective date of this offering. After that time no
further grants will be made under our 1996 Stock Option Plan.
SHARE RESERVE. A total of 4.4 million shares of our common stock have been
reserved for issuance under the 2000 Plan. Commencing with January 1, 2002, and
each January 1 thereafter, the share reserve will increase by the least of the
following:
- 6% of our total outstanding common stock (on a fully diluted, as converted
basis) at the time of an increase; or
- an amount less than that above as determined by our board of directors.
No more than of the shares reserved can be issued through the exercise
of incentive stock options. When a stock option expires or is terminated before
it is exercised, the shares not acquired pursuant to the stock option again
become available for issuance under the 2000 Plan.
ADMINISTRATION. Our board of directors administers the 2000 Plan. Our board
of directors, however, may delegate this authority to a committee of one or more
board members. The board or this committee has the authority to construe,
interpret and amend the 2000 Plan as well as to determine:
- the recipient of any stock award;
- the grant date of a stock award;
- the number of shares subject to a stock award;
- the exercisability and vesting of a stock award;
- the exercise price of a stock award;
- the type of consideration to receive stock under a stock award; and
- the other terms of a stock award.
Our board of directors may amend or modify the 2000 Plan at any time.
However, no amendment or modification shall adversely affect the rights and
obligations with respect to stock awards unless the holder consents to that
amendment or modification. In addition, our board of directors may, if required
or desirable, seek the approval of our stockholders to:
- increase the maximum number of shares issuable under incentive stock
options under the 2000 Plan or the rate at which shares are added to the
reserve of the 2000 Plan (except for permissible adjustments in the event
of certain changes in the company's capitalization);
- materially modify the eligibility requirements for participation; or
- materially increase the benefits accruing to participants.
ELIGIBILITY. The 2000 Plan permits granting stock awards to employees,
directors and consultants of us or certain of our affiliates. A stock award may
be an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code, a nonstatutory stock option, a right to purchase restricted stock,
or a restricted stock bonus.
Section 162(m) of the Internal Revenue Code, among other things, denies a
deduction to publicly held corporations for compensation paid to the chief
executive officer or any of the four highest compensated officers (excluding the
chief executive officer) in a taxable year to the extent that the compensation
of that officer exceeds $1,000,000. To prevent options granted under the 2000
Plan from being included in this
39
<PAGE>
compensation, in any calendar year the board may not grant options under the
2000 Plan to an employee covering an aggregate of more than 2 million shares.
STOCK OPTION PROVISIONS GENERALLY. In general, the duration of a stock
option granted under the 2000 Plan cannot exceed 10 years. The exercise price of
an incentive stock option cannot be less than 100% of the fair market value of
the common stock on the date of grant. The exercise price of a nonstatutory
stock option cannot be less than 85% of the fair market value of the common
stock on the date of grant. An incentive stock option may be transferred only on
death, but a nonstatutory stock option may be transferred as permitted in the
stock option agreement.
Unless the terms of an optionholder's stock option agreement provide for
earlier or later termination, if all of an optionholder's service relationships
with us and our affiliates terminate, then that optionholder (or that
optionholder's beneficiary if that optionholder has died) generally may exercise
vested options within:
- 18 months after that date if termination is due to death;
- 12 months after that date if termination is due to disability; or
- 30 days after that date if termination is for any reason other than
disability or death.
Incentive stock options may be granted only to our employees and the
employees of certain affiliates. The aggregate fair market value, determined at
the time of grant, of shares of our common stock with respect to which incentive
stock options are exercisable for the first time by an optionholder during any
calendar year under all of our stock plans may not exceed $100,000. An incentive
stock option granted to a person who at, the time of grant, owns or is deemed to
own more than 10% of the total combined voting power of us or any of our
affiliates must have a term of no more than five years and an exercise price
that is at least 110% of fair market value at the time of grant.
PROVISIONS OF OTHER STOCK AWARDS GENERALLY. The board or committee
determines the purchase price of other stock awards, which for nonstatutory
stock options and stock purchase awards cannot be less than 85% of the stock's
fair market value at the time of grant. Stock bonuses, however, may be awarded
in consideration of past services without additional payment. Shares that we
sell or award under the 2000 Plan may, but need not be, restricted and subject
to a repurchase option in our favor in accordance with a vesting schedule. The
board or committee, however, may accelerate the vesting of restricted stock.
EFFECT ON STOCK AWARDS OF A CHANGE IN CONTROL. The 2000 Plan provides that
in the event of a change in control of our company, the surviving entity may
assume all outstanding stock awards or substitute similar stock awards for them.
If the surviving entity determines not to assume or substitute for these stock
awards, the vesting in full of stock awards held by persons whose service with
us or our affiliates has not already terminated will accelerate immediately
prior to this change in control. If there is no assumption or substitution, then
all outstanding stock awards terminate upon the change of control to the extent
not exercised.
OTHER PROVISIONS. If there is a transaction or event not involving our
receipt of consideration, including a merger, consolidation, reorganization,
stock dividend, or stock split, the board will appropriately adjust the class
and the maximum number of shares subject to the 2000 plan, the cap on the number
of shares available for incentive stock options, and the Section 162(m) limit.
Our board also will appropriately adjust the price under outstanding stock
awards as well as the class and number of shares of those stock awards.
PLAN TERMINATION. The 2000 plan terminates as determined by our board or
committee, but incentive stock options will not be granted after May 4, 2010.
OPTIONS ISSUED. As the 2000 plan is not effective until the effective date
of this offering, we have not granted any stock awards under the 2000 plan.
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<PAGE>
1996 STOCK OPTION PLAN
Our board of directors adopted and our stockholders approved our 1996 Stock
Option Plan in September 1996. An aggregate of 8,810,820 shares of common stock
are currently authorized for issuance under the 1996 Stock Option Plan. On the
effective date of this offering, stock options will no longer be granted under
the 1996 Stock Option Plan. Stock options granted under the 1996 Stock Option
Plan have substantially the same terms as will apply to stock option grants
under the 2000 Plan. With respect to change in control provisions, however,
outstanding options under the 1996 Stock Option Plan can, but need not, be
assumed or substituted by any surviving entity. Stock options not exercised
prior to the effective date of the change in control shall terminate and cease
to be outstanding on the effective date of a change in control. As of March 31,
2000 we had issued 2,805,835 shares upon the exercise of stock options under the
1996 Stock Option Plan and stock options to purchase 5,135,089 shares at a
weighted average exercise price of $.603 per share were outstanding.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted the 2000 Employee Stock Purchase Plan, or
"2000 Purchase Plan," in May 2000, and our stockholders approved it in
2000.
SHARE RESERVE. A total of 500,000 shares of common stock have currently
been authorized for issuance under the 2000 Purchase Plan. Beginning with
January 1, 2002, and each January 1 thereafter, including and ending on ,
the share reserve will increase by the least of the following:
- 1% of our total outstanding common stock (on a fully diluted, as converted
basis); or
- a lesser amount as determined by our board at or prior to the date of an
increase.
The total number of shares that may be issued over the life of the 2000 Purchase
Plan is shares.
The 2000 Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. Under the 2000 Purchase Plan, eligible employees will be able to
purchase common stock at a discount price in periodic offerings. The first
offering under the 2000 Purchase Plan will commence on the effective date of
this offering.
ELIGIBILITY. All employees are eligible to participate in the 2000 Purchase
Plan so long as they are customarily employed by us, or an eligible subsidiary
of ours designated by the board of directors, for at least five months per
calendar year and for at least 20 hours per week. Any employee who is a 5%
stockholder is not eligible to participate in the 2000 Purchase Plan.
OFFERINGS. Under the 2000 Purchase Plan, the board may specify offerings of
up to 27 months. Unless our board determines otherwise, common stock will be
purchased for accounts of participating employees at a price per share equal to
the lower of:
- 85% of the fair market value of a share our common stock on the first day
of the offering; or
- 85% of the fair market value of a share of our common stock on the
purchase date.
The first offering will begin on the effective date of this offering, and
shares that are offered will be registered on a Form S-8 registration statement.
The fair market value of the shares on the first date of this offering will be
the price per share at which our shares are first sold to the public as
specified in the final prospectus with respect to this offering. Otherwise, fair
market value generally means the closing sales price, rounded up where necessary
to the nearest whole cent, for these shares, or the closing bid, if no sales
were reported, as quoted on the Nasdaq National Market on the last trading day
prior to the relevant determination date, as reported in The Wall Street
Journal.
41
<PAGE>
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the 2000 Purchase Plan; or
- 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 15% of
their compensation for the purchase of stock under the 2000 Purchase Plan.
Employees may end their participation in an offering before a purchase period
ends. Participation ends automatically on termination of employment.
OTHER PROVISIONS. The board may grant eligible employees purchase rights
under the 2000 Purchase Plan only if the purchase rights together with any other
purchase rights granted under other employee stock 2000 Purchase Plans
established by us or by our affiliates, if any, do not permit the employee's
rights to purchase our stock to accrue at a rate which exceeds $25,000 of fair
market value of our stock for each calendar year in which the purchase rights
are outstanding.
Upon a change in control, the board may provide that the successor
corporation either will assume or replace outstanding purchase rights.
Alternatively, the board may shorten the ongoing offering period and provide
that our stock will be purchased for the participants immediately before the
change in control.
SHARES ISSUED. The 2000 Purchase Plan will not be effective until the
effective date of this initial public offering of our stock. Therefore, as of
the date hereof, no shares of common stock have been purchased under the 2000
Purchase Plan.
PLAN TERMINATION. The 2000 Purchase Plan has no set termination date.
401(k) PLAN
We sponsor a 401(k) plan, a defined contribution plan intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended. All
employees are eligible to participate. Participants may make pre-tax
contributions to the 401(k) plan of up to 20% of their eligible earnings,
subject to a statutorily prescribed annual limit. The limit is $10,500 in
calendar year 2000. Homestead does not make matching contributions. Under the
401(k) plan, each employee is fully vested in his or her deferred salary
contributions. Employee contributions are held and invested by the
401(k) plan's trustee. Each participant's contributions, and the corresponding
investment earnings, are generally not taxable to the participants until
withdrawn. Individual participants may direct the trustee to invest their
accounts in authorized investment alternatives.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATIONS OF LIABILITY
As permitted by the Delaware General Corporation Law, we have adopted
provisions in our certificate of incorporation and bylaws that limit or
eliminate the personal liability of our directors for a breach of their
fiduciary duty of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably available to
them. Consequently, a director will not be personally liable to us or our
stockholders for monetary damages or breach of fiduciary duty as a director,
except for liability 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
42
<PAGE>
- any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation allows us to indemnify our officers,
directors and other agents to the fullest extent permitted by Delaware law. We
intend to enter into indemnification agreements with each of our directors and
executive officers that are, in some cases, broader than the specific
indemnification provisions permitted by Delaware law, and that may provide
additional procedural protection. The indemnification agreements require us,
among other things, to:
- indemnify executive officers and directors against certain liabilities
that may arise because of their status as executive officers or directors;
and
- advance expenses, as incurred, to executive officers and directors in
connection with a legal proceeding, subject to limited exceptions.
Additionally, we anticipate obtaining directors' and officers' liability
insurance.
Our bylaws also permit us to purchase insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether Delaware law would permit
indemnification, and to provide indemnification in circumstances in which
indemnification is otherwise discretionary under Delaware law.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
PREFERRED STOCK SALES
In May 1998, we issued and sold an aggregate of 6,442,350 shares of
Series A preferred stock at a price per share of $.70. Each share of Series A
preferred stock is convertible into one share of common stock.
In April 1999, we issued and sold an aggregate of 6,421,710 shares of
Series B preferred stock at a price per share of $2.727. Each share of Series B
preferred stock is convertible into one share of common stock.
In January 2000, we issued and sold an aggregate of 3,401,361 shares of
Series C preferred stock at a price per share of $10.29. Each share of Series C
preferred stock is convertible into one share of common stock.
The following 5% stockholders and stockholders associated with certain of
our directors purchased shares in these preferred stock financings. Upon closing
of this initial public offering, the following shares of preferred stock convert
into common stock at the rate of one share of common stock for each share of
preferred stock:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED TOTAL AGGREGATE
PURCHASER STOCK STOCK STOCK SHARES PRICE PAID
- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
Donaldson, Lufkin & Jenrette, Inc.... -- 1,466,814 267,250 1,734,064 $ 6,750,004
Entities affiliated with
Mr. Draper or Draper Fisher
Jurvetson............................ 4,761,322 494,306 517,806 5,773,434 10,009,598
Entities affiliated with
Institutional Venture Partners....... -- 4,400,441 427,600 4,828,041 16,400,007
GC&H Investments....................... 35,709 3,717 4,390 43,816 80,306
</TABLE>
The entities referenced in the table above are specifically described in the
notes to the Principal Stockholders table. See "Principal Stockholders."
In connection with the above transactions, we entered into agreements with
the investors providing for registration rights with respect to these shares.
The most recent such agreement is an Amended and Restated Investor Rights
Agreement dated January 14, 2000, which restates and incorporates the
registration rights of all investors. For more information regarding this
agreement, see "Description of Capital Stock--Registration Rights."
Mr. Draper, one of our directors, is a managing director of Draper Fisher
Management Co. IV, LLC and Draper Associates, Inc. which are affiliated with the
Draper Fisher Jurvetson entities. Mr. Haley, one of our directors, is a managing
director of Institutional Venture Management VIII, LLC which is a manager or
general partner of the entities affiliated with Institutional Venture Partners.
Ms. Levinson, one of our directors, is a partner at Global Retail Partners,
L.P., an affiliate of Donaldson, Lufkin & Jenrette, Inc., the parent corporation
of Donaldson, Lufkin & Jenrette Securities Corporation. James C. Kitch, one of
our directors, is a partner with Cooley Godward LLP, a law firm which provides
legal services to Homestead, and a general partner of GC&H Investments.
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
In March and December 1999, James C. Kitch exercised options to purchase an
aggregate of 80,500 shares of common stock at an aggregate purchase price of
$8,935.50.
44
<PAGE>
In September 1999 and March 2000, Mr. Wu exercised options to purchase an
aggregate of 249,000 shares of common stock at an aggregate purchase price of
$42,923. In April 2000, Mr. Wu exercised options to acquire 501,100 shares of
our common stock for an aggregate exercise price of $214,052 subject to a right
of repurchase by Homestead. Mr. Wu paid for the latter options with a full
recourse promissory note at an annual interest rate of 6.71% due April 27, 2005.
In January 2000, Ms. Burr was granted and exercised options to acquire
750,000 shares of our common stock, for an aggregate exercise price of $562,500
subject to a right of repurchase by Homestead. Ms. Burr paid for these options
with a full recourse promissory note at an annual interest rate of 5.77% due
January 1, 2005. Under the terms of the option grant to Ms. Burr, in the event
of a change of control during the first year of her employment in which her
employment is terminated or materially altered against her will vesting for a
pro rata portion of the options that would have vested after the first year
shall be accelerated for the portion of the year Ms. Burr actually worked.
In March 2000, Mr. Garrett was granted and exercised options to acquire
475,000 shares of our common stock, for an aggregate exercise price of
$1,187,500 subject to a right of repurchase by Homestead. Mr. Garrett paid for
these options with a full recourse promissory note at an annual interest rate of
5.77% due March 16, 2005. Under the terms of the option grant to Mr. Garrett, in
the event of a change of control in which his employment is terminated or
materially altered against his will, the vesting of his options shall be
accelerated by 50% of the remaining unvested options at the time of change of
control.
We have granted additional options to our executive officers and directors
which are described in "Director Compensation" and "Executive Compensation."
CONSULTING AGREEMENT WITH VIRTUAL VILLAGE
We provided consulting services pursuant to an agreement with Virtual
Village, Inc. in the amount of approximately $3.05 million in 1997 and $961,000
in 1998. This agreement was terminated in June 1998. Mr. Heap and Justin S.
Kitch, both directors and principal stockholders, are directors of Virtual
Village.
TECHNOLOGY LICENSE AGREEMENT WITH HEARME
In December 1999, we entered into a technology license agreement with
HearMe, an online communications company, for approximately $250,000 over a
twelve month period. Mr. Matteucci, one of our directors, is chief executive
officer and chairman of the board of HearMe.
As a matter of policy, all future transactions between us and any of our
officers, directors or principal stockholders will be approved by a majority of
the board of directors, including a majority of the independent and
disinterested members of the board.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides summary information regarding the beneficial
ownership of our outstanding common stock as of March 31, 2000 for:
- each person or group who beneficially owns more than 5% of our common
stock;
- each of the executive officers named in the Summary Compensation Table;
- each of our directors; and
- all of our executive officers and directors as a group.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission and generally includes any shares over which
a person exercises sole or shared voting or investment power. 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 held by them. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of
March 31, 2000 are deemed outstanding for calculating the percentage of
outstanding shares of the person holding these options, but are not deemed
outstanding for calculating the percentage of any other person. Applicable
percentage ownership in the following table is based on 32,271,256 shares of
common stock outstanding as of March 31, 2000, after giving effect to the
conversion of all outstanding shares of preferred stock into common stock upon
the closing of this offering, and shares of common stock outstanding
immediately following the completion of this offering.
Unless otherwise indicated, the address of each of the named individuals is
c/o Homestead.com Incorporated, 3375 Edison Way, Menlo Park, CA 94025.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OUTSTANDING
--------------------------------
NAME AND ADDRESS SHARES BEFORE OFFERING AFTER OFFERING
- ---------------- ---------- --------------- --------------
<S> <C> <C> <C>
5% STOCKHOLDERS:
Entities affiliated with
Draper Fisher Jurvetson(1)............................. 5,551,251 17.2% %
400 Seaport Court, Suite 250
Redwood City, CA 94063
Entities affiliated with
Institutional Venture Partners(2)...................... 4,828,041 15.0
3000 Sand Hill Rd, Building #2, Suite 290
Menlo Park, CA 94025
Entities affiliated with
Donaldson, Lufkin & Jenrette, Inc.(3).................. 1,734,064 5.4
277 Park Avenue
New York, NY 10172
Matthew Harad(4)....................................... 1,700,000 5.3
Entities affiliated with
Global Retail Partners, L.P.(5)........................ 1,636,882 5.1
2121 Avenue of the Stars
Los Angeles, CA 90067
EXECUTIVE OFFICERS AND DIRECTORS:
Justin S. Kitch........................................ 6,975,000 21.6
David J. Wu(6)......................................... 292,599 *
Timothy C. Draper(7)................................... 5,773,434 17.9
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OUTSTANDING
--------------------------------
NAME AND ADDRESS SHARES BEFORE OFFERING AFTER OFFERING
- ---------------- ---------- --------------- --------------
<S> <C> <C> <C>
Timothy M. Haley(2).................................... 4,828,041 15.0% %
David A. Heap(8)....................................... 4,500,000 13.9
James C. Kitch(9)...................................... 138,260 *
Linda Fayne Levinson(5)................................ 1,636,882 5.1
Paul Matteucci(10)..................................... -- --
All executive officers and directors as a group
(10 persons)(11)..................................... 25,369,216 78.6
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Consists of 336,680 shares held by Draper Associates, L.P., 4,579,770
shares held by Draper Fisher Associates Fund IV, L.P., 290,088 shares held
by Draper Fisher Jurvetson ePlanet Ventures L.P., and 344,713 shares held
by Draper Fisher Partners Fund IV, LLC (the "Draper Fisher Jurvetson
entities"). Mr. Draper is the president and sole owner of Draper
Associates, Inc., the general partner of Draper Associates, L.P., and
therefore is deemed to beneficially own the shares held by Draper
Associates, L.P. Mr. Draper, John Fisher and Steve Jurvetson are the
managing members of Draper Fisher Partners Fund IV, L.P. and Draper Fisher
Management IV, LLC, the general partner of Draper Fisher Associates
Fund IV, L.P., and therefore are deemed to beneficially own the shares held
by Draper Fisher Partners Fund IV, L.P. and Draper Fisher Associates
Fund IV, L.P. Mr. Draper, Mr. Fisher, Mr. Jurvetson, Asad Jamal and
Roderick Thompson are the managing members of Draper Fisher Jurvetson
ePlanet Partners, Ltd., the general partner of Draper Fisher Jurvetson
ePlanet Ventures L.P., and therefore are deemed to beneficially own the
shares held by Draper Fisher Jurvetson ePlanet Ventures, L.P. Each of
Messrs. Draper, Fisher, Jurvetson, Jamal and Thompson disclaim beneficial
ownership in all of the shares described above except to the extent of his
pecuniary interest therein.
(2) Consists of 11,000 shares held by ADM Partners, 4,267,876 shares held by
Institutional Venture Partners VIII, L.P., 66,361 shares held by IVM
Investment Fund VIII, LLC, and 482,804 shares held by IVP Broadband Fund,
L.P. (the "IVP entities"). Mr. Haley is one of ten managing directors of
Institutional Venture Management VIII, LLC, which is the direct or indirect
manager or general partner of the IVP entities. Mr. Haley disclaims
beneficial ownership in these shares except to the extent of his pecuniary
interest therein.
(3) Includes 21,240 shares held by DLJ Fund Investment Partners II, L.P., 1,944
shares held by DLJ Private Equity Employees Fund, L.P., 54,562 shares held
by DLJ Private Equity Partners Fund, L.P. and 19,436 shares held by DLJ ESC
II, L.P. (referred to as the "DLJ entities"). Also included are 1,636,882
shares held by the GRP entities described in note (5) below. Donaldson,
Lufkin & Jenrette, Inc. is the corporate parent of Donaldson, Lufkin &
Jenrette Securities Corporation and the several entities which are the
managing partners of the DLJ entities, Global Retail Partners, L.P. and the
GRP entities.
(4) The address for Mr. Harad is 2 Soldiers Field Park #112, Boston, MA 02163.
(5) Consists of 940,429 shares held by Global Retail Partners, L.P., 137,428
shares held by GRP A, L.P., 61,137 shares held by GRP Partners, L.P.,
84,341 shares held by Global Retail Partners Funding, Inc. 280,236 shares
held by DLJ Diversified Partners, L.P., 104,067 shares held by DLJ
Diversified Partners - A, L.P. and 29,244 shares held by DLJ ESC II, L.P.
(referred to as the "GRP entities"). The entities which are the several
managing partners of the GRP entities, including Global Retail Partners,
L.P., are subsidiaries of Donaldson, Lufkin & Jenrette, Inc., which is the
corporate parent of Donaldson, Lufkin & Jenrette Securities Corporation and
the DLJ entities. Linda Fayne Levinson
47
<PAGE>
is a partner of Global Retail Partners, L.P. Ms. Levinson disclaims
beneficial ownership in these shares except to the extent of her pecuniary
interest in the GRP entities.
(6) Includes 43,599 shares issuable upon exercise of options exercisable within
60 days of March 31, 2000.
(7) Includes 1,500 shares held directly by Mr. Draper, 46,866 shares held by
Timothy Draper, Trustee of the Timothy Draper Living Trust, 6,000 shares
held by Timothy Draper, as Custodian under the UGMA for his minor children,
79,148 shares held by JABE, LLC, whose members are Mr. Draper's children
and 85,669 shares held directly by Polly Draper, for whom Mr. Draper is
attorney in fact and 3,000 shares held by Polly Draper as Custodian under
the UGMA for her minor children. Also includes 5,551,251 shares held by the
Draper Fisher Jurvetson entities. See note (1). Mr. Draper disclaims
beneficial ownership in the shares held by Polly Draper and by the Draper
Fisher Jurvetson entities except to the extent of his pecuniary interest in
the Draper Fisher Jurvetson entities.
(8) The address for Mr. Heap is Virtual Village, 5455 Beltline Road, Dallas, TX
75240.
(9) Consists of 80,500 shares held directly by Mr. Kitch, 13,944 shares
issuable upon exercise of options exercisable within 60 days of March 31,
2000 and 43,816 shares held by GC&H Investments, an investment partnership
of which Mr. Kitch is a general partner. Mr. Kitch disclaims beneficial
ownership in the shares owned by GC&H Investments except to the extent of
his pecuniary interest therein. The address for Mr. Kitch is Cooley Godward
LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, CA 94306.
(10) The address for Mr. Matteucci is HearMe, 665 Clyde Avenue, Mountain View,
CA 94043.
(11) See footnotes (1), (2) and (4) - (9) above, as applicable.
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
undesignated preferred stock, $.001 par value. As of March 31, 2000, there were
32,271,256 shares of common stock outstanding held by record by approximately
210 stockholders. There will be shares of common stock outstanding after
giving effect to the sale of the shares of common stock offered under this
prospectus.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. 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 receive ratably any dividends out of assets legally
available therefor as our board of directors may from time to time determine.
Upon liquidation, dissolution or winding up of Homestead, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable.
PREFERRED STOCK
According to our Amended and Restated Certificate of Incorporation, our
board of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock, in one or more
series. Our board shall determine the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of any series. The issuance of preferred stock could diminish voting power of
holders of common stock, and the likelihood that holders of preferred stock will
receive dividend payments and payments upon liquidation may have the effect of
delaying, deferring or preventing a change in control of Homestead, which could
depress the market price of our common stock. We have no present plan to issue
any shares of preferred stock.
WARRANTS
In connection with equipment financing facilities, we issued a warrant to
purchase up to 16,071 shares of Series A Preferred Stock at an exercise price of
$1.40 per share and warrants to purchase up to 20,615 shares of Series B
Preferred Stock at exercise prices ranging from $2.73 to $3.12 per share.
In connection with customer acquisition agreements, we issued warrants to
purchase up to 687,837 shares of Series B Preferred Stock at exercise prices
ranging from $3.12 to $5.45 per share. These warrants vest in increments based
upon the achievement of certain performance milestones. As of March 31, 2000,
80,216 shares have vested.
In connection with real estate leases, we issued warrants to purchase up to
22,820 shares of Series B Preferred Stock at exercise prices ranging from $2.73
to $5.45 per share.
Upon the closing of this offering, the warrants to purchase preferred stock
will become exercisable for common stock at a rate of one share of common stock
for each share of preferred stock. Each of the warrants contain provisions for
the adjustment of the exercise price and the aggregate number of shares
49
<PAGE>
issuable upon the exercise of the warrants in the event of stock dividends,
stock splits, reorganizations and reclassifications and consolidations.
REGISTRATION RIGHTS
Upon completion of this offering, holders of an aggregate of 20,430,577
shares of common stock will be entitled to rights to register these shares under
the Securities Act. These rights are provided under the Amended and Restated
Investor Rights Agreement, dated January 14, 2000. If we propose to register any
of our securities under the Securities Act, either for our own account or for
the account of others, the holders of these shares are entitled to notice of the
registration and are entitled to include, at our expense, their shares of common
stock in the registration and any related underwriting, provided, among other
conditions, that the underwriters may limit the number of shares to be included
in the registration. In addition, the holders of these shares may require us, at
our expense and on not more than two occasions at any time beginning six months
from the date of the closing of the offerings, to file a registration statement
under the Securities Act with respect to their shares of common stock, and we
will be required to use our best efforts to effect the registration. Further,
the holders may require us at our expense to register their shares on Form S-3
when this form becomes available.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly held 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:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who are
directors and also officers, and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that interested
stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
50
<PAGE>
Our bylaws provide that candidates for director may be nominated only by the
board of directors or by a stockholder who gives written notice to us no later
than 90 days prior nor earlier than 120 days prior to the first anniversary of
the last annual meeting of stockholders. The board may consist of one or more
members to be determined from time to time by the board. The board currently
consists of seven members divided into three different classes. As a result,
only one class of directors will be elected at each annual meeting of
stockholders of our company, with the other classes continuing for the remainder
of their respective terms. Between stockholder meetings, the board may appoint
new directors to fill vacancies or newly created directorships.
Our certificate of incorporation requires that any action required or
permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing. Our certificate of incorporation also provides that the authorized
number of directors may be changed only by resolution of the board of directors.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control or our management, which could
depress the market price of our common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Harris Trust and
Savings Bank. Its telephone number is (312) 360-5100.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common stock
outstanding. Of these shares, the shares sold in this offering will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates," as that term is defined in Rule 144 under the Securities
Act. Substantially all shares of our stock outstanding prior to this offering is
subject to 180-day lock-up agreements, and may not be sold in the public market
prior the expiration of the lock-up agreements. Morgan Stanley & Co.
Incorporated may release the shares subject to the lock-up agreements in whole
or in part at any time without prior public notice. However, Morgan Stanley &
Co. Incorporated has no current plans to effect such a release. Upon the
expiration of the lock-up agreements, approximately 28,866,250 additional shares
will be available for sale in the public market, subject in some cases to
compliance with the volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
SHARES
DAYS AFTER DATE OF THIS PROSPECTUS ELIGIBLE FOR SALE COMMENT
- ---------------------------------- ----------------- ------------------------------------
<S> <C> <C>
Upon effectiveness.................. 0 Freely tradable shares sold in this
offering and/or eligible for sale
under Rule 144 and not locked-up
90 days............................. 0 Shares not locked-up and saleable
under Rules 144 and 701
180 days............................ 28,869,895 less Lock-up released; shares saleable
shares subject to under Rules 144 and 701
repurchase
Various dates thereafter............ 3,401,361 plus Restricted securities held for one
shares subject to year or less as of 180 days
repurchase following effectiveness
</TABLE>
RULE 144
In general, under Rule 144 a person, or persons whose shares are aggregated,
who has beneficially owned shares for at least one year is entitled to sell
within any three-month period commencing 90 days after the date of this
prospectus a number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of our common stock, approximately
shares immediately after this offering; or
- the average weekly trading volume during the four calendar weeks preceding
such sale, subject to the filing of a Form 144 with respect to the sale.
A person, or persons whose shares are aggregated, who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the sale
who has beneficially owned his or her shares for at least two years is entitled
to sell these shares pursuant to Rule 144(k) without regard to the limitations
described above. Affiliates must always sell pursuant to Rule 144, even after
the applicable holding periods have been satisfied.
We cannot estimate the number of shares that will be sold under Rule 144, as
this will depend on the market price for our common stock, the personal
circumstances of the sellers and other factors. Prior to this offering, there
has been no public market for our common stock, and there can be no assurance
that a significant public market for our common stock will develop or be
sustained after this offering. Any future sale of substantial amounts of our
common stock in the open market may adversely affect the market price of our
common stock.
52
<PAGE>
RULE 701
Any of our employees or consultants who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitations or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus.
LOCK-UP AGREEMENTS
We and our directors, executive officers and certain of our stockholders
have agreed pursuant to the underwriting agreement and other agreements not to
sell any of our common stock without the prior consent of Morgan Stanley & Co.
Incorporated until 180 days from the date of this prospectus. Transfers or
dispositions can be made sooner only with the prior written consent of Morgan
Stanley & Co. Incorporated.
STOCK OPTIONS
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of our common stock that are subject to outstanding
options or reserved for issuance under our stock option and employee stock
purchase plans immediately following the effectiveness of this registration
statement, thus permitting the resale of these shares by nonaffiliates in the
public market without restriction under the Securities Act.
53
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus the underwriters named below, for
whom Morgan Stanley & Co. Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, severally, the number of shares
indicated below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
-------
Total.....................................................
=======
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of various legal matters by their counsel and to other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered by this prospectus if any such shares are taken.
However, the underwriters are not required to take or pay for the shares covered
by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to select dealers at a price that represents a
concession not in excess of $ a share under the public offering price. The
underwriters may allow, and the dealers may reallow, a concession not in excess
of $ a share to other underwriters or dealers. After the initial offering of
the shares of common stock, the offering price and other selling terms may from
time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price listed on the cover page of
this prospectus, less underwriting discounts and commissions. The underwriters
may exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of common stock offered
by this prospectus. To the extent the option is exercised, each underwriter will
become obligated, subject to certain conditions, to purchase about the same
percentage of the additional shares of common stock as the number listed next to
the underwriter's name in the preceding table bears to the total number of
shares of common stock listed next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised in full, the total
price to the public would be $ , the total underwriters' discounts and
commissions would be $ and total proceeds to us would be $ .
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We have applied to have the common stock listed for quotation, subject to
official notice of issuance, on the Nasdaq National Market under the symbol
"HMST."
54
<PAGE>
We, the directors, executive officers and certain other of our stockholders
have each agreed that, subject to limited exceptions, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it
will not, during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise.
The restrictions described in this paragraph do not apply to:
- the sale of shares to the underwriters;
- the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing;
- transfers by any person, other than us, by gift, will or intestacy, or to
affiliates or immediate family members, provided that the transferee
agrees to be bound by such restriction; or
- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.
We and the underwriters have agreed to indemnify each other against various
liabilities, including liabilities under the Securities Act.
Certain entities affiliated with Donaldson, Lufkin & Jenrette Securities
Corporation own 1,734,064 shares of common stock which were purchased in private
placements on the same terms and conditions as the other investors in each
respective private placement, including the price per share. Ms. Levinson, one
of our directors, is a partner of Global Retail Partners, L.P., one of such
affiliates of Donaldson Lufkin & Jenrette Securities Corporation.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. The initial public offering price for our common stock will be determined
by negotiation among us and the representatives of the underwriters. Among the
factors to be considered in determining the public offering price will be:
- our record of operations, current financial position and future prospects;
- the future prospects of our industry in general;
55
<PAGE>
- the experience of our management;
- our sales, earnings and other financial operating information in recent
periods; and
- the price-earnings ratios, price-sales ratios, market prices of securities
and financial and operating information of companies engaged in activities
similar to ours.
The estimated initial public offering price range is subject to change as a
result of market conditions and other factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Cooley Godward LLP, Palo Alto, California. As of the date of this prospectus,
partners and associates of Cooley Godward LLP own an aggregate of approximately
80,500 shares of common stock directly and 43,816 shares of common stock through
an investment partnership. Legal matters in connection with this offering will
be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on their authority as
experts in auditing and accounting.
In March 2000, Ernst & Young LLP was dismissed and PricewaterhouseCoopers
LLP replaced Ernst & Young LLP as our independent accountants. The selection of
PricewaterhouseCoopers LLP as our independent accountants was ratified by our
board of directors in April 2000. During fiscal 1999, we had no disagreement
with our former accountants, Ernst & Young LLP, on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to the subject
matter of the disagreement. Ernst & Young LLP did not issue a report on our
financial statements with respect to the years ended December 31, 1999 and 1998.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock offered under this prospectus. This prospectus does not contain all
of the information in the registration statement and the exhibits and schedule
to the registration statement. For further information with respect to us and
our common stock, we refer you to the registration statement and to the exhibits
and schedule to registration statement. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and in each instance, we refer you to the copy of the
contract or other document filed as an exhibit to the registration statement.
Each of these statements is qualified in all respects by this reference. You may
inspect a copy of the registration statement without charge at the SEC's
principal office in Washington, D.C., and copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of fees
prescribed by the SEC. The SEC maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the Web site
is http://www.sec.gov. The SEC's toll free investor information service can be
reached at 1-800-SEC-0330.
Upon completion of the offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
56
<PAGE>
HOMESTEAD.COM INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Stockholders' Equity (Deficit)................. F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Homestead.com Incorporated
The amendment to the certificate of incorporation described in Note 10 to
the financial statements has not been filed as of May 5, 2000. When the
amendment to the certificate of incorporation has been filed, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit), and of cash flows present
fairly, in all material respects, the financial position of Homestead.com
Incorporated 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. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
April 3, 2000, except
for Note 10, which
is as of May , 2000
F-2
<PAGE>
HOMESTEAD.COM INCORPORATED
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- MARCH 31, MARCH 31,
1998 1999 2000 2000
-------- -------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 2,702 $ 2,323 $ 10,922
Short-term investments................................. -- 4,727 22,473
Accounts receivable, net of allowances of $0, $100 and
$280................................................. -- 813 900
Prepaid expenses and other current assets.............. 27 4,333 494
------- -------- --------
Total current assets................................. 2,729 12,196 34,789
Property and equipment, net.............................. 668 2,879 6,178
Other assets............................................. 234 1,124 1,374
------- -------- --------
Total assets......................................... $ 3,631 $ 16,199 $ 42,341
======= ======== ========
LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 103 $ 971 $ 2,329
Accrued liabilities.................................... 112 997 684
Deferred revenue....................................... -- 571 792
Current portion of debt................................ 67 828 839
------- -------- --------
Total current liabilities............................ 282 3,367 4,644
------- -------- --------
Long-term debt, less current portion..................... 392 2,089 1,951
------- -------- --------
Series A, B and C Convertible Preferred Stock and
warrants............................................... 4,496 22,601 58,144 $ --
------- -------- --------
Commitments and contingencies (Note 3)
Stockholders' equity (deficit):
Preferred Stock, issuable in series, $0.001 par value,
7,000, 13,200 and 17,200 shares authorized at
December 31, 1998, 1999 and March 31, 2000
(unaudited), respectively; 6,442, 12,864 and 16,265
shares of Convertible Preferred stock issued and
outstanding at December 31, 1998, 1999 and March 31,
2000 (unaudited), respectively; 5,000 shares
authorized and no shares outstanding pro forma
(unaudited).......................................... -- -- -- --
Common Stock, $0.001 par value, 43,000, 46,800 and
50,800 shares authorized at December 31, 1998, 1999
and March 31, 2000 (unaudited) respectively; 13,320,
14,236 and 16,006 shares issued and outstanding at
December 31, 1998, 1999 and March 31, 2000
(unaudited), respectively; 100,000 shares authorized
and 32,271 shares issued and outstanding pro forma
(unaudited).......................................... 13 14 16 32
Additional paid-in capital............................. 600 15,646 40,943 99,071
Notes receivable....................................... -- -- (1,750) (1,750)
Unearned stock-based compensation...................... -- (11,661) (31,148) (31,148)
Accumulated deficit.................................... (2,152) (15,857) (30,459) (30,459)
------- -------- -------- --------
Total stockholders' equity (deficit)................. (1,539) (11,858) (22,398) $ 35,746
------- -------- -------- ========
Total liabilities, convertible preferred stock and
stockholders' equity (deficit)..................... $ 3,631 $ 16,199 $ 42,341
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HOMESTEAD.COM INCORPORATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Web site........................................ $ -- $ -- $ 504 $ 4 $ 1,142
Consulting...................................... 3,068 974 -- -- --
------- ------- -------- ------- --------
Total net revenues............................ 3,068 974 504 4 1,142
------- ------- -------- ------- --------
Cost of revenues:
Web site (excluding $0, $0, $87, $0 and $90 of
stock-based compensation)..................... -- 220 1,486 112 936
Member support.................................. -- 79 428 45 199
Consulting...................................... 764 310 -- -- --
------- ------- -------- ------- --------
Total cost of revenues........................ 764 609 1,914 157 1,135
------- ------- -------- ------- --------
Gross profit (loss)............................... 2,304 365 (1,410) (153) 7
------- ------- -------- ------- --------
Operating expenses:
Web site development and operations (excluding
$0, $0, $998, $10 and $1,082 of stock-based
compensation)................................. 1,381 1,987 3,909 630 1,773
Sales and marketing (excluding $0, $0, $965, $7
and $1,877 of stock-based compensation)....... 129 641 3,647 496 8,058
General and administrative (excluding $5, $90,
$1,190, $74 and $911 of stock-based
compensation)................................. 650 853 1,900 332 1,129
Stock-based compensation........................ 5 90 3,240 91 3,960
------- ------- -------- ------- --------
Total operating expenses...................... 2,165 3,571 12,696 1,549 14,920
------- ------- -------- ------- --------
Operating income (loss)........................... 139 (3,206) (14,106) (1,702) (14,913)
Interest income, net.............................. 68 124 401 9 311
------- ------- -------- ------- --------
Net income (loss)................................. 207 (3,082) (13,705) (1,693) (14,602)
Deemed preferred stock dividend................... -- -- -- -- (16,020)
------- ------- -------- ------- --------
Net income (loss) available to common
stockholders.................................... $ 207 $(3,082) $(13,705) $(1,693) $(30,622)
======= ======= ======== ======= ========
Basic and diluted net income (loss) per share
available to common stockholders................ $ 0.02 $ (0.23) $ (1.01) $ (0.13) $ (2.11)
======= ======= ======== ======= ========
Basic and diluted weighted average shares used in
computation of net income (loss) per share
available to common stockholders................ 13,200 13,256 13,541 13,326 14,502
======= ======= ======== ======= ========
Pro forma basic and diluted net loss per share
(unaudited)..................................... $ (0.56) $ (1.01)
======== ========
Pro forma basic and diluted weighted average
shares (unaudited).............................. 24,596 30,206
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
HOMESTEAD.COM INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON STOCK ADDITIONAL UNEARNED EARNINGS STOCKHOLDERS'
------------------- PAID-IN NOTES STOCK-BASED (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION DEFICIT) (DEFICIT)
-------- -------- ---------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996... 13,200 $ 13 $ 490 $ -- $ -- $ 723 $ 1,226
Exercise of stock options...... 4 -- -- -- -- -- --
Issuance of stock options for
services..................... -- -- 5 -- -- -- 5
Net income..................... -- -- -- -- -- 207 207
------ ---- -------- ------- -------- -------- --------
Balance at December 31, 1997... 13,204 13 495 -- -- 930 1,438
Issuance of stock options for
services..................... -- -- 90 -- -- -- 90
Exercise of stock options...... 116 15 -- -- -- 15
Net loss....................... -- -- -- -- -- (3,082) (3,082)
------ ---- -------- ------- -------- -------- --------
Balance at December 31, 1998... 13,320 13 600 -- -- (2,152) (1,539)
Exercise of stock options...... 916 1 145 -- -- -- 146
Issuance of stock options for
services..................... -- -- 983 -- -- -- 983
Unearned stock-based
compensation................. -- -- 13,918 -- (13,918) -- --
Stock-based compensation....... -- -- -- -- 2,257 -- 2,257
Net loss....................... -- -- -- -- -- (13,705) (13,705)
------ ---- -------- ------- -------- -------- --------
Balance at December 31, 1999... 14,236 14 15,646 -- (11,661) (15,857) (11,858)
Exercise of stock options
(unaudited).................. 1,770 2 1,850 (1,750) -- -- 102
Issuance of stock options for
services (unaudited)......... -- -- 460 -- -- -- 460
Unearned stock-based
compensation (unaudited)..... -- -- 22,987 -- (22,987) -- --
Stock-based compensation
(unaudited).................. -- -- -- -- 3,500 -- 3,500
Allocation of discount on
preferred stock
(unaudited).................. -- -- 16,020 -- -- -- 16,020
Deemed preferred stock dividend
(unaudited).................. -- -- (16,020) -- -- -- (16,020)
Net loss (unaudited)........... -- -- -- -- -- (14,602) (14,602)
------ ---- -------- ------- -------- -------- --------
Balance at March 31, 2000
(unaudited).................. 16,006 $ 16 $ 40,943 $(1,750) $(31,148) $(30,459) $(22,398)
====== ==== ======== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HOMESTEAD.COM INCORPORATED
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 207 $(3,082) $(13,705) $(1,693) $(14,602)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Allowance for bad debt...................... -- -- 100 -- 180
Depreciation and amortization............... 93 250 678 100 176
Stock-based compensation.................... 5 43 3,579 91 4,250
Changes in assets and liabilities:
Accounts receivable....................... (200) 341 (913) (6) (267)
Deferred revenue.......................... -- -- 571 -- 221
Accounts payable and other current
liabilities............................. 37 167 1,752 370 1,045
Prepaid expenses and other assets......... (49) 7 (4,912) 51 3,892
----- ------- -------- ------- --------
Net cash provided by (used in) operating
activities.................................... 93 (2,276) (12,850) (1,087) (5,105)
----- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (284) (158) (704) (132) (3,449)
Purchase of short-term investments.............. -- -- (133,990) -- (42,399)
Sale and maturity of short term investments..... -- -- 129,263 -- 24,653
----- ------- -------- ------- --------
Net cash used in investing activities........... (284) (158) (5,431) (132) (21,195)
----- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of Common Stock...... -- 15 146 10 102
Proceeds from the sale of Preferred Stock....... -- 4,490 17,482 -- 34,950
Proceeds from (repayments under) line of
credit........................................ -- -- 153 72 (153)
Proceeds from debt.............................. -- -- 121 --
----- ------- -------- ------- --------
Net cash provided by financing activities....... -- 4,505 17,902 82 34,899
----- ------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................... (191) 2,073 (379) (1,137) 8,599
Cash and cash equivalents at the beginning of
the period.................................... 820 629 2,702 2,702 2,323
----- ------- -------- ------- --------
Cash and cash equivalents at the end of the
period........................................ $ 629 $ 2,702 $ 2,323 $ 1,565 $ 10,922
===== ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid................................... $ -- $ 14 $ 127 $ 10 $ 75
===== ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
Equipment acquired under capital lease.......... $ -- $ 204 $ 2,179 $ 71 $ 628
===== ======= ======== ======= ========
Issuance of warrants in connection with
financing..................................... $ -- $ 6 $ 112 $ -- $ --
===== ======= ======== ======= ========
Issuance of warrants in connection with lease
agreements.................................... $ -- $ -- $ 188 $ -- $ --
===== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Homestead.com Incorporated (the "Company") empowers individuals and small
businesses to become active participants on the Internet by enabling them to
build their own web sites using third-party content, services and technology.
The Company provides a proprietary platform over its web site, homestead.com,
that enables individuals and small businesses (collectively "Members") to easily
build a web site by integrating and customizing building blocks, called
elements, containing content and services provided by the Company's business
partners ("Business Partners"). The Company was incorporated in Kansas in
September 1994 and reincorporated in Delaware in May 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED INTERIM RESULTS
The interim financial statements as of March 31, 2000 and for the three
months ended March 31, 1999 and 2000 are unaudited. In the opinion of
management, these interim financial statements have been prepared in the same
basis as the audited financial statements and reflect all adjustments,
consisting only of normal, recurring adjustments necessary for the fair
presentation of the results of interim periods. The financial data and other
information disclosed in these notes to the financial statements for the related
periods are unaudited. The results of the interim periods are not necessarily
indicative of the results to be expected for future periods.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company classifies all investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" which requires investment securities to be
classified as either held to maturity, trading or available-for-sale. All of the
Company's investments are classified as available-for-sale and are stated at
fair market value which approximates cost.
The Company's cash equivalents consist of $498,000 and $5.4 million of
commercial paper at December 31, 1999 and March 31, 2000, respectively. The
Company's short-term investments consist of $1.0 million of time deposits and
$3.7 million of U.S. corporate and other debt securities at December 31, 1999
and $22.5 million of U.S. corporate and other debt securities at March 31, 2000.
Unrealized gains or losses have been insignificant for all periods presented.
F-7
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets of
three to five years.
REVENUE RECOGNITION
The Company derives revenues on the web site from multiple sources,
including sponsored elements, co-branded partnerships, promotion to Members and
banner advertising. The Company enters into contracts with Business Partners who
give Members access to sponsored elements, such as stock tickers, chat rooms,
online stores and search boxes. The term of these contracts generally range from
three to 24 months. Under the terms of the contracts, the Company charges
Business Partners when the Member places the element on a site ("drop"), when
the element is viewed by a visitor to the site ("impression") or when the
element is used by a visitor to the site ("click"). Revenue from these contracts
is recognized in the period the drop, impression or click takes place provided
no on-going obligation exists and collectibility is reasonably assured. Revenue
is recorded based on the greater of the minimum guaranteed fees or number of
drops, impressions or clicks delivered. Cash payments received upon signing of
the contract are recorded as deferred revenue. Under certain of these contracts,
the Company also earns a commission on sales on the Business Partners' web site
resulting from clicks on a sponsored element. Commission revenue is recognized
in the period in which notification from the partner is received.
The Company also provides promotional placements to Members' web sites and
banner advertising on the Company's web site. Revenue from promotional
placements and banner advertising is recognized ratably in the period the
advertisement is displayed or promotion is placed, provided an insertion order
is received from the customer, no obligations remain and collection of the
resulting receivable is reasonably assured. The Company sometimes uses an
outside third-party to sell or service banner advertisements. Revenue resulting
from advertisements that were sold by a third-party is recorded net of fees
earned by the third-party since the Company does not act as the principle in the
transaction with the customer.
The Company also enters into contracts to develop and host co-branded,
customized versions of the Homestead web site. The terms of the contracts
generally range form one to three years. Revenue for these contracts is
recognized ratably from the date of the web site launch to the end of the
contract term, provided no on-going obligation exists and collectibility is
reasonably assured. Cash payments received in advance of revenue recognition are
recorded as deferred revenue and recognized ratably over the term, from the date
of launch. Under certain contracts, the Company also receives a percentage of
the revenues generated on the co-branded web site. Since the Company is not the
principle in the transaction with the customer, revenue is recognized net of the
partners share in the period earned.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"). This bulletin summarizes certain
interpretations and practices followed by the SEC in applying generally accepted
accounting principles to revenue recognition. The Company has evaluated and
believes that its current revenue recognition complies with the guidance
provided under SAB 101.
Consulting revenue for 1997 and 1998 was derived under a contract with a
single customer. Under the terms of the contract, revenue was recognized as the
services were provided. The Company terminated the contract in 1998.
F-8
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ADVERTISING COSTS
Costs incurred for producing and communicating advertising are expensed as
incurred. Advertising expense for the years ended December 31, 1998, 1999 and
the three months ended March 31, 2000 was $98,000, $1.3 million and
$5.5 million, respectively. There was no advertising expense incurred for the
year ended December 31, 1997. As of December 31, 1999 and March 31, 2000,
amounts totaling $3.9 million and $210,000, respectively, are included in
prepaid expenses on the balance sheet, which represents funds held by an
advertising agency on behalf of the Company for advertising costs to be procured
in the future.
WEB SITE DEVELOPMENT AND OPERATIONS
Web site development and operations costs, which primarily consist of
payroll and related costs, are expensed as incurred. Effective January 1, 1999,
the Company adopted Statement of Position 98-1 ("SOP 98-1"), "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use." In accordance
with SOP 98-1, the Company classifies software development costs into one of
three categories: (i) preliminary project stage (ii) application development
stage and (iii) operational stage. For the year ended December 31, 1999 costs
associated with the preliminary projects stage were insignificant and charged to
web site development and operations costs as incurred. Costs associated with the
application development stage primarily consists of external software purchase
and internal costs to develop software with an expected life in excess of three
months. For the year ended December 31, 1999 and the three months ended
March 31, 2000, the Company capitalized approximately $112,000 and $637,000,
respectively, of costs associated with the application development stage and is
amortizing such amounts to cost of sales over the estimated useful life of one
to three years. Costs associated with the operational stage primarily consist of
internal costs to maintain and enhance the Company's Web site and internal costs
to develop software with an expected life three months or less. For the year
ended December 31, 1999 and the three months ended March 31, 2000, the Company
expensed approximately $3.4 million and $1.4 million, respectively, of cost
associated with operational stage and internal costs to develop software with an
expected life of three months or less.
NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss)
for the period by the weighted-average number of shares of Common Stock
outstanding during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) available to common stockholders for the
period by the weighted average number of common and potential common equivalent
shares outstanding during the period. The calculation of diluted net income
(loss) per share excludes potential common shares if the effect is antidilutive.
Potential common shares are composed of Common Stock subject to repurchase
rights and incremental shares of Common Stock issuable upon the exercise of
stock options and warrants and Common Stock issuable upon conversion of
Preferred Stock.
F-9
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The following table sets forth the computation of basic and diluted net
income (loss) per share for the periods indicated (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)........... $ 207 $(3,082) $(13,705) $(1,693) $(14,602)
Deemed preferred stock
dividend.................. -- -- -- -- (16,020)
------- ------- -------- ------- --------
Net income (loss) available to
common stockholders......... $ 207 $(3,082) $(13,705) $(1,693) $(30,622)
======= ======= ======== ======= ========
Denominator:
Weighted average shares..... 13,200 13,256 13,541 13,326 15,324
Weighted average shares of
common stock subject to
repurchase agreements..... -- -- -- -- (822)
------- ------- -------- ------- --------
Denominator for basic and
diluted calculation....... 13,200 13,256 13,541 13,326 14,502
======= ======= ======== ======= ========
Basic and diluted net income
(loss) per share available
to common stockholders...... $ 0.02 $ (0.23) $ (1.01) $ (0.13) $ (2.11)
======= ======= ======== ======= ========
</TABLE>
The following table sets forth the weighted average potential shares of
Common Stock that are not included in the diluted net income (loss) per share
calculation above because to do so would be antidilutive for the periods
indicated (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Weighted average effect of dilutive
securities:
Series A Preferred Stock............ -- 3,554 6,442 6,442 6,442
Series B Preferred Stock............ -- -- 4,613 -- 6,422
Series C Preferred Stock............ -- -- -- -- 2,840
Warrants to purchase Series A and
B Preferred Stock................. -- 8 254 16 747
Employee stock options.............. 1,589 3,796 4,766 4,186 5,332
----- ----- ------ ------ ------
1,589 7,358 16,075 10,644 21,783
===== ===== ====== ====== ======
</TABLE>
F-10
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1999 and the
three months ended March 31, 2000 is computed using the weighted average number
of common shares outstanding, including the conversion of the Company's
Convertible Preferred Stock into shares of the Company's Common Stock effective
upon the closing of the Company's initial public offering, as if such conversion
occurred at January 1, 1999 or at date of original issuance, if later. The
resulting unaudited pro forma adjustment includes an increase in the weighted
average shares used to compute basic and diluted net loss per share of
11,055,000 and 15,704,000 for the year ended December 31, 1999 and three months
ended March 31, 2000, respectively. The calculation of pro forma diluted net
loss per share excludes incremental Common Stock issuable upon the exercise of
stock options and warrants and Common Stock subject to repurchase agreements as
the effect would be antidilutive.
INCOME TAXES
Income taxes are accounted for using the asset and liability approach in
accordance with Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes." Under the asset and liability approach, a current tax
liability or asset is recognized for the estimated taxes payable or refundable
on tax returns for the current year. A deferred tax liability or asset is
recognized for the estimated future tax effects attributable to temporary
differences and carryforwards. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any benefits that, based on available
evidence, are not expected to be realized.
COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, the Company adopted the provisions of SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting comprehensive income and its components in financial statements.
Comprehensive income (loss), as defined, includes all changes in equity (net
assets) during a period from non-owner sources. For each of the three years in
the period ended December 31, 1999, the Company has not had any significant
transactions that are required to be reported in comprehensive income (loss).
SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information." For the year ended December 31, 1999, the
Company's management focused its business activities on providing a platform
that enables individuals and small businesses to build web sites. Since
management's primary form of internal reporting is aligned with providing this
platform, the Company believes it operates in one segment. All revenue is
derived from customers located in the United States.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25") and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
F-11
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
("SFAS No. 123"). Under APB 25, unearned compensation is based on the
difference, if any, on the date of the grant, between the fair value of the
Company's stock and the exercise price. Unearned compensation is amortized and
expensed in accordance with Financial Accounting Standards Board Interpretation
No. 28. The Company accounts for stock-based compensation issued to
non-employees in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Force No. 96-18, "Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."
CONCENTRATION OF RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents, short-term investments and
accounts receivables. Cash equivalents and short-term investments, primarily
composed of demand deposit accounts and investments in money market funds and
marketable securities, are maintained with two institutions and the composition
and maturities are regularly monitored by management. For accounts receivable,
the Company maintains an allowance for uncollectible accounts receivable based
on the expected collectibility of all accounts receivables. Because of their
short-term nature, the carrying value of all financial instruments approximate
their respective fair value.
For the years ended December 31, 1997 and 1998, one customer accounted for
99% of the Company's total net revenues. For the year ended December 31, 1999,
two customers each accounted for 11% of the Company's total net revenues. For
the three months ended March 31, 2000, three customers accounted for 14%, 11%
and 11% of the Company's total net revenues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivatives and
Hedging Activities". SFAS 133 establishes accounting and reporting standards of
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. In July 1999, the Financial
Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133". SFAS 137 deferred the effective date until the first fiscal
quarter ending June 30, 2000. The Company will adopt SFAS 133 in its quarter
ending June 30, 2000. The Company has not engaged in hedging activities or
invested in derivative instruments.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of APB
Opinion No. 25 ("FIN 44"). FIN 44 establishes guidance for the accounting for
stock option grants or modifications to existing stock options awards and is
effective for option grants made after June 30, 2000. FIN 44 also establishes
guidance for the repricing of stock options and determining whether a grantee is
an employee, for which the guidance was effective after December 15, 1998 and
modifying a fixed option to add a reload feature, for which the guidance was
effective after January 12, 2000. The adoption of certain of the provisions of
FIN 44 prior to March 31, 2000 did not have a material effect on the financial
statements. The Company does not expect that the adoption of the remaining
provisions will have a material effect on the financial statements.
F-12
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 2--BALANCE SHEET COMPONENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid advertising........................... $ -- $ 3,890 $ 210
Deposits...................................... -- 125 5
Other......................................... 27 318 279
------ ------- -------
$ 27 $ 4,333 $ 494
====== ======= =======
PROPERTY AND EQUIPMENT:
Computers and equipment....................... $ 766 $ 3,496 $ 6,737
Leasehold improvements........................ 265 292 316
Furniture and fixtures........................ 16 141 353
------ ------- -------
1,047 3,929 7,406
Less: Accumulated depreciation................ (379) (1,050) (1,228)
------ ------- -------
$ 668 $ 2,879 $ 6,178
====== ======= =======
ACCRUED LIABILITIES:
Payroll and related expense................... $ 34 $ 75 $ 90
Professional fees............................. 12 512 204
Other......................................... 66 410 390
------ ------- -------
$ 112 $ 997 $ 684
====== ======= =======
</TABLE>
NOTE 3--COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases office space under noncancelable operating leases which
expire in December 2000 and September 2014. Rent expense totaled $71,000,
$142,000, $201,000, $50,000 and $138,000 in 1997, 1998, 1999 and for the three
months ended March 31, 1999 and 2000 (unaudited), respectively.
F-13
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 3--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Future minimum lease payments under noncancelable leases as of December 31,
1999 are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
- ------------ -------- ---------
<S> <C> <C>
2000...................................................... $ 756 $ 750
2001...................................................... 1,076 775
2002...................................................... 877 769
2003...................................................... 168 769
2004...................................................... -- 748
Thereafter................................................ -- 7,513
------ -------
Total minimum lease payments.............................. 2,877 $11,324
=======
Less: Amount representing interest........................ 438
------
Present value of future lease payments.................... 2,439
Less: Current portion..................................... 519
------
Non-current portion....................................... $1,920
======
</TABLE>
CONTINGENCIES
From time to time, the Company may have certain contingent liabilities that
arise in the ordinary course of its business activities. The Company accrues
contingent liabilities when it is probable that future expenditures will be made
and such expenditures can be reasonably estimated. In the opinion of management,
there are no pending claims of which the outcome is expected to result in a
material adverse effect on the financial position or results of operations or
cash flows of the Company.
NOTE 4--LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment term loan................................ $205 $ 325 $ 286
Line of credit..................................... -- 153 --
Capital leases..................................... 254 2,439 2,504
---- ------ ------
459 2,917 2,790
Current portion of long-term debt.................. (67) (828) (839)
---- ------ ------
$392 $2,089 $1,951
==== ====== ======
</TABLE>
In July 1998, the Company entered into a loan agreement with a bank, which
provided for a line of credit and a term loan under which the Company may borrow
a maximum of $750,000. Under the equipment term loan, the Company can receive
advances to purchase equipment prior to July 25, 1999.
F-14
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 4--LONG-TERM DEBT: (CONTINUED)
The term loan bears interest at the bank's prime rate (8.5% at December 31,
1999) and is payable in thirty equal monthly installments, plus interest,
commencing in August 1999. Maturities under the term loan are $156,000 in 2000
and 2001 and $13,000 in 2002. Under the line of credit, the Company is permitted
to borrow, through January 25, 2000, up to the maximum available under the loan
agreement, reduced by the outstanding balance under the term loan. The line of
credit bears interest at the bank's prime rate and is payable monthly. The
Company paid the outstanding balance under the line of credit in full in
January 2000.
In March 2000, the Company entered into a new loan agreement with a bank,
which provides for a (i) line of credit, (ii) new equipment loan, and
(iii) continuation of the existing equipment and term loan. Under the line of
credit, the Company can receive revolving advances of up to $750,000, based upon
available collateral. The line of credit bears interest equal to the prime rate
plus one percent and matures in March 2001. Under the equipment loan, the
Company can receive advances of up to $1.5 million to purchase equipment. The
equipment loan bears interest equal to the basic rate as defined by the bank and
matures in March 2002. Under the existing term loan, the Company can receive
additional advances of up to $300,000. The term loan bears interest equal to the
prime rate and is payable in twenty-four equal installments through
January 2002. Under the terms of the new loan agreement, the Company must meet
certain financial covenants. The Company is also prohibited from paying
dividends without prior approval from the bank.
The Company has entered into several noncancelable leases that are accounted
for as capital lease obligations (see Note 3). The capital leases bear interest
from 7.83% to 18.78% per annum and are secured by the equipment. Included in
property and equipment are $254,000, $2.4 million and $2.5 million of assets
held under capital lease agreements at December 31, 1998, 1999 and March 31,
2000, respectively. Accumulated amortization related to leased assets totaled
$43,000, $371,000 and $672,000 at December 31, 1998, 1999 and March 31, 2000,
respectively.
NOTE 5--INCOME TAXES:
The Company incurred net operating losses for each of the two years in the
period ended December 31, 1999 and accordingly, no provision for income taxes
has been recorded. The tax (benefit) provision is reconciled to the amount
computed using the federal statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Federal statutory (benefit) provision................ $ 71 $ (999) $(3,851)
State taxes, net of federal (benefit) provision...... 12 (176) (355)
Future benefits not currently recognized............. (83) 1,175 3,700
Nondeductible compensation........................... -- -- 506
---- ------ -------
$ -- $ -- $ --
==== ====== =======
</TABLE>
At December 31, 1999, the Company had approximately $11.2 million of federal
and state net operating loss carryforwards available to offset future taxable
income which expire at various dates through 2019. Under the Tax Reform Act of
1986, the amounts of and benefits from net operating loss
F-15
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 5--INCOME TAXES: (CONTINUED)
carryforwards may be impaired or limited in certain circumstances. Events which
cause limitations in the amount of net operating losses that the Company may
utilize in any one year include, but are not limited to, a cumulative ownership
change of more than 50%, as defined, over a three year period.
Deferred tax assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 800 $ 4,500
Accruals and allowances................................... 100 100
----- -------
Net deferred tax assets................................. 900 4,600
Less: Valuation allowance................................... (900) (4,600)
----- -------
$ -- $ --
===== =======
</TABLE>
The Company has incurred losses during each of the last two years.
Management believes that based on the history of such losses and other factors,
the weight of available evidence indicates that it is more likely than not that
the Company will not be able to realize its deferred tax assets and thus a full
valuation reserve has been recorded at December 31, 1998 and 1999.
NOTE 6--CONVERTIBLE PREFERRED STOCK:
Convertible Preferred Stock ("Preferred Stock") consists of the following
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
PROCEEDS
NET OF
SHARES PER SHARE ISSUANCE
SERIES AUTHORIZED OUTSTANDING AMOUNT COSTS
- ------ ---------- ----------- --------- --------
<S> <C> <C> <C> <C>
A................................... 6,500 6,442 $ 0.70 $ 4,490
------ ------ -------
Balance at December 31, 1998........ 6,500 6,442 4,490
B................................... 6,700 6,422 2.73 17,482
------ ------ -------
Balance at December 31, 1999........ 13,200 12,864 21,972
C (unaudited)....................... 4,000 3,401 10.29 34,950
------ ------ -------
Balance at March 31, 2000
(unaudited)....................... 17,200 16,265 $56,922
====== ====== =======
</TABLE>
The Company recorded a preferred stock dividend of $16.0 million to reflect
the beneficial conversion feature granted the holders of the Series C Preferred
Stock.
F-16
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 6--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
The holders of the Convertible Preferred Stock have various rights and
preferences as follows:
DIVIDENDS
Holders of the Series A, Series B and Series C Preferred Stock are each
entitled to receive non-cumulative dividends at the annual rate of $0.056,
$0.218 and $0.823 per share(appropriately adjusted for stock splits, dividends,
combinations or other recapitalizations), respectively, when and if declared by
the Board of Directors prior to the declaration of dividends to holders of
Common Stock. No dividends have been declared to date.
CONVERSION
Each share of Series A, Series B and Series C Preferred Stock is convertible
into shares of common stock based on a formula which currently results in a
one-for-one exchange ratio. This formula is subject to adjustment, as defined,
which essentially provides adjustments for holders of the Preferred Stock in the
event of dilutive issuances, stock splits, stock dividends and combinations or
other recapitalizations. The conversion of Series A Preferred Stock is automatic
upon the effective date of a public offering of Common Stock in which (i) the
public offering price per share values the Company at at least $50 million and
(ii) aggregate gross proceeds are at least $10 million. The conversion of
Series B Preferred Stock is automatic upon the effective date of a public
offering of Common Stock in which (i) the public offering price per share equals
or exceeds $5.00 and (ii) aggregate gross proceeds are at least $10 million. The
conversion of Series C Preferred Stock is automatic upon the effective date of a
public offering of Common Stock in which (i) the public offering price per share
equals or exceeds $13.38 and (ii) the aggregate gross proceeds are at least
$40 million.
LIQUIDATION
In the event of liquidation, holders of the Series A Preferred Stock are
entitled to a per share distribution in preference to holders of Common Stock
equal to the Series A stated value of $0.70 plus any declared but unpaid
dividends. The holders of Series B Preferred Stock are entitled to a per share
distribution preference to holders of Common Stock equal to the Series B stated
value of $2.727 plus any declared but unpaid dividends. The holders of Series C
Preferred Stock are entitled to a per share distribution preference to holders
of Common Stock equal to the Series C stated value of $10.29 plus any declared
but unpaid dividends. In the event funds are sufficient to make a complete
distribution to holders of Series A, Series B and Series C as described above,
the remaining assets will be distributed ratably among the holders of Common
Stock. A merger, acquisition, sale of voting control or sale of substantially
all of the assets of the Company, in which the stockholders of the Company do
not own a majority (50% or more) of the outstanding shares of the surviving
corporation is deemed to be a liquidation.
REDEMPTION
Outside certain preferences granted upon liquidation, the holders of the
Series A, B and C Preferred Stock have no redemption rights.
F-17
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 6--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
VOTING
The holders of the Series A, B and C Preferred Stock have one vote for each
share of Common Stock into which such Preferred Stock may be converted.
WARRANTS FOR PREFERRED STOCK
In connection with the loan agreement entered into in July 1998, the Company
issued to a bank a fully vested warrant to purchase 16,071 shares of Series A
Preferred Stock. The warrant may be exercised at any time prior to July 31, 2003
at an exercise price of $1.40 per share. The warrant was recorded as a debt
discount at its estimated fair value of $6,000. Amortization of the discount was
recognized as interest expense over the term of the loan agreement. The warrant
automatically converts to a warrant to purchase Common Stock upon the effective
date of an initial public offering.
In connection with various capital lease agreements entered into during
1999, the Company issued fully vested warrants to purchase 20,615 shares of
Series B Preferred Stock. The warrants expire at various dates through
September 2004 and may be exercised at any time prior to the date of expiration
at exercise prices ranging from $2.73 to $3.12. The warrants were recorded as
debt discounts at their estimated fair value of $112,000. Amortization of the
discount is recognized as interest expense over the term of the lease
agreements. The warrants automatically convert to warrants to purchase Common
Stock upon the effective date of an initial public offering.
In connection with the Company's facility lease agreements entered into
during 1999, the Company issued fully vested warrants to purchase 22,820 shares
of Series B Preferred Stock. The warrants may be exercised at any time prior to
date of expiration at exercise prices ranging from $2.73 to $5.45. The fair
value of the warrants of $188,000 is being recorded as rent expense over the
life of the leases. The warrants automatically convert to warrants to purchase
Common Stock upon the effective date of an initial public offering.
In connection with two customer acquisition arrangements entered into during
1999, the Company issued warrants to purchase 687,837 of Series B Preferred
Stock. The warrants vest over the term of the agreements pursuant to certain
performance provisions. The warrants expire at dates through October 2004 and
may be exercised at exercise prices ranging from $3.12 to $5.45. The warrants
are recorded as charges to sales and marketing during the periods in which the
performance obligations are met. For the year ended December 31, 1999 and three
months ended March 31, 2000, warrants to purchase 48,789 and 31,427 vested,
respectively, pursuant to the terms. For the year ended December 31, 1999 and
the three months ended March 31, 2000, the Company recorded $323,000 and
$281,000, respectively, to sales and marketing expense related to the fair value
of the warrants earned during the period. The warrants automatically convert to
warrants to purchase Common Stock upon the effective date of an initial public
offering.
F-18
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 6--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
The Company estimated the fair value of each warrant using the Black-Scholes
option pricing model using the following assumptions in addition to the
estimated fair value of the stock and the exercise price:
<TABLE>
<S> <C>
Risk free interest rate..................................... 6.5%
Expected life............................................... term
Dividend yield.............................................. 0%
Expected volatility......................................... 75%
</TABLE>
In determining the estimated fair value of the Preferred Stock, the Company
considered among other things, the sale of similar securities to outside
parties, the relative level of revenues and other operating results, the absence
of a public trading market for the Company's securities and the competitive
nature of the Company's market.
NOTE 7--COMMON STOCK:
At December 31, 1998 and 1999, there were 13,320,000 and 14,236,000 shares
outstanding, respectively, of Common Stock issued to the founders of the
Company, affiliates and other nonrelated parties. At March 31, 2000, there were
16,006,000 shares of Common Stock outstanding. A portion of the shares sold are
subject to a right of repurchase by the Company subject to vesting. At
December 31, 1998 and 1999, there were no shares subject to repurchase. At
March 31, 2000, there were 1,225,000 shares subject to repurchase.
In May 1998, the Board of Directors approved a one-for-ten stock split of
the Company's Common Stock and Preferred Stock with a corresponding adjustment
to outstanding stock options and warrants. All Common and Preferred converted
share and per share data in the accompanying financial statements have been
adjusted retroactively to give effect to the stock split.
The Company has reserved shares of Common Stock as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
2000
-----------
(UNAUDITED)
<S> <C>
Conversion of Series A...................................... 6,442
Conversion of Series B...................................... 6,422
Conversion of Series C...................................... 3,401
Common Stock issued......................................... 16,006
Exercise of options under the equity incentive plans........ 6,005
Exercise of warrants issued for Series A and B Preferred
Stock..................................................... 747
Undesignated................................................ 11,777
------
50,800
======
</TABLE>
NOTE 8--STOCK OPTION PLAN:
In September 1996, the Board of Directors adopted the 1996 Stock Option Plan
(the "1996 Plan") providing for the issuance of incentive and nonstatutory stock
options to employees, consultants and outside directors of the Company. As of
March 31, 2000, 8,810,820 shares are authorized for issuance under the 1996
Plan.
F-19
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 8--STOCK OPTION PLAN: (CONTINUED)
Under the 1996 Plan, options may be granted at an exercise price at the date
of grant of not less than the fair market value per share for incentive stock
options and not less than 85% of the fair market value per share for
nonstatutory stock options, except for options granted to a person owning
greater than 10% of the total combined voting power of all classes of stock of
the Company, for which the exercise price of the option must be not less than
110% of the fair market value. The fair market value of the Company's Common
Stock is determined by the Board of Directors or a committee thereof.
Options granted under the 1996 Plan generally become exercisable at a rate
of 25% per year over four years and expire no later than ten years after the
grant date.
The following table summarizes information about stock option transactions
under the 1996 Plan (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
--------------------------------------------------------------- ENDED
1997 1998 1999 MARCH 31, 2000
------------------- ------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period.......................... 467 $0.11 2,818 $0.11 4,124 $ -- 5,294 $ 0.35
Granted below fair value.......... -- $ -- -- $ -- 2,155 $0.67 1,757 $ 1.59
Granted at fair value............. 2,416 $0.11 1,886 $0.17 88 $0.25 -- $ --
Exercised......................... (4) $0.11 (116) $0.13 (916) $0.16 (1,770) $ 1.05
Canceled.......................... (61) $0.11 (464) $0.11 (157) $0.26 (110) $ 0.43
----- ----- ----- ------
Outstanding at end of period...... 2,818 $0.11 4,124 $0.14 5,294 $0.35 5,171 $ 0.53
===== ===== ===== ======
Options vested.................... 259 1,277 1,515 1,342
===== ===== ===== ======
Weighted average fair value of
options granted during the
period.......................... $0.14 $0.17 $5.35 $15.00
===== ===== ===== ======
</TABLE>
At March 31, 2000, the Company had 833,891 shares available for future grant
under the 1996 Plan (unaudited).
The following table summarizes the information about stock options
outstanding and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
NUMBER REMAINING AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE
PRICES (IN THOUSANDS) LIFE (IN YEARS) PRICE
- -------- -------------- --------------- --------
<S> <C> <C> <C>
$0.11..................................... 1,251 7.52 $0.11
$0.25..................................... 231 8.90 $0.25
$0.75..................................... 33 9.70 $0.75
</TABLE>
F-20
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 8--STOCK OPTION PLAN: (CONTINUED)
The following table summarizes the information about stock options
outstanding and exercisable as of March 31, 2000 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
NUMBER REMAINING AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE
PRICES (IN THOUSANDS) LIFE (IN YEARS) PRICE
- -------- -------------- --------------- --------
<S> <C> <C> <C>
$0.11..................................... 1,020 7.30 $0.11
$0.25..................................... 280 8.68 $0.25
$0.75..................................... 37 9.48 $0.75
$2.50..................................... 5 9.84 $2.50
</TABLE>
The weighted average remaining contractual life of stock options outstanding
at December 31, 1999 and March 31, 2000 was 8.49 and 8.47 years, respectively.
FAIR VALUE DISCLOSURES
The Company applies the measurement principles of APB No. 25 in accounting
for its stock option plans. Had compensation expense for options granted been
determined based on the fair value at the grant date as prescribed by SFAS
No. 123, the Company's net loss and net loss per share would have been adjusted
to the pro forma amounts indicated below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss) available to
common stockholders:
As reported................... $ 207 $(3,082) $(13,705) $(1,693) $(30,622)
===== ======= ======== ======= ========
Pro forma..................... $ 190 $(3,266) $(14,177) $(1,818) $(31,348)
===== ======= ======== ======= ========
Basic and diluted net income
(loss) per share available to
common stockholders:
As reported:.................. $0.02 $ (0.23) $ (1.01) $ (0.13) $ (2.11)
===== ======= ======== ======= ========
Pro forma:.................... $0.01 $ (0.25) $ (1.05) $ (0.14) $ (2.16)
===== ======= ======== ======= ========
</TABLE>
The Company calculated the minimum fair value of each option grant on the
date of grant using the Black-Scholes option pricing model as prescribed by SFAS
No. 123 using the following assumptions:
<TABLE>
<CAPTION>
<S> <C>
Risk-free interest rates.................................... 6.5%
Expected lives (in years)................................... 4
Dividend yield.............................................. 0%
Expected volatility......................................... 0%
</TABLE>
F-21
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 8--STOCK OPTION PLAN: (CONTINUED)
Because the determination of fair value of all options granted after such
time as the Company becomes a public entity will include an expected volatility
factor in addition to the factors described in the preceding paragraph, the
above results may not be representative of future periods.
UNEARNED STOCK-BASED COMPENSATION
In connection with certain stock option grants to employees, during the year
ended December 31, 1999 and the three months ended March 31, 2000, the Company
recognized unearned stock-based compensation totaling $13.9 million and
$23.0 million, respectively, which is being amortized over the vesting periods
of the related options, which is generally four years, using the multiple option
approach. Amortization expense recognized for the year ended December 31, 1999
and the three months ended March 31, 2000 totaled approximately $2.3 million and
$3.5 million, respectively. In determining the fair market value on each grant
date, the Board of Directors considered among other things, the developmental
stage of the Company, the absence of a public trading market for the Company's
securities and the nature of the Company's market. The Company also recorded
amortization expense of $983,000 and $460,000 for the year ended December 31,
1999 and March 31, 2000, respectively, in connection with stock options issued
for services. The Company estimated the fair value of the options issued for
services using a Black-Scholes option pricing model using the following
assumptions: risk free interest rate of 6.5%, volatility of 75% and a ten year
(term) expected life.
NOTE 9--RELATED PARTY TRANSACTIONS:
In December 1999, the Company entered into a technology license agreement
with a firm controlled by a member of the Board of Advisors of the Company. This
member holds options to purchase the Company's common stock. Approximately
$19,000 and $63,000 of revenue was recorded relating to this agreement during
the year ended December 31, 1999 and the three months ended March 31, 2000,
respectively.
Substantially all of the revenues recorded by the Company for the years
ended December 31, 1997 and 1998 were from a consulting contract with a single
customer. This customer is controlled by a member of the Board of Directors of
the Company. This consulting contract was terminated during June 1998. No
revenues have subsequently been recorded by the Company relating to this
customer.
In January and March 2000, certain executives of the Company exercised their
stock options prior to vesting by issuance of full recourse promissory notes to
the Company. The aggregate notes of $1.8 million bear interest at a rate of
6.21% per annum and are due in January and March 2005. The notes are
collateralized by the related shares of Common Stock issued, which are subject
to the Company's right of repurchase. The net amount outstanding has been
reflected as a separate component of stockholders' equity.
NOTE 10--SUBSEQUENT EVENTS:
2000 STOCK PLANS
In May 2000, the Company's Board of Directors approved the 2000 Equity
Incentive Plan (the "2000 Plan"), which will serve as the successor plan to the
1996 Plan. The Board of Directors also approved a 2000 Employee Stock Purchase
Plan (the "2000 ESPP"). These plans will become effective immediately
F-22
<PAGE>
HOMESTEAD.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
NOTE 10--SUBSEQUENT EVENTS: (CONTINUED)
prior to the completion of the initial public offering. The common stock
reserved for future issuances under these plans will be 4,900,000 of the shares
of Common Stock outstanding immediately after the initial public offering.
Additionally, the share reserve in each plan will automatically increase each
January 1, beginning with calendar year 2002, equal to the lesser of (i) 6% and
1% of the then outstanding shares for the 2000 Plan and the 2000 ESPP,
respectively; or (ii) an amount determined by the Board of Directors.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
In May 2000, the Company's Board of Directors approved (a) an amendment to
the certificate of incorporation changing the par value of the Company's Common
Stock and Preferred Stock to $0.001 per share, and (b) an amendment and
restatement of the certificate of incorporation, effective upon completion of an
initial public offering. Under the amended and restated certificate, the Company
will have total authorized capital consisting of 100,000,000 shares of Common
Stock, $0.001 par value and 5,000,000 of Preferred Stock, $0.001 par value. The
par value of the Common and Preferred Stock in the balance sheet and the
statement of stockholders' equity (deficit) have been retroactively adjusted to
reflect the change in par value for all periods presented.
F-23
<PAGE>
[Back cover: Homestead.com logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discounts payable by us, in connection with the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 18,480
NASD filing fee............................................. 7,500
Nasdaq National Market listing fee..........................
Blue Sky fees and expenses..................................
Transfer Agent and Registrar fees...........................
Accounting fees and expenses................................
Legal fees and expenses.....................................
Printing and engraving costs................................
Miscellaneous expenses......................................
----------
Total................................................... $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of duty of loyalty to us or to our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Article III of our Amended and Restated Certificate of Incorporation further
provides that we must indemnify our directors and executive officers and may
indemnify our other officers and employees and agents to the fullest extent
permitted by Delaware law. We believe that indemnification under our Amended and
Restated Certificate of Incorporation covers negligence and gross negligence on
the part of indemnified parties.
We intend to enter into indemnification agreements with each of our
directors and certain officers. These agreements, among other things, will
require us to indemnify each director and executive officer for certain expenses
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of Homestead arising out of the person's services as our director or
officer, any subsidiary of ours or any other company or enterprise to which the
person provides services at our request.
The underwriting agreement (Exhibit 1.1) will provide for indemnification by
the underwriters of Homestead, our directors, our officers who sign the
registration statement, and our controlling persons for some liabilities,
including liabilities arising under the Securities Act.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since April 1997, we have sold and issued the following unregistered
securities:
1. In May 1998, we issued and sold 6,442,350 shares of Series A preferred
stock for an aggregate consideration of $4,509,645 to 12 accredited investors.
2. In July 1998, we issued a warrant to purchase 16,071 shares of Series A
preferred stock, at an exercise price of $1.40 per share, to Silicon Valley Bank
in connection with an equipment financing facility.
3. In April 1999, we issued and sold 6,421,710 shares of Series B preferred
stock, for an aggregate consideration of $17,500,000, to 20 accredited
investors.
4. In May 1999, we issued a warrant to purchase 11,000 shares of Series B
preferred stock, at an exercise price of $2.727 per share, to Insight
Investments, Corp. in connection with an equipment financing facility.
5. In July 1999, we issued a warrant to purchase 320,864 shares of
Series B preferred stock, at an exercise price of $3.1166 per share, to Dell
USA, L.P. in connection with a customer acquisition agreement. The warrant vests
in increments based upon the achievement of certain performance milestones. As
of March 31, 2000, 80,216 shares have vested.
6. In September 1999, we issued a warrant to purchase 9,615 shares of
Series B preferred stock, at an exercise price of $3.12 per share, to Dominion
Capital Management, L.L.C. in connection with an equipment financing facility.
7. In August 1999, we issued a warrant to purchase 12,000 shares of
Series B preferred stock, at an exercise price of $2.727 per share, to
3355 Edison Partners, a California general partnership, in connection with a
real estate lease.
8. In October 1999, we issued a warrant to purchase 366,973 shares of
Series B preferred stock, at an exercise price of $5.45 per share, to AltaVista
Company in connection with a customer acquisition agreement. The warrant vests
in increments based upon the achievement of certain performance milestones. As
of March 31, 2000, no shares have vested.
9. In November 1999, we issued a warrant to purchase 10,820 shares of
Series B preferred stock, at an exercise price of $5.45 per share, to Luigi and
Miranda Zanette in connection with a real estate lease.
10. In January 2000, we issued and sold 3,401,361 shares of Series C
preferred stock for an aggregate consideration of $35,000,000 to 31 accredited
investors.
11. Since April 1997 and through April 30, 2000, we granted options to our
employees, directors and consultants under our 1996 Stock Option Plan to
purchase an aggregate of 8,016,924 shares of common stock at weighted exercise
price of $.629 per share, and options for 3,133,238 shares have been exercised.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (10) above were made in reliance on Rule 506 of
Regulation D promulgated under the Securities Act or Section 4(2) of the
Securities Act. These sales were made to accredited investors without general
solicitation or advertising.
The sales and issuances of common stock made pursuant to the exercise of
stock options granted under the 1996 Stock Option Plan to our officers,
directors, employees and consultants as described in paragraph (11) above were
made in reliance on Rule 701 promulgated under the Securities Act.
ITEM 16. (A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Certificate to be effective upon the
closing of this offering.
3.3 Bylaws.
3.4* Amended and Restated Bylaws to be effective upon the closing
of this offering.
4.1* Specimen Common Stock Certificate.
4.2 Investor Rights Agreement, dated January 14, 2000.
5.1* Opinion of Cooley Godward LLP.
10.1* Form of Indemnity Agreement.
10.2 1996 Stock Option Plan and related documents.
10.3* 2000 Equity Incentive Plan and related documents.
10.4* 2000 Employee Stock Purchase Plan and related documents.
10.5 Standard Industrial/Commercial Multi-Tenant Lease by and
between Homestead and 3355 Edison Partners, a California
General Partnership, dated July 6, 1999.
10.6 Standard Industrial/Commercial Multi-Tenant Lease by and
between Homestead and Luigi Zanette and Miranda Zanette,
Trustees of the Zanette Family Trust U/A dated October 2,
1993, dated September 20, 1999.
10.7 Lease by and between Homestead and Ronald M. Newdoll, dated
December 15, 1999.
10.8 Loan and Security Agreement by and between Homestead and
Silicon Valley Bank, dated July 13, 1998.
10.9 Amended and Restated Loan and Security Agreement by and
between Homestead and Silicon Valley Bank, dated March 1,
2000.
10.10 Master Lease Agreement by and between Homestead and CC
Finance L.L.C., dated May 11, 1998.
10.11 Master Lease Agreement by and between Homestead and Dominion
Ventures, Inc., dated September 28, 1998.
10.12 Master Lease Agreement by and between Homestead and Insight
Investments, Corp., dated April 7, 1999.
10.13 Lease Agreement by and between Homestead and Dell Financial
Services L.P., dated November 24, 1999.
10.14 Master Lease Agreement by and between Homestead and EMC
Corporation, dated December 22, 1999.
10.15 Early Exercise Stock Purchase Agreement by and between
Homestead and Elizabeth Burr, dated January 1, 2000.
10.16 Early Exercise Stock Purchase Agreement by and between
Homestead and Mark Garrett, dated March 16, 2000.
16.1 Letter from Ernst & Young LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
The registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Menlo Park, State of
California on the 8th day of May, 2000.
HOMESTEAD.COM INCORPORATED
By: /s/ JUSTIN S. KITCH
--------------------------------------
Justin S. Kitch
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Justin S. Kitch and Mark S. Garrett as his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement on Form S-1, and to sign any registration statement filed under
Rule 462 under the Securities Act of 1933, as amended, including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, 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 said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JUSTIN S. KITCH
------------------------------------ Chief Executive Officer and Chairman of May 8, 2000
Justin S. Kitch the Board (Principal Executive Officer)
/s/ MARK S. GARRETT Senior Vice President and Chief Financial
------------------------------------ Officer (Principal Financial and May 8, 2000
Mark S. Garrett Accounting Officer)
/s/ TIMOTHY C. DRAPER
------------------------------------ Director May 8, 2000
Timothy C. Draper
/s/ TIMOTHY M. HALEY
------------------------------------ Director May 8, 2000
Timothy M. Haley
/s/ DAVID A. HEAP
------------------------------------ Director May 8, 2000
David A. Heap
/s/ JAMES C. KITCH
------------------------------------ Director May 8, 2000
James C. Kitch
/s/ LINDA FAYNE LEVINSON
------------------------------------ Director May 8, 2000
Linda Fayne Levinson
/s/ PAUL MATTEUCCI
------------------------------------ Director May 8, 2000
Paul Matteucci
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Certificate to be effective upon the
closing of this offering.
3.3 Bylaws.
3.4* Amended and Restated Bylaws to be effective upon the closing
of this offering.
4.1* Specimen Common Stock Certificate.
4.2 Investor Rights Agreement, dated January 14, 2000.
5.1* Opinion of Cooley Godward LLP.
10.1* Form of Indemnity Agreement.
10.2 1996 Stock Option Plan and related documents.
10.3* 2000 Equity Incentive Plan and related documents.
10.4* 2000 Employee Stock Purchase Plan and related documents.
10.5 Standard Industrial/Commercial Multi-Tenant Lease by and
between Homestead and 3355 Edison Partners, a California
General Partnership, dated July 6, 1999.
10.6 Standard Industrial/Commercial Multi-Tenant Lease by and
between Homestead and Luigi Zanette and Miranda Zanette,
Trustees of the Zanette Family Trust U/A dated October 2,
1993, dated September 20, 1999.
10.7 Lease by and between Homestead and Ronald M. Newdoll, dated
December 15, 1999.
10.8 Loan and Security Agreement by and between Homestead and
Silicon Valley Bank, dated July 13, 1998.
10.9 Amended and Restated Loan and Security Agreement by and
between Homestead and Silicon Valley Bank, dated March 1,
2000.
10.10 Master Lease Agreement by and between Homestead and CC
Finance L.L.C., dated May 11, 1998.
10.11 Master Lease Agreement by and between Homestead and Dominion
Ventures, Inc., dated September 28, 1998.
10.12 Master Lease Agreement by and between Homestead and Insight
Investments, Corp., dated April 7, 1999.
10.13 Lease Agreement by and between Homestead and Dell Financial
Services L.P., dated November 24, 1999.
10.14 Master Lease Agreement by and between Homestead and EMC
Corporation, dated December 22, 1999.
10.15 Early Exercise Stock Purchase Agreement by and between
Homestead and Elizabeth Burr, dated January 1, 2000.
10.16 Early Exercise Stock Purchase Agreement by and between
Homestead and Mark Garrett, dated March 16, 2000.
16.1 Letter from Ernst & Young LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
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* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HOMESTEAD.COM INCORPORATED
Homestead.com Incorporated, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of Homestead.com
Incorporated was filed with the Secretary of the State of Delaware on April 28,
1998. The original name of the corporation was "Homestead Technologies, Inc."
SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation in the form attached hereto as Exhibit A has been duly adopted in
accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors of the Corporation.
THIRD: Pursuant to a resolution of the Board of Directors, this Amended
and Restated Certificate of Incorporation in the form attached hereto as Exhibit
A was submitted to the stockholders of the Corporation for their approval, and
was approved, in accordance with Section 228, 242, and 245 of the General
Corporation Law of the State of Delaware.
FOURTH: The Amended and Restated Certificate of Incorporation so
adopted reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
IN WITNESS WHEREOF, Homestead.com Incorporated has caused this
Certificate to be signed by the President and attested to by the Secretary this
13th day of January, 2000.
HOMESTEAD.COM INCORPORATED
By: /s/ Justin S. Kitch
---------------------------------
Justin S. Kitch
President
ATTEST:
/s/ Justin S. Kitch
- -----------------------
Justin S. Kitch
Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HOMESTEAD.COM INCORPORATED
I.
A. The name of the corporation is HOMESTEAD.COM INCORPORATED (the
"Corporation" or the "Company").
B. The address of the registered office of the Corporation in the State of
Delaware is: 15 East North Street, Dover, County of Kent. The name of the
Corporation's registered agent at said address is AmeriSearch Corporate Services
Inc.
C. The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
II.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Sixty Eight Million
(68,000,000) shares, Fifty Million Eight Hundred Thousand (50,800,000) shares of
which shall be Common Stock (the "Common Stock"), and Seventeen Million Two
Hundred Thousand (17,200,000) shares of which shall be Preferred Stock (the
"Preferred Stock"). Of the shares of Preferred Stock, Six Million Five Hundred
Thousand (6,500,000) shares shall be designated "Series A Preferred Stock" (the
"Series A Preferred"), Six Million Seven Hundred Thousand (6,700,000) shares
shall be designated "Series B Preferred Stock" (the "Series B Preferred") and
Four Million (4,000,000) shares shall be designated "Series C Preferred Stock"
(the "Series C Preferred"). The Preferred Stock shall have a par value of one
hundredth of one dollar ($.01) per share and the Common Stock shall have a par
value of one hundredth of one dollar ($.01) per share. The Common Stock shall
have all rights ascribed by law to Common Stock.
B. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, the Series B Preferred and the Series C
Preferred are as follows:
1. DIVIDEND RIGHTS.
a. Holders of Series A Preferred, Series B Preferred and Series C
Preferred, in preference to the holders of any other stock of the Company
("Junior Stock"), shall be entitled to receive, when and as declared by the
Board of Directors, but only out of funds that are legally available therefor,
cash dividends at the rate of eight percent (8%) of the "Original Issue Price"
per annum on each outstanding share of Series A Preferred, Series B Preferred
and Series C Preferred (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares). The
Original Issue Price of the Series A Preferred shall be $0.7001, the Original
Issue Price of the Series B Preferred shall be $2.727 and the Original
<PAGE>
Issue Price of the Series C Preferred shall be $10.29. Such dividends shall be
payable only when, as and if declared by the Board of Directors and shall be
non-cumulative.
b. So long as any shares of Series A Preferred, Series B
Preferred or Series C Preferred shall be outstanding, no dividend, whether in
cash or property, shall be paid or declared, nor shall any other distribution be
made, on any Junior Stock, nor shall any shares of any Junior Stock of the
Company be purchased, redeemed, or otherwise acquired for value by the Company
(except for acquisitions of Common Stock by the Company pursuant to agreements
which permit the Company to repurchase such shares upon termination of services
to the Company) until all dividends (set forth in Section 1a above) on the
Series A Preferred, Series B Preferred and the Series C Preferred shall have
been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series A Preferred, Series B Preferred and Series C
Preferred in an amount equal per share (on an as-if-converted to Common Stock
basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1b shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock in
exchange for shares of any other Junior Stock, or (iii) any repurchase of any
outstanding securities of the Company that is unanimously approved by the
Company's Board of Directors.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Preferred, Series B Preferred and Series C
Preferred shall be voted equally with the shares of the Common Stock of the
Company and not as a separate class, at any annual or special meeting of
stockholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either case upon the following basis: each holder of
shares of Series A Preferred, Series B Preferred and Series C Preferred shall be
entitled to such number of votes as shall be equal to the whole number of shares
of Common Stock into which such holder's aggregate number of shares of Series A
Preferred, Series B Preferred and Series C Preferred are convertible (pursuant
to Section 4 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent. The Common
Stock shall have one vote per share.
b. SEPARATE VOTE OF SERIES A PREFERRED. For so long as shares of
Series A Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least a majority of the outstanding Series A Preferred shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision of
the Certificate of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series A Preferred so as to affect them adversely;
(ii) Any increase or decrease (other than by redemption or
conversion) in the authorized number of shares of Series A Preferred; or
2.
<PAGE>
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking senior to
the Series A Preferred in right of redemption, liquidation preference or
dividends or any increase in the authorized or designated number of any such new
class or series.
c. SEPARATE VOTE OF SERIES B PREFERRED. For so long as shares of
Series B Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least a majority of the outstanding Series B Preferred shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision of
the Certificate of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series B Preferred so as to affect them adversely;
(ii) Any increase or decrease (other than by redemption or
conversion) in the authorized number of shares of Series B Preferred; or
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series B Preferred in right of redemption, voting,
liquidation preference or dividends or any increase in the authorized or
designated number of any such new class or series.
d. SEPARATE VOTE OF SERIES C PREFERRED. For so long as shares of
Series C Preferred remain outstanding, in addition to any other vote or consent
required herein or by law, the vote or written consent of the holders of at
least a majority of the outstanding Series C Preferred shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any provision of
the Certificate of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Designation), that alters or changes the voting
powers, preferences, or other special rights or privileges, or restrictions of
the Series C Preferred so as to affect them adversely;
(ii) Any increase or decrease (other than by redemption or
conversion) in the authorized number of shares of Series C Preferred; or
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series C Preferred in right of redemption, voting,
liquidation preference or dividends or any increase in the authorized or
designated number of any such new class or series.
e. SEPARATE VOTE OF PREFERRED STOCK. For so long as shares of
Series A Preferred, Series B Preferred or Series C Preferred remain outstanding,
in addition to any other
3.
<PAGE>
vote or consent required herein or by law, the vote or written consent of the
holders of at least a majority of the outstanding Series A Preferred, Series B
Preferred and Series C Preferred, voting together as a class, shall be necessary
for effecting or validating any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c).
f. ELECTION OF DIRECTORS. At each election of directors of the
Company, so long as any shares of Series B Preferred are outstanding, the
holders of Series B Preferred shall be entitled, voting as a single series, to
elect one (1) director of the Corporation (the "Series B Director"). In the case
of any vacancy in the office of a Series B Director, a successor shall be
elected to hold office for the unexpired term of such director by the
affirmative vote of the holders of a majority of the Series B Preferred, voting
as a single class, given at a special meeting of such stockholders called for
that purpose or by the unanimous written consent of such stockholders. All other
directors of the Company shall be elected by the holders of the Series A
Preferred, Series C Preferred and the Common Stock, voting together as a single
class on an as-if-converted to Common Stock basis.
g. APPLICATION OF SECTION 2115 OF THE CALIFORNIA CORPORATIONS
CODE. In the event that this Corporation is subject to Section 2115(b) of the
California Corporations Code at any time, or from time to time, then the
following shall apply:
(i) Every stockholder entitled to vote in any election of
directors of the Corporation during such time the Corporation is subject to
Section 2115(b) may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder may so choose;
(ii) No stockholder, however, may cumulate such
stockholder's votes for one or more candidates unless (i) the names of such
candidates have been properly placed in nomination, in accordance with the
Bylaws of the Corporation, prior to the voting, (ii) the stockholder has given
advance notice to the Corporation of the intention to cumulate votes pursuant to
the Bylaws, and (iii) the stockholder has given proper notice to the other
stockholders at the meeting, prior to the voting, of such stockholder's
intention to cumulate such stockholder's votes; and
(iii) If any stockholder has given proper notice, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. The candidates receiving the highest number of votes of
the shares entitled to be voted for them up to the number of directors to be
elected by such shares shall be declared elected.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series A
Preferred, Series B Preferred and Series C Preferred shall be entitled to be
paid out of the assets of the Company:
4.
<PAGE>
(i) in the case of the Series A Preferred, an amount per
share of Series A Preferred equal to the Original Issue Price of the Series A
Preferred plus all declared and unpaid dividends on the Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series A Preferred held
by them;
(ii) in the case of the Series B Preferred, an amount per
share of the Series B Preferred equal to the Original Issue Price for the Series
B Preferred plus all declared and unpaid dividends on such shares of Series B
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
the Series B Preferred held by them; and
(iii) in the case of the Series C Preferred, an amount per
share of the Series C Preferred equal to the Original Issue Price for the Series
C Preferred plus all declared and unpaid dividends on such shares of Series C
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
the Series C Preferred held by them.
b. After the payment of the full liquidation preferences of the
Series A Preferred, Series B Preferred and Series C Preferred, if any, as set
forth in Section 3a above, the assets of the Company legally available for
distribution, if any, shall be distributed ratably to the holders of the Common
Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) If, upon any liquidation, distribution, or winding up,
the assets of the Company shall be insufficient to make payment in full to all
holders of Series A Preferred, Series B Preferred and Series C Preferred of the
liquidation preferences set forth in Section 3a, then such assets shall be
distributed among the holders of Series A Preferred, Series B Preferred and
Series C Preferred at the time outstanding, ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
5.
<PAGE>
(iv) In any of such events, if the consideration received by
this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as determined in good faith by the Board
of Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, the Series B Preferred and
the Series C Preferred shall have the following rights with respect to the
conversion of the Series A Preferred, the Series B Preferred and the Series C
Preferred into shares of Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred and Series C Preferred may, at the option of the holder, be converted
at any time into fully-paid and nonassessable shares of Common Stock. The number
of shares of Common Stock to which a holder of Series A Preferred, Series B
Preferred or Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying (i) in the case of the Series A Preferred, the
"Series A Preferred Conversion Rate" then in effect (determined as provided in
Section 4b) by the number of shares of Series A Preferred being converted; (ii)
in the case of the Series B Preferred, the "Series B Preferred Conversion Rate"
then in effect (determined as provided in Section 4b) by the number of shares of
Series B Preferred being converted; and (iii) in the case of the Series C
Preferred, the "Series C Preferred Conversation Rate" then in effect (determined
as provided in Section 4b) by the number of shares of Series C Preferred being
converted.
b. SERIES A, SERIES B AND SERIES C PREFERRED CONVERSION RATES.
The conversion rate in effect at any time for conversion of the Series A
Preferred (the "Series A
6.
<PAGE>
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Conversion
Price," calculated as provided in Section 4c. The conversion rate in effect at
any time for conversion of the Series B Preferred (the "Series B Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series B Preferred by the "Series B Conversion Price," calculated
as provided in Section 4c. The conversion rate in effect at any time for
conversion of the Series C Preferred (the "Series C Preferred Conversion Rate")
shall be the quotient obtained by dividing the Original Issue Price of the
Series C Preferred by the "Series C Conversion Price," calculated as provided in
Section 4c.
c. SERIES A, SERIES B AND SERIES C CONVERSION PRICES. The
conversion price for the Series A Preferred shall initially be the Original
Issue Price of the Series A Preferred (the "Series A Conversion Price"). The
conversion price for the Series B Preferred shall initially be the Original
Issue Price of the Series B Preferred (the "Series B Conversion Price"). The
conversion price for the Series C Preferred shall initially be the Original
Issue Price of the Series C Preferred (the "Series C Conversion Price"). Such
initial Series A, Series B and Series C Conversion Prices shall be adjusted from
time to time in accordance with this Section 4. All references to the Series A,
Series B and Series C Conversion Prices herein shall mean the Series A, Series B
and Series C Conversion Prices as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Preferred Stock, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Preferred
Stock being converted. Thereupon, the Company shall promptly issue and deliver
at such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled and shall promptly pay
in cash or, to the extent sufficient funds are not then 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. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Preferred
Stock to be converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series C Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series A, Series B and Series C Conversion Prices in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Preferred
Stock, the Series A, Series B and Series C
7.
<PAGE>
Conversion Prices in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4e shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A, Series B and Series C
Conversion Prices that are then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying such Conversion Prices then in
effect by a fraction (i) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the denominator
of which is the total number of shares of Common Stock issued and outstanding
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 or distribution; PROVIDED, HOWEVER, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Series A, Series B and Series C Conversion
Prices shall be recomputed accordingly as of the close of business on such
record date and thereafter such Conversion Prices shall be adjusted pursuant to
this Section 4f to reflect the actual payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Preferred Stock is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3c or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Preferred Stock shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3c or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion thereof the number of shares
of stock or other securities or property of the Company to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock
8.
<PAGE>
or securities by the terms thereof. 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 Preferred Stock after the capital
reorganization to the end that the provisions of this Section 4 (including
adjustment of the Series A, Series B and Series C Conversion Prices then in
effect and the number of shares issuable upon conversion of the Series A
Preferred, Series B Preferred and Series C Preferred) shall be applicable
after that event and be as nearly equivalent as practicable.
i. SALE OF SHARES BELOW THE CONVERSION PRICE.
(i) If at any time or from time to time after the Original
Issue Date, the Company issues or sells, or is deemed by the express provisions
of this subsection i to have issued or sold, Additional Shares of Common Stock
(as defined in subsection i(iv) below), other than as a dividend or other
distribution on any class of stock as provided in Section 4f above, and other
than a subdivision or combination of shares of Common Stock as provided in
Section 4e above, for an Effective Price (as defined in subsection i(iv) below)
less than the then effective Series A Conversion Price, the then effective
Series B Conversion Price or the then effective Series C Conversion Price, then
and in each such case the then existing Series A Conversion Price, Series B
Conversion Price and/or Series C Conversion Price, as applicable, shall be
reduced, as of the opening of business on the date of such issue or sale, to a
price determined by multiplying each such Conversion Price by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale, plus (B)
the number of shares of Common Stock which the aggregate consideration received
(as defined in subsection i(ii)) by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as
applicable, and (ii) the denominator of which shall be the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale plus the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series A
Preferred, Series B Preferred and Series C Preferred could be converted if fully
converted on the day immediately preceding the given date, and (C) the number of
shares of Common Stock which could be obtained through the exercise or
conversion of all other rights, options and convertible securities outstanding
on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required under
this Section 4i, the consideration received by the Company for any issue or sale
of securities shall (A) to the extent it consists of cash, be computed at the
net amount of cash received by the Company after deduction of any underwriting
or similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale but without deduction of any
expenses payable by the Company, (B) to the extent it consists of property other
than cash, be computed at the fair value of that property as determined in good
faith by the Board of Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities (as defined in subsection i(iii)) or rights or options to
purchase either Additional Shares of Common
9.
<PAGE>
Stock or Convertible Securities are issued or sold together with other stock
or securities or other assets of the Company for a consideration which covers
both, be computed 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 Additional Shares of Common Stock, Convertible Securities or rights
or options.
(iii) For the purpose of the adjustment required under this
Section 4i, if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series A, Series B or Series C Conversion Price, as applicable,
in each case the Company shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities,
plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the Company upon the exercise of such rights
or options, plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of Convertible Securities the
minimum amounts of such consideration cannot be ascertained, but are a function
of antidilution or similar protective clauses, the Company shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the Series
A, Series B and/or Series C Conversion Prices, as adjusted upon the issuance of
such rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If any
such rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A,
Series B and Series C Conversion Prices as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Series A,
Series B and Series C Conversion Prices which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by
10.
<PAGE>
the Company upon such exercise, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or
selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that
such readjustment shall not apply to prior conversions of Series A Preferred,
Series B Preferred or Series C Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 4i, whether or not subsequently reacquired or retired by the
Company other than (A) shares of Common Stock issued upon conversion of the
Series A Preferred, the Series B Preferred and the Series C Preferred, (B)
shares of Common Stock and/or options, warrants or other Common Stock purchase
rights, and the Common Stock issued pursuant to such options, warrants or other
rights (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like), issued or granted after the Original Issue Date
to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements or agreements that are approved by the Board, (C) shares of
Common Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date, (D) shares of Common Stock
issued for consideration other than cash pursuant to a merger, consolidation,
acquisition or similar business combination approved by the Board and (E) shares
of Common Stock issued pursuant to any equipment leasing arrangement, or debt
financing from a bank or similar financial institution approved by the Board.
The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Company under
this Section 4i, into the aggregate consideration received, or deemed to have
been received by the Company for such issue under this Section 4i, for such
Additional Shares of Common Stock.
j. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, the Series B Conversion Price or
the Series C Conversion Price for the number of shares of Common Stock or other
securities issuable upon conversion of the Series A Preferred, the Series B
Preferred or the Series C Preferred, if the Series A Preferred, the Series B
Preferred or the Series C Preferred is then convertible pursuant to this Section
4, the Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Preferred, Series B
Preferred and Series C Preferred, as applicable, at the holder's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or deemed to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (ii) the Series A
Conversion Price, the Series B Conversion Price or the Series C Conversion
Price, as applicable, at the time in effect, (iii) the number of Additional
11.
<PAGE>
Shares of Common Stock and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Series A Preferred,
the Series B Preferred or the Series C Preferred, as applicable,.
k. NOTICES OF RECORD DATE. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3c) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3c), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail
to each holder of Preferred Stock at least twenty (20) days prior to the
record date specified therein a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution
and a description of such dividend or distribution, (B) the date on which any
such Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up is expected to
become effective, and (C) the date, if any, that is to be fixed as to when
the holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer,
dissolution, liquidation or winding up.
l. AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Conversion Price, (A) at any time upon the affirmative election of the holders
of at least a majority of the outstanding shares of the Series A Preferred, or
(B) 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 public offering price per share (before
underwriting discounts, commissions, and fees) values the Company at at least
$50,000,000, and (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least $10,000,000. Each
share of Series B Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series B Conversion Price, (A) at any
time upon the affirmative election of the holders of at least a majority of the
outstanding shares of the Series B Preferred, or (B) 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 public offering price per share (before underwriting discounts, commissions,
and fees and adjusted for any stock splits, stock consolidations, stock
dividends and the like) equals or exceeds $5.00, and (ii) the gross cash
proceeds to the Company (before underwriting discounts, commissions and fees)
are at least $10,000,000. Each share of Series C Preferred shall automatically
be converted into shares of Common Stock, based on the then-effective Series C
Conversion Price, (A) at any time upon the affirmative election of the holders
of at least a majority of the outstanding shares of the
12.
<PAGE>
Series C Preferred, or (B) 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 public offering
price per share (before underwriting discounts, commissions, and fees and
adjusted for any stock splits, stock consolidations, stock dividends and the
like) equals or exceeds $13.38, and (ii) the gross cash proceeds to the
Company (before underwriting discounts, commissions and fees) are at least
$40,000,000. Upon such automatic conversion, any declared and unpaid
dividends shall be paid in accordance with the provisions of Section 4d.
(ii) Upon the occurrence of any of the events specified in
paragraph (i) above, the outstanding shares of the affected series 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 Company or its transfer agent; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion, the affected holders of Preferred Stock
shall surrender the certificates representing such shares at the office of the
Company or any transfer agent for the Preferred Stock. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred, and any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4d.
m. FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
n. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, the Series B Preferred and the Series C
Preferred, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of the Series A
Preferred, the Series B Preferred and the Series C Preferred. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred, the Series B Preferred and the Series C Preferred, the Company will
take such corporate action as may, in the opinion of its
13.
<PAGE>
counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
o. NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (iii) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage
prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All notices shall be addressed to each holder of record at the
address of such holder appearing on the books of the Company.
p. PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
q. NO DILUTION OR IMPAIRMENT. Without the consent of the holders
of then outstanding Series A Preferred as required under Section 2b, of the
holders of then outstanding Series B Preferred as required under Section 2c or
of the holders of then outstanding Series C Preferred as required under Section
2d, the Company shall not amend its Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred, Series B Preferred and Series C Preferred
against dilution or other impairment.
5. REDEMPTION.
The Series A Preferred, the Series B Preferred and the Series C
Preferred shall not be redeemable by the Company.
6. NO REISSUANCE OF PREFERRED.
No share or shares of Series A Preferred, Series B Preferred or Series
C Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued.
7. NO PREEMPTIVE RIGHTS.
Stockholders shall have no preemptive rights except as granted by the
Company pursuant to written agreements.
14.
<PAGE>
III.
A. To the extent permitted by applicable law a director of the
corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. To the extent permitted by applicable law if the Delaware
General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
B. Any repeal or modification of this Article III shall only be prospective
and shall not effect the rights under this Article III in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
IV.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws; PROVIDED, HOWEVER, that the stockholders may change or repeal
any Bylaw adopted by the Board of Directors by the affirmative vote of the
percentage of holders of capital stock as provided therein; and, provided
further, that no amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement thus adopted
by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
15.
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
KARTOFFELSOFT INCORPORATED
(A DELAWARE CORPORATION)
<PAGE>
ARTICLE I Offices................................................1
Section 1. Registered Office........................................1
Section 2. Other Offices............................................1
ARTICLE II Corporate Seal.........................................1
Section 3. Corporate Seal...........................................1
ARTICLE III Stockholders' Meetings.................................1
Section 4. Place of Meetings........................................1
Section 5. Annual Meeting...........................................2
Section 6. Special Meetings.........................................3
Section 7. Notice of Meetings.......................................3
Section 8. Quorum...................................................3
Section 9. Adjournment and Notice of Adjourned Meetings.............4
Section 10. Voting Rights............................................4
Section 11. Joint Owners of Stock....................................5
Section 12. List of Stockholders.....................................5
Section 13. Action Without Meeting...................................5
Section 14. Organization.............................................6
ARTICLE IV Directors..............................................7
Section 15. Number and Term of Office................................7
Section 16. Powers...................................................7
Section 17. Term of Directors........................................7
Section 18. Vacancies................................................7
Section 19. Resignation..............................................7
Section 20. Removal..................................................8
Section 21. Meetings.................................................8
(a) Annual Meetings..........................................8
(b) Regular Meetings.........................................8
(c) Special Meetings.........................................8
(d) Telephone Meetings.......................................8
(e) Notice of Meetings.......................................9
(f) Waiver of Notice.........................................9
Section 22. Quorum and Voting........................................9
<PAGE>
Section 23. Action Without Meeting...................................9
Section 24. Fees and Compensation....................................9
Section 25. Committees..............................................10
(a) Executive Committee.....................................10
(b) Other Committees........................................10
(c) Term 10
(d) Meetings................................................10
(e) Organization............................................11
ARTICLE V Officers..............................................11
Section 26. Officers Designated.....................................11
Section 27. Tenure and Duties of Officers...........................11
(a) General.................................................11
(b) Duties of Chairman of the Board of Directors............11
(c) Duties of President.....................................12
(d) Duties of Vice Presidents...............................12
(e) Duties of Secretary.....................................12
(f) Duties of Chief Financial Officer.......................12
Section 28. Delegation of Authority.................................13
Section 29. Resignations............................................13
Section 30. Removal.................................................13
ARTICLE VI Execution Of Corporate Instruments And Voting Of
Securities Owned By The Corporation...................13
Section 31. Execution of Corporate Instruments......................13
Section 33. Voting of Securities Owned by the Corporation...........14
ARTICLE VII Shares Of Stock.......................................14
Section 34. Form and Execution of Certificates......................14
Section 35. Lost Certificates.......................................14
Section 36. Transfers...............................................15
Section 37. Fixing Record Dates.....................................15
Section 38. Registered Stockholders.................................16
ARTICLE VIII Other Securities Of The Corporation...................16
Section 39. Execution of Other Securities...........................16
<PAGE>
ARTICLE IX Dividends.............................................17
Section 40. Declaration of Dividends................................17
Section 41. Dividend Reserve........................................17
ARTICLE X Fiscal Year...........................................17
Section 42. Fiscal Year.............................................17
ARTICLE XI Indemnification.......................................17
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents..............17
(a) Directors and Executive Officers........................17
(b) Other Officers, Employees and Other Agents..............18
(c) Expenses................................................18
(d) Enforcement.............................................18
(e) Non-Exclusivity of Rights...............................19
(f) Survival of Rights......................................19
(g) Insurance...............................................19
(h) Amendments..............................................19
(i) Saving Clause...........................................19
(j) Certain Definitions.....................................20
ARTICLE XII Notices...............................................21
Section 44. Notices.................................................21
(a) Notice to Stockholders..................................21
(b) Notice to Directors.....................................21
(c) Affidavit of Mailing....................................21
(d) Time Notices Deemed Given...............................21
(e) Methods of Notice.......................................21
(f) Failure to Receive Notice...............................21
(g) Notice to Person with Whom Communication Is Unlawful....21
(h) Notice to Person with Undeliverable Address.............22
ARTICLE XIII Amendments............................................22
Section 45. Amendments..............................................22
ARTICLE XIV Loans To Officers.....................................23
Section 46. Loans to Officers.......................................23
<PAGE>
ARTICLE XV Miscellaneous.........................................23
Section 47. Annual Report...........................................23
<PAGE>
BYLAWS
OF
KARTOFFELSOFT INCORPORATED
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware, as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
1.
<PAGE>
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
2.
<PAGE>
(c) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than fifty percent (50%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors shall fix.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
3.
<PAGE>
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote
shall constitute a quorum for the transaction of business. In the absence of
a quorum, any meeting of stockholders may be adjourned, from time to time,
either by the chairman of the meeting or by vote of the holders of a majority
of the shares represented thereat, but no other business shall be transacted
at such meeting. The stockholders present at a duly called or convened
meeting, at which a quorum is present, may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all action taken by the holders
of a majority of the vote cast, including abstentions, at any meeting at
which a quorum is present shall be valid and binding upon the corporation;
PROVIDED, HOWEVER, that directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. Where a separate vote by a
class or classes or series is required, except where otherwise provided by
the statute or by the Certificate of Incorporation or these Bylaws, a
majority of the outstanding shares of such class or classes or series,
present in person or represented by proxy, shall constitute a quorum entitled
to take action with respect to that vote on that matter and, except where
otherwise provided by statute or by the Certificate of Incorporation or these
Bylaws, the affirmative vote of the majority (plurality, in the case of the
election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. (a) For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
(b) At any time or times that the corporation is subject to Section
2115 of the California Corporations Code, every person entitled to vote at an
election for directors may
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cumulate the votes to which such person is entitled, I.E., such person may
cast a total number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such person's shares are entitled,
and may cast said total number of votes for one or more candidates in such
proportions as such person thinks fit; PROVIDED, HOWEVER, no stockholder
shall be entitled to so cumulate such stockholder's vote unless the
candidates for which such stockholder is voting have been placed in
nomination prior to the voting and a stockholder has given notice at the
meeting, prior to the vote, of an intention to cumulate votes. In any
election of directors, the candidates receiving the highest number of votes,
up to the number of directors to be elected, are elected.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
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(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty (60)
days of the earliest dated consent delivered to the corporation in the manner
herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to
its registered office in the State of Delaware, its principal place of
business or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made
to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written consent has been given in
accordance with Section 228 of the General Corporation Law of Delaware.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE.
Except as otherwise specified in the Certificate of Incorporation, the
authorized number of directors of the corporation shall be fixed by the Board of
Directors from time to time.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. TERM OF DIRECTORS. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors; pROVIDED, HOWEVER, that at
any time or times that the corporation is subject to Section 2115 of the
California Corporations Code, then a vacancy created by a removal of a director
may be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) or by the written consent of the stockholders pursuant to
Section 13 hereof. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors.
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When one or more directors shall resign from the Board of Directors,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place
shall be vacated and until his successor shall have been duly elected and
qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock; PROVIDED, HOWEVER,
that at any time or times that the corporation is subject to Section 2115 of the
California Corporations Code, then unless the entire Board is removed, no
individual directors may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election at which the same total
number of votes cast were cast (or, if such action is taken by written consent,
all shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear
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each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, postage prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; PROVIDED,
HOWEVER, at any meeting, whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so
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approved, by resolution of the Board of Directors, a fixed sum and expenses
of attendance, if any, for attendance at each regular or special meeting of
the Board of Directors and at any meeting of a committee of the Board of
Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such
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committee, no further notice of such regular meetings need be given
thereafter. Special meetings of any such committee may be held at any place
which has been determined from time to time by such committee, and may be
called by any director who is a member of such committee, upon written notice
to the members of such committee of the time and place of such special
meeting given in the manner provided for the giving of written notice to
members of the Board of Directors of the time and place of special meetings
of the Board of Directors. Notice of any special meeting of any committee may
be waived in writing at any time before or after the meeting and will be
waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized
number of members of any such committee shall constitute a quorum for the
transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee.
(e) ORGANIZATION. At every meeting of the directors, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is absent,
the President, or if the President is absent, the most senior Vice President,
or, in the absence of any such officer, a chairman of the meeting chosen by a
majority of the directors present, shall preside over the meeting. The
Secretary, or in his absence, an Assistant Secretary directed to do so by the
President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
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(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors shall designate from time to time. If there is no President,
then the Chairman of the Board of Directors shall also serve as the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in paragraph (c) of this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
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 officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
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Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
SECTION 32. Unless otherwise specifically determined by the Board of
Directors or otherwise required by law, promissory notes, deeds of trust,
mortgages and other evidences of indebtedness of the corporation, and other
corporate instruments or documents requiring the corporate seal, and
certificates of shares of stock of the corporation, shall be executed, signed or
endorsed by the Chairman of the Board of Directors, or the President or any Vice
President, and by the Secretary or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
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All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation shall be entitled to have a certificate signed by or
in the name of the corporation by the Chairman of the Board of Directors, or
the President or any Vice President and by the Treasurer or Assistant
Treasurer or the Secretary or Assistant Secretary, certifying the number of
shares owned by him in the corporation. Any or all of the signatures on the
certificate may be facsimiles. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued with the same
effect as if he were such officer, transfer agent, or registrar at the date
of issue. Each certificate shall state upon the face or back thereof, in full
or in summary, all of the powers, designations, preferences, and rights, and
the limitations or restrictions of the shares authorized to be issued or
shall, except as otherwise required by law, set forth on the face or back a
statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights. Within a reasonable time after the
issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section
or otherwise required by law or with respect to this section a statement that
the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences
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and/or rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same
class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen, or destroyed. The corporation may
require, as a condition precedent to the issuance of a new certificate or
certificates, the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the corporation a surety bond in such form and
amount as it may direct as indemnity against any claim that may be made against
the corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of
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Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within ten (10) days of the date on
which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to the corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; PROVIDED, HOWEVER, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature,
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of a trustee under an indenture pursuant to which such bond, debenture or
other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed
by the Treasurer or an Assistant Treasurer of the corporation or such other
person as may be authorized by the Board of Directors, or bear imprinted
thereon the facsimile signature of such person. In case any officer who shall
have signed or attested any bond, debenture or other corporate security, or
whose facsimile signature shall appear thereon or on any such interest
coupon, shall have ceased to be such officer before the bond, debenture or
other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted
by the corporation and issued and delivered as though the person who signed
the same or whose facsimile signature shall have been used thereon had not
ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
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ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this
Article XI, "executive officers" shall have the meaning defined in Rule 3b-7
promulgated under the 1934 Act) to the fullest extent not prohibited by the
Delaware General Corporation Law; PROVIDED, HOWEVER, that the corporation may
modify the extent of such indemnification by individual contracts with its
directors and executive officers; and, PROVIDED, FURTHER, that the
corporation shall not be required to indemnify any director or executive
officer in connection with any proceeding (or part thereof) initiated by such
person unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in
its sole discretion, pursuant to the powers vested in the corporation under
the Delaware General Corporation Law or (iv) such indemnification is required
to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation, in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
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(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract
between the corporation and the director or executive officer. Any right to
indemnification or advances granted by this Bylaw to a director or executive
officer or officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or
in part, shall be entitled to be paid also the expense of prosecuting his
claim. In connection with any claim for indemnification, the corporation
shall be entitled to raise as a defense to any such action that the claimant
has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed. In connection with any claim by an executive
officer of the corporation (except in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such executive officer is or was a director of the corporation) for advances,
the corporation shall be entitled to raise a defense as to any such action
clear and convincing evidence that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that
his conduct was lawful. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that claimant has not met the
applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
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(h) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a
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manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
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(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person
shall not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such
person. Any action or meeting which shall be taken or held without notice to
any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the
action taken by the corporation is such as to require the filing of a
certificate under any provision of the Delaware General Corporation Law, the
certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such
persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the
stockholders entitled to vote. The Board of Directors shall also have the power,
if such power is conferred upon the Board of Directors by the Certificate of
Incorporation, to adopt, amend, or repeal Bylaws (including, without limitation,
the amendment of any Bylaw setting forth the number of Directors who shall
constitute the whole Board of Directors).
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ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guarantee or assistance
may reasonably be expected to benefit the corporation. The loan, guarantee or
other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing
in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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EXHIBIT 4.2
HOMESTEAD.COM INCORPORATED
INVESTOR RIGHTS AGREEMENT
JANUARY 14, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1.GENERAL.............................................................1
1.1 Definitions.................................................1
SECTION 2.REGISTRATION; RESTRICTIONS ON TRANSFER..............................3
2.1 Restrictions on Transfer....................................3
2.2 Demand Registration.........................................4
2.3 Piggyback Registrations.....................................6
2.4 Form S-3 Registration.......................................7
2.5 Expenses of Registration....................................8
2.6 Obligations of the Company..................................9
2.7 Termination of Registration Rights.........................10
2.8 Delay of Registration; Furnishing Information..............10
2.9 Indemnification............................................10
2.10 Assignment of Registration Rights..........................12
2.11 Amendment of Registration Rights...........................13
2.12 Limitation on Subsequent Registration Rights...............13
2.13 "Market Stand-Off" Agreement; Agreement to Furnish
Information................................................13
2.14 Rule 144 Reporting.........................................14
SECTION 3.COVENANTS OF THE COMPANY...........................................14
3.1 Basic Financial Information and Reporting..................14
3.2 Inspection Rights..........................................15
3.3 Confidentiality of Records.................................15
3.4 Reservation of Common Stock................................15
3.5 Termination of Covenants...................................15
SECTION 4.RIGHTS OF FIRST REFUSAL............................................16
4.1 Subsequent Offerings.......................................16
4.2 Exercise of Rights.........................................16
4.3 Issuance of Equity Securities to Other Persons.............16
4.4 Termination and Waiver of Rights of First Refusal..........17
4.5 Transfer of Rights of First Refusal........................17
4.6 Subsequent Grants of Rights of First Refusal...............17
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.7 Excluded Securities........................................17
SECTION 5.RIGHTS OF CO-SALE..................................................18
5.1 Transfers by a Founder.....................................18
5.2 Exempt Transfers...........................................19
5.3 Prohibited Transfers.......................................20
5.4 Legend.....................................................21
5.5 Conditions to Exercise of Rights...........................21
5.6 Termination of Co-Sale Rights..............................21
5.7 Ownership..................................................21
SECTION 6.MISCELLANEOUS......................................................22
6.1 Governing Law..............................................22
6.2 Survival...................................................22
6.3 Successors and Assigns.....................................22
6.4 Entire Agreement...........................................22
6.5 Severability...............................................22
6.6 Amendment and Waiver.......................................22
6.7 Notices....................................................23
6.8 Attorneys' Fees............................................23
6.9 Termination of Prior Agreements............................23
6.10 Titles and Subtitles.......................................23
6.11 Counterparts...............................................23
ii
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HOMESTEAD.COM INCORPORATED
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of the
14th day of January, 2000, by and among HOMESTEAD.COM INCORPORATED, a Delaware
corporation (the "Company"), the purchasers of the Company's Series C Preferred
Stock ("Series C Stock") set forth on Exhibit A of that certain Series C
Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"), the holders of the Company's Series A Preferred Stock (the "Series
A Stock") and Series B Preferred Stock (the "Series B Stock"), David Heap ("Mr.
Heap"), Justin Kitch and Matthew Harad. The purchasers of Series C Stock and the
holders of the Series A Stock and Series B Stock shall be referred to
hereinafter as the "Investors" and each individually as an "Investor" and are
set forth on Exhibit A hereto. Justin Kitch and Matthew Harad shall be referred
to hereinafter as the "Founders" and each individually as a "Founder."
RECITALS
WHEREAS, the Company proposes to sell and issue up to Four Million
(4,000,000) shares of its Series C Stock pursuant to the Purchase Agreement;
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors who are parties thereto have requested that the Company extend to them
registration rights, information rights and other rights as set forth below;
WHEREAS, the Company (under its prior name, Homestead Technologies Inc.),
Mr. Heap, Investors who are holders of Series A Stock and Series B Stock and the
Founders are parties to the Investor Rights Agreement dated April 9, 1999 (the
"Prior Rights Agreement"); and
WHEREAS, the parties hereto desire to terminate the Prior Rights Agreement
and to enter into the Agreement to replace it and to extend the rights described
herein to the Investors who are purchasing Series C Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"CO-SALE STOCK" shall mean shares of the Company's Common Stock now
owned or subsequently acquired by the Founders whether or not such securities
are only registered in a
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Founder's name or beneficially or otherwise legally owned by such Founder,
including any interest of a spouse in any of the Co-Sale Stock, whether that
interest is asserted pursuant to marital property laws or otherwise. The number
of shares of Co-Sale Stock owned by the Founders as of the date hereof are set
forth on Exhibit B, which Exhibit may be amended from time to time by the
Company to reflect changes in the number of shares owned by the Founders, but
the failure to so amend shall have no effect on such Co-Sale Stock being subject
to this Agreement.
"COMMON STOCK" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's outstanding
Preferred Stock or exercise of any option, warrant or other security or right of
any kind convertible into or exchangeable for Common Stock.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"PRIMARY HOLDER" means any Holder other than Mr. Heap.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) Common Stock held by Mr. Heap on
the date of this Agreement; and (c) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include (i) any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned or (ii) any securities
which would be Registrable Securities but for the provision of this clause (ii)
if, in any three-month period, the Holder thereof could sell all such securities
under Rule 144.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are
2.
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Registrable Securities and either (a) are then issued and outstanding or (b) are
issuable pursuant to then exercisable or convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed thirty thousand dollars ($30,000) of a single special counsel for the
Holders, blue sky fees and expenses, and, except as specified in the definition
of Selling Expenses below, 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).
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions applicable to the sale, fees of special counsel for the Holders, and
expenses in excess of fifteen thousand dollars ($15,000) for any special audits
incident to or required by any demand registration under Sections 2.2 and 2.4
hereof (but excluding the compensation of regular employees of the Company which
shall be paid in any event by the Company).
"SHARES" shall mean the Company's Series A Stock, Series B Stock and
Series C Stock held by the Investors listed on Exhibit A hereto and their
permitted assigns.
"TRANSFER" shall include any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or
descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of any of the
Co-Sale Stock.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) 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 (C) 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
3.
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Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer (A) by a Holder which is a partnership to its partners or former
partners in accordance with partnership interests, (B) by a Holder which is a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (C) to the Holder's family
member or trust for the benefit of an individual Holder; PROVIDED that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under Section 5.4(a) of this Agreement or any
applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(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.
(d) 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.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from Primary Holders holding twenty percent
(20%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of at least twenty percent (20%) of the Registrable Securities
then outstanding (or a lesser percent if the anticipated aggregate offering
price would exceed $2,000,000 (a "Qualified Public Offering")), then the Company
shall, within thirty (30) days of the receipt thereof, give written notice of
such request to all
5.
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Primary Holders, and subject to the limitations of this Section 2.2, use its
best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Primary Holders request to
be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Primary Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Primary Holder's participation in such underwriting and the inclusion of such
Primary Holder's Registrable Securities in the underwriting to the extent
provided herein. All Primary Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Primary Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be allocated to the Primary
Holders of such Registrable Securities on a PRO RATA basis based on the number
of Registrable Securities held by all such Primary Holders (including the
Initiating Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) April 9, 2001 or (B) six months
following the effective date of the registration statement pertaining to the
Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
(iii) during the period starting with the date of filing of, and
ending on the date six months following the effective date of, the registration
statement pertaining to the Initial Offering; PROVIDED that the Company makes
reasonable good faith efforts to cause such registration statement to become
effective;
(iv) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Primary Holders of the Company's intention to file a registration statement
with respect to a public offering by the Company within ninety (90) days;
PROVIDED, that the Company makes reasonable good faith efforts to cause such
registration statement to become effective;
(v) if the Company shall furnish to Primary Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the
5.
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Board or Chief Executive Officer 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 investors for such registration statement to be effected at such
time, in which event the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of the
Initiating Holders; PROVIDED that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period; or
(vi) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS.
(a) The Company shall notify all Holders of Registrable Securities in
writing at least fifteen (15) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford each such Holder an opportunity to include in
such registration statement all or part of such Registrable Securities held by
such Holder. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it shall, within fifteen
(15) days after the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of disposition
of the Registrable Securities by such Holder. 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 Registrable Securities in any subsequent registration statement or
registration 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. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 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 Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated: FIRST, to the Company; SECOND, to the Primary Holders on a
PRO RATA basis based on the total number of Registrable Securities held by the
Holders; THIRD, to Mr. Heap; and FOURTH, to any shareholder of the Company
(other than a Holder) on a PRO RATA basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting. 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
6.
<PAGE>
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,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership, the partners and retired partners of such Holder,
or the estates and family members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing persons shall be deemed to be
a single "Holder", and any PRO RATA reduction with respect to such "Holder"
shall be based upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such "Holder," as defined in
this sentence.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Primary Holder or Holders of Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 (or any successor to
Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Primary Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Primary Holders of Registrable
Securities; 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 Primary
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
Primary Holder or Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company; PROVIDED, HOWEVER, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Primary Holders, or
(ii) if the Primary 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 five hundred thousand dollars
($500,000), or
(iii) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to this Section 2.4, the Company gives notice
to the Primary Holders of the Company's intention to file a registration
statement with respect to a public offering by the
7.
<PAGE>
Company within ninety (90) days; PROVIDED, that the Company makes reasonable
good faith efforts to cause such registration statement to become effective;
(iv) if the Company shall furnish to the Primary Holders a
certificate signed by the Chairman of the Board of Directors 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 investors 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 sixty (60) days after receipt of the
request of the Primary Holder or Holders under this Section 2.4; PROVIDED, that
such right to delay a request shall be exercised by the Company not more than
once in any twelve (12) month period, or
(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Primary Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Primary Holders. Registrations effected pursuant to
this Section 2.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, Section 2.3 or Section 2.4
herein shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered PRO RATA on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders were not aware at the time of such request or (b)
the Primary Holders of a majority of Registrable Securities agree to forfeit
their right to one requested registration pursuant to Section 2.2 or Section
2.4, as applicable, in which event such right shall be forfeited by all Primary
Holders). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Primary Holders shall not forfeit their rights pursuant to Section 2.2 or
Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
8.
<PAGE>
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable 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 ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; PROVIDED that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (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, addressed to the underwriters, if any, 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 addressed to the
underwriters.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if all
9.
<PAGE>
Registrable Securities held by and issuable to such Holder (and its affiliates,
partners, former partners, members and former members) may be sold under Rule
144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that 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.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively, a "Violation") by the Company: (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will pay as
incurred to each such Holder, partner, officer, director, 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; PROVIDED HOWEVER, that the indemnity agreement contained in
this Section 2.9(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
10.
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be unreasonably withheld, nor shall the Company be liable in any such case for
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder; and, PROVIDED FURTHER, that the indemnity
agreement provided in this Section 2.9(a) with respect to any preliminary
prospectus shall not inure to the benefit of any Holder from whom the person
asserting any losses, claims, damages, liabilities or actions based upon any
untrue statement or alleged untrue statement of material fact or omission or
alleged omission to state therein a material fact purchased Registrable
Securities, if a copy of the prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected had not
been sent or given to such person within the time required by the Securities Act
and the rules and regulations promulgated thereunder, unless such failure is the
result of noncompliance by the Company with Section 2.6 hereof.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; PROVIDED FURTHER, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 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 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees
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and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
general partner, limited partner, or retired partner of a Holder, (b) acquires
all of the Registrable Securities (as adjusted for stock splits and
combinations) of the Holder or (c) acquires at least one hundred thousand
(100,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); PROVIDED, HOWEVER, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company 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, (ii) such transferee shall agree to
be subject to all restrictions set forth in this Agreement, and (iii) in the
event of a transfer pursuant to (a) above, all such transferees agree to act
through a single representative.
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2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. 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 that would grant such holder registration rights senior, in the
good faith judgement of the Board of Directors of the Company, to those granted
to the Holders hereunder, unless the Company grants to the Investors similar
registration rights.
2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION. Each
Holder hereby agrees that such Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration or acquired in the open
market following such registration) for a period specified by the representative
of the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the date of the final prospectus
forming a part of the registration statement of the Company filed under the
Securities Act; PROVIDED that all officers, directors and greater than two
percent (2%) stockholders of the Company enter into similar agreements; PROVIDED
FURTHER, that the forgoing provisions of this Section 2.13 shall only apply to
the Initial Offering and during the two year period thereafter; PROVIDED
FURTHER, that if such underwritten offering is not the Initial Offering, then
such restricted period shall not exceed ninety (90) days.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten business (10) days of such request, such information as may be
required by the Company or such representative in connection with the completion
of any public offering of the Company's securities pursuant to a registration
statement filed under the Securities Act. The obligations described in this
Section 2.13 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period (or ninety (90) day period
in the case of an underwritten offering which is not the Initial Offering).
2.14 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
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(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor and Mr. Heap a balance sheet of the Company, as at the end
of such fiscal year, and a statement of income and a statement of cash flows of
the Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Investor and Mr. Heap, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, 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
may not have been made.
(d) So long as an Investor (with its affiliates) or Mr. Heap shall own
not less than four hundred thousand (400,000) shares of Registrable Securities
(as adjusted for stock splits and combinations) (each, a "Major Investor"), the
Company will furnish each such Major Investor (i) at least thirty (30) days
prior to the beginning of each fiscal year an annual budget
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and operating plans for such fiscal year (and as soon as available, any
subsequent revisions thereto); and (ii) as soon as practicable after the end of
each month, and in any event within twenty (20) days thereafter, a balance sheet
of the Company as of the end of each such month, and a statement of income and a
statement of cash flows of the Company for such month and for the current fiscal
year to date, including a comparison to plan figures for such period, prepared
in accordance with generally accepted accounting principles consistently
applied, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
(e) For so long as Draper Richards L.P., a Small Business Investment
Company (SBIC), shall be a stockholder of the Company, the Small Business
Administration ("SBA") and Draper Richards, L.P. shall have access to the
Company's books and records as requested and required under Section 107.620 of
the SBA Regulations.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; PROVIDED, HOWEVER, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor and Mr. Heap agrees to use,
and to use its best efforts to insure that its authorized representatives use,
the same degree of care as such Investor or Mr. Heap uses to protect its own
confidential information to keep confidential any 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 and Mr.
Heap may disclose such proprietary or confidential information to any partner,
subsidiary or parent of such Investor or Mr. Heap for the purpose of evaluating
its investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor and
Mr. Heap upon the earlier of (i) the effective date of the registration
statement pertaining to the Initial Offering or (ii) upon (a) the acquisition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction (a "Change in Control").
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SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 SUBSEQUENT OFFERINGS. Each Investor and Mr. Heap shall have a right of
first refusal to purchase its PRO RATA share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.7 hereof. Each Investor's or Mr. Heap's PRO RATA share is
equal to the ratio of (a) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares) which such Investor or Mr. Heap is deemed to be a holder immediately
prior to the issuance of such Equity Securities to (b) the total number of
shares of the Company's outstanding Common Stock (including all shares of Common
Stock issued or issuable upon conversion of the Shares or upon the exercise of
any outstanding warrants or options) immediately prior to the issuance of the
Equity Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor and Mr. Heap written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Investor and
Mr. Heap shall have fifteen (15) days from the giving of such notice to agree to
purchase its PRO RATA share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor or Mr. Heap who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Investors and Mr. Heap elect to purchase their PRO RATA share of the Equity
Securities, then the Company shall promptly notify in writing the Investors and
Mr. Heap who do so elect and shall offer such Investors and Mr. Heap the right
to acquire such unsubscribed shares. The Investors and Mr. Heap shall have five
(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. If the Investors
and Mr. Heap fail to exercise in full the rights of first refusal, the Company
shall have one hundred twenty (120) days thereafter to sell the Equity
Securities in respect of which the Investor's and Mr. Heap's rights were not
exercised, at a price and upon general terms and conditions materially no more
favorable to the purchasers thereof than specified in the Company's notice to
the Investors and Mr. Heap pursuant to Section 4.2 hereof. If the Company has
not sold such Equity Securities within one hundred twenty (120) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investors and Mr. Heap in the manner provided above.
4.4 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the earlier of (i) effective date of the registration statement pertaining
to the Company's Initial Public Offering
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or (ii) a Change in Control. The rights of first refusal established by this
Section 4 may be amended, or any provision waived with the written consent of
Investors and Mr. Heap holding a majority of the Registrable Securities
collectively held by all Investors and Mr. Heap, or as permitted by Section 6.6.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Investor and Mr. Heap under this Section 4 may be transferred to the same
parties, subject to the same restrictions, as any transfer of registration
rights pursuant to Section 2.10.
4.6 SUBSEQUENT GRANTS OF RIGHTS OF FIRST REFUSAL. After the date of this
agreement, in the event that the Company enters into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder rights of first refusal senior, in the good faith judgement of the
Board of Directors of the Company, to those granted to the Holders hereunder,
the Company shall also grant such rights to the Holders hereunder.
4.7 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements or agreements that are approved by the Board
of Directors;
(b) stock issued pursuant to any rights, or options, warrants or
agreements outstanding as of the date of this Agreement; and stock issued after
the date of this Agreement pursuant to any such rights, options, warrants or
agreements granted or sold in transactions to which the right of first refusal
established by this Section 4 was applied or excluded;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement, or debt financing from a bank or similar financial institution
approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer
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or development arrangements; PROVIDED that such strategic transactions and the
issuance of shares therein has been approved by the Company's Board of
Directors.
SECTION 5. RIGHTS OF CO-SALE
5.1 TRANSFERS BY A FOUNDER.
(a) If a Founder proposes to Transfer any shares of Co-Sale Stock then
the Founder shall promptly give written notice (the "Notice") simultaneously to
the Company and to each of the Investors at least thirty (30) days prior to the
closing of such Transfer. The Notice shall describe in reasonable detail the
proposed Transfer including, without limitation, the number of shares of Co-Sale
Stock to be transferred, the nature of such Transfer, the consideration to be
paid, and the name and address of each prospective purchaser or transferee. In
the event that the Transfer is being made pursuant to the provisions of Section
5.2(a), the Notice shall state under which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon written
notice to such Founder within fifteen (15) days after the Notice, to participate
in such Transfer of Co-Sale Stock on the same terms and conditions, either as a
seller or as a purchaser. Such notice shall indicate the number of shares of
Common Stock such Investor wishes to sell or purchase under his or her right to
participate. To the extent one or more of the Investors exercise such right of
participation in accordance with the terms and conditions set forth below, the
number of shares of Co-Sale Stock that such Founder may sell or purchase in the
transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which
is the number of shares of Common Stock owned by such Investor at the time of
the Transfer and the denominator of which is the total number of shares of
Common Stock owned by such Founder and all the Investors at the time of the
Transfer. Each Investor who is not participating as a seller may purchase all or
any part of that number of shares equal to the product obtained by multiplying
(i) the aggregate number of shares of Co-Sale Stock covered by the Notice by
(ii) a fraction the numerator of which is the number of shares of Common Stock
owned by such Investor at the time of the Transfer and the denominator of which
is the total number of shares of Common Stock owned by such Founder and all the
Investors at the time of the Transfer. If not all of the Investors elect to
participate in such Transfer of Co-Sale Stock, either as a seller or a
purchaser, within said fifteen (15) day period, then the Founder shall promptly
notify in writing the Investors who do so elect and shall offer such Investors
the additional right to participate in the sale or purchase of such additional
shares of Co-Sale Stock proposed to be transferred on the same percentage basis
as set forth above. The Investors shall have five (5) days after receipt of such
notice to notify the Founder of its election to sell or purchase all or a
portion thereof of the unsubscribed shares.
(d) Each Investor who elects to participate as a seller in the
Transfer pursuant to this Section 5.1 (a "Seller Participant") shall effect its
participation in the Transfer by promptly delivering to such Founder for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
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(i) the type and number of shares of Common Stock which such
Seller Participant elects to sell; or
(ii) that number of shares of Series A Stock, Series B Stock
and/or Series C Stock which is at such time convertible into the number of
shares of Common Stock which such Seller Participant elects to sell; provided,
however, that if the prospective purchaser objects to the delivery of Series A
Stock, Series B Stock or Series C Stock in lieu of Common Stock, such Seller
Participant shall convert such Series A Stock, Series B Stock or Series C Stock
into Common Stock and deliver Common Stock as provided in Section 5.1(d)(i)
above. The Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser.
(e) The stock certificate or certificates that the Seller Participant
delivers to such Founder pursuant to Section 5.1(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Founder shall
concurrently therewith remit to such Seller Participant that portion of the sale
proceeds to which such Seller Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Seller Participant exercising its rights of co-sale
hereunder, such Founder shall not sell to such prospective purchaser or
purchasers any Co-Sale Stock unless and until, simultaneously with such sale,
such Founder shall purchase such shares or other securities from such Seller
Participant on the same terms and conditions specified in the Notice.
(f) Each Investor who elects to participate as a purchaser in the
Transfer pursuant to this Section 5.1, shall purchase its PRO RATA share of the
Co-Sale Stock at the time, for the price and upon the terms and conditions
specified in the Notice.
(g) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Co-Sale Stock made by such
Founder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to Section 5.1(a).
(h) If none of the Investors elect to participate in the sale of the
Co-Sale Stock subject to the Notice, such Founder may, not later than sixty (60)
days following delivery to the Company of the Notice, enter into an agreement
providing for the closing of the Transfer of the Co-Sale Stock covered by the
Notice within thirty (30) days of such agreement on terms and conditions not
more materially favorable to the transferor than those described in the Notice.
Any proposed transfer on terms and conditions materially more favorable than
those described in the Notice, as well as any subsequent proposed transfer of
any of the Co-Sale Stock by a Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by a Founder with the
procedures described in this Section 5.1.
5.2 EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the Investors
shall not apply to (i) any transfer or transfers by a Founder which in the
aggregate, over the term of this
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Agreement, amount to no more than fifteen percent (15%) of Co-Sale Stock held by
a Founder as of the date hereof (as adjusted for stock splits, dividends and the
like), (ii) any transfer to the ancestors, descendants or spouse or to trusts
for the benefit of such persons or the Founder, (iii) any transfer or transfers
by a Founder to another Founder (the "Transferee-Founder") so long as the
Transferee-Founder is, at the time of the transfer, employed by or acting as a
consultant or director of the Company, (iv) any pledge of Co-Sale Stock made
pursuant to a bona fide loan transaction with a financial institution that
creates a mere security interest, or (v) any bona fide gift; provided that in
the event of any transfer made pursuant to one of the exemptions provided by
clauses (ii), (iii), (iv) and (v), (A) the Founder shall inform the Investors of
such pledge, transfer or gift prior to effecting it and (B) the pledgee,
transferee or donee shall furnish the Investors with a written agreement to be
bound by and comply with all provisions of Section 5.1. Except with respect to
Co-Sale Stock transferred under clause (i) above (which Co-Sale Stock shall no
longer be subject to the co-sale rights of the Investors), such transferred
Co-Sale Stock shall remain "Co-Sale Stock" hereunder, and such pledgee,
transferee or donee shall be treated as the "Founder" for purposes of this
Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 5.1 shall
not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act.
(c) This Agreement is subject to, and shall in no manner limit the
right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
5.3 PROHIBITED TRANSFERS.
(a) In the event that a Founder should Transfer any Co-Sale Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and such Founder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to such Founder the type and number of shares of Common Stock
equal to the number of shares each Investor would have been entitled to transfer
to the purchaser under Section 5.1(c) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to the
Founder shall be equal to the price per share paid by the purchaser to such
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 5.1.
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(ii) Within ninety (90) days after the date on which an Investor
received notice of the Prohibited Transfer or otherwise became aware of the
Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(iii) Such Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
5.3(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 5.3(b)(i), in cash or by other means
acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Founder to
transfer Co-Sale Stock in violation of Section 5.1 hereof shall be voidable at
the option of a majority in interest of the Investors if the Investors do not
elect to exercise the put option set forth in this Section 5.3, and the Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Investors.
5.4 LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 5.2(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER,
THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE COMPANY."
(b) The Founders agree that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5.4(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
5.5 CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the Investors' rights
under this Agreement shall be subject to and conditioned upon, and the Founders
and the Company shall use their best efforts to assist each Investor in,
compliance with applicable laws.
5.6 TERMINATION OF CO-SALE RIGHTS. All co-sale rights granted under this
Section 5 shall terminate upon the earlier of the closing of a firm commitment
underwritten public offering of the Company's Common Stock pursuant to an
effective registration statement under the Securities Act or fifteen (15) years
from the date hereof.
5.7 OWNERSHIP. The Founders represent and warrant that each is the sole
legal and beneficial owner of those shares of Co-Sale Stock he or she currently
holds subject to the
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Agreement and that no other person has any interest (other than a community
property interest) in such shares.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
6.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; PROVIDED, HOWEVER, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company, the holders of
at least a majority of the Registrable Securities, and the Founders.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
22.
<PAGE>
(c) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
6.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
6.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.9 TERMINATION OF PRIOR RIGHTS AGREEMENT. The Prior Rights Agreement is
hereby terminated and shall have no further force or effect.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23.
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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
HOMESTEAD.COM INCORPORATED MERITECH CAPITAL PARTNERS L.P.
By: MERITECH CAPITAL ASSOCIATES L.L.C.,
its General Partner
By: /s/ Justin Kitch By: MERITECH MANAGEMENT ASSOCIATES L.L.C.,
--------------------------
Justin Kitch, President A Managing Member
By:__________________________________________
Paul S. Madera, a managing member
MERITECH CAPITAL AFFILIATES L.P.
By: MERITECH CAPITAL ASSOCIATES L.L.C.,
its General Partner
By: MERITECH MANAGEMENT ASSOCIATES L.L.C.,
a Managing Member
By:__________________________________________
Paul S. Madera, a managing member
AMERINDO
By:__________________________________________
__________________________________________
Printed Name/Title
THE GOLDMAN SACHS GROUP, INC.
By:__________________________________________
__________________________________________
Printed Name/Title
HOMESTEAD. COM INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT 10.2
HOMESTEAD TECHNOLOGIES INC.
1996 STOCK OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON SEPTEMBER 20, 1996
APPROVED BY THE STOCKHOLDERS ON SEPTEMBER 20, 1996
AMENDED BY THE BOARD OF DIRECTORS ON APRIL 1, 1997
AMENDMENT APPROVED BY THE STOCKHOLDERS ON APRIL 1, 1997
ADJUSTED FOR REINCORPORATION AND STOCK SPLIT
EFFECTIVE MAY 29, 1998
ADJUSTED FOR NAME CHANGE AND CAPITAL STOCK
ADJUSTMENTS EFFECTIVE APRIL 7, 1999
AMENDED BY THE BOARD OF DIRECTORS ON MARCH 15, 2000
AMENDMENT APPROVED BY THE STOCKHOLDERS ON MARCH 20, 2000
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of the Company may be given an opportunity to purchase
stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors or Consultants and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board, be either Incentive Stock Options or Nonstatutory
Stock Options. All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and in such form as
issued pursuant to Section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMPANY" means Homestead Technologies Inc., a Delaware corporation.
(d) "CONSULTANT" means any person, including an advisor, engaged by the
Company to render consulting services and who is compensated for such services,
provided that the term "Consultant" shall not include Directors who are paid
only a director's fee by the Company or who are not compensated by the Company
for their services as Directors.
<PAGE>
(e) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
individual's employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company.
(f) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(g) "DIRECTOR" means a member of the Board.
(h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(i) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations:
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or 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 bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(j) "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.
(k) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
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<PAGE>
(l) "OPTION" means a stock option granted pursuant to the Plan.
(m) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(n) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(o) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "PLAN" means this Homestead Technologies Inc. 1996 Stock Option Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
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<PAGE>
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Eight Million Eight Hundred Ten Thousand Eight Hundred
Twenty (8,810,820) shares of the Company's common stock. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not purchased under such Option shall
revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Option if, at the time
of grant, such person owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, the Board or the Committee
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which section 424(a) of the
Code applies.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board, at the time of the grant of the Option for
Incentive Stock Options and at any time prior to exercise of the Option for
Nonstatutory Stock Options, (A) by delivery to the Company of other common stock
of the
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<PAGE>
Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. The
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan
5
<PAGE>
as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) Thirty (30) days after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant, or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionee does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan. An Optionee's Option Agreement may also provide that
if the exercise of the Option following the termination of the Optionee's
Continuous Status as an Employee, Director, or Consultant (other than upon the
Optionee's death or disability) would result in liability under Section 16(b) of
the Exchange Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement, or
(ii) the tenth (10th) day after the last date on which such exercise would
result in such liability under Section 16(b) of the Exchange Act. Finally, an
Optionee's Option Agreement may also provide that if the exercise of the Option
following the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (other than upon the Optionee's death or disability)
would be prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this section 7, or (ii) the expiration of a
period of three (3) months after the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant during which the exercise of the
Option would not be in violation of such registration requirements.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, WHICH IN NO
EVENT SHALL BE LESS THAN SIX (6) MONTHS, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under 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 and again become available for
issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to
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<PAGE>
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period, WHICH IN
NO EVENT SHALL BE LESS THAN SIX (6) MONTHS, specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; PROVIDED,
HOWEVER, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is less
than the stock's Fair Market Value.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the Option;
or (3) delivering to the Company owned and unencumbered shares of the common
stock of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; PROVIDED, HOWEVER,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company
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<PAGE>
shall be relieved from any liability for failure to issue and sell stock upon
exercise of such Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(b) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option's term, a balance
sheet and an income statement. This section shall not apply when issuance is
limited to key employees whose duties in connection with the Company assure them
access to equivalent information.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company (or to continue
acting as a Director or Consultant) or shall affect the right of the Company to
terminate the employment of any Employee with or without cause, the right of the
Company's Board of Directors and/or the Company's stockholders to remove any
Director pursuant to the terms of the Company's Bylaws and the provisions of the
Delaware General Corporation Law, or the right to terminate the relationship of
any Consultant pursuant to the terms of such Consultant's agreement with the
Company.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options.
(e) The Board shall have the authority to effect, at any time and from
time to time (i) the repricing of any outstanding Options under the Plan and/or
(ii) with the consent of the affected holders of Options, the cancellation of
any outstanding Options and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common Stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option or, in the case of a ten percent (10%)
stockholder (as defined in subsection 5(c)), not less than one hundred and ten
percent (110%) of the Fair Market Value) per share of Common Stock on the new
grant date. Notwithstanding the foregoing, the Board may grant an Option with
an exercise price lower than that set forth above if such Option is granted as
part of a transaction to which section 424(a) of the Code applies.
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<PAGE>
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a), and the outstanding Options will be appropriately adjusted in
the class(es) and number of shares and price per share of stock subject to such
outstanding Options. Such adjustments shall be made by the Board or Committee,
the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation or (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then to the extent permitted by applicable law: (i) any surviving
corporation or an affiliate of such surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar Options for those
outstanding under the Plan, or (ii) such Options shall continue in full force
and effect. In the event any surviving corporation and its affiliates refuse to
assume or continue such Options, or to substitute similar options for those
outstanding under the Plan, then such Options shall be terminated if not
exercised prior to such event. In the event of a dissolution or liquidation of
the Company, any Options outstanding under the Plan shall terminate if not
exercised prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder
9
<PAGE>
regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; PROVIDED, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on April 1, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
10
<PAGE>
HOMESTEAD TECHNOLOGIES INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
(NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Homestead Technologies Inc. (the "Company") has granted you an
option under its 1996 Stock Option Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of
the exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is exercised
and provided that at the time of exercise the Common Stock is publicly traded
and quoted regularly in THE WALL STREET JOURNAL, pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender
1
<PAGE>
would violate the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock.
4. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing your option, and you
may not exercise your option if the Company determines that such exercise would
not be in material compliance with such laws and regulations.
6. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(a) thirty (30) days after the termination of your Continuous Service for
any reason other than your Disability or death, provided that if during any part
of such three- (3-) month period your option is not exercisable solely because
of the condition set forth in the preceding paragraph relating to "Securities
Law Compliance," your option shall not expire until the earlier of the
Expiration Date or until it shall have been exercisable for an aggregate period
of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous Service
due to your Disability;
(c) eighteen (18) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the tenth (10th) anniversary of the Date of Grant.
7. EXERCISE.
(a) You may exercise the vested portion of your option during its term by
delivering a Notice of Exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1)
2
<PAGE>
the exercise of your option, (2) the lapse of any substantial risk of forfeiture
to which the shares of Common Stock are subject at the time of exercise, or (3)
the disposition of shares of Common Stock acquired upon such exercise.
(c) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
8. TRANSFERABILITY. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
9. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or
an Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
10. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or at any
time thereafter as requested by the Company, you hereby authorize withholding
from payroll and any other amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a "cashless exercise" pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or
an Affiliate, if any, which arise in connection with your option.
(b) Upon your request and subject to approval by the Company, in its sole
discretion, and compliance with any applicable conditions or restrictions of
law, the Company may withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of whole shares of
Common Stock having a Fair Market Value, determined by the Company as of the
date of exercise, not in excess of the minimum amount of tax required to
3
<PAGE>
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in
connection with such share withholding procedure shall be your sole
responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
11. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
12. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
Attachments:
1996 Homestead Stock Option Plan
Notice of Exercise
4
<PAGE>
HOMESTEAD TECHNOLOGIES INC.
STOCK OPTION GRANT NOTICE
(1996 STOCK OPTION PLAN)
Homestead Technologies Inc. (the "Company"), pursuant to its 1996 Stock Option
Plan (the "Plan"), hereby grants to Optionholder an option to purchase the
number of shares of the Company's Common Stock set forth below. This option is
subject to all of the terms and conditions as set forth herein and in the Stock
Option Agreement, the Plan and the Notice of Exercise, all of which are attached
hereto and incorporated herein in their entirety.
Optionholder: _____________________________
Date of Grant: _____________________________
Vesting Commencement Date: _____________________________
Number of Shares Subject to Option: _____________________________
Exercise Price (Per Share): _____________________________
Total Exercise Price: _____________________________
Expiration Date: _____________________________
TYPE OF GRANT: Nonstatutory Stock Option
EXERCISE SCHEDULE: Same as Vesting Schedule
VESTING SCHEDULE: [ ]
PAYMENT: By one or a combination of the following items (described in
the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded
By delivery of already-owned shares if the Shares are
publicly traded
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date
of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth
the entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS: ______________________________________
______________________________________
HOMESTEAD TECHNOLOGIES INC. OPTIONHOLDER:
By: __________________________ ______________________________________
Signature Signature
Title:________________________ Date:_________________________________
Date:_________________________
ATTACHMENTS: Stock Option Agreement, 1996 Stock Option Plan and Notice of
Exercise
<PAGE>
ATTACHMENT I
STOCK OPTION AGREEMENT
<PAGE>
ATTACHMENT II
1996 STOCK OPTION PLAN
<PAGE>
ATTACHMENT III
NOTICE OF EXERCISE
<PAGE>
NOTICE OF EXERCISE
Homestead Technologies Inc.
3475H Edison Way
Menlo Park, CA 94025 Date of Exercise: _______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / /
Stock option dated: _______________
Number of shares as
to which option is
exercised: _______________
Certificates to be
issued in name of: _______________
Total exercise price: $______________
Cash payment delivered
herewith: $______________
Value of ________ shares of
Homestead Technologies Inc.
Common stock delivered herewith (1): $______________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1996 Stock Option Plan, (ii) to provide
for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
- ----------------------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
<PAGE>
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and are deemed to constitute
"restricted securities" under Rule 701 and "control securities" under Rule 144
promulgated under the Securities Act. I warrant and represent to the Company
that I have no present intention of distributing or selling said Shares, except
as permitted under the Securities Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety days (90) after the stock of the Company becomes publicly traded
(I.E., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
----------------------------------------
2.
<PAGE>
Exhibit 10.5
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes
only, JULY 6, 1999, is made by and between 3355 EDISON PARTNERS, A CALIFORNIA
GENERAL PARTNERSHIP ("Lessor") and HOMESTEAD TECHNOLOGIES, INC., A DELAWARE
CORPORATION ("Lessee"), (collectively the "Parties," or individually a
"Party").
1.2(a) PREMISES: That certain portion of the Building, including
all improvements therein or to be provided by Lessor under the terms of this
Lease commonly known by the street address of 3375 EDISON WAY, located in the
City of MENLO PARK (UNINCORP.) County of SAN MATEO, State of CALIFORNIA, with
zip code 94025, as outlined in Exhibit B attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building) AN APPROXIMATELY
20,096 SQUARE-FOOT OFFICE / R&D BUILDING WHICH IS CURRENTLY UNDER
CONSTRUCTION AND SHALL BE COMPLETED AS PER ATTACHED PLAN.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in paragraph 2.7 below) as hereinafter specified, but shall not have
any rights to the roof, exterior walls or utility raceways of the Building or
to any other buildings in the Industrial Center. The Premises, the Building,
the Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2) *See below
1.2(b) PARKING: 55 unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6)
1.3 TERM: 15 years and 0 months ("Original Term") commencing
OCTOBER 1, 1999 ("Commencement Date") and ending SEPTEMBER 30, 2014
("Expiration Date"). (Also see Paragraph 3)
1.4 EARLY POSSESSION: -- ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $32,153.60 per month ("Base Rent"), payable on the
FIRST day of each month commencing SEPTEMBER 1, 1999. (Also see Paragraph 4.)
/X/ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum ONE, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $32,153.60. Base Rent for the
FIRST MONTH OF THE TERM
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: ONE HUNDRED
PERCENT (100%) ("Lessee's Share") as determined by /X/ pro rata square footage
of the Premises as compared to the total square footage of the Building.
1.7 SECURITY DEPOSIT: $66,000.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: GENERAL OFFICE, SOFTWARE DEVELOPMENT AND ALL
LEGALLY RELATED USES ("Permitted Use") (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
/X/ SOUROUSH KABOLI, LICENSED BROKER represents Lessor exclusively
----------------------------------- ("Lessor's Broker")
/ / represents Lessee exclusively
----------------------------------- ("Lessee's Broker")
/ / represents both Lessor and
----------------------------------- Lessee ("Dual Agency") (Also see
Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by
both Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $ -- ) for brokerage services rendered by said Broker(s) in connection
with this transaction.
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 55, and Exhibits A through B*,
all of which constitute a part of this Lease. *AND A RIDER ATTACHED HERETO.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b))
based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the obligation
of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants that any improvements (other than those constructed by Lessee
or at Lessee's direction) on or in the Premises which have been constructed
or installed by Lessor or with Lessor's consent or at Lessor's direction
shall comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances in effect on the
Commencement Date, Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility Installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting forth
with specificity the nature and extent of such non-compliance, take such
action, at Lessor's expense, as may be reasonable or appropriate to rectify
the non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.6 is permitted for the Premises under Applicable Laws (as defined
in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "Applicable Laws") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as
the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (c) that neither Lessor, nor any of Lessor's agents has, made
any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor
in this Paragraph 2 shall be of no force or effect it immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
* EXCEPT TO THE EXTENT REDUCED BY ANY GOVERNMENTAL OR REGULATORY AGENCY
DURING THE TERM OF THIS LEASE.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
<PAGE>
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules and
Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, contractors or invitees to be loaded, unloaded, or
parked in areas other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease
provide the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line as outlined on Exhibit "A" and interior utility raceways within
the Premises that are provided and designated by the Lessor from time to time
for the general non-exclusive use of Lessor, Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the
non-exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers,
and privileges reserved by Lessor under the terms hereof or under the terms
of any rules and regulations or restrictions governing the use of the
Industrial Center. Under no circumstances shall the right herein granted to
use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas,
ingress, egress, direction of traffic, landscaped areas, walkways and utility
raceways.
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available.
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional improvements to the Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Industrial Center, or
any portion thereof; and
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating Expenses and to
carry the insurance required by Paragraph 8) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee
shall not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease until
Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days after the end of said sixty (60) day period, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of Lessee
is not received by Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminate and be of no further force or
effect. Except as may be otherwise provided, and regardless of when the
Original Term actually commences, if possession is not tendered to Lessee
when required by this Lease and Lessee does not terminate this Lease, as
aforesaid, the period free of the obligation to pay Base Rent, if any, that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to the period during which the
Lessee would have otherwise enjoyed under the terms hereof, but minus any
days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor in lawful
money of the United States, without offset or deduction, on or before the day
on which it is due under the terms of this Lease. Base Rent and all other
rent and charges for any period during the term hereof which is for less than
one full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such other
addresses as Lessor may from time to time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor
during the term hereof, in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "Common Area Operating Expenses" are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the building and common area including, but not
limited to, the following:
(i) The operation, repair and maintenance, in
neat, clean, good order and condition, of the following:
(aa) The Common Areas, including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, fences and gates,
elevators and roof.
(bb) Exterior signs and any tenant
directories.
(cc) Fire detection and sprinkler
systems.
(ii) The cost of water, gas, electricity and
telephone to service the Common Areas.
(iii) Trash disposal, property management and
security service and the costs of any environmental inspections.
(v) Real Property Taxes (as defined in Paragraph
10.2) to be paid by Lessor for the Building and the Common Areas under
Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance
policies maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss
concerning the Building or the Common Areas.
(viii) Any other services to be provided by
Lessor that are stated elsewhere in this Lease to be a Common Area Operating
Expense.
(b) Any Common Area Operating Expenses and Real Property
Taxes that are specifically attributable to the Building or to any other
building in the Industrial Center or to the operation, repair and maintenance
thereof, shall be allocated entirely to the Building or to such other
building. However, any Common Area Operating Expenses and Real Property Taxes
that are not specifically attributable to the Building or to any other
building or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Industrial Center, based
on allocation in Exhibit A.
(c) The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation upon Lessor to either have said improvements or facilities or to
provide those services unless the Industrial Center already has the same.
Lessor already provides the services, or Lessor has agreed elsewhere in this
Lease to provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall
be payable by Lessee within ten (10) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At Lessor's
option, however, an amount may be estimated by Lessor from time to time of
Lessee's Share of Annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12 month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of
the actual Common Area Operating Expenses incurred during the preceding year.
If Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessor shall be
credited the amount of such over-
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payment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security
for Lessee's faithful performance of Lessee's obligations under this Lease.
If Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all
or any portion of said Security Deposit, Lessee shall within ten (10) days
after written request therefore deposit monies with Lessor sufficient to
restore said Security Deposit to the full amount required by this Lease.
Lessor shall not be required to keep all or any part of the Security Deposit
separate from its general accounts. Lessor shall at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises,
return to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest herein) that portion of the Security Deposit not used or
applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any monies
to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or
delay its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its
assignees and subtenants, for a modification of said Permitted Use, so long
as the same will not impair the structural integrity of the improvements on
the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses by other lessees, is not significantly
more burdensome to the Premises or the Building and the improvements thereon,
and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects
to withhold such consent, Lessor shall within five (5) business days after
such request give a written notification of same which notice shall include
an explanation of Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment, or the Premises; (ii) regulated
or monitored by any governmental authority; or (iii) a basis for potential
liability of Lessor to any governmental agency or third party under any
applicable statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products or by-products thereof, Lessee shall not engage in any activity in
or about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3). "Reportable
Use" shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation,
or disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (iii) the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may without Lessor's prior consent, and in compliance with
all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the
Permitted Use, so long as such use is not a Reportable Use and does not
expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its
consent to any Reportable Use of any Hazardous Substance by Lessee upon
Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the Premises
(such as concrete encasements).
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises or the Building, other than as
previously consented to by Lessor, Lessee shall immediately give Lessor
written notice thereof, together with a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim,
action, or proceeding given to, or received from any governmental authority
or private party concerning the presence, spill, release, discharge of, or
exposure to, such Hazardous Substance including but not limited to all such
documents as may be involved in any Reportable Use involving the Premises.
Lessee shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect,
defend and hold Lessor, its agents, employees, lenders and ground lessor, if
any, and the Premises, harmless from and against any and all damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, loss of
permits and attorneys' and consultants' fees arising out of or involving any
Hazardous Substance brought onto the Premises by or for Lessee or by anyone
under Lessee's control. Lessee's obligations under this Paragraph 6.2(c)
shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by Lessee,
and the cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "Applicable Requirements," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now
in effect or which may hereafter come into effect. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including but not limited to
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving failure by
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance of Lessee with this
Lease and all Applicable Requirements (as defined in Paragraph 6.3), and
Lessor shall be entitled to employ experts and/or consultants in connection
therewith to advise Lessor with respect to Lessee's activities, including but
not limited to Lessee's installation, operation, use, monitoring,
maintenance, or removal of any Hazardous Substance on or from the Premises.
The costs and expenses of any such inspections shall be paid by the party
requesting same, unless a Default or Breach of this Lease by Lessee or a
violation of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist or to be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result
of any such existing or imminent violation or contamination. In such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions And Building Code),
7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole cost and expense and at all times, keep the
Premises and every part thereof in good order, condition and report (whether
or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use,
any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense,
procure and maintain a contract, with copies to Lessor, in customary form and
substance for and with a contractor specializing and experienced in the
inspection, maintenance and service of the heating, air conditioning and
ventilation system for the Premises. However, Lessor reserves the right, upon
notice to Lessee, to procure and maintain the contract for the heating, air
conditioning and ventilating systems and if Lessor so elects, Lessee shall
reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days'
prior written notice to Lessee (except in the case of an emergency, in which
case no notice shall be required), perform such obligations on Lessee's
behalf and put the Premises in good order, condition and repair, in
accordance with Paragraph 13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order,
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls exterior roof, fire sprinkler and/or standpipe and
hose (if located in the Common Areas) or other automatic fire extinguishing
system including fire alarm and/or smoke
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detection systems and equipment, fire hydrants, parking lots, walkways,
parkways, driveways, landscaping, fences, signs and utility systems serving
the Common Areas and all parts thereof, as well as providing the services for
which there is a Common Area Operating Expense pursuant to Paragraph 4.2,
Lessor shall not be obligated to paint the exterior or interior surfaces of
exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the Building, Industrial
Center or Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility
Installations" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning
equipment, plumbing, and fencing in, on or about the Premises. The term
"Trade Fixtures" shall mean Lessee's machinery and equipment which can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises which are
provided by Lessor under the terms of this Lease other than Utility
Installations or Trade Fixtures. "Lessee-Owned Alterations and/or Utility
Installations" are defined as Alterations and/or Utility Installations made
by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make nor cause to be made any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor's consent but upon notice to Lessor, so long as they are not visible
from the outside of the Premises, do not involve puncturing, relocating or
removing the roof or any existing walls, or changing or interfering with the
fire sprinkler or fire detection systems and the cumulative cost thereof
during the term of this Lease as extended does not exceed $2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent
specific consent shall be deemed conditioned upon: (i) Lessee's acquiring all
applicable permits required by governmental authorities; (ii) the furnishing
of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Lessee
shall promptly upon completion thereof furnish Lessor with as-built plans and
specifications therefor. Lessor may, (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation
that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense, defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises. If
Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorneys' fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter
provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but considered a part of the Premises. Lessor may, at any time and at its
option, elect in writing to Lessee to be the owner of all or any specified
part of the Lessee-Owned Alterations and Utility Installations. Unless
otherwise instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon the
Premises and be surrendered with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor
may require that any or all Lessee-Owned Alterations or Utility Installations
be removed by the expiration or earlier termination of this Lease,
notwithstanding that their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any
Alterations or Utility Installations made without the required consent of
Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the
premises by the end of the last day of the Lease term or any earlier
termination date, clean and free of debris and in good operating order,
condition and state of repair, ordinary wear and tear excepted. Ordinary wear
and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practice or by Lessee performing all of its
obligations under this Lease. Except as otherwise agreed or specified herein,
the Premises, as surrendered, shall include the Alterations and Utility
Installations. The obligation of Lessee shall include the repair of any
damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and
Utility Installations, as well as the removal of any storage tank installed
by or for Lessee, and the removal, replacement, or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be required
by Applicable Requirements and/or good practice. Lessee's Trade Fixtures
shall remain the property of Lessee and shall be removed by Lessee subject to
its obligation to repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease
shall be prorated to coincide with the corresponding Commencement Date or
Expiration Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in
force during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee. Lessor and any Lender(s) whose names have been
provided to Lessee in writing (as additional insureds) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy, or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $1,000,000
per occurrence with an "Additional Insured-Managers or Lessors of Premises"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat smoke or fumes from a hostile fire. The
policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "Insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance required
by this Lease or as carried by Lessee shall not, however, limit the liability
of Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain
liability insurance described in Paragraph 8.2(a) above, in addition to and
not in lieu of, the insurance required to be maintained by Lessee. Lessee
shall not be named as an additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and
keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by
any Lender(s), but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cost. Lessee-Owned Alterations and Utility Installations, Trade
Fixtures and Lessee's personal property shall be insured by Lessee pursuant
to Paragraph 8.4. If the coverage is available and commercially appropriate,
Lessor's policy or policies shall insure against all risks of direct physical
loss or damage including, if available at commercially reasonable costs, the
perils of flood and/or earthquake, including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for
the enforcement of any enforcement of any building, zoning, safety or land
use laws as the result of a covered loss, but not including plate glass
insurance. Said policy or policies shall also contain an agreed evaluation
provision in lieu of any co-insurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S.
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in
force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and any Lender(s), insuring the loss of
the full rental and other charges payable by all lessees of the Building to
Lessor for one year (including all Real Property taxes, insurance costs, all
Common Area Operating Expenses and any scheduled rental increases). Said
insurance may provide that in the event the Lease is terminated by reason of
an insured loss, the period of indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises,
to provide for one full year's loss of rental revenues from the date of any
such loss. Said insurance shall contain an agreed valuation provision in lieu
of any co-insurance clause, and the amount of coverage shall be adjusted
annually to reflect the projected rental income, Real Property Taxes,
insurance premium costs and other expenses, if any, otherwise payable, for
the next 12-month period. Common Area Operating Expenses shall include any
deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase
in the premiums for the property insurance of the Building and for the Common
Areas or other buildings in the Industrial Center if said increase in caused
by Lessee's acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring
Party, Lessor shall not be required to insure Lessee-Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Trade Fixtures and
Lesser-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall be full replacement cost
coverage with a deductible not to exceed $1,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of
personal property and the restoration of Trade Fixtures and Lessee-Owned
Alterations and Utility Installations. Upon request from Lessor, Lessee shall
provide Lessor with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such rating as may be required by a Lender as
set forth in the most current issue of "Best's Insurance Guide." Lessee shall
not do or permit to be done anything which shall invalidate the insurance
policies referred to in
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this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven
(7) days after the earlier of the Early Possession Date or the Commencement
Date, certified copies of, or certificates evidencing the existence and
amounts of, the insurance required under Paragraphs 8.2(a) and 8.4. No such
policy shall be cancellable or subject to modification except after thirty
(30) days prior written notice to Lessor. Lessee shall at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with evidence
of renewal or "insurance binders" evidencing renewal thereof, or Lessor may
order such insurance and charge the cost hereof to Lessee, which amount shall
be payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall not
be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence and/or breach
of express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, partners, and Lenders, from and against any and all claims, loss of
rents and/or damages, costs, liens, judgments, penalties, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection with the occupancy of the Premises by Lessee, the
conduct of Lessee's business, any act, omission or neglect of Lessee, its
agents, contractors, employees or invitees and out of any Default or Breach
by Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters Lessee upon notice from Lessor shall define the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or
any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said injury or damage results from
conditions arising upon the Premises or upon other portions of the Building
of which the Premises are a part, from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is accessible or not, Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee of Lessee nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Notwithstanding Lessor's negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than
fifty percent (50%) of the then Replacement Cost (as defined in Paragraph
9.1(d)) of the Premises (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures) immediately prior to such damage or
destruction.
(b) "Premises Total Destruction" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building) of the
Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.
(c) "Insured Loss" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to
their condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in,
on, or under the Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's
expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the nature of the Improvements in the Premises,
full replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises
unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice
of such shortage and request therefor. If Lessor receives said funds or
adequate assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as possible and this Lease shall remain in full force
and effect. If Lessor does not receive such funds or assurance within said
period, Lessor may nevertheless elect by written notice to Lessee within ten
(10) days thereafter to make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within such ten (10) day period, and if Lessor does not so
elect to restore and repair, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor
for any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect), Lessor may
at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within thirty
(30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60)
days following the date of such notice. In the event Lessor elects to give
such notice of Lessor's intention to terminate this Lease, Lessee shall have
the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of such
damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following such commitment from Lessee. In
such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required by
any authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's damages
from Lessee except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date of
occurrence of such damage. Provided, however, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Premises, then
Lessee may preserve this Lease by (a) exercising such option, and (b)
providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10) days after Lessee's receipt of Lessor's written
notice purporting to terminate this Lease; or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense,
repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
and provide such funds or assurance during such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph
9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Lessee is not legally responsible,
the Base Rent Common Area Operating Expenses and other charges, if any,
payable by Lessee hereunder for the period during which such damage or
condition, its repair remediation or restoration continues, shall be abated
in proportion to the degree to which Lessee's use of the Premises is
impaired, but not in excess of the limits of coverage from insurance required
to be carried under Paragraph 8.3(b). Except for abatement of Base Rent,
Common Area Operating Expenses and other charges, if any, as aforesaid, all
other obligations of Lessee hereunder shall be performed by Lessee, and
Lessee shall have no claim against Lessor for any damage suffered by reason
of any such damage, destruction, repair, remediation or restoration, unless
due to Lessor's gross negligence or willful misconduct.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in
a substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and
effect but subject
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to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense,
in which event this Lease shall continue in full force and effect, or (ii) if
the estimated cost to investigate and remediate such condition exceeds twelve
(12) times the then monthly Base Rent or $100,000, whichever is greater, give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such Hazardous Substance Condition or Lessor's
desire to terminate this Lease, Lessee shall have the right within ten (10)
days after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the excess costs of (a) investigation and
remediation of such Hazardous Substance Condition to the extent required by
Applicable Requirements, over (b) an amount equal to twelve (12) times the
then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with the funds required of Lessee or satisfactory assurance
thereof within thirty (30) days following said commitment by Lessee. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified
in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it
is inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in
the calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city,
state or federal government or any school, agricultural, sanitary, fire,
street, drainage, or other improvement district thereof, levied against any
legal or equitable interest of Lessor in the Industrial Center or any portion
thereof, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect, during the term of this Lease, including but not limited to a change
in the ownership of the Industrial Center or in the improvements thereon, the
execution of this Lease, or any modification, amendment or transfer thereof,
and whether or not contemplated by the Parties. In calculating Real Property
Taxes for any calendar year, the Real Property Taxes for any real estate tax
year shall be included in the calculation of Real Property Taxes for such
calendar year based upon the number of days which such calendar year and tax
year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the
Industrial Center by other lessees or by Lessor for the exclusive enjoyment
of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall,
however, pay to Lessor at the time Common Area Operating Expenses are payable
under Paragraph 4.2, the entirety of any increase in Real Property Taxes if
assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable
proportion of the Real Property Taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Lessor from the respective valuations assigned in the assessor's work sheets
or such other information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or stored within the
Industrial Center. When possible, Lessee shall cause its Lessee-owned
Alterations and Utility Installations, Trade Fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from the
real property of Lessor. If any of Lessee's said property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable
to Lessee's property within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon. If any such utilities or services are not separately metered
to the Premises or separately billed to the Premises, Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such charges
jointly metered or billed with other premises in the Building, in the manner
and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
SEE RIDER par. 12
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12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein.
(a) Lessee hereby assigns and transfer to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all
or a portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease, provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligation under this Lease, Lessee may except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations under
this Lease to pay to Lessor the rents and other charges due and to become due
under the sublease. Sublease shall rely upon any such statement and request
from Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary, Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor for any such rents and other charges so paid by
said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance
of its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the
sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said default. A "Default" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "Breach" by Lessee is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after
notice is specified herein, the failure by Lessee to defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to
cure such Default prior to the expiration of the applicable grace period, and
shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease,
the failure by Lessee to make any payment of Base Rent, Lessee's Share of
Common Area Operating Expenses, or any other monetary payment required to be
made by Lessee hereunder as and when due, the failure by Lessee to provide
Lessor with reasonable evidence of insurance or surety bond required under
this Lease, or the failure of Lessee to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure
continues for a period of three (3) days following written notice thereof by
or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease,
the failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (vii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this lease, where any
such failure continues for a period of ten (10) days following written notice
by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under
Paragraph 40 hereof that are to be observed, complied with or performed by
Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c),
above, where such Default continues for a period of thirty (30) days after
written notice thereof by or on behalf of Lessor to Lessee; provided,
however, that if the nature of Lessee's Default is such that more than thirty
(30) days are reasonably required for its cure, then it shall not be deemed
to be a Breach of this Lease by Lessee if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
Subparagraph 13.1(e) is contrary to any applicable law, such provision shall
be of no force or effect, and shall not affect the validity of the remaining
provisions.
(f) The discovery by Lessor that any financial statement
of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor,
was materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurances of security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its own option, may require all future payments to be made under
this Lease by Lessee to be made only by cashier's check. In the event of a
Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or
without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach, Lessor
may:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event, Lessor shall be entitled to recover from Lessee:
(i) the worth at the time of the award of the unpaid rent which had been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
that the Lessee proves could have been reasonably avoided; (iii) the worth at
the time of award of the amount of which the unpaid rent for the balance of
the term after the time of award exceeds the amount of such rental loss that
the Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank District in which
the Premises are located at the time of award plus one percent (1%). Efforts
by Lessor to mitigate damages caused by Lessee's Default or Breach of this
Lease shall not waive Lessor's right to recover damages under this Paragraph
13.2. If termination of this Lease is obtained through the provisional remedy
of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor
may reserve the right to recover all or any part thereof in a separate suite
for such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay
rent or quit, or to perform or quit, as the case may be, given to Lessee
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable
grace period under the unlawful detainer statue shall run currently after the
one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitle Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after
Lessee's Breach and recover the rent as it becomes due, provided Lessee has
the right to sublet or assign, subject only to reasonable limitations, Lessor
and Lessee agree that the limitations on assignment and subletting in this
Lease are reasonable. Acts of maintenance or preservation, efforts to relet
the Premises or the appointment of a receiver to protect the Lessor's
interest under this Lease, shall not constitute a termination of the Lessee's
right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
the located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease, all
of which concessions are hereinafter referred to as "Inducement Provisions"
shall be deemed conditions under Lessee's full and faithful performance of
all of the terms covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor, as additional rent
due under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph 13.3 shall not be deemed a waiver
by Lessor of the provisions of this Paragraph 13.3 unless specifically so
stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
days after such amount shall be due, then without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder where or not collected for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt
by Lessor and by any Lender(s) whose name and address shall have been
furnished to Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor's obligation is such that more than thirty (30)
days after such notice are reasonably required for its performance, then
Lessor shall not be in breach of this Lease if performance is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession whichever first occurs. If more than the ten
percent (10%) of the floor area of the Premises, or more than twenty-five
percent (25%) of the portion of the Common Areas designated for Lessee's
parking, is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing within ten (10) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced
in the same proportion as the rentable floor area of the Premises taken bears
to the total rentable floor area of the Premises. No reduction of Base Rent
shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under
the power of eminent domain or any payment made under threat of the exercise
of such power shall be the property of Lessor, whether such award shall be
made as compensation for diminution of value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee for
Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the
event that that this Lease is not terminated by reason of such condemnation,
Lessor shall be to the extent of its net severance damages received, over and
above Lessee's Share of the legal and other expenses incurred by Lessor in
the condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such
repair.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises or
other premises in which Lessor has an interest, or (c) if Lessee remains in
possession of the Premises with the consent of Lessor after the expiration of
the term of this Lease after having failed to exercise an Option, or (d) if
said Brokers are the procuring cause of any other lease or sale entered into
between the Parties pertaining to the Premises and/or any adjacent property
in which Lessor has an interest, or (e) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then as to any of said
transactions, Lessor shall pay said Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of the execution of this
Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation
of law, shall be deemed to have assumed Lessor's obligation under this
Paragraph 15. Each Broker shall be an intended third party beneficiary of the
provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any
person, firm broker or finder other than as named in Paragraph 1.10(a) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction, Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings
or actions of the indemnifying Party, including any costs, expenses, and/or
attorneys' fees reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each party (as "Responding Party") shall
within ten (10) days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party
a statement in writing in a form similar to the then most current "Tenancy
Statement" form published by the American Industrial Real Estate Association,
plus such additional information, confirmation and/or statements as may be
reasonably requested by the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In
the event of a transfer of Lessor's title or interest in the Premises or in
this Lease. Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10)
days following the date on which it was due, shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in the
state in which the Premises are located plus four percent (4%) per annum, but
not exceeding the maximum rate allowed by law, in addition to the potential
late charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this
Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. Each Broker shall be an intended
third party beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or
registered mail or U.S. Postal Service Express Mail, with postage prepaid, or
by facsimile transmission during normal business hours, and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mail of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises
shall constitute Lessee's address for the purpose of mailing or delivering
notices to Lessee. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties
at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail, the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail
or overnight courier that guarantees next day
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delivery shall be deemed given twenty-four (24) hours after delivery of the
same to the United States Postal Services or courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall be
deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, approval of any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to
enforce the provision or provisions of this Lease requiring such consent.
Regardless of Lessor's knowledge of a Default or Breach at the time of
accepting rent, the acceptance of rent by Lessor shall not be a waiver of any
Default or Breach by Lessee of any provision hereof. Any payment given Lessor
by Lessee may be accepted by Lessor on account of moneys or damages due
Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing
by Lessor at or before the time of deposit of such payment.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this
Paragraph 26 without the written consent of Lessor then the Base Rent payable
from and after the time of the expiration or earlier termination of this
Lease shall be increased to two hundred percent (200%) of the Base Rent
applicable during the month immediately receding such expiration or earlier
termination. Nothing contained herein shall be construed as a consent by
Lessor to any holder over the Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, whenever possible, be cumulative with all other remedies
of law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust or
other hypothecation or security device (collectively, "Security Device"), now
or hereafter placed by Lessor upon the real property of which the Premises
are a part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor's default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for such purpose notice of Lessor's default
pursuant to Paragraph 13.5. If any Lender shall elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security Device
and shall give written notice thereof to Lessee, this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative
dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any
options to extend the term hereof, will not be disturbed so long as Lessee is
not in Breach hereof and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with
a sale, financing or refinancing of Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document
any such subordination or non-subordination, attornment and/or
non-disturbance agreement as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorneys' fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by
compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection with
such Default of resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
Building, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or Building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs.
All such activities of Lessor shall be without abatement of rent or liability
to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent
install (but not on the roof) such signs as are reasonably required to
advertise Lessee's own business so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements and the signage
criteria established for the Industrial Center by Lessor. The installation of
any sign on the Premises by or for Lessee shall be subject to the provisions
of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade Fixtures
and Alterations). Unless otherwise expressly agreed herein, Lessor reserves
all rights to the use of the roof of the Building, and the right to install
advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate
in the Premises; provided, however, Lessor shall, in the event of any such
surrender, termination or cancellation, have the option to continue any one
or all of any existing subtenancies. Lessor's failure within ten (10) days
following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Lessor's election to have such event constitute the termination of such
interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as
otherwise provided herein, wherever in this Lease the consent of a Party is
required to an act by or for the other Party, such consent shall not be
unreasonably withheld or delayed. Lessor's actual reasonable costs and
expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response
to, a request by Lessee for any Lessor consent pertaining to this Lease or
the Premises, including but not limited to consents to an assignment a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 12.2(e), Lessor's
consent to any act, assignment of this Lease or subletting of the Premises by
Lessee shall not constitute an acknowledgement that no Default or Breach of
this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise specifically stated in
writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
impositions by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter for
which consent is being given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this
Lease per Paragraph 1.11, the form of the guaranty to be executed by each
such Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the
same obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a
Default of the Lessee under this Lease if any such Guarantor fails or refuses
upon reasonable request by Lessor to give: (a) evidence of the due execution
of the guaranty called for by this Lease, including the authority of the
Guarantor (and of the party signing on Guarantor's behalf) to obligate such
Guarantor on said guaranty, and resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to
all of the provisions of this Lease.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-9-
<PAGE>
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants
or tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide
same. Lessee assumes all responsibility for the protection of the Premises,
Lessee, its agents and invitees and their property from the acts of third
parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum of any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of
such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not
be deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-10-
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR
YOUR ATTORNEYS REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE
POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR
HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at: Redwood City, California Executed at: Menlo Park, California
----------------------------------------- --------------------------------
on: 7/13/99 on: 6 July 1999
-------------------------------------------------- -----------------------------------------
By LESSOR: By LESSEE:
3355 Edison Partners, Homestead Technologies, Inc.,
- ----------------------------------------------------- --------------------------------------------
a California General Partnership a Delaware Corporation
- ----------------------------------------------------- --------------------------------------------
By: /s/ Alyn T. Beals By: /s/ Justin S. Kitch
-------------------------------------------------- -----------------------------------------
Name Printed: Alyn T. Beals Name Printed: Justin S. Kitch
---------------------------------------- -------------------------------
Title: Managing Partner Title: President & CEO
----------------------------------------------- --------------------------------------
By: By: /s/ Joe H. Davila
-------------------------------------------------- -----------------------------------------
Name Printed: Name Printed: Joe H. Davila
---------------------------------------- -------------------------------
Title: Title: VP of Finance and Administration
----------------------------------------------- --------------------------------------
Address: 2596 Bay Road, Unit A Address: 3475 Edison Way, Suite H
--------------------------------------------- ------------------------------------
Redwood City, Ca 94063 Menlo Park, Ca 94025
- ----------------------------------------------------- --------------------------------------------
Telephone: (650) 364-8141 Telephone: (650) 549-3100
------------------------------------------- ----------------------------------
Facsimile: (650) 367-7645 Facsimile: (650) 364-7329
------------------------------------------- ----------------------------------
BROKER: BROKER:
Executed at: Redwood City, California Executed at:
----------------------------------------- --------------------------------
on: 7/12/99 on:
-------------------------------------------------- -----------------------------------------
By: /s/ Soroush Kaboli By:
-------------------------------------------------- -----------------------------------------
Name Printed: Soroush Kaboli Name Printed:
---------------------------------------- -------------------------------
Title: Licensed Real Estate Broker Title:
----------------------------------------------- --------------------------------------
Address: 2042 Barbara Drive Address:
--------------------------------------------- ------------------------------------
Palo Alto, CA 94303
- ----------------------------------------------------- --------------------------------------------
Telephone: (650) 325-7891 Telephone: ( )
------------------------------------------- ----------------------------------
Facsimile: (650) 325-7891 Facsimile: ( )
------------------------------------------- ----------------------------------
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law
and needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION,
345 So. Figueroa St., M-1, Los Angeles, CA 90071 (213) 687-8777.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-11-
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
- --------------------------------------------------------------------------------
This Addendum One is made a part of the Standard Industrial/Commercial Single
- -Tenant Lease - Modified Net ("Lease") dated as of June 18, 1999, by and
between 3355 Edison Partners, a California General Partnership, as Lessor,
and Homestead Technologies, Inc., a Delaware Corporation, as Lessee, for the
premises commonly known as 3375 Edison Way, Menlo Park, CA. If any conflicts
exist between the Lease and this Addendum, the terms of this Addendum shall
govern.
49. TENANT IMPROVEMENT ALLOWANCE:
Lessor at its sole cost shall improve the premises per attached plans
Exhibits A & B and construction drawings. Said improvements shall include
$50,000.00 allowance for Voice and Data Cabling. In addition, if requested by
Lessee on or before September 1, 1999, Lessor shall provide up to $25,000.00
additional allowance towards Data Cabling. It is agreed and understood that
the Monthly Rent shall increase $10.40 for every $1,000.00 of the additional
allowance that is used at the request of Lessee.
50. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT:
Lessee shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the premises or to
any other portion of the property and/or building of which the premises are a
part, required or reasonably necessary because of: (1) the use to which the
Premises or any portion thereof is put; (2) the use by a subtenant by reason
of assignment or sublease; or (3) both, including any improvements,
alterations or other work required under the Americans With Disabilities Act
of 1990. Compliance with the provisions of this Paragraph shall be a
condition of Lessor granting its consent to any assignment or lease of all or
a portion of this Lease and the Premises described in this Lease.
Broker makes no representation or warranty with respect to compliance or
noncompliance of the facility or any contemplated use with ADA requirements.
We recommend that you consult your attorney to determine if this act applies
to you and if so the requirements that must be met. The applicability of the
Act is a legal issue and we cannot give you legal advice on such matters.
51. TOXIC CONTAMINATION DISCLOSURE:
Lessor and Lessee acknowledge that they have been advised that numerous
federal, state, and/or local laws, ordinances and regulations (hereinafter
referred to as the "Laws") affect the existence and removal, storage,
disposal, leakage of and contamination by materials designated as hazardous
or toxic (hereinafter referred to as the "Toxics"). Many materials, some
utilized in everyday business activities and property maintenance, are
designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by landowners,
future landowners or former landowners without regard to whether the party
required to pay for "clean up" caused the contamination, owned the property
at the time the contamination occurred or even knew about the contamination.
Some items, such as asbestos or PCBs, which were legal when installed, now
are classified as Toxics, and are subject to removal requirements. Civil
lawsuits for damages resulting from Toxics may be filed by third parties in
certain circumstances.
Broker has recommended, and hereby recommends, that each of the parties have
competent professional environmental specialists review the Property and make
recommended test so that a reasonably informed assessment of these matters
can be made by each of the parties. Lessor and Lessee acknowledge that
neither Broker nor its agents or salespersons, have been retained to
investigate or arrange investigation by others, and have not made any
recommendations or representations with regard to the presence or absence of
Toxics on, in or beneath the Property. Lessor and Lessee agree that they will
rely only on persons who are experts in this field and will obtain such
expert advice so each of them will be as fully informed as possible with
regards to Toxics in entering into this Agreement.
52. ANNUAL COST OF LIVING RENTAL ADJUSTMENTS:
The minimum monthly rent provided for in Rent and Base Rent Paragraphs of the
lease agreement shall be subject to adjustment at the commencement of the
second year of the term and each year thereafter (hereinafter referred to as
the "Adjustment Date") as follows:
The base for computing the adjustment is the Consumer Price Index for: All
Urban Consumers/Urban Wage Earners and Clerical Workers (base year 1967 =
100) for San Francisco/Oakland published by the United States Department of
Labor, Bureau of Labor Statistics (hereinafter referred to as the "Index"),
which is in effect on the date of the commencement of the term (hereinafter
referred to as the "Beginning Index"). The Index published most immediately
preceding the Adjustment Date in question (hereinafter referred to as the
"Extension Index") is to be used in determining the amount of the adjustment.
If the Extension Index has increased over the Beginning Index, the minimum
monthly rent for the following year shall be set by multiplying the minimum
monthly rent set forth in Rent Paragraphs by a fraction, the numerator of
which is the Extension Index and the denominator of which is the Beginning
Index.
In no event shall such rent increases be less than 4% of the rent in effect
for the preceding 12 month period nor more than 8% of said period's rent.
1.
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
- --------------------------------------------------------------------------------
On adjustment of the minimum monthly rent as provided in this Lease, the
parties shall immediately execute an amendment to this Lease stating the new
minimum monthly rent.
If the Index is changed so that the Base Year differs from that in effect
when the term commences, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is discontinued or revised during the term,
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the Index had not been discontinued or revised.
53.
The parties acknowledge that Soroush Kaboli is a licensed real estate broker
acting on behalf of the Lessor and is also a partner of the Lessor.
54. ADDITIONAL SECURITY:
As additional security for Lessee's performance under the Lease, concurrently
with the execution hereof Tenant shall establish an interest bearing escrow
account ("Escrow") with a federally insured bank or savings and loan
association ("Bank"), held jointly in the name of Lessor and Tenant in the
amount of Five Hundred Thousand Dollars ($500,000.00) on the following terms
and conditions:
54.1 RIGHT TO DRAW UPON ESCROW PROCEEDS. Lessor may (but shall not
be required to) draw from the Escrow from time to time, in singular or
partial draws upon Lessor's election in any such amount as may be necessary
to cure the then-existing default, up to the full amount thereof, and use the
proceeds therefrom (the "Escrow Proceeds") or any portion thereof to (i) cure
or remedy any Default of Tenant under this Lease; (ii) repair damage to the
Premises caused by Tenant; (iii) clean the Premises upon termination of this
Lease, (iv) reimburse Lessor for the payment of any amount which Lessor may
spend or be required to spend by reason of Lessee's Default, or (v)
compensate Lessor for any other loss or damage which Lessor may suffer by
reason of Lessee's Default, including without limitation all costs reasonably
incurred by Lessor in releasing the Premises; it being understood that any
use of the Escrow Proceeds shall not constitute a bar or defense to any of
Lessor's remedies set forth in this Lease. In such event and upon written
notice from Lessor to Tenant specifying the amount of the Escrow Proceeds so
utilized by Lessor, Tenant shall immediately restore the Escrow to the full
original amount required under this section. Lessee's failure to restore the
Escrow within ten (10) business days of Lessor's notice shall constitute a
Default hereunder.
54.2 ESCROW INSTRUCTIONS. The instructions to the Bank ("Escrow
Instructions") shall provide (i) that Lessor may make partial and multiple
draws thereunder in any such amount as may be necessary to cure the
then-existing default, up to the full amount thereof, (ii) that Lessor may
draw upon the Escrow up to the full amount thereof, and the Bank will pay to
Lessor the amount of such draw upon receipt by the Bank of a sight draft
signed by Lessor, accompanied by a written certificate from Lessor that
Tenant is in Default under the Lease and that Tenant has failed to cure such
Default within fifteen (15) days after receipt by Tenant of Notice of Default
and that Lessor is otherwise entitled to draw upon the Escrow, and (iii)
that, in the event of Lessor's assignment or other transfer of its interest
in this Lease, the Escrow shall be freely assignable by and without recourse
to Lessor, to the assignee or transferee of such interest and the Bank will
confirm the same to Lessor and such assignee or transferee. The Escrow
Instructions shall also provide that the Escrow may not be released to Lessee
without the written consent of Lessor; but it shall be subject, however, to
release and/or reduction as set forth in Section 54.3 below. The Escrow
Instructions shall further provide that it will comply with instructions for
release an reduction of the Escrow only from the Lessor.
54.3 RELEASE, REDUCTION, AND RESTORATION: The funds held in Escrow
shall be subject to release to Lessee and/or reduction as follows:
a) RELEASE. Within ten (10) days of the date that Lessee provides a
certified statement to Lessor that it has received new capital in the
minimum amount of Fifty Million and no/100 ($50,000,000.00) Dollars
through an Initial Public Offering, Lessor shall execute written
instructions to Bank releasing the Escrow in its entirety to Lessee.
This right to release is in addition to, and not in lieu of, the right
of reduction set forth below.
b) REDUCTION. Commencing on the third (3rd) anniversary of the
Commencement Date, provided that Lessee is not and has not at any time
been in Default beyond any applicable cure periods (except for monetary
defaults), and annually on each anniversary thereafter so long as there
is no occurrence of default, the amount of the Escrow shall be reduced
by One Hundred Thousand and no/100 ($100,000.00) Dollars. Within five
(5) days of each applicable anniversary, Lessor shall execute written
instructions to Bank releasing the aforesaid sum to Lessee.
c) RESTORATION. Lessee shall provide quarterly financial reports to
Lessor throughout the Term of the Lease. In the event that proceeds in
the Escrow have previously been released pursuant to Section 54.3(b)
above, and thereafter Lessee's Cash and Cash Equivalent Assets (as
hereinafter defined) drop below Twenty Million and no/100
($20,000,000.00) Dollars, Lessee shall restore the Escrow to the
original
2.
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
- --------------------------------------------------------------------------------
amount. If Lessee defaults in any provision of the Lease beyond any
applicable cure periods (except for monetary defaults),, regardless of
whether such default is subsequently cured, Lessee shall restore the
Escrow Account to its original amount and it shall remain at that
amount for the term of the Lease including all options and periods of
occupancy.
d) CASH AND CASH EQUIVALENT ASSETS. "Cash and Cash Equivalent Assets"
shall mean the aggregate amount of the following, to the extent owned
by Lessee free and clear of all loans, ninety day payables, and
encumbrances (and excluding any Security Deposit or Escrow hereunder):
(i) cash on hand; (ii) dollar demand deposits maintained in the United
States with, or certificates of deposit having a maturity of 150 days
or less issued by, any commercial bank or other financial institution
acceptable to the Lessor; (iii) direct obligations of, or
unconditionally guaranteed by, the United States and having a maturity
of one hundred fifty (150) days or less; and (iv) readily marketable
commercial paper having a maturity of one hundred fifty (150) days or
less, issued by any corporation organized and existing under the laws
of the United States or any state thereof or the District of Columbia
and rated by any nationally recognized rating organization in the
United States with the highest rating assigned by such organization.
e) RELEASE AT EXPIRATION OF TERM. On a date which is not more than
thirty (30) days following the expiration of the Term (as it may be
extended) or earlier termination of this Lease, the Escrow (as reduced
pursuant to this section) shall be released to Lessee, less any amounts
that Lessor reasonably estimates to be required to remedy any Defaults
on the part of Lessee hereunder.
f) UCC FILING. Lessor shall be entitled to file a UCC-1 protecting its
interest in the Escrow. Within five (5) days of any release or
reduction of the Escrow in accordance with the terms of this Lease,
Lessor shall file a revised UCC-1 or UCC-2, as applicable. Lessee shall
execute such documents as reasonably requested by Lessor and required
for any such filing.
g) STOCK WARRANTS. Upon execution, Lessee shall issue to Lessor or as
Lessor directs, 12,000 warrants at a price of $2.727 per warrant.
55. BASE RENT ADJUSTMENT:
In addition to the rental adjustment referred to in Paragraph 52 to this
Addendum, Base rent also shall be adjusted on the fifth and tenth
anniversaries of the Commencement Date (each an "Anniversary Date") to equal
the Fair Market Rental Value of the Premises on such Anniversary Date;
provided, however, that the Base Rent shall never be adjusted downward. Fair
Market Rental Value shall be determined as follows: Sixty (60) days prior to
each Anniversary Date, Lessor and Lessee shall meet and endeavor to agree
upon Fair Market Rental Value. If they are unable to so agree within thirty
(30) days, Lessor and Lessee shall each select a licensed real estate broker
who is active in the leasing or appraisal of similar space in the general
vicinity of the Building and is not affiliated with either Lessor or Lessee
(each a "Broker"). Each Broker shall thereupon determine the fair market
rental value of the Premises, and the Fair Market Rental Value, as ultimately
determined, shall not be greater than the larger determination nor less than
the smaller determination (the "Range"). The Brokers shall then select a
similarly qualified licensed real estate broker, who shall determine the Fair
Market Rental Value, which shall, in any event, be within the Range. Each
party shall pay the costs and fees of its respective Broker, and shall pay
half the costs and fees of the jointly appointed broker.
<TABLE>
<S> <C>
LESSOR: 3355 EDISON PARTNERS, A CALIFORNIA GENERAL PARTNERSHIP
By: /s/ Alyn T. Beals Date: 7/13/99
----------------------------------------- -------------------------------------
Alyn T. Beals, Managing Partner
LESSEE: HOMESTEAD TECHNOLOGIES, INC., A DELAWARE CORPORATION
By: /s/ Justin S. Kitch Date: 13 July 1999
--------------------------------------- -------------------------------------
Justin S. Kitch, President & CEO
By: /s/ Joe H. Davila Date: 6 July 1999
--------------------------------------- -------------------------------------
Joe H. Davila, V.P. of Finance & Administration
</TABLE>
3.
<PAGE>
EXHIBIT B
HOMESTEAD TECHNOLOGIES
OUTLINE SPECIFICATIONS
All T.I. materials shall be medium grade standard.
The space shall be in conformance with the 1997 UBC, UFC, NEC, ADA and any local
building codes and ordinance and all other governing authorities having
jurisdiction.
1. HVAC SYSTEMS: Systems to meet Uniform
Mechanical Code standard and requirements.
Open ceiling areas to have exposed ducts.
2. ELECTRICAL/TEL/DATE:
Private Office: 3 duplex, 1 tel/data location
Workstation: 2 duplex, 1 tel/data location
Conference: 2 duplex, 1 tel/data location
Kitchen: Dedicated circuits for appliances, and outlets
for general areas
Mail/Copier: Dedicated circuits for copier and printers, and
outlets for general office equipment and use
Server Room: Dedicated circuits for computer equipment per
tenant's requirements separate A/C unit for
this room
Electrical supply and outlets and phone jacks to the 1st floor Open
Office shall be paid for by Lessor
3. FINISHES (GENERAL OFFICE)
Floor: -Carpet throughout except as noted below quality:
28 oz. loop pilas style TBD with accent pattern at
the main entry
-VCT in Lunch, Kitchen, Storage and Mail/Copy Room
-Static free sheet vinyl in Server Room
-Sealed concrete in Shipping/Receiving
Carpet installation shall be direct glue down on 1st floor and with
padding on the 2nd floor.
Base: 4" high rubber base
Wall: Painted textured finish gypsum board walls
Accent paint at doors and frame by tenant
Ceiling: Exposed structure except at Private Offices and all
enclosed rooms to have 2x4 suspended ceiling
4. FINISHES (TOILET ROOMS)
Floor: Sheet vinyl flooring
Wall: 4'-0" high FRP panels with painted gyp bd above
Ceiling: Gypsum board ceiling
Shower: Prefabricated fiberglass shower
5. Open office low wall partitions shall be by owner except for the
Homestead logo facade shall be paid for by tenant.
6. KITCHEN APPLIANCES: sink, garbage disposal, and dishwasher shall be
provided by owner. Tenant to provide refrigerator, microwave oven and
other countertop appliances. Owner to provide electrical outlets.
1.
<PAGE>
RIDER TO A.I.R.E.A. STANDARD INDUSTRIAL LEASE -- MULTI-TENANT (MODIFIED NET -
1993) DATED, FOR REFERENCE PURPOSES MAY 18, 1999 BY AND BETWEEN 3355 EDISON
PARTNERS ("LESSOR"), AND HOMESTEAD TECHNOLOGIES ("LESSEE").
This Rider is attached to and made a part of the above-referenced typeset
lease (the "Lease"). In the event of any conflict between the typeset portion
of the Lease and this Rider, the terms and provisions of this Rider shall
govern. If any addenda or amendments are also attached to the typeset portion
of the Lease, this Rider shall govern to the extent of any conflict between
the terms and provisions of this Rider and such addenda or amendments. All
references in the following paragraphs are to corresponding paragraphs of the
typeset portion of the Lease, except as otherwise expressly provided herein.
INSERT 1.2(a): PREMISES.
Lessor agrees that it will construct the Building in accordance with
the approved plans. Upon completion of the Building, either party shall have
the right, to be exercised within the first 30 days of the term, to cause the
rentable square feet of the Building to be measured by a certified architect
in accordance with Lessor's architect's methodology. In the event that the
measurement shows that the actual rentable square feet (calculated by
reference to the approved plans) is more or less than the 20,096 as
represented by Lessor, then Base Rent shall be adjusted proportionately. If
neither party exercises it right to measure the Building as set forth herein,
then the rentable square feet of the Building shall be deemed to be 20,096.
INSERT 1.2(b): PARKING.
Lessee's use of such parking shall be at no cost to Lessee during
the term of this Lease or any extensions thereof.
PAR. 2.2: CONDITION.
Notwithstanding anything to the contrary in Paragraph 2.2, should a
non-compliance with this warranty be of a latent nature, the time limitation
for delivery of notice shall be extended to nine (9) months, and Lessor shall
rectify such non-compliance, at Lessor's sole cost and expense, promptly
after receipt of written notice thereof.
PAR. 2.3: COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODES.
If necessary to protect or preserve the rights of Lessee, Lessor
shall assign to Lessee the benefit of construction warranties respecting the
Building or the Premises.
PAR. 2.10: COMMON AREAS - CHANGES.
Notwithstanding the provisions of Paragraph 2.10, Landlord may
expand the Common Areas by the acquisition of adjacent land for purposes of
providing additional parking and landscaping for the benefit of the Premises.
In the event Landlord so expands the Common Area and such expansion is for
the benefit of other properties or tenants, then Lessee shall be required to
pay only its proportionate share of the costs of such expanded Common Area.
Lessor's rights pursuant to this Paragraph 2.10 shall be subject to the
condition that exercise of any of such rights shall not unreasonably
interfere with Lessee's use of the Premises, substantially change the size,
shape or location of the Common Areas as outlined on the attached Exhibit A
except as allowed in the previous sentence or decrease the number of parking
places allocated to Lessee pursuant to Paragraph 1.2(b).
PAR. 3.3: DELAY IN POSSESSION.
Notwithstanding anything to the contrary contained herein, if the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, and Lessee does not elect to terminate within the ten (10)
day period after such period, if a subsequent event occurs which further
delays the Commencement Date, fifteen (15) days after giving additional
notice to Lessor, Lessee shall be entitled to terminate this Lease. Such
election must be made by notice given to Lessor in writing within the twenty
(20) day period following the expiration of such fifteen (15) day notice
period.
PAR. 4.2(a): COMMON AREA OPERATING EXPENSES.
1.
<PAGE>
Notwithstanding anything to the contrary contained in this Lease,
the following shall not be included within Common Area Operating Expenses:
Any depreciation on the Building or Property.
Costs of a capital nature involving replacement of the
roof, foundation, structural members, load-bearing walls, or building
systems; provided, however, that Lessee shall be responsible for replacement
of the HVAC system serving the Premises, if required during the first ten
(10) years of the Lease term. If replacement of the HVAC system is required
thereafter, the cost thereof shall be borne by Landlord, and Landlord shall
be entitled to include in Common Area Operating Expenses annually an amount
equal to one year's amortized cost of such replacement HVAC, amortized over
an anticipated ten year useful life. Such amortization shall be at ten
percent (10%).
Costs incurred due to Lessor's violation of any terms or
conditions of this Lease.
Overhead profit increments paid to Lessor's subsidiaries or
affiliates for management or other services on or to the building or for
supplies or other materials to the extent that the cost of the services,
supplies, or materials exceeds the cost that would have been paid had the
services, supplies, or materials been provided by unaffiliated parties on a
competitive basis.
All interest, loan fees, and other carrying costs related
to any mortgage or deed of trust or related to any capital item, and all
rental and other payable due under any ground or underlying lease, or any
lease for any equipment ordinarily considered to be of a capital nature
(except janitorial equipment which is not affixed to the Building.)
Costs of repairs and other work occasioned by fire,
windstorm, or other casualty of an insurable nature (but not including
deductibles paid by Landlord for insured losses). In no event, however, shall
Common Area Operating Costs include the amount of any deductibles paid with
respect to any loss covered by earthquake coverage, where such deductible
exceeds twenty-five thousand dollars.
Any costs, fines, or penalties incurred due to violations
by Lessor of any governmental rule or authority, this Lease or any other
lease in the Property, or due to Lessor's negligence or willful misconduct.
Management costs, to the extent they exceed 5% of Annual
Rent.
The cost of correcting any building code or other
violations which were violations prior to the Commencement Date.
The cost of containing, removing, or otherwise remediating
any contamination of the Property (including the underlying land and ground
water) by any toxic or hazardous materials (including, without limitation,
asbestos and "PCB's") where such contamination was not caused by Lessee or
any of its agents, employees, contractors or invitees.
PARAGRAPH 4.2(d): COMMON AREA OPERATING EXPENSES.
Lessor shall keep complete and accurate records in accordance with good
bookkeeping and accounting practices regarding all Common Area Operating
Expenses. Lessee shall have the right to audit, at its sole cost and expense,
such records for each calendar year during the term of this Lease by
notifying Lessor within 120 days following the end of each such calendar year
and/or 120 days after Lessor has furnished Lessee a statement of such actual
expenses. If an audit (performed by a certified public accountant on behalf
of Lessee) reveals that Lessor has overcharged Lessee for common Area
Operating Expenses, Lessee shall so inform Lessor. If Lessee and Lessor do
not agree on such overcharge, then Lessee and Lessor agree to arbitrate the
amount (if any) of such overcharge and if Lessor is found to have overcharged
Lessee, Lessor shall refund the amount overcharged within ten days after such
determination has been made.
PARAGRAPH 6.2(d): LESSOR'S INDEMNITY. Paragraph 6.2(d) is hereby added, which
shall read in its entirety as follows:
2.
<PAGE>
Lessor warrants to Lessee that on the commencement of the term
hereof, to its actual knowledge, the Premises are free from contamination by
any preexisting Hazardous Substances (and for purposes of this Paragraph
6.2(d), the Premises shall be deemed to include the underlying soil and
ground water). Lessee shall in no event be responsible for any Hazardous
Substances which were preexisting or preexisting conditions on the Premises.
The provisions of this paragraph shall survive the termination of this Lease.
PAR. 7.2: LESSOR'S OBLIGATIONS.
Notwithstanding the provisions of Paragraph 7.2, if Lessor fails to
timely and reasonably perform its maintenance and repair obligations
hereunder, and, as a consequence, Lessee's use of the Premises is
substantially impaired, Lessee shall have the right to cause such repair or
maintenance to be performed at Lessor's expense and to deduct the costs
thereof, together with interest thereon at the highest rate permitted by law,
from the rent payable to Lessor.
PAR. 7.3(a): DEFINITIONS; CONSENT REQUIRED.
Notwithstanding the provisions of 7.3, Lessee shall be entitled to
make Alterations and Utility Installations in, on, under or about the
Premises, without the prior consent of Lessor, so long as the cost of each
such Alteration or Utility Installation (i) does not exceed the sum of
$15,000 (or the aggregate cost of such Alteration or Utility Installation
during any given one year period does not exceed $50,000), (ii) does not
effect any structural or exterior portions of the Building or adversely
effect the Building electrical, plumbing or HVAC systems, or (iii) does not
involve the removal or relocation of any walls. Lessee shall, however,
provide Lessor with fifteen (15) days prior advance written notice to enable
Lessor to post any desired notices of non-responsibility.
PAR. 7.4: OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION. Notwithstanding any
provision in this Lease to the contrary:
(a) Lessee shall not be required to remove (i) any improvements and
fixtures installed by Lessee in, on or about the Premises pursuant to
Lessee's repair obligation under this Lease, (ii) any of the initial Tenant
Improvements pursuant to Paragraph 50(A) hereof, or (iii) any Alterations or
Utility Installations for which Lessee has obtained Lessor's consent, unless
Lessor has indicated, at the time of granting such consent, that such removal
will be required.
(b) In addition to its personal property, equipment, and Trade
Fixtures, Lessee shall be entitled to remove any Lessee Owned Alterations and
Utility Installations (but not, in any case, any electrical or communications
cabling and any items agreed in advance by Lessor and Lessee to remain on the
Premises) at the expiration of the term, provided Lessee repairs all damage
caused by such removal.
PAR. 8.2(a) INSURANCE.
Following the seventh year of the term, Lessor shall have the right
to require the amount of insurance coverage required to be carried by Lessee
hereunder to be adjusted to what is then a commercially reasonable and
customary amount.
PAR. 9: DAMAGE OR DESTRUCTION.
Notwithstanding anything to the contrary in Paragraph 9, if Lessee's
use of the Premises is substantially impaired for a period of more than 240
days after the date of casualty, Lessee shall have the right to terminate
this Lease by written notice to Lessor at any time thereafter until Lessee's
use of the Premises is substantially restored.
PAR. 10: REAL PROPERTY TAXES. Notwithstanding anything to the contrary in
Paragraph 10:
All amounts paid by Lessee to Lessor in advance payment of any
year's Tax Increase in excess of taxes actually owed shall be paid by Lessor
to Lessee within five (5) days of reconciliation of such amounts by Lessor.
PAR. 12: ASSIGNMENT AND SUBLETTING.
3.
<PAGE>
Lessee shall not sublet all or any portion of the Premises without
Lessor's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned, subject to the terms of this Paragraph 12
and Paragraph 36.
In the event Lessee desires to sublet all or any portion of the
Premises, Lessee shall so notify Lessor, specifying the portion of the
Premises proposed to be sublet, the terms of the proposed sublease and the
proposed subtenant. Lessee shall also provide Lessor with such other
information concerning the sublease, including the proposed use of the
Premises by such subtenant and the subtenant's financial status, as Lessor
may reasonably request. Upon receipt of such notice and information and upon
Lessee's request for consent to the sublease, Lessor shall have fifteen (15)
days to either consent to the proposed sublease or to terminate this Lease as
to the portion of the Premises proposed to be sublet (including the entire
Premises, if Lessee proposes to sublease the entire Premises). In the event
Lessor elects to so terminate this Lease as to a portion of the Premises,
Lessee shall be responsible for any costs of demising the portion of the
Premises as to which the Lease is terminating. In the event Lessor elects to
approve the proposed sublease, Lessor and Lessee shall share any Bonus Rent
received by Lessee pursuant to such sublease in the proportion of 70% for
Lessor and 30% for Lessee. For purposes of this Paragraph, "Bonus Rent" shall
mean the amount (if any) by which all consideration received by Lessee for
the sublease of the Premises exceeds the Rent payable hereunder, after first
deducting costs and fees paid by Lessee to sublease the Premises (but not the
costs to install Lessee's tenant improvements).
Lessee may assign this Lease, or any portion thereof, without
Lessor's consent, by operation of law or otherwise, including to any entity
which controls, is controlled by, or is under common control with Lessee; to
any entity which results from a merger of, reorganization of, or
consolidation with Lessee; to any entity engaged in a joint venture with
Lessee; or to any entity which acquires substantially all of the stock or
assets of Lessee, as a going concern, with respect to the business that is
being conducted in the Premises (collectively, a "Permitted Transfer").
Lessee agrees to provide written notice to Lessor of any Permitted Transfer.
PAR. 13.2: REMEDIES.
Notwithstanding any other provisions of this Lease to the contrary,
Lessor's entry into the Premises for any purpose allowed by this Lease shall
be subject to Lessee's reasonable security requirements, including the
providing of reasonable notice, except in the event of emergency, in which
case, entry shall be allowed without prior notice or restriction.
PAR. 16.2 FINANCIAL STATEMENTS.
Notwithstanding the foregoing, Lessee's obligations upon Lessor's
request, are limited to delivery of its currently existing financial
statements. In addition, Lessee agrees to provide Lessor with quarterly
unaudited financial statements and annual audited financial statements.
PAR. 25 RECORDING.
Neither party shall record this Lease or a memorandum of lease with
the County Reorder.
PAR. 32: LESSOR'S ACCESS.
Notwithstanding the provisions of Paragraph 32, Lessor shall provide
Lessee with at least 24 hours' prior actual notice before entering the
Premises. In the event of an emergency, the determination of which shall
require Lessor to be reasonable, Lessor shall use its best efforts to provide
Lessee with notice reasonable in such situation. In the event of any entry by
Lessor onto the Premises, Lessor shall use its best efforts not to interfere
with the conduct of Lessee's business.
PAR. 54: ADDITIONAL SECURITY.
The Escrow shall be in an interest bearing account with interest to
accrue for the benefit of Lessee and shall be paid out to Lessee quarterly.
Notwithstanding the foregoing, in the event Lessee is in default of its
obligations hereunder (after any applicable cure periods), such interest
shall be retained in the Escrow thereafter.
PAR. 55: LESSOR'S WARRANTY. Paragraph 55 is hereby added, reading in its
entirety as follows:
4.
<PAGE>
Lessor hereby warrants that it is the fee owner of the Premises, that
it has authority to enter into this Lease.
PAR. 56: LESSOR'S LIEN. Paragraph 56 is hereby added, reading in its entirety
as follows:
Notwithstanding anything herein to the contrary, Lessor
waives any and all rights, title and interest Lessor now has, or hereafter
may have, whether statutory or otherwise, to Lessee's inventory, equipment,
furnishings, trade fixtures, books and records, personal property, and tenant
improvements paid for by Lessee located at the Premises (singly and/or
collectively, the "Collateral"). Lessor acknowledges that Lessor has no lien,
right, claim, interest or title in or to the Collateral. Lessor further
agrees that Lessee have the right, at its discretion, to mortgage, pledge,
hypothecate or grant a security interest in the Collateral as security for
its obligations under any equipment lease or other financing arrangement
related to the conduct of Lessee's business at the Premises. Lessor further
agrees to execute and deliver within three (3) business days any UCC filing
statement or other documentation required to be executed by Lessor in
connection with any such lease or financing arrangement, and any real estate
consent or waiver forms submitted by any vendors, equipment lessors, chattel
mortgagees, or holders or owners of the Collateral setting forth, inter alia
that Lessor waives, in favor of such party any superior lien, claim, interest
or other right therein.
The Collateral shall not become the property of Lessor or a part of the
realty no matter how affixed to the Premises and may be removed by Lessee or
any Equipment Lessors at any time and from time to time during the entire
term of this Lease. Lessee shall promptly repair any damage caused by the
removal of such property, whether effected by Lessee or Equipment Lessors.
PAR. 57: ESTOPPEL CERTIFICATES.
Each party shall, within ten (10) business days of receiving a
request from the other party, execute, acknowledge in recordable form, and
deliver to the other party or its designee a certificate stating, subject to
a specific statement of any applicable exceptions, that the Lease as amended
to date is in full force and effect, that the Lessee is paying Rent and other
charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has
no offsets or claims. The certifying party may also be required to state the
date of commencement of payment of Rent, the Commencement Date, the
Termination Date, the Base Rent, the current Common Area Operating Expense
estimates, the status of any improvements required to be completed by Lessor,
the amount of any security deposit, and such other matters as may be
reasonably requested.
<TABLE>
<S> <C>
LESSOR: LESSEE:
3355 EDISON PARTNERS CORPORATION HOMESTEAD TECHNOLOGIES INC.
By: /s/ Alyn T. Beals By: /s/ Justin Shelby Kitch
------------------------------------ ---------------------------------------------
Title: Managing Partner Title: CEO & President
---------------------------------- -------------------------------------------
Signature: Alyn T. Beals Signature: Justin Shelby Kitch
----------------------------- ---------------------------------------
Date: 7/13/99 Date: July 13, 1999
------------------------------------ ---------------------------------------------
Joe H. Davila, Jr.
---------------------------------------------
/s/ Joe H. Davila, Jr.
---------------------------------------------
V.P. Finance and Administration
---------------------------------------------
6 July 1999
---------------------------------------------
</TABLE>
5.
<PAGE>
EXHIBIT A
[floor plans]
<PAGE>
Exhibit 10.6
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes
only, SEPTEMBER 20, 1999 is made by and between LUIGI ZANETTE AND MIRANDA
ZANETTE, TRUSTEES OF THE ZANETTE FAMILY TRUST U/A, DATED OCTOBER 2, 1993
("Lessor") and HOMESTEAD TECHNOLOGIES, INC., a Delaware Corporation
("Lessee"), (collectively the "Parties," or individually a "Party").
1.2(a) PREMISES: That certain portion of the Building, including
all improvements therein or to be provided by Lessor under the terms of this
Lease commonly known by the street address of 3469 Edison Way located in the
City of MENLO PARK (UNINCORP.) County of SAN MATEO, State of CALIFORNIA, with
zip code 94025 as outlined in Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building) AN APPROXIMATELY
18,130 SQUARE-FOOT OFFICE/R&D BUILDING WHICH IS CURRENTLY UNDER CONSTRUCTION
AND SHALL BE COMPLETED AS PER ATTACHED PLAN.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in paragraph 2.7 below) as hereinafter specified, but shall not have
any rights to the roof, exterior walls or utility raceways of the Building or
to any other buildings in the Industrial Center. The Premises, the Building,
the Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.) *See below
1.2(b) PARKING: 53 unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6.)
1.3 TERM: APPROXIMATELY 14 years and 10 months ("Original Term")
commencing DECEMBER 1, 1999 OR UPON SUBSTANTIAL COMPLETION ("Commencement
Date") and ending SEPTEMBER 30, 2014 ("Expiration Date"). (Also see Paragraph
3.)
1.4 EARLY POSSESSION: -- ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $29,008.00 per month ("Base Rent"), payable on the
FIRST day of each month commencing JANUARY 1, 2000. (Also see Paragraph 4.)
/X/ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum ONE, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $29,008. Base Rent for the
FIRST MONTH OF THE TERM
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: ONE
HUNDRED PERCENT (100%) ("Lessee's Share") as determined by /X/ pro rata
square footage of the Premises as compared to the total square footage of the
Building or [ ] other criteria as described in Addendum ____
1.7 SECURITY DEPOSIT: $58,000 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: GENERAL OFFICE, SOFTWARE DEVELOPMENT AND ALL
LEGALLY RELATED USES ("Permitted Use") (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
/X/ Soroush Kaholi, Licensed Broker represents Lessor exclusively
----------------------------------- ("Lessor's Broker")
/ / represents Lessee exclusively
----------------------------------- ("Lessee's Broker")
/ / represents both Lessor and
----------------------------------- Lessee ("Dual Agency") (Also
see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by
both Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $ -- ) for brokerage services rendered by said Broker(s) in connection
with this transaction.
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 55, and Exhibits A through **,
all of which constitute a part of this Lease. ** AND A RIDER ATTACHED HERETO.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b))
based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the obligation
of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants that any improvements (other than those constructed by Lessee
or at Lessee's direction) on or in the Premises which have been constructed
or installed by Lessor or with Lessor's consent or at Lessor's direction
shall comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances in effect on the
Commencement Date, Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility Installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
and setting forth with specificity the nature and extent of such
non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that
the Permitted Use in Paragraph 1.6 is permitted for the Premises under
Applicable Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "Applicable Laws") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as
the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (c) that neither Lessor, nor any of Lessor's agents has, made
any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor
in this Paragraph 2 shall be of no force or effect it immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
* EXCEPT TO THE EXTENT REDUCED BY ANY GOVERNMENTAL OR REGULATORY AGENCY
DURING THE TERM OF THIS LEASE.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
<PAGE>
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules and
Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, contractors or invitees to be loaded, unloaded, or
parked in areas other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease
provide the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line as outlined on Exhibit ___ and interior utility raceways within
the Premises that are provided and designated by the Lessor from time to time
for the general non-exclusive use of Lessor, Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the
non-exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers,
and privileges reserved by Lessor under the terms hereof or under the terms
of any rules and regulations or restrictions governing the use of the
Industrial Center. Under no circumstances shall the right herein granted to
use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including,
without limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas, walkways and
utility raceways;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the
Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Industrial Center, or
any portion thereof; and
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating Expenses and to
carry the insurance required by Paragraph 8) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee
shall not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease until
Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days after the end of said sixty (60) day period, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of Lessee
is not received by Lessor within said ten (10) day period. Lessee's right to
cancel this Lease hereunder shall terminate and be of no further force or
effect. Except as may be otherwise provided, and regardless of when the
Original Term actually commences, if possession is not tendered to Lessee
when required by this Lease and Lessee does not terminate this Lease, as
aforesaid, the period free of the obligation to pay Base Rent, if any, that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to the period during which the
Lessee would have otherwise enjoyed under the terms hereof, but minus any
days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor in lawful
money of the United States, without offset or deduction, on or before the day
on which it is due under the terms of this Lease. Base Rent and all other
rent and charges for any period during the term hereof which is for less than
one full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such other
addresses as Lessor may from time to time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor
during the term hereof, in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "Common Area Operating Expenses" are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the Building and Common Areas, including, but not
limited to, the following:
(i) The operation, repair and maintenance, in
neat, clean, good order and condition, of the following:
(aa) The Common Areas, including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, fences and gates,
elevators and roof.
(bb) Exterior signs and any tenant
directories.
(cc) Fire detection and sprinkler
systems.
(ii) The cost of water, gas, electricity and
telephone to service the Common Areas.
(iii) Trash disposal, property management and
security service and the costs of any environmental inspections.
(v) Real Property Taxes (as defined in Paragraph
10.2) to be paid by Lessor for the Building and the Common Areas under
Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance
policies maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss
concerning the Building or the Common Areas.
(viii) Any other services to be provided by
Lessor that are stated elsewhere in this Lease to be a Common Area Operating
Expense.
(b) Any Common Area Operating Expenses and Real Property
Taxes that are specifically attributable to the Building or to any other
building in the Industrial Center or to the operation, repair and maintenance
thereof, shall be allocated entirely to the Building or to such other
building. However, any Common Area Operating Expenses and Real Property Taxes
that are not specifically attributable to the Building or to any other
building or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Industrial Center based
on square footage.
(c) The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation upon Lessor to either have said improvements or facilities or to
provide those services unless the Industrial Center already has the same.
Lessor already provides the services, or Lessor has agreed elsewhere in this
Lease to provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall
be payable by Lessee within ten (10) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At Lessor's
option, however, an amount may be estimated by Lessor from time to time of
Lessee's Share of Annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12 month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of
the actual Common Area Operating Expenses incurred during the preceding year.
If Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessor shall be
credited the amount of such over-
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payment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.
5. SECURITY DEPOSIT.
Lessee shall deposit with Lessor upon Lessee's execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Lessee's faithful
performance of Lessee's obligations under this Lease. If Lessee fails to pay
Base Rent or other rent or charges due hereunder, or otherwise Defaults under
this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur
by reason thereof. If Lessor uses or applies all or any portion of said
Security Deposit, Lessee shall within ten (10) days after written request
therefore deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Lessor shall not be
required to keep all or any part of the Security Deposit separate from its
general accounts. Lessor shall at the expiration or earlier termination of
the term hereof and after Lessee has vacated the Premises, return to Lessee
(or, at Lessor's option, to the last assignee, if any, of Lessee's interest
herein) that portion of the Security Deposit not used or applied by Lessor.
Unless otherwise expressly agreed in writing by Lessor, no part of the
Security Deposit shall be considered to be held in trust, to bear interest or
other increment for its use, or to be prepayment for any monies to be paid by
Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or
delay its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its
assignees and subtenants, for a modification of said Permitted Use, so long
as the same will not impair the structural integrity of the improvements on
the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses by other lessees, is not significantly
more burdensome to the Premises or the Building and the improvements thereon,
and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects
to withhold such consent, Lessor shall within five (5) business days after
such request give a written notification of same which notice shall include
an explanation of Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment, or the Premises; (ii) regulated
or monitored by any governmental authority; or (iii) a basis for potential
liability of Lessor to any governmental agency or third party under any
applicable statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products or by-products thereof. Lessee shall not engage in any activity in
or about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3). "Reportable
Use" shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation,
or disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (iii) the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may without Lessor's prior consent, in compliance with all
Applicable Requirements, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of the Permitted Use, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to any Reportable Use of any
Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to
protect itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited
to the installation (and, at Lessor's option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements).
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises or the Building, other than as
previously consented to by Lessor, Lessee shall immediately give Lessor
written notice thereof, together with a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim,
action, or proceeding given to, or received from any governmental authority
or private party concerning the presence, spill, release, discharge of, or
exposure to, such Hazardous Substance including but not limited to all such
documents as may be involved in any Reportable Use involving the Premises.
Lessee shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect,
defend and hold Lessor, its agents, employees, lenders and ground lessor, if
any, and the Premises, harmless from and against any and all damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, loss of
permits and attorneys' and consultants' fees arising out of or involving any
Hazardous Substance brought onto the Premises by or for Lessee or by anyone
under Lessee's control. Lessee's obligations under this Paragraph 6.2(c)
shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by Lessee,
and the cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "Applicable Requirements," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now
in effect or which may hereafter come into effect. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including but not limited to
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving failure by
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance of Lessee with this
Lease and all Applicable Requirements (as defined in Paragraph 6.3), and
Lessor shall be entitled to employ experts and/or consultants in connection
therewith to advise Lessor with respect to Lessee's activities, including but
not limited to Lessee's installation, operation, use, monitoring,
maintenance, or removal of any Hazardous Substance on or from the Premises.
The costs and expenses of any such inspections shall be paid by the party
requesting same, unless a Default or Breach of this Lease by Lessee or a
violation of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist or to be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result
of any such existing or imminent violation or contamination. In such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole cost and expense and at all times, keep the
Premises and every part thereof in good order, condition and report (whether
or not such portion of the Premises requiring repair, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use,
any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense,
procure and maintain a contract, with copies to Lessor, in customary form and
substance for and with a contractor specializing and experienced in the
inspection, maintenance and service of the heating, air conditioning and
ventilation system for the Premises. However, Lessor reserves the right, upon
notice to Lessee, to procure and maintain the contract for the heating, air
conditioning and ventilating systems and if Lessor so elects, Lessee shall
reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days'
prior written notice to Lessee (except in the case of an emergency, in which
case no notice shall be required), perform such obligations on Lessee's
behalf and put the Premises in good order, condition and repair, in
accordance with Paragraph 13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order,
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, exterior roof, fire sprinkler and/or standpipe and
hose (if located in the Common Areas) or other automatic fire extinguishing
system including fire alarm and/or smoke
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detection systems and equipment, fire hydrants, parking lots, walkways,
parkways, driveways, landscaping, fences, signs and utility systems serving
the Common Areas and all parts thereof, as well as providing the services for
which there is a Common Area Operating Expense pursuant to Paragraph 4.2.
Lessor shall not be obligated to paint the exterior or interior surfaces of
exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the Building, Industrial
Center or Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility
Installations" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning
equipment, plumbing, and fencing in, on or about the Premises. The term
"Trade Fixtures" shall mean Lessee's machinery and equipment which can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises which are
provided by Lessor under the terms of this Lease other than Utility
Installations or Trade Fixtures. "Lessee-Owned Alterations and/or Utility
Installations" are defined as Alterations and/or Utility Installations made
by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make nor cause to be made any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor's consent but upon notice to Lessor, so long as they are not visible
from the outside of the Premises, do not involve puncturing, relocating or
removing the roof or any existing walls, or changing or interfering with the
fire sprinkler or fire detection systems and the cumulative cost thereof
during the term of this Lease as extended does not exceed $2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent
specific consent shall be deemed conditioned upon: (i) Lessee's acquiring all
applicable permits required by governmental authorities; (ii) the furnishing
of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Lessee
shall promptly upon completion thereof furnish Lessor with as-built plans and
specifications therefor. Lessor may, (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation
that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense, defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises. If
Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorneys' fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter
provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but considered a part of the Premises. Lessor may, at any time and at its
option, elect in writing to Lessee to be the owner of all or any specified
part of the Lessee-Owned Alterations and Utility Installations. Unless
otherwise instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon the
Premises and be surrendered with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor
may require that any or all Lessee-Owned Alterations or Utility Installations
be removed by the expiration or earlier termination of this Lease,
notwithstanding that their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any
Alterations or Utility Installations made without the required consent of
Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the
premises by the end of the last day of the Lease term or any earlier
termination date, clean and free of debris and in good operating order,
condition and state of repair, ordinary wear and tear excepted. Ordinary wear
and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practice or by Lessee performing all of its
obligations under this Lease. Except as otherwise agreed or specified herein,
the Premises, as surrendered, shall include the Alterations and Utility
Installations. The obligation of Lessee shall include the repair of any
damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and
Utility Installations, as well as the removal of any storage tank installed
by or for Lessee, and the removal, replacement, or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be required
by Applicable Requirements and/or good practice. Lessee's Trade Fixtures
shall remain the property of Lessee and shall be removed by Lessee subject to
its obligation to repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease
shall be prorated to coincide with the corresponding Commencement Date or
Expiration Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in
force during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee, Lessor and any Lender(s) whose names have been
provided to Lessee in writing (as additional insureds) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy, or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $1,000,000
per occurrence with an "Additional Insured Managers or Lessors of Premises"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat smoke or fumes from a hostile fire. The
policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "Insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance required
by this Lease or as carried by Lessee shall not, however, limit the liability
of Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain
liability insurance described in Paragraph 8.2(a) above, in addition to and
not in lieu of, the insurance required to be maintained by Lessee. Lessee
shall not be named as an additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and
keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by
any Lender(s), but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cost. Lessee-Owned Alterations and Utility Installations, Trade
Fixtures and Lessee's personal property shall be insured by Lessee pursuant
to Paragraph 8.4. If the coverage is available and commercially appropriate,
Lessor's policy or policies shall insure against all risks of direct physical
loss or damage including, if available at commercially reasonable cost,
perils of flood and/or earthquake, including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for
the enforcement of any enforcement of any building, zoning, safety or land
use laws as the result of a covered loss, but not including plate glass
insurance. Said policy or policies shall also contain an agreed evaluation
provision in lieu of any co-insurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S.
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in
force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and any Lender(s), insuring the loss of
the full rental and other charges payable by all lessees of the Building to
Lessor for one year (including all Real Property taxes, insurance costs, all
Common Area Operating Expenses and any scheduled rental increases). Said
insurance may provide that in the event the Lease is terminated by reason of
an insured loss, the period of indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises,
to provide for one full year's loss of rental revenues from the date of any
such loss. Said insurance shall contain an agreed valuation provision in lieu
of any co-insurance clause, and the amount of coverage shall be adjusted
annually to reflect the projected rental income, Real Property Taxes,
insurance premium costs and other expenses, if any, otherwise payable, for
the next 12-month period. Common Area Operating Expenses shall include any
deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase
in the premiums for the property insurance of the Building and for the Common
Areas or other buildings in the Industrial Center if said increase is caused
by Lessee's acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring
Party, Lessor shall not be required to insure Lessee-Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Trade Fixtures and
Lesser-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall be full replacement cost
coverage with a deductible not to exceed $1,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of
personal property and the restoration of Trade Fixtures and Lessee-Owned
Alterations and Utility Installations. Upon request from Lessor, Lessee shall
provide Lessor with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such rating as may be required by a Lender as
set forth in the most current issue of "Best's Insurance Guide." Lessee shall
not do or permit to be done anything which shall invalidate the insurance
policies referred to in
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this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven
(7) days after the earlier of the Early Possession Date or the Commencement
Date, certified copies of, or certificates evidencing the existence and
amounts of, the insurance required under Paragraphs 8.2(a) and 8.4. No such
policy shall be cancellable or subject to modification except after thirty
(30) days prior written notice to Lessor. Lessee shall at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with evidence
of renewal or "insurance binders" evidencing renewal thereof, or Lessor may
order such insurance and charge the cost hereof to Lessee, which amount shall
be payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall not
be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor's master or ground lessor,
partners, and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgments, penalties, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection with the occupancy of the Premises by Lessee, the
conduct of Lessee's business, any act, omission or neglect of Lessee, its
agents, contractors, employees or invitees and out of any Default or Breach
by Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters Lessee upon notice from Lessor shall define the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or
any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said injury or damage results from
conditions arising upon the Premises or upon other portions of the Building
of which the Premises are a part, from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is accessible or not, Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee of Lessee nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Notwithstanding Lessor's negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than
fifty percent (50%) of the then Replacement Cost (as defined in Paragraph
9.1(d)) of the Premises (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures) immediately prior to such damage or
destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building) of the
Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to
their condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in,
on, or under the Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's
expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the nature of the Improvements in the Premises,
full replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises
unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice
of such shortage and request therefor. If Lessor receives said funds or
adequate assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as possible and this Lease shall remain in full force
and effect. If Lessor does not receive such funds or assurance within said
period, Lessor may nevertheless elect by written notice to Lessee within ten
(10) days thereafter to make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within such ten (10) day period, and if Lessor does not so
elect to restore and repair, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor
for any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect), Lessor may
at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within thirty
(30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60)
days following the date of such notice. In the event Lessor elects to give
such notice of Lessor's intention to terminate this Lease, Lessee shall have
the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of such
damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following such commitment from Lessee. In
such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required by
any authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's damages
from Lessee except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date of
occurrence of such damage. Provided, however, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Premises, then
Lessee may preserve this Lease by (a) exercising such option, and (b)
providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10) days after Lessee's receipt of Lessor's written
notice purporting to terminate this Lease; or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense,
repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
and provide such funds or assurance during such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph
9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Lessee is not legally responsible,
the Base Rent Common Area Operating Expenses and other charges, if any,
payable by Lessee hereunder for the period during which such damage or
condition, its repair remediation or restoration continues, shall be abated
in proportion to the degree to which Lessee's use of the Premises is
impaired, but not in excess of the limits of coverage from insurance required
to be carried under Paragraph 8.3(b). Except for abatement of Base Rent,
Common Area Operating Expenses and other charges, if any, as aforesaid, all
other obligations of Lessee hereunder shall be performed by Lessee, and
Lessee shall have no claim against Lessor for any damage suffered by reason
of any such damage, destruction, repair, remediation or restoration, unless
due to Lessor's gross negligence or willful misconduct.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in
a substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and
effect but subject
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to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense,
in which event this Lease shall continue in full force and effect, or (ii) if
the estimated cost to investigate and remediate such condition exceeds twelve
(12) times the then monthly Base Rent or $100,000, whichever is greater, give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such Hazardous Substance Condition or Lessor's
desire to terminate this Lease, Lessee shall have the right within ten (10)
days after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the excess costs of (a) Investigation and
remediation of such Hazardous Substance Condition to the extent required by
Applicable Requirements, over (b) an amount equal to twelve (12) times the
then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with the funds required of Lessee or satisfactory assurance
thereof within thirty (30) days following said commitment by Lessee. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the time
period specified above, this Lease shall terminate as of the date specified
in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it
is inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in
the calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city,
state or federal government or any school, agricultural, sanitary, fire,
street, drainage, or other improvement district thereof, levied against any
legal or equitable interest of Lessor in the Industrial Center or any portion
thereof, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect, during the term of this Lease, including but not limited to a change
in the ownership of the Industrial Center or in the improvements thereon, the
execution of this Lease, or any modification, amendment or transfer thereof,
and whether or not contemplated by the Parties. In calculating Real Property
Taxes for any calendar year, the Real Property Taxes for any real estate tax
year shall be included in the calculation of Real Property Taxes for such
calendar year based upon the number of days which such calendar year and tax
year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the
Industrial Center by other lessees or by Lessor for the exclusive enjoyment
of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall,
however, pay to Lessor at the time Common Area Operating Expenses are payable
under Paragraph 4.2, the entirety of any increase in Real Property Taxes if
assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable
proportion of the Real Property Taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Lessor from the respective valuations assigned in the assessor's work sheets
or such other information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or stored within the
Industrial Center. When possible, Lessee shall cause its Lessee-owned
Alterations and Utility Installations, Trade Fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from the
real property of Lessor. If any of Lessee's said property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable
to Lessee's property within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon. If any such utilities or services are not separately metered
to the Premises or separately billed to the Premises, Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such charges
jointly metered or billed with other premises in the Building, in the manner
and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
See Rider Para. 12.
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12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein.
(a) Lessee hereby assigns and transfer to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all
or a portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease, provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations under
this Lease to pay to Lessor the rents and other charges due and to become due
under the sublease. Sublessee shall rely upon any such statement and request
from Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary, Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor for any such rents and other charges so paid by
said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance
of its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the
sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said default. A "Default" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "Breach" by Lessee is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after
notice is specified herein, the failure by Lessee to cure such Default prior
to the expiration of the applicable grace period, and shall entitle Lessor to
pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease,
the failure by Lessee to make any payment of Base Rent, Lessee's Share of
Common Area Operating Expenses, or any other monetary payment required to be
made by Lessee hereunder as and when due, the failure by Lessee to provide
Lessor with reasonable evidence of insurance or surety bond required under
this Lease, or the failure of Lessee to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure
continues for a period of three (3) days following written notice thereof by
or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease,
the failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (vii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this lease, where any
such failure continues for a period of ten (10) days following written notice
by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under
Paragraph 40 hereof that are to be observed, complied with or performed by
Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c),
above, where such Default continues for a period of thirty (30) days after
written notice thereof by or on behalf of Lessor to Lessee; provided,
however, that if the nature of Lessee's Default is such that more than thirty
(30) days are reasonably required for its cure, then it shall not be deemed
to be a Breach of this Lease by Lessee if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
Subparagraph 13.1(e) is contrary to any applicable law, such provision shall
be of no force or effect, and shall not affect the validity of the remaining
provisions.
(f) The discovery by Lessor that any financial statement
of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor,
was materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurances of security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its own option, may require all future payments to be made under
this Lease by Lessee to be made only by cashier's check. In the event of a
Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or
without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach, Lessor
may:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event, Lessor shall be entitled to recover from Lessee:
(i) the worth at the time of the award of the unpaid rent which had been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
that the Lessee proves could have been reasonably avoided; (iii) the worth at
the time of award of the amount of which the unpaid rent for the balance of
the term after the time of award exceeds the amount of such rental loss that
the Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank District in which
the Premises are located at the time of award plus one percent (1%). Efforts
by Lessor to mitigate damages caused by Lessee's Default or Breach of this
Lease shall not waive Lessor's right to recover damages under this Paragraph
13.2. If termination of this Lease is obtained through the provisional remedy
of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor
may reserve the right to recover all or any part thereof in a separate suit
for such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay
rent or quit, or to perform or quit, as the case may be, given to Lessee
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable
grace period under the unlawful detainer statue shall run concurrently after
the one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after
Lessee's Breach and recover the rent as it becomes due, provided Lessee has
the right to sublet or assign, subject only to reasonable limitations, Lessor
and Lessee agree that the limitations on assignment and subletting in this
Lease are reasonable. Acts of maintenance or preservation, efforts to relet
the Premises or the appointment of a receiver to protect the Lessor's
interest under this Lease, shall not constitute a termination of the Lessee's
right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
the located.
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(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease, all
of which concessions are hereinafter referred to as "Inducement Provisions"
shall be deemed conditions under Lessee's full and faithful performance of
all of the terms covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor, as additional rent
due under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph 13.3 shall not be deemed a waiver
by Lessor of the provisions of this Paragraph 13.3 unless specifically so
stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
days after such amount shall be due, then without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder where or not collected for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt
by Lessor and by any Lender(s) whose name and address shall have been
furnished to Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor's obligation is such that more than thirty (30)
days after such notice are reasonably required for its performance, then
Lessor shall not be in breach of this Lease if performance is commenced
within such thirty (30) day period and thereafter diligently pursued to
completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession whichever first occurs. If more than the ten
percent (10%) of the floor area of the Premises, or more than twenty-five
percent (25%) of the portion of the Common Areas designated for Lessee's
parking, is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing within ten (10) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced
in the same proportion as the rentable floor area of the Premises taken bears
to the total rentable floor area of the Premises. No reduction of Base Rent
shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under
the power of eminent domain or any payment made under threat of the exercise
of such power shall be the property of Lessor, whether such award shall be
made as compensation for diminution of value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee for
Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the
event that that this Lease is not terminated by reason of such condemnation,
Lessor shall be to the extent of its net severance damages received, over and
above Lessee's Share of the legal and other expenses incurred by Lessor in
the condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such
repair.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises or
other premises in which Lessor has an interest, or (c) if Lessee remains in
possession of the Premises with the consent of Lessor after the expiration of
the term of this Lease after having failed to exercise an Option, or (d) if
said Brokers are the procuring cause of any other lease or sale entered into
between the Parties pertaining to the Premises and/or any adjacent property
in which Lessor has an interest, or (e) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then as to any of said
transactions, Lessor shall pay said Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of the execution of this
Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation
of law, shall be deemed to have assumed Lessor's obligation under this
Paragraph 15. Each Broker shall be an intended third party beneficiary of the
provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any
person, firm broker or finder other than as named in Paragraph 1.10(a) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction, Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings
or actions of the indemnifying Party, including any costs, expenses, and/or
attorneys' fees reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each party (as "Responding Party") shall
within ten (10) days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party
a statement in writing in a form similar to the then most current "Tenancy
Statement" form published by the American Industrial Real Estate Association,
plus such additional information, confirmation and/or statements as may be
reasonably requested by the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease. Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10)
days following the date on which it was due, shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in the
state in which the Premises are located plus four percent (4%) per annum, but
not exceeding the maximum rate allowed by law, in addition to the potential
late charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this
Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. Each Broker shall be an intended
third party beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or
registered mail or U.S. Postal Service Express Mail, with postage prepaid, or
by facsimile transmission during normal business hours, and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mail of notice purposes. Either Party may be
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises
shall constitute Lessee's address for the purpose of mailing or delivering
notices to Lessee. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties
at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail, the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail
or overnight courier that guarantees next day
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delivery shall be deemed given twenty-four (24) hours after delivery of the
same to the United States Postal Services or courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall be
deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to
enforce the provision or provisions of this Lease requiring such consent.
Regardless of Lessor's knowledge of a Default or Breach at the time of
accepting rent, the acceptance of rent by Lessor shall not be a waiver of any
Default or Breach by Lessee of any provision hereof. Any payment given Lessor
by Lessee may be accepted by Lessor on account of moneys or damages due
Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing
by Lessor at or before the time of deposit of such payment.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this
Paragraph 26 then the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be increased to two
hundred percent (200%) without the written consent of Lessor of the Base Rent
applicable during the month immediately preceding such expiration or earlier
termination. Nothing contained herein shall be construed as a consent by
Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, whenever possible, be cumulative with all other remedies
of law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust or
other hypothecation or security device (collectively, "Security Device"), now
or hereafter placed by Lessor upon the real property of which the Premises
are a part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor's default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for such purpose notice of Lessor's default
pursuant to Paragraph 13.5. If any Lender shall elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security Device
and shall give written notice thereof to Lessee, this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative
dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any
options to extend the term hereof, will not be disturbed so long as Lessee is
not in Breach hereof and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with
a sale, financing or refinancing of Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document
any such subordination or non-subordination, attornment and/or
non-disturbance agreement as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorneys' fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by
compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection with
such Default of resulting Breach. Broker(s) shall be intended third party
beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
Building, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or Building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs.
All such activities of Lessor shall be without abatement of rent or liability
to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent
install (but not on the roof) such signs as are reasonably required to
advertise Lessee's own business so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements and the signage
criteria established for the Industrial Center by Lessor. The installation of
any sign on the Premises by or for Lessee shall be subject to the provisions
of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade Fixtures
and Alterations). Unless otherwise expressly agreed herein, Lessor reserves
all rights to the use of the roof of the Building, and the right to install
advertising signs on the Building, including the roof, which do not
unreasonably interfere with the conduct of Lessee's business; Lessor shall be
entitled to all revenues from such advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate
in the Premises; provided, however, Lessor shall, in the event of any such
surrender, termination or cancellation, have the option to continue any one
or all of any existing subtenancies. Lessor's failure within ten (10) days
following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Lessor's election to have such event constitute the termination of such
interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as
otherwise provided herein, wherever in this Lease the consent of a Party is
required to an act by or for the other Party, such consent shall not be
unreasonably withheld or delayed. Lessor's actual reasonable costs and
expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response
to, a request by Lessee for any Lessor consent pertaining to this Lease or
the Premises, including but not limited to consents to an assignment a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment of this Lease or subletting
of the Premises by Lessee shall not constitute an acknowledgement that no
Default or Breach of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
impositions by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter for
which consent is being given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this
Lease per Paragraph 1.11, the form of the guaranty to be executed by each
such Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the
same obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a
Default of the Lessee under this Lease if any such Guarantor fails or refuses
upon reasonable request by Lessor to give: (a) evidence of the due execution
of the guaranty called for by this Lease, including the authority of the
Guarantor (and of the party signing on Guarantor's behalf) to obligate such
Guarantor on said guaranty, and resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to
all of the provisions of this Lease.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-9-
<PAGE>
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants
or tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide
same. Lessee assumes all responsibility for the protection of the Premises,
Lessee, its agents and invitees and their property from the acts of third
parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum of any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
after request by Lessor, deliver to Lessor evidence satisfactory to Lessor of
such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not
be deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-10-
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR
YOUR ATTORNEYS REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE
POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR
HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at: Redwood City, California Executed at: Menlo Park, California
----------------------------------------- --------------------------------
on: on: 9/24/99
-------------------------------------------------- -----------------------------------------
By LESSOR: By LESSEE:
Luigi Zanette and Miranda Zanette, Homestead Technologies, Inc.,
- ----------------------------------------------------- --------------------------------------------
Trustees of the Zanette Family Trust U/A a Delaware Corporation
- ----------------------------------------------------- --------------------------------------------
dated October 2, 1993
By: /s/ Luigi Zanette By: /s/ Justin S. Kitch
-------------------------------------------------- -----------------------------------------
Name Printed: Luigi Zanette Name Printed: Justin S. Kitch
---------------------------------------- -------------------------------
Title: Title: President & CEO
----------------------------------------------- --------------------------------------
By: /s/ Miranda Zanette By: /s/ Joe H. Davila
-------------------------------------------------- -----------------------------------------
Name Printed: Miranda Zanette Name Printed: Joe H. Davila
---------------------------------------- -------------------------------
Title: Title: VP of Finance and Administration
----------------------------------------------- --------------------------------------
Address: 709 Melissa St. Address: 3475 Edison Way, Suite H
--------------------------------------------- ------------------------------------
San Mateo, Ca 94402 Menlo Park, Ca 94025
- ----------------------------------------------------- --------------------------------------------
Telephone: (650) 345-8766 Telephone: (650) 549-3100
------------------------------------------- ----------------------------------
Facsimile: (650) 593-0123 Facsimile: (650) 364-7329
------------------------------------------- ----------------------------------
BROKER: BROKER:
Executed At: Redwood City, California Executed At:
----------------------------------------- --------------------------------
On: 10/21/99 On:
-------------------------------------------------- -----------------------------------------
By: /s/ Soroush Kaboli By:
-------------------------------------------------- -----------------------------------------
Name Printed: Soroush Kaboli Name Printed:
---------------------------------------- -------------------------------
Title: Licensed Real Estate Broker Title:
----------------------------------------------- --------------------------------------
Address: 2042 Barbara Drive Address:
--------------------------------------------- ------------------------------------
Palo Alto, Ca 94303
- ----------------------------------------------------- --------------------------------------------
Telephone: (650) 325-7891 Telephone: ( )
------------------------------------------- ---------------------------------
Facsimile: (650) 325-7891 Facsimile: ( )
------------------------------------------- ----------------------------------
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law
and needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION,
345 So. Figueroa St., M-1, Los Angeles, CA 90071 (213) 687-8777.
Initials: /s/ [ILLEGIBLE]
---------------
/s/ [ILLEGIBLE]
---------------
-11-
<PAGE>
RIDER TO A.I.R.E.A. STANDARD INDUSTRIAL LEASE -- MULTI-TENANT (MODIFIED NET
- -1993) DATED, FOR REFERENCE PURPOSES SEPTEMBER 20, 1999 BY AND BETWEEN LUIGI
ZANETTE AND MIRANDA ZANETTE, TRUSTEES OF THE ZANETTE FAMILY TRUST U/A DATED
OCTOBER 2, 1993 ("LESSOR"), AND HOMESTEAD TECHNOLOGIES ("LESSEE").
This Rider is attached to and made a part of the above-referenced typeset
lease (the "Lease"). In the event of any conflict between the typeset portion
of the Lease and this Rider, the terms and provisions of this Rider shall
govern. If any addenda or amendments are also attached to the typeset portion
of the Lease, this Rider shall govern to the extent of any conflict between
the terms and provisions of this Rider and such addenda or amendments. All
references in the following paragraphs are to corresponding paragraphs of the
typeset portion of the Lease, except as otherwise expressly provided herein.
INSERT 1.2(a): PREMISES.
Lessor agrees that it will construct the Building in accordance with
the approved plans. Upon completion of the Building, either party shall have
the right, to be exercised within the first 30 days of the term, to cause the
rentable square feet of the Building to be measured by a certified architect
in accordance with Lessor's architect's methodology. In the event that the
measurement shows that the actual rentable square feet (calculated by
reference to the approved plans) is more or less than the 18,130 as
represented by Lessor, then Base Rent shall be adjusted proportionately. If
neither party exercises it right to measure the Building as set forth herein,
then the rentable square feet of the Building shall be deemed to be 18,130.
INSERT 1.2(b): PARKING.
Lessee's use of such parking shall be at no cost to Lessee during
the term of this Lease or any extensions thereof.
PAR 2.2: CONDITION.
Notwithstanding anything to the contrary in Paragraph 2.2, should a
non-compliance with this warranty be of a latent nature, the time limitation
for delivery of notice shall be extended to nine (9) months, and Lessor shall
rectify such non-compliance, at Lessor's sole cost and expense, promptly
after receipt of written notice thereof.
PAR 2.3: COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODES.
If necessary to protect or preserve the rights of Lessee, Lessor
shall assign to Lessee the benefit of construction warranties respecting the
Building or the Premises.
PAR. 2.10: COMMON AREAS - CHANGES.
Notwithstanding the provisions of Paragraph 2.10, Landlord may
expand the Common Areas by the acquisition of adjacent land for purposes of
providing additional parking and landscaping for the benefit of the Premises.
In the event Landlord so expands the Common Area and such expansion is for
the benefit of other properties or tenants, then Lessee shall be required to
pay only its proportionate share of the costs of such expanded Common Area.
Lessor's rights pursuant to this Paragraph 2.10 shall be subject to the
condition that exercise of any of such rights shall not unreasonably
interfere with Lessee's use of the Premises, substantially change the size,
shape or location of the Common Areas as outlined on the attached Exhibit A
except as allowed in the previous sentence or decrease the number of parking
places allocated to Lessee pursuant to Paragraph 1.2(b).
PAR. 3.3: DELAY IN POSSESSION.
Notwithstanding anything to the contrary contained herein, if the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, and Lessee does not elect to terminate within the ten (10)
day period after such period, if a subsequent event occurs which further
delays the Commencement Date, fifteen (15) days after giving additional
notice to Lessor, Lessee shall be entitled to terminate this Lease. Such
election must be made by notice given to Lessor in writing within the twenty
(20) day period following the expiration of such fifteen (15) day notice
period.
1.
<PAGE>
PAR. 4.2(a): COMMON AREA OPERATING EXPENSES.
Notwithstanding anything to the contrary contained in this Lease,
the following shall not be included within Common Area Operating Expenses:
Any depreciation on the Building or Property.
Costs of a capital nature involving replacement of the
roof, foundation, structural members, load-bearing walls, or building
systems; provided, however, that Lessee shall be responsible for replacement
of the HVAC system serving the Premises, if required during the first ten
(10) years of the Lease term. If replacement of the HVAC system is required
thereafter, the cost thereof shall be borne by Landlord, and Landlord shall
be entitled to include in Common Area Operating Expenses annually an amount
equal to one year's amortized cost of such replacement HVAC, amortized over
an anticipated ten year useful life. Such amortization shall be at ten
percent (10%).
Costs incurred due to Lessor's violation of any terms or
conditions of this Lease.
Overhead profit increments paid to Lessor's subsidiaries or
affiliates for management or other services on or to the building or for
supplies or other materials to the extent that the cost of the services,
supplies, or materials exceeds the cost that would have been paid had the
services, supplies, or materials been provided by unaffiliated parties on a
competitive basis.
All interest, loan fees, and other carrying costs related
to any mortgage or deed of trust or related to any capital item, and all
rental and other payable due under any ground or underlying lease, or any
lease for any equipment ordinarily considered to be of a capital nature
(except janitorial equipment which is not affixed to the Building.)
Costs of repairs and other work occasioned by fire,
windstorm, or other casualty of an insurable nature (but not including
deductibles paid by Landlord for insured losses). In no event, however, shall
Common Area Operating Costs include the amount of any deductibles paid with
respect to any loss covered by earthquake coverage, where such deductible
exceeds twenty-five thousand dollars.
Any costs, fines, or penalties incurred due to violations
by Lessor of any governmental rule or authority, this Lease or any other
lease in the Property, or due to Lessor's negligence or willful misconduct.
Management costs to the extent they exceed 5% of Annual
Rent.
The cost of correcting any building code or other
violations which were violations prior to the Commencement Date.
The cost of containing, removing, or otherwise remediating
any contamination of the Property (including the underlying land and ground
water) by any toxic or hazardous materials (including, without limitation,
asbestos and "PCB's") where such contamination was not caused by Lessee or
any of its agents, employees, contractors or invitees.
PARAGRAPH 4.2(d): COMMON AREA OPERATING EXPENSES.
Lessor shall keep complete and accurate records in accordance with good
bookkeeping and accounting practices regarding all Common Area Operating
Expenses. Lessee shall have the right to audit, at its sole cost and expense,
such records for each calendar year during the term of this Lease by
notifying Lessor within 120 days following the end of each such calendar year
and/or 120 days after Lessor has furnished Lessee a statement of such actual
expenses. If an audit (performed by a certified public accountant on behalf
of Lessee) reveals that Lessor has overcharged Lessee for common Area
Operating Expenses, Lessee shall so inform Lessor. If Lessee and Lessor do
not agree on such overcharge, then Lessee and Lessor agree to arbitrate the
amount (if any) of such overcharge and if Lessor is found to have overcharged
Lessee, Lessor shall refund the amount overcharged within ten days after such
determination has been made.
PARAGRAPH 6.2(d): LESSOR'S INDEMNITY. Paragraph 6.2(d) is hereby added, which
shall read in its entirety as follows:
2.
<PAGE>
Lessor warrants to Lessee that on the commencement of the term
hereof, to its actual knowledge, the Premises are free from contamination by
any preexisting Hazardous Substances (and for purposes of this Paragraph
6.2(d), the Premises shall be deemed to include the underlying soil and
ground water). Lessee shall in no event be responsible for any Hazardous
Substances which were preexisting or preexisting conditions on the Premises.
The provisions of this paragraph shall survive the termination of this Lease.
PAR. 7.2: LESSOR'S OBLIGATIONS.
Notwithstanding the provisions of Paragraph 7.2, if Lessor fails to
timely and reasonably perform its maintenance and repair obligations
hereunder, and, as a consequence, Lessee's use of the Premises is
substantially impaired, Lessee shall have the right to cause such repair or
maintenance to be performed at Lessor's expense and to deduct the costs
thereof, together with interest thereon at the highest rate permitted by law,
from the rent payable to Lessor.
PAR. 7.3(a): DEFINITIONS; CONSENT REQUIRED.
Notwithstanding the provisions of 7.3, Lessee shall be entitled to
make Alterations and Utility Installations in, on, under or about the
Premises, without the prior consent of Lessor, so long as the cost of each
such Alteration or Utility Installation (i) does not exceed the sum of
$15,000 (or the aggregate cost of such Alteration or Utility Installation
during any given one year period does not exceed $50,000), (ii) does not
effect any structural or exterior portions of the Building or adversely
effect the Building electrical, plumbing or HVAC systems, or (iii) does not
involve the removal or relocation of any walls. Lessee shall, however,
provide Lessor with fifteen (15) days prior advance written notice to enable
Lessor to post any desired notices of non-responsibility.
PAR. 7.4: OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION. Notwithstanding any
provision in this Lease to the contrary:
(a) Lessee shall not be required to remove (i) any improvements and
fixtures installed by Lessee in, on or about the Premises pursuant to
Lessee's repair obligation under this Lease, (ii) any of the initial Tenant
Improvements pursuant to Paragraph 50(A) hereof, or (iii) any Alterations or
Utility Installations for which Lessee has obtained Lessor's consent, unless
Lessor has indicated, at the time of granting such consent, that such removal
will be required.
(b) In addition to its personal property, equipment, and Trade
Fixtures, Lessee shall be entitled to remove any Lessee Owned Alterations and
Utility Installations (but not, in any case, any electrical or communications
cabling and any items agreed in advance by Lessor and Lessee to remain on the
Premises) at the expiration of the term, provided Lessee repairs all damage
caused by such removal.
PAR. 8.2(a) INSURANCE.
Following the seventh year of the term, Lessor shall have the right
to require the amount of insurance coverage required to be carried by Lessee
hereunder to be adjusted to what is then a commercially reasonable and
customary amount.
PAR. 9: DAMAGE OR DESTRUCTION.
Notwithstanding anything to the contrary in Paragraph 9, if Lessee's
use of the Premises is substantially impaired for a period of more than 240
days after the date of casualty, Lessee shall have the right to terminate
this Lease by written notice to Lessor at any time thereafter until Lessee's
use of the Premises is substantially restored.
PAR. 10: REAL PROPERTY TAXES. Notwithstanding anything to the contrary in
Paragraph 10:
All amounts paid by Lessee to Lessor in advance payment of any
year's Tax Increase in excess of taxes actually owed shall be paid by Lessor
to Lessee within five (5) days of reconciliation of such amounts by Lessor.
3.
<PAGE>
PAR. 12: ASSIGNMENT AND SUBLETTING.
Lessee shall not sublet all or any portion of the Premises without
Lessor's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned, subject to the terms of this Paragraph 12
and Paragraph 36.
In the event Lessee desires to sublet all or any portion of the
Premises, Lessee shall so notify Lessor, specifying the portion of the
Premises proposed to be sublet, the terms of the proposed sublease and the
proposed subtenant. Lessee shall also provide Lessor with such other
information concerning the sublease, including the proposed use of the
Premises by such subtenant and the subtenant's financial status, as Lessor
may reasonably request. Upon receipt of such notice and information and upon
Lessee's request for consent to the sublease, Lessor shall have fifteen (15)
days to either consent to the proposed sublease or to terminate this Lease as
to the portion of the Premises proposed to be sublet (including the entire
Premises, if Lessee proposes to sublease the entire Premises). In the event
Lessor elects to so terminate this Lease as to a portion of the Premises,
Lessee shall be responsible for any costs of demising the portion of the
Premises as to which the Lease is terminating. In the event Lessor elects to
approve the proposed sublease, Lessor and Lessee shall share any Bonus Rent
received by Lessee pursuant to such sublease in the proportion of 70% for
Lessor and 30% for Lessee. For purposes of this Paragraph, "Bonus Rent" shall
mean the amount (if any) by which all consideration received by Lessee for
the sublease of the Premises exceeds the Rent payable hereunder, after first
deducting costs and fees paid by Lessee to sublease the Premises (but not the
costs to install Lessee's tenant improvements).
Lessee may assign this Lease, or any portion thereof, without
Lessor's consent, by operation of law or otherwise, including to any entity
which controls, is controlled by, or is under common control with Lessee; to
any entity which results from a merger of, reorganization of, or
consolidation with Lessee; to any entity engaged in a joint venture with
Lessee; or to any entity which acquires substantially all of the stock or
assets of Lessee, as a going concern, with respect to the business that is
being conducted in the Premises (collectively, a "Permitted Transfer").
Lessee agrees to provide written notice to Lessor of any Permitted Transfer.
PAR. 13.2: REMEDIES.
Notwithstanding any other provisions of this Lease to the contrary,
Lessor's entry into the Premises for any purpose allowed by this Lease shall
be subject to Lessee's reasonable security requirements, including the
providing of reasonable notice, except in the event of emergency, in which
case, entry shall be allowed without prior notice or restriction.
PAR. 16.2 FINANCIAL STATEMENTS.
Notwithstanding the foregoing, Lessee's obligations upon Lessor's
request, are limited to delivery of its currently existing financial
statements. In addition, Lessee agrees to provide Lessor with quarterly
unaudited financial statements and annual audited financial statements.
PAR. 25 RECORDING.
Neither party shall record this Lease or a memorandum of lease with
the County Reorder.
PAR. 32: LESSOR'S ACCESS.
Notwithstanding the provisions of Paragraph 32, Lessor shall provide
Lessee with at least 24 hours' prior actual notice before entering the
Premises. In the event of an emergency, the determination of which shall
require Lessor to be reasonable, Lessor shall use its best efforts to provide
Lessee with notice reasonable in such situation. In the event of any entry by
Lessor onto the Premises, Lessor shall use its best efforts not to interfere
with the conduct of Lessee's business.
PAR. 54: ADDITIONAL SECURITY.
The Escrow shall be in an interest bearing account with interest to
accrue for the benefit of Lessee and shall be paid out to Lessee quarterly.
Notwithstanding the foregoing, in the event Lessee is in default of its
obligations hereunder (after any applicable cure periods), such interest
shall be retained in the Escrow thereafter.
4.
<PAGE>
PAR. 55: LESSOR'S WARRANTY. Paragraph 55 is hereby added, reading in its
entirety as follows:
Lessor hereby warrants that it is the fee owner of the Premises,
that it has authority to enter into this Lease.
PAR. 56: LESSOR'S LIEN. Paragraph 56 is hereby added, reading in its entirety
as follows:
Notwithstanding anything herein to the contrary, Lessor waives any
and all rights, title and interest Lessor now has, or hereafter may have,
whether statutory or otherwise, to Lessee's inventory, equipment,
furnishings, trade fixtures, books and records, personal property, and tenant
improvements paid for by Lessee located at the Premises (singly and/or
collectively, the "Collateral"). Lessor acknowledges that Lessor has no lien,
right, claim, interest or title in or to the Collateral. Lessor further
agrees that Lessee have the right, at its discretion, to mortgage, pledge,
hypothecate or grant a security interest in the Collateral as security for
its obligations under any equipment lease or other financing arrangement
related to the conduct of Lessee's business at the Premises. Lessor further
agrees to execute and deliver within three (3) business days any UCC filing
statement or other documentation required to be executed by Lessor in
connection with any such lease or financing arrangement, and any real estate
consent or waiver forms submitted by any vendors, equipment lessors, chattel
mortgagees, or holders or owners of the Collateral setting forth, inter alia
that Lessor waives, in favor of such party any superior lien, claim, interest
or other right therein.
The Collateral shall not become the property of Lessor or a part of the
realty no matter how affixed to the Premises and may be removed by Lessee or
any Equipment Lessors at any time and from time to time during the entire
term of this Lease. Lessee shall promptly repair any damage caused by the
removal of such property, whether effected by Lessee or Equipment Lessors.
PAR. 57: ESTOPPEL CERTIFICATES.
Each party shall, within ten (10) business days of receiving a
request from the other party, execute, acknowledge in recordable form, and
deliver to the other party or its designee a certificate stating, subject to
a specific statement of any applicable exceptions, that the Lease as amended
to date is in full force and effect, that the Lessee is paying Rent and other
charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has
no offsets or claims. The certifying party may also be required to state the
date of commencement of payment of Rent, the Commencement Date, the
Termination Date, the Base Rent, the current Common Area Operating Expense
estimates, the status of any improvements required to be completed by Lessor,
the amount of any security deposit, and such other matters as may be
reasonably requested.
<TABLE>
<S> <C>
LESSOR: LESSEE:
LUIGI ZANETTE AND MARANDA ZANETTE, HOMESTEAD TECHNOLOGIES INC.
TRUSTEES OF THE ZANETTE FAMILY TRUST CORPORATION
U/A DATED OCTOBER 2, 1993
/s/ Luigi Zanette By: /s/ Justin Shelby Kitch
- --------------------------------------------- ---------------------------------------------
Luigi Zanette, Trustee
Title:
-------------------------------------------
/s/ Miranda Zanette Date: 9/24/99
- --------------------------------------------- --------------------------------------------
Miranda Zanette, Trustee
Date: 10-21-99 By: Joe H. Davila
- --------------------------------------------- --------------------------------------------
Title: V.P. Finance and Administration
-------------------------------------------
Date: 9/24/99
--------------------------------------------
</TABLE>
5.
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET
- --------------------------------------------------------------------------------
This Addendum is made a part of the Standard Industrial/Commercial
Multi-Tenant Lease - Modified Net ("Lease") dated as of September 20, 1999,
by and between Luigi Zanette and Miranda Zanette, Trustees of the Zanette
Family Trust U/A dated October 2, 1993, as Lessor, and Homestead
Technologies, Inc., a Delaware Corporation, as Lessee, for the premises
commonly known as 3469 Edison Way, Menlo Park, CA. If any conflicts exist
between the Lease and this Addendum, the terms of this Addendum shall govern.
49. TENANT IMPROVEMENT ALLOWANCE:
Lessor at its sole cost shall improve the premises per attached plans and
construction drawings. Said improvements shall include $50,000.00 allowance
for Voice and Data Cabling. In addition, if requested by Lessee on or before
November 1, 1999, Lessor shall provide up to $25,000.00 additional allowance
towards Data Cabling. It is agreed and understood that the Monthly Rent shall
increase $10.40 for every $1,000.00 of the additional allowance that is used
at the request of Lessee.
50. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT:
Lessee shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the premises or to
any other portion of the property and/or building of which the premises are a
part, required or reasonably necessary because of: (1) the use to which the
Premises or any portion thereof is put; (2) the use by a subtenant by reason
of assignment or sublease; or (3) both, including any improvements,
alterations or other work required under the Americans With Disabilities Act
of 1990. Compliance with the provisions of this Paragraph shall be a
condition of Lessor granting its consent to any assignment or lease of all or
a portion of this Lease and the Premises described in this Lease.
Broker makes no representation or warranty with respect to compliance or
noncompliance of the facility or any contemplated use with ADA requirements.
We recommend that you consult your attorney to determine if this act applies
to you and if so the requirements that must be met. The applicability of the
Act is a legal issue and we cannot give you legal advice on such matters.
51. TOXIC CONTAMINATION DISCLOSURE:
Lessor and Lessee acknowledge that they have been advised that numerous
federal, state, and/or local laws, ordinances and regulations (hereinafter
referred to as the "Laws") affect the existence and removal, storage,
disposal, leakage of and contamination by materials designated as hazardous
or toxic (hereinafter referred to as the "Toxics"). Many materials, some
utilized in everyday business activities and property maintenance, are
designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by landowners,
future landowners or former landowners without regard to whether the party
required to pay for "clean up" caused the contamination, owned the property
at the time the contamination occurred or even knew about the contamination.
Some items, such as asbestos or PCBs, which were legal when installed, now
are classified as Toxics, and are subject to removal requirements. Civil
lawsuits for damages resulting from Toxics may be filed by third parties in
certain circumstances.
Broker has recommended, and hereby recommends, that each of the parties have
competent professional environmental specialists review the Property and make
recommended test so that a reasonably informed assessment of these matters
can be made by each of the parties. Lessor and Lessee acknowledge that
neither Broker nor its agents or salespersons, have been retained to
investigate or arrange investigation by others, and have not made any
recommendations or representations with regard to the presence or absence of
Toxics on, in or beneath the Property. Lessor and Lessee agree that they will
rely only on persons who are experts in this field and will obtain such
expert advice so each of them will be as fully informed as possible with
regards to Toxics in entering into this Agreement.
52. ANNUAL COST OF LIVING RENTAL ADJUSTMENTS:
The minimum monthly rent provided for in Rent and Base Rent Paragraphs of the
lease agreement shall be subject to adjustment at the commencement of the
second year of the term and each year thereafter (hereinafter referred to as
the "Adjustment Date") as follows:
The base for computing the adjustment is the Consumer Price Index for: All
Urban Consumers/Urban Wage Earners and Clerical Workers (base year 1967 =
100) for San Francisco/Oakland published by the United States Department of
Labor, Bureau of Labor Statistics (hereinafter referred to as the "Index"),
which is in effect on the date of the commencement of the term (hereinafter
referred to as the "Beginning Index"). The Index published most immediately
preceding the Adjustment Date in question (hereinafter referred to as the
"Extension Index") is to be used in determining the amount of the adjustment.
If the Extension Index has increased over the Beginning Index, the minimum
monthly rent for the following year shall be set by multiplying the minimum
monthly rent set forth in Rent Paragraphs by a fraction, the numerator of
which is the Extension Index and the denominator of which is the Beginning
Index.
In no event shall such rent increases be less than 4% of the rent in effect
for the preceding 12 month period nor more than 8% of said period's rent.
1.
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET
- --------------------------------------------------------------------------------
On adjustment of the minimum monthly rent as provided in this Lease, the
parties shall immediately execute an amendment to this Lease stating the new
minimum monthly rent.
If the Index is changed so that the Base Year differs from that in effect
when the term commences, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is discontinued or revised during the term,
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the Index had not been discontinued or revised.
53. ADDITIONAL SECURITY:
As additional security for Lessee's performance under the Lease, concurrently
with the execution hereof Tenant shall establish an interest bearing escrow
account ("Escrow") with a federally insured bank or savings and loan
association ("Bank"), held jointly in the name of Lessor and Tenant in the
amount of Four Hundred Fifty Thousand Dollars ($450,000.00) on the following
terms and conditions:
53.1 RIGHT TO DRAW UPON ESCROW PROCEEDS. Lessor may (but shall not
be required to) draw from the Escrow from time to time, in singular or
partial draws upon Lessor's election in any such amount as may be necessary
to cure the then-existing default, up to the full amount thereof, and use the
proceeds therefrom (the "Escrow Proceeds") or any portion thereof to (i) cure
or remedy any Default of Tenant under this Lease; (ii) repair damage to the
Premises caused by Tenant; (iii) clean the Premises upon termination of this
Lease, (iv) reimburse Lessor for the payment of any amount which Lessor may
spend or be required to spend by reason of Lessee's Default, or (v)
compensate Lessor for any other loss or damage which Lessor may suffer by
reason of Lessee's Default, including without limitation all costs reasonably
incurred by Lessor in releasing the Premises; it being understood that any
use of the Escrow Proceeds shall not constitute a bar or defense to any of
Lessor's remedies set forth in this Lease. In such event and upon written
notice from Lessor to Tenant specifying the amount of the Escrow Proceeds so
utilized by Lessor, Tenant shall immediately restore the Escrow to the full
original amount required under this section. Lessee's failure to restore the
Escrow within ten (10) business days of Lessor's notice shall constitute a
Default hereunder.
53.2 ESCROW INSTRUCTIONS. The instructions to the Bank ("Escrow
Instructions") shall provide (i) that Lessor may make partial and multiple
draws thereunder in any such amount as may be necessary to cure the
then-existing default, up to the full amount thereof, (ii) that Lessor may
draw upon the Escrow up to the full amount thereof, and the Bank will pay to
Lessor the amount of such draw upon receipt by the Bank of a sight draft
signed by Lessor, accompanied by a written certificate from Lessor that
Tenant is in Default under the Lease and that Tenant has failed to cure such
Default within fifteen (15) days after receipt by Tenant of Notice of Default
and that Lessor is otherwise entitled to draw upon the Escrow, and (iii)
that, in the event of Lessor's assignment or other transfer of its interest
in this Lease, the Escrow shall be freely assignable by and without recourse
to Lessor, to the assignee or transferee of such interest and the Bank will
confirm the same to Lessor and such assignee or transferee. The Escrow
Instructions shall also provide that the Escrow may not be released to Lessee
without the written consent of Lessor; but it shall be subject, however, to
release and/or reduction as set forth in Section 54.3 below. The Escrow
Instructions shall further provide that it will comply with instructions for
release an reduction of the Escrow only from the Lessor.
53.3 RELEASE, REDUCTION, AND RESTORATION: The funds held in Escrow
shall be subject to release to Lessee and/or reduction as follows:
a) RELEASE. Within ten (10) days of the date that Lessee provides a
certified statement to Lessor that it has received new capital in the
minimum amount of Fifty Million and no/100 ($50,000,000.00) Dollars
through an Initial Public Offering, Lessor shall execute written
instructions to Bank releasing the Escrow in its entirety to Lessee.
This right to release is in addition to, and not in lieu of, the right
of reduction set forth below.
b) REDUCTION. Commencing on the third (3rd) anniversary of the
Commencement Date, provided that Lessee is not and has not at any time
been in Default beyond any applicable cure periods (except for monetary
defaults), and annually on each anniversary thereafter so long as there
is no occurrence of default, the amount of the Escrow shall be reduced
by One Hundred Thousand and no/100 ($100,000.00) Dollars. Within five
(5) days of each applicable anniversary, Lessor shall execute written
instructions to Bank releasing the aforesaid sum to Lessee.
c) RESTORATION. Lessee shall provide quarterly financial reports to
Lessor throughout the Term of the Lease. In the event that proceeds in
the Escrow have previously been released pursuant to Section 54.3(b)
above, and thereafter Lessee's Cash and Cash Equivalent Assets (as
hereinafter defined) drop below Twenty Million and no/100
($20,000,000.00) Dollars, Lessee shall restore the Escrow to the
original amount. If Lessee defaults in any provision of the Lease
beyond any applicable cure periods (except for monetary defaults),
regardless of whether such default is subsequently cured, Lessee shall
restore the Escrow Account to its original amount and it shall remain
at that amount for the term of the Lease including all options and
periods of occupancy.
2.
<PAGE>
- --------------------------------------------------------------------------------
A D D E N D U M TO
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET
- --------------------------------------------------------------------------------
d) CASH AND CASH EQUIVALENT ASSETS. "Cash and Cash Equivalent Assets"
shall mean the aggregate amount of the following, to the extent owned
by Lessee free and clear of all loans, ninety day payables, and
encumbrances (and excluding any Security Deposit or Escrow hereunder):
(i) cash on hand; (ii) dollar demand deposits maintained in the United
States with, or certificates of deposit having a maturity of 150 days
or less issued by, any commercial bank or other financial institution
acceptable to the Lessor; (iii) direct obligations of, or
unconditionally guaranteed by, the United States and having a maturity
of one hundred fifty (150) days or less; and (iv) readily marketable
commercial paper having a maturity of one hundred fifty (150) days or
less, issued by any corporation organized and existing under the laws
of the United States or any state thereof or the District of Columbia
and rated by any nationally recognized rating organization in the
United States with the highest rating assigned by such organization.
e) RELEASE AT EXPIRATION OF TERM. On a date which is not more than
thirty (30) days following the expiration of the Term (as it may be
extended) or earlier termination of this Lease, the Escrow (as reduced
pursuant to this section) shall be released to Lessee, less any amounts
that Lessor reasonably estimates to be required to remedy any Defaults
on the part of Lessee hereunder.
f) UCC FILING. Lessor shall be entitled to file a UCC-1 protecting its
interest in the Escrow. Within five (5) days of any release or
reduction of the Escrow in accordance with the terms of this Lease,
Lessor shall file a revised UCC-1 or UCC-2, as applicable. Lessee shall
execute such documents as reasonably requested by Lessor and required
for any such filing.
g) STOCK WARRANTS. Upon execution, Lessee shall issue to Lessor or as
Lessor directs, 10,820 warrants at a price of $5.45 per warrant.
55. BASE RENT ADJUSTMENT:
In addition to the rental adjustment referred to in Paragraph 52 to this
Addendum, Base rent also shall be adjusted on the fifth and tenth
anniversaries of the Commencement Date (each an "Anniversary Date") to equal
the Fair Market Rental Value of the Premises on such Anniversary Date;
provided, however, that the Base Rent shall never be adjusted downward. Fair
Market Rental Value shall be determined as follows: Sixty (60) days prior to
each Anniversary Date, Lessor and Lessee shall meet and endeavor to agree
upon Fair Market Rental Value. If they are unable to so agree within thirty
(30) days, Lessor and Lessee shall each select a licensed real estate broker
who is active in the leasing or appraisal of similar space in the general
vicinity of the Building and is not affiliated with either Lessor or Lessee
(each a "Broker"). Each Broker shall thereupon determine the fair market
rental value of the Premises, and the Fair Market Rental Value, as ultimately
determined, shall not be greater than the larger determination nor less than
the smaller determination (the "Range"). The Brokers shall then select a
similarly qualified licensed real estate broker, who shall determine the Fair
Market Rental Value, which shall, in any event, be within the Range. Each
party shall pay the costs and fees of its respective Broker, and shall pay
half the costs and fees of the jointly appointed broker.
<TABLE>
<S> <C>
LESSOR:
LUIGI ZANETTE AND MIRANDA ZANETTE, TRUSTEES OF THE
ZANETTE FAMILY TRUST U/A DATED OCTOBER 7, 1993
/s/ Luigi Zanette Date: 10-21-99
- --------------------------------------------------- ----------------------------
Luigi Zanette, Trustee
/s/ Miranda Zanette Date: 10-21-99
- --------------------------------------------------- ----------------------------
Miranda Zanette, Trustee
LESSEE: HOMESTEAD TECHNOLOGIES, INC., A DELAWARE CORPORATION
By: /s/ Justin S. Kitch Date: 9/24/99
------------------------------------------------ ----------------------------
Justin S. Kitch, President & CEO
By: /s/ Joe H. Davila Date: 9/24/99
------------------------------------------------ ----------------------------
Joe H. Davila, V.P. of Finance & Administration
</TABLE>
3.
<PAGE>
EXHIBIT "A"
[Floor Plans]
<PAGE>
EXHIBIT "A-1"
HOMESTEAD TECHNOLOGIES 9-10-99
3468 EDISON WAY
OUTLINE SPECIFICATIONS
ALL T.I. MATERIALS SHALL BE MEDIUM GRADE STANDARD
The space shall be in conformance with the 1997n UBC, UFC, NEC, ADA, and any
local building codes and ordinance and all other governing authorities having
jurisdiction.
1. HVAC SYSTEMS: Systems to meet Uniform Mechanical Code standard and
requirements. Open ceiling areas to have exposed ducts.
2. ELECTRICAL / TEL / DATA:
Private Office: 3 duplex, 1 tel /data location
Workstation: 2 duplex, 1 tel /data location
Conference: 2 duplex, 1 tel /data location
Kitchen: Dedicated circuits for appliances and outlets for
general areas
Mail / Copier: dedicated circuits for copier and printers, and outlets
for general office equipment and use
Server Room: Dedicated circuits for computer equipment per tenant's
requirements separate A/C unit for this room
Electrical supply to the 1st floor Open Office shall be paid for by Lessor.
3. FINISHES (GENERAL OFFICE)
Floor: - Carpet throughout except as noted below quality: 28 oz.
loop piles style TBD with accent pattern at the main
entry
- VCT in Lunch, Coffee, Storage and Mail / Copy Room
- Static free sheet vinyl in Server Room
Carpet installation shall be direct glue down on 1st floor and with padding
on the 2nd floor
Base: 4" high rubber base
Wall: Painted textured finish gypsum board walls
Accent paint at doors and frame by tenant
Ceiling: Exposed structure except at Private Offices and all
enclosed rooms to have 2x4 suspended ceiling
4. FINISHES (TOILET ROOMS)
Floor: Sheet vinyl flooring
Wall: 4'-0" high FRP panels with painted gyp bd above
Ceiling: Gypsum board ceiling
Showers: Prefabricated fiberglass shower
5. OPEN OFFICE LOW WALL PARTITIONS shall be by owner except for the Homestead
logo facade shall be paid for by tenant
6. KITCHEN APPLIANCES: sink, garbage disposal, and dishwasher shall be
provided by owner. Tenant to provide refrigerator, microwave oven and other
countertop appliances. Owner to provide electrical outlets.
7. DOORS: 3'-0"Wx7'-0"Hx13/4"T solid core wood door with ADA door
hardware. All other upgrade doors such as French doors,
etc. shall be paid for by Lessor.
8. LIGHTING FIXTURES:
At suspended ceiling: 2x4 recessed fluorescent light fixture with
parabolic lens
At open ceiling: Suspended light fixtures
9. STAIRS: Shall be constructed of wood with carpeting or pre-molded vinyl
treads and risers
10. SECURITY SYSTEMS: By Tenant
General Contractor to coordinate during construction
<PAGE>
Homestead Technologies
3475 Edison Way, Suite H
Menlo Park, CA 94025
September 17, 1999
RE: Lease dated September 20, 1999 (3469 Edison Way) (the "Lease")
Luigi Zanette
Miranda Zanette
Trustees of the Zanette Family Trust
c/o Saroush Kaboli
2042 Barbara Drive
Palo Alto, CA 94303
Dear Mr. and Mrs. Zanette:
In connection with our execution of the Lease, we are requesting your consent
to an initial subleasing of up to half of the premises. This consent would be
valid only during the first six months of the Lease term.
Additionally, you and we have agreed that Homestead will be able to retain
any excess or bonus rents resulting from such subleasing.
Please indicate your consent and agreement to these matters by signing the
enclosed copy of this letter where indicated, and returning a copy to me.
Sincerely,
Homestead Technologies
By
---------------------------------
Title
------------------------------
The undersigned hereby consent and agree to the foregoing.
- ----------------------------------------------------------------------------
Luigi Zanette, Trustee of the Zanette Family Trust U/A October 2, 1993
- ----------------------------------------------------------------------------
Miranda Zanette, Trustee of the Zanette Family Trust U/A October 2, 1993
1.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ADDENDUM TO
STANDARD INDUSTRIAL / COMMERCIAL SINGLE-TENANT LEASE - NET
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Addendum Two is made a part of the Standard Industrial / Commercial
Multi-Tenant Lease - Modified Net ("Lease") dated as of September 20, 1999,
by and between Luigi Zanette and Miranda Zanette, Trustees of the Zanette
Family Trust U/A dated October 2, 1993, as Lessor, and Homestead.com,
formerly known as Homestead Technologies, Inc., a Delaware Corporation, as
Lessee, for the premises commonly known as 3469 Edison Way, Menlo Park, CA.
If any conflicts exist between the Lease, the first addendum, the RIDER and
this Addendum, the terms of this Addendum shall govern.
1. PREMISES
Lessor agrees that it will construct the Building in accordance with the
approved plans per Exhibit B and B-1. The rentable square foot of the
Building is approximately 17,454.
2. BASE RENT
$27,926.40 per month.
3. BASE RENT PAID UPON EXECUTION:
$27,926.40.
4. SECURITY DEPOSIT:
$56,000.00.
5. COMMENCEMENT AND TERMINATION DATE:
Commencement Date shall be March 1, 2000 or upon substantial completion of
construction and Termination Date shall be September 30, 2014.
6. AREA A, B AND C CONSTRUCTION
Unless specified otherwise by Lessee, Lessor agrees to complete construction
of area A, B and C within 90 days of receipt of certificate of occupancy.
<TABLE>
<S> <C>
Lessor: LUIGI ZANETTE AND MIRANDA ZANETTE, TRUSTEES OF THE ZANETTE
FAMILY TRUST U/A DATED OCTOBER 2, 1993
By: 10-21-99 /s/ Luigi Zanette Date: 10-21-99
---------------------------------------------------- -------------------------
Luigi Zanette
By: /s/ Miranda Zanette Date: 10-21-99
---------------------------------------------------- -------------------------
Miranda Zanette
LESSEE: HOMESTEAD.COM FORMERLY KNOWN AS HOMESTEAD TECHNOLOGIES, INC., A
DELAWARE CORPORATION
By: /s/ Justin S. Kitch Date: 10-21-99
---------------------------------------------------- -------------------------
Justin S. Kitch, President & CEO
By: /s/ Joe H. Davila Date: 10-21-99
---------------------------------------------------- -------------------------
Joe H. Davila, V.P. of Finance & Administration
</TABLE>
- -------------------------------------------------------------------------------
Page 1 of 1
<PAGE>
EXHIBIT "B"
[Floor Plan]
<PAGE>
EXHIBIT "B-1"
HOMESTEAD TECHNOLOGIES 9-10-99
3468 EDISON WAY REV. 10-13-99
OUTLINE SPECIFICATIONS
ALL T.I. MATERIALS SHALL BE MEDIUM GRADE STANDARD
The space shall be in conformance with the 1997n UBC, UFC, NEC, ADA, and any
local building codes and ordinance and all other governing authorities having
jurisdiction.
1. HVAC SYSTEMS: Systems to meet Uniform Mechanical Code standard and
requirements. Open ceiling areas to have exposed
ducts.
2. ELECTRICAL / TEL / DATA:
Private Office: 3 duplex, 1 tel /data location
Workstation: 2 duplex, 1 tel /data location
Conference: 2 duplex, 1 tel /data location
Kitchen: Dedicated circuits for appliances and outlets for
general areas
Mail / Copier: dedicated circuits for copier and printers, and
outlets for general office equipment and use
Server Room: Dedicated circuits for computer equipment per
tenant's requirements separate A/C unit for this room
Electrical supply to the 1st floor Open Office shall be paid for by
Lessor
3. FINISHES (GENERAL OFFICE)
Floor: - Carpet throughout except as noted below
quality: 28 oz. loop piles style TBD
with accent pattern at the main entry
- Sealed Conc in Shipping / Receiving Room
- VCT in Lunch, Coffee, Storage and Mail / Copy Room
- Static free sheet vinyl in Server Room
Carpet installation shall be direct glue down on 1st floor and with
padding on the 2nd floor
Base: 4" high rubber base
Wall: Painted textured finish gypsum board walls
Accent paint at doors and frame by tenant
Ceiling: Exposed structure except at Private Offices and all
enclosed rooms to have 2x4 suspended ceiling
4. FINISHES (TOILET ROOMS)
Floor: Sheet vinyl flooring
Wall: 4'-0" high FRP panels with painted gyp bd above
Ceiling: Gypsum board ceiling
Shower: Prefabricated Fiberglass Shower
5. OPEN OFFICE LOW WALL PARTITIONS shall be by owner except for the
Homestead logo facade shall be paid for by tenant
6. KITCHEN APPLIANCES: sink, garbage disposal, and dishwasher shall be
provided by owner. Tenant to provide refrigerator, microwave oven and
other countertop appliances. Owner to provide electrical outlets.
7. DOORS: 3'-0"Wx7'-0"Hx13/4"T solid core wood door with
ADA door hardware. All other upgrade doors such as
French doors, etc. shall be paid for by Lessor.
8. LIGHTING FIXTURES:
At suspended ceiling: 2x4 recessed fluorescent light fixture with
parabolic lens
At open ceiling: Suspended light fixtures
9. STAIRS: Shall be constructed of wood with carpeting or pre-molded
vinyl treads and risers
10. SECURITY SYSTEMS: By Tenant
General Contractor to coordinate during construction
<PAGE>
EXHIBIT 10.7
COMMERCIAL LEASE AND DEPOSIT RECEIPT
Received from _______________ KARTOFFELSOFT, INC. ___________________
hereinafter referred to as LESSEE, the sum of $__12,376.00--(__Twelve Thousand
Three Hundred Seventy Six & 00/100__________________), evidenced by
______Check___, as a deposit which shall belong to Lessor and shall be applied
as follows
<TABLE>
<CAPTION>
Total Received Due By 1/1/2000
<S> <C> <C> <C>
Rent for the period from __1/1/200 to 12/31/2000-__H,I,M $_12,376.00 $___________ $____12,376.00_
Security deposit (not applicable toward last month's rent) $_12,376.00 $___________ $____12,376.00_
Other____________ Common Area Charge____________________ $____247.52 $___________ $_______247.52_
Total____________________________________________________ $_24,999.52 $___________ $____24,999.52_
</TABLE>
In the event that this Lease is not accepted by the Lessor within __15__
days, the total deposit received shall be refunded.
Lessee offers to lease from Lessor the premises situated in the City of
Menlo Park, County of San Mateo, State of California, described as __6,188 sq.
ft. portion at 3475-H-I-M___Edison Way of___ a__larger 40,000 Sq. Ft.
Building____________________ upon the following TERMS and CONDITIONS:
1. TERM: The term hereof shall commence on __January 1, 2000___ and end on
__December 31, 2000____.
2. RENT: The total rent plus common area shall be __$151,482.23__payable as
follows: ___$12,623.52---- on the first day of each month__. All rents
shall be paid to Lessor or his/her authorized agent, at the following
address:
____ Ronald M. Newdoll, 3475-A Edison Way, Menlo Park, CA 94025 TEL: (415)
365-2843________ or at such other places as may be designated by Lessor
from time to time. In the event rent is not paid within __10__ days after
due date, Lessee agrees to pay a late charge of $125.00 plus interest at 8%
per annum on the delinquent amount. Lessee further agrees to pay $25.00 for
each dishonored bank check. The late charge period is not a grace period,
and Lessor is entitled to make written demand for any rent if not paid when
due.
3. USE: The premises are to be used for the operation of ____Software
Development & Other Related __Activities___________________and for no other
purpose, without prior written consent of Lessor. Lessee shall not commit
any waste upon the premises, or any nuisance or act which may disturb the
quiet enjoyment of any tenant in the building.
4. USES PROHIBITED: Lessee shall not use any portion of the premises for
purposes other than those specified. No use shall be made or permitted to
be made upon the premises, nor acts done, which will increase the existing
rate of insurance upon the property, or cause cancellation of insurance
policies covering the property. Lessee shall not conduct or permit any sale
by auction on the premises.
5. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease or sublet any
portion of the premises without prior written consent of the Lessor, which
shall not be unreasonably withheld. Any such assignment or subletting
without consent shall be void and, at the option of the Lessor shall
terminate this Lease.
6. ORDINANCES AND STATUTES: Lessee shall comply with all statutes, ordinances,
and requirements of all municipal, state and federal authorities now in
force, or which may later be in force. The commencement or pendency of any
state or federal court abatement proceeding affecting the use of the
premises shall, at the option of the Lessor, be deemed a breach of this
Lease.
7. MAINTENANCE, REPAIRS, ALTERATIONS: Unless otherwise indicated, Lessee
acknowledges that the premises are in a good order and repair. Lessee
shall, at his/her own expense, maintain the premises in a good and safe
condition, including plate glass, electrical wiring, plumbing and
heating installations, and any other system or equipment. The premises
shall be surrendered, at termination of the Lease, in as good condition
as received, normal wear and tear excepted. Lessee shall be responsible
for all repairs required, except the roof, exterior walls, structural
foundations, and_____________________________________________________
which shall be maintained by Lessor. No improvement or alteration of the
premises shall be made without the prior written consent of Lessor.
Prior to the commencement of any substantial repair, improvement, or
alteration, Lessee shall give Lessor at least two (2) days written
notice in order that Lessor may post appropriate notices to avoid any
liability for liens.
8. ENTRY AND INSPECTION: Lessee shall permit Lessor or Lessor's agents to
enter the premises at reasonable times and upon reasonable notice for the
purpose of inspecting the premises, and shall permit Lessor, at any time
within sixty (60) days prior to the expiration of this Lease, to place upon
the premises any usual "To Let" or "For Lease" signs, and permit persons
desiring to lease the premises to inspect the premises at reasonable times.
9. INDEMNIFICATION OF LESSOR: Lessor shall not be liable for any damage or
injury to Lessee, or any other person, or to any property, occurring on the
premises. Lessee agrees to hold Lessor harmless from any claims for damages
arising out of Lessee's use of the premises, and to indemnify Lessor for
any expense incurred by Lessor in defending any such claims.
10. POSSESSION: If Lessor is unable to deliver possession of the premises at
the commencement date set forth above, Lessor shall not be liable for any
damage caused by the delay, nor shall this Lease be void or voidable but
Lessee shall not be liable for any rent until possession is delivered.
Lessee may terminate this lease if possession is not delivered within
__15__days of the commencement term in Item 1.
Page 1 of 3
<PAGE>
11. LESSEE'S INSURANCE: Lessee, at his/her expense, shall maintain plate glass
and public liability insurance, including bodily injury and property
damage, insurance, Lessee and Lessor with minimum coverage as follows: of
$500,000. Lessee shall provide Lessor with a Certificate of Insurance
showing Lessor as additional insured. The policy shall require ten (10)
days' written notice to Lessor prior to cancellation or material change of
coverage.
12. LESSOR'S INSURANCE: Lessor shall maintain hazard insurance covering one
hundred percent (100%) replacement cost of the improvements throughout the
Lease term. Lessor's insurance will not insure Lessee's personal property
or leasehold improvements.
13. SUBROGATION: To the maximum extent permitted by insurance policies which
may be owned by the parties, Lessor and Lessee waive any and all rights of
subrogation which might otherwise exist.
14. UTILITIES: Lessee agrees that he/she shall be responsible for the payment
of all utilities including gas, electricity and other services delivered to
the premises.
15. SIGNS: Lessor reserves the exclusive right to the roof, side and rear walls
of the premises. Lessee shall not construct any projecting sign or awning
without the prior written consent of Lessor, which shall not be
unreasonably withheld.
16. ABANDONMENT OF PREMISES: Lessee shall not vacate or abandon the premises at
any time during the term of this Lease. If Lessee does abandon or vacate
the premises, or is dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left on the premises shall be deemed
to be abandoned, at the option of the Lessor.
17. TRADE FIXTURES: Any and all improvements made to the premises during the
term shall belong to the Lessor, except trade fixtures of the Lessee.
Lessee may, upon termination, remove all his/her trade fixtures, but shall
pay for all costs necessary to repair any damage to the premises occasioned
by the removal.
18. DESTRUCTION OF PREMISES: In the event of a partial destruction of the
premises during the term, from any cause, Lessor shall promptly repair the
premises, provided that such repairs can be reasonably made within sixty
(60) days. Such partial destruction shall not terminate this Lease, except
that Lessee shall be entitled to a proportionate reduction of rent while
such repairs are being made, based upon the extent to which the making of
such repairs interferes with the business of Lessee on the premises. If the
repairs cannot be made within sixty (60) days, this Lease may be terminated
at the option of either party by giving written notice to the other party
within the sixty (60) day period.
19. HAZARDOUS MATERIALS: Lessee shall not use, store, or dispose of any
hazardous substances upon the premises, except the use and storage of such
substances that are customarily used in Lessee's business, and are in
compliance with all environmental laws. Hazardous substances means any
hazardous waste, substance or toxic materials regulated under any
environmental laws or regulations applicable to the property.
20. INSOLVENCY: The appointment of a receiver, an assignment for the benefits
of creditors, or the filing of a petition in bankruptcy by or against
Lessee, shall constitute a breach of this Lease by Lessee.
21. DEFAULT: In the event of any breach of this Lease by Lessee, Lessor may,
at his/her option, terminate the Lease and recover from Lessee: (a) the
worth at the time of award of the unpaid rent, which had been earned at
the time of termination; (b) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after
termination until the time of the award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided;
(c) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the
amount of such rental loss that the Lessee proves could be reasonably
avoided; and (d) any other amount necessary to compensate Lessor for all
the detriment proximately caused by the Lessee's failure to perform
his/her obligations under the Lease or which in the ordinary course of
things would be likely to result therefrom.
Lessor may, in the alternative, continue this lease in effect, as long
as Lessor does not terminate Lessee's right to possession, and Lessor may
enforce all of Lessor's rights and remedies under the Lease, including the
right to recover the rent as it becomes due under the Lease. If said breach
of Lease continues, Lessor may, at any time thereafter, elect to terminate
the Lease.
Nothing contained herein shall be deemed to limit any other rights or
remedies which Lessor may have.
22. SECURITY: The security deposit set forth above shall secure the performance
of the Lessee's obligations. Lessor may, but shall not be obligated to
apply all or portions of the deposit on account of Lessee's obligations.
Any balance remaining upon termination shall be returned to Lessee. Lessee
shall not have the right to apply the security deposit in payment of the
last month's rent.
23. DEPOSIT REFUNDS: The balance of all deposit shall be refunded within three
weeks (or otherwise required by law), from date possession is delivered to
Lessor of his/her authorized Agent, together with a statement showing any
charges made against such deposits by Lessor.
24. ATTORNEY'S FEE AND COSTS: In any action or proceeding involving a dispute
between Lessor and Lessee arising out of this Lease, the prevailing party
shall be entitled to reasonable attorney's fees.
25. WAIVER: No failure of Lessor to enforce any term of this Lease shall be
deemed to be a waiver.
Page 2 of 3
<PAGE>
26. NOTICES: Any notice which either party may or is required to give, shall be
given by mailing the same, postage prepaid, to Lessee at the premises, or
to Lessor at the address shown in item 2, or at such other places as may be
designated by the parties from time to time. Notice shall be effective five
days after mailing, or on personal delivery.
27. HOLDING OVER: Any holding over after the expiration of this Lease, with the
consent of Owner, shall become a month-to-month tenancy at a monthly rent
of $12,113.10 _payable in advance and otherwise subject to the terms of
this Lease, as applicable, until either party shall terminate the same by
giving the other party thirty (30) days written notice.
28. TIME: Time is of the essence of this Lease.
29. HEIRS, ASSIGNS, SUCCESSORS: This lease is binding upon and inures to the
benefit of the heirs, assigns and successors of the parties.
30. OPTION TO RENEW: Provided that Lessee is not in default in the performance
of this Lease, Lessee shall have the option to renew the Lease for an
additional term of ___________________ commencing at the expiration of the
initial Lease term. All of the terms and conditions of the Lease shall
apply during the renewal term, except that the monthly rent shall be the
sum of __$_____________.
The option shall be exercised by written notice given to Lessor not less
than __60__ days prior to the expiration of the initial Lease term. If
notice is not given within the time specified, this Option shall expire.
31. AMERICANS WITH DISABILITIES ACT: The parties are alerted to the existence
of the Americans With Disabilities Act, which may require costly structural
modifications. The parties are advised to consult with a professional
familiar with the requirements of the Act.
32. LESSOR'S LIABILITY: In the event of a transfer of Lessor's title or
interest to the property during the term of this Lease, Lessee agrees that
the grantee of such title or interest shall be substituted as the Lessor
under this Lease, and the original Lessor shall be released of all further
liability; provided that all deposits shall be transferred to the grantee.
33. ESTOPPEL CERTIFICATE:
(a) On ten (10) days prior written notice from Lessor, Lessee shall
execute, acknowledge, and deliver to Lessor a statement in writing:
(1) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and
effect), the amount of any security deposit, and the date to which the
rent and other charges are paid in advance, if any; and (2)
acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of the Lessor, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective buyer or encumbrancer of the premises.
(b) At Lessor's option, Lessee's failure to deliver such statement within
such time shall be a material breach of this Lease or shall be
conclusive upon Lessee: (1) that this Lease is in full force and
effect, without modification except as may be represented by Lessor:
(2) that there are no uncured defaults in Lessor's performance; and
(3) that not more than one month's rent has been paid in advance.
(c) If Lessor desires to finance, refinance, or sell the premises, or any
part thereof, Lessee agrees to deliver to any lender or buyer
designated by lessor such financial statements of Lessee as may be
reasonably required by such lender or buyer. All financial statements
shall be received by the Lessor or the lender or buyer in confidence
and shall be used only for the purposes set forth.
34. ENTIRE AGREEMENT: The foregoing constitutes the entire Agreement between
the parties and may be modified only in writing signed by all parties. The
following exhibits are a part of this lease: Exhibit A: _Lessee agrees to
limit total personnel occupying space to no more than 15 people____________
Exhibit B: ATTACHMENT A____________________________________________________
The undersigned Lessee hereby acknowledges that he/she has thoroughly read and
approved each of the provisions contained in this Offer, and agrees to the terms
and conditions specified. Lessee acknowledges receipt of a copy of the accepted
agreements.
Lessee: /S/ ANDREW CHMYZ Date: 12/15/99 Lessee:_______________ Date:_______
-----------------
Andrew Chmyz,
Controller
(650) 549-3124
ACCEPTANCE
The undersigned Lessor accepts the foregoing Offer and agrees to lease the
premises on the terms and conditions set forth above.
Lessor:_________________ Date:________ Lessor:_______________ Date:__________
Ronald M. Newdoll
Page 3 of 3
<PAGE>
EXHIBIT 10.8
[LOGO] SILICON VALLEY BANK
QUICKSTART LOAN AND SECURITY AGREEMENT
Borrower: KARTOFFELSOFT INCORPORATED Address: 3475-H Edison Way
Menlo Park, CA 94025
Date: July 13, 1998
SILICON'S OFFER TO EXTEND FINANCING ON THE TERMS SET FORTH HEREIN
SHALL EXPIRE IF THIS AGREEMENT IS NOT EXECUTED BY
BORROWER AND RETURNED TO SILICON WITHIN 30 DAYS OF THE ABOVE DATE.
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (the "Borrower"), whose
chief executive office is located at the above address ("Borrower's Address").
1. LOANS. Silicon will make loans to Borrower (the "Loans") in amounts
determined by Silicon in its reasonable business judgment up to the amount (the
"Credit Limit") shown on the Schedule to this Agreement (the "Schedule"),
provided no Event of Default and no event which, with notice or passage of time
or both, would constitute an Event of Default has occurred. All Loans and other
monetary Obligations will bear interest at the rate shown on the Schedule.
Interest will be payable monthly, on the date shown on the monthly billing from
Silicon. Silicon may, in its discretion, charge interest to Borrower's deposit
accounts maintained with Silicon.
2. SECURITY INTEREST. As security for all present and future indebtedness,
guarantees, liabilities, and other obligations, of Borrower to Silicon
(collectively, the "Obligations"), Borrower hereby grants Silicon a continuing
security interest in all of Borrower's interest in the following types of
property, whether now owned or hereafter acquired, and wherever located
(collectively, the "Collateral"): All "accounts," "general intangibles,"
"contract rights," "chattel paper," "documents," "letters of credit,"
"instruments," "deposit accounts," "inventory," "farm products," "investment
property," "fixtures" and "equipment," as such terms are defined in Division 9
of the California Uniform Commercial Code in effect on the date hereof, and all
products, proceeds and insurance proceeds of the foregoing.
3. REPRESENTATIONS AND AGREEMENTS OF BORROWER. Borrower represents to Silicon as
follows, and Borrower agrees that the following representations will continue to
be true, and that Borrower will comply with all of the following agreements
throughout the term of this Agreement:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby have been duly and validly authorized, and do not violate
any law or any provision of, and are not grounds for accretion under, any
agreement or instrument which is binding upon Borrower.
3.2 NAME; PLACES OF BUSINESS. The name of Borrower set forth in this
Agreement is its correct name. Borrower shall give Silicon 15 days' prior
written notice before changing its name. The address set forth in the heading to
this Agreement is Borrower's chief executive office. In addition, Borrower has
places of business and Collateral is located only at the locations set forth on
the Schedule. Borrower will give Silicon at least 15 days' prior written notice
before changing its chief executive office or locating the Collateral at any
other location.
3.3 COLLATERAL. Silicon has and will at all times continue to have a
first-priority perfected security interest in all of the Collateral other than
specific equipment. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.4 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or in
the future delivered to Silicon have been, and will be, prepared in conformity
with generally accepted accounting principles. Since the last date covered by
any such statement, there has been no material adverse change in the financial
condition or business or Borrower. Borrower will provide Silicon: (i) within 30
days after the end of each month, a monthly financial statement prepared by
Borrower, and such other information as Silicon shall reasonably request; (ii)
within 120 days following the end of Borrower's fiscal year, complete annual
financial statements, certified by independent certified public accountants
acceptable to Silicon and accompanied by the unqualified report thereon by said
independent certified public accountants; and (iii) other financial information
reasonably requested by Silicon from time to time.
3.5 TAXES; COMPLIANCE WITH LAW. Borrower has filed, and will file, when
due, all tax returns and reports required by applicable law, and Borrower has
paid, and will pay, when due, all taxes, assessments, deposits and contributions
now or in the future owed by Borrower. Borrower has complied, and will comply,
in all material respects, with all applicable laws, rules and regulations.
3.6 INSURANCE. Borrower shall at all times insure all of the tangible
personal property Collateral and carry such other business insurance as is
customary in Borrower's industry.
3.7 ACCESS TO COLLATERAL AND BOOKS AND RECORDS. At reasonable times, on one
business day notice, Silicon or its
<PAGE>
agents, shall have the right to inspect the Collateral, and the right to audit
and copy Borrower's books and records.
3.8 OPERATING ACCOUNTS. Borrower shall maintain its primary operating
accounts with Bank.
3.9 ADDITIONAL AGREEMENTS. Borrower shall not, without Silicon's prior
written consent, do any of the following: (i) enter into any transaction outside
the ordinary course of business except for the sale of capital stock to venture
investors, provided that Borrower promptly delivers written notification to
Silicon any of such sale; (ii) sell or transfer any Collateral, except in the
ordinary course of business; (iii) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); or (iv)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock other than the repurchase of up to five percent (5%) of
Borrower's then issued stock in any fiscal year from Borrower's employees or
directors pursuant to written agreement with Borrower.
4. TERM. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the "Maturity Date"). This Agreement may be terminated,
without penalty, prior to the Maturity Date as follows: (i) by Borrower,
effective three business days after written notice of termination is given to
Silicon; or (ii) by Silicon at any time after the occurrence of an Event of
Default, without notice, effective immediately. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay all Obligations in
full, whether or not such Obligations are otherwise then due and payable. No
termination shall in any way affect or impair any security interest or other
right or remedy of Silicon, nor shall any such termination relieve Borrower of
any Obligation to Silicon, until all of the Obligations have been paid and
performed in full.
5. EVENTS OF DEFAULT AND REMEDIES. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement: (a) Any
representation, statement, report or certificate given to Silicon by Borrower or
any of its officers, employees or agent, now or in the future, is untrue or
misleading in a material respect, or (b) Borrower fails to pay when due any Loan
or any interest thereon or any other monetary Obligation; or (c) the total
Obligations outstanding at any time exceed the Credit Limit; or (d) Borrower
fails to perform any other non-monetary Obligation, which failure is not cured
within 5 business days after the date due; or (e) Dissolution, termination of
existence, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by or against Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (f) a material
adverse change in the business, operations, or financial or other condition of
Borrower. If an Event of Default occurs, Silicon, shall have the right to
accelerate and declare all of the Obligations to be immediately due and payable,
increase the interest rate by an additional four percent per annum, and exercise
all rights and remedies accorded it by applicable law.
6. GENERAL. If any provision of this Agreement is held to be unenforceable, the
remainder of this Agreement shall still continue in full force and effect. This
Agreement and any other written agreements, documents and instruments executed
in connection herewith are the complete agreement between Borrower and Silicon
and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in this
Agreement. There are no oral understandings, representations or agreements
between the parties which are not in this Agreement or in other written
agreements signed by the parties in connection this Agreement. The failure of
Silicon at any time to require Borrower to comply strictly with any of the
provisions of this Agreement shall not waive Silicon's right later to demand and
receive strict compliance. Any waiver of a default shall not waive any other
default. None of the provisions of this Agreement may be waived except by a
specific written waiver signed by an officer of Silicon and delivered to
Borrower. The provisions of this Agreement may not be amended, except in a
writing signed by Borrower and Silicon. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all other reasonable costs incurred by Silicon,
in connection with this Agreement (whether or not a lawsuit is filed). If
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party shall be entitled to recover its
reasonable costs and attorneys' fees from the non-prevailing party. Borrower may
not assign any rights under this Agreement without Silicon's prior written
consent. This Agreement shall be governed by the laws of the State of
California.
7. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF SILICON
OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
AFFILIATES.
BORROWER:
KARTOFFELSOFT INCORPORATED
By: /s/ Justin Shelby Kitch
-------------------------------
President or Vice President
SILICON:
SILICON VALLEY BANK
By:________________________________
Title:_____________________________
<PAGE>
[LOGO] SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (MASTER)
BORROWER: KARTOFFELSOFT INCORPORATED
DATE: July 13, 1998
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
<TABLE>
<CAPTION>
CREDIT LIMIT (AGGREGATE)
<S> <C> <C>
(Section 1): $750,000.00 (includes, without limitation, Equipment
Advances and the Merchant Services and Business Visa
Reserve, if any)
Interest Rate (Section 1): A rate equal to the "Prime Rate" in effect from time to
time, per annum. Interest shall be calculated on the basis
of a 60-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate upon which
other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
Maturity Date (Section 4): January 25, 2000.
OTHER LOCATIONS AND ADDRESS
(Section 3.2): ______________________________________
Other Agreements: Borrower also agrees as follows:
1. LOAN FEE. Borrower shall concurrently pay Silicon a
non-refundable Loan Fee in the amount of $500.00
2. BANKING RELATIONSHIP. Borrower shall at all times
maintain on deposit with Silicon, a minimum amount
equivalent to 33% of liquid assets in operating, money
market accounts or certificates of deposit.
BORROWER: SILICON:
KARTOFFELSOFT INCORPORATED SILICON VALLEY BANK
By: /s/ Justin Shelby Kitch By:____________________________________________
- --------------------------------------
President or Vice President Title:_________________________________________
</TABLE>
<PAGE>
[LOGO] SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (EQUIPMENT ADVANCES)
BORROWER: KARTOFFELSOFT INCORPORATED
--------------------------
DATE: July 13, 1998
-------------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
<TABLE>
<CAPTION>
CREDIT LIMIT (EQUIPMENT)
<S> <C> <C>
(Section 1): $750,000.00 (such amount to be funded under the aggregate
Credit Limit). Equipment Advances will be made only on or
prior to July 25, 1999 (the "Last Advance Date") and only
for the purpose of purchasing equipment reasonably
acceptable to Silicon. Borrower must provide invoices for
the equipment to Silicon on or before the Last Advance Date.
INTEREST RATE (Section 1): A rate equal to the "Prime Rate" in effect from time to
time, per annum. Interest shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate upon which
other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
MATURITY DATE (Section 4): After the Last Advance Date, the unpaid principal balance of
the Equipment Advances shall be repaid in 30 equal monthly
installments of principal, plus interest, commencing on
August 25, 1999 and continuing on the same day of each month
thereafter until the entire unpaid principal balance of the
Equipment Advances and all accrued unpaid interest have been
paid (subject to Silicon's right to accelerate the Equipment
Advances on an Event of Default).
BORROWER: SILICON:
KARTOFFELSOFT INCORPORATED SILICON VALLEY BANK
BY: /s/ Justin Shelby Kitch By:________________________________________
------------------------------------------------
President or Vice President Title:_____________________________________
</TABLE>
<PAGE>
[LOGO] SILICON VALLEY BANK
SCHEDULE TO QUICKSTART LOAN AND SECURITY AGREEMENT (MERCHANT SERVICES/BUSINESS
CREDIT CARD SUBLIMIT)
BORROWER: KARTOFFELSOFT, INC.
-------------------
DATE: 01/14/99
--------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
<TABLE>
MERCHANT SERVICES/ BUSINESS CREDIT CARD
<S> <C>
SUBLIMIT (SECTION 1): The aggregate Credit Limit shall be reduced by an amount
equal to the sum of (a) $0.00 (the "Merchant Service
Reserve") and (b) $15,000.00 (the "Business Credit Card
Reserve"). Silicon may, in its sole discretion, charge as
Loans, any amounts that may become due or owing to Silicon
in connection with merchant credit card processing services
and/or Business Credit Card services furnished to Borrower
by or through Silicon, collectively, the "Credit Card
Services." Borrower shall execute all standard form
applications and agreements, including without limitation,
the Indemnification and Pledge Agreement, of Silicon in
connection with the Credit Card Services and, without
limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges
of Silicon in connection with the Credit Card Services and,
without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges
of Silicon in connection with the Credit Card Services.
MATURITY DATE (Section 4): 07/25/99
--------
BORROWER: SILICON:
KARTOFFELSOFT, INC. SILICON VALLEY BANK
By: /s/ Justin Shelby Kitch By:________________________________
---------------------------------------------
</TABLE>
<PAGE>
[LOGO] SILICON VALLEY BANK
CERTIFIED RESOLUTION
Borrower: KARTOFFELSOFT INC., a corporation organized under the laws of the
State of Delaware
Date: July 13, 1998
I, the undersigned, corporate officer of the above-named borrower, a
corporation organized under the laws of the state set forth above, do hereby
certify that the following is a full, true and correct copy of resolutions duly
and regularly adopted by the Board of Directors of said corporation as required
by law, and by the by-laws of said corporation, and that said resolutions are
still in full force and effect and have not been in any way modified, repealed,
rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank ("Silicon"),
from time to time, such sum or sums of money as, in the judgment of the officer
or officers authorized hereby, this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she is
hereby authorized, in the name of this corporation, to execute and deliver to
Silicon the loan agreements, security agreements, notes, financing statements,
and other documents and instruments providing for such loans and evidencing or
securing such loans, and said authorized officers are authorized from time to
time to execute renewals, extensions and/or amendments of said loan agreements,
security agreements, and other documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, as security for any and all indebtedness of this corporation to
Silicon, whether arising pursuant to this resolution or otherwise, to grant, to
Silicon, or deed in trust for its benefit, any property of any and every kind,
belonging to this corporation, including, but not limited to, any and all real
property, accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture, fixtures,
goods, and other property of every kind, and to execute and deliver to Silicon
any and all pledge agreements, mortgages, deeds of trust, financing statements,
security agreements and other agreements, which said instruments and the note or
notes and other instruments referred to in the preceding paragraph may contain
such provisions, covenants, recitals and agreements as Silicon may require, and
said authorized officers may approve, and the execution thereof by said
authorized officers shall be conclusive evidence of such approval.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized to issue warrants to purchase this corporation's capital stock, for
such class, series and number, and on such terms, as said officers shall deem
appropriate
RESOLVED FURTHER, that Silicon may conclusively rely on a certified copy of
these resolutions and a certificate of the corporate officer of this corporation
as to the officers of this corporation and their offices and signatures, and
continue to conclusively rely on such certified copy of these resolutions and
said certificate for all past, present and future transactions until written
notice of any change hereto or thereto is given to Silicon by this corporation
by certified mail, return receipt requested.
The undersigned further hereby certifies that the following persons are the duly
elected and acting officers of the corporation named above as borrower and that
the following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
<S> <C> <C>
Justin Shelby Kitch CEO, President, Chairman X /s/ Justin Shelby Kitch
------------------------------
- -------------------------------- ---------------------------------- X ----------------------------
- -------------------------------- ---------------------------------- X ----------------------------
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such corporate officer on the
date set forth above.
By: /s/ Justin Shelby Kitch
-------------------------
Its:________________________
<PAGE>
[LOGO] SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: KARTOFFELSOFT INCORPORATED
ACCOUNT OFFICER: Herman White
DATE: July 13,1998
Loan Fee $500.00*
FEES DUE $500.00
-------- =======
*Loan fee inclusive of UCC search and filing fees
Please indicate the method of payment:
( x ) A check for the total amount is attached.
( ) Debit DDA # _____________ for the total amount.
( ) Loan proceed
/s/ Justin Shelby Kitch
--------------------------------------------
Authorized Signer (Date)
--------------------------------------------
Silicon Valley Bank (Date)
Account Officer's Signature
<PAGE>
===============================================================================
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
HOMESTEAD.COM INCORPORATED
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1 ACCOUNTING AND OTHER TERMS...............................................................................4
2 LOAN AND TERMS OF PAYMENT................................................................................4
2.1 Credit Extensions...............................................................................4
2.2 Overadvances....................................................................................5
2.3 Interest Rate, Payments.........................................................................5
2.4 Fees............................................................................................7
3 CONDITIONS OF LOANS......................................................................................7
3.1 Conditions Precedent to Credit Extension........................................................7
3.2 Conditions Precedent to all Credit Extensions...................................................7
4 CREATION OF SECURITY INTEREST............................................................................7
4.1 Grant of Security Interest......................................................................7
5 REPRESENTATIONS AND WARRANTIES...........................................................................8
5.1 Due Organization and Authorization..............................................................8
5.2 Collateral......................................................................................8
5.3 Litigation......................................................................................8
5.4 No Material Adverse Change in Financial Statements..............................................8
5.5 Solvency........................................................................................8
5.6 Regulatory Compliance...........................................................................8
5.7 Subsidiaries....................................................................................9
5.8 Full Disclosure.................................................................................9
6 AFFIRMATIVE COVENANTS....................................................................................9
6.1 Government Compliance...........................................................................9
6.2 Financial Statements, Reports, Certificates.....................................................9
6.3 Inventory; Returns.............................................................................10
6.4 Taxes..........................................................................................10
6.5 Insurance......................................................................................10
6.6 Primary Accounts...............................................................................10
6.7 Financial Covenants............................................................................10
6.8 Registration of Intellectual Property Rights...................................................11
6.9 Loss; Destruction; or Damage...................................................................11
6.10 Further Assurances.............................................................................11
7 NEGATIVE COVENANTS......................................................................................11
7.1 Dispositions...................................................................................11
7.2 Changes in Business, Ownership, Management or Business Locations...............................12
7.3 Mergers or Acquisitions........................................................................12
7.4 Indebtedness...................................................................................12
7.5 Encumbrance....................................................................................12
7.6 Distributions; Investments.....................................................................12
7.7 Transactions with Affiliates...................................................................12
7.8 Subordinated Debt..............................................................................12
7.9 Compliance.....................................................................................12
8 EVENTS OF DEFAULT.......................................................................................13
8.1 Payment Default................................................................................13
8.2 Covenant Default...............................................................................13
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
8.3 Material Adverse Change........................................................................13
8.4 Attachment.....................................................................................13
8.5 Insolvency.....................................................................................13
8.6 Other Agreements...............................................................................14
8.7 Judgments......................................................................................14
8.8 Misrepresentations.............................................................................14
9 BANK'S RIGHTS AND REMEDIES..............................................................................14
9.1 Rights and Remedies............................................................................14
9.2 Power of Attorney..............................................................................15
9.3 Accounts Collection............................................................................15
9.4 Bank Expenses..................................................................................15
9.5 Bank's Liability for Collateral................................................................15
9.6 Remedies Cumulative............................................................................15
9.7 Demand Waiver..................................................................................15
10 NOTICES.................................................................................................15
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER..............................................................16
12 GENERAL PROVISIONS......................................................................................16
12.1 Successors and Assigns.........................................................................16
12.2 Indemnification................................................................................16
12.3 Time of Essence................................................................................16
12.4 Severability of Provision......................................................................16
12.5 Amendments in Writing, Integration.............................................................16
12.6 Counterparts...................................................................................16
12.7 Survival.......................................................................................17
12.8 Confidentiality................................................................................17
12.9 Effect of Amendment and Restatement............................................................17
12.10 Attorneys' Fees, Costs and Expenses............................................................17
13 DEFINITIONS.............................................................................................17
13.1 Definitions....................................................................................17
</TABLE>
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THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated March 1,
2000, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman
Drive, Santa Clara, California 95054 and HOMESTEAD.COM INCORPORATED, formerly
known as HOMESTEAD TECHNOLOGIES INC. formerly known as KARTOFFELSOFT
INCORPORATED ("Borrower"), whose address is 3475 H. Edison Way, Menlo Park,
California 94025.
RECITALS
A. Bank and Borrower are parties to that certain QuickStart Loan
and Security Agreement dated July 13, 1998, as amended (collectively, the
"Original Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital, equipment line and term loan and
to amend and restate in its entirety without novation the Original Agreement
in accordance with the provisions herein. This Agreement shall be construed
to impart upon Bank a duty to act reasonably at all times.
AGREEMENT
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP.
The term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base. Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank
the Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based
on instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have
become due. Bank may rely on any telephone notice given by a person whom Bank
believes is a Responsible Officer or designee. Borrower will indemnify Bank
for any loss Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
2.1.2 EQUIPMENT ADVANCES.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to lend to Borrower, from time to time prior to the Commitment
Termination Date, equipment advances (each an "Equipment
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Advance" and collectively the "Equipment Advances") in an aggregate amount
not to exceed the Committed Equipment Line. When repaid, the Equipment
Advances may not be re-borrowed. The proceeds of the Equipment Advances will
be used solely to reimburse Borrower for the purchase of Eligible Equipment
purchased within 90 days of the Closing Date. Each Equipment Advance shall be
considered a promissory note evidencing the amounts due hereunder for all
purposes. Bank's obligation to lend hereunder shall terminate on the earlier
of (i) the occurrence and continuance of an Event of Default, or (ii) the
Commitment Termination Date. For purposes of this Section, the minimum amount
of each Equipment Advance is $75,000 and the maximum number of Equipment
Advances that will be made is 5.
(b) To obtain an Equipment Advance, Borrower will deliver to Bank a
completed supplement in substantially the form attached as Exhibit E ("Loan
Supplement"), copies of invoices for the Financed Equipment and such
additional information as Bank may request at least five (5) Business Days
before the proposed funding date (the "Funding Date"). On each Funding Date,
Bank will specify in the Loan Supplement for each Equipment Advance, the
Basic Rate, the Loan Factor, and the Payment Dates. If Borrower satisfies the
conditions of each Equipment Advance specified herein, Bank will disburse
such Equipment Advance by internal transfer to Borrower's deposit account
with Bank. Each Equipment Advance may not exceed 100% of the Original Stated
Cost.
(c) Bank's obligation to lend the undisbursed portion of the
Committed Equipment Line will terminate if, in Bank's sole discretion, there
has been a material adverse change in the general affairs, management,
results of operation, condition (financial or otherwise) or the prospects of
Borrower, whether or not arising from transactions in the ordinary course of
business, or there has been any material adverse deviation by Borrower from
the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
2.1.3 TERM LOAN.
(a) Bank will continue to make a Term Loan available to Borrower.
(b) Borrower will pay 24 equal installments of principal of
$13,004.56 plus Interest (the "Term Loan Payment"). Each Term Loan Payment is
payable on the 25th of each month during the term of the loan. Borrower's
final Term Loan Payment, due on January 25, 2002, includes all outstanding
Term Loan principal and accrued interest.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 exceed the lesser of
either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
AS TO ADVANCES.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 1.0 percentage point above the Prime
Rate. After an Event of Default, Obligations accrue interest at 5 percent
above the rate effective immediately before the Event of Default. The interest
rate increases or decreases when the Prime Rate changes. Interest is computed
on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is
payable on the 9th day of each month.
AS TO EQUIPMENT ADVANCES.
(a) Principal and Interest Payments On Payment Dates. Borrower will
repay the Equipment Advances on the terms provided in the Loan Supplement.
Borrower will make payments monthly in
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advance of principal and accrued interest for each Equipment Advance
(collectively, "Scheduled Payments"), on the first Business Day of the month
following the Funding Date (or commencing on the Funding Date if the Funding
Date is the first Business Day of the month) with respect to such Equipment
Advance and continuing thereafter during the Repayment Period on the first
Business Day of each calendar month (each a "Payment Date"), in an amount
equal to the Loan Factor multiplied by the Loan Amount for such Equipment
Advance as of such Payment Date. All unpaid principal and accrued interest is
due and payable in full on the last Payment Date with respect to such
Equipment Advance. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. An
Equipment Advance may only be prepaid in accordance with Sections 2.3 (e) and
2.3 (g).
(b) Interest Rate. Borrower will pay interest on the Payment Dates
(as described above) at the per annum rate of interest equal to the Basic
Rate determined by Bank as of the Funding Date for each Equipment Advance in
accordance with the definition of the Basic Rate. Any amounts outstanding
during the continuance of an Event of Default shall bear interest at a per
annum rate equal to the Basic Rate plus five percent (5%). If any change in
the law increases Bank's expenses or decreases its return from the Equipment
Advances, Borrower will pay Bank upon request the amount of such increase or
decrease.
(c) Interim Payment. In addition to the Scheduled Payments, on the
Funding Date for each Equipment Advance (unless the Funding Date is the first
Business Day of the month) Borrower shall pay to Bank, on behalf of Bank, the
projected interest to accrue from the Funding Date to the first Payment Date,
pursuant to paragraph "(b)" of this Section.
(d) Final Payment. On the Maturity Date with respect to each
Equipment Advance, Borrower will pay, in addition to the unpaid principal and
accrued interest and all other amounts due on such date with respect to such
Equipment Advance, an amount equal to the Final Payment.
(e) Prepayment Upon an Event of Loss. If any Financed Equipment is
subject to an Event of Loss as defined in Section 6.9 and Borrower is
required to or elects to prepay the Equipment Advance with respect to such
Financed Equipment pursuant to Section 6.9, then such Equipment Advance shall
be prepaid to the extent and in the manner provided in such section.
(f) Mandatory Prepayment Upon an Acceleration. If the Equipment
Advances are accelerated following the occurrence of an Event of Default or
otherwise (other than following an Event of Loss), then Borrower will
immediately pay to Bank (i) all unpaid Scheduled Payments (including
principal and interest) with respect to each Equipment Advance, (ii) all
remaining Scheduled Payments (including principal and interest unpaid) (iii)
all accrued unpaid interest, including the default rate of interest, to the
date of the prepayment, (iv) the Final Payment and (v) all other sums, if
any, that shall have become due and payable with respect to any Equipment
Advance.
(g) Permitted Prepayment of Loans. Borrower shall have the option to
prepay all, but not less than all, of the Equipment Advances advanced by Bank
under this Agreement, PROVIDED Borrower (i) provides written notice to Bank
of its election to prepay the Equipment Advances at least thirty (30) days
prior to such prepayment, and (ii) pays, on the date of the prepayment (A)
all unpaid Scheduled Payments (including principal and interest) with respect
to each Equipment Advance; (B) all remaining Scheduled Payments (including
principal and interest); (C) all unpaid accrued interest to the date of the
prepayment; (D) the Final Payment; and (E) all other sums, if any, that shall
have become due and payable hereunder with respect to this Agreement.
AS TO TERM LOAN.
(a) Interest Rate. (i) Term Loan accrue interest at a per annum rate
equal to the Prime Rate. After an Event of Default, the Obligations accrue
interest at 5 percent above the rate effective immediately before the Event
of Default. The interest rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for the actual number of days
elapsed.
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2.3.2 REQUEST TO DEBIT ACCOUNTS.
Bank may debit any of Borrower's deposit accounts including Account
Number 3300123800 for principal and interest payments or any amounts Borrower
owes Bank when due. Bank will notify Borrower when it debits Borrower's
accounts. These debits are not a set-off.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$7,500 for the Committed Revolving Line due on the Closing Date;
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through and after the date
of this Agreement, are payable when due; and
(c) Good Faith Deposit. Borrower has paid to Bank a Good Faith
Deposit of $2,500 to initiate Banks due diligence review process.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires and a satisfactory Collateral audit. The initial Credit Extension
shall be an Advance to pay off Borrower's loan #1100062565 with Bank, subject
to the terms and conditions of this Agreement.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default may have occurred and
be continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations
and warranties of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and
performance of each of Borrower's duties under the Loan Documents. Except for
Permitted Liens, any security interest will be a first priority security
interest in the Collateral. Bank may place a "hold" on any deposit account
pledged as Collateral. If this Agreement is terminated, Bank's lien and
security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
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5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing
in its state of formation and qualified and licensed to do business in, and
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be qualified, except where the failure
to do so could not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower's formation
documents, nor constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default under any agreement to
which or by which it is bound in which the default could cause reasonably be
expected to cause a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has no notice of any actual or imminent Insolvency
Proceeding of any account debtor whose accounts are an Eligible Account in
any Borrowing Base Certificate. All Inventory is in all material respects of
good and marketable quality, free from material defects. Borrower is the sole
owner of the Intellectual Property, except for non-exclusive licenses granted
to its customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid
or unenforceable, in whole or in part, and no claim has been made that any
part of the Intellectual Property violates the rights of any third party,
except to the extent such claim could not reasonably be expected to cause a
Material Adverse Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a
likely adverse decision could reasonably be expected to cause a Material
Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects
Borrower's consolidated financial condition and Borrower's consolidated
results of operations. There has not been any material deterioration in
Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
in this Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin
stock (under Regulations T and U of the Federal Reserve Board of Governors).
Borrower has complied in all material respects with the Federal Fair Labor
Standards Act. Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than
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legally. Borrower and each Subsidiary has timely filed all required tax
returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all
notices to, all government authorities that are necessary to continue its
business as currently conducted, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other
equity securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower
in any certificate or written statement given to Bank (taken together with
all such written certificates and written statements to Bank) contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the certificates or statements
not misleading. It being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period
or periods covered by such projections and forecasts may differ from the
projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or
operations or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period, in a form and certified by a
Responsible Officer acceptable to Bank; (ii) as soon as available, but no
later than 90 days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower
or any Subsidiary of $100,000 or more; (iv) budgets, sales projections,
operating plans or other financial information Bank reasonably requests; and
(v) prompt notice of any material change in the composition of the
Intellectual Property, including any subsequent ownership right of Borrower
in or to any Copyright, Patent or Trademark not shown in any intellectual
property security agreement between Borrower and Bank or knowledge of an
event that materially adversely affects the value of the Intellectual
Property.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer
in the form of Exhibit C, with aged listings of accounts receivable and
accounts payable.
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(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral at Borrower's
expense, but the audits will be conducted no more often than every 6 months
unless an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at
execution of this Agreement. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments and
will deliver to Bank, on demand, appropriate certificates attesting to the
payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank requests. Insurance policies will be in a form, with
companies, and in amounts that are reasonably satisfactory to Bank. All
property policies will have a lender's loss payable endorsement showing Bank
as an additional loss payee and all liability policies will show the Bank as
an additional insured and all policies will provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of
all premium payments. Subject to Section 6.9 below, so long as no Event of
Default has occurred and is continuing, Borrower shall have the option of
applying the proceeds of any casualty policy to the replacement or repair of
destroyed or damaged property; provided that, after the occurrence and during
the continuance of an Event of Default, all proceeds payable under any such
casualty policy shall, at the option of Bank, be payable to Bank on account
of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts
and short-term investment accounts with Bank.
6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each month:
(i) LIQUIDITY COVERAGE. A ratio of unrestricted cash plus
50% of Eligible Accounts greater than either (a) two times the outstanding
Credit Extensions or (b) four months Remaining Months Liquidity. At such time
as Borrower achieves a minimum quarterly profit of $1 for 2 consecutive
quarters, the Liquidity Coverage shall be replaced by a Debt Service Coverage
described in (ii) below.
(ii) DEBT SERVICE COVERAGE. A ratio of earnings before tax
plus depreciation and amortization divided by the sum of current maturities
of long term debt plus interest expense monthly of at least 1.50 to 1.00.
(iii) PROFITABILITY. Borrower will have a minimum net
profit of $1 for each month, except that Borrower may suffer a quarterly loss
not to exceed 125% of Borrower's financial projections approved by its Board
of Directors in form and substance acceptable to Bank.
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6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property within
30 days of the date of this Agreement, and additional Intellectual Property
rights developed or acquired including revisions or additions with any
product before the sale or licensing of the product to any third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in
writing of material infringements and (ii) not allow any Intellectual
Property to be abandoned, forfeited or dedicated to the public without Bank's
written consent.
6.9 LOSS; DESTRUCTION; OR DAMAGE.
Borrower will bear the risk of the Financed Equipment being lost,
stolen, destroyed, or damaged. If during the term of this Agreement any item
of Financed Equipment is lost, stolen, destroyed, damaged beyond repair,
rendered permanently unfit for use, or seized by a governmental authority for
any reason for a period equal to at least the remainder of the term of this
Agreement (an "Event of Loss"), then in each case, Borrower:
(a) prior to the occurrence of an Event of Default, at Borrower's
option, will (i) pay to Bank on account of the Obligations all accrued
interest to the date of the prepayment, plus all outstanding principal, plus
the Final Payment; or (ii) repair or replace any Financed Equipment subject
to an Event of Loss provided the repaired or replaced Financed Equipment is
of equal or like value to the Financed Equipment subject to an Event of Loss
and provided further that Bank has a first priority perfected security
interest in such repaired or replaced Financed Equipment.
(b) during the continuance of an Event of Default, on or before the
Payment Date after such Event of Loss for each such item of Financed
Equipment subject to such Event of Loss, Borrower will, at Bank's option, pay
to Bank an amount equal to the sum of: (i) all accrued and unpaid Scheduled
Payments (with respect to such Equipment Advance related to the Event of
Loss) due prior to the next such Payment Date, (ii) all Regularly Scheduled
Payments (including principal and interest), (iii) the Final Payment plus
(iv) all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due amounts.
(c) On the date of receipt by Bank of the amount specified above
with respect to each such item of Financed Equipment subject to an Event of
Loss, this Agreement shall terminate as to such Financed Equipment. If any
proceeds of insurance or awards received from governmental authorities are in
excess of the amount owed under this Section, Bank shall promptly remit to
Borrower the amount in excess of the amount owed to Bank.
6.10 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank's security
interest in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior
written consent, which will not be unreasonably withheld:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part
of its business or property, other than Transfers (i) of Inventory in the
ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the
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property of Borrower or its Subsidiaries in the ordinary course of business;
or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower or
reasonably related thereto or have a material change in its ownership or
management (other than the sale of Borrower's equity securities in a public
offering or to venture capital investors approved by Bank) of greater than
25%. Borrower will not, without at least 30 days prior written notice,
relocate its chief executive office or add any new offices or business
locations.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) result in a decrease of more than 25% of Tangible Net
Worth. A Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign
or convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or
permit any Collateral not to be subject to the first priority security
interest granted here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of
its Subsidiaries to do so. Pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock, except for
repurchases of stock from former employees or directors of Borrower under the
terms of applicable repurchase agreements in an aggregate amount not to
exceed $50,000 in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchase.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with
any Affiliate except transactions that are in the ordinary course of
Borrower's business, on terms less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under
the terms of the Subordinated Debt, or amend any provision in any document
relating to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to
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purchase or carry margin stock, or use the proceeds of any Credit Extension
for that purpose; fail to meet the minimum funding requirements of ERISA,
permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to
occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonable be expected to
have a material adverse effect on Borrower's business or operations or would
reasonably be expected to cause a Material Adverse Change, or permit any of
its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 business
days after their due date. During the additional period the failure to cure
the default is not an Event of Default (but no Credit Extension will be made
during the cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7 or does not perform or observe any other material
term, condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or
cannot be cured after Borrower's attempts within 10 day period, and the
default may be cured within a reasonable time, then Borrower has an
additional period (of not more than 30 days) to attempt to cure the default.
During the additional time, the failure to cure the default is not an Event
of Default (but no Credit Extensions will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or
priority of the Bank's security interest in the Collateral or in the value of
such Collateral (other than normal depreciation) which is not covered by
adequate insurance or (ii) if the Bank determines, based upon information
available to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower will fail to comply with one or more of the
financial covenants in Section 6 during the next succeeding financial
reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in 10 days, or if Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business or if a judgment or other claim becomes a Lien on a
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within 10 days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by
Borrower (but no Credit Extensions will be made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made
before any Insolvency Proceeding is dismissed);
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8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $50,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without
notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise
any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit
or the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any
name, trade secrets, trade names, Trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section,
Borrower's rights under all licenses and all franchise agreements inure to
Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
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9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues,
Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse
Borrower's name on any checks or other forms of payment or security; (ii)
sign Borrower's name on any invoice or bill of lading for any Account or
drafts against account debtors, (iii) make, settle, and adjust all claims
under Borrower's insurance policies; (iv) settle and adjust disputes and
claims about the Accounts directly with account debtors, for amounts and on
terms Bank determines reasonable; and (v) transfer the Collateral into the
name of Bank or a third party as the Code permits. Bank may exercise the
power of attorney to sign Borrower's name on any documents necessary to
perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred. Bank's appointment as Borrower's
attorney in fact, and all of Bank's rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and
verify the amount of the Account. Borrower must collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank
in the form received from the account debtor, with proper endorsements for
deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to
make similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9-207
of the Code, it is not liable for: (a) the safekeeping of the Collateral; (b)
any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee,
or other person. Borrower bears all risk of loss, damage or destruction of
the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right
or remedy is not an election, and Bank's waiver of any Event of Default is
not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
10 NOTICES
All notices or demands by any party about this Agreement or any
other related agreement must be in writing and be personally delivered or
sent by an overnight delivery service, by certified mail,
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postage prepaid, return receipt requested, or by telefacsimile to the
addresses set forth at the beginning of this Agreement. A party may change
its notice address by giving the other party written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.
THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or
any rights under it without Bank's prior written consent which may be granted
or withheld in Bank's discretion. Bank has the right, without the consent of
or notice to Borrower, to sell, transfer, negotiate, or grant participation
in all or any part of, or any interest in, Bank's obligations, rights and
benefits under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in
this Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into
this Agreement and the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
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12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until
all statutes of limitations for actions that may be brought against Bank have
run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the
same degree of care that it exercises for its own proprietary information,
but disclosure of information may be made (i) to Bank's subsidiaries or
affiliates in connection with their business with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans, (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank's examination or audit and (v) as Bank considers
appropriate exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.
12.9 EFFECT OF AMENDMENT AND RESTATEMENT.
This Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All Credit Extensions or loans
outstanding under the Original Agreement are and shall continue to be
outstanding under this Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
12.10 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred,
in addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or
lease of goods (including licensing software and other technology) or
provision of services, all credit insurance, guaranties, other security and
all merchandise returned or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly
or indirectly the Person, any Person that controls or is controlled by or is
under common control with the Person, and each of that Person's senior
executive officers, directors, partners and, for any Person that is a limited
liability company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan
Documents (including appeals or Insolvency Proceedings).
"BASIC RATE" is, as of the Funding Date, the per annum rate of
interest (based on a year of 360 days) equal to the sum of (a) the U.S.
Treasury note yield to maturity for a term equal to the Treasury
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Note Maturity as quoted in The Wall Street Journal on the day the Loan
Supplement is prepared, plus (b) the Loan Margin.
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs
or any equipment containing the information.
"BORROWING BASE" is 75% of Eligible Accounts as determined by Bank
from Borrower's most recent Borrowing Base Certificate; PROVIDED, HOWEVER,
that Bank may lower the percentage of the Borrowing Base after performing an
audit of Borrower's Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CAPITALIZED PRODUCT DEVELOPMENT COSTS" are all costs associated
with the development of Borrower's product, including, but not limited to
software, that are not recorded as an expense and have been classified as an
asset account.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code.
"COLLATERAL" is the property described on EXHIBIT A.
"COMMITMENT TERMINATION DATE" June 1, 2000.
"COMMITTED EQUIPMENT LINE" is a Credit Extension of up to $1,500,000.
"COMMITTED REVOLVING LINE" is an Advance of up to $750,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an
obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (ii) any obligations for undrawn letters of credit for the
account of that Person; and (iii) all obligations from any interest rate,
currency or commodity swap agreement, interest rate cap or collar agreement,
or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
but "Contingent Obligation" does not include endorsements in the ordinary
course of business. The amount of a Contingent Obligation is the stated or
determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the Person in good faith; but the
amount may not exceed the maximum of the obligations under the guarantee or
other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Revolving Advances, Equipment Advance and
Term Loan, or any other extension of credit by Bank for Borrower's benefit.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties
in Section 5; BUT Bank may change eligibility standards by giving Borrower
notice. Unless Bank agrees otherwise in writing, Eligible Accounts will not
include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts
have not been paid within 90 days of invoice date;
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(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose
total obligations to Borrower exceed 25% of all Accounts, for the
amounts that exceed that percentage, unless the Bank approves in
writing;
(e) Accounts for which the account debtor does not have its
principal place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or
instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, bill and hold, or other terms if account debtor's payment
may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but
only up to the disputed or claimed amount), or if the Account Debtor
is subject to an Insolvency Proceeding, or becomes insolvent, or
goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"ELIGIBLE EQUIPMENT" is general purpose computer equipment, office
equipment, test and laboratory equipment and furnishings that complies with
all of Borrower's representations and warranties to Bank and which is
acceptable to Bank in all respects. All Equipment financed with the proceeds
of Equipment Advances shall be new equipment.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.2.
"ERISA" is the Employment Retirement Income Security Act of 1974,
and its regulations.
"FINAL PAYMENT" is a payment (in addition to and not a substitution
for the regular monthly payments of principal plus accrued interest) due on
the Maturity Date for such Equipment Advance equal to the Loan Amount for
such Equipment Advance multiplied by the Final Payment Percentage.
"FINAL PAYMENT PERCENTAGE" is, for each Equipment Advance, 8%.
"FINANCED EQUIPMENT" is defined in the Loan Supplement.
"FUNDING DATE" is any date on which an Equipment Advance is made to
or on account of Borrower.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the
deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations evidenced
by notes, bonds, debentures or similar instruments, (c) capital lease
obligations and (d) Contingent Obligations.
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"INSOLVENCY PROCEEDING" are proceedings by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors,
compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing,
created, acquired or held;
(c) All design rights which may be available to Borrower now or
later created, acquired or held;
(d) Any claims for damages (past, present or future) for
infringement of any of the rights above, with the right, but not the
obligation, to sue and collect damages for use or infringement of the
intellectual property rights above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has
any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for
sale or lease or to be furnished under a contract of service, of every kind
and description now or later owned by or in the custody or possession, actual
or constructive, of Borrower, including inventory temporarily out of its
custody or possession or in transit and including returns on any accounts or
other proceeds (including insurance proceeds) from the sale or disposition of
any of the foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, Credit
Extension or capital contribution to any Person.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN AMOUNT" is the aggregate amount of the Equipment Advance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or
notes or guaranties executed by Borrower or Guarantor, and any other present
or future agreement between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated.
"LOAN FACTOR" is the percentage which results from amortizing the
Equipment Advance over the Repayment Period, using the Basic Rate as the
interest rate.
"LOAN MARGIN" is 275 basis points.
"LOAN SUPPLEMENT" is attached as Exhibit E.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"MATURITY DATE" is, with respect to each Equipment Advance, the last
day of the Repayment Period for such Equipment Advance, or if earlier, the
date of acceleration of such Equipment Advance by Bank following an Event of
Default.
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"OBLIGATIONS" are debts, principal, interest, Bank Expenses and
other amounts Borrower owes Bank now or later, including cash management
services, letters of credit and foreign exchange contracts, if any and
including interest accruing after Insolvency Proceedings begin and debts,
liabilities, or obligations of Borrower assigned to Bank.
"ORIGINAL AGREEMENT" has the meaning set forth in recital paragraph
A.
"ORIGINAL STATED COST" is (i), the original cost to the Borrower of
the item of new Equipment net of any and all freight, installation, tax or
(ii) the fair market value assigned to such item of used Equipment by mutual
agreement of Borrower and Bank at the time of making of the Equipment Advance.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course
of business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing
Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard &
Poor's Corporation or Moody's Investors Service, Inc., and (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges
or levies, either not delinquent or being contested in good faith and for
which Borrower maintains adequate reserves on its Books, IF they have no
priority over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by
Borrower or its Subsidiaries incurred for financing the acquisition of the
Equipment, or (ii) existing on equipment when acquired, IF the Lien is
confined to the property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any
license or sublicense, IF the licenses and sublicenses permit granting Bank a
security interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
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(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
may not increase.
"PERSON" is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company association, trust,
unincorporated organization, association, corporation, institution, public
benefit corporation, firm, joint stock company, estate, entity or government
agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.
"REMAINING MONTHS LIQUIDITY" Borrower will maintain, as of the last
day of each month, at least 4 months Remaining Months Liquidity. "Remaining
Months Liquidity" is cash on hand (and cash equivalents) plus 50% of
Borrower's net accounts receivable, divided by Cash Burn. If cash (and cash
equivalents) increases from the prior period, "Cash Burn" is cash (prior
period) minus cash (current period) plus increases/less decreases in short
and long term borrowings plus increases/less decreases in stock, paid-in
capital and Subordinated Debt. If cash (and cash equivalents) decreases from
prior period, "Cash Burn" is cash (prior period) less (current period) minus
increases/plus decreases in short and long term borrowings minus
increases/plus decreases in stock, paid-in capital and subordinated debt.
"REPAYMENT PERIOD" as to the Equipment Advances, is 24 months.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is March 1, 2001.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of
which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates
of the Person.
"TERM LOAN" a loan of $312,109.18
"TERM LOAN MATURITY DATE" is January 25, 2002.
"TRADEMARKS" are trademark and servicemark rights, registered or
not, applications to register and registrations and like protections, and the
entire goodwill of the business of Assignor connected with the trademarks.
"TREASURY NOTE MATURITY" is 24 months.
BORROWER:
Homestead.com Incorporated
By: /s/ Andrew Chmyz
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Title: Controller
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BANK:
SILICON VALLEY BANK
By:
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Title:
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EXHIBIT A
The Collateral consists of all of Borrower's right, title and
interest in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily Borrower's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired; all trade secret rights, including all rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
<PAGE>
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: _______________________
FAX#: (408) 496-2426 TIME: _______________________
________________________________________________________________________________
FROM: HOMESTEAD.COM INCORPORATED
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: /s/ Andrew Chmyz
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: /s/ Andrew Chmyz
-----------------------------------------------------------
PHONE NUMBER: (650) 549-3124
-------------------------------------------------------------------
FROM ACCOUNT #________________ TO ACCOUNT #_______________
REQUEST TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $__________________________
PRINCIPAL PAYMENT (ONLY) $__________________________
INTEREST PAYMENT (ONLY) $__________________________
PRINCIPAL AND INTEREST (PAYMENT) $__________________________
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All Borrower's representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
on the date of the telephone request for and Advance confirmed by this Borrowing
Certificate; but those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as of
that date.
________________________________________________________________________________
________________________________________________________________________________
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
_____________________________________ __________________________________
Authorized Requester Phone #
_____________________________________ __________________________________
Received By (Bank) Phone #
____________________________________
Authorized Signature (Bank)
________________________________________________________________________________
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
________________________________________________________________________________
Borrower Homestead.com Incorporated Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Commitment Amount: $750,000
________________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
--------------- ------------------------
2. Additions (please explain on reverse) ______ $
------------------------
3. TOTAL ACCOUNTS RECEIVABLE $
------------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
---------------
5. Balance of 50% over 90 day accounts $
---------------
6. Credit balances over 90 days $
---------------
7. Concentration Limits $
---------------
8. Foreign Accounts $
---------------
9. Governmental Accounts $
---------------
10. Contra Accounts $
---------------
11. Promotion or Demo Accounts $
---------------
12. Intercompany/Employee Accounts $
---------------
13. Other (please explain on reverse) $
---------------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
--------------------------
15. Eligible Accounts (#3 minus #14) $
--------------------------
16. LOAN VALUE OF ACCOUNTS (75% of #15) $
--------------------------
BALANCES
17. Maximum Loan Amount $
---------------
18. Total Funds Available [Lesser of #17 or #16] $
--------------------------
19. Present balance owing on Line of Credit $ 0
---------------
20. Outstanding under Sublimits ( ) $ 0
---------------
21. RESERVE POSITION (#18 minus #19 and #20) $
--------------------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
----------------------
COMMENTS:
BANK USE ONLY
Homestead.com Incorporated
Rec'd By:____________
By:_________________________________ Auth. Signer
Authorized Signer Date:________________
Verified:____________
Auth. Signer
Date:________________
_____________________
----------------------
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM: HOMESTEAD.COM INCORPORATED
The undersigned authorized officer of Homestead.com Incorporated
("Borrower") certifies that under the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank "Agreement"), (i)
Borrower is in complete compliance for the period ending 2/29/00 with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ -------- --------
<S> <C> <C>
Monthly financial statements + CC Monthly within 30 days _X_ Yes ___ No
Annual (Audited) FYE within 90 days ___ Yes _X_ No
A/R & A/P Agings Monthly within 30 days _X_ Yes ___ No
Borrowing Base Certificate Monthly within 30 days _X_ Yes ___ No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Debt Service* ___ Yes _X_ No
Minimum Liquidity Coverage** _X_ Yes ___ No
Profitability: Monthly $ _X_ Yes ___ No
------------
Losses not to exceed: a maximum quarterly loss of 125% of the _X_ Yes ___ No
financial projections.
</TABLE>
* A ratio of earnings before tax plus depreciation and amortization
divided by the sum of current maturities of long term debt plus
interest expense monthly of at lease 1.50 to 1.00.
** A ratio of unrestricted cash plus 50% of Eligible Accounts greater than
either (a) two times the outstanding Credit Extensions or (b) four
months Remaining Months Liquidity. At such time as Borrower achieves a
minimum quarterly of $1 for 2 consecutive quarters, the Liquidity
Coverage shall be replaced by a Debt Service Coverage.
<PAGE>
-------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached.
BANK USE ONLY
Sincerely,
Rec'd By:_______________
Homestead.com Incorporated, Auth. Signer
Date:___________________
/s/ Andrew Chmyz
- -------------------------- Verified:_______________
SIGNATURE Auth. Signer
Date:___________________
Controller
- -------------------------- Compliance Status: Yes No
TITLE
-------------------------
3/27/00
- --------------------------
DATE
<PAGE>
[LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
- -------------------------------------------------------------------------------
BORROWER: HOMESTEAD.COM INCORPORATED
LOAN OFFICER: QUENTIN FALCONER
DATE: MARCH 1, 2000
REVOLVING LOAN FEE $7,500.00
CREDIT REPORT 35.00
UCC SEARCH FEE 150.00
UCC FILING FEE 20.00
INTELLECTUAL PROPERTY FILING FEES 550.00
DOCUMENTATION FEE 1,500.00
LESS GOOD FAITH DEPOSIT ($2,500.00)
TOTAL FEE DUE $7,255.00
------------ =========
PLEASE INDICATE THE METHOD OF PAYMENT:
( ) A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
( x ) DEBIT DDA #3300123800 FOR THE TOTAL AMOUNT.
( ) LOAN PROCEEDS
BORROWER:
BY: /s/ Andrew Chmyz
--------------------------------
(AUTHORIZED SIGNER)
- -----------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of
March 1,2000 by and between SILICON VALLEY BANK ("Bank") and Homestead.com
Incorporated ("Grantor").
RECITALS
A. Bank has agreed to make certain Credit Extensions of money
and to extend certain financial accommodation to Grantor (the "Loans") in the
amounts and manner set forth in that certain Loan and Security Agreement by
and between Bank and Grantor dated March 1, 2000 (as the same may be amended,
modified or supplemented from time to time, the "Loan Agreement"; capitalized
terms used herein are used as defined in the Loan Agreement). Bank is willing
to make the Loans to Grantor, but only upon the condition, among others, that
Grantor shall grant to Bank a security interest in certain Copyrights,
Trademarks, Patents, and Mask Works to secure the obligations of Grantor
under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has
granted to Bank a security interest in all of Grantor's right, title and
interest, whether presently existing or hereafter acquired, in, to and under
all of the Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, and intending to be legally bound, as
collateral security for the prompt and complete payment when due of its
obligations under the Loan Agreement, Grantor hereby represents, warrants,
covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants
and pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works
listed on Schedules A, B, C, and D hereto), and including without limitation
all proceeds thereof (such as, by way of example but not by way of
limitation, license royalties and proceeds of infringement suits), the right
to sue for past, present and future infringements, all rights corresponding
thereto throughout the world and all re-issues, divisions continuations,
renewals, extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity.
Each right, power and remedy of Bank provided for herein or in the Loan
Agreement or any of the Loan Documents, or now or hereafter existing at law
or in equity shall be cumulative and concurrent and shall be in addition to
every right, power or remedy provided for herein and the exercise by Bank of
any one or more of the rights, powers or remedies provided for in this
Intellectual Property Security Agreement, the Loan Agreement or any of the
other Loan Documents, or now or hereafter existing at law or in equity, shall
not preclude the simultaneous or later exercise by any person, including
Bank, of any or all other rights, powers or remedies.
IN WITNESS WHEREOF, the parties have cause this Intellectual
Property Security Agreement to be duly executed by its officers thereunto
duly authorized as of the first date written above.
<PAGE>
GRANTOR:
Address of Grantor: Homestead.com Incorporated
3475 H. Edison Way By: /s/ Andrew Chmyz
- ----------------------------------- -----------------------------
Menlo Park, CA 94025 Title: Controller
- ----------------------------------- --------------------------
Attn:
------------------------------
BANK:
Address of Bank: SILICON VALLEY BANK
3003 Tasman Drive By:
Santa Clara, CA 95054-1191 -----------------------------
Title:
Attn: --------------------------
------------------------------
2
<PAGE>
EXHIBIT A
---------
Copyrights
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
None
<PAGE>
EXHIBIT B
---------
Patents
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
None
<PAGE>
EXHIBIT C
---------
Trademarks
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
"HOMESTEAD" 2286063 10/12/99
<PAGE>
EXHIBIT D
---------
Mask Works
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
None
<PAGE>
EXHIBIT E
---------
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT No. []
LOAN AGREEMENT SUPPLEMENT No. [], dated ___________, 2000 ("Supplement"), to
the Loan and Security Agreement dated as of ________, 2000 (the "Loan
Agreement") by and between the undersigned ("Borrower"), and Silicon Valley
Bank ("Bank").
Capitalized terms used herein but not otherwise defined herein are used with
the respective meanings given to such terms in the Loan Agreement.
To secure the prompt payment by Borrower of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrower of all
the terms contained in the Loan Agreement, Borrower grants Bank, a first
priority security interest in each item of equipment and other property
described in Annex A hereto, which equipment and other property shall be
deemed to be additional Financed Equipment and Collateral. The Loan Agreement
is hereby incorporated by reference herein and is hereby ratified, approved
and confirmed.
Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto.
The proceeds of the Loan should be transferred to Borrower's account with
Bank set forth below:
Bank Name: Silicon Valley Bank
Account No.:
Borrower hereby certifies that (a) the foregoing information is true and
correct and authorizes Bank to endorse in its respective books and records,
the Basic Rate applicable to the Funding Date of the Loan contemplated in
this Loan Agreement Supplement and the principal amount set forth in the Loan
Terms Schedule; (b) the representations and warranties made by Borrower in
the Loan Agreement are true and correct on the date hereof and will be true
and correct on such Funding Date. No Event of Default has occurred and is
continuing under the Loan Agreement. This Supplement may be executed by
Borrower and Bank in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
This Supplement is delivered as of this day and year first above written.
SILICON VALLEY BANK Homestead.com
---------------------------------------
By: By: /s/ Andrew Chmyz
------------------------------- ------------------------------------
Name: Name: Andrew Chmyz
-------------------------- ----------------------------------
Title: Title: Controller
------------------------- ---------------------------------
Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule
<PAGE>
ANNEX A TO EXHIBIT E
--------------------
The Financed Equipment being financed with the Equipment Advance which this
Loan Agreement Supplement is being executed is listed below. Upon the funding
of such Equipment Advance, this schedule automatically shall be deemed to be
a part of the Collateral.
Description of Equipment: Make Model Serial # Invoice #
See attached invoices
2
<PAGE>
ANNEX B TO EXHIBIT E
--------------------
LOAN TERMS SCHEDULE #_________
Loan Funding Date:____________, 2000
Original Loan Amount: $___________
Basic Rate: _______%
Loan Factor: ________%
Scheduled Payment Dates and Amounts*:
<TABLE>
<S> <C> <C>
One (1) payment of $______________ due ______________________
_______ payment of $______________ due monthly in advance from _______________ through __________.
One (1) payment of $______________ due _______________________
</TABLE>
Maturity Date: ____________
Final Payment: An additional amount equal to the Final Payment Percentage
multiplied by the Loan Amount then in effect, shall be paid on
the Maturity Date with respect to such Loan.
Payment No. Payment Date
1
2
3
4
...
35
[36]
...
*/ The amount of each Scheduled Payment will change as the Loan Amount
changes.
3
<PAGE>
CC FINANCE L.L.C.
Raritan Plaza III
101 Fieldcrest Ave., #500
Edison, NJ 08837
MASTER LEASE AGREEMENT
NO. 521596
PART I
This Master Lease Agreement between CC FINANCE L.L.C. ("Lessor") and
the undersigned ("Lessee"), is in consideration of the mutual covenants,
terms and conditions herein contained, and shall apply to certain property,
together with all components, parts, additions and attachments now
incorporated therein or hereafter incorporated herein (all such property
hereinafter collectively referred to as the "Equipment") described in the
Equipment Schedule(s) to be executed pursuant hereto (all such schedules are
hereinafter collectively referred to as the "Equipment Schedule"). This
Agreement shall also be subject to the additional terms and conditions set
forth in the Equipment Schedule(s). The term of this Agreement with respect
to any item of the Equipment shall consist of the term set forth in the
Equipment Schedule relating thereto. This Agreement shall be effective with
respect to each Equipment Schedule from and after the date of acceptance by
Lessor of said Equipment Schedule. Lease payments are to be made in the
manner specified in the Equipment Schedule and shall commence on the date the
Equipment Schedule is accepted by Lessor. Lessee must notify Lessor of
Equipment to be included in any proposed Equipment Schedule and Lessor
reserves the right to accept or reject such Equipment. Lessor's acceptance of
the Equipment Schedule shall be evidenced by Lessor's execution of the
Acceptance Section of each Schedule. Upon receipt of written notice by either
party hereto by certified mail from the other party further attachments,
incorporations or additions of Equipment Schedule(s) to this Agreement shall
cease. The cessation of further additions to this Agreement shall not in any
way affect the validity and enforceability of this Agreement and any
equipment.
PART II
THIS LEASE CANNOT BE CANCELLED EXCEPT AS EXPRESSLY PROVIDED HEREIN. THIS LEASE
SHALL BECOME EFFECTIVE UPON EXECUTION BY LESSOR AT ITS OFFICE.
1. TERMS AND CONDITIONS. In consideration of Lessor's purchase of the equipment
selected by Lessee, Lessor leases to Lessee, and Lessee leases from Lessor, the
equipment identified on the front hereof and on any attached schedule
("Equipment") pursuant to the terms and conditions set forth herein. Lessee
authorizes Lessor to insert in this Equipment Lease Agreement ("Lease") serial
numbers and other identification data when determined. THIS LEASE CONSTITUTES
THE FULL AND ENTIRE AGREEMENT between the Lessor and Lessee in connection with
the Equipment and MERGES ANY OTHER UNDERSTANDING. In no case shall the
preprinted terms and conditions on Lessee's or Supplier's standard transactional
documentation (e.g., order forms and invoices) apply to Lessor. Neither party
relies on any other statement, representation or assurance of cure. THE LEASE
CAN BE NEITHER CANCELLED NOR MODIFIED except by a written agreement signed by
Lessee and by a corporate officer of Lessor.
2. LESSEE'S AND GUARANTOR'S WARRANTIES TO LESSOR. Lessee and any Guarantor
expressly represent and warrant to Lessor, and Lessor relies on, the fact that:
a) said parties have read and understood this Lease before it was signed; b)
SAID PARTIES HAVE SELECTED AND ARE FULLY SATISFIED WITH BOTH THE EQUIPMENT AND
THE SUPPLIER WHO SOLD THE EQUIPMENT TO LESSOR; c) said parties will authorize
Lessor to pay for the Equipment only after Lessee has received and accepted the
Equipment as fully operable for Lessee's purposes; d) said parties have freely
chosen to lease, not buy, from Lessor only after having considered other means
of obtaining the use of the Equipment; e) NEITHER THE SUPPLIER OF THE EQUIPMENT
NOR ANY OF ITS SALESPERSONS ARE, OR HAVE ACTED AS, LESSOR'S AGENTS OR EMPLOYEES;
f) financial information and other statements provided to Lessor are accurate
and correct and will be updated upon Lessor's request during the term of the
Lease; g) said parties are currently meeting all debts as such come due; h) the
Equipment is leased exclusively for Lessee's established business purposes and
not for starting a new business or for personal, family or household purposes;
i) Lessee has unrestricted power to enter into this Lease, has duly authorized
the person executing it, and certifies that all signatures are authentic; and j)
said parties will pay all costs connected with the Equipment, including taxes,
insurance, repairs, shipping, early termination fees, collection costs and other
expenses normally paid in a net lease.
3. LESSEE'S WAIVER OF DAMAGES AND WARRANTIES FROM LESSOR. a) Lessee leases
the Equipment from Lessor "AS IS/WHERE IS." EXCEPT AS TO QUIET ENJOYMENT,
LESSOR MAKES ABSOLUTELY NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; b) IF THE
EQUIPMENT IS NOT PROPERLY INSTALLED, DOES NOT OPERATE AS REPRESENTED OR
WARRANTED BY THE SUPPLIER, OR IS UNSATISFACTORY FOR ANY REASON WHATSOEVER,
LESSEE SHALL MAKE ANY CLAIM ON ACCOUNT THEREOF SOLELY AGAINST THE SUPPLIER
AND LESSEE HEREBY WAIVES ANY SUCH CLAIM AGAINST LESSOR. All warranties from
the Supplier to Lessor are hereby assigned to Lessee for the term of the
Lease for Lessee's exercise at Lessee's expense; c) LESSEE SHALL HOLD LESSOR
HARMLESS AND SHALL BE RESPONSIBLE FOR ANY LOSS, DAMAGE OR INJURY TO PERSONS
OR PROPERTY CAUSED BY THE EQUIPMENT; d) NO REPRESENTATION OR WARRANTY BY THE
SUPPLIER OR SALESPERSON IS BINDING ON LESSOR NOR SHALL BREACH OF SUCH
WARRANTY RELIEVE LESSEE OF LESSEE'S OBLIGATIONS TO LESSOR; and e) IN NO CASE
SHALL LESSOR BE LIABLE TO LESSEE FOR SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES.
4. PAYMENTS. Lessee agrees to make lease payments in advance and to pay such
other charges as provided herein. THE LEASE PAYMENTS SHALL BE ADJUSTED
PROPORTIONATELY UPWARD OR DOWNWARD IF THE ACTUAL TOTAL COST OF THE EQUIPMENT
AT THE TIME OF CLOSING EXCEEDS OR IS LESS THAN THE ESTIMATE. LESSEE HEREBY
AUTHORIZES LESSOR TO ADJUST THE LEASE PAYMENTS BY UP TO TWENTY PERCENT (20%)
IN THAT EVENT. Lease payments shall be increased by any cost or expense
Lessor incurs to preserve the Equipment or to pay taxes, assessments, fees,
penalties, liens, or encumbrances. Unless Lessor gives written notice of a
new address, all payments under this Lease shall be sent to Lessor at the
address provided by Lessor. Each payment received, at lessor's discretion,
will be applied first to the oldest charge due under the Lease. LESSEE AGREES
THAT TIME IS OF THE ESSENCE AND TO MAKE PAYMENTS REGARDLESS OF ANY PROBLEMS
LESSEE MIGHT HAVE WITH THE EQUIPMENT INCLUDING ITS OPERATION, CAPABILITY,
INSTALLATION, OR REPAIR AND REGARDLESS OF ANY CLAIM, SETOFF, DEFENSE LESSEE
MIGHT HAVE AGAINST THE VENDOR OR MANUFACTURER ("SUPPLIER"), SALESPERSON, OR
OTHER THIRD PARTY. Without Lessor's prior written consent, any payment to
Lessor of a smaller sum than due at any time under this Lease shall not
constitute a release or an accord and satisfaction for any greater sum due,
or to become due, regardless of any endorsement restriction, unless otherwise
agreed by both parties in a signed writing. An advance payment shall be held
by Lessor as a nonrefundable deposit, which shall not bear interest and may
be commingled with other funds. In case the Lease is never finalized, the
advance payment will be retained by Lessor in liquidation of documentation
and processing expenses, unless the application is rejected by Lessor.
5. TAXES, ASSESSMENTS AND FEES. Lessee agrees to pay all licensing, filing
and registration fees; to keep the Equipment free of all liens and
encumbrances; TO SHOW THE EQUIPMENT AS "LEASED EQUIPMENT" ON TAX RETURNS; TO
PAY ALL PERSONAL PROPERTY TAXES ASSESSED AGAINST THE EQUIPMENT; to pay all
other taxes, assessments, fees and penalties which may be levied or assessed
in respect to the Equipment, its use or any interest therein, or any lease
payments, including but not limited to all federal, state, and local taxes,
however designated, levied or assessed, whether upon Lessee or Lessor or the
Equipment or upon the sale, ownership, use or operation, excepting any income
taxes levied on the Lessor. Lessor may, at its option, collect from Lessee an
escrow fee of up to 35% of the Equipment cost per month for a tax escrow
fund. Lessor may, at its option, pay on Lessee's behalf such taxes and other
amounts, file applicable returns, and collect full reimbursement plus an
administrative fee from Lessee. In addition, Lessee authorizes Lessor to file
at Lessor's option informational financing statements and/or fixture filings
without Lessee's signature and, if a signature is required by law, Lessee
appoints Lessor as Lessee's attorney-in-fact to execute such statements and
filings. For purposes of any filing, Lessee hereby grants Lessor a security
interest in all lease payments and Equipment, and all interest of Lessee
therein, and all proceeds and products thereof, but in no case shall this
grant or any filing be deemed to contravene a true-lease transaction. Lessee
agrees to pay Lessor a documentation fee to be billed with the first lease
payment to cover account setup and administrative costs. Lessee and any
guarantor agree to reimburse Lessor for reasonable costs incurred in
collecting taxes, assessments, or fees for which Lessee is liable, and any
collection charges attributable thereto, including reasonable attorney fees.
Lessee agrees that Lessor is entitled to all tax benefits resulting from
ownership of the Equipment. Lessee agrees that, should any such tax benefits
be disallowed, Lessee shall indemnify Lessor for such loss by paying Lessor
an amount equal to the value of the lost benefits.
- ------------------------------------------------------------------------------
THIS LEASE IS NON CANCELLABLE
and is a binding contract consisting of all terms on the front and reverse
hereof.
KARTOFFELSOFT, INC.
LESSEE (Complete Legal Name)
3475 H EDISON WAY_SUITE H
Billing Address
MENLO PARK, , CA 94025
City County State Zip
650-306-0670
Phone Date
By: X /s/ Justin Shelby Kitch 4-30-98
- --------------------------------------------------------
Authorized Signature JUSTIN SHELBY KITCH
Title CEO
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Accepted by: CC FINANCE L.L.C., Lessor
By: /s/ [ILLEGIBLE]
-----------------------------------------------------
Authorized Signature
Date: 5/11/98
---------------------------------------------------
LEASE NO: 521596
- ------------------------------------------------------------------------------
<PAGE>
6. NOTICE. Until Lessor and Lessee notify each other of any new address in
writing, any invoice, notice or transaction notice required by the Lease or
by law is validly given when mailed postage prepaid by first class mail to
the last known address.
7. SUCCESSORS AND ASSIGNMENTS. LESSEE AGREES NOT TO TRANSFER, SELL, SUBLEASE,
ASSIGN, PLEDGE OR ENCUMBER EITHER THE EQUIPMENT OR ANY RIGHTS UNDER THIS
LEASE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, and even with Lessor's
consent, Lessee shall remain jointly and severally liable to the full extent
with Lessee's assignee. However, in any case, the provisions of this
Agreement bind all heirs, executors, administrators, successors, trustees,
and assigns of the Lessee and any guarantor. LESSOR MAY, AT ITS OPTION ASSIGN
ITS RIGHTS AND INTERESTS UNDER THIS LEASE WITHOUT NOTICE. Lessee agrees that
Lessor's assignee will have the same rights and remedies that Lessor now has.
Lessee agrees that the rights of Lessor's assignee will not be subject to
claims, defenses, or setoffs that Lessee may have against Lessor. Lessee
agrees that Lessor is not an agent of Lessor's assignee and that Lessor has
no affiliation with such assignee except for such assignment. Lessee
stipulates that any such assignment by Lessor shall not materially change
Lessee's duties, obligations or risks under this Lease.
8. OWNERSHIP AND TITLE. Lessor is the sole owner of the Equipment, has sole
title and all residual rights, has the right to inspect the Equipment, and
has the right to affix and display a notice of Lessor's ownership thereon.
The Equipment shall remain Lessor's personal property whether or not affixed
to realty and shall not be part of any real property on which it is placed.
At Lessor request, Lessee shall obtain a landlord and/or mortgage waiver for
the Equipment. All additions, attachments, and accessories placed on the
Equipment become part of the Equipment and Lessor's property. Lessee agrees
to maintain the Equipment so that it may be removed from the property or
building where located without damage.
9. OPERATION AND TERMINATION. Lessee shall be solely responsible for the
installation, operation, and maintenance of the Equipment, shall keep it in
good condition and running order, and shall use and operate the Equipment in
compliance with applicable laws. If the Equipment is of the type not normally
maintainable by the Lessee, the Lessee, at its expense, shall maintain in
full force and effect throughout the Lease term Supplier's standard
maintenance contract. Upon return to Lessor, the Equipment must be eligible,
without further cost or expense, for immediate continuation of coverage under
Supplier's standard maintenance contract. Lessee agrees to keep and use this
Equipment only at the business address specified above, to never abandon or
move the Equipment from that address, nor relinquish possession of the
Equipment except to Lessor's agent. At the end of the Lease term, Lessee
must contact Lessor, who will designate the return location within the
continental United States, and Lessee shall, at Lessee's expense, immediately
crate, insure and return the Equipment to the designated location in as good
a condition as when Lessee received it, excepting only reasonable wear and
tear. Until Lessor actually receives the Equipment at the return location,
the Lease renews automatically from month to month, and Lessee agrees to
continue to make lease payments at the last effective rate under the lease.
10. RISK OF LOSS AND INSURANCE. Until Lessee has returned the Equipment to
the designated location, Lessee bears the entire risk or loss or damage to
the Equipment, regardless how arising. Lessee shall immediately notify Lessor
of the occurrence of any Loss or other occurrence affecting Lessor's
interests and shall make repairs or corrections at Lessee's expense. In such
event, Lessee agrees to continue to meet all payment and other obligations
under the Lease. Lessee agrees to keep the Equipment insured at Lessee's
expense against risks of loss or damage from any cause whatsoever. Lessee
agrees that such insurance shall not be less than the unpaid balance of the
Lease plus the then current fair market value of the Equipment. Lessee also
agrees that the insurance shall be in such additional amount as is reasonable
to cover Lessor for public liability and property damage arising from the
Equipment or Lessee's use of it. Lessee agrees to name Lessor as the loss
payee and an additional insured. Each policy shall provide that the insurance
cannot be canceled without thirty days prior written notice to Lessor. Upon
request by Lessor, Lessee agrees to furnish proof of each insurance policy
including a certificate of insurance and a copy of the policy. The proceeds
of such insurance shall be applied at Lessor's sole election toward the
replacement or repair of the Equipment or payment towards Lessee's
obligations. Lessee appoints Lessor as attorney-in-fact to make any claim
for, receive payment of, or execute or endorse all documents, checks or
drafts for loss or damage or return of premium under such insurance. Because
of increased credit risks to Lessor when not insured by Lessee, Lessee agrees
to pay to Lessor each month a risk charge stipulated and liquidated at 25% of
Lessor's original Equipment cost until Lessee provides proof of compliance
with insurance requirements. In spite of the payment of such risk charge,
Lessee has no right or claim to any insurance benefits from Lessor. Lessee is
still liable for all losses, and such risk charge is not in lieu of the
insurance requirements of this Lease.
11. INDEMNITY. Lessee agrees to indemnify and hold Lessor harmless from and
against, any and all losses, damages, injuries, claims, demands, and expenses
(a "Claim"), including any and all attorney's fees and legal expenses,
arising from or caused directly or indirectly by any actual or alleged use,
possession, maintenance, condition (whether or not latent or discoverable),
operation, location, delivery or transportation of any item of Equipment.
Should Lessee be entitled under applicable law to revoke its acceptance of
the Equipment, Lessee agrees to pay and indemnify Lessor for any payment by
Lessor to the Supplier of the Equipment.
12. COLLECTION CHARGES AND ATTORNEY'S FEES. If any part of any sum is not
paid when due, Lessee agrees to pay Lessor a) in the first month, a late
charge to compensate Lessor for collecting and processing the late sum, such
late charge is stipulated and liquidated at the greater of $.15 per dollar of
each delayed sum or $15; plus b) a charge for every month after the first
month in which the sum is late to compensate Lessor for the inability to
reinvest the sum, such charge is stipulated and liquidated at 1 1/2 % per
month, or when less, the maximum allowed by NEW JERSEY or other applicable
law; plus c) a collection call charge to compensate Lessor for the time and
expense in making any call, such collection call charge is stipulated and
liquidated at $15.50 per collection call; plus d) a personal visit charge
equal to actual out-of-pocket expenses to compensate Lessor for the time and
expense of all collection efforts; plus e) a returned check or non-sufficient
funds ("NSF") charge to reimburse Lessor for its time and expense incurred
with respect to a check that is returned for any reason, such NSF charge is
stipulated and liquidated at the greater of $50 or actual bank charges to
Lessor, plus other amounts allowed by law.
LESSEE AND ANY GUARANTOR AGREE TO PAY ALL COSTS OF COLLECTION, INCLUDING
COLLECTORS' CONTINGENCY FEES, AND TO PAY LESSOR'S REASONABLE ATTORNEY FEES AS
DAMAGES AND NOT COSTS in all proceedings arising under this Lease, such
proceedings include any arbitration, bankruptcy proceeding, civil action,
mediation, counter claim on which Lessor prevails, or post-judgment action or
appeal with respect to any of the foregoing. A reasonable attorney fee is not
less than the greater of $300 or 25% of Lessor's total amount in collection.
13. DEFAULT. Lessee shall be in default of this Lease on any of the following
events: a) Lessee fails to pay any month's rent within ten days after it
first becomes due; b) Lessee assigns, moves, pledges, subleases, sells or
relinquishes possession of the Equipment, or attempts to do so, without
Lessor's written authorization; c) Lessee breaches any of its warranties or
other obligations under this Lease, or any other agreement with Lessor and
fails to cure such breach within ten days after Lessor sends notice of the
existence of such breach; d) any execution or writ of process is issued in
any action or proceeding to seize or detain the Equipment; e) Lessee or any
guarantor gives Lessor reasonable cause to be insecure about Lessee's
willingness or ability to perform obligations under the Lease or any other
agreement with Lessor; f) Lessee or any guarantor dies, becomes insolvent or
unable to pay debts when due; stops doing business as a going concern,
merges, consolidates, transfers all or substantially all of its assets, makes
an assignment for the benefit of creditors, appoints a trustee or receives or
undergoes a substantial deterioration of financial health or g) Lessee or
any guarantor fails to reaffirm this Lease obligation within sixty (60) days
of the filing of any petition for protection under the United States
Bankruptcy code.
14. REMEDIES. a) Should Lessee default, Lessor has the right to collect and
to exercise any or all of the following: 1) Lessor may, without notice,
accelerate all sums under the Lease and any other agreement with Lessor, and
require Lessee to immediately pay Lessor all sums that are already due and
the discounted value of those that will become due, including the lease-end
fair market value of the Equipment (subject to 15b); 2) All lost or
recaptured Tax benefits to Lessor shall also be immediately due and payable
from the Lessee; 3) Lessor has the right to immediately retake possession of
the Equipment without any court order or other process of law and for such
purpose may enter upon any premises where the Equipment may be, remove the
same and apply any proceeds as provided below. Lessee shall be liable for all
reasonable costs and expenses incurred in the repossession, recovery,
storage, repair, sale, re-lease or other disposition of the Equipment; 4)
Lessor has the right to exercise any remedy at law or equity, notice thereof
being expressly waived by Lessee and any guarantor; 5) Lessor's action or
failure to act on one remedy constitutes neither an election to be limited
thereto nor a waiver of any other remedy or a release of Lessee from the
liability to return the Equipment or for any loss or Claim with respect
thereto; 6) The provisions of this Lease are severable and shall not be
affected or impaired if any one provision is held unenforceable, invalid, or
illegal. Any provision held in conflict with any statute or rule of law shall
be deemed inoperative only to the extent of such conflict and shall be
modified to conform with such statute or rule; b) To the extent permitted by
applicable law, Lessee hereby waives Lessee's rights to: 1) cancel or
repudiate this Lease; 2) revoke acceptance of or reject the Equipment; 3)
claim a security interest in the Equipment; 4) accept partial delivery of the
Equipment; 5) sell or dispose of the Equipment upon rejection or revocation;
6) seek "cover" in substitution for the Lease from Lessor.
15. MITIGATION OF DAMAGES. In furtherance of the mitigation of damages,
Lessee and any guarantor agree and stipulate: a) Each accelerated sum and
lease-end fair market value shall have a discounted or present value computed
at 6% per annum. A single payment present worth factor shall be applied to
the lease-end fair market value. A uniform series present worth factor shall
be applied to the accelerated periodic payments; b) Should Lessor use or
dispose of any returned or repossessed Equipment, Lessor will credit the
amount that Lessee owes with any excess which Lessor actually recovers over
the cost of retaking and disposing of the equipment. Such credit shall not be
deemed to be an equity offset but shall be in full mitigation of Lessor's
repossession of the Equipment before the end of the Lease; c) To encourage
and facilitate settlement of any dispute, and at apportion litigation costs
associated therewith, any deposition of any witness, whether a party or not,
shall be taken by telephone and/or by video tape in the county where the
witness works or resides. Such deposition may be used for any purpose
including any discovery, trial, or proceeding as long as the deponent resides
or works more than 100 miles away therefrom. No party shall require any
witness to attend any deposition, trial, or proceeding more than 100 miles
from where that witness resides or works without first tendering to that
witness full payment of all costs reasonably necessary to allow such
attendance including travel, transportation, lodging and meal; d) Lessor or
Lessee may submit any matter arising out of this transaction, including any
claim, counterclaim, setoff, or defense, to binding arbitration by the
American Arbitration Association in New Jersey. The decision and award of the
arbitrator(s) shall be final and binding and may be entered as rendered in
any court having jurisdiction thereof; e) Any action under this Lease by
Lessee for claims against Lessor for indemnity, misrepresentation, product
liability, breach of warranty and contract default shall be commenced within
one (1) year after any such cause of action accrues.
16. CONSENT TO NEW JERSEY LAW, JURISDICTION, VENUE, AND NON-JURY TRIAL.
Lessee and any guarantor consent, agree, and stipulate that: a) this Lease
shall be deemed fully executed and performed in the State of New Jersey and
shall be governed by and construed in accordance with the laws thereof; and
b) in any action, proceeding, or appeal on any matter related to or arising
out of this Lease, the Lessor, Lessee and any guarantor; 1) SHALL BE SUBJECT
TO THE PERSONAL JURISDICTION OF THE STATE OF NEW JERSEY, including any state
or federal court sitting therein, and all court rules therefrom; 2) SHALL
ACCEPT VENUE IN ANY FEDERAL OR STATE COURT IN NEW JERSEY; and 3) EXPRESSLY
WAIVE ANY RIGHT TO A TRIAL BY JURY so that trial shall be by and only to the
court.
17. CONSENT TO SERVICE OF PROCESS. Lessee and any guarantor agree that any
process served for any action or proceeding shall be valid if mailed by
certified mail, return receipt requested, with delivery restricted to the
Lessee, is registered agent, or any agent appointed in writing to accept such
process. Lessee and any guarantor accordingly hereby expressly account
APPOINTED SERVICES, or its successor in NEW JERSEY as THEIR AGENT TO ACCEPT
SERVICE of such process in connection with this Lease.
<PAGE>
CC FINANCE L.L.C.
LESSOR
RARITAN PLAZA III, 101 FIELDCREST AVE., #500
EDISON, NJ 08837
EQUIPMENT SCHEDULE NUMBER 521596
FORMING A PART OF MASTER LEASE AGREEMENT NUMBER 521596
This Equipment Schedule forms a part of that certain Master Lease
Agreement referenced above and is subject to the terms and conditions set forth
therein. The equipment described herein is leased pursuant to the terms and
conditions of this Equipment Schedule and the Master Lease Agreement. All terms
used herein shall be defined pursuant to the requirements of the Master Lease
Agreement.
The undersigned hereby certifies that all property described below
has been furnished, that delivery and installation has been fully completed
as required, and that after final inspection the equipment is accepted as
satisfactory in all respects by the Lessee, and accordingly, Lessee hereby
authorizes the Lessor to purchase the Equipment described below or on the
attached schedule.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
VENDOR: CONTACT:
- ---------------------------------------------------------------------------------------------------------------------------------
<S><C>
SEE ATTACHED SCHEDULE A
- ---------------------------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT MODEL NO. SERIAL NO. Neither Vendor nor any
salesman is an agent of
SEE ATTACHED SCHEDULE A Lessor nor are they
authorized to waive or
alter the terms of this
Lease. Their
representations shall in
no way affect Lessee or
Lessor's rights or
obligations as herein
set forth.
- ---------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT LOCATION: (if other than Billing Address of Lessee)
Street Address: 3475 H EDISON WAY
City: MENLO PARK County: State: CA Zip: 94025
- ------------------------------------------------------------ ------------------------------------------------------------------
INITIAL MONTHLY RENT ADVANCE PAYMENT
RENTAL CHECK FOR THIS AMOUNT MUST ACCOMPANY LEASE APPLICATION
TERM
36 $ 3,954.41 / / Security Deposit
/X/ First Payment in
Months $ 3,954.41 Advance
- ------------------------------------------------------------ ------------------------------------------------------------------
KARTOFFELSOFT, INC., THIS LEASE IS NON-CANCELLABLE
LESSEE (Complete Legal Name)
----------------------------------------------------------------
3475 H EDISON WAY Accepted By: CC FINANCE L.L.C., Lessor, at Edison, NJ.
Billing Address
MENLO PARK CA 94025 By:
City/County/State/Zip Code
650-306-0670 /s/ [ILLEGIBLE]
-----------------------------------------
Area Phone Authorized Signature
-----------
By: X /s/ Justin Shelby Kitch 4-30-98 Date: 5/11/98
----------------------------------------------- -----------------------------------
Authorized Signature JUSTIN SHELBY KITCH
Title: CEO
- ------------------------------------------------------------ ------------------------------------------------------------------
DO NOT WRITE BELOW-FOR OFFICE USE ONLY
CPO Verification of Acceptance and Authorization to Purchase:
--------------------------------------
Adv. Given by:
------------------------------------- -------------------------------------------------
To: Date:
------------------------- ----------------------
</TABLE>
<PAGE>
COMPAQ
CAPITAL
BUSINESS LEASE AGREEMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Lessee Information LESSEE (Complete Legal Name) KARTOFFELSOFT, INC. BUSINESS PHONE 550-306-0670
<S> <C>
------------------------------------------------------------------------------------------------------------
BILLING ADDRESS 3475 H EDISON WAY SUITE H Federal Tax ID
------------------------------------------------------------------------------------------------------------
CITY: MENLO PARK COUNTY SAN MATEO STATE CA ZIP 94025
------------------------------------------------------------------------------------------------------------
EQUIPMENT ADDRESS 3475 H EDISON WAY SUITE H
------------------------------------------------------------------------------------------------------------
CITY: MENLO PARK COUNTY: SAN MATEO STATE CA ZIP 94025
------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Lease Acceptance THIS LEASE IS NON-CANCELABLE and consists of all items on front
(Sign and initial) and reverse hereof. This Lease is the full and final agreement and
/s/ Justin Shelby Kitch cannot be modified or terminated except by written agreement signed
---------------------------------------------- both by Lessee and by a corporate officer of Lessor.
Signature(s) above and initial to right Acknowledged and Accepted
/s/ Justin Shelby Kitch
---------------------------------------------
Print Name JUSTIN SHELBY KITCH Title CEO Please Initial
-----------------------------------------------------------------------------------------------------------------------------
INITIAL TERM MONTHLY LEASE PAYMENT ADVANCE PAYMENT (How Applied) / / Security Deposit
36 $ 400.56 $400.56 X ADVANCE
Months EXCLUSIVE of Applicable Tax
-----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Equipment to be QUANTITY DESCRIPTION OF EQUIPMENT TO BE LEASED SERIAL NUMBER
Leased
------------------------------------------------------------------------------------------------------
(If additional room is 1 PROLIANT 3000R 6/333 P2-333 SYST 512K
------------------------------------------------------------------------------------------------------
required, complete 1 PROLIANT 3000R 6/333 512K PROCESSOR
------------------------------------------------------------------------------------------------------
Schedule A and 1 64MB BUFFERED EDO DIMM MEMORY KIT
------------------------------------------------------------------------------------------------------
attach signed 1 4.30GB SCSI ULTRA WIDE 1 PLUGGABLE
------------------------------------------------------------------------------------------------------
Schedule A to this 2 9.10GB SCSI3 WIDE-ULTRA 1 PLUGGABLE
------------------------------------------------------------------------------------------------------
agreement.) 1 PROLIANT 3000/5500 REDUNDANT POWER SUPPLY
------------------------------------------------------------------------------------------------------
1 SMART-2SL ARRAY CONTROLLER ACCS
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantor GUARANTEE: In consideration of the Lessor leasing to the Lessee and for other good and valuable
Information consideration, the receipt of which is hereby acknowledged, the undersigned personally and
unconditionally guarantees payment and performance of, and agrees to the subject to, all the terms
and conditions of this Lease until all obligations under the Lease are fulfilled, including payment
of collection costs and attorney's fees. LESSOR MAY PROCEED AGAINST THE UNDERSIGNED IN THE FIRST
INSTANCE WITHOUT RESORTING TO OTHER CLAIMS OR COLLATERAL, AND THE UNDERSIGNED WAIVES ANY STATUTORY OR
OTHER RIGHT TO REQUIRE OTHERWISE. The undersigned hereby pledges the sole and separate estate of the
undersigned and waives notice of any settlement, impairment, substitution, dishonor, modification,
amendment or extension under the Lease; and waives demand, protest, presentment, and all related
notices. Any Guarantee shall be valid and enforceable whether or not the Key-Person Protection Plan
is applicable to this Lease but a Key Person, if any, must sign below. THIS GUARANTEE IS
NON-CANCELABLE.
------------------------------------------------------------------------------------------------
SIGNATURE (An individual (No Title) Full Joint and Several Liability Social Security Number
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
SIGNATURE (An individual (No Title) Full Joint and Several Liability Social Security Number
-----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Equipment On behalf of Lessee, I hereby certify that all of the Equipment referred to in the above Lease has been
Acceptance and delivered to and has been received by the Lessee, that all installation or other work necessary prior to
Purchase the use thereof has been completed, that the Equipment has been examined by the Lessee and is in good
Authorization operating order and condition and is in all respects satisfactory to the Lessee, and that the Equipment
is accepted by the Lessee for all purposes under the Lease. The Lease payment shall be due on the same
date each month, which date is set by Lessor upon receipt and confirmation of this Authorization. LESSEE
ACKNOWLEDGES THAT THIS IS A "FINANCE LEASE" (defined in the Uniform Personal Property Leasing Act) AND
WARRANTS TO LESSOR THAT LESSEE HAS RECEIVED OR REVIEWED SUPPLIER'S WRITTEN CONTRACT COVERING THE
EQUIPMENT'S TERMS OF SALE AND WARRANTIES. ACCORDINGLY, I AUTHORIZE LESSOR TO PURCHASE THE EQUIPMENT.
------------------------------------------------------------------------------------------------------
Authorizing Signature of Lessee Date
------------------------------------------------------------------------------------------------------------
FOR LESSORS USE ONLY (Verification of acceptance and Authorization to Purchase)
------------------------------------------------------------------------------------------------------------
Given By Date
------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
FOR USE ONLY ACCEPTED BY CC FINANCE L.L.C. LESSOR
/s/ Lisa Hallins 7/9/98 525136
------------------------------------------------------------------------------------------------------------
Date Lease Number
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
KARTOFFELSOFT, INC.
3475 H EDISON WAY
MENLO PARK, CA 94025
Provided the Lessee has, on a timely basis, fully complied with all the terms
and conditions of the Lease Agreement, Lease #525136, Lessee may choose to
exercise one of the following options upon the natural expiration of the base
lease term or any renewal term:
1. Lessee may at lease expiration choose to purchase the Equipment at its
then Fair Market Value (plus all applicable sales taxes) on an "all or
none" basis and on an as-is where-is basis. This option may be exercised
by Lessee only upon giving prior written notice of election to Lessor
not less than sixty (60) days before expiration. "Fair Market Value"
shall mean the price which a willing buyer (who is neither a lessee in
possession nor a used equipment dealer) would pay for the Equipment in
an arm's-length transaction to a willing seller under no compulsion to
sell: PROVIDED, HOWEVER, that in such determination: (i) the Equipment
shall be assumed to be in the condition in which it is required to be
maintained and returned under this Agreement; (ii) in the case of any
installed Equipment, that Equipment shall be valued on an installed
basis; and (iii) costs of removal from current location shall not be a
deduction from such valuation. If Lessor and Lessee are unable to agree
on the Fair Market Value, at least 30 days before lease expiration,
Lessor shall appoint an independent appraiser (reasonably acceptable to
Lessee) to determine Fair Market Value, at least 30 days before
expiration, and that determination shall be final, binding and
conclusive. Lessee shall bear all costs associated with any such
appraisal.
2. Lessee may renew the lease at the then Fair Market Rental Value.
3. Lessee may return the equipment to Lessor pursuant to the terms of the
Lease.
ACCEPTED BY:
KARTOFFELSOFT, INC. CC FINANCE L.L.C.
(Lessee) (Lessor)
BY: /s/ JUSTIN SHELBY KITCH /s/ Lisa Hallins
------------------------------------ ------------------------
CEO DS
------------------------------------ ---------------------------
(Title) (Title)
DATED: 6/8/98 DATED: 4/9/98
---------------------------------- ----------------------
<PAGE>
DELIVERY AND ACCEPTANCE CERTIFICATE
Lessor: CC FINANCE L.L.C
Lease(s) No. 525136
- ------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT ("Equipment") SERIAL NO.
- ------------------------------------------------------------------------------
1 PROLIANT 3000R 6/333 P2-333 SYST 512K
1 PROLIANT 3000R 6/333 512K PROCESSOR
1 64MB BUFFERED EDO DIMM MEMORY KIT
1 4.30GB SCSI ULTRA-WIDE 1 PLUGGABLE
2 9.10GB SCSI3 WIDE-ULTRA 1 PLUGGABLE
1 PROLIANT 3000/5500 REDUNDANT POWER SUPPLY
1 SMART-2SL ARRAY CONTROLLER ACCS
- ------------------------------------------------------------------------------
EQUIPMENT LOCATION: (if other than Billing Address of Lessee)
3475 H EDISON WAY City MENLO PARK County SAN MATEO State CA Zip 94025
- -------------------------------------------------------------------------------
LESSEE'S ACKNOWLEDGEMENT & DELIVERY ACCEPTANCE CERTIFICATE & PURCHASE
AUTHORIZATION:
- -------------------------------------------------------------------------------
We are pleased to confirm to you as follows:
1. All of the Equipment described above or in the above Lease has been
delivered to and received by the undersigned Lessee; that all installation or
other work necessary prior to the use thereof has been completed; that said
Equipment has been examined and/or tested and is in good operating order and
condition and is in all respects satisfactory to the undersigned and as
represented, and that said Equipment has been accepted by the undersigned and
complies with all requirements of the Lessee. CONSEQUENTLY, LESSOR IS HEREBY
AUTHORIZED TO PAY FOR THE EQUIPMENT AND COMMENCE SAID LEASE(S).
2. In the future, in the event that Equipment fails to perform as expected
or represented, Lessee will continue to honor the Lease by continuing to make
monthly payments in the normal course of business and will look solely to the
seller or manufacturer ("Supplier") for the performance of all covenants and
warranties, whether express or implied.
In addition, Lessee will indemnify Lessor and hold it harmless from any
nonperformance of the aforementioned Equipment or resulting claim or liability.
3. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE MANUFACTURER, DISTRIBUTOR OR
SUPPLIER * OF THE EQUIPMENT AND HAS NO CONTROL, KNOWLEDGE OR FAMILIARITY WITH
THE CONDITION, CAPACITY, FUNCTIONING OR OTHER CHARACTERISTICS OF THE
EQUIPMENT.
LESSEE ACKNOWLEDGES THAT THIS IS A "FINANCE LEASE" (defined in the Uniform
Personal Property Leasing Act, UCC Art. 2A) AND WARRANTS TO LESSOR THAT
LESSEE HAS RECEIVED REVIEWED, AND APPROVED SUPPLIER'S WRITTEN SUPPLY CONTRACT
COVERING THE EQUIPMENT'S TERMS OF SALE AND WARRANTIES.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
LESSEE: VENDOR:
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
KARTOFFELSOFT, INC. COMPUTERSAMERICA INC.
- -------------------------------------------------------------------------------------------------------------------
(Complete Legal Name) (Complete Legal Name)
3475 H EDISON WAY 1925 FRANSICO BLVD.
- -------------------------------------------------------------------------------------------------------------------
Billing Address Address
MENLO PARK, SAN MATEO, CA 94025 SAN RAFAEL, CA 94901
- -------------------------------------------------------------------------------------------------------------------
City County State Zip City County State Zip
650-306-0670 415-257-1010 EXT. 2388
- -------------------------------------------------------------------------------------------------------------------
Phone Date Phone Date
By: X /s/ Justin Shelby Kitch RICHARD MORENO
- -------------------------------------------------------------------------------------------------------------------
Authorized Signature Title Contact
JUSTIN SHELBY KITCH CEO
</TABLE>
<PAGE>
AGENCY DISCLAIMER:
Neither Supplier nor any salesperson is an agent of Lessor nor are they
authorized to waive or alter the terms of this Lease. Their representations
shall in no way affect Lessee or Lessor rights and obligations as herein set
forth.
- -------------------------
THIS LEASE CANNOT BE CANCELED EXCEPT AS EXPRESSLY PROVIDED HEREIN. THIS LEASE
SHALL BECOME EFFECTIVE UPON EXECUTION BY LESSOR AT ITS
PAYMENT PROTECTION PLAN. Lessee may make an election for any business
reasons, except Equipment defects, to postpone up to three monthly lease
payments to the end of the initial lease term. This option to delay up to
three regular payments is conditioned upon the following requirements: 1)
Lessee's written notice to make an election must be received by Lessor on or
before the due date of any payments to be postponed, 2) Upon receipt of
Lessee's written notice of election, Lessor shall prepare a Payment
Protection Election form and send it to Lessee for execution, 3) Lessor must
receive back the duly signed Payment Protection Election under this plan
within fifteen days following the first due date of the payment(s) postponed,
4) Lessee's option under this plan cannot be exercised for any payment which
becomes due or payable during the first six months of the Lease, and 5)
Lessee must have at all times prior to an election complied with all terms,
conditions, covenants and requirements of the Lease or this option is void.
KEY-PERSON PROTECTION PLAN for small-ticket leases. Provided that Lessee has
at all times complied with all terms, conditions, covenants and requirements
of the Lease and upon the death of the Key-Person Guarantor only (other
guarantor's excluded), the Lessee may be entitled to a dollar reduction of
fifty percent (50% in each remaining monthly lease payment. This reduction in
lease payments is conditioned upon the following requirements: 1) The total
cost of all Equipment leased from Lessor does not exceed $20,000 and the Key
Person must have been properly identified below and have executed the
guarantee provision of this Lease, 2) On the 91st day after the Key Person's
death, Lessee shall lose all rights to a reduction under this Plan if Lessor
has not received written notice of the Key Person's death including a copy of
the death certificate, 3) The Lease payments shall be reduced only in
connection with obligations arising or amounts becoming due after Lessor's
receipt of Lessee's proper written notice, 4) Except for the reduction in
each lease payments, Lessee and any Guarantors shall remain fully responsible
under the Lease for all obligations, including any loss or damage to the
Equipment, and 5) All rights and obligations under this plan are further
subject to and controlled by the requirements, terms and conditions of the
insurance schedule provided to the Lessee with a copy of the executed Lease.
THE KEY PERSON GUARANTOR IS IDENTIFIED AS FOLLOWS:
(Print Full Name):________________________________
1. TERMS AND CONDITIONS. In consideration of Lessor's purchase of the equipment
selected by Lessee, Lessor leases to Lessee, and Lessee leases from Lessor, the
equipment identified on the front hereof and on any attached schedule
("Equipment") pursuant to the terms and conditions set forth herein. Lessee
authorizes Lessor to insert in this Equipment Lease Agreement ("Lease") serial
numbers and other identification data when determined. THIS LEASE CONSTITUTES
THE FULL AND ENTIRE AGREEMENT between the Lessor and Lessee in connection with
the Equipment and MERGES ANY OTHER UNDERSTANDING. In no case shall the
preprinted terms and conditions on Lessee's or Supplier's standard transactional
documentation (e.g., order forms and invoices) apply to Lessor. Neither party
relies on any other statement, representation or assurance of cure. THE LEASE
CAN BE NEITHER CANCELLED NOR MODIFIED except by a written agreement signed by
Lessee and by a corporate officer of Lessor.
2. LESSEE'S AND GUARANTOR'S WARRANTIES TO LESSOR. Lessee and any Guarantor
expressly represent and warrant to Lessor, and Lessor relies on, the fact that:
a) said parties have read and understood this Lease before it was signed; b)
SAID PARTIES HAVE SELECTED AND ARE FULLY SATISFIED WITH BOTH THE EQUIPMENT AND
THE SUPPLIER WHO SOLD THE EQUIPMENT TO LESSOR; c) said parties will authorize
Lessor to pay for the Equipment only after Lessee has received and accepted the
Equipment as fully operable for Lessee's purposes; d) said parties have freely
chosen to lease, not buy, from Lessor only after having considered other means
of obtaining the use of the Equipment; e) NEITHER THE SUPPLIER OF THE EQUIPMENT
NOR ANY OF ITS SALESPERSONS ARE, OR HAVE ACTED AS, LESSOR'S AGENTS OR EMPLOYEES;
f) financial information and other statements provided to Lessor are accurate
and correct and will be updated upon Lessor's request during the term of the
Lease; g) said parties are currently meeting all debts as such come due; h) the
equipment is leased exclusively for Lessee's established business purposes and
not for starting a new business or for personal, family or household purposes;
i) Lessee has unrestricted power to enter into this Lease, has duly authorized
the person executing it, and certifies that all signatures are authentic; and j)
said parties will pay all costs connected with the Equipment, including taxes,
insurance, repairs, shipping, early termination fees, collection costs and other
expenses normally paid in a net lease.
3. LESSEE'S WAIVER OF DAMAGES AND WARRANTIES FROM LESSOR. a) Lessee leases the
Equipment from Lessor "AS IS/WHERE IS." EXCEPT AS TO QUIET ENJOYMENT, LESSOR
MAKES ABSOLUTELY NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE; b) IF THE EQUIPMENT IS NOT
PROPERLY INSTALLED, DOES NOT OPERATE AS REPRESENTED OR WARRANTED BY THE
SUPPLIER, OR IS UNSATISFACTORY FOR ANY REASON WHATSOEVER, LESSEE SHALL MAKE ANY
CLAIM ON ACCOUNT THEREOF SOLELY AGAINST THE SUPPLIER AND LESSEE HEREBY WAIVES
ANY SUCH CLAIM AGAINST LESSOR. All warranties from the Supplier to Lessor are
hereby assigned to Lessee for the term of the Lease for Lessee's exercise at
Lessee's expense; c) LESSEE SHALL HOLD LESSOR HARMLESS AND SHALL BE RESPONSIBLE
FOR ANY LOSS, DAMAGE OR INJURY TO PERSONS OR PROPERTY CAUSED BY THE EQUIPMENT;
d) NO REPRESENTATION OR WARRANTY BY THE SUPPLIER OR SALESPERSON IS BINDING ON
LESSOR NOR SHALL BREACH OF SUCH WARRANTY RELIEVE LESSEE OF LESSEE'S OBLIGATIONS
TO LESSOR; and e) IN NO CASE SHALL LESSOR BE LIABLE TO LESSEE FOR SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES.
4. PAYMENTS. Lessee agrees to make lease payments in advance and to pay such
other charges as provided herein. THE LEASE PAYMENTS SHALL BE ADJUSTED
PROPORTIONATELY UPWARD OR DOWNWARD IF THE ACTUAL TOTAL COST OF THE EQUIPMENT AT
THE TIME OF CLOSING EXCEEDS OR IS LESS THAN THE ESTIMATE. LESSEE HEREBY
AUTHORIZES LESSOR TO ADJUST THE LEASE PAYMENTS BY UP TO TWENTY PERCENT (20%) IN
THAT EVENT. Lease payments shall be increased by any cost or expense Lessor
occurs to preserve the Equipment or to pay taxes, assessments, fees, penalties,
liens, or encumbrances. Unless Lessor gives written notice of a new address, all
payments under this Lease shall be sent to Lessor at the address provided by
Lessor. Each payment received, at lessor's discretion, will be applied first to
the oldest charge due under the Lease. LESSEE AGREES THAT TIME IS OF THE ESSENCE
AND TO MAKE PAYMENTS REGARDLESS OF ANY PROBLEMS LESSEE MIGHT HAVE WITH THE
EQUIPMENT INCLUDING ITS OPERATION, CAPABILITY, INSTALLATION, OR REPAIR AND
REGARDLESS OF ANY CLAIM, SETOFF, DEFENSE LESSEE MIGHT HAVE AGAINST THE VENDOR OR
MANUFACTURER ("SUPPLIER"), SALESPERSON, OR OTHER THIRD PARTY. Without Lessor's
prior written consent, any payment to lessor of a smaller sum than due at any
time under the Lease shall not constitute a release or an accord and
satisfaction for any greater sum due, or to become due, regardless of any
endorsement restriction, unless otherwise agreed by both parties in a signed
writing. An advance payment shall be held by Lessor as a nonrefundable deposit,
which shall not bear interest and may be commingled with other funds. In case
the Lease is never finalized, the advance payment will be retained by Lessor in
liquidation of documentation and processing expenses, unless the application is
rejected by Lessor.
5. TAXES, ASSESSMENTS AND FEES. Lessee agrees to pay all licensing, filing and
registration fees; to keep the Equipment free of all liens and encumbrances; TO
SHOW THE EQUIPMENT AS "LEASED EQUIPMENT" ON TAX RETURNS; TO PAY ALL PERSONAL
PROPERTY TAXES ASSESSED AGAINST THE EQUIPMENT; to pay all other taxes,
assessments, fees and penalties which may be levied or assessed in respect to
the Equipment, its use or any interest therein, or any lease payments, including
but not limited to all federal, state, and local taxes, however designated,
levied or assessed, whether upon Lessee or Lessor or the Equipment or upon the
sale, ownership, use or operation, excepting any income taxes levied on the
Lessor. Lessor may, at its option, collect from Lessee an escrow fee of up to
35% of the Equipment cost per month for a tax escrow fund. Lessor may, at its
option, pay on Lessee's behalf such taxes and other amounts, file applicable
returns, and collect full reimbursement plus an administrative fee from Lessee.
In addition, Lessee authorizes Lessor to file at Lessor's option informational
financing statements and/or fixture filings without Lessee's signature and, if a
signature is required by law, Lessee appoints Lessor as Lessee's
attorney-in-fact to execute such statements and filings. For purposes of any
filing, Lessee hereby grants Lessor a security interest in all lease payments
and Equipment, and all interest of Lessee therein, and all proceeds and products
thereof, but in no case shall this grant or any filing be deemed to contravene a
true-lease transaction. Lessee agrees to pay Lessor a documentation fee to be
billed with the first lease payment to cover account setup and administrative
costs. Lessee and any guarantor agrees to reimburse Lessor for reasonable costs
incurred in collecting taxes, assessments, or fees for which Lessee is liable,
and any collection charges attributable thereto, including reasonable attorney
fees. Lessee agrees that Lessor is entitled to all tax benefits resulting from
ownership of the Equipment. Lessee agrees that, should any such tax benefits be
disallowed, Lessee shall indemnify Lessor for such loss by paying Lessor an
amount equal to the value of the lost benefits.
6. NOTICE. Until Lessor and Lessee notify each other of any new address in
writing, any invoice, notice of transaction notice required by the Lessor by law
is validly given when mailed postage prepaid by first class mail to the last
known address.
7. SUCCESSORS AND ASSIGNMENTS. LESSEE AGREES NOT TO TRANSFER, SELL, SUBLEASE,
ASSIGN, PLEDGE OR ENCUMBER EITHER THE EQUIPMENT OR ANY RIGHTS UNDER THIS LEASE
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, and even with Lessor's consent,
Lessee shall remain jointly and severally liable to the full extent with
Lessee's assignee. However, in any case, the provisions of this Agreement bind
all heirs, executors, administrators, successor, trustees, and assigns of the
Lessee and any guarantor. LESSOR MAY, AT ITS OPTION ASSIGN ITS RIGHTS AND
INTERESTS UNDER THIS LEASE WITHOUT NOTICE. Lessee agrees that Lessor's assignee
will have the same rights and remedies that Lessor now has. Lessee agrees that
the rights of Lessor's assignee will not be subject to claims, defenses, or
setoffs that Lessee may have against Lessor. Lessee agrees that Lessor is not an
agent of Lessor's assignee and that Lessor has no affiliation with such assignee
except for such assignment. Lessee stipulates that any such assignment by Lessor
shall not materially change Lessee's duties, obligations or risks under this
Lease.
8. OWNERSHIP AND TITLE. Lessor is the sole owner of the Equipment, has sole
title and all residual rights, has the right to inspect the Equipment, and has
the right to affix and display a notice of Lessor's ownership thereon. The
Equipment shall remain Lessor's personal property whether or not affixed to
realty and shall not be part of any real property on which it is placed. At
Lessor request, Lessee shall contain a landlord and/or mortgage waiver for the
Equipment. All additions, attachments, and accessories placed on the Equipment
become part of the Equipment and Lessor's property. Lessee agrees to maintain
the Equipment so that it may be removed from the property or building where
located without charge.
9. OPERATION AND TERMINATION. Lessee shall be solely responsible for the
installation, operation, and maintenance of the Equipment, shall keep it in good
condition and running order, and shall use and operate the Equipment in
compliance with applicable laws. If the Equipment is of the type not normally
maintainable by the Lessee, the Lessee, at its expense, shall maintain in full
force and effect throughout the Lease term Supplier's standard maintenance
contract. Upon return to Lessor, the Equipment must be eligible, without further
cost or expense, for immediate continuation of coverage under Supplier's
standard maintenance contract. Lessee agrees to keep and use this Equipment only
at the business address specified above, to never abandon or move the Equipment
from that address and relinquish possession of the Equipment except to Lessors's
agent. At the end of the Lease term, Lessee must contact Lessor, who will
designate the return location within the continental United States, and Lessee
shall, at Lessee's expense, immediately crate, insure and return the Equipment
to the designated location in as good a condition as when Lessee received it,
excepting only reasonable wear and tear. Until Lessor actually receives the
Equipment at the return location, the Lease renews automatically from month to
month, and Lessee agrees to continue to make lease payments at the last
effective rate under the lease.
10. RISK OF LOSS AND INSURANCE. Until Lessee has returned the Equipment to the
designated location, Lessee bears the entire risk or loss or damage to the
Equipment, regardless how arising. Lessee shall immediately notify Lessor of the
occurrence of any Loss or other occurrence affecting Lessor's interests and
shall make repairs or corrections at Lessee's expense. In such event, Lessee
agrees to continue to meet all payment and other obligations under the Lease.
Lessee agrees to keep the Equipment insured at Lessee's expense against risks of
loss or damage from any cause whatsoever. Lessee agrees that such insurance
shall not be less than the unpaid balance of the Lease plus the then current
fair market value of the Equipment. Lessee also agrees that the insurance shall
be in such additional amount as is reasonable to cover Lessor for public
liability and property damage arising from the Equipment or Lessee's use of it.
Lessee agrees to name Lessor as the loss payee and an additional insured. Each
policy shall provide that the insurance cannot be canceled without thirty days
prior written notice to Lessor. Upon request by Lessor, Lessee agrees to furnish
proof of each insurance policy including a certificate of insurance and a copy
of the policy. The proceeds of such insurance shall be applied at Lessor's sole
election toward the replacement or repair of the Equipment or payment towards
Lessee's obligations. Lessee appoints Lessor as attorney-in-fact to make any
claim for, receive payment of, or execute or endorse all documents, checks or
drafts for loss or damage or return of premium under such insurance. Because of
increased credit risks to Lessor when not insured by Lessee, Lessee agrees to
pay to Lessor each month a risk charge stipulated and liquidated at 25% of
Lessor's original Equipment cost until Lessee provides proof of compliance with
insurance requirements. In spite of the payments of such risk charge, Lessee has
no right or claim to any insurance benefits from Lessor. Lessee is still liable
for all losses, and such risk charge is not in lieu of the insurance
requirements of this Lease.
11. INDEMNITY. Lessee agrees to indemnify and hold Lessor harmless from and
against, any and all losses, damages, injuries, claims, demands, and expenses (a
"Claim"), including any and all attorney's fees and legal expenses, arising from
or caused directly or indirectly by any actual or alleged use, possession,
maintenance, condition (whether or not latent or discoverable), operation,
location, delivery or transportation of any item of Equipment. Should Lessee be
entitled under applicable law to revoke its acceptance of the Equipment, Lessee
agrees to pay and indemnify lessor for any payment by lessor to the Supplier of
the Equipment.
12. COLLECTION CHARGES AND ATTORNEY'S FEES. If any part of any sum is not paid
when due, Lessee agrees to pay Lessor a) in the first month, a late charge to
compensate Lessor for collecting and processing the late sum, such late charge
is stipulated and liquidated at the greater of $.15 per dollar of each delayed
sum or $.15 plus b) a charge for every month after the first month in which the
sum is late to compensate Lessor for the inability to reinvest the sum, such
charge is stipulated and liquidated at 1 1/2 % per month, or when less, the
maximum allowed by NEW JERSEY or other applicable law, plus c) a collection call
charge to compensate Lessor for the time and expense in making any call, such
collection call charge is stipulated and liquidated at $15.50 per collection
call, plus d) a personal visit charge equal to actual out-of-pocket expenses to
compensate Lessor for the time and expense of all collection efforts, plus e) a
returned check or non-sufficient funds ("NSF") charge to reimburse Lessor for
its time and expense incurred with respect to a check that is returned for any
reason, such NSF charge is stipulated and liquidated at the greater of $50 or
actual bank charges to Lessor, plus other amounts allowed by law.
LESSEE AND ANY GUARANTOR AGREE TO PAY ALL COSTS OF COLLECTION, INCLUDING
COLLECTORS' CONTINGENCY FEES, AND TO PAY LESSOR'S REASONABLE ATTORNEY FEES AS
DAMAGES AND NOT COSTS in all proceedings arising under this Lease, such
proceedings include any arbitration, bankruptcy proceeding, civil action,
mediation, counter claim on which Lessor prevails, or post-judgment action or
appeal with respect to any of the foregoing. A reasonable attorney fee is not
less than the greater of $300 or 25% of Lessor's total amount in collection.
13. DEFAULT. Lessee shall be in default of this Lease on any of the following
events: a) Lessee fails to pay any month's rent within ten days after it
first becomes due; b) Lessee assigns, moves, pledges, subleases, sells or
relinquishes possession of the Equipment, or attempts to do so, without
Lessor's written authorization; c) Lessee breaches any of its warranties or
other obligations under this Lease, or any other agreement with Lessor and
fails to cure such breach within ten days after Lessor sends notice of the
existence of such breach; d) any execution or writ of process is issued in
any action or proceeding to seize or detain the Equipment; e) Lessee or any
guarantor gives Lessor reasonable cause to be insecure about Lessee's
willingness or ability to perform obligations under the Lease or any other
agreement with Lessor; f) Lessee or any guarantor dies, becomes insolvent or
unable to pay debts when due, stops doing business as a going concern,
merges, consolidates, transfers all or substantially all of its assets, makes
an assignment for the benefit of creditors, appoints a trustee or receiver or
undergoes a substantial deterioration of financial health or; g) Lessee or
any guarantor fails to reaffirm this Lease obligation within sixty (60) days
of the filing of any petition for protection under the United States
Bankruptcy code.
14. REMEDIES. a) Should Lessee default, Lessor has the right to collect and
to exercise any or all of the following: 1) Lessor may, without notice,
accelerate all sums under the Lease and any other agreement with Lessor, and
require Lessee to immediately pay Lessor all sums that are already due and
the discounted value of those that will become due, including the lease-end
fair market value of the Equipment (subject to 15b); 2) All lost or
recaptured Tax benefits to Lessor shall also be immediately due and payable
from the Lessee; 3) Lessor has the right to immediately retake possession of
the Equipment without any court order or other process of law and for such
purpose may enter upon any premises where the Equipment may be, remove the
same and apply any proceeds as provided below. Lessee shall be liable for all
reasonable costs and expenses incurred in the repossession, recovery,
storage, repair, sale, re-lease or other disposition of the Equipment; 4)
Lessor has the right to exercise any remedy at law or equity, notice thereof
being expressly waived by Lessee and any guarantor; 5) Lessor's action or
failure to act on one remedy constitutes neither an election to be limited
thereto nor a waiver of any other remedy or a release of Lessee from the
Liability to return the Equipment or for any loss or Claim with respect
thereto; 6) The provisions of this Lease are severable and shall not be
affected or impaired if any one provision is held unenforceable, invalid, or
illegal. Any provision held in conflict with any statute or rule of law shall
be deemed inoperative only to the extent of such conflict and shall be
modified to conform with such statute or rule; b) To the extent permitted by
applicable law, Lessee hereby waives Lessee's right to: 1) cancel or
repudiate this lease; 2) revoke acceptance of or reject the Equipment; 3)
claim a security interest in the Equipment; 4) accept partial delivery of the
Equipment; 5) sell or dispose of the Equipment upon rejection or revocation;
6) seek "cover" in substitution for the Lease from Lessor; and 7) claim an
agency relationship between Supplier and Lessor.
15. MITIGATION OF DAMAGES. In furtherance of the mitigation of damages,
Lessee and any guarantor agree and stipulate: a) Each accelerated sum and
lease-end fair market value shall have a discounted or present value computed
at 6% per annum. A single payment present worth factor shall be applied to
the lease-end fair market value. A uniform series present worth factor shall
be applied to the accelerated periodic payments; b) Should Lessor use or
dispose of any returned or repossessed Equipment, Lessor will credit the
amount that Lessee owes with any excess which Lessor actually recovers over
the cost of retaking and disposing of the equipment. Such credit shall not be
deemed to be an equity offset but shall be in full mitigation of Lessor's
repossession of the Equipment before the end of the Lease; c) To encourage
and facilitate settlement of any dispute, and at apportion litigation costs
associated therewith, any deposition of any witness, whether a party or not,
shall be taken by telephone and/or by video tape in the county where the
witness works or resides. Such deposition may be used for any purpose
including any discovery, trial, or proceeding as long as the deponent resides
or works more than 100 miles away therefrom. No party shall require any
witness to attend any deposition, trial, or proceeding more than 100 miles
from where that witness resides or works without first tendering to that
witness full payment of all costs reasonably necessary to allow such
attendance including travel, transportation, lodging and meal; d) Lessor or
Lessee may submit any matter arising out of this transaction, including any
claim, counterclaim, setoff, or defense, to binding arbitration by the
American Arbitration Association in New Jersey. The decision and award of the
arbitrator(s) shall be final and binding and may be entered as rendered in
any court having jurisdiction thereof; e) Any action under this Lease by
Lessee for claims against Lessor for indemnity, misrepresentation, product
liability, breach of warranty and contract default shall be commenced within
one (1) year after any such cause of action accrues.
16. CONSENT TO NEW JERSEY LAW, JURISDICTION, VENUE, AND NON-JURY TRIAL. Lessee
and any guarantor consent, agree, and stipulate that: a) this Lease shall be
deemed fully executed and performed in the State of NEW JERSEY and shall be
governed by and construed in accordance with the laws thereof; and b) in any
action, proceeding, or appeal on any matter related to or arising out of this
Lease, the Lessor, Lessee and any guarantor; 1) SHALL BE SUBJECT TO THE PERSONAL
JURISDICTION OF THE STATE OF NEW JERSEY, including any state or federal court
sitting therein, and all court rules therefrom; 2) SHALL ACCEPT VENUE IN ANY
FEDERAL OR STATE COURT IN NEW JERSEY; and 3) EXPRESSLY WAIVE ANY RIGHT TO A
TRIAL BY JURY so that trial shall be by and only to the court.
17. CONSENT TO SERVICE OF PROCESS. Lessee and any guarantor agree that any
process served for any action or proceeding shall be valid if mailed by
certified mail, return receipt requested, with delivery restricted to the
Lessee, its registered agent, or any agent appointed in writing to accept
such process. Lessee and any guarantor accordingly hereby expressly appoint
APPOINTED SERVICES, or its successor, in NEW JERSEY as THEIR AGENT TO ACCEPT
SERVICE of such process in connection with this Lease.
- ------------------------------------------------------------------------------
CC FINANCE L.L.C.
Raritan Plaza III, Fieldcrest Ave. #500
Edison, New Jersey 08837
(732) 417-0600
<PAGE>
MASTER LEASE AGREEMENT
Agreement No. 10840 Dated as of September 28, 1998
between
DOMINION VENTURES, INC.
44 Montgomery Street, Suite 4200
San Francisco, California 94104
as Lessor
and
KARTOFFELSOFT INCORPORATED (D/B/A/ HOMESTEAD TECHNOLOGIES, INC.)
a Delaware corporation
3475 Edison Way, Suite ___
Menlo Park, CA 94025
as Lessee
Master Lease Line: $350,000.00
Rent Factor I: .7083% Initial Lease Term: 42 months
Rent Factor II: 3.686%
Advance Rental: $12,901 Security Deposit: $ 0
(PLUS APPLICABLE TAXES)
Minimum Funding Amount: $25,000 Maximum Funding Frequency: monthly
Funding Expiration Date: May 15, 1999
Eligible Equipment: New and/or used computers, furniture, software and office
equipment. Software not to exceed fifteen (15%) of the
lease line. All equipment to be purchased must be approved
by Lessor.
ORIGINAL COUNTERPART NO. __
The terms and information set forth on this cover page are a part of
the MASTER LEASE AGREEMENT, dated as of the date first written above (this
"Lease"), entered into by and between DOMINION VENTURES, INC. ("Lessor") and
the Lessee set forth above, the terms and conditions of which are as follows:
<PAGE>
LESSOR'S OBLIGATIONS UNDER THIS LEASE AND EACH SCHEDULE ARE SUBJECT TO
THE PRIOR SATISFACTION OF THE CONDITIONS SET FORTH ON ADDENDUM I HERETO.
1. DEFINITIONS: Unless otherwise defined in this Lease (which term
shall include the cover page, any Addendum, any Exhibit and any Schedule
hereto), capitalized terms shall have the following meanings:
(a) "ACCEPTANCE CERTIFICATE" means the Certificate of Inspection and
Acceptance in the form attached hereto as Exhibit D.
(b) "ACCEPTANCE DATE" means, with respect to each Schedule, the date
of the Acceptance Certificate executed in connection with such
Schedule.
(c) "ADVANCE RENTAL" has the meaning set forth in Paragraph 5(a) and
is in the amount as set forth on the cover page.
(d) "ASSIGNEE" has the meaning set forth in Paragraph 11(b).
(e) "BILL OF SALE" means a bill of sale in the form attached hereto as
Exhibit C.
(f) "COMMENCEMENT DATE" has the meaning set forth in Paragraph 4.
(g) "COST" means the cost to Lessor of purchasing one or more Units of
Equipment including any sales taxes and other charges paid by
Lessor and net of any discounts and rebates.
(h) "DISCOUNT RATE" means, as of any date of determination, the lesser
of (i) the then current per annum interest rate for one-year
United States treasury bills as set forth in the WALL STREET
JOURNAL on such date and (ii) six percent (6%).
(i) "ELIGIBLE EQUIPMENT" means Equipment of the types listed following
such term on the cover page of this Lease to the extent acceptable
to Lessor.
(j) "ENVIRONMENTAL LAW" means the Resource Conservation and Recovery
Act of 1987, the Comprehensive Environmental Response,
Compensation and Liability Act, and any other Federal, state or
local statute, law, ordinance, code, rule, regulation, order or
decree (in each case having the force of law) regulating or
imposing liability or standards of conduct concerning any
Hazardous Materials or other hazardous, toxic or dangerous waste,
constituent, or other substance, whether solid, liquid or gas, as
now or at any time hereafter in effect.
(k) "EQUIPMENT" means all Units listed in any Schedule together with
all replacement parts, additions, accessions and accessories to
such Units.
(l) "EVENT OF DEFAULT" shall have the meaning set forth in Paragraph
24 hereof.
(m) "FINANCIAL STATEMENTS" has the meaning set forth in Paragraph
19(a).
(n) "FUNDING EXPIRATION DATE" means the date set forth opposite such
term on the cover page of this Lease or such earlier date on which
Lessor terminates its commitment to fund Schedules pursuant to the
terms of this Lease.
(o) "HAZARDOUS MATERIAL" means any hazardous or toxic substance,
material, pollutant or waste, whether solid, liquid or gaseous,
which is regulated by any Federal, state or local governmental
authority.
(p) "HOLDOVER PERIOD" has the meaning set forth in Paragraph 18.
(q) "INITIAL LEASE TERM" means, with respect to each Schedule, the
period beginning on the first day of the calendar month following
the Acceptance Date for such Schedule and continuing for the
number of months set forth following such term on the cover page
of this Lease.
(r) "INTERIM RENT" shall have the meaning set forth in Paragraph 5(b)
of this Lease.
(s) "LEASE TERM" means, with respect to each Schedule, the
Noncancellable Term and any Holdover Period.
(t) "LESSOR AFFILIATE" has the meaning set forth in Paragraph 11(c)
hereof.
(u) "MASTER LEASE LINE" means the amount set forth following such term
on the cover page of this Lease.
(v) "MAXIMUM FUNDING FREQUENCY" means the time interval specified
opposite such term on the cover page hereof.
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<PAGE>
(w) "MINIMUM FUNDING AMOUNT" means the amount set forth following such
term on the cover page of this lease.
(x) "NONCANCELLABLE TERM" means, with respect to each Schedule, the
period from the Acceptance Date for such Schedule through the end
of the Initial Lease Term for such Schedule.
(y) "PURCHASE ORDER ASSIGNMENT" means a purchase order assignment in
the form of Exhibit B hereto.
(z) "RENT FACTOR" means the Rent Factor applicable to each Schedule
which is set forth on the cover page of this Lease.
(aa) "RENTAL PAYMENT" means, for any Schedule, the monthly rent payment
for the Units identified in such Schedule.
(bb) "RESIDUAL VALUE" has the meaning set forth in Paragraph 22(b) of
this Lease.
(cc) "SCHEDULE" means a schedule in the form of Exhibit F to this Lease
identifying this Lease and incorporating this Lease by reference,
which is executed by both parties hereto.
(dd) "UCC" means the Uniform Commercial Code as in effect in the State
of California from time to time.
(ee) "UNIT" means an item of Equipment.
2. LEASE. Lessor leases to Lessee, and Lessee hires and takes from
Lessor, subject to the terms and conditions set forth in this Lease, the Units
described in the Schedules executed hereunder. Each Schedule shall constitute a
separate and independent lease and contractual obligation of Lessee
incorporating the terms of this Lease. Lessor's commitment to fund Schedules
under this Lease continues through the Funding Expiration Date and is limited to
the amount of the Master Lease Line; provided, however, that Lessor, acting in
its sole discretion, may terminate or modify its funding commitment at any time
if: (a) there is any material adverse change to the general affairs, management,
results of operations, condition (financial or otherwise) or prospects of
Lessee, whether or not arising from transactions in the ordinary course of
business, (b) there is any material adverse deviation by Lessee from the
business plan (as it may have been supplemented in writing) of Lessee presented
to Lessor, since the date first written on the cover page of this Lease, (c) any
Event of Default or event which with the passage of time or notice or both would
constitute an Event of Default exists, or (d) if any term or condition in any
Schedule is not satisfied prior to the Acceptance Date with respect to such
Schedule. Each Schedule shall be funded in an amount not less than the Minimum
Funding Amount and not more frequently than the Maximum Funding Frequency. No
Unit of Equipment shall have a unit cost of less than $1,000 or be subject to a
single invoice of less than $5,000.
3. EQUIPMENT SUBJECT TO LEASE. Lessee shall select the type and
quantity of Equipment (which Equipment shall in each case be Eligible Equipment
acceptable to Lessor) to be subject to each Schedule. Subject to the terms and
conditions of this Lease: (i) if such Equipment is not previously owned by
Lessee and is not subject to a purchase order issued by Lessee, Lessor shall at
Lessee's direction order each Unit from the respective suppliers, and upon
delivery and acceptance by Lessee each such Unit shall be leased to Lessee
hereunder; (ii) if Lessee has previously issued its purchase order to a
supplier, Lessee shall execute a Purchase Order Assignment assigning such
purchase order to Lessor and the Units subject to such purchase order, upon
delivery and acceptance by Lessee, shall be leased to Lessee hereunder; or (iii)
if Lessee owns the Equipment which it intends to make subject to this Lease,
Lessee shall execute a Bill of Sale transferring title to such Equipment to
Lessor at the purchase price agreed to between Lessor and Lessee according to an
appraisal undertaken at the expense of Lessee (except in the case of Equipment
placed in service by Lessee not more than sixty (60) days prior to the date of
any Schedule for which the purchase price shall be the original cost to Lessee
thereof (net of freight, taxes, installation and similar costs). Lessee
acknowledges that Lessor may have the ability to obtain discounts or rebates not
available to Lessee from suppliers from which Lessor buys in volume. Any
discounts or rebates remitted to Lessee shall be turned over to Lessor and Cost
of the Equipment set forth on any Schedule shall be deemed to be the Cost net of
such discount or rebate. Any request by Lessee to Lessor to purchase Equipment
directly or by assignment of a purchase order shall be irrevocable.
4. TERM. This Lease is effective upon execution hereof by Lessor and
shall continue until full performance of every provision of this Lease; provided
that Lessor's obligations to fund any Schedule are subject to the
-2-
<PAGE>
prior satisfaction by Lessee of the conditions set forth in Part 1 of
Addendum I to this Lease. All obligations under each Schedule shall commence
upon Lessee's execution of an Acceptance Certificate and Schedule for the
Units to be subject to such Schedule and Lessor's countersignature on such
Schedule; provided that Lessor's obligation to fund such Schedule is subject
to the prior satisfaction by Lessee of the conditions set forth in Part 2 of
Addendum I to this Lease. The Initial Lease Term with respect to each
Schedule shall begin on the first day of the calendar month following the
Acceptance Date (the "Commencement Date").
5. RENTAL PAYMENTS.
(a) ADVANCE RENTAL. Upon execution of this Lease, Lessee shall pay to
Lessor an advance payment in an amount equal to Rent Factor II multiplied by the
Master Lease Line (plus applicable taxes) (the "Advance Rental"). A pro-rata
portion of the Advance Rental shall be deemed to prepay as of the date of this
Lease the last Rental Payment for each Schedule. If the Master Lease Line has
not been fully expended by the Funding Expiration Date, Lessor shall retain the
unutilized portion of the Advance Rental as compensation for expenses.
(b) INTERIM RENT. If the Acceptance Date with respect to any Schedule
shall be other than the first day of the calendar month, Lessee shall make
interim rental payments ("Interim Rent") for each day from and including the
Acceptance Date, through and including the last day of the calendar month prior
to the beginning of the Initial Lease Term in an amount equal to one-thirtieth
of the monthly Rental Payment set forth on the Schedule. Such Interim Rent
shall be due and payable on the first day of the calendar month following the
month for which such payment is assessed.
(c) RENTAL PAYMENTS. Lessee shall pay to Lessor, (i) as rental for
Equipment during the first twelve (12) months of the Initial Lease Term of any
Schedule, an amount equal to Rent Factor I set forth on the cover page of this
Lease multiplied by the total Cost of the Equipment to Lessor, which amount
shall be due and payable in advance on the first day of each calendar month
during the Initial Lease Term, and (ii) as rental for Equipment for months
thirteen (13) through month forty-two (42) of the Initial Lease Term of any
Schedule and during any Holdover Period, an amount equal to Rent Factor II set
forth on the cover page of this Lease multiplied by the total Cost of the
Equipment to Lessor, which amount shall be due and payable in advance on the
first day of each calendar month during months thirteen (13) through month
forty-two (42) of the Initial Lease Term and during any Holdover Period. In
addition to any other remedies that Lessor may have under this Lease, if Lessee
fails to pay any Rental Payment or Interim Rent or other amount herein provided
within five (5) business days after the same is due, Lessee shall pay to Lessor
a late charge calculated daily from the due date until the date of payment, at
the rate of two percent (2%) of such amount per month, or at the highest rate
permitted by applicable law, whichever is less, to compensate Lessor for
additional bookkeeping and collection expense. All Rental Payments, Advance
Rental, Interim Rent, late charges and other amounts for which Lessee is liable
shall be paid to Lessor at its address as set forth above or as otherwise
directed by Lessor.
(d) AUTOMATIC TRANSFERS. If Lessee so agrees, Lessor will initiate
monthly debit entries to Lessee's bank account for payment of Rental Payments on
the fifth business day of each month. If Lessee agrees to automatic transfers,
Lessee will provide depository and account information to Lessor and shall
execute or cause to be executed such supplemental agreements as Lessor deems
necessary in order to instate and maintain automatic transfer payments by Lessee
to Lessor. Other amounts due hereunder will be invoiced to Lessee by Lessor and
shall be due and payable within five (5) days of receipt of invoice.
6. CHARACTERIZATION OF LEASE; WARRANTIES; WAIVERS; LIABILITY.
(a) CHARACTERIZATION OF LEASE. It is the intent of Lessor and Lessee
that this Lease be a true lease and not a lease intended as security or a
conditional sales agreement. Lessor and Lessee agree to treat this Lease as a
true lease for income tax purposes. Lessor and Lessee agree that this Lease is
a "finance lease" as that term is defined by Section 10103(a)(7) of the UCC.
With respect to the Equipment subject to each Schedule, Lessee acknowledges and
warrants as
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of the date of such Schedule that (i) Lessee has received a copy of
the contract(s) pursuant to which Lessor acquired the Equipment (the "Supply
Contract"), or (ii) Lessee has reviewed and approved the Supply Contract, or
(iii) Lessor has informed Lessee in writing that Lessee may have rights under
the Supply Contract and that Lessee should contact the supplier for a
description of any such rights. LESSOR AND LESSEE AGREE THAT THIS LEASE IS A
"NET" LEASE, AND LESSEE'S OBLIGATION TO MAKE RENTAL PAYMENTS AND PAY OTHER SUMS
WHEN DUE AND OTHERWISE PERFORM ITS OBLIGATIONS UNDER THIS LEASE SHALL BE
ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO OR AFFECTED BY OR
REDUCED BY ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE, COUNTERCLAIM,
INTERRUPTION, DEFERMENT, RECOUPMENT OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST
LESSOR, THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT OR ANY OTHER PERSON.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NO DEFECT OR UNFITNESS OF ANY
ITEM OF EQUIPMENT NOR OTHER CLAIM REGARDING CONDITION OR USE OF THE EQUIPMENT
SHALL RELIEVE LESSEE OF THE OBLIGATION TO MAKE RENTAL PAYMENTS, PAY ANY OTHER
SUM WHEN DUE OR OTHERWISE PERFORM ANY OTHER OBLIGATION DUE TO LESSOR AND ITS
SUCCESSORS AND ASSIGNS UNDER THIS LEASE.
(b) WARRANTIES. Lessor warrants that, so long as no Event of Default
has occurred and is continuing, neither Lessor nor its successors or Assignees
or anyone acting or claiming through Lessor will interfere with Lessee's quiet
enjoyment and use of the Equipment. EXCEPT FOR LESSOR'S WARRANTY OF QUIET
ENJOYMENT, LESSEE HAS NOT RELIED UPON LESSOR IN SELECTING THE EQUIPMENT AND
ACKNOWLEDGES THAT LESSOR HAS MADE NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT LIMITATION
ITS CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. Until the
Lease is terminated, Lessor hereby assigns to Lessee and Lessee shall have the
benefit of, any and all manufacturer's warranties, service agreements and
intellectual property indemnities, if any, with respect to each Unit. Lessee's
sole remedy for the breach of any such warranty, indemnification or service
agreement shall be against the manufacturer or supplier of such Equipment and
not against Lessor, nor shall any such breach have any effect whatsoever on the
rights and obligations of Lessor or Lessee hereunder.
(c) WAIVERS. Lessee hereby specifically waives any and all rights and
remedies conferred upon Lessee by UCC Sections 10508 through 10522, including
(without limitation) Lessee's rights to (i) cancel or repudiate this Lease, (ii)
reject or revoke acceptance of any Unit, (iii) recover damages from Lessor for
breach of warranty or for any other reason, (iv) claim a security interest in
any rejected property in Lessee's possession or control, (v) deduct from Rental
Payments all or any part of any claimed damages resulting from Lessor's default
under this Lease, (vi) accept partial delivery of the Equipment, (vii) "cover"
by making any purchase or lease of other property in substitution for properly
due from Lessor, (viii) recover from the Lessor any general, special, incidental
or consequential damages, for any reason whatsoever, and (ix) seek specific
performance, replevin or the like for any of the Units. To the extent permitted
by applicable law, Lessee also hereby waives any rights now or hereafter
conferred by statute or otherwise which may require Lessor to sell, lease or
otherwise use any Equipment in mitigation of Lessor's damages except as set
forth in Paragraph 26 of this Lease or which may otherwise limit or modify any
of Lessor's rights or remedies under Paragraph 25. Notwithstanding the
foregoing, nothing in this Lease shall be construed as a waiver of Lessee's
right to seek a separate recovery of any Rental Payment that is not due and
payable under this Lease, and Lessee retains the right to seek damages or other
remedies on account of Lessor's failure to perform its obligations under this
Lease.
(d) LIABILITY. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE
MANUFACTURER, SUPPLIER OR DISTRIBUTOR OF THE EQUIPMENT, THAT SAID ENTITIES ARE
NOT AGENTS OF LESSOR, THAT LESSEE RENTS THE EQUIPMENT "AS IS", AND THAT LESSOR
HAS ACCEPTED NO RESPONSIBILITY FOR THE TRANSPORTATION, INSTALLATION OR REQUIRED
LICENSING NECESSARY FOR THE TRANSFER, INSTALLATION OR USE OF THE EQUIPMENT.
LESSEE HEREBY
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WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY
IN TORT) WHICH IT MIGHT HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY
BY THE EQUIPMENT, ITS USE OR MAINTENANCE, OR ANY DELAY OR FAILURE TO PROVIDE
ANY UNIT OF EQUIPMENT, OR ANY INTERRUPTION OF SERVICE OR LOSS OF USE OF THE
EQUIPMENT. If any Unit is unsatisfactory for any reason, Lessee shall make
any claim solely against the manufacturer or supplier of the Unit. Lessor
shall not be liable for specific performance of this Lease or for damages if
for any reason a supplier declines, delays or fails to fill any order.
7. ADJUSTMENTS FOR ACTUAL COST. Upon Lessee's request, Lessor may,
but shall have no obligation to, fund a Schedule which would cause the aggregate
Cost of Equipment on all Schedules funded under this Lease to exceed the Master
Lease Line. If at any time the actual aggregate Cost of all Equipment exceeds
the Master Lease Line, the Advance Rental shall be increased proportionately.
Lessee shall pay any additional sums for Advance Rental due under this Lease
within five (5) business days after receiving notice from Lessor. Lessee may
not request funding for a Schedule which would cause the aggregate Cost of
Equipment under all Schedules funded under this Lease to exceed the Lease Line
by more than ten percent (10%).
8. TITLE. All Equipment shall remain personal property, and the
title thereto shall remain exclusively in Lessor, notwithstanding the manner in
which any Unit may be attached to realty. Lessee agrees, upon the request of
Lessor at any time during the Lease Term, to affix or permit Lessor to affix, in
a permanent place on any Unit, labels supplied by Lessor identifying the
Equipment as property of Lessor, and shall not alter or remove any such label
from any Unit. Lessee shall keep the Equipment free from any and all liens and
encumbrances except those created by Lessor. Lessee shall give Lessor immediate
notice of any judicial process or encumbrance affecting the Equipment and shall
indemnify and save Lessor harmless from any loss or damage caused thereby,
including without limitation court costs, reasonable attorney fees and expenses.
9. FILING. Lessee shall execute or cause to be executed, at Lessee's
sole expense, such supplemental instruments, financing statements and landlord's
waivers as Lessor deems necessary or advisable and shall cooperate to defend the
title of Lessor in the Equipment by filing or otherwise. Lessee authorizes
Lessor to record in any state, this Lease and any financing statements, security
agreements and landlord's waivers with respect to the Equipment or any
collateral provided by Lessee to Lessor. Lessee agrees to give Lessor thirty
(30) days written notice of any change in Lessee's name or place of business.
Lessee agrees to give written notice to Lessor as soon as Lessee has knowledge
of any change of ownership of the real property upon which or within which the
Equipment is located.
10. TAXES. Lessee shall pay in a timely fashion, and shall indemnify
and hold Lessor harmless against all federal, state and local taxes,
assessments, license and registration fees, and other governmental charges of
any kind including, without limitation, those levied on motor vehicles or
trailers, and any interest or penalties thereon, which may be levied, directly
or indirectly, against the Equipment or with respect to its ordering,
purchasing, delivery, ownership, possession, use, leasing, documentation, and
return or other disposition thereof, regardless of whether such taxes and fees
are levied against Lessor or Lessee. Such taxes and fees to be paid by Lessee
shall include, without limitation, property, sales, rent, franchise, gross
receipts, lease, and use taxes, and any other tax measured by gross Rental
Payments, but shall not include income or franchise taxes based on Lessor's net
income and payable by Lessor on its receipt of Rental Payments hereunder.
Personal property taxes shall be reasonably estimated by Lessor and billed to
Lessee as of the date of assessment each year. Upon receipt by Lessor of the
final personal property tax assessment and invoice, Lessor shall invoice or
credit Lessee, as applicable, for any differences of such final assessment and
Lessor's original estimate. Lessor shall have the right, but not the
obligation, to pay any such taxes or fees regardless of whether levied against
Lessor or Lessee. Any and all sales or use taxes levied against Lessor's
purchase of Equipment shall be added to the total Cost of such Equipment as
specified on the Schedule under which such Equipment is added to this Lease.
With the exception of taxes and fees which are added to the total Cost of
Equipment hereunder, Lessee shall reimburse Lessor within five (5)
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days after receipt of invoice from Lessor specifying the amount of, and
reason for, any payment by Lessor of amounts for which Lessee is liable under
this Paragraph 10. Lessee shall timely prepare and file all reports and
returns which are required to be made with respect to such taxes and/or fees,
and all such reports shall show Lessor as owner of the Equipment.
11. ASSIGNMENTS AND SUBLEASES.
(a) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, LESSEE SHALL NOT
ASSIGN, PLEDGE, GRANT A SECURITY INTEREST IN, OTHERWISE ENCUMBER, SUBLEASE OR
TRANSFER, OR IN ANY WAY DISPOSE OF OR OTHERWISE RELINQUISH POSSESSION OR CONTROL
OVER (COLLECTIVELY, A "TRANSFER") ITS RIGHTS WITH RESPECT TO ANY UNIT OF
EQUIPMENT OR ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS UNDER THIS LEASE. If
notwithstanding the foregoing, a Transfer by Lessee takes place, the rights of
the sublessee or other transferee will be subject and subordinate to all of the
terms of this Lease, including Lessor's right of repossession on the occurrence
of an Event of Default. Lessee will remain primarily liable for the performance
of all of the terms of this Lease to the same extent as if the sublease or
transfer of possession had not occurred. Lessor and Lessee agree that any
purchase of all or substantially all of Lessee's assets, any merger or
consolidation into or with Lessee regardless of whether Lessee is the surviving
entity or any entity acquiring more than twenty percent (20%) of Lessee's voting
securities shall be deemed to be a Transfer under this Lease.
(b) Lessor shall have the right, in its sole discretion, to assign,
sell, pledge, grant a security interest in or otherwise encumber its rights
under this Lease or one or more Schedules and/or with respect to the Equipment
subject to this Lease or such Schedule(s) to one or more persons or entities
(each, an "Assignee"). Lessee acknowledges that an assignment, sale or other
encumbrance by Lessor would not materially change Lessee's duties under the
Lease or materially increase its burdens or risks. Even if such an assignment,
sale or other encumbrance could be deemed to have that effect, Lessee agrees
that the assignment, sale or other encumbrance will nevertheless be permitted.
Without prejudice to any rights that Lessee may have against Lessor, Lessee
agrees that it will not assert against an Assignee any claim or defense that it
may have against Lessor.
(c) Lessee acknowledges that it is Lessor's intention to assign this
Lease and/or one or more Schedules and the related Equipment to one or more
limited partnerships with which Lessor is affiliated (each, a "Lessor
Affiliate") and agrees that upon any such assignment the sole liability for
performance of Lessor's obligations hereunder shall fall upon such Lessor
Affiliate which shall assume such obligations and Lessor shall be fully released
from such liabilities and that the limited partners of such Lessor Affiliate
shall have no personal liability for the performance or observance of this
Lease. A Lessor Affiliate which succeeds to the rights and interests of Lessor
under this Paragraph 11(c) shall be bound by the terms of this Lease without
alteration and any claim or defense which Lessee may have had against Lessor
prior to such assignment may only be asserted against the assignee Lessor
Affiliate.
(d) Subject to the foregoing, this Lease inures to the benefit
of, and is binding upon, the heirs, legatees, representatives, successors and
assigns of Lessee and Lessor.
12. REPRESENTATIONS AND WARRANTIES.
(a) Lessee warrants and represents the following as of the date
hereof: (i) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is duly qualified
and authorized to do business in the state(s) where the Equipment will be
located; (ii) Lessee has the full corporate power, authority and legal right and
has obtained all approvals and consents and has given all notices necessary to
execute and deliver this Lease and perform the terms hereof and of each
Schedule; (iii) there is no action, proceeding or claim pending or, insofar as
Lessee knows, threatened against Lessee or any of its subsidiaries before any
court or administrative agency which might have a material adverse effect on the
business, condition or operations of Lessee or any subsidiary; and
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(iv) this Lease has been and each Schedule will be duly executed and
delivered by Lessee and constitute or will constitute the valid, binding and
enforceable obligations of Lessee.
(b) Lessee agrees that by its signature on each Schedule it
shall be deemed to have warranted and represented the following as of the
Acceptance Date of such Schedule: (i) all of the Units subject to such
Schedule are accurately described in Annex A attached to such Schedule, have
been fully assembled and conform to all applicable performance criteria; (ii)
the requirements of this Lease and of Lessor with respect to the
identification of the Units have been met; and (iii) each of the
representations and warranties set forth in clause (a) of this Section 12
remains true and correct.
13. USE AND INDEMNITY. Lessee shall use the Equipment only in
Lessee's business. Lessee agrees not to allow the Equipment to be used by
other than its employees, consultants and agents. Lessee acknowledges that
the Equipment is leased for commercial purposes and not for personal, family
or household use. Lessee agrees to indemnify and hold Lessor, and Lessor's
officers, directors, shareholders, partners, affiliates, agents, servants,
successors and Assignees, harmless against any and all liabilities, losses,
damages, actions, claims and expenses of any kind and nature, including,
without limitation, court costs and reasonable attorneys' fees and expenses
(each, a "Claim"), directly or indirectly related to or arising in connection
with the breach of any representation or warranty of Lessee under this Lease
or the manufacture, purchase, licensing, lease or sublease, delivery,
installation, operation, use, ownership, maintenance, storage, relocation,
return or condition of any Unit of the Equipment (regardless of whether such
Unit is at the time in the possession or control of Lessee), except to the
extent any such claims, actions, liabilities and expenses result from the
willful misconduct of Lessor. The foregoing indemnity shall cover, without
limitation, (i) any Claim in connection with a design or other defect (latent
or patent) in any Unit, (ii) any Claim for infringement of any patent,
copyright, trademark or other intellectual property right, (iii) any Claim
resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release from any Unit of any Hazardous
Materials, including, without limitation, any Claims asserted or arising
under any Environmental Law, or (iv) any Claim for negligence or strict or
absolute liability in tort. Upon Lessor's written demand, Lessee shall
assume and diligently conduct, at its sole cost and expense, the entire
defense of Lessor and its agents, employees, successors and assigns against
any indemnified Claim described in this Paragraph 5. Lessee shall not settle
or compromise any Claim against or involving Lessor without first obtaining
Lessor's written consent thereto, which consent shall not be unreasonably
withheld. The foregoing indemnity shall continue in full force and effect
notwithstanding termination or cancellation of this Lease, whether by
expiration of time, operation of law or otherwise.
14. LOCATION. Lessee shall keep the Equipment at its place of
business as specified above or on the Schedules. Lessee shall not permit any
Equipment to be moved to a new location without the prior written consent of
Lessor.
15. RIGHT OF INSPECTION. Lessor and its agents shall have the
right, at any time during normal business hours, to inspect and photograph
the Equipment, to review all maintenance records related to the Equipment and,
during the last ninety (90) days of the Noncancellable Term of each
respective Schedule, to demonstrate the Equipment specified thereon to
prospective purchasers; provided, however, Lessor shall give five (5) days'
notice to Lessee of any such demonstration.
16. MAINTENANCE. Lessee shall exercise due and proper care in the
use, repair and servicing of the Equipment. Lessee shall, at its own
expense, make all repairs and replacements required to maintain the Equipment
in good working condition in accordance with manufacturers' specifications
and Lessor's requirements, and shall pay all other operating expenses
relating to the Equipment. Lessee shall have the right, upon (10) days prior
written notice to Lessor, to make any alterations, additions or improvements
to any Unit which do not render the Unit in such a condition that it cannot,
prior to the expiration, cancellation or other termination of this Lease, be
restored to its original condition, reasonable wear and tear alone excepted;
provided that no such alteration, addition or improvement shall be made by
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Lessee if as a result thereof any warranties made by the supplier of the Unit
would be canceled or terminated. If Lessee does not exercise its option to
purchase the Equipment, as specified in Paragraph 17, or if this Lease shall
be earlier terminated or cancelled for any reason, Lessee shall restore each
Unit to its original condition, reasonable wear and tear alone excepted,
prior to the expiration, cancellation or other termination of each respective
Schedule. All replacement parts and additions incorporated into a Unit shall
become the property of Lessor immediately upon incorporation; provided,
however, that Lessor shall transfer to Lessee title to any alterations,
additions and improvements which were made by Lessee at its own expense to
each item of Equipment purchased by Lessee pursuant to the provisions of
Paragraph 17. Lessee agrees to maintain and provide upon request of Lessor
ail internal maintenance reports relating to the Equipment.
17. PURCHASE OPTION. Upon written notice to Lessor not less than
ninety (90) days nor more than one hundred eighty (180) days prior to the
last day of the Noncancellable Term of the first Schedule executed pursuant
to this Lease, if Lessee has fulfilled all of its obligations hereunder,
Lessee shall have the right to purchase all, but not less than all, of the
Equipment under all Schedules, for the aggregate Fair Market Value of such
Equipment (plus applicable taxes). Should Lessor and Lessee fail to agree
upon the Fair Market Value of the Equipment, said price shall be determined
by an independent appraiser, and the cost of the appraisal shall be borne
equally by both Lessor and Lessee. Notwithstanding anything contained in
this Section 17, not less than thirty (30) days prior to the last day of the
Noncancellable Term of each Schedule, Lessee shall be required to purchase
all Equipment consisting of software under such Schedule at ten percent (10%)
of total Cost of such Equipment to Lessor. Notwithstanding the date on which
Lessee exercises this option, Lessee shall acquire no rights of title to any
Equipment, nor shall title to any Unit be transferred to Lessee after the
exercise of this purchase option until the expiration of the Noncancellable
Term for the Schedule on which such Unit is specified. Lessee shall remain
liable for all Rental Payments and other obligations due under each Schedule
until the expiration of the Noncancellable Term of such Schedule. Any
Equipment sold by Lessor shall be sold "AS IS", "WHERE IS", and with no
warranties, express or implied, including without limitation implied
warranties of merchantability and fitness for any particular purpose. "Fair
Market Value" is defined as the estimated amount at which the property might
be expected to exchange in an arm's length transaction between a willing
buyer (other than a used equipment dealer) and a willing seller, neither
being under compulsion, each having reasonable knowledge of all relevant
facts, and with equity to both, with the assumptions that the Units (i) are
being sold "in place and in use," (ii) are free and clear of all liens and
encumbrances, and (iii) are in the condition required by Paragraph 16 of this
Lease.
18. RETURN OF EQUIPMENT. Upon ninety (90) days' written notice to
Lessor, in the event Lessee has not exercised its purchase option as
specified in Paragraph 17, after such notification and upon the expiration,
cancellation or other termination of the Noncancellable Term of each
Schedule, Lessee shall, at Lessee's sole expense, properly pack and return
the Equipment, insured, unencumbered and in the same condition as when
received by Lessee, reasonable wear and tear alone excepted, by such carriers
as Lessor shall approve and to such place as designated by Lessor. Should
Lessee fail to give notice of its intent to return or fail to return the
Equipment as directed above, all obligations of Lessee under this Lease,
including Rental Payments, shall remain in full force and effect for the
period from the end of the Initial Lease Term until ninety (90) days after
notice is given to Lessor of Lessee's intent to return or purchase the
Equipment (the "Holdover Period").
19. FINANCIAL STATEMENTS; OTHER INFORMATION.
(a) Lessee shall provide to Lessor the financial statements
specified in this Paragraph 19 (a), prepared in accordance with generally
accepted accounting principles, consistently applied (the "Financial
Statements"); provided, however, that after the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" shall be deemed to refer only to those statements
required to be filed by the Securities and Exchange Commission, to be
provided no less frequently than quarterly.
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(i) As soon as practicable (and in any event within thirty
(30) days after the end of each month), a reasonably detailed balance sheet
as of the end of such month and the related statements of income or loss,
cash flow and capital structure of the Lessee during such month (including
notification of the commencement of any material litigation by or against
Lessee), certified by Lessee's Chief Executive Officer or Chief Financial
Officer fairly to present the data reflected therein.
(ii) As soon as practicable (and in any event within ninety
(90) days after the end of each fiscal year), audited balance sheets as of
the end of such year (consolidated if applicable), and related statements of
income or loss, retained earnings or deficit, cash flows and capital
structure of Lessee for such year, setting forth in comparative form the
corresponding figures for the preceding fiscal year, and accompanied by an
audit report and opinion of the independent certified public accountants of
recognized national standing selected by Lessee.
(b) Lessee shall promptly provide to Lessor copies of all notices,
minutes, consents and other material that it provides to Lessee's equity
securities holders at the same time they are delivered to such equity
securities holders. Lessee shall promptly furnish to Lessor any additional
information (including but not limited to tax returns, income statements,
balance sheets, and names of principal creditors) as Lessor reasonably
believes necessary to evaluate Lessee's continuing financial obligations (the
"Additional Information").
(c) Lessor agrees to preserve the confidentiality of all
information provided to it hereunder by Lessee regarding the Lessee and its
business which Lessee designates in writing as confidential and which is
otherwise not generally known (except to the extent any disclosure of such
information is required by a court of competent jurisdiction or governmental
authority).
20. TAX INDEMNIFICATION. Lessee acknowledges that this Lease has
been entered into on the basis that Lessor or Lessor's Assignee intends to
claim such depreciation, interest deductions and other tax benefits (the "Tax
Benefits") as are provided to an owner of Equipment under the Internal
Revenue Code of 1986, as amended (the "Code") and corresponding provisions of
state law. If Lessor or Lessor's Assignee shall not have the right to claim
or there shall be disallowed, deferred, recaptured or otherwise made
unavailable with respect to Lessor or Lessor's Assignee all or any portion of
the Tax Benefits as a result of an act or failure to act by Lessee in
contravention of any of the terms and conditions of the Lease, Lessee shall
promptly pay to Lessor or Lessor's Assignee, an amount which, on an after-tax
basis, will compensate Lessor or Lessor's Assignee for the value of the lost
Tax Benefits. The Tax Benefits shall be deemed to have been disallowed or
recaptured upon the earliest of (i) the adjustment by a taxing authority of
the tax return of Lessor to reflect such loss; or (ii) the payment by Lessor
to the Internal Revenue Service or state taxing authority of the tax increase
resulting from such lost Tax Benefits. Lessor or Lessor's Assignee shall be
deemed not to have the right to claim the Tax Benefits if, in the opinion of
Lessor's independent tax counsel, reasonably acceptable to Lessee, there is
no reasonable basis for claiming the Tax Benefits.
21. ADDITIONAL LESSOR RIGHTS. Lessor shall be entitled to consult
with and advise management of Lessee on significant business issues,
including management's proposed annual and quarterly operating plans, and
management will meet with Lessor within thirty days after the end of each
fiscal quarter at the Lessee's facilities at mutually agreeable times for
such consultation and advice and to review progress in achieving said plans;
22. RISK OF LOSS. Lessee assumes the entire risk of loss, theft
and damage of the Equipment from any cause whatsoever, and no such event
shall relieve Lessee of any obligation under this Lease. Lessee shall notify
Lessor in writing within ten (10) days after any such event. Lessee agrees
that Lessor shall have the following remedies upon each occurrence of the
following events:
(a) In the case of damage of any kind whatsoever to any Unit
(unless such Unit is damaged beyond repair), Lessee shall, at Lessee's sole
expense and with Lessor's reasonable consent, (i) restore such Equipment to
its original
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condition, reasonable wear and tear alone excepted, or (ii) replace it with
like equipment of the same or later model in good condition. Upon Lessee's
replacement of any Equipment as specified in clause (ii) of this Paragraph
22(a), Lessee shall transfer title to such replaced Equipment to Lessor.
(b) If any Unit is determined by Lessor to be damaged beyond
repair, or if Lessor has reasonable cause to believe that any Unit is stolen
or lost and such Unit is not returned to its proper location within thirty
(30) days after notice thereof to Lessee, Lessee shall, with Lessor's
reasonable consent, immediately pay to Lessor: (i) the amount required to
replace such Unit with like equipment of the same or later model in good
condition, in which case such Unit shall be substituted for the damaged Unit
on the relevant Schedule, and Rental Payments shall continue throughout the
Lease Term of the Schedule to which the Unit becomes subject without any
interruption, or (ii) the sum of (A) the aggregate unpaid rent due for the
balance of the Noncancellable Term for the Unit involved, discounted to
present value at the Discount Rate; PLUS (B) the then estimated Fair Market
Value of the Unit involved, calculated as of the expiration of the
Noncancellable Term (the "Residual Value"), discounted to present value at
the Discount Rate; PLUS (C) any tax payments or indemnification for which
Lessee is liable under Paragraphs 10 and 20; PLUS any other amounts with
respect to such Unit for which Lessee is liable under this Lease; provided,
however, the option specified in clause (i) of this Paragraph 22(b) shall not
be available if an Event of Default has occurred and is continuing. Upon
payment under clause (ii) of Paragraph 22(b), this Lease shall terminate with
respect to the Unit(s) paid for, and Lessee shall become entitled to such
Unit(s) "AS IS" and "WHERE IS" WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
(c) Any proceeds paid to Lessor from the personal property
insurance specified in Paragraph 23(a)(i) shall be applied to Lessee's
obligations under this Paragraph 22.
23. INSURANCE.
(a) Lessee shall, at its own expense, maintain the following types
of insurance, with companies with an A-5 Best rating or better, acceptable to
Lessor, until such time as Lessee has returned the Equipment as specified in
Paragraph 18 or taken title to the Equipment pursuant to Paragraph 17:
(i) Personal property insurance on all property owned by
Lessee (including without limitation all of the Equipment) in an agreed
amount based upon the following:
(A) Standard "all risk" property insurance,
including boiler and machinery insurance, earthquake insurance, if
applicable, and flood insurance if any Equipment is located in an
identified "flood hazard area," in which flood insurance has been
made available pursuant to the National Flood Insurance Act of
1968;
(B) The amount of such insurance shall be not
less than the greater of the fair market value or the full
undepreciated replacement value of the Equipment. The amount of
such insurance allocable to loss or damage or personal property
shall not have a deductible in excess of one thousand dollars
($1,000.00) per occurrence.
(C) Such insurance shall contain an endorsement
issued by the insurer (as opposed to a certificate issued by an
agent of the insurer) in which Lessor is named as loss payee with
respect to the Equipment, and shall set aside the amount stated in
Paragraph 23(a)(i)(B) for the sole benefit of, and payable
directly to, Lessor.
(ii) Employee dishonesty insurance payable to Lessor with
respect to the theft of the Equipment.
-10-
<PAGE>
(iii) Business interruption insurance in an amount at all
times equal to the total Rental Payments to become due during the six months
following the date of calculation. In the event of any interruption of
Lessee's business, the amount payable to Lessor shall be equal to the actual
loss of Rental Payments suffered by Lessor as the result of such
interruption, and shall be payable to Lessor within thirty (30) days from
the date of loss, and on a month-to-month basis thereafter, until Lessee's
business is returned to a fully operational state, plus ninety (90) days.
(iv) Commercial general liability insurance covering bodily
injury (including death) and property damage, naming Lessor, its directors,
officers, agents and employees as an Additional Insureds on all policies
(evidenced by an endorsement issued by the insurer (as opposed to a
certificate issued by an agent of the insurer)), and providing total limits
in amounts as are at the time carried by entities engaged in the same or
similar business and which are similarly situated, but in no event less than
two million dollars ($2,000,000.00) for combined single limit occurrence.
All such policies shall cover any injury or damage occasioned by, or
occurring upon, Lessee's premises, products, operations and, at Lessor's
option, explosion, collapse and underground hazards. All such policies shall
contain contractual liability coverage including all liability assumed under
this agreement, and a cross liability clause providing that such insurance
shall, except with respect to the limits of liability, apply separately to
each insured.
(v) Workers compensation insurance.
(b) All insurance specified in this Paragraph 23 shall be primary
over, and in no event shall, any insurance carried by Lessor be called upon
to contribute to any loss relating to or arising out of this Lease. All
insurance shall be in effect, and shall be evidenced by policies and/or
endorsements delivered to Lessor no later than twenty (20) days after the
date upon which Lessee executes this Lease. Notwithstanding anything to the
contrary contained in this Lease, Lessor shall have no obligation to purchase
any Equipment until all policies are in place. All such policies shall
provide for at least thirty (30) days' prior written notice to Lessor in the
event of any cancellation, non-renewal or material change in coverage, and
Lessor shall receive a copy of any and all endorsements or other
documentation relating to such policies.
(c) Should Lessee, at any time during the Lease Term, be without
sufficient insurance, as determined by Lessor in accordance with the
provisions of this Paragraph 23, Lessee appoints Lessor as its agent to
obtain such coverage, and promises to pay to Lessor the entire cost of such
coverage.
24. DEFAULT. Each of the following events shall constitute an
"Event of Default" under this Lease:
(a) Nonpayment, by the due date specified herein, of any Rental
Payment or other payment required of Lessee under the terms of this Lease,
and such nonpayment shall continue for a period of five (5) business days;
(b) Noncompliance with any or all of the provisions of Paragraph
23, and such noncompliance shall continue for a period of five (5) days after
notice thereof is given to Lessee;
(c) If Lessor shall determine that Lessee has made a misstatement
or false statement of, or omitted to state, a material fact in connection
with the execution, performance or nonperformance of this Lease or any
Schedule, or if any representation or warranty of Lessee in this Lease, any
Schedule or any Acceptance Certificate is inaccurate or false;
(d) If Lessee, without Lessor's prior written consent, shall have
removed, parted possession with, sold transferred, encumbered, assigned or
sublet the Equipment or Lessee's interest under this Lease or attempted to do
any of the foregoing; or if Lessee shall have converted any interest of
Lessor arising under this Lease or any purchase order, or resulting from the
purchase of Equipment or attempted to convert any of the foregoing;
(e) If Lessee, without Lessor's prior written consent, shall
encumber or grant a security interest in (other than for valid business
purposes in the ordinary course of business with respect to license
agreements or similar
-11-
<PAGE>
agreements), sell, transfer or assign Lessee's rights, title and interest in
all patents, patent applications, invention disclosures, copyrights,
copyright applications, trademarks (including service marks), trademark
registrations, trade names, computer software and hardware, microcode and
source code, trade secrets, know-how and processes owned by Lessee or other
intellectual property rights;
(f) If any of Lessee's credit or financial information submitted to
Lessor at any time (including but not limited to due diligence materials,
Financial Statements and Additional Information) contains any misstatement or
false statement of a material fact, or fails to state therein any material
fact necessary to make the statements made, in light of the circumstances
under which they were made, not misleading;
(g) If in the determination of Lessor the present fair salable
value of Lessee's assets is less than the amount that will be required to pay
the probable liability on Lessee's existing debts as they become absolute and
matured;
(h) If any single judgment for payment of money damages in excess
of twenty-five thousand dollars ($25,000.00), or aggregate judgments for
payment of money damages in excess of fifty thousand dollars ($50,000.00),
shall be rendered against Lessee and shall remain undischarged for a period
of sixty (60) days (unless during such period execution shall not be
effectively stayed in which case there shall be no grace period under this
Paragraph 24(h));
(i) If any substantial part of Lessee's property shall be subjected
to any levy, seizure, involuntary assignment, attachment, application or sale
for or by any creditor or governmental agency;
(j) If any single indebtedness of Lessee exceeding the sum of
twenty-five thousand dollars ($25,000.00), or aggregate indebtedness
exceeding the sum of fifty thousand dollars ($50,000.00), under any other
lease or contract for the borrowing of money or on account of the deferred
purchase price of property shall be accelerated, or subject to acceleration
upon the giving of notice, passage of time or both as a result of a default
by Lessee, or the obligee with respect to such indebtedness shall exercise
any other remedy it may have as a result of such default;
(k) If an order, judgement or decree shall be entered by any court
having jurisdiction for (i) relief in respect of Lessee in an involuntary
case under any applicable bankruptcy, insolvency or other similar law (as now
or hereafter in effect), (ii) appointing of receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official) for Lessee or for any
substantial part of its property, or sequestering any substantial part of the
property of Lessee, or (iii) liquidating of Lessee's affairs, and any such
order, judgement or decree shall remain in force undismissed, unstayed or
unvacated for a period of sixty (60) days after the date of entry thereof; or
if Lessee shall seek relief of any kind under any such law or consent to any
of the foregoing; or
(l) Nonperformance of any of Lessee's obligations under this Lease
other than those described elsewhere in this Paragraph 24, and such
nonperformance shall continue for a period of ten (10) days after notice
thereof is given to Lessee.
25. REMEDIES. Upon the occurrence and during the continuance of
any Event of Default, with or without cancelling or terminating this Lease,
Lessor or its agent shall have the right, without demand or prior notice, in
Lessor's sole discretion, to exercise any one or more of the following
remedies:
(a) To cancel this Lease and all Schedules;
(b) To declare the damages specified in Paragraph 26 to be
immediately due and payable;
(c) To take possession of any or all Units of Equipment with or
without any court order or other process of law, and for this purpose Lessor
and/or its agents may enter upon any premises of or under the control or
jurisdiction of
-12-
<PAGE>
Lessee or any agent of Lessee, without liability for suit, action or other
proceeding by Lessee and remove the Equipment therefrom; Lessee further
agrees, on demand, to assemble the Equipment and make it available to Lessor
at a place to be designated by Lessor which is reasonably convenient to
Lessor and Lessee; notwithstanding the foregoing, such taking of possession
shall not relieve Lessee of its obligations to pay damages as set forth in
Paragraph 26. Lessee further waives any and all damages occasioned by such
taking of possession.
(d) To exercise any other right or remedy which may be available to
Lessor under the UCC or any other applicable law.
26. DAMAGES. Lessor's damages, in the event of default by Lessee,
shall include (in addition to all other damages available to Lessor under
applicable law): (i) the due and unpaid balance of Rental Payments and all
other amounts payable hereunder plus late charges and interest due under
Paragraph 5(c) (but not more than the maximum rate permitted by law) for the
period after the date such payments were due, (ii) the aggregate of all
remaining Rental Payments through the end of the Noncancellable Term of each
Schedule, discounted to present value at the Discount Rate, (iii) the
Residual Value, discounted to present value at the Discount Rate, (iv) any
indemnification payments due hereunder plus interest at a rate equal to the
lesser of 1.5 % per month or the maximum rate permitted by law for the period
after the date such payments were due, (v) costs of repossession, recovery,
storage and repairs and of lease or sale to a third party, plus (vi) all
other expenses including court costs and reasonable attorneys' fees and
expenses. Lessor's obligation to mitigate said damages and any reduction of
the amounts due to Lessor shall be limited as follows:
(a) Lessor shall make best efforts to mitigate its damages by
re-leasing the Equipment to a third party, and any rentals received in
consideration for such third party's use of said Equipment during any period
of the Noncancellable Term of any Schedule shall be applied only to that
portion of Lessor's damages resulting from loss of rentals that Lessor would
have received from Lessee during the same period had Lessee not become in
default. Amounts received from such third party shall be applied in
mitigation of Lessor's damages only to the extent such amounts are payable in
connection with such third party's periodic rental obligations as specified
in the preceding sentence; in no event shall any other amount received from
such third party, including without limitation as a security deposit or as an
advance on periodic rental obligations, be applied in mitigation of Lessor's
damages hereunder.
(b) Lessor shall have no obligation to sell any of the Equipment;
however, any amounts received from a sale to a third party shall be applied
to Lessor's damages as specified in this Paragraph 26.
27. MISCELLANEOUS.
(a) If more than one Lessee is named in or added to this Lease, the
liability of each shall be joint and several.
(b) All notices related hereto shall be mailed to Lessor or Lessee
at its respective address as specified on the cover page of this
Lease, or at such other address as either party may designate upon ten days
written notice to the other party.
(c) Paragraph titles are solely for convenience and are not an aid
in the interpretation of this Lease.
(d) Time is of the essence of this Lease and each of its provisions.
(e) If notwithstanding the intent of the parties this Lease and any
Schedules hereto are determined to be a lease for security or a security
agreement, Lessee shall have been deemed to have granted to Lessor a security
interest in
-13-
<PAGE>
all of Lessee's right, title and interest in and to the Equipment and the
proceeds thereof to secure all of Lessee's obligations to Lessor arising
hereunder or otherwise.
(f) This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument; PROVIDED, HOWEVER, that to the extent, if any, that this
Lease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease may be created through the transfer or possession of
any counterpart of this Lease or any Schedule other than the original
counterparts marked "Original Counterpart No. 1".
28. RIGHT OF FIRST OFFER. During the lease term, Lessee shall
provide Lessor with all requests for additional debt or lease financing prior
to the time that such requests are provided to other financing sources.
Should Lessor and Lessee fail to agree on the terms and conditions of such
financing, then Lessee may accept a funding source other than Lessor.
29. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee shall
fail duly and promptly to perform any of its obligations under this Lease,
Lessor may, at its option and at any time, perform the same without waiving
any default on the part of Lessee, or any of Lessor's rights. Lessee shall
reimburse Lessor, within five (5) days after notice thereof is given to
Lessee, for all expenses and liabilities incurred by Lessor in the
performance of Lessee's obligations.
30. NONWAIVER; RIGHTS AND REMEDIES CUMULATIVE. Lessor's failure at
any time to require strict performance by Lessee shall not constitute waiver
of, or diminish, Lessor's right to demand strict compliance with any
provision of this Lease. Waiver by Lessor of any default shall not
constitute waiver of any other default. No rights or remedies referred to
herein shall be exclusive, but shall be cumulative and in addition to any
other right or remedy set forth herein or otherwise available to Lessee at
law or in equity.
31. SURVIVAL OF OBLIGATIONS; LIMITATIONS ON ACTIONS. All
agreements, covenants, representations and warranties of Lessee contained in
this Lease or in the Schedules or other documents delivered pursuant hereto
or in connection herewith shall survive the execution and delivery, and the
expiration, cancellation or other termination of this Lease. Any action by
Lessee against Lessor for any default by Lessor under this Lease shall be
commenced within one (1) year after any such cause of action accrues.
32. SEVERABILITY. If any provision or remedy herein provided is
determined invalid under applicable law, such provision shall be inapplicable
and deemed omitted; but the remaining provisions, including remaining default
remedies, shall be given effect in accordance with their terms.
33. UPGRADES, ADDITIONS AND ATTACHMENTS. Any added memory,
upgrades, additions and attachments to Equipment previously placed under this
Lease shall, upon approval by Lessor, be included on a Schedule, with a
Noncancellable Term that is coterminous with the Equipment to which such
added memory, upgrade, addition or attachment is being attached.
-14-
<PAGE>
34. CHOICE OF LAW. THIS LEASE SHALL BE DEEMED TO HAVE BEEN MADE
AND ACCEPTED AND PERFORMED IN THE COUNTY OF SAN FRANCISCO, IN THE STATE OF
CALIFORNIA, WHERE THE LESSOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED. THIS
LEASE AND ALL TRANSACTIONS HEREUNDER, AND ALL RIGHTS AND LIABILITIES OF THE
PARTIES HERETO, SHALL BE DETERMINED AND GOVERNED AS TO THE VALIDITY,
INTERPRETATION, ENFORCEMENT AND EFFECT BY THE LAWS OF THE STATE OF
CALIFORNIA. THE LESSEE HEREBY CONSENTS, IN ALL ACTIONS AND PROCEEDINGS
ARISING DIRECTLY OR INDIRECTLY FROM THIS LEASE, TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OR ANY
STATE COURT LOCATED WITHIN SAN FRANCISCO COUNTY IN THE STATE OF CALIFORNIA.
LESSEE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS LEASE. IN ADDITION, ANY CLAIM
OR DISPUTE ARISING UNDER OR RELATING TO THIS LEASE MAY, AT LESSOR'S
DISCRETION, BE SUBMITTED TO BINDING ARBITRATION IN SAN FRANCISCO, CALIFORNIA
PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
Lessee Initials: Lessor Initials
------------- -------------
35. ENTIRE AGREEMENT. This instrument constitutes the entire
agreement between the parties and may not be modified except in writing
executed by Lessor and Lessee. No supplier or agent of Lessor is authorized
to bind Lessor or to waive or modify any term of this Lease.
Lessee Initials: Lessor Initials
------------- -------------
The undersigned representative of Lessee affirms that he or she has
read and understood this Lease and is duly authorized to execute this Lease
on behalf of Lessee and that, if Lessee is a corporation, this Lease is
entered into with consent of Lessee's Board of Directors and stockholders if
so required.
IN WITNESS WHEREOF, the parties hereto execute this noncancellable
Lease as of the date on the cover page hereof.
LESSEE: LESSOR:
KARTOFFELSOFT INCORPORATED DOMINION VENTURES, INC.
(d/b/a Homestead Technologies, Inc.)
By: /s/ Justin Shelby Kitch By: /s/ [ILLEGIBLE]
---------------------------------- ---------------------------------
Name: Name:
-------------------------------- -------------------------------
Title: Title:
------------------------------- ------------------------------
This Lease incorporates the following Addenda as if fully set forth herein:
Addendum I.
-15-
<PAGE>
FIRST AMENDMENT TO MASTER LEASE AGREEMENT NO. 10840
This First Amendment, dated as of March 23, 1999, to Master Lease
Agreement No. 10840 dated September 28, 1998 (the "Lease"), is entered into
by and between Kartoffelsoft Incorporated (d/b/a Homestead Technologies,
Inc.), a Delaware corporation (the "Lessee" and Dominion Ventures, Inc., a
California corporation (the "Lessor").
WHEREAS, Lessee has requested an increase in Master Lease Line to
allow additional Equipment to be purchased pursuant to the terms of the
Lease; and
WHEREAS, Lessor has agreed to extend the Master Lease Line to allow
for the purchase of additional Equipment, subject to the approval of Lessor
and pursuant to the terms of the Lease. All capitalized terms used and not
otherwise defined herein shall have the meanings given in the Lease.
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. The Master Lease Line shall be increased by $400,000 for a total
of $750,000, subject to the terms of the Lease.
2. The Advance Rental Amount of $12,901.00, specified on page 1 of
the Lease shall be increased by $14,744.00 for a total of
$27,645.00 (plus applicable taxes).
3. The Funding Expiration Date shall be amended to August 15, 1999.
Except as specifically provided herein, all terms and conditions of the
Lease shall remain in full force and effect, without waiver or
modification.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to
be executed as of the date first written above.
LESSEE: LESSOR:
KARTOFFELSOFT INCORPORATED DOMINION VENTURES, INC.
(d/b/a Homestead Technologies)
By: /s/ Justin Shelby Kitch By: /s/ Renee C. Baker
---------------------------------- ---------------------------------
Name: Justin Shelby Kitch Name: Renee C. Baker
-------------------------------- -------------------------------
Title: CEO Title: V.P.
------------------------------- ------------------------------
<PAGE>
SECOND AMENDMENT TO MASTER LEASE AGREEMENT NO. 10840
This Second Amendment dated August 15, 1999 to Master Lease Agreement No.
10840 dated September 28, 1998 (the "Lease"), is entered into by and between
Homestead Technologies, Inc., a Delaware corporation (the "Lessee") and
Dominion Venture Finance, L.L.C. (the "Lessor").
WHEREAS, Lessee has requested an increase in Master Lease Line to
allow addition Equipment to be purchased pursuant to the terms of the Lease;
and
WHEREAS, Lessor has agreed to extend the Master Lease Line to allow
for the purchase of additional Equipment, subject to the approval of Lessor
and pursuant to the terms of the Lease. All capitalized terms used and not
otherwise defined herein shall have the meanings given in the Lease.
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. The Master Lease Line shall be increased by $1,000,000.00 for a
total of $1,750,000.00.
2. The Funding Expiration Date of August 15, 1999 as set forth in
the First Amendment to the Master Lease, shall be extended to
August 15, 2000.
3. The Advance Rental Amount of $27,645.00 as specified in the First
Amendment to the Master Lease, shall be increased by $36,860.00
(plus applicable taxes) for a total of $64,505.00 (plus applicable
taxes). The increase in the Advance Rental shall be paid to
Lessor upon execution of this Second Amendment and shall be
credited to the last complete calendar month's rent for each item
of Equipment, subject to the conditions set forth in paragraph 5
of the Lease.
4. The Rent Factor shall remain at .7083%, for the first twelve (12)
months for each Schedule, and thereafter shall remain at 3.686%
for months thirteen (13) through forty-two (42), consisting of
equal payments of interest and principle.
5. Software shall not exceed twenty-five percent (25%) of total
aggregate cost of Equipment funded pursuant to this increase in
the Master Lease Line.
Except as specifically provided herein, all terms and conditions of
the Lease shall remain in full force and effect, without waiver or
modification.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
Page 1 of 2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed as of the date first written above.
LESSEE: HOMESTEAD TECHNOLOGIES, INC. LESSOR: DOMINION VENTURE FINANCE
L.L.C.
By: /s/ Justin Shelby Kitch By: /s/ Emily Walther
--------------------------------- ---------------------------------
Its: Its: VP Finance
-------------------------------- --------------------------------
Page 2 of 2
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-1
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURES, INC. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead Technologies, Inc.)
Suite 4200 3475 Edison Way, Suite H
San Francisco, CA 94104 Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $81,585.78
FUNDING EXPIRATION DATE.................... May 15, 1999
RENTAL AMOUNT
Months 1-12............................ $ 577.87
Months 13-42........................... $3,007.25
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... December 1, 1998
ADVANCE RENTAL............................. $3,007.25
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION..... KARTOFFELSOFT INCORPORATED d/b/a
Homestead Technologies, Inc.
3475 Edison Way, Suite H
Menlo Park, CA 94025
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-2
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURES, INC. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead Technologies, Inc.)
Suite 4200 3475 Edison Way, Suite H
San Francisco, CA 94104 Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $9,423.00
FUNDING EXPIRATION DATE..................... May 15, 1999
RENTAL AMOUNT
Months 1-12............................. $ 66.74
Months 13-42............................ $347.33
FREQUENCY................................... Monthly, in advance
INITIAL TERM................................ 42 Months
COMMENCEMENT DATE........................... December 1, 1998
ADVANCE RENTAL.............................. $347.33
SECURITY DEPOSIT............................ $0.00
EQUIPMENT LOCATION............... KARTOFFELSOFT INCORPORATED
d/b/a Homestead Technologies, Inc.
3475 Edison Way, Suite H
Menlo Park, CA 94025
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-3
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURES, INC. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead Technologies, Inc.)
Suite 4200 3475 Edison Way, Suite H
San Francisco, CA 94104 Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto, and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $71,352.00
FUNDING EXPIRATION DATE..................... May 15, 1999
RENTAL AMOUNT
Months 1-12............................. $ 505.39
Months 13-42............................ $ 2,630.03
FREQUENCY................................... Monthly, in advance
INITIAL TERM................................ 42 Months
COMMENCEMENT DATE........................... March 1, 1999
ADVANCE RENTAL.............................. $2,630.03
SECURITY DEPOSIT............................ $0.00
EQUIPMENT LOCATION................ KARTOFFELSOFT INCORPORATED
d/b/a Homestead Technologies, Inc.
.................................. 3475 Edison Way, Suite H
.................................. Menlo Park, CA 94025
<PAGE>
LESSEE CONTACT.............................. DENNIS GILBERTSON, CFA
(650) 549-3124
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
KARTOFFELSOFT INCORPORATED DOMINION VENTURES, INC.
(d/b/a Homestead Technologies, Inc.)
By: By:
---------------------------------- ---------------------------------
Name: Justin Shelby Kitch Name:
-------------------------------- -------------------------------
Title: President & CEO Title:
------------------------------- ------------------------------
Date: Date:
-------------------------------- -------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-4
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURES, INC. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead Technologies, Inc.)
Suite 4200 3475 Edison Way, Suite H
San Francisco, CA 94104 Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $64,888.00
FUNDING EXPIRATION DATE.................... May 15, 1999
RENTAL AMOUNT
Months 1-12............................ $ 459.60
Months 13-42........................... $ 2,391.77
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... April 1, 1999
ADVANCE RENTAL............................. $2,391.77
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION................. KARTOFFELSOFT INCORPORATED
d/b/a Homestead Technologies, Inc.
................................... 3475 Edison Way, Suite H
................................... Menlo Park, CA 94025
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-5
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURES, INC. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead Technologies, Inc.)
Suite 4200 3475 Edison Way, Suite H
San Francisco, CA 94104 Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $115,335.95
FUNDING EXPIRATION DATE.................... May 15, 1999
RENTAL AMOUNT
Months 1-12............................ $ 816.92
Months 13-42........................... $ 4,251.28
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... May 1, 1999
ADVANCE RENTAL............................. $4,251.28
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION................. KARTOFFELSOFT INCORPORATED
d/b/a Homestead Technologies, Inc.
................................... 3475 Edison Way, Suite H
................................... Menlo Park, CA 94025
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-6
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: KARTOFFELSOFT INCORPORATED
44 Montgomery Street (d/b/a Homestead
Suite 4200 Technologies, Inc.)
San Francisco, CA 94104 3475 Edison Way, Suite H
Menlo Park, CA 94025
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto, and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $200,710.75
FUNDING EXPIRATION DATE.................... August 15, 1999
RENTAL AMOUNT
Months 1-12............................ $1,421.63
Months 13-42........................... $7,398.20
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... July 1, 1999
ADVANCE RENTAL............................. $7,398.20
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION................ KARTOFFELSOFT INCORPORATED
d/b/a Homestead Technologies, Inc.
.................................. 3475 Edison Way, Suite H
.................................. Menlo Park, CA 94025
LESSEE CONTACT.................... DENNIS GILBERTSON, CFA
(650) 549-3124
<PAGE>
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
KARTOFFELSOFT INCORPORATED DOMINION VENTURE FINANCE L.L.C.
(d/b/a Homestead Technologies, Inc.) By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By:
--------------------------------- ------------------------------------
Name: Justin Shelby Kitch Name:
------------------------------- ----------------------------------
Title: President & CEO Title:
------------------------------ ---------------------------------
6/14/99 Date:
----------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-7
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD TECHNOLOGIES, INC.
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $95,668.76
FUNDING EXPIRATION DATE.................... August 15, 1999
RENTAL AMOUNT
Months 1-12............................ $ 677.62
Months 13-42........................... $ 3,526.35
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... August 1, 1999
ADVANCE RENTAL.............................. $3,526.35
SECURITY DEPOSIT............................ $0.00
EQUIPMENT LOCATION............... Homestead Technologies, Inc.
................................. 3475 Edison Way, Suite H
................................. Menlo Park, CA 94025
LESSEE CONTACT................... JOE DAVILA
(650) 549-3106
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
HOMESTEAD TECHNOLOGIES DOMINION VENTURE FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By: /s/ [ILLEGIBLE]
--------------------------------- ---------------------------------
Name: Justin Shelby Kitch Name: [ILLEGIBLE]
------------------------------- -------------------------------
Title: President and CEO Title: Portfolio Manager
------------------------------ ------------------------------
Date: 7/30/99
-------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-8
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD TECHNOLOGIES, INC.
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $109,490.00
FUNDING EXPIRATION DATE.................... August 15, 1999
RENTAL AMOUNT
Months 1-12............................ $ 775.52
Months 13-42........................... $4,035.80
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... September 1, 1999
ADVANCE RENTAL............................. $4,035.80
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION.............. Homestead Technologies, Inc.
................................ 3475 Edison Way, Suite H
................................ Menlo Park, CA 94025
LESSEE CONTACT.................. JOE DAVILA
(650) 549-3106
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
HOMESTEAD TECHNOLOGIES DOMINION VENTURE FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By: /s/ [ILLEGIBLE]
----------------------------------- ---------------------------------
Name: Justin Shelby Kitch Name: [ILLEGIBLE]
--------------------------------- -------------------------------
Title: C.E.O. Title: PORTFOLIO MANAGER
-------------------------------- ------------------------------
Date: [ILLEGIBLE]
-------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-9
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD TECHNOLOGIES, INC.
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and
conditions of the Lease are hereby expressly incorporated into this Schedule
and made a part hereof by this reference. By their execution of this
Schedule, the parties reaffirm all terms and conditions of the Master Lease
Agreement except as they may be modified hereby. This Schedule shall become
effective on the later of the date executed by Lessor or the date on which
each of the conditions set forth in Part 2 of Addendum I to the Lease are
satisfied or waived. Capitalized terms used in this Schedule and not
otherwise defined herein shall have the respective meanings set forth in the
Lease.
TOTAL EQUIPMENT COST....................... $47,811.04
FUNDING EXPIRATION DATE.................... August 15, 2000
RENTAL AMOUNT
Months 1-12............................ $ 338.65
Months 13-42........................... $1,762.31
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... October 1, 1999
ADVANCE RENTAL............................. $1,762.31
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION............... Homestead Technologies, Inc.
................................. 3475 Edison Way, Suite H
................................. Menlo Park, CA 94025
LESSEE CONTACT................... JOE DAVILA
(650) 549-3106
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of
the date set forth below.
LESSEE: LESSOR:
HOMESTEAD TECHNOLOGIES, INC. DOMINION VENTURE FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By:
--------------------------------- ---------------------------------
Name: Justin Kitch Name:
------------------------------- -------------------------------
Title: President Title:
------------------------------ ------------------------------
Date:
-------------------------------
<PAGE>
CERTIFICATE OF INSPECTION AND ACCEPTANCE
This document is an "Acceptance Certificate" referred to in Paragraph 1
of the Master Lease Agreement Number 10840 (the "Lease") dated as of
September 28, 1998, between Dominion Venture Finance, L.L.C. ("Lessor") and
Homestead Technologies, Inc. ("Lessee"). This Acceptance Certificate relates
to the Equipment described in Schedule 10840-9 to the Lease (the "Schedule").
All capitalized terms used without definition herein shall have the
respective meanings given to such terms in the Lease.
LESSEE HAS NOT RELIED UPON LESSOR IN SELECTING THE TYPE AND QUANTITY OF
THE EQUIPMENT AND ACKNOWLEDGES THAT LESSOR HAS MADE NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT,
INCLUDING WITHOUT LIMITATION ITS CONDITION, MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE. Lessee further acknowledges that Lessor has accepted
no responsibility for the transportation, installation or required licensing
necessary for the transfer, installation or use of the equipment.
Lessee certifies that the Equipment (i) has been delivered to Lessee at
the location specified in the Schedule, (ii) has been inspected by Lessee and
has been found to be in good working order, repair and condition, (iii) has
been installed to Lessee's satisfaction, and (iv) is of a size, design,
capacity and manufacture to satisfy Lessee's requirements. Lessee
understands that it may have rights under the contract pursuant to which the
Equipment was acquired and should contact the supplier of the Equipment for a
description of such rights.
Lessee hereby represents and warrants to Lessor that (i) no event of
default under Paragraph 24 of the Lease or event which, with the giving of
notice or the lapse of time, or both, would become such an event of default
has occurred and is continuing, except as disclosed in writing to Lessor,
which disclosed event has either been cured by Lessee or concerning which
Lessee has provided evidence to Lessor that Lessee is in the process of
curing such default and is diligently prosecuting such cure to completion
(nothing herein shall constitute a waiver by Lessor of any rights or remedies
which it may have under the Lease with respect to any event of default); (ii)
each of the representations and warranties set forth in Paragraph 12(b) of
the Lease is true and correct and (iii) Lessee has obtained, and there are
in full force and effect, all insurance policies with respect to the
Equipment required to be obtained under the terms of the Lease.
Date: LESSEE:
------------------------------
HOMESTEAD TECHNOLOGIES, INC.
By: /s/ Justin Shelby Kitch
-----------------------------------
Name: Justin Kitch
---------------------------------
Title: President
--------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-10
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD TECHNOLOGIES, INC.
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and conditions
of the Lease are hereby expressly incorporated into this Schedule and made a
part hereof by this reference. By their execution of this Schedule, the parties
reaffirm all terms and conditions of the Master Lease Agreement except as they
may be modified hereby. This Schedule shall become effective on the later of
the date executed by Lessor or the date on which each of the conditions set
forth in Part 2 of Addendum I to the Lease are satisfied or waived. Capitalized
terms used in this Schedule and not otherwise defined herein shall have the
respective meanings set forth in the Lease.
<TABLE>
<S> <C>
TOTAL EQUIPMENT COST....................... $57,233.70
FUNDING EXPIRATION DATE.................... August 15, 2000
RENTAL AMOUNT
Months 1-12............................ $ 405.39
Months 13-42........................... $2,109.63
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... November 1, 1999
ADVANCE RENTAL............................. $2,109.63
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION........... Homestead Technologies, Inc.
3475 Edison Way, Suite H
Menlo Park, CA 94025
LESSEE CONTACT............... Andrew Chmyz
(650) 549-3100
</TABLE>
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of the
date set forth below.
LESSEE: LESSOR:
HOMESTEAD TECHNOLOGIES, INC. DOMINION VENTURES FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By:
---------------------------------- -----------------------------------
Name: Justin Kitch Name:
------------------------------- --------------------------------
Title: President Title:
------------------------------- --------------------------------
Date:
--------------------------------
<PAGE>
CERTIFICATE OF INSPECTION AND ACCEPTANCE
This document is an "Acceptance Certificate" referred to in Paragraph 1 of
the Master Lease Agreement Number 10840 (the "Lease") dated as of September 28,
1998, between Dominion Venture Finance, L.L.C. ("Lessor") and Homestead
Technologies, Inc. ("Lessee"). This Acceptance Certificate relates to the
Equipment described in Schedule 10840-10 to the Lease (the "Schedule"). All
capitalized terms used without definition herein shall have the respective
meanings given to such terms in the Lease.
LESSEE HAS NOT RELIED UPON LESSOR IN SELECTING THE TYPE AND QUANTITY OF THE
EQUIPMENT AND ACKNOWLEDGES THAT LESSOR HAS MADE NO REPRESENTATION OR WARRANTY OF
ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT
LIMITATION ITS CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
Lessee further acknowledges that Lessor has accepted no responsibility for the
transportation, installation or required licensing necessary for the transfer,
installation or use of the equipment.
Lessee certifies that the Equipment (i) has been delivered to Lessee at
the location specified in the Schedule, (ii) has been inspected by Lessee and
has been found to be in good working order, repair and condition, (iii) has
been installed to Lessee's satisfaction, and (iv) is of a size, design,
capacity and manufacture to satisfy Lessee's requirements. Lessee
understands that it may have rights under the contract pursuant to which the
Equipment was acquired and should contact the supplier of the Equipment for a
description of such rights.
Lessee hereby represents and warrants to Lessor that (i) no event of
default under Paragraph 24 of the Lease or event which, with the giving of
notice or the lapse of time, or both, would become such an event of default has
occurred and is continuing, except as disclosed in writing to Lessor, which
disclosed event has either been cured by Lessee or concerning which Lessee has
provided evidence to Lessor that Lessee is in the process of curing such default
and is diligently prosecuting such cure to completion (nothing herein shall
constitute a waiver by Lessor of any rights or remedies which it may have under
the Lease with respect to any event of default); (ii) each of the
representations and warranties set forth in Paragraph 12(b) of the Lease is true
and correct and (iii) Lessee has obtained, and there are in full force and
effect, all insurance policies with respect to the Equipment required to be
obtained under the terms of the Lease.
Date: 10/14/99 LESSEE:
-------------
HOMESTEAD TECHNOLOGIES, INC.
By: /s/ Justin Shelby Kitch
----------------------------------
Name: Justin Kitch
-------------------------------
Title: President
-------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-11
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD TECHNOLOGIES, INC.
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and conditions
of the Lease are hereby expressly incorporated into this Schedule and made a
part hereof by this reference. By their execution of this Schedule, the parties
reaffirm all terms and conditions of the Master Lease Agreement except as they
may be modified hereby. This Schedule shall become effective on the later of
the date executed by Lessor or the date on which each of the conditions set
forth in Part 2 of Addendum I to the Lease are satisfied or waived. Capitalized
terms used in this Schedule and not otherwise defined herein shall have the
respective meanings set forth in the Lease.
<TABLE>
<S> <C>
TOTAL EQUIPMENT COST....................... $104,479.80
FUNDING EXPIRATION DATE.................... August 15, 2000
RENTAL AMOUNT
Months 1-12............................ $ 740.03
Months 13-42........................... $3,851.13
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... December 1, 1999
ADVANCE RENTAL............................. $4,591.16
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION.............. Homestead Technologies, Inc.
3475 Edison Way, Suite H
Menlo Park, CA 94025
LESSEE CONTACT.................. Andrew Chmyz
(650) 549-3100
</TABLE>
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of the
date set forth below.
LESSEE: LESSOR:
HOMESTEAD TECHNOLOGIES, INC. DOMINION VENTURE FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By:
------------------------------- ----------------------------------
Name: Justin Kitch Name:
----------------------------- --------------------------------
Title: CEO Title:
---------------------------- -------------------------------
Date:
-------------------------------
<PAGE>
CERTIFICATE OF INSPECTION AND ACCEPTANCE
This document is an "Acceptance Certificate" referred to in Paragraph 1 of
the Master Lease Agreement Number 10840 (the "Lease") dated as of September 28,
1998, between Dominion Venture Finance, L.L.C. ("Lessor") and Homestead
Technologies, Inc. ("Lessee"). This Acceptance Certificate relates to the
Equipment described in Schedule 10840-11 to the Lease (the "Schedule"). All
capitalized terms used without definition herein shall have the respective
meanings given to such terms in the Lease.
LESSEE HAS NOT RELIED UPON LESSOR IN SELECTING THE TYPE AND QUANTITY OF THE
EQUIPMENT AND ACKNOWLEDGES THAT LESSOR HAS MADE NO REPRESENTATION OR WARRANTY OF
ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT
LIMITATION ITS CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
Lessee further acknowledges that Lessor has accepted no responsibility for the
transportation, installation or required licensing necessary for the transfer,
installation or use of the equipment.
Lessee certifies that the Equipment (i) has been delivered to Lessee at the
location specified in the Schedule, (ii) has been inspected by Lessee and has
been found to be in good working order, repair and condition (iii) has been
installed to Lessee's satisfaction, and (iv) is of a size, design, capacity and
manufacture to satisfy Lessee's requirements. Lessee understands that it may
have rights under the contract pursuant to which the Equipment was acquired and
should contact the supplier of the Equipment for a description of such rights.
Lessee hereby represents and warrants to Lessor that (i) no event of
default under Paragraph 24 of the Lease or event which, with the giving of
notice or the lapse of time, or both, would become such an event of default has
occurred and is continuing, except as disclosed in writing to Lessor, which
disclosed event has either been cured by Lessee or concerning which Lessee has
provided evidence to Lessor that Lessee is in the process of curing such default
and is diligently prosecuting such cure to completion (nothing herein shall
constitute a waiver by Lessor of any rights or remedies which it may have under
the Lease with respect to any event of default); (ii) each of the
representations and warranties set forth in Paragraph 12(b) of the Lease is true
and correct; and (iii) Lessee has obtained, and there are in full force and
effect, all insurance policies with respect to the Equipment required to be
obtained under the terms of the Lease.
Date: Nov. 29, 99 LESSEE:
---------------
HOMESTEAD TECHNOLOGIES, INC.
By: /s/ Justin Shelby Kitch
----------------------------------
Name: Justin Kitch
--------------------------------
Title: CEO
-------------------------------
<PAGE>
EQUIPMENT SCHEDULE
NO. 10840-12
TO MASTER LEASE AGREEMENT NUMBER 10840 DATED SEPTEMBER 28, 1998
LESSOR: DOMINION VENTURE FINANCE L.L.C. LESSEE: HOMESTEAD.com
44 Montgomery Street 3475 Edison Way, Suite H
Suite 4200 Menlo Park, CA 94025
San Francisco, CA 94104
This is one of the "Schedules" to the above-referenced Master Lease
Agreement (the "Lease"). This Schedule together with the Lease constitutes a
lease of the Equipment described on Annex A hereto and all terms and conditions
of the Lease are hereby expressly incorporated into this Schedule and made a
part hereof by this reference. By their execution of this Schedule, the parties
reaffirm all terms and conditions of the Master Lease Agreement except as they
may be modified hereby. This Schedule shall become effective on the later of
the date executed by Lessor or the date on which each of the conditions set
forth in Part 2 of Addendum I to the Lease are satisfied or waived. Capitalized
terms used in this Schedule and not otherwise defined herein shall have the
respective meanings set forth in the Lease.
<TABLE>
<S> <C>
TOTAL EQUIPMENT COST....................... $487,280.73
FUNDING EXPIRATION DATE.................... August 15, 2000
RENTAL AMOUNT
Months 1-12............................ $ 3,451.41
Months 13-42........................... $ 17,961.17
FREQUENCY.................................. Monthly, in advance
INITIAL TERM............................... 42 Months
COMMENCEMENT DATE.......................... January 1, 2000
ADVANCE RENTAL............................. $ 17,961.17
SECURITY DEPOSIT........................... $0.00
EQUIPMENT LOCATION............. Homestead.com
3475 Edison Way, Suite H
Menlo Park, CA 94025
LESSEE CONTACT................. Andrew Chmyz
(650) 549-3100
</TABLE>
SEE ANNEX A ATTACHED HERETO FOR EQUIPMENT DESCRIPTION.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Schedule as of the
date set forth below.
LESSEE: LESSOR:
HOMESTEAD.com DOMINION VENTURE FINANCE L.L.C.
By: DOMINION CAPITAL MANAGEMENT
L.L.C., as Managing Member
By: /s/ Justin Shelby Kitch By:
------------------------------- -----------------------------------
Name: Justin Kitch Name:
----------------------------- ---------------------------------
Title: CEO Title:
---------------------------- --------------------------------
Date:
---------------------------------
<PAGE>
INSIGHT INVESTMENTS, CORP
MASTER LEASE AGREEMENT NO. 6400
MASTER LEASE AGREEMENT NO. 6400, DATED APRIL 7, 1999, (THE "MASTER LEASE") BY
AND BETWEEN INSIGHT INVESTMENTS, CORP., A CALIFORNIA CORPORATION ("LESSOR"), 265
SOUTH ANITA DRIVE, SUITE 200, ORANGE, CALIFORNIA 92868 AND HOMESTEAD
TECHNOLOGIES, A CALIFORNIA CORPORATION ("LESSEE"), 3475H EDISON WAY, MENLO PARK,
CA 94025.
FOR AND IN CONSIDERATION OF THE MUTUAL COVENANTS AND PROMISES SET FORTH HEREIN
AND THE PAYMENT OF RENT AS PROVIDED HEREIN, LESSOR AND LESSEE AGREE AS FOLLOWS:
1. LEASE OF EQUIPMENT. Lessor leases to Lessee, and Lessee leases from Lessor,
all of the personal property, together with all replacements, parts and repairs
incorporated therein (collectively, the "Equipment"; and individually, an
"Item") described in each Equipment Schedule ("Schedule") executed and delivered
from time to time pursuant to this Master Lease.
2. SCHEDULES. Each Schedule shall incorporate the terms and conditions of this
Master Lease and such other terms and conditions as Lessor and Lessee shall
agree upon. Each Schedule is a separate and independent lease and contractual
obligation. In the event of a conflict between the provisions of the Master
Lease and those of any Schedule, the provisions of the Schedule shall control.
The term "Lease" shall mean an individual Schedule which incorporates the terms
and conditions of this Master Lease. The Lease shall be effective upon execution
by Lessee and subsequent acceptance by Lessor at its principal place of
business.
3. LEASE TERM. The term of lease ("Lease Term") for each item shall begin on its
Acceptance Date and continue after the Commencement Date for that number of
months specified in the Schedule as the "Initial Lease Term", and thereafter
until terminated by either party upon not less than one hundred twenty (120)
days prior notice (which notice shall apply to all the Equipment and may not be
revoked without the consent of the other party). The term "Commencement Date"
means the first day of the month immediately following the month during which
the Acceptance Date occurs for the item to be last installed or delivered, as
applicable.
4. ACCEPTANCE. The Acceptance Date for each item shall be the earliest of (i)
the date the manufacturer, or other party acceptable to Lessor, installs the
item and certifies that Item to be in good working order, or (ii) if Lessee has
caused a delay in the installation of an Item, then the fifth day after the Item
is delivered to the location specified in the Schedule, or (iii) if Lessee is to
install the Item, the fifth day after delivery; or (iv) if the Item does not
require installation, the third day after the day the Item is delivered to
Lessee. If the Equipment is already installed at the Lessee's location, the
Acceptance Date shall be the date on which the Lessor pays for the Equipment. On
each Acceptance Date, Lessee shall execute and deliver to Lessor a Certificate
of Acceptance.
5. RENT.
(a) "Rent" as used herein shall mean and include all of the following:
(1) INTERIM RENT. Lessee's interim rental obligation for each Item shall
commence on its Acceptance Date and continue through the day immediately
preceding the Commencement Date ("Interim Rent"). Interim Rent for each item
shall be one-thirtieth (1/30) of the Monthly Rent for that Item per day, with
Interim Rent for all items being due and payable on the Commencement Date. If
the Acceptance Date for all the Equipment is the first day of a calendar month,
there shall be no Interim Rent.
(2) MONTHLY RENT. Lessee shall pay Lessor Monthly Rent for the Equipment in the
amount set forth in the Schedule. Monthly Rent shall begin to accrue on the
Commencement Date and shall be due and payable by Lessee in advance on the
Commencement Date and on the first day of each month thereafter during the Lease
Term.
(3) ADDITIONAL RENT. Lessee shall also owe to Lessor, as additional rent
("Additional Rent") any and all charges, expenses, indemnities and other sums
which become due by Lessee to Lessor under the terms of this Lease. Any such
Additional Rent shall be paid to Lessor within thirty (30) days after the date
that Lessor gives notice to Lessee that such Additional Rent is due, unless a
longer or shorter period is otherwise specified herein.
(b) LATE CHARGE. If Lessee fails to pay to Lessor within ten (10) days after the
due date thereof (and without regard as to whether Lessor has given Lessee
notice of such failure or whether an Event of Default has occurred) any Rent due
hereunder, then Lessee shall also owe to Lessor Late Charges on such delinquent
payment from the due date until paid at the lower of two percent (2%) per month
or the maximum rate permitted by applicable law.
(c) METHOD OF PAYMENT. All payment of Rent, Late Charges or other amounts
required to be paid by Lessee shall be paid to Lessor by check or wire transfer
so as to constitute immediately available funds at the address of Lessor set
forth above or at such other place as Lessor shall designate in writing, or, if
to an Assignee of Lessor, at such place as such Assignee shall designate in
writing.
6. USE AND LOCATION; TITLE AND INTEREST.
(a) USE. Lessee shall use the Equipment in a careful and proper manner in
conformance with all manufacturer's specifications and shall comply with all
federal, state, municipal and other laws, ordinances and regulations in any way
relating to the possession, use or maintenance of the Equipment, and in
compliance with all requirements of the insurance policies required to be
maintained by Lessee pursuant to Section 12 herein.
(b) LOCATION. Each Item will at all times be and remain in Lessee's sole
possession and control at the place of installation/location shown in the
Schedule. The Equipment may be moved to another location of Lessee within the
continental contiguous United States with Lessor's prior written consent; such
consent shall not be unreasonably withheld.
(c) TITLE AND INTEREST. Lessee shall execute and deliver to Lessor such
documents as Lessor shall deem necessary or desirable to protect Lessor's or
Assignee's title to or interest in this Master Lease and Schedules hereto, the
payments due hereunder and the Equipment. Notwithstanding the above language,
Lessee hereby appoints Lessor, or its agents, as its attorney-in-fact to execute
on behalf of Lessee Uniform Commercial Code ("UCC") financing statements and any
and all other instruments necessary to perfect the interest of Lessor or its
successors or assigns in this Master Lease, the Schedules hereto, the payments
due hereunder and the Equipment. Lessor, at its option, may file a copy of this
Master Lease and Schedules as a financing statement.
7. MAINTENANCE AND REPAIR. Lessee hereby assumes the sole duty
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to maintain the Equipment and shall not look to Lessor or any Assignee for such
maintenance. At its own expense, Lessee shall maintain and keep the Equipment
in good repair, condition and working order and shall furnish any and all
parts, mechanisms, devices and labor required therefor, and shall enter into
and maintain during the Lease Term a maintenance agreement with the Equipment
manufacturer or other party acceptable to Lessor. Lessee shall furnish a copy
of such agreement to Lessor upon Lessor's request.
8. QUIET ENJOYMENT. Lessor hereby covenants that so long as no Event of Default
has occurred, Lessee shall and may quietly have, hold and enjoy the Equipment in
accordance with the terms and conditions of the Lease, free from disturbance by
Lessor or anyone claiming by or through Lessor.
9. LESSOR'S RIGHT TO INSPECT. Lessor shall at all times during business hours,
and subject to Lessee's reasonable security requirements, have the right to
enter upon the premises where an Item may be located for the purpose of
inspecting such Item.
10. EQUIPMENT IMPROVEMENTS.
(a) Lessee may, with the prior consent of Lessor and subject to compliance with
this Section 10, affix or install any accessory, feature or device to the
Equipment and make any improvement, upgrade, modification, alteration or
addition to the Equipment (each of the foregoing being an "Improvement"). The
affixing or installation of the Improvement must not adversely affect the
Equipment manufacturer's warranties or maintenance agreement, or require that
substantial original parts of the Equipment be removed; nor can it impair the
originally intended function, value or use of the Equipment. Title to each
improvement shall, without further action, upon the affixing or installing of
such Improvement, vest solely in Lessor. Upon the expiration or earlier
termination of this Lease, Lessee may remove and retain any readily detachable
Improvement provided that: (i) no Event of Default has occurred; (ii) by such
removal the Equipment is not rendered any less useful or valuable to Lessor than
if such Improvement had not been made and later removed, and (iii) the Equipment
is returned in compliance with Section 13 herein. Upon Lessee's permitted
removal of a detachable Improvement and compliance with this Section 10, title
shall thereupon revert to Lessee free and clear of any claims of Lessor
whatsoever.
(b) Lessee shall notify Lessor not less than sixty (60) days prior to the
anticipated Acceptance Date of the type of Improvement Lessee desires to obtain.
Lessor may, within fifteen (15) days after receipt of such notice, offer to
lease or sell the Improvement to Lessee upon mutually agreeable terms and
conditions. Lessee shall notify Lessor of the terms of any offers from vendors
or other lessors and Lessor shall have the right to match all vendor's or other
lessor's offers within a reasonable time after Lessee notifies Lessor of such
offers. If Lessee leases the Improvement from Lessor, such Improvement shall be
on a separate Schedule with an Initial Lease Term co-terminous with that of the
Equipment.
11. LOSS AND DAMAGES; STIPULATED LOSS VALUE.
(a) LESSEE'S ASSUMPTION OF RISK. Lessee hereby assumes and shall bear the entire
risk of loss, damage, theft or destruction to the Equipment from any cause
whatsoever, or governmental taking. No loss, damage, theft or destruction to the
Equipment, or any part thereof, or governmental taking shall affect any
obligation of Lessee under this Lease, which shall continue in full force and
effect notwithstanding any such loss or damage. Lessee's assumption of risk of
loss shall commence when the Equipment or Item is placed in transit to Lessee
and shall continue until Lessor has received and accepted the surrendered
Equipment pursuant to Section 13.
(b) NOTICE OF LOSS OR DAMAGE. Lessee shall promptly notify Lessor of the loss,
damage, destruction, theft or governmental taking of any Item.
(c) DUTY TO REPAIR. Unless such Item is lost, stolen, damaged beyond repair or
there is a governmental taking ("Casualty Loss"), Lessee shall promptly repair
and restore such Item to the same condition, working order and appearance as of
the Acceptance Date.
(d) CASUALTY LOSS; PAYMENT OF STIPULATED LOSS VALUE. If the Equipment or any
Item is a Casualty Loss, then Lessee, at Lessee's option:
(1) shall pay Lessor in cash the Stipulated Loss Value (as per Attachment A to
this Master Lease) for such Equipment or Item calculated as of the next Monthly
Rent payment date, which amount shall be due and payable not later than thirty
(30) days after the date of the occurrence of the Casualty Loss. Upon payment of
the Stipulated Loss Value, and provided that no Event of Default (as hereinafter
defined) has occurred:
(i) Lessee's obligation to pay Rent for all remaining Items shall
remain in full force and effect and shall terminate only with respect to such
Casualty Loss Item.
(ii) Lessee shall become entitled to such Item, as-is, where-is,
without warranty, express or implied, with respect to any matter whatsoever; OR,
(2) shall continue all payments under the Lease without interruption as if no
such loss had occurred, and shall request that Lessor, within thirty (30) days
after the date of the occurrence of the Casualty Loss, replace the Casualty Loss
Item with a "Replacement Item". Lessee shall pay all costs of such Replacement
Item; provided, however, that the cost of the Replacement Item shall not exceed
Lessor's list price. Unless otherwise mutually agreed, the Replacement Item
shall be of the same manufacturer, model and type and of at least equal
capacity, function and value as the Casualty Loss Item.
(e) INSURANCE PROCEEDS. Lessee's obligation to repair or pay Stipulated Loss
Value shall not be contingent upon receipt of any insurance proceeds.
12. INSURANCE. Lessee shall at its expense keep each Item insured from every
cause whatever for not less than the Stipulated Loss Value thereof, and shall
carry public liability and property damage insurance in amounts acceptable to
Lessor. All such insurance shall be with companies acceptable to Lessor, and
shall name Lessor and its Assigns as additional insureds and, as to the all-risk
insurance, loss payees as their interests may appear. Such insurance policies
shall provide that they may not be invalidated against Lessor or its Assigns by
reason of any violation of a condition or breach of warranty of the policies or
the application therefor by Lessee and that Lessor shall be given written notice
thirty (30) days prior to any alteration or cancellation of such policies. The
proceeds of such insurance, if Lessee is not in default hereunder, shall be
applied to reimburse Lessee for Stipulated Loss Value to the extent previously
paid by Lessee; or shall be paid to Lessor or Assignee to the extent of
Stipulated Loss Value not previously paid by Lessee; or shall be applied to
repair the Equipment or to reimburse Lessee for repairs for which Lessee
previously paid. If Lessee is in default hereunder, then such insurance proceeds
shall be paid to Lessor or its Assigns to be applied to the satisfaction of
Lessee's obligations under the Lease. If Lessee fails to obtain or maintain
insurance as required under this Section, Lessor shall have the right to obtain
such insurance in accordance with Section 16 herein.
13. DELIVERY AND SURRENDER.
Lessee hereby assumes all cost and expense of the transportation, rigging,
drayage, unpacking and in-transit insurance to Lessee's premises and
installation of the Equipment. Upon the expiration of the Lease Term, or sooner
termination of this Lease with respect to any Item, Lessee shall (unless Lessee
has paid Lessor the Stipulated Loss Value of such Item pursuant to Section 11)
return at its expense, including but not limited to the expenses of
deinstallation, packing,
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transportation and in-transit insurance, the Item to a location designated by
Lessor in the same repair, condition, appearance and working order as of the
Acceptance Date, ordinary wear and tear from proper use alone excepted, and
certified as acceptable by the Equipment manufacturer for the standard
manufacturer's maintenance agreement.
14. TAX BENEFITS. Lessee acknowledges that Lessor or other owner of the
Equipment shall be entitled to claim for federal tax purposes (i) deductions on
Lessor's cost of the Equipment for each of its tax years during the Lease Term
under any method of depreciation or other cost recovery formula permitted by the
Internal Revenue Code of 1986, as amended (the "Code"); (ii) interest deductions
as permitted by the Code on the aggregate interest paid to any Assignee; and
(iii) investment tax credit, or similar credit, as may be available as of the
Acceptance Date to the owner of the Equipment (all the foregoing being hereafter
referred to as the "Tax Benefits"). Lessee agrees to take no action inconsistent
with the foregoing or which would result in the loss, disallowance, recapture or
unavailability of the Tax Benefits to Lessor or other owner of the Equipment.
Lessee hereby indemnifies Lessor or other owner of the Equipment from and
against (a) any loss, disallowance, unavailability or recapture of any Tax
Benefit resulting from any action or failure to act of Lessee, plus (b) all
interest, penalties, costs (including legal fees) or additions to tax resulting
from such loss, disallowance, unavailability or recapture.
15. TAXES. In addition to the Rent as provided in Section 5, Lessee shall be
responsible for the payment of all taxes (exclusive of taxes based on Lessor's
net income), fees, charges, licenses and assessments whatsoever, however
designated, whether based on the Rent or levied, assessed or imposed upon the
Equipment or upon or in respect of the manufacture, purchase, delivery,
ownership, leasing, use or return of the Equipment, now or hereafter levied,
assessed or imposed during the Lease Term by a federal, state or local taxing
jurisdiction, regardless of when and by whom payable. Notwithstanding the
foregoing, unless otherwise specified in the Schedule, Lessor shall be
responsible for filing all personal property tax returns with respect to the
Equipment and shall pay all taxes in connection with such filing. Lessee shall
reimburse Lessor for such personal property tax payments within ten (10) days of
receipt of Lessor's invoice therefor.
16. LESSOR'S PAYMENT. If Lessee fails to procure or maintain insurance or to pay
fees, assessments, charges, taxes or expenses, all as herein required, Lessor
shall have the right, but not the obligation, to pay the premiums for such
insurance and such fees, assessments, charges, taxes and expenses. In such
event, the cost thereof shall be Additional Rent payable to Lessor with the next
installment of Rent, plus interest, taxes and penalties, if any, imposed by the
charging entity, and the Late Charge from the date of such payment by Lessor
until receipt by Lessor of reimbursement from Lessee.
17. DISCLAIMER OF WARRANTIES.
(a) The following acknowledgments by Lessee are integral to this Lease and are
made to induce Lessor to enter into and perform under this Lease:
(1) EACH ITEM IS, AS OF ITS ACCEPTANCE DATE, OF A SIZE, DESIGN, TYPE AND
MANUFACTURE SELECTED BY LESSEE AND, AS BETWEEN LESSOR AND LESSEE, LESSEE HAS
UNCONDITIONALLY ACCEPTED SUCH ITEM.
(2) SINCE LESSOR IS NOT THE MANUFACTURER OF THE EQUIPMENT OR AGENT OF THE
MANUFACTURER, LESSEE ACCEPTS THE EQUIPMENT FROM LESSOR "AS IS".
(3) LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR DAMAGE
CAUSED OR ALLEGED TO BE CAUSED DIRECTLY, INDIRECTLY, INCIDENTLY OR
CONSEQUENTIALLY BY THE EQUIPMENT, BY ANY INADEQUACY THEREOF OR DEFECT THEREIN,
OR BY ANY INCIDENT WHATSOEVER IN CONNECTION THEREWITH, ARISING IN STRICT
LIABILITY, NEGLIGENCE OR OTHERWISE, OR IN ANY WAY RELATING TO OR ARISING OUT OF
THE LEASE, WHETHER OR NOT KNOWN OR DISCLOSED TO LESSOR.
(4) LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING THOSE
OF MERCHANTABILITY, DURABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, OR
RELATING TO PATENT INFRINGEMENT OR THE LIKE WITH RESPECT TO THE EQUIPMENT AND
EXPRESSLY DISCLAIMS THE SAME.
(5) IT IS AGREED AND UNDERSTOOD THAT LESSOR SHALL HAVE NO OBLIGATION TO INSTALL,
TEST, ADJUST, REPAIR OR SERVICE THE EQUIPMENT.
(b) Lessor warrants that Lessor has the right to lease the Equipment to Lessee
under the terms of this Lease. So long as no Event of Default has occurred,
Lessee shall have the right during the Lease Term to obtain the benefit of and
enforce in Lessee's own name and at Lessee's sole expense any manufacturer's
warranty in respect of the Equipment to the extent such warranty is assignable.
18. INDEMNIFICATION. Except for the gross negligence of Lessor, Lessee hereby
assumes liability for and indemnifies, protects, saves and keeps harmless Lessor
and its Assignees from and against any and all liabilities, losses, damages,
penalties, claims, actions, suits, costs and expenses, including attorneys' fees
and other legal expenses, imposed on, incurred by, or asserted against Lessor or
its Assignees (whether or not also indemnified against by any other person) in
any way relating to or arising out of this Lease or the manufacture, purchase,
ownership, delivery, lease, possession, use, operation, condition, return or
other disposition of the Equipment by Lessor or Lessee, including without
limitation, latent and other defects, whether or not discoverable by Lessor or
Lessee, any claim for patent, trademark or copyright infringement, or any claim
arising out of strict liability. Lessee agrees to give Lessor, and Lessor agrees
to give Lessee, prompt written notice of any claim or liability hereby
indemnified against. The indemnities and assumptions of liability set forth in
this Section 18 do not guarantee a residual value of the Equipment; nor shall
they be construed to limit or restrict Lessee's right to prosecute any claim,
action or suit against the manufacturer of the Equipment.
19. EVENTS OF DEFAULT; REMEDIES.
(a) EVENTS OF DEFAULT. Occurrence of any of the following events or conditions
shall constitute an Event of Default hereunder.
(1) Lessee's failure to pay, when due, any Rent, and such failure continues for
a period of ten (10) days after notice that such Rent is overdue; or
(2) Except as expressly permitted in the Lease, Lessee attempts to remove, sell,
encumber, assign or sublease or fails to insure the Equipment, or fails (within
five (5) days after notice of such failure) to deliver any document required of
Lessee under the Lease; or
(3) Failure of Lessee to perform, within thirty (30) days after Lessor gives
Lessee notice of such failure (or, with respect to performance which cannot be
completed in such time, failure to commence such performance within such time
and to pursue such performance diligently thereafter) any other obligation, term
or condition of this Lease; or
(4) A writ, order of attachment, execution or other legal process is levied on
or charged against any Item and not released or satisfied within ten (10) days
after Lessee is notified thereof; or
(5) The filing by or against Lessee of a petition under any federal or state
bankruptcy or insolvency law or law providing for the relief of debtors, the
making by Lessee of any general assignment for the benefit of creditors, the
appointment of a receiver or trustee for Lessee or for any of Lessee's assets,
or any formal or informal proceeding for the dissolution, liquidation,
settlement of claims against, or winding up of the affairs of
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Lessee, any of which remains undismissed for forty-five (45) days; or the
making by Lessee of a transfer of all or a material portion of Lessee's assets
or inventory not in the ordinary course of business, or the admission by Lessee
of inability to pay debts as they become due; or
(6) The occurrence of any event described in Subsection 19(a)(5) with respect to
any guarantor or any other party liable for payment or performance of this
Lease; or
(7) if any certificate, statement, representation, warranty or financial
information previously or hereafter furnished by or on behalf of Lessee or any
guarantor or other party liable for payment or performance of the Lease proves
to have been false or misleading in any material respect as of the time made or
furnished to Lessor, or to have been afterward breached; or
(8) The giving to Lessee of three (3) notices pursuant to one or more of
Subsections 19(a)(1), (2) or (3) within any consecutive twelve (12) month
period, notwithstanding Lessee's cure of the defaults within the notice periods
applicable.
(b) REMEDIES. Upon the occurrence of an Event of Default:
(1) Lessee hereby authorizes Lessor without notice or process of law to enter
any premises where the Equipment is located and take possession of and remove
the Equipment; and
(2) Lessee shall forthwith and without demand pay to Lessor as liquidated
damages for loss of a bargain and not as a penalty an amount equal to the
Stipulated Loss Value for the Equipment computed as of the date of the Monthly
Rent payment last received by Lessor, plus all previously due but unpaid Rent
and all other sums due under this Lease and all legal and other expenses
incurred by Lessor in enforcing its remedies hereunder; and
(3) Lessor may upon notice to Lessee effective immediately terminate the Lease,
but such termination shall not affect Lessor's right to enforce the remedies
granted to Lessor in this Subsection 19(b); and
(4) Lessor may pursue any other remedy available at law or in equity.
(5) Lessor may sell the Equipment at public or private sale, without notice and
without having the Equipment present at the place of sale; or Lessor may lease,
otherwise dispose of or keep idle all or part of the Equipment; subject,
however, to Lessor's obligation to mitigate damages. The proceeds of any such
sale, lease or other disposition, if any, of the Equipment shall be applied as
follows: FIRST, to Lessor's costs and expenses incurred in taking, removing,
holding, repairing and selling, leasing or otherwise disposing of the Equipment
including legal fees and costs; SECOND, to pay to Lessor the Stipulated Loss
Value to the extent not previously paid by Lessee and all previously due but
unpaid Rent; THIRD, to reimburse to Lessee the Stipulated Loss Value to the
extent previously paid by Lessee pursuant to Subsection 19(b)(2); and FOURTH,
any surplus to Lessor.
Notwithstanding repossession or any other action which Lessor may take, Lessee
shall be and remain liable for the full performance of all its obligations under
this Lease. Lessee hereby waives any requirement of law, now or hereafter in
effect, which might limit or modify any of the remedies herein provided, to the
extent that such waiver is permitted by law. No right or remedy of Lessor herein
granted is exclusive of any other right or remedy herein or by law or equity
provided or permitted; but each shall be cumulative of every other right or
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise, and may be enforced concurrently or from time to time, and
in any order.
(c) LESSOR'S EXPENSES. Lessee shall pay Lessor all costs and expenses, including
attorneys' fees, incurred by Lessor in exercising any of its rights or remedies
hereunder or enforcing any of the terms, conditions, or provisions hereof.
(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE WAIVES ANY AND ALL RIGHTS
AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A OF THE UNIFORM COMMERCIAL
CODE THAT ARE IN CONFLICT WITH THE PROVISIONS OF THIS MASTER LEASE.
20. ASSIGNMENT.
(a) BY LESSEE. LESSEE SHALL KEEP THE LEASE AND THE EQUIPMENT FREE AND CLEAR OF
ALL LIENS AND ENCUMBRANCES OF WHATSOEVER KIND (EXCEPT THOSE CREATED BY OR
THROUGH LESSOR) AND LESSEE SHALL NOT ASSIGN, TRANSFER, SUBLEASE OR IN ANY WAY
TRANSFER OR DISPOSE OF ITS INTERESTS OR OBLIGATIONS UNDER THE LEASE OR IN THE
EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. NO ASSIGNMENT, TRANSFER,
SUBLEASE OR OTHER DISPOSITION BY LESSEE SHALL IN ANY MANNER WHATSOEVER RELIEVE
LESSEE OF ANY OBLIGATION HEREUNDER, AND LESSEE SHALL REMAIN PRIMARILY LIABLE TO
PAY RENT AND PERFORM ALL ITS OBLIGATIONS HEREUNDER.
Lessee shall notify Lessor of the terms of any sublease offers from other users
of equipment or other lessors and Lessor shall have the right to match all
other user's or other lessor's offers within a reasonable time after Lessee
notifies Lessor of such offers.
(b) BY LESSOR. All rights of Lessor hereunder or to the Equipment may be sold,
assigned, pledged, mortgaged or otherwise transferred, either in whole or in
part, without notice to Lessee but always, however, subject to the rights of
Lessee under this Lease. If Lessor sells the Equipment or assigns this Lease or
the Rent due or to become due hereunder or any other interest herein, whether as
security for any of its indebtedness or otherwise, no breach or default by
Lessor hereunder or pursuant to any other agreement between Lessor and Lessee,
should there be one, shall excuse performance by Lessee of any provision hereof.
No such vendee or assignee (each an "Assignee") shall be obligated to perform
any duty, covenant or condition required to be performed by Lessor under the
terms of this Lease; except that Lessor covenants with Lessee not to transfer
any interest in the Lease or the Equipment to any Assignee unless such Assignee
agrees in writing not to disturb Lessee's quiet enjoyment of the Equipment while
no Event of Default has occurred. Lessee acknowledges that any such sale,
assignment or grant of security interest shall not materially change Lessee's
obligations under this Lease nor materially increase the burdens imposed on
Lessee. Lessee agrees and acknowledges that any such Assignee shall rely on and
be entitled to the benefit of the provisions of this Lease. Lessee agrees to
acknowledge any such assignment within five (5) days of receipt of written
request to do so in the form requested by Lessor.
LESSEE'S OBLIGATION TO PAY RENT IS ABSOLUTE AND UNCONDITIONAL AND LESSEE SHALL
NOT ASSERT AGAINST ANY ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SETOFF THAT THE
LESSEE MAY HAVE AGAINST THE LESSOR OR ANY OTHER PARTY, AND LESSEE ACKNOWLEDGES
THAT ANY ASSIGNEE IS RELYING ON THE FOREGOING.
21. OWNERSHIP. Lessee shall have no right, title or interest in the Equipment
except as expressly set forth in the Lease, which interest is a leasehold
interest. Lessor and Lessee agree, and Lessee represents for the benefit of
Lessor and its Assignees, that the Lease is intended to be a "finance lease" and
not a "lease intended as security" as those terms are used in Article 2A of the
UCC. Lessor may upon notice to Lessee advise Lessee that certain Items are
leased to Lessor and provided to Lessee under the Lease as a sublease. Lessee
agrees to execute and deliver such acknowledgments and assignments in connection
with such Lease as are reasonably required. If, at any time during the Lease
Term, Lessor's right to lease the Equipment expires, Lessor may remove the
Equipment from Lessee's premises and immediately provide identical substitute
Equipment. All expenses of such substitution shall be borne by Lessor.
22. PERSONAL PROPERTY. The Equipment is, and shall at all times be and remain,
personal property, notwithstanding that the Equipment or any Item or part
thereof may now be, or hereafter become, in any manner affixed or attached to
any real property. If requested by Lessor
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prior to or at any time during the Lease Term, Lessee will obtain and deliver
to Lessor waivers of interest or liens in recordable form and satisfactory to
Lessor, from all persons claiming any interest in the real property on which
such Item or Equipment is installed or located.
23. NET LEASE; OFFSET. This lease is a net lease, it being the intention of the
parties that all costs, expenses and liabilities associated with the Equipment
or its lease shall be the obligations of Lessee. Except in the event of a
Casualty Loss and payment of Stipulated Loss Value pursuant to Section 11,
Lessee shall not be entitled, and hereby waives any right it may have, to any
abatement of Rent or other payments due hereunder or any reduction thereof under
any circumstances or for any reason whatsoever.
24. FINANCIAL AND OTHER COVENANTS.
(a) Lessee hereby represents, warrants and agrees with Lessor and any Assignee
as follows:
(1) Lessee is a legal entity, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and in each
jurisdiction where the Equipment will be located and has adequate power to enter
into and perform the Master Lease and each Schedule.
(2) The Master Lease and each Schedule have been duly authorized, executed and
delivered by Lessee, and constitute valid, legal and binding agreements of
Lessee, enforceable in accordance with their terms.
(3) The entering into and performance of the Master Lease and each Schedule does
not and will not violate any judgment, order, law or regulation applicable to
Lessee or any provision of Lessee's Articles of Incorporation or Bylaws, or
result in any breach of, or constitute a default under, or result in the
creation of any lien, charge, security interest or other encumbrance upon any
assets of Lessee or on the Equipment pursuant to any instrument to which Lessee
is a party or by which it or its assets may be bound.
(4) There are no actions, suits or proceedings pending, or to the knowledge of
Lessee threatened, before any court, administrative agency, arbitrator or
governmental body which will, if determined adversely to Lessee, materially
adversely affect its ability to perform its obligations under this Master Lease,
any Schedule or any related agreement to which it is a party.
(5) 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 Lessee of the Master Lease or any Schedule, or, if any such
approval, notice, registration or action is required, it has been obtained.
(6) Prior to and during the Lease Term, Lessee will furnish Lessor with Lessee's
audited financial statements. If Lessee is a subsidiary of another company,
Lessee shall supply such company's financial statements and guarantees as are
reasonably acceptable to Lessor. Lessor's obligation to perform under any Lease
is subject to the condition that the financial statements furnished to Lessor by
Lessee present the financial condition and results of operations of Lessee and
its affiliated corporations, if any, and any guarantor of Lessee's obligations
under any Lease, as of the date of such financial statements, and that since the
date of such statements there have been no material adverse changes in the
assets or liabilities, the financial condition or other condition which in
Lessor's or Assignee's sole discretion are deemed to be materially adverse.
(b) Upon Lessor's request, Lessee shall, with respect to each Lease, deliver to
Lessor (i) a certificate of a secretarial officer of Lessee certifying the
bylaw, resolution (specific or general) or corporate action authorizing the
transaction contemplated in the Lease; (ii) an incumbency certificate certifying
that the person signing this Master Lease and the Schedule holds the office the
person purports to hold and has authority to sign on behalf of Lessee; (iii) an
opinion of counsel with respect to the representations in this Section 24, (iv)
an agreement with Lessor's Assignee with regard to any assignment as referred to
in Subsection 20(b), (v) purchase documents if Lessee has sold or assigned its
interest in the Equipment to Lessor, (vi) an insurance certificate evidencing
the insurance provided by Lessee pursuant to Section 12; and (vii) Certificate
of Acceptance(s) duly executed by Lessee.
(c) The foregoing representations, warranties and agreements shall continue
throughout the Lease Term and shall, upon request of Lessor be made to any
Assignee.
25. LESSEE CHANGE OF OWNERSHIP; FINANCIAL CONDITION.
(a) During the Lease Term should controlling interest in Lessee be acquired by
another company, or should a substantial portion of Lessee's assets be acquired
by another entity, such other company or entity shall (i) agree in writing to be
bound by the terms and conditions of this Lease and, if requested by Lessor,
shall (ii) execute and deliver to Lessor guaranty in form and substance
acceptable to Lessor.
(b) If, at any time during the Lease Term, upon the occurrence of an event
described in Subsection 25(a) or for any other reason, Lessor reasonably
determines that there has been a material adverse change in the financial
condition of Lessee or Lessee's ability to meet current or future obligations
under the Lease, then Lessee, upon Lessor's request, shall provide to Lessor
additional security acceptable to Lessor for Lessee's obligations hereunder.
26. NON-WAIVER. No covenant or condition of this Lease can be waived except by
written consent of Lessor. The waiver by Lessor of any breach of Lessee shall
not be a waiver of any other breach of the same or any other obligation. The
subsequent acceptance of Rent by Lessor shall not be deemed a waiver of any such
prior existing breach at the time of acceptance of such Rent payment.
27. NOTICES. Any notice, consent or request required or permitted hereunder
shall be in writing and will be conclusively deemed to have been received by a
party hereto on the day it is delivered to such party at the address set forth
above (or at such other address as such party specifies to the other in writing)
and shall be sent by registered mail, return receipt requested, overnight
courier service, or facsimile (with telephonic verification of receipt).
28. SEVERABILITY. Any provision of the Lease prohibited by or unlawful or
unenforceable under any applicable law or any jurisdiction shall be ineffective
as to such jurisdiction without invalidating the remaining provisions of the
Lease.
29. SECURITY INTEREST. Each Schedule shall be executed in three counterparts,
consecutively numbered. To the extent, if any, that a Schedule constitutes
chattel paper (as such term is defined in the UCC) no security interest may be
created through the transfer and possession of any counterpart other than that
designated "Counterpart No. 1".
30. SUSPENSION OF OBLIGATIONS OF LESSOR. Prior to delivery of any Item
hereunder, the obligations of Lessor will be suspended to the extent that it is
hindered or prevented from complying therewith because of labor disturbances,
including but not limited to, strikes and lockouts, or acts of God, fires,
storms, accidents, failure of the manufacturer to deliver any Item, governmental
regulations or interference or any cause whatsoever not within the exclusive
control of Lessor.
31. NON-SPECIFIED FEATURES. If Equipment delivered pursuant to any Lease
contains any feature not specified therein, Lessee grants Lessor, at Lessor's
option and expense, the right to remove or deactivate any such feature. Such
removal or deactivation shall be performed by the manufacturer or other
acceptable party at the request of Lessor at a time convenient to Lessee,
provided that Lessee shall not unreasonably
5
<PAGE>
delay the removal or deactivation of such feature.
32. MISCELLANEOUS.
(a) Lessor and Lessee acknowledge that there are no agreements or
understandings, written or oral, between Lessor and Lessee with respect to the
Equipment, other than as set forth in the Lease, and the Lease contains the
entire agreement between Lessor and Lessee with respect thereto. NEITHER THE
MASTER LEASE NOR ANY SCHEDULE MAY BE ALTERED, MODIFIED, TERMINATED OR DISCHARGED
EXCEPT BY A WRITING SIGNED BY BOTH PARTIES.
(b) If there is more than one Lessee named in this Lease, the liability of each
shall be joint and several.
(c) Section headings are for convenience only and shall not be construed as part
of the Lease.
(d) Time is of the essence of this Lease and each and all of its provisions.
(e) This Lease shall be governed by the laws of the State of California without
giving effect to the principles of conflict of laws, and shall be deemed to have
been made in California.
(f) LESSEE AND LESSOR HEREBY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT TO
MATTERS ARISING OUT OF THIS LEASE.
(g) Lessee's obligations and liabilities hereunder shall not be affected by, and
shall survive, the expiration or earlier termination of this Lease.
(h) This Lease shall inure to the benefit of and shall be binding upon Lessee
and Lessor and their respective successors and assigns.
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS MASTER LEASE AS OF THE DATE
FIRST ABOVE WRITTEN.
LESSOR: INSIGHT INVESTMENTS, CORP. LESSEE: HOMESTEAD TECHNOLOGIES
By: /s/ JOHN FORD By: /s/ Justin Shelby Kitch
------------------------------- ---------------------------
Name: JOHN FORD Name: JUSTIN SHELBY KITCH
----------------------------- -------------------------
Title: PRESIDENT Title: PRESIDENT & CEO
---------------------------- ------------------------
6
<PAGE>
ATTACHMENT A
TO MASTER LEASE NO. 6400, DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR
AND HOMESTEAD TECHNOLOGIES, AS LESSEE
Stipulated Loss Value is calculated by multiplying the percentage set forth
opposite the applicable Monthly Rent payment number by the list price of the
Equipment or Item, as applicable.
<TABLE>
<CAPTION>
Rent Payment Stip. Loss Rent Payment Stip. Loss Rent Payment Stip. Loss
Number Percent Number Percent Number Percent
<S> <C> <C> <C> <C> <C>
1 108.20% 21 87.80% 41 67.40%
2 107.18% 22 86.78% 42 66.38%
3 106.15% 23 85.76% 43 65.36%
4 105.14% 24 84.74% 44 64.34%
5 104.12% 25 83.72% 45 63.32%
6 103.10% 26 82.70% 46 62.30%
7 102.08% 27 81.68% 47 61.28%
8 101.06% 28 80.66% 48 60.26%
9 100.04% 29 79.64% 49 59.24%
10 99.02% 30 78.62% 50 58.22%
11 98.00% 31 77.60% 51 57.20%
12 96.98% 32 76.58% 52 56.18%
13 95.96% 33 75.56% 53 55.16%
14 94.94% 34 74.54% 54 54.14%
15 93.92% 35 73.52% 55 53.12%
16 92.90% 36 72.50% 56 52.10%
17 91.88% 37 71.48% 57 51.08%
18 90.86% 38 70.46% 58 50.06%
19 89.84% 39 69.44% 59 49.04%
20 88.82% 40 68.42% 60 48.02%
AND THEREAFTER
</TABLE>
LESSOR: INSIGHT INVESTMENTS CORP. LESSEE: HOMESTEAD TECHNOLOGIES
By: /s/ JOHN FORD By: /s/ Justin Shelby Kitch
-------------------------------- ----------------------------
Name: JOHN FORD Name:
------------------------------ --------------------------
Title: PRESIDENT Title:
----------------------------- -------------------------
<PAGE>
CERTIFICATE OF INCUMBENCY
The undersigned hereby certifies (a) that I hold the office of
SECRETARY for HOMESTEAD TECHNOLOGIES a corporation duly organized and validly
existing under the laws of the State of California, and that as such officer I
have access to the original books and records of said corporation and am
authorized to make and deliver this certificate; (b) that the individuals named
below have been duly appointed to and currently holds the position of said
corporation set forth opposite his name; (c) and further, the person designated
below has been given authority to act on behalf of and to bind the corporation
with respect to transactions involving the leasing of equipment between Insight
Investments, Corp. as "Lessor" and HOMESTEAD TECHNOLOGIES as "Lessee" under
Master Lease Number 6400, dated APRIL 7, 1999; and (d) that the following is the
genuine signature of said individual or of an individual authorized to sign said
individual's name to wit:
Name Office Signature
-------- ---------- -------------
1. JUSTIN SHELBY KITCH PRESIDENT & CEO /s/ Justin Shelby Kitch
----------------------- ------------------ ---------------------------
2.
----------------------- ------------------ ---------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said corporation this 11th day of May, 1999
/s/ Justin Shelby Kitch
-----------------------------------
By:
SECRETARY
-----------------------------------
Its:
(Corporate Seal)
<PAGE>
AMENDMENT NO. 1
TO MASTER LEASE AGREEMENT NO. 6400 DATED APRIL 7, 1999
BY AND BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE
(THE "MASTER LEASE" OR THE "LEASE")
The terms and conditions of the Master Lease are hereby modified and
amended as follows:
1. Lessee's name set forth in the Master Lease is hereby amended from
Homestead Technologies to Homestead Technologies Inc.
2. Lessee's state of incorporation set forth in the Master Lease is hereby
amended from California to Delaware.
All other terms and conditions of the Master Lease shall remain the same.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of
the 1st day of July, 1999.
INSIGHT INVESTMENTS, CORP. HOMESTEAD TECHNOLOGIES INC.
LESSOR LESSEE
By: By: /s/ Justin Shelby Kitch
---------------------------- ----------------------------
Name: Name: JUSTIN SHELBY KITCH
Title: Title: PRESIDENT & CEO
<PAGE>
SCHEDULE NO. 1, DATED JULY 6, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES, AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE TERMS
AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE LEASE OF THE
EQUIPMENT.
<TABLE>
<S> <C> <C>
1. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2 EQUIPMENT COST: $162,463.28
3. MONTHLY RENT: $5,605.00/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 07/01/1999
6. PURCHASE OPTION: Lessee may purchase the equipment for the then fair market value,
return to IIC or continue leasing. Each equipment schedule purchased
or renewed must be done so on an all or nothing basis. Provided all
monies due and payable IIC, or its assigns has been received, IIC will
finance the buyout of the equipment at the then current market rate.
7. Other:
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
</TABLE>
LESSOR: INSIGHT INVESTMENTS, CORP. LESSEE: Homestead Technologies
By: By: /s/ Justin Shelby Kitch 7/13/97
----------------------------- ------------------------------------
Name: Name: JUSTIN SHELBY KITCH
---------------------------- ----------------------------------
Title: Title: PRESIDENT & CEO
---------------------------- ----------------------------------
THIS IS COUNTERPART NO. 3 OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
NOTICE OF ASSIGNMENT AND
LESSEE'S ACKNOWLEDGEMENT
To: Homestead Technologies
3475H Edison Way
Menlo Park, CA 94025
Please be advised that Insight Investments Corporation ("Lessor") has
assigned to Charter Financial, Inc all rights of Lessor in the equipment
schedules listed below ("the Schedules") to the Lease No. 6400 between you
and Lessor dated, April 7, 1999 ("the Lease"), including all rights to
receive the lease payments listed below payable by you commencing with the
first payment referenced below and continuing up to and including the last
payment referenced below and all other sums which may become due and payable
from you to Lessor under the Schedule.
<TABLE>
<CAPTION>
SCHEDULE PAYMENT NO. OF MONTHS FIRST PAYMENT/LAST PAYMENT
<S> <C> <C> <C>
1 $5,605.00 35 August 1, 1999/June 1, 2002
</TABLE>
Except as otherwise directed by the Charter Financial, Inc., please pay any
and all rents including the interim rent and any other amounts payable by you
under the Schedule directly to the address listed below:
CHARTER FINANCIAL, INC.
P.O. BOX 11509
CHURCH STREET STATION
NEW YORK, NY 10286-1509
Please acknowledge this assignment on the following page.
INSIGHT INVESTMENTS CORP.
(Lessor)
By:
--------------------------------
Title:
-----------------------------
<PAGE>
The undersigned acknowledges receipt of the foregoing Notice of Assignment
and in consideration of the financing extended by Charter Financial, Inc. to
Lessor and the benefits derived there from to the undersigned agrees: (1) to
be bound by the provision of the Lease, the Schedule and the foregoing Notice
of Assignment; (2) that the undersigned has received no notice of any other
assignments or claims relating to the Schedule and has no reason to refuse to
make payments of rent and other proceeds due thereunder to Charter Financial,
Inc.; (3) not to amend the Lease or Schedule or substitute the equipment
subject to the Schedule without prior written consent of Charter Financial,
Inc.; (4) that the Lease and Schedule as executed are binding and legally
enforceable against the undersigned in accordance with their terms; and (5)
to make payments to Charter Financial, Inc. until instructed to do otherwise
by Charter Financial, Inc. without any set-off or deduction whatsoever,
notwithstanding any defect in, damage to or requisition of any of the
equipment leased under the Schedule, or any other similar or dissimilar
event, or any defense, set-off, counterclaim or recoupment arising out of any
claim the undersigned may have against Lessor, it being understood that the
undersigned retains the right to assert any such claim in a separate action
against Lessor.
The undersigned further acknowledges that Charter Financial, Inc. has not
assumed any duties of Lessor under the Lease or Schedule and has made no
representations or warranties whatsoever as to the Lease, the Schedule or any
of the leased equipment.
Section 19(a)(3) of the Lease is hereby deemed amended and restated in its
entirety, as follows: "Failure of Lessee to perform, within thirty (30) days
after Lessor gives Lessee notice of any such failure, any other obligation,
term or condition of this Lease; or".
Section 19(a) of the Lease is hereby deemed amended to include subsection (9)
stated as follows: "Lessee or any guarantor of any of Lessee's obligations
hereunder shall be in breach of or in default in the payment or performance
of any obligation owing to Lessor whether or not related to this Lease and
howsoever arising, whether by operation of law or otherwise, present or
future, contracted for or acquired, and whether joint, several, absolute,
contingent, secured, unsecured, matured or unmatured. If this Lease is deemed
at any time to be one intended as security, Lessee agrees that the Equipment
shall secure, in addition to the indebtedness set forth herein, any other
indebtedness at any time owing by Lessee to Lessor."
Notwithstanding anything to the contrary, set forth in the Lease or
elsewhere, Lessor and any Assignee of Lessor shall have the right to assign
or transfer any interest in the Lease or any Schedule without obtaining the
written agreement of any Assignee not to disturb Lessee's quiet enjoyment of
the Equipment while no Event of Default has occurred, provided, however that
Lessor shall indemnify Lessee from any loss resulting from such Assignee's
disturbance of Lessee's quiet enjoyment of the Equipment while no Event of
Default has occurred.
If the Lease is deemed at any time to be one intended as security, Lessee
agrees that the Equipment shall secure the indebtedness set forth in the
Schedule and any other indebtedness at any time owing by Lessee to Charter
Financial, Inc.
HOMESTEAD TECHNOLOGIES
(Lessor)
By: /S/ JUSTIN SHELBY KITCH
------------------------------------
Title: PRESIDENT & CEO
---------------------------------
Date: 7/13/99
----------------------------------
<PAGE>
SCHEDULE NO.2, DATED AUGUST 10, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE
TERMS AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH
IS INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER
LEASE CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE
LEASE OF THE EQUIPMENT.
1. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2 EQUIPMENT COST: $166,477.80
3. MONTHLY RENT: $5,744.00/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 09/01/1999
6. END OF TERM OPTION: Lessee may purchase the equipment for the
then fair market value, return to IIC or
continue leasing. Each equipment schedule
purchased or renewed must be done so on an
all or nothing basis. Provided all monies
due and payable IIC, or its assigns has
been received, IIC will finance the buyout
of the equipment at the then current market
rate.
7. Other:
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
LESSOR: INSIGHT INVESTMENTS, CORP. LESSEE: HOMESTEAD TECHNOLOGIES INC.
By: By: /s/ JUSTIN SHELBY KITCH
----------------------------------- --------------------------------
Name: Name: JUSTIN SHELBY KITCH
--------------------------------- ------------------------------
Title: Title: CEO
-------------------------------- -----------------------------
THIS IS COUNTERPART NO. 1 OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code, no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
NOTICE OF ASSIGNMENT
(Assignment of Lease)
September 27, 1999
Homestead Technologies Inc.
3475H Edison Way
Menlo Park, CA 94025
Dear Sir or Madam;
Reference is made to Master Lease Agreement No. 6400 dated as of April 7, 1999
(the "Master Lease") and Schedule No. 2 dated August 10, 1999 between Insight
Investments, Corp. ("Insight") as Lessor and HOMESTEAD TECHNOLOGIES INC. as
Lessee (the "Schedule"). The Schedule and Master Lease are collectively referred
to herein as the "Lease".
Please be advised that Insight has assigned all its right, title and interest in
the Lease effective NOVEMBER 1, 1999 to DATA SALES CO., INC. the "Assignee".
This is to notify you of the assignment and to authorize you to send all Monthly
Rent payments commencing with that payment due (date of first payment assigned)
to:
DATA SALES CO., INC.
3450 WEST BURNSVILLE PARKWAY
BURNSVILLE, MN 55337
The Assignee shall perform all duties and obligations of Lessor under the Lease
and shall have the right as of the date of assignment to direct that remittances
be made to a different address or a new assignee.
All future invoices, including those for sales or use taxes, will be received
from Insight Investments, Corp. or its Assignee.
In addition, this letter will confirm that the leased equipment has been
installed and accepted. The Lease is for a period of 36 months. Rental payments
commenced SEPTEMBER 1, 1999 and will end AUGUST 31, 2002. As of the date of the
assignment, there will be 34 remaining monthly payments of $5,744.00 each
commencing NOVEMBER 1, 1999 and ending AUGUST 1, 2002.
<PAGE>
Please sign the original and a copy of this letter indicating that: (i) the
Lessee will be bound by the Lease, the Schedule and this Notice of Assignment
(ii) Lessee has received no notice of any other assignments of or claims
relating to the Schedule and has no reason to refuse to make payments of rent or
other proceeds due under the Lease (iii) the Lease and Schedule as executed are
binding and legally enforceable against the Lessee in accordance with their
terms; (iv) no defaults exists on the part of the Lessee; and (v) the Lessee
will make payments without any setoffs or deductions whatsoever arising out of
any claims Lessee may have against Lessor, it being understood that the Lessee
retains the right to assert any such claim in a separate action against Lessor.
LESSOR LESSEE
INSIGHT INVESTMENTS, CORP. HOMESTEAD TECHNOLOGIES, INC.
By: By: /s/ JUSTIN SHELBY KITCH
---------------------------- -----------------------------
Name: Name: JUSTIN SHELBY KITCH
-------------------------- ---------------------------
Title: Title: CEO & PRESIDENT
------------------------- --------------------------
Date: Date: 9/27/99
-------------------------- ---------------------------
<PAGE>
SCHEDULE NO. 3, DATED AUGUST 4, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE TERMS
AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE LEASE OF THE
EQUIPMENT.
1. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2. EQUIPMENT COST: $319,809.35
3. MONTHLY RENT: $11,033.42/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 09/01/1999
6. END OF TERM OPTION: Lessee may purchase the equipment for the
then fair market value, return to IIC or
continue leasing. Each equipment schedule
purchased or renewed must be done so on an
all or nothing basis. Provided all monies
due and payable IIC, or its assigns has
been received, IIC will finance the buyout
of the equipment at the then current
market rate.
7. Other:
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
LESSOR: INSIGHT INVESTMENTS, CORP. LESSEE: HOMESTEAD TECHNOLOGIES INC.
By: By: /s/ Justin Shelby Kitch
---------------------------- ----------------------------
Name: Name: JUSTIN SHELBY KITCH
---------------------------- ----------------------------
Title: Title: CEO
---------------------------- ----------------------------
THIS IS COUNTERPART NO. __ OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
ACCEPTANCE CERTIFICATE
FOR EQUIPMENT SCHEDULE NO. 3
TO MASTER LEASE AGREEMENT NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP. ("LESSOR")
AND HOMESTEAD TECHNOLOGIES INC., ("LESSEE")
LESSEE CERTIFIES THAT THE FOLLOWING EQUIPMENT HAS BEEN DELIVERED TO THE
INSTALLATION/LOCATION SITE SPECIFIED IN THE EQUIPMENT SUPPLEMENT, INSPECTED AND
FOUND TO BE IN GOOD OPERATING ORDER AND MEETING LESSEE'S ACCEPTANCE CRITERIA,
AND UNCONDITIONALLY ACCEPTED UNDER THE LEASE ON THE ACCEPTANCE DATE INSERTED
BELOW:
Quantity Mfgr Model/Features Description Serial No
SEE ATTACHMENT "A" TO EQUIPMENT SCHEDULE FOR DESCRIPTION
LESSEE HEREBY REPRESENTS TO LESSOR AND ANY ASSIGNEE THAT ON THE ACCEPTANCE DATE:
(i) Lessee's representations and warranties contained in the Lease are true
and correct;
(ii) The Equipment is insured as required by the Lease;
(iii) No Event of Default has occurred;
(iv) Lessee acknowledges that Lessor acquired the Equipment for this Lease
and Lessee is aware of the warranty rights from the manufacturer.
(v) Lessee's financial statements, and the financial statements of any
guarantor of Lessee's obligations, given to Lessor represent Lessee's and such
guarantor's financial and business conditions as of the dates of such
statements, and since such dates there have been no materially adverse changes
in Lessee's or such guarantor's financial or business conditions.
ACCEPTANCE DATE: 8/4/99
LESSEE: HOMESTEAD TECHNOLOGIES INC.
By: /s/ Justin Shelby Kitch
----------------------------------
Name: JUSTIN SHELBY KITCH
--------------------------------
Title: CEO
-------------------------------
THIS IS COUNTERPART NO. __ OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that this Acceptance Certificate constitutes chattel paper under
the Uniform Commercial Code, no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1
<PAGE>
NOTICE OF ASSIGNMENT AND
LESSEE'S ACKNOWLEDGEMENT
To: Homestead Technologies Inc.
3475H Edison Way
Menlo Park, CA 94025
Please be advised that Insight Investments Corporation ("Lessor") has assigned
to Charter Financial, Inc. all rights of Lessor in the equipment schedules
listed below ("the Schedules") to the Lease No. 6400 between you and Lessor
dated, April 7, 1999 ("the Lease"), including all rights to receive the lease
payments listed below payable by you commencing with the first payment
referenced below and continuing up to and including the last payment referenced
below and all other sums which may become due and payable from you to Lessor
under the Schedule.
SCHEDULE PAYMENT NO. OF MONTHS FIRST PAYMENT/LAST PAYMENT
-------- ------- ------------- --------------------------
3 $11,033.42 34 October 1, 1999/July 31, 2002
Except as otherwise directed by the Charter Financial, Inc., please pay any and
all rents including the interim rent and any other amounts payable by you under
the Schedule directly to the address listed below:
CHARTER FINANCIAL, INC.
P.O. BOX 11509
CHURCH STREET STATION
NEW YORK, NY, 10286-1509
Please acknowledge this assignment on the following page.
INSIGHT INVESTMENTS, CORP.
--------------------------
(Lessor)
By: /s/ John Ford
------------------------------
Title: JOHN FORD PRESIDENT
------------------------------
<PAGE>
SCHEDULE NO. 4, DATED JULY 29, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE TERMS
AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE LEASE OF THE
EQUIPMENT.
l. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2. EQUIPMENT COST: $87,721.75
3. MONTHLY RENT: $3,026.40/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 09/01/1999
6. PURCHASE OPTION: Lessee may purchase the equipment for the
then fair market value, return to IIC or
continue leasing. Each equipment schedule
purchased or renewed must be done so on an
all or nothing basis. Provided all monies
due and payable IIC, or its assigns has been
received, IIC will finance the buyout of the
equipment at the then current market rate.
7. Other:
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
LESSOR: INSIGHT INVESTMENTS, CORP. LESSEE: HOMESTEAD TECHNOLOGIES
INC.
By: By: /s/ Justin Shelby Kitch
---------------------------- -------------------------
Name: Name: JUSTIN SHELBY KITCH
---------------------------- -------------------------
Title: Title: CEO
---------------------------- -------------------------
THIS IS COUNTERPART NO. _ OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
ACCEPTANCE CERTIFICATE
FOR EQUIPMENT SCHEDULE NO. 4
TO MASTER LEASE AGREEMENT NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP. ("LESSOR")
AND HOMESTEAD TECHNOLOGIES INC. ("LESSEE")
LESSEE CERTIFIES THAT THE FOLLOWING EQUIPMENT HAS BEEN DELIVERED TO THE
INSTALLATION/LOCATION SITE SPECIFIED IN THE EQUIPMENT SUPPLEMENT, INSPECTED AND
FOUND TO BE IN GOOD OPERATING ORDER AND MEETING LESSEE'S ACCEPTANCE CRITERIA,
AND UNCONDITIONALLY ACCEPTED UNDER THE LEASE ON THE ACCEPTANCE DATE INSERTED
BELOW:
Quantity Mfgr Model/Features Description Serial No.
SEE ATTACHMENT "A" TO EQUIPMENT SCHEDULE FOR DESCRIPTION
LESSEE HEREBY REPRESENTS TO LESSOR AND ANY ASSIGNEE THAT ON THE ACCEPTANCE DATE:
(i) Lessee's representations and warranties contained in the Lease are true
and correct;
(ii) The Equipment is insured as required by the Lease;
(iii) No Event of Default has occurred;
(iv) Lessee acknowledges that Lessor acquired the Equipment for this Lease
and Lessee is aware of the warranty rights from the manufacturer.
(v) Lessee's financial statements, and the financial statements of any
guarantor of Lessee's obligations, given to Lessor represent Lessee's and such
guarantor's financial and business conditions as of the dates of such
statements, and since such dates there have been no materially adverse changes
in Lessee's or such guarantor's financial or business conditions.
ACCEPTANCE DATE: 8/15/99
LESSEE: HOMESTEAD TECHNOLOGIES INC.
By: /s/ Justin Shelby Kitch
----------------------------------
Name: JUSTIN SHELBY KITCH
----------------------------------
Title: CEO
----------------------------------
THIS IS COUNTERPART NO. __ OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that this Acceptance Certificate constitutes chattel paper under
the Uniform Commercial Code, no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1
<PAGE>
BILL OF SALE
For and in consideration of the sum of $ 87,721.75, HOMESTEAD TECHNOLOGIES INC.,
hereinafter referred to as Seller, sells and conveys to:
Insight Investments, Corp.
265 S. Anita Dr., #200
Orange, CA 92868
all its right, title and interest in and to that certain equipment listed on
Invoice No(s). SEE ATTACHED INVOICE LOG, a copy of which is attached hereto, and
incorporated herein by reference.
Seller hereby warrants to Buyer that it is the legal owner of said equipment,
that there are no encumbrances, UCC-1 filings, or liens on said equipment.
Seller hereby indemnifies Buyer from any and all legal damages or suits which
may be brought against Seller or Buyer with regards to the equipment, if in fact
at a later date a third party claims interest in and to said equipment and said
claim is based on damages incurred by Seller prior to the sale of the equipment.
EQUIPMENT: SEE EQUIPMENT SCHEDULE # 4
SELLER: HOMESTEAD TECHNOLOGIES INC.
BY: /s/ Justin Shelby Kitch
------------------------------
TITLE: CEO
---------------------------
DATE: 8.23.99
----------------------------
<PAGE>
NOTICE OF ASSIGNMENT
(ASSIGNMENT OF LEASE)
September 27, 1999
Homestead Technologies Inc.
3475H Edison Way
Menlo Park, CA 94025
Dear Sir or Madam;
Reference is made to Master Lease Agreement No. 6400 dated as of April 7, 1999
(the "Master Lease") and Schedule No. 4 dated July 29, 1999 between Insight
Investments, Corp. ("Insight") as Lessor and HOMESTEAD TECHNOLOGIES Inc. as
Lessee (the "Schedule"). The Schedule and Master Lease are collectively referred
to herein as the "Lease".
Please be advised that Insight has assigned all its right, title and interest in
the Lease effective NOVEMBER 1, 1999 to DATA SALES CO., INC. the "Assignee."
This is to notify you of the assignment and to authorize you to send all Monthly
Rent payments commencing with that payment due (date of first payment assigned)
to:
DATA SALES CO., INC.
3450 WEST BURNSVILLE PARKWAY
BURNSVILLE, MN 55337
The Assignee shall perform all duties and obligations of Lessor under the Lease
and shall have the right as of the date of assignment to direct that remittances
be made to a different address or a new assignee.
All future invoices, including those for sales or use taxes, will be received
from Insight Investments, Corp. or its Assignee.
In addition, this letter will confirm that the leased equipment has been
installed and accepted. The Lease is for a period of 36 months. Rental payments
commenced SEPTEMBER 1, 1999 and will end AUGUST 31, 2002. As of the date of the
assignment, there will be 34 remaining monthly payments of $ 3,026.40 each
commencing NOVEMBER 1, 1999 and ending AUGUST 1, 2002.
<PAGE>
Please sign the original and a copy of this letter indicating that: (i) the
Lessee will be bound by the Lease, the Schedule and this Notice of Assignment
(ii) Lessee has received no notice of any other assignments of or claims
relating to the Schedule and has no reason to refuse to make payments of rent or
other proceeds due under the Lease (iii) the Lease and Schedule as executed are
binding and legally enforceable against the Lessee in accordance with their
terms; (iv) no defaults exists on the part of the Lessee; and (v) the Lessee
will make payments without any setoffs or deductions whatsoever arising out of
any claims Lessee may have against Lessor, it being understood that the Lessee
retains the right to assert any such claim in a separate action against Lessor.
<TABLE>
<CAPTION>
LESSOR LESSEE
<S> <C>
INSIGHT INVESTMENTS, CORP. HOMESTEAD TECHNOLOGIES INC.
By: By: /S/ JUSTIN SHELBY KITCH
----------------------------- -----------------------------
Name: Name: JUSTIN SHELBY KITCH
--------------------------- ---------------------------
Title: Title: CEO & PRESIDENT
-------------------------- --------------------------
Date: Date: 9/27/99
--------------------------- ---------------------------
</TABLE>
<PAGE>
SCHEDULE NO. 5, DATED SEPTEMBER 9, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE TERMS
AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE LEASE OF THE
EQUIPMENT.
<TABLE>
<CAPTION>
<S> <C> <C>
l. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2. EQUIPMENT COST: $20,053.54
3. MONTHLY RENT: $706.68/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 10/01/1999
6. PURCHASE OPTION: Lessee may purchase the equipment for the then fair market value, return to IIC
or continue leasing. Each equipment schedule purchased or renewed must be done
so on an all or nothing basis. Provided all monies due and payable IIC, or its
assigns has been received, IIC will finance the buyout of the equipment at the
then current market rate.
7. Other:
</TABLE>
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
<TABLE>
<CAPTION>
LESSOR: INSIGHT INVESTMENTS CORP. LESSEE: HOMESTEAD TECHNOLOGIES INC.
<S> <C>
By: /s/ JOHN FORD By: /s/ JUSTIN SHELBY KITCH
-------------------------------- --------------------------------
Name: JOHN FORD Name: JUSTIN SHELBY KITCH
------------------------------ ------------------------------
Title: PRESIDENT Title: CEO
----------------------------- -----------------------------
</TABLE>
THIS IS COUNTERPART NO. 3 OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code, no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
NOTICE AND ACKNOWLEDGEMENT OF ASSIGNMENT
This Notice and Acknowledgment of Assignment dated as of OCTOBER 27, 1999, is
made by Insight Investments, Corp. ("Lessor") and HOMESTEAD TECHNOLOGIES, INC.
("Lessee") concerning Equipment Schedule No. 5, to Master Lease Agreement No.
6400 dated APRIL 7. 1999 (the "Lease") between Lessor and Lessee.
NOTICE OF ASSIGNMENT: Lessor hereby notifies and directs Lessee that:
A. Lessor has assigned all of its rights and obligations under the Lease
to and among LINC Capital, Inc. ("Assignee"), as of DECEMBER 1, 1999,
(the "Rent Assignment Date").
B. Until further written notice to the contrary is received by Lessee from
Assignee, all lease rentals and any other payments due on and after the
Rent Assignment Date under the Lease (the "Monies") shall be paid by
the date due directly by Lessee to Assignee at the following address:
LINC CAPITAL, INC.
P.O. BOX 1213
DEPT. 15151
NEWARK, NJ 07101
ACKNOWLEDGMENT OF ASSIGNMENT: Lessee consents to the assignment hereto by Lessor
and will remit and deliver all Monies directly to Assignee at the address set
forth above and Lessee acknowledges that:
(i) the initial term of the Lease is 36 months, commencing on OCTOBER 1, 1999
and ending on SEPTEMBER 30, 2002; (ii) the regular monthly rental is $ 706.68,
exclusive of applicable taxes and shall be due and payable on the 1ST
day of each month during the term beginning with any payments due as of the
commencement date set forth in the Lease. Lessor has collected the last month's
rent and all rent payable prior to the rent assignment date and there are 33
consecutive monthly rentals in the above amount remaining, beginning with the
payment due on the Rent Assignment Date; (iii) there are no additional
agreements between Lessee and Lessor relating to the equipment ("Equipment")
under the Lease; (iv) the Lease is in full force and effect; (v) the Equipment
currently is in Lessee's possession and control at the location(s) specified in
the Lease; (vi) it will not enter into any agreement amending, modifying or
terminating the Lease without the prior written consent of Assignee; and (vii)
it has not made with respect to Lessor, nor will it make with respect to
Assignee, any claims, offsets, demands or defenses of any kind, nature or
description with reference to any of Lessor's obligations under the Lease.
Lessee also acknowledges and agrees that it will deliver copies of all notices
and other communications given to or made by Lessee pursuant to the Lease, to
Assignee at the following address: LINC CAPITAL, INC., 303 EAST WACKER DRIVE,
SUITE 1000, CHICAGO, ILLINOIS 60601 ATTENTION: PORTFOLIO MANAGEMENT.
FURTHER AGREEMENTS: Upon execution of this Notice and Acknowledgment of Lessor
and Lessee and acceptance hereof by Assignee, Assignee agrees that in lieu of
any covenant of quiet enjoyment that may be given on behalf of Assignee in the
Lease, Assignee hereby covenants that so long as Lessee is not in default of any
provisions of the Lease and has not breached any of its covenants or
representations in this Notice and Acknowledgment, Assignee will not disturb the
Lessee's quiet and peaceful possession of the Equipment or its unrestricted use
thereof for its intended purpose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Notice and
Acknowledgment of Assignment to be executed by their authorized officers as
of the date set forth above.
<TABLE>
<CAPTION>
INSIGHT INVESTMENTS, CORP. Homestead Technologies, Inc.
(Lessor) (Lessee)
<S> <C>
By: By: /s/ JUSTIN SHELBY KITCH
----------------------------- -------------------------------
Its: Its: PRESIDENT
---------------------------- ------------------------------
</TABLE>
Accepted by:
LINC Capital, Inc.
(Assignee)
By:
-----------------------------
Its:
----------------------------
<PAGE>
SCHEDULE NO. 6, DATED NOVEMBER 2, 1999
INCORPORATING BY REFERENCE MASTER LEASE NO. 6400 DATED APRIL 7, 1999
BETWEEN INSIGHT INVESTMENTS, CORP., AS LESSOR,
AND HOMESTEAD TECHNOLOGIES INC., AS LESSEE.
LESSEE HEREBY LEASES THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY
ACCEPTANCE OF THIS LEASE, AGREES TO LEASE THE EQUIPMENT TO LESSEE ON THE TERMS
AND CONDITIONS IN THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS EQUIPMENT SCHEDULE AND THE MASTER LEASE
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AS TO THE LEASE OF THE
EQUIPMENT.
<TABLE>
<S> <C> <C>
l. EQUIPMENT DESCRIPTION AND LOCATION DESCRIBED ON ATTACHMENT "A"
2. EQUIPMENT COST: $105,970.00
3. MONTHLY RENT: $3,812.80/month
4. INITIAL LEASE TERM: 36 months
5. COMMENCEMENT DATE: 11/01/1999
6. PURCHASE OPTION: Lessee may purchase the equipment for the then fair market value, return to IIC
or continue leasing. Each equipment schedule purchased or renewed must be done
so on an all or nothing basis. Provided all monies due and payable IIC, or its
assigns has been received, IIC will finance the buyout of the equipment at the
then current market rate.
7. LESSEE'S PO: 091699-001, 090999-0002 and 090799-0001
8. Other:
</TABLE>
Lessee hereby authorizes Lessor to insert and/or revise serial numbers
and other information relevant to the proper identification and/or
description of the Equipment subsequent to Lessee's execution of this
Equipment Schedule and any Attachment A thereto.
<TABLE>
<CAPTION>
LESSOR: INSIGHT INVESTMENTS CORP. LESSEE: HOMESTEAD TECHNOLOGIES INC.
<S> <C>
By: /s/ RICHARD M. HEARD By: /s/ JUSTIN SHELBY KITCH
--------------------------------- -------------------------------
Name: RICHARD M. HEARD Name: JUSTIN SHELBY KITCH
------------------------------- -----------------------------
Title: CFO Title: CEO
------------------------------ -----------------------------
</TABLE>
THIS IS COUNTERPART NO. 3 OF THREE (3) SERIALLY NUMBERED COUNTERPARTS.
To the extent that an Equipment Schedule constitutes chattel paper under the
Uniform Commercial Code, no security interest may be created through the
transfer and possession of any counterpart other than counterpart No. 1.
<PAGE>
NOTICE AND ACKNOWLEDGMENT OF ASSIGNMENT
This Notice and Acknowledgment of Assignment dated as of NOVEMBER 2, 1999, is
made by Insight Investments, Corp. ("Lessor") and HOMESTEAD TECHNOLOGIES, INC.
("Lessee") concerning Equipment Schedule No. 5, to Master Lease Agreement No.
6400 dated APRIL 7, 1999 (the "Lease") between Lessor and Lessee.
NOTICE OF ASSIGNMENT: Lessor hereby notifies and directs Lessee that:
A. Lessor has assigned all of its rights and obligations under the Lease
to and among LINC Capital, Inc. ("Assignee"), as of DECEMBER 1, 1999,
(the "Rent Assignment Date").
B. Until further written notice to the contrary is received by Lessee from
Assignee, all lease rentals and any other payments due on and after the
Rent Assignment Date under the Lease (the "Monies") shall be paid by
the date due directly by Lessee to Assignee at the following address:
LINC CAPITAL, INC.
P.O. BOX 1213
DEPT. 15151
NEWARK, NJ 07101
ACKNOWLEDGMENT OF ASSIGNMENT: Lessee consents to the assignment hereto by Lessor
and will remit and deliver all Monies directly to Assignee at the address set
forth above and Lessee acknowledges that:
(i) the initial term of the Lease is 36 months, commencing on NOVEMBER 1, 1999
and ending on OCTOBER 3l, 2002 (ii) the regular monthly rental is $ 3,812.80,
exclusive of applicable taxes and shall be due and payable on the 1ST day of
each month during the term beginning with any payments due as of the
commencement date set forth in the Lease. Lessor has collected the last month's
rent and all rent payable prior to the rent assignment date and there are 34
consecutive monthly rentals in the above amount remaining, beginning with the
payment due on the Rent Assignment Date; (iii) there are no additional
agreements between Lessee and Lessor relating to the equipment ("Equipment")
under the Lease; (iv) the Lease is in full force and effect; (v) the Equipment
currently is in Lessee's possession and control at the location(s) specified in
the Lease; (vi) it will not enter into any agreement amending, modifying or
terminating the Lease without the prior written consent of Assignee; and (vii)
it has not made with respect to Lessor, nor will it make with respect to
Assignee, any claims, offsets, demands or defenses of any kind, nature or
description with reference to any of Lessor's obligations under the Lease.
Lessee also acknowledges and agrees that it will deliver copies of all notices
and other communications given to or made by Lessee pursuant to the Lease, to
Assignee at the following address: LINC CAPITAL, INC., 303 EAST WACKER DRIVE,
SUITE 1000, CHICAGO, ILLINOIS 60601 ATTENTION: PORTFOLIO MANAGEMENT.
FURTHER AGREEMENTS: Upon execution of this Notice and Acknowledgment of Lessor
and Lessee and acceptance hereof by Assignee, Assignee agrees that in lieu of
any covenant of quiet enjoyment that may be given on behalf of Assignee in the
Lease, Assignee hereby covenants that so long as Lessee is not in default of any
provisions of the Lease and has not breached any of its covenants or
representations in this Notice and Acknowledgment. Assignee will not disturb the
Lessee's quiet and peaceful possession of the Equipment or its unrestricted use
thereof for its intended purpose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Notice and
Acknowledgment of Assignment to be executed by their authorized officers as of
the date set forth above.
<TABLE>
<CAPTION>
INSIGHT INVESTMENTS, CORP. Homestead Technologies, Inc.
(Lessor) (Lessee)
<S> <C>
By: By: /s/ JUSTIN SHELBY KITCH
---------------------------- ---------------------------------
Its: Its: CEO
--------------------------- --------------------------------
</TABLE>
Accepted by:
LINC Capital, Inc.
(Assignee)
By:
----------------------------
Its:
---------------------------
<PAGE>
LEASE NO: 005180742-001
[LOGO]
FINANCIAL SERVICES
+
Company No: 05
THIS LEASE HAVE BEEN WRITTEN IN "PLAIN ENGLISH". WHEN WE USE YOU AND YOUR IN
THIS LEASE WE MEAN YOU, THE CUSTOMER WHO IS THE LESSEE INDICATED BELOW. WHEN WE
USE WE, US AND OUR WE MEAN THE LESSOR, DELL FINANCIAL SERVICES LP
<TABLE>
<CAPTION>
<S><C>
- ---------------------------------------------------------------- ------------ ------------------- ---------------- -----------
FULL LEGAL NAME OF LESSEE LEASE TERM MONTHLY RENT MONTHLY
(MONTHS) PAYMENT^ PERSONAL
PROPERTY MGMT
HOMESTEAD.COM, INC. 36 FEE^
$774.36 $14.88
^Subject to ^Subject to
Applicable Applicable Tax
Tax
- ----------------------------------- ---------------------------- -------------------------------------------------------------
DBA NAME (IF ANY) TYPE OF BUSINESS FINANCING TERMS
CORPORATION Product Cost = $22,350.00
Doc. Fee* = $55.00
- ----------------------------------- ----------------------------
BILLING ADDRESS: STREET, CITY, *A $55.00 Documentation Fee IS included in the Monthly Rent
STATE, ZIP CODE Payment shown above.
3475 EDISON WAY STE H **Charges to ship to you ARE NOT included in the Monthly
MENLO PARK, CA 94025 Rental Payment, and WILL appear as a one time charge on
your first invoice.
- ---------------------------------------------------------------- -------------------------------------------------------------
PRODUCT LOCATION GENERAL PRODUCT DESCRIPTION/SUPPLIER
SEE ATTACHMENT A SEE ATTACHMENT A
- ---------------------------------------------------------------- -------------------------------------------------------------
GUARANTOR (IF ANY) SOCIAL SECURITY NUMBER END OF LEASE PURCHASE OPTION
10% of Equipment Cost
- ---------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS OF LEASE
1. LEASE; ACCEPTANCE AND COMMENCEMENT; TERM; RENT: We agree to lease to you and
you agree to lease from us the products, services, and software (the "Products")
described in Exhibit A to this lease on the terms and conditions shown in this
lease agreement (the "Lease"). With respect to services, we will only finance
one-time charges for services rendered in connection with the Products. Services
may include delivery and installation fees, internet service plans, or similar
services ("Services"). This Lease will begin and Products will be deemed
irrevocably accepted for purposes of this Lease five (5) days after shipment
from the Supplier (the "Commencement Date"). When you receive the Products, you
agree to inspect them promptly and advise us if they are not in good working
order. We honor Dell Computer Corporation's ("Dell") "Total Satisfaction Return
Policy". If you return Dell branded Products within 30 days after shipment from
Dell, in the condition and manner required by Dell, you may terminate the Lease.
You are responsible for freight charges to deliver and return the Products.
Complete details regarding the "Total Satisfaction Return Policy" are included
in the manufacturer's documentation provided to you with the Products. The first
Rent payment is due thirty (30) days after the Commencement Date, and subsequent
payments of Rent are due on the same date of each subsequent month (or the last
day of the month if there is no such date). You agree to pay us the Rent for the
number of months of the Lease Term stated above. You will make all payments
required under this Lease to us at the address we specify in writing. You
authorize us to adjust the Rent amount by not more than 15% if the actual
Product Cost (which is all amounts we have paid or will pay in connection with
the purchase, delivery and installation of the Products, including any trade-up
and buyout amounts, or amounts incurred by us as a result of changes you make to
your order with the Supplier) differs from the Product Cost shown above. If any
payment of Rent or other amount payable to us is not paid within ten (10) days
after the due date, you will pay us a late charge equal to the greater of (i) 5%
of the late payment amount or (ii) $5.00 for each late payment (or if less, the
highest amount permitted by applicable law).
2. NO WARRANTIES. WE ARE LEASING THE PRODUCTS TO YOU "AS IS". YOU ACKNOWLEDGE
THAT WE DO NOT MANUFACTURE OR SUPPLY THE PRODUCTS. WE DO NOT REPRESENT THE
MANUFACTURER OR SUPPLIER AND YOU HAVE SELECTED THE PRODUCTS AND THE SUPPLIER
BASED ON YOUR OWN JUDGMENT. WE MAKE NO WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF
THE PRODUCT OR ANY SERVICES. WE HEREBY ASSIGN ALL WARRANTIES MADE TO USE BY
SUPPLIER, MANUFACTURER, AND ANY SERVICE PROVIDER TO YOU, AND YOU AGREE THAT YOU
WILL MAKE ALL CLAIMS OF ANY KIND RELATING TO THE PRODUCTS OR SERVICES AGAINST
SUCH SUPPLIER, MANUFACTURER, AND/OR SERVICE PROVIDER.
3. SELECTION AND ORDERING OF PRODUCTS: You select the type and quality of the
Products subject to this Lease. If you have entered into a purchase or supply
contract ("Supply Contract") with any Supplier, you assign your rights but not
your obligations (other than the obligation to pay for the Products if accepted
by you under this Lease) effective prior to the passage of title by the Supplier
to you.
4. LOCATION; USE; ALTERATIONS; INSPECTION: You will use the Products solely at
the location specified in the Lease, or if none is specified, at your billing
address. Except for temporary relocation of laptop personal computers, you may
not move the Products without our prior written consent, which shall not be
unreasonably withheld. At your own expense, you will maintain the Products in
good repair, condition and functional order (except for ordinary wear and tear)
and will use them in compliance with all applicable laws. You will use all
software in accordance with the end user license terms of the applicable
software license agreement ("License"). You may make additions or improvements
to the Products unless the addition or improvement would violate any License,
decrease the value of Products, or impair their utility. You may remove any such
addition or improvement at the end of the Lease if (i) you repair any damage to
Products resulting from the removal; (ii) you restore the Products to their
original and functional condition (excluding ordinary wear and tear); and, (iii)
the removal does not violate any License or render the Products incapable of use
or operation. All additions or improvements not removed will become our property
at no cost to us. You agree that, we, our assignees, and agents, may inspect the
Products at the premises where the Products are located at any reasonable time
with prior notice.
B S D
Page 1 of 3 +
<PAGE>
5. TITLE; QUIET ENJOYMENT; PERSONAL PROPERTY; FILING: We are the owner of and
will hold title to the Products. You will keep the Products free from any and
all liens, encumbrances and claims. So long as you are not in Default under the
Lease, we will not interfere with your quiet use and enjoyment of the Products
during the Lease Term or any renewal term. Unless the Purchase Option is $1, you
agree that this transaction is intended to be a true lease under UCC Article 2A.
However, if this transaction is deemed to be a lease intended for security under
UCC Article 9, you grant us a purchase money security interest in the Products
(including any replacements, substitutions, additions, attachments and
proceeds). You authorize us to file a copy of this Lease as a UCC-1 financing
statement (UCC-1) and hereby appoint us or our designee as your attorney-in-fact
to sign on your behalf and to file UCC-1's covering the Products. You agree to
pay a one-time Documentation Fee to cover our costs for such filing and other
documentation costs.
6. LOSS OR DAMAGE: From the time the Products are delivered to a carrier for
shipment to you until their return to us, you are responsible for any loss,
theft, damage to or destruction of the Products ("Loss") from any cause at
all, whether or not the Loss is covered by insurance. You are required to
make all payments under the Lease even if there is a Loss. You must notify us
immediately if there is any Loss. Then at our option, you will either (a)
repair the Products so they are in good condition and working order to our
satisfaction; or (b) replace the Products with like products in good
condition and repair and of the same manufacture and equal or greater
capacity and capability, with clear title thereto in us; or (c) pay us the
"Stipulated Loss Value" which is the sum of: (i) all Rent payments for all
the Products and other amounts past due (plus interest thereon) or currently
owed to us under the Lease, including unpaid taxes and (ii) all future Rent
payments that would accrue over the remaining Lease Term plus our estimated
value of our residual interest of all of the Products at the end of the Lease
Term, such sum to be discounted to present value at a discount rate equal to
the Federal Reserve Bank Discount Rate in effect at the Commencement Date of
the Lease ("Discount Rate"). When you pay the amount of (c) about to us, we
will transfer to you our interest in the Products, "AS-IS-WHERE-IS", without
any warranty, express or implied, including warranty of merchantability or
fitness for any particular purpose.
7. INSURANCE: You will provide and maintain, at your expense, (a) property
insurance against the loss or theft of or damage to the Products, for their full
replacement value naming us as loss payee and (b) public liability and third
party property damage insurance naming us as an additional insured. All
insurance shall be in a form and amount and with companies satisfactory to us
and will provide that we will be given thirty (30) days written notice before
cancellation or material change of the policy. At our request, you will deliver
the policies or certificates of insurance to us. If you do not give us evidence
of insurance acceptable to use we have the right, but not the obligation, to
obtain such insurance covering our interest in the Products for the Lease Term.
The cost for such insurance will be an additional amount due from you under the
Lease.
8. TAXES: You will pay when due, either directly or to us on demand, all taxes
(local, state and federal), fines or penalties which may now or hereafter be
imposed or levied upon the Lease and the Products, excluding taxes on our net
income. We do not have to contest any taxes, fines or penalties. We may, at our
option, charge you a liquidated monthly personal property management fee, to be
added to Rent payments owed under this Lease.
9. RETURN: Unless the Lease is renewed or you purchase the Products in
accordance with the terms of the Lease, you will immediately deliver the
Products and original operating system software, (including but not limited to
the operating software kit, manuals, cables, power cords, keys, etc.) in good
repair, operable condition and able to qualify for the manufacturer's warranty
service (ordinary wear and tear excepted) to any place in the continental United
States that we direct. You will pay all expenses for deinstalling, packing and
shipping and you will insure the Products for the full replacement value during
shipping. You will immediately pay us on demand the costs and expenses of all
missing or damaged Products (including the operating software kit).
10. PURCHASE OPTION; AUTOMATIC RENEWAL: If no Default exists under the Lease,
you will have the option at the end of the Lease Term to purchase all (but not
less than all) of the Products for the amount of the Purchase Option price shown
above which, if it is the then fair market value of the Products, will be as
determined by us, plus any applicable taxes. Unless the Purchase Option price is
$1, you must give us written notice at least ninety (90) days before the end of
the Lease Term that you will purchase the Products or that you will return the
Products to us. Unless you purchase the Products or return the Products to us on
the last day of the Lease Term, this Lease will automatically renew for an
additional ninety (90) day term and thereafter on a continuing month to month
basis until you give us thirty (30) days notice and deliver the Products to us.
During such renewal terms, the Rent payment will remain the same. If the Fair
Market Value Purchase Option has been selected we will use our reasonable
judgement to determine the Products' in place value. If you do not agree with
our determination, the fair market retail value will be determined for you at
your expense by an independent appraiser elected by us. Upon payment of the
Purchase Option price in full, we will transfer our interest in the Products to
you "AS-IS-WHERE-IS", without any warranty whatsoever, and the Lease will
terminate.
11. ASSIGNMENT: YOU MAY NOT ASSIGN, SELL, TRANSFER, OR SUBLEASE THE PRODUCTS OR
YOUR INTEREST IN THIS LEASE. We may, without notifying you, sell, assign, or
transfer the Lease and our rights in the Products. You agree that the new owner
will have the same rights and benefits that we have now under this Lease, but
not our obligations. The rights of the new owner will not be subject to any
claim, defense, or setoff that you may have against us.
12. DEFAULT: Each of the following is a default ("Default") under the Lease: (a)
you fail to pay any Rent or any other payment within 10 days of its due date;
(b) you do not perform any of your obligations under the Lease or in any other
agreement with us or with any of our affiliates and this failure continues for
10 days after we have notified you of it; (c) you become insolvent, you dissolve
or are dissolved, you assign your assets for the benefit of your creditors or
enter voluntarily or involuntarily any bankruptcy or other reorganization
proceeding; (c) you or any Guarantor provide us incorrect or untrue information
regarding any material matter in connection with your application for credit or
entering into this Lease; or (d) if this Lease has been guaranteed by someone
other than you, any guarantor of the Lease dies, does not perform its
obligations under the Guaranty or becomes subject to one of the events listed in
clause (c).
13. REMEDIES: If a Default occurs, we may do one or more of the following: (a)
we may cancel or terminate the Lease or any agreements that we have entered into
with you or withdraw any offer of credit; (b) we may require you to pay us, as
compensation for loss of our bargain and not as a penalty, a sum equal to (i)
the Stipulated Loss Value calculated under clause 6 plus (ii) all other amounts
due and to become due under the Lease; (c) we may require you to deliver the
Products to us as set forth in clause 9; (d) we or our agent may peacefully
repossess the Products without court order and you will not make any claims
against us for trespass, damages or any other reason and (e) we may exercise any
other right at law or in equity. You agree to pay all of our costs of enforcing
our rights against you, including reasonable attorney's fees. If we take
possession of the Products we may sell or otherwise dispose of the Products,
with or without notice at public or private sale and apply the net proceeds
(after we have deducted our costs related to the sale and disposition) to the
amounts that you owe us. You agree that if notice of a sale is required by law
to be given, 10 days notice will constitute reasonable notice. You will remain
responsible for any amounts that are due after we have applied such net
proceeds.
14. INDEMNITY: You are responsible for losses, damages, penalties, claims, costs
(including attorneys' fees and expenses), actions, suits and proceedings of
every kind, (collectively "Claims") whether based on a theory of strict
liability or otherwise caused by or related to this Lease or the Products,
(including any defects in the Products). You will reimburse us for, and if we
request defend us against, any Claims.
15. ARBITRATION: Either party to this Lease may choose to have any dispute,
claim, or controversy arising from or relating to this Lease, any prior
agreement or lease between the parties, any application or advertisement
related to this Lease or the validity of this arbitration clause or the
entire Lease, resolved by binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If such rules
conflict with this arbitration agreement, however, then the terms of this
arbitration agreement shall control. This arbitration agreement is made
pursuant to a transaction involving interstate commerce, and shall be
governed by the Federal Arbitration Act at 9 U.S.C. Section 1 ET SEQ.
Judgement upon the award rendered may be entered in any court having
jurisdiction. Any arbitration award in excess of $100,000 made pursuant to
this arbitration agreement may be appealed by the party against which the
award is made. Such appeal will be a de novo arbitration proceeding before
three arbitrators. The parties agree and understand that they may choose
arbitration instead of litigation to resolve disputes. The parties under that
that they have a right opportunity to litigate disputes in court, but may
elect to resolve their disputes through arbitration as provided herein. The
parties agree and understand that all disputes arising under case law,
statutory law, and all other laws including, but not limited to, all
contract, tort, and property disputes, may be subject to binding arbitration
in accord with this Lease. No class action or request for relief may be
brought under this arbitration agreement. You agree that you shall not have
the right to participate in arbitration or in court proceedings as a
representative or a member of any class of claimants pertaining to any claim
arising from or relating to this Lease. The parties agree and understand that
the arbitrator shall have all powers provided by law and this Lease, except
for powers limited or prohibited by this Lease. Notwithstanding anything
herein to the contrary, we retain an option to use judicial or non-judicial
relief to recover the Products or to enforce our security interest in the
Products, to enforce the monetary obligation secured by the Products or to
foreclose on the Products. Such judicial relief would take the form of a
lawsuit. The institution and maintenance of any action for judicial relief in
a court to foreclose upon any Products, to obtain a monetary judgment or to
enforce this Lease, shall not constitute a waiver of the right of any party
to compel arbitration regarding any other dispute or remedy subject to
arbitration in this Lease, including the filing of a counterclaim in a suit
brought by us pursuant to this provision. YOU UNDERSTAND AND AGREE THAT IN
ARBITRATION: YOU GIVE UP RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY
Page 2 of 3
<PAGE>
TRIAL; YOUR ABILITY TO COMPEL OTHER PARTIES TO PRODUCE DOCUMENTS OR BE
EXAMINED IS MORE LIMITED THAN IN A LAWSUIT; AND, YOUR RIGHTS TO APPEAL OR
CHANGE ANY ARBITRATION AWARD IN ANY COURT ARE STRICTLY LIMITED.
16. FINANCE LEASE: You agree that if Article 2A of the Uniform Commercial Code
applies to this Lease, this Lease will be considered a "finance lease" as
defined by Article 2A and by signing this Lease you acknowledge that either (1)
you have received, reviewed and approved the supply contract with the Supplier
or (2) we have informed you of the identity of the Supplier, that you may have
rights and warranties under the supply contracts for the Products and you may
contact the Supplier of the Products for a description of those rights and
warranties. TO THE EXTENT PERMITTED BY APPLICABLE LAW, YOU HEREBY WAIVE ANY AND
ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A.
17. MISCELLANEOUS: You agree that the terms and conditions of this Lease make up
the entire agreement between you and us regarding the lease of the Products. Any
change in the terms and conditions of the Lease must be in writing and signed by
us. You agree however, that we are authorized, without notice to you, to supply
missing information or correct obvious errors in this Lease. All of our rights
and remedies will survive termination of this Lease. All notices under this
Lease will be given in writing and will be considered given when deposited in
the U.S. mail, postage prepaid, addressed to the respective address given below
or to a substitute address specified in writing by one of us to the other. Any
failure of ours to require strict performance by you or any waiver by us of any
provision in this Lease will not be construed as a consent or waiver of any
other breach of the same or any provision. If any portion of this Lease is
deemed invalid, it will not affect the balance of this Lease. It is the express
intent of both of us not to violate any usury laws or to exceed the maximum
amount of time price differential, or interest as applicable permitted to be
charged, or collected under applicable law and any such excess payment will be
applied to payments under the Lease in inverse order of maturity and the
remaining payments will be refunded to you. If a signed copy of this Lease is
delivered to us by facsimile transmission, it will be binding on you, however,
we will not be bound by this Lease until we accept it by manually or
electronically signing it or by purchasing the Products, whichever occurs fist.
You waive notice of our acceptance and waive your right to receive a copy of the
accepted Lease. You agree that, notwithstanding any rule of evidence to the
contrary, in any hearing, trial or proceeding of any kind with respect to this
Lease, we may produce a copy of the Lease transmitted to us by facsimile
transmission that has been manually signed by us and such signed copy shall be
deemed to be the original of this Lease. To the extent (if any) that this Lease
constitutes chattel paper under the Uniform Commercial Code, no security
interest in this Lease may be created through the transfer and possession of any
copy or counterpart hereof except the copy with our original signature. If you
deliver this Lease to us by facsimile transmission, you acknowledge that we are
relying on your representation that this Lease has not been changed.
BY SIGNING THIS LEASE: (a) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND THE
TERMS AND CONDITIONS OF THIS LEASE; (b) YOU AGREE THAT THIS LEASE IS A NET LEASE
AND YOU CANNOT TERMINATE OR CANCEL AND UPON ACCEPTANCE OF THE PRODUCTS YOU HAVE
AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS UNDER THIS LEASE AND YOU CANNOT
WITHHOLD, SETOFF OR REDUCE SUCH PAYMENTS FOR ANY REASON; (c) YOU AGREE THAT THE
PRODUCTS WILL RE USED FOR BUSINESS PURPOSES ONLY AND NOT FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES; (d) YOU CONFIRM THAT THE PERSON SIGNING THIS LEASE FOR YOU
HAS THE AUTHORITY TO DO SO AND TO GRANT THE POWER OF ATTORNEY IN SECTION 5; (e)
YOU AGREE THAT THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS
AND YOU CONSENT TO THE JURISDICTION OF ANY COURT LOCATED WITHIN THAT STATE AND
YOU EXPRESSLY WAIVE THE RIGHT TO A TRIAL BY JURY AND (f) YOU CONFIRM THAT THE
INFORMATION IN ANY APPLICATION, STATEMENT, TRADE REFERENCE OR FINANCIAL REPORT
SUBMITTED TO US IS TRUE AND CORRECT AND YOU UNDERSTAND THAT ANY MATERIAL
MISREPRESENTATION SHALL CONSTITUTE A DEFAULT UNDER THE LEASE.
<TABLE>
<CAPTION>
<S><C>
- ------------------------------------------------------------ ---------------------------------------------------------
LESSEE: LESSOR:
HOMESTEAD.COM, INC. Dell Financial Services L.P. (800) 955-3355
P.O. Box 99200 FAX (512) 671-814
840 S Canal Street 3rd Floor
Chicago, IL 60693
- ------------------------------------------------------------ ---------------------------------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ ANDREW CHMYZ
- --------------------------------------------- -------------- ------------------------------------------ --------------
PRINT NAME AND TITLE 11/24/99 PRINT NAME AND TITLE
ANDREW CHMYZ, CONTROLLER DATE DATE
- --------------------------------------------- -------------- ------------------------------------------ --------------
</TABLE>
/NOT APPLICABLE/ FED ID # 77-0384549
FEDERAL EMPLOYEE ID # (or SOCIAL SECURITY NUMBER for SOLE PROPRIETORS)
THIS NUMBER MUST BE PROVIDED ON THE EXECUTED LEASE AGREEMENT
- --------------------------------------------------------------------------------
PERSONAL AND CONTINUING GUARANTY OF LEASE NO. 005180742-001
- --------------------------------------------------------------------------------
THIS PERSONAL AND CONTINUING GUARANTY ("GUARANTY") CREATES SPECIFIC LEGAL
OBLIGATIONS. WHEN WE USE THE WORDS YOU AND YOUR IN THIS GUARANTY WE MEAN THE
PERSONAL GUARANTORS INDICATED BELOW. WHEN WE USE THE WORDS WE, US AND OUR IN THE
GUARANTY WE MEAN THE LESSOR INDICATED IN THE LEASE AGREEMENT ABOVE (THE
"LEASE"). IN CONSIDERATION OF OUR ENTERING INTO THE LEASE, YOU UNCONDITIONALLY
AND IRREVOCABLY GUARANTEE TO US, OUR SUCCESSORS AND ASSIGNS, THE PROMPT PAYMENT
AND PERFORMANCE OF ALL OBLIGATIONS OF LESSEE UNDER THE LEASE REGARDLESS OF ANY
CIRCUMSTANCE WHICH MIGHT OTHERWISE BE A DEFENSE AVAILABLE TO, OR A DISCHARGE OF,
LESSEE OR YOU. YOU AGREE THAT THIS A GUARANTY OF PAYMENT AND NOT OF COLLECTION,
AND THAT WE CAN PROCEED DIRECTLY AGAINST YOU WITHOUT FIRST PROCEEDING AGAINST
LESSEE OR THE PRODUCTS. YOU WAIVE ALL DEFENSES AND NOTICES, INCLUDING THOSE OF
PROTEST, PRESENTMENT AND DEMAND, NOTICE OF ACCEPTANCE HEREOF AND ALL OTHER
NOTICES OF ANY KIND. YOU AGREE THAT WE CAN RENEW, EXTEND OR OTHERWISE MODIFY THE
TERMS OF THE LEASE WITHOUT RELEASING YOU. YOU WILL PAY ALL OUR EXPENSES
INCLUDING ATTORNEYS' FEES INCURRED BY US IN ENFORCING OUR RIGHTS AGAINST YOU.
THIS IS A CONTINUING GUARANTY THAT WILL NOT BE DISCHARGED OR AFFECTED BY YOUR
DEATH AND WILL BIND YOUR HEIRS, ADMINISTRATORS AND PERSONAL REPRESENTATIVES. WE
MAY, WITHOUT AFFECTING YOUR LIABILITY HEREUNDER, COMPROMISE OR RELEASE ANY
RIGHTS AGAINST LESSEE OR THE PRODUCTS OR YOU. YOU CONSENT TO THE TRANSFER, SALE
OR ANY OTHER DISPOSITION OF THE PRODUCTS AND THE LEASE. IF MORE THAN ONE PERSON
HAS SIGNED THIS GUARANTY, EACH OF YOU AGREES THAT ITS LIABILITY IS JOINT AND
SEVERAL. THE GUARANTY MAY BE ENFORCED BY ANY ASSIGNEE OR SUCCESSOR OF OURS TO
THE SAME EXTENT AS WE MAY ENFORCE IT. YOU AUTHORIZE US OR ANY OUR AFFILIATES TO
OBTAIN CREDIT BUREAU REPORTS REGARDING YOUR PERSONAL CREDIT AND MAKE OTHER
CREDIT INQUIRES THAT WE DETERMINE ARE NECESSARY. THIS GUARANTY SHALL BE GOVERNED
BY THE INTERNAL LAWS OF ILLINOIS. YOU EXPRESSLY AGREE TO ARBITRATION AS PROVIDED
IN PARAGRAPH 15.
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------
Date
------------- --------------------------------------------- ------------------------------------------------------
(Date Signed) INDIVIDUAL GUARANTOR NAME (PRINTED) GUARANTOR SOCIAL SECURITY NUMBER
--------------------------------------------- ------------------------------------------------------
By
--------------------------------------------- ------------------------------------------------------
SIGNATURE INDIVIDUAL GUARANTOR (NO TITLE) GUARANTOR HOME ADDRESS (STREET CITY STATE AND ZIP CODE)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
LEASE NO: 005180742-002
[LOGO]
FINANCIAL SERVICES
+
Company No: 05
THIS LEASE HAVE BEEN WRITTEN IN "PLAIN ENGLISH". WHEN WE USE YOU AND YOUR
IN THIS LEASE WE MEAN YOU, THE CUSTOMER WHO IS THE LESSEE INDICATED BELOW.
WHEN WE USE WE, US AND OUR WE MEAN THE LESSOR, DELL FINANCIAL SERVICES LP
<TABLE>
<CAPTION>
<S><C>
- ---------------------------------------------------------------- ------------ ------------------- ---------------- -----------
FULL LEGAL NAME OF LESSEE LEASE TERM MONTHLY RENT MONTHLY
(MONTHS) PAYMENT^ PERSONAL
PROPERTY MGMT
HOMESTEAD.COM, INC. 36 FEE^
$774.36 $14.88
^Subject to ^Subject to
Applicable Applicable Tax
Tax
- ----------------------------------- ---------------------------- -------------------------------------------------------------
DBA NAME (IF ANY) TYPE OF BUSINESS FINANCING TERMS
CORPORATION Product Cost = $22,350.00
Doc. Fee* = $55.00
- ---------------------------------------------------------------
BILLING ADDRESS: STREET, CITY,
STATE, ZIP CODE *A $55.00 Documentation Fee IS included in the Monthly
Rent Payment shown above.
3475 EDISON WAY STE H
MENLO PARK, CA 94025 **Charges to ship to you ARE NOT included in the Monthly Rental
Payment, and WILL appear as a one time charge on your first
invoice.
- ----------------------------------- ---------------------------- -------------------------------------------------------------
PRODUCT LOCATION GENERAL PRODUCT DESCRIPTION/SUPPLIER
SEE ATTACHMENT A SEE ATTACHMENT A
- ---------------------------------------------------------------- -------------------------------------------------------------
GUARANTOR (IF ANY) SOCIAL SECURITY NUMBER END OF LEASE PURCHASE OPTION
10% of Equipment Cost
- ---------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS OF LEASE
1. LEASE; ACCEPTANCE AND COMMENCEMENT; TERM; RENT: We agree to lease to you
and you agree to lease from us the products, services, and software (the
"Products") described in Exhibit A to this lease on the terms and conditions
shown in this lease agreement (the "Lease"). With respect to services, we
will only finance one-time charges for services rendered in connection with
the Products. Services may include delivery and installation fees, internet
service plans, or similar services ("Services"). This Lease will begin and
Products will be deemed irrevocably accepted for purposes of this Lease five
(5) days after shipment from the Supplier (the "Commencement Date"). When you
receive the Products, you agree to inspect them promptly and advise us if
they are not in good working order. We honor Dell Computer Corporation's
("Dell") "Total Satisfaction Return Policy". If you return Dell branded
Products within 30 days after shipment from Dell, in the condition and manner
required by Dell, you may terminate the Lease. You are responsible for
freight charges to deliver and return the Products. Complete details
regarding the "Total Satisfaction Return Policy" are included in the
manufacturer's documentation provided to you with the Products. The first
Rent payment is due thirty (30) days after the Commencement Date, and
subsequent payments of Rent are due on the same date of each subsequent month
(or the last day of the month if there is no such date). You agree to pay us
the Rent for the number of months of the Lease Term stated above. You will
make all payments required under this Lease to us at the address we specify
in writing. You authorize us to adjust the Rent amount by not more than 15%
if the actual Product Cost (which is all amounts we have paid or will pay in
connection with the purchase, delivery and installation of the Products,
including any trade-up and buyout amounts, or amounts incurred by us as a
result of changes you make to your order with the Supplier) differs from the
Product Cost shown above. If any payment of Rent or other amount payable to
us is not paid within ten (10) days after the due date, you will pay us a
late charge equal to the greater of (i) 5% of the late payment amount or (ii)
$5.00 for each late payment (or if less, the highest amount permitted by
applicable law).
2. NO WARRANTIES. WE ARE LEASING THE PRODUCTS TO YOU "AS IS". YOU ACKNOWLEDGE
THAT WE DO NOT MANUFACTURE OR SUPPLY THE PRODUCTS. WE DO NOT REPRESENT THE
MANUFACTURER OR SUPPLIER AND YOU HAVE SELECTED THE PRODUCTS AND THE SUPPLIER
BASED ON YOUR OWN JUDGMENT. WE MAKE NO WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE
OF THE PRODUCT OR ANY SERVICES. WE HEREBY ASSIGN ALL WARRANTIES MADE TO USE
BY SUPPLIER, MANUFACTURER, AND ANY SERVICE PROVIDER TO YOU, AND YOU AGREE
THAT YOU WILL MAKE ALL CLAIMS OF ANY KIND RELATING TO THE PRODUCTS OR
SERVICES AGAINST SUCH SUPPLIER, MANUFACTURER, AND/OR SERVICE PROVIDER.
3. SELECTION AND ORDERING OF PRODUCTS: You select the type and quality of the
Products subject to this Lease. If you have entered into a purchase or supply
contract ("Supply Contract") with any Supplier, you assign your rights but
not your obligations (other than the obligation to pay for the Products if
accepted by you under this Lease) effective prior to the passage of title by
the Supplier to you.
4. LOCATION; USE; ALTERATIONS; INSPECTION: You will use the Products solely
at the location specified in the Lease, or if none is specified, at your
billing address. Except for temporary relocation of laptop personal
computers, you may not move the Products without our prior written consent,
which shall not be unreasonably withheld. At your own expense, you will
maintain the Products in good repair, condition and functional order (except
for ordinary wear and tear) and will use them in compliance with all
applicable laws. You will use all software in accordance with the end user
license terms of the applicable software license agreement ("License"). You
may make additions or improvements to the Products unless the addition or
improvement would violate any License, decrease the value of Products, or
impair their utility. You may remove any such addition or improvement at the
end of the Lease if (i) you repair any damage to Products resulting from the
removal; (ii) you restore the Products to their original and functional
condition (excluding ordinary wear and tear); and, (iii) the removal does not
violate any License or render the Products incapable of use or operation. All
additions or improvements not removed will become our property at no cost to
us. You agree that, we, our assignees, and agents, may inspect the Products
at the premises where the Products are located at any reasonable time with
prior notice.
B S D
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<PAGE>
5. TITLE; QUIET ENJOYMENT; PERSONAL PROPERTY; FILING: We are the owner of and
will hold title to the Products. You will keep the Products free from any and
all liens, encumbrances and claims. So long as you are not in Default under
the Lease, we will not interfere with your quiet use and enjoyment of the
Products during the Lease Term or any renewal term. Unless the Purchase
Option is $1, you agree that this transaction is intended to be a true lease
under UCC Article 2A. However, if this transaction is deemed to be a lease
intended for security under UCC Article 9, you grant us a purchase money
security interest in the Products (including any replacements, substitutions,
additions, attachments and proceeds). You authorize us to file a copy of this
Lease as a UCC-1 financing statement (UCC-1) and hereby appoint us or our
designee as your attorney-in-fact to sign on your behalf and to file UCC-1's
covering the Products. You agree to pay a one-time Documentation Fee to cover
our costs for such filing and other documentation costs.
6. LOSS OR DAMAGE: From the time the Products are delivered to a carrier for
shipment to you until their return to us, you are responsible for any loss,
theft, damage to or destruction of the Products ("Loss") from any cause at
all, whether or not the Loss is covered by insurance. You are required to
make all payments under the Lease even if there is a Loss. You must notify us
immediately if there is any Loss. Then at our option, you will either (a)
repair the Products so they are in good condition and working order to our
satisfaction; or (b) replace the Products with like products in good
condition and repair and of the same manufacture and equal or greater
capacity and capability, with clear title thereto in us; or (c) pay us the
"Stipulated Loss Value" which is the sum of: (i) all Rent payments for all
the Products and other amounts past due (plus interest thereon) or currently
owed to us under the Lease, including unpaid taxes and (ii) all future Rent
payments that would accrue over the remaining Lease Term plus our estimated
value of our residual interest of all of the Products at the end of the Lease
Term, such sum to be discounted to present value at a discount rate equal to
the Federal Reserve Bank Discount Rate in effect at the Commencement Date of
the Lease ("Discount Rate"). When you pay the amount of (c) about to us, we
will transfer to you our interest in the Products, "AS-IS-WHERE-IS", without
any warranty, express or implied, including warranty of merchantability or
fitness for any particular purpose.
7. INSURANCE: You will provide and maintain, at your expense, (a) property
insurance against the loss or theft of or damage to the Products, for their
full replacement value naming us as loss payee and (b) public liability and
third party property damage insurance naming us as an additional insured. All
insurance shall be in a form and amount and with companies satisfactory to us
and will provide that we will be given thirty (30) days written notice before
cancellation or material change of the policy. At our request, you will
deliver the policies or certificates of insurance to us. If you do not give
us evidence of insurance acceptable to use we have the right, but not the
obligation, to obtain such insurance covering our interest in the Products
for the Lease Term. The cost for such insurance will be an additional amount
due from you under the Lease.
8. TAXES: You will pay when due, either directly or to us on demand, all
taxes (local, state and federal), fines or penalties which may now or
hereafter be imposed or levied upon the Lease and the Products, excluding
taxes on our net income. We do not have to contest any taxes, fines or
penalties. We may, at our option, charge you a liquidated monthly personal
property management fee, to be added to Rent payments owed under this Lease.
9. RETURN: Unless the Lease is renewed or you purchase the Products in
accordance with the terms of the Lease, you will immediately deliver the
Products and original operating system software, (including but not limited
to the operating software kit, manuals, cables, power cords, keys, etc.) in
good repair, operable condition and able to qualify for the manufacturer's
warranty service (ordinary wear and tear excepted) to any place in the
continental United States that we direct. You will pay all expenses for
deinstalling, packing and shipping and you will insure the Products for the
full replacement value during shipping. You will immediately pay us on demand
the costs and expenses of all missing or damaged Products (including the
operating software kit).
10. PURCHASE OPTION; AUTOMATIC RENEWAL: If no Default exists under the Lease,
you will have the option at the end of the Lease Term to purchase all (but
not less than all) of the Products for the amount of the Purchase Option
price shown above which, if it is the then fair market value of the Products,
will be as determined by us, plus any applicable taxes. Unless the Purchase
Option price is $1, you must give us written notice at least ninety (90) days
before the end of the Lease Term that you will purchase the Products or that
you will return the Products to us. Unless you purchase the Products or
return the Products to us on the last day of the Lease Term, this Lease will
automatically renew for an additional ninety (90) day term and thereafter on
a continuing month to month basis until you give us thirty (30) days notice
and deliver the Products to us. During such renewal terms, the Rent payment
will remain the same. If the Fair Market Value Purchase Option has been
selected we will use our reasonable judgement to determine the Products' in
place value. If you do not agree with our determination, the fair market
retail value will be determined for you at your expense by an independent
appraiser elected by us. Upon payment of the Purchase Option price in full,
we will transfer our interest in the Products to you "AS-IS-WHERE-IS",
without any warranty whatsoever, and the Lease will terminate.
11. ASSIGNMENT: YOU MAY NOT ASSIGN, SELL, TRANSFER, OR SUBLEASE THE PRODUCTS
OR YOUR INTEREST IN THIS LEASE. We may, without notifying you, sell, assign,
or transfer the Lease and our rights in the Products. You agree that the new
owner will have the same rights and benefits that we have now under this
Lease, but not our obligations. The rights of the new owner will not be
subject to any claim, defense, or setoff that you may have against us.
12. DEFAULT: Each of the following is a default ("Default") under the Lease:
(a) you fail to pay any Rent or any other payment within 10 days of its due
date; (b) you do not perform any of your obligations under the Lease or in
any other agreement with us or with any of our affiliates and this failure
continues for 10 days after we have notified you of it; (c) you become
insolvent, you dissolve or are dissolved, you assign your assets for the
benefit of your creditors or enter voluntarily or involuntarily any
bankruptcy or other reorganization proceeding; (c) you or any Guarantor
provide us incorrect or untrue information regarding any material matter in
connection with your application for credit or entering into this Lease; or
(d) if this Lease has been guaranteed by someone other than you, any
guarantor of the Lease dies, does not perform its obligations under the
Guaranty or becomes subject to one of the events listed in clause (c).
13. REMEDIES: If a Default occurs, we may do one or more of the following:
(a) we may cancel or terminate the Lease or any agreements that we have
entered into with you or withdraw any offer of credit; (b) we may require you
to pay us, as compensation for loss of our bargain and not as a penalty, a
sum equal to (i) the Stipulated Loss Value calculated under clause 6 plus
(ii) all other amounts due and to become due under the Lease; (c) we may
require you to deliver the Products to us as set forth in clause 9; (d) we or
our agent may peacefully repossess the Products without court order and you
will not make any claims against us for trespass, damages or any other reason
and (e) we may exercise any other right at law or in equity. You agree to pay
all of our costs of enforcing our rights against you, including reasonable
attorney's fees. If we take possession of the Products we may sell or
otherwise dispose of the Products, with or without notice at public or
private sale and apply the net proceeds (after we have deducted our costs
related to the sale and disposition) to the amounts that you owe us. You
agree that if notice of a sale is required by law to be given, 10 days notice
will constitute reasonable notice. You will remain responsible for any
amounts that are due after we have applied such net proceeds.
14. INDEMNITY: You are responsible for losses, damages, penalties, claims,
costs (including attorneys' fees and expenses), actions, suits and
proceedings of every kind, (collectively "Claims") whether based on a theory
of strict liability or otherwise caused by or related to this Lease or the
Products, (including any defects in the Products). You will reimburse us for,
and if we request defend us against, any Claims.
15. ARBITRATION: Either party to this Lease may choose to have any dispute,
claim, or controversy arising from or relating to this Lease, any prior
agreement or lease between the parties, any application or advertisement
related to this Lease or the validity of this arbitration clause or the
entire Lease, resolved by binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If such rules
conflict with this arbitration agreement, however, then the terms of this
arbitration agreement shall control. This arbitration agreement is made
pursuant to a transaction involving interstate commerce, and shall be
governed by the Federal Arbitration Act at 9 U.S.C. Section 1 ET SEQ.
Judgement upon the award rendered may be entered in any court having
jurisdiction. Any arbitration award in excess of $100,000 made pursuant to
this arbitration agreement may be appealed by the party against which the
award is made. Such appeal will be a de novo arbitration proceeding before
three arbitrators. The parties agree and understand that they may choose
arbitration instead of litigation to resolve disputes. The parties under that
that they have a right opportunity to litigate disputes in court, but may
elect to resolve their disputes through arbitration as provided herein. The
parties agree and understand that all disputes arising under case law,
statutory law, and all other laws including, but not limited to, all
contract, tort, and property disputes, may be subject to binding arbitration
in accord with this Lease. No class action or request for relief may be
brought under this arbitration agreement. You agree that you shall not have
the right to participate in arbitration or in court proceedings as a
representative or a member of any class of claimants pertaining to any claim
arising from or relating to this Lease. The parties agree and understand that
the arbitrator shall have all powers provided by law and this Lease, except
for powers limited or prohibited by this Lease. Notwithstanding anything
herein to the contrary, we retain an option to use judicial or non-judicial
relief to recover the Products or to enforce our security interest in the
Products, to enforce the monetary obligation secured by the Products or to
foreclose on the Products. Such judicial relief would take the form of a
lawsuit. The institution and maintenance of any action for judicial relief in
a court to foreclose upon any Products, to obtain a monetary judgment or to
enforce this Lease, shall not constitute a waiver of the right of any party
to compel arbitration regarding any other dispute or remedy subject to
arbitration in this Lease, including the filing of a counterclaim in a suit
brought by us pursuant to this provision. YOU UNDERSTAND AND AGREE THAT IN
ARBITRATION: YOU GIVE UP RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY
Page 2 of 3
<PAGE>
TRIAL; YOUR ABILITY TO COMPEL OTHER PARTIES TO PRODUCE DOCUMENTS OR BE
EXAMINED IS MORE LIMITED THAN IN A LAWSUIT; AND, YOUR RIGHTS TO APPEAL OR
CHANGE ANY ARBITRATION AWARD IN ANY COURT ARE STRICTLY LIMITED.
16. FINANCE LEASE: You agree that if Article 2A of the Uniform Commercial
Code applies to this Lease, this Lease will be considered a "finance lease"
as defined by Article 2A and by signing this Lease you acknowledge that
either (1) you have received, reviewed and approved the supply contract with
the Supplier or (2) we have informed you of the identity of the Supplier,
that you may have rights and warranties under the supply contracts for the
Products and you may contact the Supplier of the Products for a description
of those rights and warranties. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
YOU HEREBY WAIVE ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY
ARTICLE 2A.
17. MISCELLANEOUS: You agree that the terms and conditions of this Lease make
up the entire agreement between you and us regarding the lease of the
Products. Any change in the terms and conditions of the Lease must be in
writing and signed by us. You agree however, that we are authorized, without
notice to you, to supply missing information or correct obvious errors in
this Lease. All of our rights and remedies will survive termination of this
Lease. All notices under this Lease will be given in writing and will be
considered given when deposited in the U.S. mail, postage prepaid, addressed
to the respective address given below or to a substitute address specified in
writing by one of us to the other. Any failure of ours to require strict
performance by you or any waiver by us of any provision in this Lease will
not be construed as a consent or waiver of any other breach of the same or
any provision. If any portion of this Lease is deemed invalid, it will not
affect the balance of this Lease. It is the express intent of both of us not
to violate any usury laws or to exceed the maximum amount of time
pricedifferential, or interest as applicable permitted to be charged, or
collected under applicable law and any such excess payment will be applied to
payments under the Lease in inverse order of maturity and the remaining
payments will be refunded to you. If a signed copy of this Lease is delivered
to us by facsimile transmission, it will be binding on you, however, we will
not be bound by this Lease until we accept it by manually or electronically
signing it or by purchasing the Products, whichever occurs fist. You waive
notice of our acceptance and waive your right to receive a copy of the
accepted Lease. You agree that, notwithstanding any rule of evidence to the
contrary, in any hearing, trial or proceeding of any kind with respect to
this Lease, we may produce a copy of the Lease transmitted to us by facsimile
transmission that has been manually signed by us and such signed copy shall
be deemed to be the original of this Lease. To the extent (if any) that this
Lease constitutes chattel paper under the Uniform Commercial Code, no
security interest in this Lease may be created through the transfer and
possession of any copy or counterpart hereof except the copy with our
original signature. If you deliver this Lease to us by facsimile
transmission, you acknowledge that we are relying on your representation that
this Lease has not been changed.
BY SIGNING THIS LEASE: (a) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND
THE TERMS AND CONDITIONS OF THIS LEASE; (b) YOU AGREE THAT THIS LEASE IS A
NET LEASE AND YOU CANNOT TERMINATE OR CANCEL AND UPON ACCEPTANCE OF THE
PRODUCTS YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS UNDER THIS
LEASE AND YOU CANNOT WITHHOLD, SETOFF OR REDUCE SUCH PAYMENTS FOR ANY REASON;
(c) YOU AGREE THAT THE PRODUCTS WILL RE USED FOR BUSINESS PURPOSES ONLY AND
NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES; (d) YOU CONFIRM THAT THE
PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO AND TO GRANT THE
POWER OF ATTORNEY IN SECTION 5; (e) YOU AGREE THAT THIS LEASE WILL BE
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN THAT STATE AND YOU EXPRESSLY WAIVE
THE RIGHT TO A TRIAL BY JURY AND (f) YOU CONFIRM THAT THE INFORMATION IN ANY
APPLICATION, STATEMENT, TRADE REFERENCE OR FINANCIAL REPORT SUBMITTED TO US
IS TRUE AND CORRECT AND YOU UNDERSTAND THAT ANY MATERIAL MISREPRESENTATION
SHALL CONSTITUTE A DEFAULT UNDER THE LEASE.
<TABLE>
<CAPTION>
<S><C>
- ------------------------------------------------------------ ---------------------------------------------------------
LESSEE: LESSOR:
HOMESTEAD.COM, INC. Dell Financial Services L.P. (800) 955-3355
P.O. Box 99200 FAX (512) 671-814
840 S Canal Street 3rd Floor
Chicago, IL 60693
- ------------------------------------------------------------ ---------------------------------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ ANDREW CHMYZ
- --------------------------------------------- -------------- ------------------------------------------ --------------
PRINT NAME AND TITLE 12/15/99 PRINT NAME AND TITLE
ANDREW CHMYZ, CONTROLLER DATE DATE
- --------------------------------------------- -------------- ------------------------------------------ --------------
</TABLE>
770384549
FEDERAL EMPLOYEE ID # (or SOCIAL SECURITY NUMBER for SOLE PROPRIETORS)
THIS NUMBER MUST BE PROVIDED ON THE EXECUTED LEASE AGREEMENT
<TABLE>
<CAPTION>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------
PERSONAL AND CONTINUING GUARANTY OF LEASE NO. 005180742-002
- -----------------------------------------------------------------------------------------------------------------------
THIS PERSONAL AND CONTINUING GUARANTY ("GUARANTY") CREATES SPECIFIC LEGAL
OBLIGATIONS. WHEN WE USE THE WORDS YOU AND YOUR IN THIS GUARANTY WE MEAN THE
PERSONAL GUARANTORS INDICATED BELOW. WHEN WE USE THE WORDS WE, US AND OUR IN THE
GUARANTY WE MEAN THE LESSOR INDICATED IN THE LEASE AGREEMENT ABOVE (THE
"LEASE"). IN CONSIDERATION OF OUR ENTERING INTO THE LEASE, YOU UNCONDITIONALLY
AND IRREVOCABLY GUARANTEE TO US, OUR SUCCESSORS AND ASSIGNS, THE PROMPT PAYMENT
AND PERFORMANCE OF ALL OBLIGATIONS OF LESSEE UNDER THE LEASE REGARDLESS OF ANY
CIRCUMSTANCE WHICH MIGHT OTHERWISE BE A DEFENSE AVAILABLE TO, OR A DISCHARGE OF,
LESSEE OR YOU. YOU AGREE THAT THIS A GUARANTY OF PAYMENT AND NOT OF COLLECTION,
AND THAT WE CAN PROCEED DIRECTLY AGAINST YOU WITHOUT FIRST PROCEEDING AGAINST
LESSEE OR THE PRODUCTS. YOU WAIVE ALL DEFENSES AND NOTICES, INCLUDING THOSE OF
PROTEST, PRESENTMENT AND DEMAND, NOTICE OF ACCEPTANCE HEREOF AND ALL OTHER
NOTICES OF ANY KIND. YOU AGREE THAT WE CAN RENEW, EXTEND OR OTHERWISE MODIFY THE
TERMS OF THE LEASE WITHOUT RELEASING YOU. YOU WILL PAY ALL OUR EXPENSES
INCLUDING ATTORNEYS' FEES INCURRED BY US IN ENFORCING OUR RIGHTS AGAINST YOU.
THIS IS A CONTINUING GUARANTY THAT WILL NOT BE DISCHARGED OR AFFECTED BY YOUR
DEATH AND WILL BIND YOUR HEIRS, ADMINISTRATORS AND PERSONAL REPRESENTATIVES. WE
MAY, WITHOUT AFFECTING YOUR LIABILITY HEREUNDER, COMPROMISE OR RELEASE ANY
RIGHTS AGAINST LESSEE OR THE PRODUCTS OR YOU. YOU CONSENT TO THE TRANSFER, SALE
OR ANY OTHER DISPOSITION OF THE PRODUCTS AND THE LEASE. IF MORE THAN ONE PERSON
HAS SIGNED THIS GUARANTY, EACH OF YOU AGREES THAT ITS LIABILITY IS JOINT AND
SEVERAL. THE GUARANTY MAY BE ENFORCED BY ANY ASSIGNEE OR SUCCESSOR OF OURS TO
THE SAME EXTENT AS WE MAY ENFORCE IT. YOU AUTHORIZE US OR ANY OUR AFFILIATES TO
OBTAIN CREDIT BUREAU REPORTS REGARDING YOUR PERSONAL CREDIT AND MAKE OTHER
CREDIT INQUIRES THAT WE DETERMINE ARE NECESSARY. THIS GUARANTY SHALL BE GOVERNED
BY THE INTERNAL LAWS OF ILLINOIS. YOU EXPRESSLY AGREE TO ARBITRATION AS PROVIDED
IN PARAGRAPH 15.
- -----------------------------------------------------------------------------------------------------------------------
Date
--------------
(Date Signed)
--------------------------------------------- ------------------------------------------------------
INDIVIDUAL GUARANTOR NAME (PRINTED) GUARANTOR SOCIAL SECURITY NUMBER
--------------------------------------------- ------------------------------------------------------
By
--------------------------------------------- ------------------------------------------------------
SIGNATURE INDIVIDUAL GUARANTOR (NO TITLE) GUARANTOR HOME ADDRESS (STREET CITY STATE AND ZIP CODE)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
LEASE NO: 005180742-003
[LOGO]
FINANCIAL SERVICES
+
Company No: 05
THIS LEASE HAVE BEEN WRITTEN IN "PLAIN ENGLISH". WHEN WE USE YOU AND YOUR
IN THIS LEASE WE MEAN YOU, THE CUSTOMER WHO IS THE LESSEE INDICATED BELOW.
WHEN WE USE WE, US AND OUR WE MEAN THE LESSOR, DELL FINANCIAL SERVICES LP
<TABLE>
<S><C>
- ---------------------------------------------------------------- ------------ ------------------- ---------------- -----------
FULL LEGAL NAME OF LESSEE LEASE TERM MONTHLY RENT MONTHLY
(MONTHS) PAYMENT^ PERSONAL
PROPERTY MGMT
HOMESTEAD.COM, INC. 24 FEE^
$1,346.13 $18.69
^Subject to ^Subject to
Applicable Applicable Tax
Tax
- ----------------------------------- ---------------------------- -------------------------------------------------------------
DBA NAME (IF ANY) TYPE OF BUSINESS FINANCING TERMS
CORPORATION Product Cost = $28,704.00
Doc. Fee* = $55.00
- ---------------------------------------------------------------
BILLING ADDRESS: STREET, CITY, *A $55.00 Documentation Fee IS included
STATE, ZIP CODE in the Monthly Rent Payment shown above.
3475 EDISON WAY STE H **Charges to ship to you ARE NOT included in the Monthly Rental
MENLO PARK, CA 94025 Payment, and WILL appear as a one time charge on your first
invoice.
- ---------------------------------------------------------------- -------------------------------------------------------------
PRODUCT LOCATION GENERAL PRODUCT DESCRIPTION/SUPPLIER
SEE ATTACHMENT A SEE ATTACHMENT A
- ---------------------------------------------------------------- -------------------------------------------------------------
GUARANTOR (IF ANY) SOCIAL SECURITY NUMBER END OF LEASE PURCHASE OPTION
10% of Equipment Cost
- ---------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS OF LEASE
1. LEASE; ACCEPTANCE AND COMMENCEMENT; TERM; RENT: We agree to lease to you
and you agree to lease from us the products, services, and software (the
"Products") described in Exhibit A to this lease on the terms and conditions
shown in this lease agreement (the "Lease"). With respect to services, we
will only finance one-time charges for services rendered in connection with
the Products. Services may include delivery and installation fees, internet
service plans, or similar services ("Services"). This Lease will begin and
Products will be deemed irrevocably accepted for purposes of this Lease five
(5) days after shipment from the Supplier (the "Commencement Date"). When you
receive the Products, you agree to inspect them promptly and advise us if
they are not in good working order. We honor Dell Computer Corporation's
("Dell") "Total Satisfaction Return Policy". If you return Dell branded
Products within 30 days after shipment from Dell, in the condition and manner
required by Dell, you may terminate the Lease. You are responsible for
freight charges to deliver and return the Products. Complete details
regarding the "Total Satisfaction Return Policy" are included in the
manufacturer's documentation provided to you with the Products. The first
Rent payment is due thirty (30) days after the Commencement Date, and
subsequent payments of Rent are due on the same date of each subsequent month
(or the last day of the month if there is no such date). You agree to pay us
the Rent for the number of months of the Lease Term stated above. You will
make all payments required under this Lease to us at the address we specify
in writing. You authorize us to adjust the Rent amount by not more than 15%
if the actual Product Cost (which is all amounts we have paid or will pay in
connection with the purchase, delivery and installation of the Products,
including any trade-up and buyout amounts, or amounts incurred by us as a
result of changes you make to your order with the Supplier) differs from the
Product Cost shown above. If any payment of Rent or other amount payable to
us is not paid within ten (10) days after the due date, you will pay us a
late charge equal to the greater of (i) 5% of the late payment amount or (ii)
$5.00 for each late payment (or if less, the highest amount permitted by
applicable law).
2. NO WARRANTIES. WE ARE LEASING THE PRODUCTS TO YOU "AS IS". YOU ACKNOWLEDGE
THAT WE DO NOT MANUFACTURE OR SUPPLY THE PRODUCTS. WE DO NOT REPRESENT THE
MANUFACTURER OR SUPPLIER AND YOU HAVE SELECTED THE PRODUCTS AND THE SUPPLIER
BASED ON YOUR OWN JUDGMENT. WE MAKE NO WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE
OF THE PRODUCT OR ANY SERVICES. WE HEREBY ASSIGN ALL WARRANTIES MADE TO USE
BY SUPPLIER, MANUFACTURER, AND ANY SERVICE PROVIDER TO YOU, AND YOU AGREE
THAT YOU WILL MAKE ALL CLAIMS OF ANY KIND RELATING TO THE PRODUCTS OR
SERVICES AGAINST SUCH SUPPLIER, MANUFACTURER, AND/OR SERVICE PROVIDER.
3. SELECTION AND ORDERING OF PRODUCTS: You select the type and quality of the
Products subject to this Lease. If you have entered into a purchase or supply
contract ("Supply Contract") with any Supplier, you assign your rights but
not your obligations (other than the obligation to pay for the Products if
accepted by you under this Lease) effective prior to the passage of title by
the Supplier to you.
4. LOCATION; USE; ALTERATIONS; INSPECTION: You will use the Products solely
at the location specified in the Lease, or if none is specified, at your
billing address. Except for temporary relocation of laptop personal
computers, you may not move the Products without our prior written consent,
which shall not be unreasonably withheld. At your own expense, you will
maintain the Products in good repair, condition and functional order (except
for ordinary wear and tear) and will use them in compliance with all
applicable laws. You will use all software in accordance with the end user
license terms of the applicable software license agreement ("License"). You
may make additions or improvements to the Products unless the addition or
improvement would violate any License, decrease the value of Products, or
impair their utility. You may remove any such addition or improvement at the
end of the Lease if (i) you repair any damage to Products resulting from the
removal; (ii) you restore the Products to their original and functional
condition (excluding ordinary wear and tear); and, (iii) the removal does not
violate any License or render the Products incapable of use or operation. All
additions or improvements not removed will become our property at no cost to
us. You agree that, we, our assignees, and agents, may inspect the Products
at the premises where the Products are located at any reasonable time with
prior notice.
B S D
Page 1 of 3 +
<PAGE>
5. TITLE; QUIET ENJOYMENT; PERSONAL PROPERTY; FILING: We are the owner of and
will hold title to the Products. You will keep the Products free from any and
all liens, encumbrances and claims. So long as you are not in Default under
the Lease, we will not interfere with your quiet use and enjoyment of the
Products during the Lease Term or any renewal term. Unless the Purchase
Option is $1, you agree that this transaction is intended to be a true lease
under UCC Article 2A. However, if this transaction is deemed to be a lease
intended for security under UCC Article 9, you grant us a purchase money
security interest in the Products (including any replacements, substitutions,
additions, attachments and proceeds). You authorize us to file a copy of this
Lease as a UCC-1 financing statement (UCC-1) and hereby appoint us or our
designee as your attorney-in-fact to sign on your behalf and to file UCC-1's
covering the Products. You agree to pay a one-time Documentation Fee to cover
our costs for such filing and other documentation costs.
6. LOSS OR DAMAGE: From the time the Products are delivered to a carrier for
shipment to you until their return to us, you are responsible for any loss,
theft, damage to or destruction of the Products ("Loss") from any cause at
all, whether or not the Loss is covered by insurance. You are required to
make all payments under the Lease even if there is a Loss. You must notify us
immediately if there is any Loss. Then at our option, you will either (a)
repair the Products so they are in good condition and working order to our
satisfaction; or (b) replace the Products with like products in good
condition and repair and of the same manufacture and equal or greater
capacity and capability, with clear title thereto in us; or (c) pay us the
"Stipulated Loss Value" which is the sum of: (i) all Rent payments for all
the Products and other amounts past due (plus interest thereon) or currently
owed to us under the Lease, including unpaid taxes and (ii) all future Rent
payments that would accrue over the remaining Lease Term plus our estimated
value of our residual interest of all of the Products at the end of the Lease
Term, such sum to be discounted to present value at a discount rate equal to
the Federal Reserve Bank Discount Rate in effect at the Commencement Date of
the Lease ("Discount Rate"). When you pay the amount of (c) about to us, we
will transfer to you our interest in the Products, "AS-IS-WHERE-IS", without
any warranty, express or implied, including warranty of merchantability or
fitness for any particular purpose.
7. INSURANCE: You will provide and maintain, at your expense, (a) property
insurance against the loss or theft of or damage to the Products, for their
full replacement value naming us as loss payee and (b) public liability and
third party property damage insurance naming us as an additional insured. All
insurance shall be in a form and amount and with companies satisfactory to us
and will provide that we will be given thirty (30) days written notice before
cancellation or material change of the policy. At our request, you will
deliver the policies or certificates of insurance to us. If you do not give
us evidence of insurance acceptable to use we have the right, but not the
obligation, to obtain such insurance covering our interest in the Products
for the Lease Term. The cost for such insurance will be an additional amount
due from you under the Lease.
8. TAXES: You will pay when due, either directly or to us on demand, all
taxes (local, state and federal), fines or penalties which may now or
hereafter be imposed or levied upon the Lease and the Products, excluding
taxes on our net income. We do not have to contest any taxes, fines or
penalties. We may, at our option, charge you a liquidated monthly personal
property management fee, to be added to Rent payments owed under this Lease.
9. RETURN: Unless the Lease is renewed or you purchase the Products in
accordance with the terms of the Lease, you will immediately deliver the
Products and original operating system software, (including but not limited
to the operating software kit, manuals, cables, power cords, keys, etc.) in
good repair, operable condition and able to qualify for the manufacturer's
warranty service (ordinary wear and tear excepted) to any place in the
continental United States that we direct. You will pay all expenses for
deinstalling, packing and shipping and you will insure the Products for the
full replacement value during shipping. You will immediately pay us on demand
the costs and expenses of all missing or damaged Products (including the
operating software kit).
10. PURCHASE OPTION; AUTOMATIC RENEWAL: If no Default exists under the Lease,
you will have the option at the end of the Lease Term to purchase all (but
not less than all) of the Products for the amount of the Purchase Option
price shown above which, if it is the then fair market value of the Products,
will be as determined by us, plus any applicable taxes. Unless the Purchase
Option price is $1, you must give us written notice at least ninety (90) days
before the end of the Lease Term that you will purchase the Products or that
you will return the Products to us. Unless you purchase the Products or
return the Products to us on the last day of the Lease Term, this Lease will
automatically renew for an additional ninety (90) day term and thereafter on
a continuing month to month basis until you give us thirty (30) days notice
and deliver the Products to us. During such renewal terms, the Rent payment
will remain the same. If the Fair Market Value Purchase Option has been
selected we will use our reasonable judgement to determine the Products' in
place value. If you do not agree with our determination, the fair market
retail value will be determined for you at your expense by an independent
appraiser elected by us. Upon payment of the Purchase Option price in full,
we will transfer our interest in the Products to you "AS-IS-WHERE-IS",
without any warranty whatsoever, and the Lease will terminate.
11. ASSIGNMENT: YOU MAY NOT ASSIGN, SELL, TRANSFER, OR SUBLEASE THE PRODUCTS
OR YOUR INTEREST IN THIS LEASE. We may, without notifying you, sell, assign,
or transfer the Lease and our rights in the Products. You agree that the new
owner will have the same rights and benefits that we have now under this
Lease, but not our obligations. The rights of the new owner will not be
subject to any claim, defense, or setoff that you may have against us.
12. DEFAULT: Each of the following is a default ("Default") under the Lease:
(a) you fail to pay any Rent or any other payment within 10 days of its due
date; (b) you do not perform any of your obligations under the Lease or in
any other agreement with us or with any of our affiliates and this failure
continues for 10 days after we have notified you of it; (c) you become
insolvent, you dissolve or are dissolved, you assign your assets for the
benefit of your creditors or enter voluntarily or involuntarily any
bankruptcy or other reorganization proceeding; (c) you or any Guarantor
provide us incorrect or untrue information regarding any material matter in
connection with your application for credit or entering into this Lease; or
(d) if this Lease has been guaranteed by someone other than you, any
guarantor of the Lease dies, does not perform its obligations under the
Guaranty or becomes subject to one of the events listed in clause (c).
13. REMEDIES: If a Default occurs, we may do one or more of the following:
(a) we may cancel or terminate the Lease or any agreements that we have
entered into with you or withdraw any offer of credit; (b) we may require you
to pay us, as compensation for loss of our bargain and not as a penalty, a
sum equal to (i) the Stipulated Loss Value calculated under clause 6 plus
(ii) all other amounts due and to become due under the Lease; (c) we may
require you to deliver the Products to us as set forth in clause 9; (d) we or
our agent may peacefully repossess the Products without court order and you
will not make any claims against us for trespass, damages or any other reason
and (e) we may exercise any other right at law or in equity. You agree to pay
all of our costs of enforcing our rights against you, including reasonable
attorney's fees. If we take possession of the Products we may sell or
otherwise dispose of the Products, with or without notice at public or
private sale and apply the net proceeds (after we have deducted our costs
related to the sale and disposition) to the amounts that you owe us. You
agree that if notice of a sale is required by law to be given, 10 days notice
will constitute reasonable notice. You will remain responsible for any
amounts that are due after we have applied such net proceeds.
14. INDEMNITY: You are responsible for losses, damages, penalties, claims,
costs (including attorneys' fees and expenses), actions, suits and
proceedings of every kind, (collectively "Claims") whether based on a theory
of strict liability or otherwise caused by or related to this Lease or the
Products, (including any defects in the Products). You will reimburse us for,
and if we request defend us against, any Claims.
15. ARBITRATION: Either party to this Lease may choose to have any dispute,
claim, or controversy arising from or relating to this Lease, any prior
agreement or lease between the parties, any application or advertisement
related to this Lease or the validity of this arbitration clause or the
entire Lease, resolved by binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. If such rules
conflict with this arbitration agreement, however, then the terms of this
arbitration agreement shall control. This arbitration agreement is made
pursuant to a transaction involving interstate commerce, and shall be
governed by the Federal Arbitration Act at 9 U.S.C. Section 1 ET SEQ.
Judgement upon the award rendered may be entered in any court having
jurisdiction. Any arbitration award in excess of $100,000 made pursuant to
this arbitration agreement may be appealed by the party against which the
award is made. Such appeal will be a de novo arbitration proceeding before
three arbitrators. The parties agree and understand that they may choose
arbitration instead of litigation to resolve disputes. The parties under that
that they have a right opportunity to litigate disputes in court, but may
elect to resolve their disputes through arbitration as provided herein. The
parties agree and understand that all disputes arising under case law,
statutory law, and all other laws including, but not limited to, all
contract, tort, and property disputes, may be subject to binding arbitration
in accord with this Lease. No class action or request for relief may be
brought under this arbitration agreement. You agree that you shall not have
the right to participate in arbitration or in court proceedings as a
representative or a member of any class of claimants pertaining to any claim
arising from or relating to this Lease. The parties agree and understand that
the arbitrator shall have all powers provided by law and this Lease, except
for powers limited or prohibited by this Lease. Notwithstanding anything
herein to the contrary, we retain an option to use judicial or non-judicial
relief to recover the Products or to enforce our security interest in the
Products, to enforce the monetary obligation secured by the Products or to
foreclose on the Products. Such judicial relief would take the form of a
lawsuit. The institution and maintenance of any action for judicial relief in
a court to foreclose upon any Products, to obtain a monetary judgment or to
enforce this Lease, shall not constitute a waiver of the right of any party
to compel arbitration regarding any other dispute or remedy subject to
arbitration in this Lease, including the filing of a counterclaim in a suit
brought by us pursuant to this provision. YOU UNDERSTAND AND AGREE THAT IN
ARBITRATION: YOU GIVE UP RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY
Page 2 of 3
<PAGE>
TRIAL; YOUR ABILITY TO COMPEL OTHER PARTIES TO PRODUCE DOCUMENTS OR BE
EXAMINED IS MORE LIMITED THAN IN A LAWSUIT; AND, YOUR RIGHTS TO APPEAL OR
CHANGE ANY ARBITRATION AWARD IN ANY COURT ARE STRICTLY LIMITED.
16. FINANCE LEASE: You agree that if Article 2A of the Uniform Commercial
Code applies to this Lease, this Lease will be considered a "finance lease"
as defined by Article 2A and by signing this Lease you acknowledge that
either (1) you have received, reviewed and approved the supply contract with
the Supplier or (2) we have informed you of the identity of the Supplier,
that you may have rights and warranties under the supply contracts for the
Products and you may contact the Supplier of the Products for a description
of those rights and warranties. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
YOU HEREBY WAIVE ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY
ARTICLE 2A.
17. MISCELLANEOUS: You agree that the terms and conditions of this Lease make
up the entire agreement between you and us regarding the lease of the
Products. Any change in the terms and conditions of the Lease must be in
writing and signed by us. You agree however, that we are authorized, without
notice to you, to supply missing information or correct obvious errors in
this Lease. All of our rights and remedies will survive termination of this
Lease. All notices under this Lease will be given in writing and will be
considered given when deposited in the U.S. mail, postage prepaid, addressed
to the respective address given below or to a substitute address specified in
writing by one of us to the other. Any failure of ours to require strict
performance by you or any waiver by us of any provision in this Lease will
not be construed as a consent or waiver of any other breach of the same or
any provision. If any portion of this Lease is deemed invalid, it will not
affect the balance of this Lease. It is the express intent of both of us not
to violate any usury laws or to exceed the maximum amount of time price
differential, or interest as applicable permitted to be charged, or collected
under applicable law and any such excess payment will be applied to payments
under the Lease in inverse order of maturity and the remaining payments will
be refunded to you. If a signed copy of this Lease is delivered to us by
facsimile transmission, it will be binding on you, however, we will not be
bound by this Lease until we accept it by manually or electronically signing
it or by purchasing the Products, whichever occurs fist. You waive notice of
our acceptance and waive your right to receive a copy of the accepted Lease.
You agree that, notwithstanding any rule of evidence to the contrary, in any
hearing, trial or proceeding of any kind with respect to this Lease, we may
produce a copy of the Lease transmitted to us by facsimile transmission that
has been manually signed by us and such signed copy shall be deemed to be the
original of this Lease. To the extent (if any) that this Lease constitutes
chattel paper under the Uniform Commercial Code, no security interest in this
Lease may be created through the transfer and possession of any copy or
counterpart hereof except the copy with our original signature. If you
deliver this Lease to us by facsimile transmission, you acknowledge that we
are relying on your representation that this Lease has not been changed.
BY SIGNING THIS LEASE: (a) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND
THE TERMS AND CONDITIONS OF THIS LEASE; (b) YOU AGREE THAT THIS LEASE IS A
NET LEASE AND YOU CANNOT TERMINATE OR CANCEL AND UPON ACCEPTANCE OF THE
PRODUCTS YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL PAYMENTS UNDER THIS
LEASE AND YOU CANNOT WITHHOLD, SETOFF OR REDUCE SUCH PAYMENTS FOR ANY REASON;
(c) YOU AGREE THAT THE PRODUCTS WILL RE USED FOR BUSINESS PURPOSES ONLY AND
NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES; (d) YOU CONFIRM THAT THE
PERSON SIGNING THIS LEASE FOR YOU HAS THE AUTHORITY TO DO SO AND TO GRANT THE
POWER OF ATTORNEY IN SECTION 5; (e) YOU AGREE THAT THIS LEASE WILL BE
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS AND YOU CONSENT TO THE
JURISDICTION OF ANY COURT LOCATED WITHIN THAT STATE AND YOU EXPRESSLY WAIVE
THE RIGHT TO A TRIAL BY JURY AND (f) YOU CONFIRM THAT THE INFORMATION IN ANY
APPLICATION, STATEMENT, TRADE REFERENCE OR FINANCIAL REPORT SUBMITTED TO US
IS TRUE AND CORRECT AND YOU UNDERSTAND THAT ANY MATERIAL MISREPRESENTATION
SHALL CONSTITUTE A DEFAULT UNDER THE LEASE.
<TABLE>
<S><C>
- ------------------------------------------------------------ ---------------------------------------------------------
LESSEE: LESSOR:
HOMESTEAD.COM, INC. Dell Financial Services L.P. (800) 955-3355
P.O. Box 99200 FAX (512) 671-814
840 S Canal Street 3rd Floor
Chicago, IL 60693
- ------------------------------------------------------------ ---------------------------------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ ANDREW CHMYZ
- --------------------------------------------- -------------- ------------------------------------------ --------------
PRINT NAME AND TITLE 1/11/2000 PRINT NAME AND TITLE
ANDREW CHMYZ, CONTROLLER DATE DATE
- --------------------------------------------- -------------- ------------------------------------------ --------------
770384549
FEDERAL EMPLOYEE ID # (or SOCIAL SECURITY NUMBER for SOLE PROPRIETORS)
THIS NUMBER MUST BE PROVIDED ON THE EXECUTED LEASE AGREEMENT
- -----------------------------------------------------------------------------------------------------------------------
PERSONAL AND CONTINUING GUARANTY OF LEASE NO. 005180742-003
- -----------------------------------------------------------------------------------------------------------------------
THIS PERSONAL AND CONTINUING GUARANTY ("GUARANTY") CREATES SPECIFIC LEGAL
OBLIGATIONS. WHEN WE USE THE WORDS YOU AND YOUR IN THIS GUARANTY WE MEAN THE
PERSONAL GUARANTORS INDICATED BELOW. WHEN WE USE THE WORDS WE, US AND OUR IN THE
GUARANTY WE MEAN THE LESSOR INDICATED IN THE LEASE AGREEMENT ABOVE (THE
"LEASE"). IN CONSIDERATION OF OUR ENTERING INTO THE LEASE, YOU UNCONDITIONALLY
AND IRREVOCABLY GUARANTEE TO US, OUR SUCCESSORS AND ASSIGNS, THE PROMPT PAYMENT
AND PERFORMANCE OF ALL OBLIGATIONS OF LESSEE UNDER THE LEASE REGARDLESS OF ANY
CIRCUMSTANCE WHICH MIGHT OTHERWISE BE A DEFENSE AVAILABLE TO, OR A DISCHARGE OF,
LESSEE OR YOU. YOU AGREE THAT THIS A GUARANTY OF PAYMENT AND NOT OF COLLECTION,
AND THAT WE CAN PROCEED DIRECTLY AGAINST YOU WITHOUT FIRST PROCEEDING AGAINST
LESSEE OR THE PRODUCTS. YOU WAIVE ALL DEFENSES AND NOTICES, INCLUDING THOSE OF
PROTEST, PRESENTMENT AND DEMAND, NOTICE OF ACCEPTANCE HEREOF AND ALL OTHER
NOTICES OF ANY KIND. YOU AGREE THAT WE CAN RENEW, EXTEND OR OTHERWISE MODIFY THE
TERMS OF THE LEASE WITHOUT RELEASING YOU. YOU WILL PAY ALL OUR EXPENSES
INCLUDING ATTORNEYS' FEES INCURRED BY US IN ENFORCING OUR RIGHTS AGAINST YOU.
THIS IS A CONTINUING GUARANTY THAT WILL NOT BE DISCHARGED OR AFFECTED BY YOUR
DEATH AND WILL BIND YOUR HEIRS, ADMINISTRATORS AND PERSONAL REPRESENTATIVES. WE
MAY, WITHOUT AFFECTING YOUR LIABILITY HEREUNDER, COMPROMISE OR RELEASE ANY
RIGHTS AGAINST LESSEE OR THE PRODUCTS OR YOU. YOU CONSENT TO THE TRANSFER, SALE
OR ANY OTHER DISPOSITION OF THE PRODUCTS AND THE LEASE. IF MORE THAN ONE PERSON
HAS SIGNED THIS GUARANTY, EACH OF YOU AGREES THAT ITS LIABILITY IS JOINT AND
SEVERAL. THE GUARANTY MAY BE ENFORCED BY ANY ASSIGNEE OR SUCCESSOR OF OURS TO
THE SAME EXTENT AS WE MAY ENFORCE IT. YOU AUTHORIZE US OR ANY OUR AFFILIATES TO
OBTAIN CREDIT BUREAU REPORTS REGARDING YOUR PERSONAL CREDIT AND MAKE OTHER
CREDIT INQUIRES THAT WE DETERMINE ARE NECESSARY. THIS GUARANTY SHALL BE GOVERNED
BY THE INTERNAL LAWS OF ILLINOIS. YOU EXPRESSLY AGREE TO ARBITRATION AS PROVIDED
IN PARAGRAPH 15.
- -----------------------------------------------------------------------------------------------------------------------
Date
--------------
(Date Signed)
--------------------------------------------- ------------------------------------------------------
INDIVIDUAL GUARANTOR NAME (PRINTED) GUARANTOR SOCIAL SECURITY NUMBER
----------------------------------------------------------------------------------------------------
--------------------------------------------- ------------------------------------------------------
By
--------------------------------------------- ------------------------------------------------------
SIGNATURE INDIVIDUAL GUARANTOR (NO TITLE) GUARANTOR HOME ADDRESS (STREET CITY STATE AND ZIP CODE)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE>
ORIGINAL
EMC CORPORATION No. 12065
----------
EMC(2)
MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT (hereinafter called the "Master Agreement") is
entered into by and between EMC Corporation, a Massachusetts corporation
(hereinafter called "Lessor"), having its principal place of business at 171
South Street, Hopkinton, MA 01748, and _____HOMESTEAD.COM INC._____ (hereinafter
called "Lessee"), having a principal place of business at _____3475H EDISON WAY,
MENLO PARK, CALIFORNIA 94025_____.
I. THE LEASE
1.1 LEASE OF EQUIPMENT. In accordance with the terms and conditions of this
Master Agreement, Lessor agrees to lease to Lessee, and Lessee agrees to
lease from Lessor, the units of personal property (hereinafter
individually called a "Unit" and collectively called "Equipment")
described in supplement(s) which are executed pursuant to and incorporate
the terms of this Master Agreement (each hereinafter, a "Supplement").
Each Supplement shall constitute a separate, distinct, and independent
lease and contractual obligation of Lessee. The term "Lease" as used
hereinafter shall refer to an individual Supplement which incorporates
the terms of this Master Agreement. Lessor or its assignee shall retain
the full legal title to the Equipment, it being expressly agreed by both
parties that this Master Agreement and each Lease shall constitute an
agreement of lease only. Each Lease shall be binding upon Lessor and
Lessee from the date of acceptance and execution of the applicable
Supplement, by Lessor at its headquarters.
1.2 TERM OF LEASE. The original term of lease for each Unit (hereinafter the
"Original Term") shall commence on the date specified in the applicable
Supplement and, subject to Section 2.5 below, shall terminate as
specified in such Supplement. No Lease may be canceled by Lessee for any
reason whatsoever.
1.3 DISCLAIMERS; WARRANTIES. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR MAKES
NO EXPRESS OR IMPLIED WARRANTIES ARISING OUT OF OR RELATED TO LESSEE'S
USE OR OPERATION OF THE EQUIPMENT. LESSOR EXPRESSLY DISCLAIMS THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE FOR
THE EQUIPMENT OR OTHER PRODUCTS, DOCUMENTATION AND SERVICES PROVIDED
HEREIN. IN NO EVENT SHALL LESSOR BE LIABILE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR ASSOCIATED WITH THE
EQUIPMENT OR THE LEASE THEREOF EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
1.4 RENTAL PAYMENTS. Lessee shall pay rental to Lessor for the Unit(s) in the
amounts and on the dates specified in the applicable Supplement. If any
rental or other amount due
<PAGE>
hereunder is not paid within five (5) days of the due date thereof,
Lessee shall pay to Lessor on demand, as additional rental, interest
thereon from the due date until payment at a rate equal to the lesser of
(i) eighteen (18%) per annum, or (ii) the maximum rate permitted by law.
All rental and other amounts payable by Lessee to Lessor hereunder shall
be paid to Lessor at the address specified above, or at such other place
as Lessor may designate in writing to Lessee. Time is of the essence with
respect to all of Lessee's obligations under any Lease.
1.5 RETURN OF EQUIPMENT. Upon expiration of the Original Term, Lessee will
immediately return the Equipment to Lessor as provided in Section 2.3
below. Should Lessee not return the Equipment at the end of the Original
Term, the Equipment shall continue to be held and leased hereunder, and
the Lease shall thereupon be extended for successive three (3) month
terms, at the same monthly rental, subject to the right of either Lessee
or the Lessor to terminate the Lease upon ninety (90) days written
notice, whereupon the Lessee shall forthwith deliver the Equipment to the
Lessor. If Lessee fails to return the Equipment upon demand therefor by
Lessor, Lessee shall pay Lessor, as the reasonable measure of Lessor's
damages, the value, at replacement cost, of the Equipment so converted.
II. COVENANTS OF LESSEE
2.1 PAYMENT OF RENTAL AND OTHER MONIES. Each lease is a net lease and Lessee
acknowledges and agrees that Lessee's obligation to pay all rental and
other sums payable hereunder, and the rights of Lessor in and to such
payments, shall be absolute and unconditional and shall not be subject to
any abatement, reduction, setoff, counterclaim or other defense for any
reason whatsoever. It being the intent of Lessor, and an inducement to
Lessor, to enter into the Lease, to claim all available tax benefits of
ownership with respect to the Equipment, Lessee acknowledges and agrees
that (i) no right, title or interest in the Equipment has been or is
intended to be passed to Lessee, other than the right to maintain
possession and use of the Equipment for the Original Term, conditioned on
Lessee's performance of the terms and conditions of the Lease, (ii)
Lessee has not taken and will not at any time during the Original Term
take any action which shall cause Lessor to lose any tax benefits of
ownership, and (iii) the Stipulated Loss Values (defined in the
applicable Lease) agreed to under this Lease are intended to provide
recovery by Lessor of such lost tax benefits of ownership.
2.1.1 ACCEPTANCE OF EQUIPMENT. Lessee's acceptance of the Equipment shall be
conclusively and irrevocably evidenced by Lessee executing the
Certificate of Delivery and Acceptance and upon acceptance the Lease of
such Equipment shall be noncancellable for the Original Term unless
otherwise agreed to in writing by Lessor.
2.2 USE OF EQUIPMENT. Lessee shall use the Equipment solely in the conduct of
its business, in a manner and for the use contemplated by the
manufacturer thereof, and in compliance with all laws, rules and
regulations of every governmental authority having jurisdiction over the
Equipment and with the provisions of all policies of insurance carried by
Lessee pursuant to Section 2.6 below; provided, however, Lessee shall
have the right to allow third parties, under Lessee's supervision, to use
the Equipment, so long as Lessee shall
<PAGE>
retain uninterrupted possession and control of the Equipment. Lessee
shall pay all costs, expenses, fees and charges incurred in connection
with the use and operation of the Equipment.
2.3 DELIVERY, INSTALLATION, MAINTENANCE AND REPAIR. Lessee shall be solely
responsible, at its own expense, for the delivery of the Equipment to
Lessee, the packing, rigging and delivery of the Equipment back to Lessor
upon expiration of the Original Term in good repair, condition, and
working order, ordinary wear and tear excepted, at the location(s) within
the continental United States specified by Lessor. Lessee is also solely
responsible for the installation, de-installation, maintenance and repair
of the Equipment. Lessee shall, at its expense, (a) keep the Equipment in
good repair, condition and working order, ordinary wear and tear
excepted, and (b) at the expiration of the Original Term or any renewal
term have the Equipment inspected and certified as acceptable for
maintenance service by the manufacturer. Lessor shall be entitled to
inspect the Equipment at Lessee's location at reasonable times.
2.4 TAXES. Lessee agrees to pay, and to indemnify and hold Lessor harmless
from, all license fees, assessments, and sales, use, property, excise and
other taxes and charges ("Imposts") (other than those measured by
Lessor's net income) now or hereafter imposed by any governmental body or
agency upon or with respect to (a) the Equipment or the possession,
ownership, use or operation thereof or (b) this Master Agreement, any
Lease, or the consummation of the transactions herein contemplated. All
required personal property tax returns relating to the Equipment shall be
filed by Lessee unless otherwise provided in writing. Lessee shall
reimburse Lessor promptly upon demand for the amount of any Imposts
remitted by Lessor which are required hereunder to be borne by Lessee.
2.5 LOSS OF EQUIPMENT. Lessee shall bear the entire risk of the Equipment
being lost, destroyed or otherwise rendered permanently unfit or
unavailable for use from any cause whatsoever (hereinafter called an
"Event of Loss") after its delivery to Lessee. If an Event of Loss shall
occur with respect to any Unit, Lessee shall promptly and fully notify
Lessor thereof. On the rental payment date following such notice Lessee
shall pay to Lessor an amount equal to the rental payment or payments due
and payable for such Unit on such date plus a sum equal to the Stipulated
Loss Value (as defined in the applicable Supplement) of such Unit as of
the date of such payment set forth in such Supplement. Upon the making of
such payment by Lessee regarding any Unit, the rental obligation for such
Unit shall cease, the Lease as to such Unit shall terminate and (except
in the case of loss, theft or complete destruction) Lessor shall be
entitled to recover possession of such Unit at Lessee's expense in
accordance with the provisions of Section 2.3 above. Provided that Lessor
has received the Stipulated Loss Value for any Unit, Lessee shall be
entitled to the proceeds of any recovery in respect of such Unit from
insurance or otherwise.
2.6 INSURANCE. Lessee shall obtain and maintain for the entire term of the
Lease, at its own expense, property damage and liability insurance and
insurance against loss or damage to the Equipment including, without
limitation, loss by fire (including so-called extended coverage), theft
and such other risks of loss as are required on the type of Equipment
<PAGE>
leased hereunder and by businesses in which Lessee is engaged in such
amounts in such form and with such insurers as shall be satisfactory to
Lessor, provided however, that such insurance for loss or damage of any
Unit shall always be at a minimum, the amount of the Stipulated Loss
Value of such Unit. Each insurance policy will name Lessee as insured and
Lessor as an additional insured and loss payee thereof as Lessor's
interests may appear and shall provide that it may not be canceled or
altered without at least 30 days prior written notice to Lessor or its
successors and assigns. Lessee shall provide to Lessor a certificate of
insurance as evidence of insurance coverage prior to delivery of any
Unit.
2.7 INDEMNITY. Lessee shall and does hereby indemnify Lessor and its
successors and assigns against, and hold Lessor and its successors and
assigns harmless from, any and all claims, demands, actions and suits,
proceedings, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, hereinafter ("Claims"), arising out of,
connected with or resulting from this Master Agreement, any Lease, or the
Equipment, including, without limitation, the selection, ownership,
control, maintenance, lease, purchase, delivery, possession, condition,
use, operation, or return of the Equipment. Lessee shall give Lessor
immediate notice of any Claim and Lessee shall satisfy, pay and discharge
any and all judgments and fines that may be recovered against Lessor in
connection with any such Claim. Lessor shall give Lessee written notice
of any such Claim of which Lessor has knowledge.
2.8 POSSESSION; ASSIGNMENT, PLEDGE. Without the prior written consent of
Lessor, which such consent as it pertains to subsections (a) and (d),
shall not be unreasonably withheld or delayed, Lessee shall not (a)
sublease the Equipment, or any part thereof, provided, that Lessee may,
without the prior written consent of Lessor, permit any parent or
subsidiary of Lessee to use the Equipment, or any part thereof, in the
ordinary course of its business, (b) assign, this Master Agreement or any
Lease or its interest hereunder or thereafter, (c) create or incur any
lien or encumbrance with respect to the Equipment, or any part thereof,
(d) move the Equipment, or any part thereof, or permit any of the
Equipment to be moved from the location at which it is first installed,
or (e) permit the Equipment, or any part thereof, to be removed outside
the continental limits of the United States.
2.9 IDENTIFICATION. At any time during the term of a Lease, Lessor may
require Lessee to legibly mark each Unit subject to such Lease in a
reasonably prominent location with a label, disc or other marking stating
that the Equipment is owned by Lessor.
2.10 ALTERATIONS OR MODIFICATIONS. Lessee shall not make any alterations of or
additions to the Equipment without the prior written consent of Lessor.
At any time during the Original Term, of any Lease there may be added to
such Lease additional Units of the same type as are rented thereunder for
a term equal to the remaining Original Term and, subject to the terms and
conditions hereof, at the rental rates applicable to such Equipment and
team in effect at the time the order is placed, provided that the order
is in writing and accepted by Lessor. Such acceptance shall be at the
sole discretion of Lessor. All additions, attachments or accessories to
or improvements of the Equipment shall immediately belong to and become
property of the Lessor unless, at the request of Lessor,
<PAGE>
such additions, attachments or accessories to or improvements of the
Equipment are removed prior to the return of said Equipment by Lessee.
Lessee shall be responsible for the costs of such removal and shall
restore the Equipment to the same operating condition as when it became
subject to the Lease.
2.11 EQUIPMENT TO BE PERSONAL PROPERTY. Lessee agrees that the Equipment shall
be and remain personal property notwithstanding the manner in which it
may be attached or affixed to realty, and Lessee shall do all acts and
enter into all agreements necessary to ensure that the Equipment remains
personal property.
2.12 FINANCIAL STATEMENTS. Lessee shall promptly furnish, or cause to be
furnished, to Lessor such financial or other statements respecting the
condition and operations of Lessee or respecting the Equipment as Lessor
may from time to time reasonably request.
2.13 LESSEE REPRESENTATIONS. Lessee hereby represents, warrants and covenants
that with respect to this Master Agreement and each Lease entered into
hereunder:
(A) The execution, delivery and performance thereof by the Lessee have
been duly authorized by all necessary corporate action;
(B) The individual executing such was duly authorized to do so;
(C) This Master Agreement and each Lease constitute the legal, valid
and binding obligations of the Lessee enforceable in accordance
with their respective terms.
III. DEFAULT AND REMEDIES
3.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder: (a) Lessee shall fail to pay on
the due date any rental or other payment due under any lease, (b) any
provision of this Master Agreement or any Lease or any provision in any
document provided by Lessee for this Master Agreement or any Lease, or in
any document furnished pursuant to the provisions hereof or otherwise,
shall prove to have been false or misleading in any material respect as
of the date when it was made, (c) Lessee shall fail to perform any
provision, covenant, condition or agreement made by it under this Master
Agreement or Lease, and such failure shall continue for ten (10) days
after notice thereof from Lessor to Lessee or (d) bankruptcy,
receivership, insolvency, reorganization, dissolution, liquidation, or
other similar proceedings shall be instituted by or against Lessee or all
or any part of its property under the Federal Bankruptcy Code or other
law of the United States or of any state law, and if against Lessee it
shall consent thereto or shall fail to cause the same to be discharged
within twenty (20) days, or (e) Lessee shall default under my agreement
with respect to the purchase or installation of the Equipment, or (f) if
Lessee or any guarantor of Lessee's obligations hereunder shall default
under any other agreement with Lessor.
3.2 REMEDIES. If an Event of Default hereunder shall occur and be continuing,
Lessor may exercise any one or more of the following remedies: (a)
immediately terminate this Master Agreement and any or all Leases and
Lessee's rights hereunder and thereunder, (b) proceed, by appropriate
court action or actions either at law or in equity, to enforce
<PAGE>
performance by Lessee of the applicable covenants of the Lease or to
recover damages for the breach thereof, (c) by notice in writing to
Lessee, recover all amounts due on or before the date of the event of
default, plus, as liquidated damages for loss of a bargain and not as a
penalty, accelerate, and declare to be immediately due and payable all
rentals and other sums payable trader any or all such Leases, without any
presentment, demand, protest or further notice (all of which hereby are
expressly waived by Lessee), whereupon the same shall be and become
immediately due and payable, and (d) personally, or by its agents take
immediate possession of the Equipment, or any part thereof, from Lessee
and for such purpose, enter upon Lessee's premises where any of the
Equipment is located with or without notice or process of law and free
from all claims by Lessee. The exercise of any of the foregoing remedies
by Lessor shall not constitute a termination of any Lease unless Lessor
so notifies Lessee in writing.
3.3 DISPOSITION OF EQUIPMENT. In the event Lessor repossesses Equipment,
Lessor may (a) lease the Equipment, or any portion thereof, in such a
manner, for such time and upon such term(s) as Lessor may determine or
(b) sell the Equipment, or any portion thereof, at one or more public or
private sales, in such manner, and at such times and upon such terms as
Lessor may determine. In the event that Lessor leases any such Units, any
rentals received by Lessor for the Remaining Lease Term(s) (the period
ending on the date when the Original Term for the Unit(s) would have
expired if an Event of Default had not occurred) for such Units shall be
applied to the payment of (i) all costs and expenses (including
attorneys' fees) incurred by Lessor in retaking possession of, and
removing, storing, repairing, refurbishing and leasing such Units, and
(ii) the rentals for the remainder of the Original Term and all other
sums, including past due rentals, remaining unpaid under the Lease. The
balance of such rentals, if any, shall be applied first to reimburse
Lessee for any amounts previously paid by Lessee as liquidated damages,
and any remaining amounts shall be retained by Lessor. All rentals
received by Lessor for the period commencing after the expiration of the
Remaining Lease Term(s) shall be retained by Lessor. Lessee shall remain
liable to Lessor to the extent that the aggregate amount of the sums
referred to in clauses (i) and (ii) above shall exceed the aggregate
rentals received by Lessor under such leases for the respective Remaining
Lease Term(s) applicable to the Units covered by such leases. In the
event that Lessor shall sell or otherwise dispose of (other than pursuant
to a lease) any such Unit, the proceeds thereof shall be applied to the
payment of (i) all costs and expenses (including reasonable attorneys'
fees) incurred by Lessor in retaking possession of, and removing,
storing, repairing, refurbishing and selling or otherwise disposing of
such Unit(s), (ii) the rentals that either did or would have accrued
under the Lease but are unpaid up to the time of such sale or other
disposition, (iii) any and all other sums (other than rentals) then owing
to Lessor by Lessee under, and (iv) the Stipulated Loss Value of such
Unit(s) determined as of the date of such sales or other disposition in
accordance with the schedule set forth in the Lease for such Unit(s). The
balance of such proceeds, if any, shall be applied first to reimburse
Lessee for any sums previously paid by Lessee as liquidated damages, and
any remaining amount shall be retained by Lessor. Lessee shall remain
liable to Lessor to the extent that the aggregate amount of the sums
referred to in clauses (i) through (iv) above shall exceed the aggregate
proceeds received by Lessor in connection with the sale or disposition of
the Equipment (other than pursuant to a lease).
<PAGE>
IV. MISCELLANEOUS
4.1 PERFORMANCE OF LESSEE'S OBLIGATIONS. Upon Lessee's failure to pay any sum
or perform any obligation hereunder when due, Lessor shall have the
option, but shall in no case be obligated, to pay such sum or perform
such obligation, whereupon such sum or the cost of such performance shall
immediately become due and payable as additional rent from Lessee to
Lessor with interest at the highest legal rate from the date payment or
performance was due.
4.2 ASSIGNMENT. No right, obligation or interest of Lessee with respect to
this Master Agreement, any Lease or Equipment shall, without the prior
written consent of Lessor, be assignable by Lessee or by operation of
law, and any such purported assignment, transfer or succession shall be
null and void. Lessor may, at anytime, without the consent of Lessee,
assign the Master Agreement and any Lease or any interest herein or
therein to any party. In the event of any assignment of Lessor, the
assignee shall have all of Lessor's rights hereunder, but none of its
obligations, and upon receipt by Lessee of written notice of any such
assignment, Lessee shall make all payments thereafter becoming due under
any assigned Lease to such assignee without regard to any set-off,
defense or counter claim that Lessee may have against Lessor.
4.3 QUIET ENJOYMENT. So long as Lessee shall not be in default hereunder and
Lessor continues to receive all rent and other sums payable by Levee
hereunder in accordance with the terms hereof, neither Lessor nor its
assignee, shall interfere with Lessee's right of quiet enjoyment and use
of the Equipment.
4.4 FURTHER ASSURANCES. Lessee agrees that at any time, and from time to
time, after the execution and delivery of this Lease, it shall, upon the
request of Lessor, execute and deliver such further documents and do such
further acts and things as Lessor may reasonably request in order fully
to effect the purposes of this Lease including without limitation, the
filing of financial and confirmation statements. Lessee authorizes Lessor
to file a financing statement signed or any confirmation statements
signed only by Lessor in accordance with the Uniform Commercial Code or
signed by Lessor as Lessee's attorney in fact.
4.5 RIGHTS, REMEDIES, POWERS. Each and every right, remedy and power granted
to Lessor hereunder shall be cumulative and in addition to any other
right, remedy or power herein specifically granted or now or hereafter
existing in equity, at law, by virtue of statute or otherwise, and may be
exercised by Lessor from time to time concurrently or independently and
as often and in such order as Lessor may deem expedient. And any failure
or delay on the part of Lessor in exercising any such right, remedy or
power, or abandonment or discontinuance of steps to enforce the same,
shall not operate as a waiver thereof or affect Lessor's right thereafter
to exercise the same, and any single or partial exercise of any such
right, remedy or power shall not preclude any other or further exercise
thereof or the exercise of any other right, remedy or power.
4.6 NOTICES. Any notice request, demand, consent, approval or other
communication provided or permitted hereunder shall be in writing and
shall be conclusively deemed to
<PAGE>
have been received by a party hereto on the day it is delivered to such
party at its address set forth above (or at such other address as such
party shall specify to the other party in writing), or if sent by
registered or certified mail, return receipt requested, on the third
business day after the day on which totaled, addressed to such party at
such address.
4.7 SECTION HEADINGS. Section headings are inserted for convenience only and
shall not affect any construction or interpretation of any Lease.
4.8 BINDING EFFECT. Each Lease, subject to the provisions of Sections 2.8 and
4.3 hereof, shall be binding upon and shall inure to the benefit of the
respective successors and assigns of the Lessee and Lessor.
4.9 GOVERNING LAW. Each Lease shall be governed in all respects by the laws
of the Commonwealth of Massachusetts.
4.10 ENTIRE LEASE. Each lease, consisting of the terms and conditions of this
Master Agreement, a Supplement, and any Amendments, Schedules or Riders
to other of them, constitutes the entire agreement between Lessor and
Lessee. No waiver, consent, modification or change of terms of this Lease
shall bind either party unless in writing signed by both parties, and
then such waiver, consent, modification or change shall be effective only
in the specific instance and for the specific purpose given. There are no
understanding, agreements, representations or warranties, express or
implied, not specified therein regarding any Lease or the Equipment
leased thereunder. Any terms and conditions of any purchase order or
other document (with the exception of Supplements) submitted by Lessee in
connection with any Lease which are in addition to or inconsistent with
the terms and conditions of such Lease will not be binding on Lessor and
will not apply to the Lease. LESSEE BY THE SIGNATURE BELOW OF ITS
AUTHORIZED REPRESENTATIVE ACKNOWLEDGES THAT IT HAS READ THIS MASTER
AGREEMENT, UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS TERMS AND
CONDITIONS WITH RESPECT TO ANY LEASE ENTERED INTO HEREUNDER.
LEASE ACCEPTED BY:
EMC CORPORATION, (Lessor) Homestead.com Inc. (Lessee)
BY: BY:
------------------------------ --------------------------------
TITLE: TITLE: Justin Kitch / CEO
------------------------------ --------------------------------
<PAGE>
EMC CORPORATION Supplement No. 1
MASTER LEASE AGREEMENT SUPPLEMENT
This Supplement to Master Lease Agreement Number 12065 (hereinafter called the
"Master Agreement") between Lessor and the Lessee whose name appears below,
together with the Master Agreement, constitutes a lease of the Equipment
described below (hereinafter, collectively, this "Lease"). All the terms and
conditions of the Master Agreement apply to this Lease with the same force and
effect as if all said terms and conditions were fully set forth hereto and said
terms and conditions are incorporated herein and made part hereof by reference.
All capitalized terms not defined in this Supplement shall have the meanings
given such terms in the Master Agreement. It is the intent of the parties that
this Supplement be separately enforceable as a complete and independent lease,
independent of all other Supplements to the Lease.
EQUIPMENT DESCRIPTION:
<TABLE>
<CAPTION>
Original
Item Qty. Equipment Monthly Rent Term (Mos.) Equipment Cost
---- --- --------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
1. 1 Symmetrix 3930-36 $46,227.00 36 $1,350,192.00
2. 16 3030-36M2 Included Included
3. 16 3030-362 Included Included
4. 1 MEM2-8192 Included Included
5. 4 DP2-USD4SW Included Included
6. 4 C19M-68S Included Included
7. 1 SYMMGR-PKG Included Included
8. 1 SYMOPT Included Included
9. 1 TF-OPEN Included Included
10. 1 Celerra CFS-14 Included Included
11. 6 CDM6-E4-G Included Included
12. 1 CCS5-E Included Included
13. 11 C6MINI68S Included Included
14. 2 CFS-CS-LIC Included Included
15. 6 CFS-ENT-LIC Included Included
16. 1 CFS-ENT-DCD Included Included
17. 1 CFS-INST-DOM Included Included
</TABLE>
* Fair Market Value not to exceed 38% of original Equipment Cost at Lease end.
Equipment Location: ABOVENET. 50 WEST SAN FERNANDO STREET, SUITE 1010, SAN JOSE,
CA 95113
MONTHLY RENT: The first payment of monthly rent is due and payable on the
Commencement Date. Subsequent payments of monthly rent are due and payable on
the same date of each succeeding month. The Lease Term for each Unit will
automatically extend for successive three (3) month periods after the expiration
of the original term in accordance with all the terms and conditions of this
Lease including the same monthly rent, until either party shall give the other
<PAGE>
party at least ninety (90) days prior notice of its intent to extend or renew
this Supplement.
SUPPLEMENT ACCEPTED BY:
EMC CORPORATION (Lessor) Homestead.com Inc. (Lessee)
By: By:
---------------------------------- --------------------------------
(Authorized Signature) (Authorized Signature)
Justin Kitch / CEO
---------------------------------- --------------------------------
(Name/Title) (Name/Title)
12/22/99
---------------------------------- --------------------------------
(Date) (Date)
(Continued on reverse)
COMMENCEMENT DATE: The Commencement Date shall be the first day of the month
following the day on which all of the equipment listed above is installed and is
accepted by Lessee, unless the acceptance date is the first day of the month in
which case first day of that month shall be the Commencement Date.
INTERIM RENT: Lessee shall pay interim rental at a rate of 1/30th of the monthly
rent per day from and including the Acceptance Date the Commencement Date.
Payments of interim rent are due and payable upon Lessee's receipt of invoice
from Lessor.
CHATTEL PAPER: To the extent this Lease may be considered "chattel paper" as
defined in the Uniform Commercial Code, this original executed supplement,
incorporating the terms of the Master Agreement, shall constitute the original
Lease, and Lessor's interests herein may be transferred only by transfer of
possession of this original Supplement.
STIPULATED LOSS VALUES: The Stipulated Loss Value for each Unit, as of any date,
shall be an amount equal to the product of (i) the of the unit (as specified on
the reverse side hereof) and (ii) the percentage indicated below opposite the
period of time in which such date occurs.
<TABLE>
<CAPTION>
MONTH OF ORIGINAL TERM BEGINNING
FROM COMMENCEMENT DATE PERCENTAGE
<S> <C>
1st through 12th month 107%
13th through 24th month 85%
25th through 36th month 70%
37th through 48th month 50%
49th through 60th month 30%
</TABLE>
<PAGE>
After the 60th month of the Original Term of the Lease for each Unit, and until
each Unit has been surrendered to Lessor, as provided in the Agreement, the
Stipulated Loss Value of each Unit shall be 20% of the cost thereof.
---------------- ---------------
initial initial
<PAGE>
Exhibit 10.15
HOMESTEAD.COM INCORPORATED
EARLY EXERCISE STOCK PURCHASE AGREEMENT
UNDER THE 1996 STOCK OPTION PLAN
THIS AGREEMENT is made this 1st day of January, 2000 by and between
HOMESTEAD.COM INCORPORATED, a Delaware corporation (the "Company"), and
ELIZABETH BURR ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option to purchase shares up to 750,000
shares of common stock ("Common Stock") of the Company at a purchase price of
$0.75 per share (the "Option") pursuant to the Company's 1996 Stock Option
Plan (the "Plan"); and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Option and desires to exercise the Option on the terms and
conditions contained herein.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. INCORPORATION OF PLAN AND OPTION BY REFERENCE. This Agreement is
subject to all of the terms and conditions as set forth in the Plan and the
Option. If there is a conflict between the terms of this Agreement and/or the
Option and the terms of the Plan, the terms of the Plan shall control. If
there is a conflict between the terms of this Agreement and the terms of the
Option, the terms of the Option shall control. Defined terms not explicitly
defined in this Agreement but defined in the Plan shall have the same
definitions as in the Plan.
2. PURCHASE AND SALE OF COMMON STOCK.
(a) AGREEMENT TO PURCHASE AND SELL COMMON STOCK. Purchaser hereby
agrees to purchase from the Company, and the Company hereby agrees to sell to
Purchaser, an aggregate of seven hundred fifty thousand (750,000) shares of
Common Stock at $0.75 per share (the "Exercise Price"), for an aggregate
purchase price of $562,500.00, payable as follows:
<TABLE>
<S> <C>
Cash .....................................................................$7,500.00
Promissory Note in the form set forth in EXHIBIT C, subject to
a Pledge Agreement in the form set forth in EXHIBIT D...................$555,000.00
Total Exercise Price....................................................$562,500.00
</TABLE>
In accordance with the terms of the Option, the purchase price for the
shares of Common Stock is payable by a Promissory Note substantially in the
form set forth in EXHIBIT C, subject to a Pledge Agreement substantially in
the form set forth in EXHIBIT D.
-1-
<PAGE>
(b) CLOSING. The closing hereunder, including payment for and
delivery of the Common Stock, shall occur at the offices of the Company
immediately following the execution of this Agreement, or at such other time
and place as the parties may mutually.
3. REPURCHASE OPTION
(a) REPURCHASE OPTION. In the event Purchaser's Continuous
Service terminates, then the Company shall have an irrevocable option (the
"Repurchase Option") for a period of ninety (90) days after said termination
(or in the case of shares issued upon exercise of the Option after such date
of termination, within ninety (90) days after the date of the exercise), or
such longer period as may be agreed to by the Company and the Purchaser, to
repurchase from Purchaser or Purchaser's personal representative, as the case
may be, those shares that Purchaser received pursuant to the exercise of the
Option that have not as yet vested as of such termination date (the "Unvested
Shares") in accordance with the provisions of Section 3(b) below
(b) VESTING SCHEDULE.
(i) One hundred percent (100%) of the Option Shares shall
initially be subject to the Repurchase Option. On the date one (1) year from
the Vesting Commencement Date (the "Vesting Anniversary Date") twenty-five
percent (25%) of the Option Shares (187,500 shares) (the "First Year Shares")
subject to the Repurchase Option shall vest and be released from the
Repurchase Option. Thereafter, 1/48th of the Option Shares (15,625 shares)
shall vest and be released from the Repurchase Option on a monthly basis
measured from the Vesting Anniversary Date, until all the Option Shares are
released from the Repurchase Option (provided in each case that Purchaser's
relationship as an employee, director or consultant of the Company (or a
parent or subsidiary of the Company) has not been terminated prior to the
date of such release).
(ii) Notwithstanding the foregoing Section 3(b)(i), if during
the first year of Purchaser's employment with the Company, there is (A) a
Corporate Transaction (defined below) in connection with or after which
Purchaser is involuntarily terminated or Purchaser's role within the
surviving company is substantially and materially altered against Purchaser's
will, then the Repurchase Option shall be released for the number of shares
equal to the product of the First Year Shares times the fraction of the first
year for which Purchaser had been employed by the Company. For example, if
Purchaser had been employed for seven months, then 7/12th of the First Year
Shares would be released from the Repurchase Option (7/12 * 187,500 =
109,375).
(iii) A "Corporation Transaction" shall mean (A) a sale of
substantially all of the assets of the Company; (B) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation in which shareholders immediately before the merger or
consolidation have, immediately after the merger or consolidation, greater
stock voting power); (C) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise (other than a reverse merger in which shareholders immediately
before the merger
-2-
<PAGE>
have, immediately after the merger, greater stock voting power); or (D) any
transaction or series of related transactions in which in excess of 50% of
the Company's voting power is transferred.
(c) SHARES REPURCHASABLE AT PURCHASER'S ORIGINAL EXERCISE PRICE.
The Company may repurchase all or any of the Unvested Shares at a price
("Option Price") equal to the Purchaser's Exercise Price for such shares.
4. EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be
exercised by written notice signed by an Officer of the Company and delivered
or mailed as provided herein. Such notice shall identify the number of shares
of Common Stock to be purchased and shall notify Purchaser of the time, place
and date for settlement of such purchase, which shall be scheduled by the
Company within the term of the Repurchase Option set forth above. The Company
shall be entitled to pay for any shares of Common Stock purchased pursuant to
its Repurchase Option at the Company's option in cash or by offset against
any indebtedness owing to the Company by Purchaser (including without
limitation any Note given in payment for the Common Stock), or by a
combination of both. Upon delivery of such notice and payment of the purchase
price in any of the ways described above, the Company shall become the legal
and beneficial owner of the Common Stock being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the Common Stock being repurchased by the Company,
without further action by Purchaser.
5. CAPITALIZATION ADJUSTMENTS TO COMMON STOCK. In the event of a
"Adjustment Upon Changes in Stock" affecting the Company's outstanding Common
Stock as a class as designated in Section 10 of the Plan, then any and all
new, substituted or additional securities or other property to which
Purchaser is entitled by reason of Purchaser's ownership of Common Stock
shall be immediately subject to the Repurchase Option and be included in the
word "Common Stock" for all purposes of the Repurchase Option with the same
force and effect as the shares of the Common Stock presently subject to the
Repurchase Option, but only to the extent the Common Stock is, at the time,
covered by such Repurchase Option. While the total Option Price shall remain
the same after each such event, the Option Price per share of Common Stock
upon exercise of the Repurchase Option shall be appropriately adjusted.
6. CHANGE IN CONTROL. In the event of a Corporate Transaction, then the
Repurchase Option may be assigned by the Company to the successor of the
Company (or such successor's parent company), if any, in connection with such
Corporate Transaction. To the extent the Repurchase Option remains in effect
following such Corporate Transaction, it shall apply to the new capital stock
or other property received in exchange for the Common Stock in consummation
of the Corporate Transaction, but only to the extent the Common Stock was at
the time covered by such right. Appropriate adjustments shall be made to the
price per share payable upon exercise of the Repurchase Option to reflect the
Corporate Transaction upon the Company's capital structure; PROVIDED,
HOWEVER, that the aggregate Option Price shall remain the same.
7. ESCROW OF UNVESTED COMMON STOCK. As security for Purchaser's
faithful performance of the terms of this Agreement and to insure the
availability for delivery of Purchaser's Common Stock upon exercise of the
Repurchase Option herein provided for,
-3-
<PAGE>
Purchaser agrees, at the closing hereunder, to deliver to and deposit with
the Secretary of the Company or the Secretary's designee ("Escrow Agent"), as
Escrow Agent in this transaction, three (3) stock assignments duly endorsed
(with date and number of shares blank) in the form attached hereto as EXHIBIT
A, together with a certificate or certificates evidencing all of the Common
Stock subject to the Repurchase Option; said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Company and Purchaser set forth in EXHIBIT B, attached
hereto and incorporated by this reference, which instructions shall also be
delivered to the Escrow Agent at the closing hereunder.
8. RIGHTS OF PURCHASER. Subject to the provisions of the Option,
Purchaser shall exercise all rights and privileges of a stockholder of the
Company with respect to the shares deposited in escrow. Purchaser shall be
deemed to be the holder of the shares for purposes of receiving any dividends
that may be paid with respect to such shares and for purposes of exercising
any voting rights relating to such shares, even if some or all of such shares
have not yet vested and been released from the Company's Repurchase Option.
9. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not sell,
assign, hypothecate, donate, encumber or otherwise dispose of any interest in
the Option Shares while the Option Shares are subject to the Repurchase
Option. After any Option Shares have been released from the Repurchase
Option, Purchaser shall not sell, assign, hypothecate, donate, encumber or
otherwise dispose of any interest in the Option Shares except in compliance
with the provisions herein and applicable securities laws. Furthermore, the
Option Shares shall be subject to any right of first refusal in favor of the
Company or its assignees that may be contained in the Company's Bylaws.
10. RESTRICTIVE LEGENDS. All certificates representing the Option Shares
shall have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements
between the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER
OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
-4-
<PAGE>
(c) Any legend required by appropriate blue sky officials.
11. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Common Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Common Stock.
Purchaser is acquiring the Common Stock for investment for Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the Common Stock has not been
registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Common
Stock must be held indefinitely unless the Common Stock is subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser further acknowledges and understands that the Company is
under no obligation to register the Common Stock. Purchaser understands that
the certificate evidencing the Common Stock will be imprinted with a legend
that prohibits the transfer of the Common Stock unless the Common Stock is
registered or such registration is not required in the opinion of counsel for
the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
under the Securities Act, as in effect from time to time, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an affiliate of such
issuer), in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of issuance of the securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the securities exempt under Rule 701 may be
sold by Purchaser ninety (90) days thereafter, subject to the satisfaction of
certain of the conditions specified by Rule 144 and the market stand-off
provision described in Section 12 below.
(e) In the event that the sale of the Common Stock does not qualify
under Rule 701 at the time of purchase, then the Common Stock may be resold
by Purchaser in certain limited circumstances subject to the provisions of
Rule 144, which requires, among other things: (i) the availability of certain
public information about the Company and (ii) the resale occurring following
the required holding period under Rule 144 after the Purchaser has purchased,
and made full payment of (within the meaning of Rule 144), the securities to
be sold.
(f) Purchaser further understands that at the time Purchaser wishes
to sell the Common Stock there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company
may not be satisfying the current public current information requirements of
Rule 144 or 701, and that, in such event, Purchaser would be
-5-
<PAGE>
precluded from selling the Common Stock under Rule 144 or 701 even if the
minimum holding period requirement had been satisfied.
12. MARKET STAND-OFF AGREEMENT. By exercising the Option Purchaser
agrees that the Company (or a representative of the underwriters) may, in
connection with any underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the
Purchaser not sell, dispose of, transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other
securities of the Company held by Purchaser, for a period of time specified
by the underwriter(s) (not to exceed one hundred eighty (180) days) following
the effective date of the registration statement of the Company filed under
the Securities Act. Purchaser further agrees to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary
to give further effect thereto. In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to Purchaser's
Common Stock until the end of such period.
13. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Code, taxes as ordinary income the difference between the amount paid for
the Common Stock and the fair market value of the Common Stock as of the date
any restrictions on the Common Stock lapse. In this context, "restriction"
includes the right of the Company to buy back the Common Stock pursuant to
the Repurchase Option set forth above. Purchaser understands that Purchaser
may elect to be taxed at the time the Common Stock is purchased, rather than
when and as the Repurchase Option expires, by filing an election under
Section 83(b) (an "83(b) Election") of the Code with the Internal Revenue
Service WITHIN THIRTY (30) DAYS FROM THE DATE OF PURCHASE. Even if the fair
market value of the Common Stock at the time of the execution of this
Agreement equals the amount paid for the Common Stock, the 83(b) Election
must be made to avoid income under Section 83(a) in the future. PURCHASER
UNDERSTANDS THAT FAILURE TO FILE SUCH AN 83(b) ELECTION IN A TIMELY MANNER
MAY RESULT IN ADVERSE TAX CONSEQUENCES FOR PURCHASER. Purchaser further
understands that Purchaser must file an additional copy of such 83(b)
Election with his or her federal income tax return for the calendar year in
which the date of this Agreement falls. Purchaser acknowledges that the
foregoing is only a summary of the effect of United States federal income
taxation with respect to purchase of the Common Stock hereunder, and does not
purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death. Purchaser assumes all responsibility for filing an 83(b)
Election and paying all taxes resulting from such election or the lapse of
the restrictions on the Common Stock.
14. REFUSAL TO TRANSFER. The Company shall not be required (a) to
transfer on its books any shares of Common Stock of the Company which shall
have been transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
-6-
<PAGE>
15. NO EMPLOYMENT RIGHTS. This Agreement is not an employment contract and
nothing in this Agreement shall affect in any manner whatsoever the right or
power of the Company (or a parent or subsidiary of the Company) to terminate
Purchaser's employment for any reason at any time, with or without cause and
with or without notice.
16. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or sent by telegram or fax or upon deposit in the United States Post Office,
by registered or certified mail with postage and fees prepaid, addressed to
the other party hereto at such party's address hereinafter shown below its
signature or at such other address as such party may designate by ten (10)
days' advance written notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Company may assign the Repurchase
Option hereunder at any time or from time to time, in whole or in part.
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the Option Price, pursuant to the terms of this
Agreement, shall be entitled to receive the Common Stock, in specie, in order
to have such Common Stock available for future issuance without dilution of
the holdings of other stockholders. Furthermore, it is expressly agreed
between the parties that money damages are inadequate to compensate the
Company for the Common Stock and that the Company shall, upon proper exercise
of the Repurchase Option, be entitled to specific enforcement of its rights
to purchase and receive said Common Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of California. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to,
and does hereby, submit to the jurisdiction and venue of, the appropriate
state or federal court for the district encompassing the Company's principal
place of business.
(e) FURTHER EXECUTION. The parties agree to take all such further
action(s) as may reasonably be necessary to carry out and consummate this
Agreement as soon as practicable, and to take whatever steps may be necessary
to obtain any governmental approval in connection with or otherwise qualify
the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this Agreement
has been prepared on behalf of the Company by Cooley Godward LLP, counsel to
the Company and
-7-
<PAGE>
that Cooley Godward LLP does not represent, and is not acting on behalf of,
Purchaser. Purchaser has been provided with an opportunity to consult with
Purchaser's own counsel with respect to this Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or
revoked, in whole or in part, except by an agreement in writing signed by
each of the parties hereto.
(h) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (i) such provision shall be excluded from this Agreement,
(ii) the balance of the Agreement shall be interpreted as if such provision
were so excluded and (iii) the balance of the Agreement shall be enforceable
in accordance with its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
HOMESTEAD.COM INCORPORATED
By: /s/ JUSTIN S. KITCH
-----------------------------------
JUSTIN S. KITCH
Title: President and CEO
Address: 3475H Edison Way
Menlo Park, CA 94025
/s/ ELIZABETH BURR
-----------------------------------
ELIZABETH BURR
Address: 700 Woodland Avenue
Menlo Park, CA 94025
-8-
<PAGE>
ATTACHMENTS:
<TABLE>
<S> <C>
Exhibit A Stock Assignment Separate from Certificate
Exhibit B Joint Escrow Instructions
Exhibit C Promissory Note
Exhibit D Pledge Agreement
</TABLE>
-9-
<PAGE>
EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Elizabeth Burr hereby sells, assigns and transfers
unto HOMESTEAD.COM INCORPORATED, a Delaware corporation (the "Company"),
pursuant to the Repurchase Option under that certain Early Exercise Stock
Purchase Agreement, dated _______________ by and between the undersigned and the
Company (the "Agreement"), _______________ (_______________) shares of Common
Stock of the Company standing in the undersigned's name on the books of the
Company represented by Certificate No(s). _______________ and does hereby
irrevocably constitute and appoint the Company's Secretary, Assistant Secretary
or attorney to transfer said Common Stock on the books of the Company with full
power of substitution in the premises. This Assignment may be used only in
accordance with and subject to the terms and conditions of the Agreement, in
connection with the repurchase of shares of Common Stock issued to the
undersigned pursuant to the Agreement, and only to the extent that such shares
remain subject to the Company's Repurchase Option under the Agreement.
Dated: _______________
/s/ Elizabeth Burr
-----------------------------------
(Signature)
Elizabeth Burr
-----------------------------------
(Print Name)
(INSTRUCTION: Please do not fill in any blanks other than the "Signature" line
and the "Print Name" line.)
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
<PAGE>
JOINT ESCROW INSTRUCTIONS
James C. Kitch, Assistant Secretary
Homestead.com Incorporated
c/o Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Dear Mr. Kitch:
As Escrow Agent for both HOMESTEAD.COM INCORPORATED, a Delaware
corporation ("Company"), and the undersigned purchaser of Common Stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Early Exercise
Stock Purchase Agreement ("Agreement"), dated January 1, 2000 to which a copy of
these Joint Escrow Instructions is attached as EXHIBIT B, in accordance with the
following instructions:
1. In the event the Company or an assignee shall elect to exercise
the Repurchase Option set forth in the Agreement, the Company or its assignee
will give to Purchaser and you a written notice specifying the number of
shares of Common Stock to be purchased, the purchase price, and the time for
a closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock
assignments necessary for the transfer in question, (b) to fill in the number
of shares being transferred, and (c) to deliver same, together with the
certificate evidencing the shares of Common Stock to be transferred, to the
Company against the simultaneous delivery to you of the purchase price (which
may include suitable acknowledgment of cancellation of indebtedness) of the
number of shares of Common Stock being purchased pursuant to the exercise of
the Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of Common Stock to be held by you
hereunder and any additions and substitutions to said shares as specified in
the Agreement. Purchaser does hereby irrevocably constitute and appoint you
as the Purchaser's attorney-in-fact and agent for the term of this escrow to
execute with respect to such securities and other property all documents of
assignment and/or transfer and all stock certificates necessary or
appropriate to make all securities negotiable and complete any transaction
herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full
of the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same
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<PAGE>
to Purchaser and shall be discharged of all further obligations hereunder;
PROVIDED, HOWEVER, that if at the time of termination of this escrow you are
advised by the Company that the property subject to this escrow is the
subject of a pledge or other security agreement, you shall deliver all such
property to the pledgeholder or other person designated by the Company.
6. Except as otherwise provided in these Joint Escrow
Instructions, your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act
you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be Secretary of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the
Company may appoint any officer or assistant officer of the Company as
successor Escrow Agent and Purchaser hereby confirms the appointment of such
successor or successors as the Purchaser's attorney-in-fact and agent to the
full extent of your appointment.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and
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<PAGE>
directed to retain in your possession without liability to anyone all or any
part of said securities until such dispute shall have been settled either by
mutual written agreement of the parties concerned or by a final order, decree
or judgment of a court of competent jurisdiction after the time for appeal
has expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery,
including delivery by express courier or five days after deposit in the
United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by
ten days' advance written notice to each of the other parties hereto:
<TABLE>
<CAPTION>
<S> <C>
COMPANY: Homestead.com Incorporated
3475H Edison Way
Menlo Park, CA 94025
Attention: Chief Executive Officer
PURCHASER: Elizabeth Burr
700 Woodland Avenue
Menlo Park, CA 94025
ESCROW AGENT: James C. Kitch, Assistant Secretary
Homestead.com Incorporated
c/o Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
</TABLE>
15. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
16. You shall be entitled to employ such legal counsel and other
experts (including without limitation the firm of Cooley Godward LLP) as you
may deem necessary properly to advise you in connection with your obligations
hereunder. You may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor. The Company shall be responsible
for all fees generated by such legal counsel in connection with your
obligations hereunder.
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
It is understood and agreed that references to "you" or "your" herein refer
to the original Escrow Agent and to any and all successor Escrow Agents. It
is understood and agreed that the Company may at any time or from time to
time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
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<PAGE>
18. This Agreement shall be governed by and interpreted and
determined in accordance with the laws of the State of California, as such
laws are applied by California courts to contracts made and to be performed
entirely in California by residents of that state.
Very truly yours,
HOMESTEAD.COM INCORPORATED
By: /s/ JUSTIN S. KITCH
--------------------------------
JUSTIN S. KITCH
Title: President and CEO
PURCHASER:
/s/ Elizabeth Burr
------------------------------------
ELIZABETH BURR
ESCROW AGENT:
/s/ JAMES C. KITCH
- --------------------------------
JAMES C. KITCH
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<PAGE>
EXHIBIT C
PROMISSORY NOTE
<PAGE>
PROMISSORY NOTE
$555,000 Menlo Park, California
January 1, 2000
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises
to pay to the order of HOMESTEAD.COM INCORPORATED, a Delaware corporation
(the "Company"), at 3475H Edison Way, Menlo Park, CA 94025, or at such other
place as the holder hereof may designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal
sum of FIVE HUNDRED FIFTY FIVE THOUSAND DOLLARS ($555,000) together with
interest accrued from the date hereof on the unpaid principal at the minimum
rate allowable to avoid the imputation of interest (currently 6.21%), as
follows:
PRINCIPAL REPAYMENT AND INTEREST PAYMENTS. The outstanding principal
amount hereunder shall be due and payable in full on January 1, 2005
("Principal Repayment Date") and interest shall be compounded annually and
shall be payable in arrears on the Principal Repayment Date and shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed; PROVIDED, HOWEVER, that in the event that the undersigned's
employment by or association with the Company or its Affiliate is terminated
for any reason prior to payment in full of this Note, this Note shall be
accelerated and all remaining unpaid principal and interest shall become due
and payable ninety (90) days after such termination.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of
Common Stock of the Company, and is subject to all of the terms and
provisions of the Early Exercise Stock Purchase Agreement and Stock Pledge
Agreement of even date herewith between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due
under this Note are not consumer debt, and are not incurred primarily for
personal, family or household purposes, but are for business and commercial
purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.
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<PAGE>
This Note shall be governed by, and construed, enforced and
interpreted in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of
laws of any other jurisdiction.
Signed /s/ ELIZABETH BURR
-------------------
ELIZABETH BURR
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<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made this 1st
day of January by ELIZABETH BURR ("Pledgor"), in favor of HOMESTEAD.COM
INCORPORATED, a Delaware corporation ("Pledgee") with its principal place of
business at 3475H Edison Way, Menlo Park, CA 94025.
WHEREAS, Pledgor has concurrently herewith executed that certain
Promissory Note (the "Note") in favor of Pledgee in the amount of Five
Hundred Fifty Five Thousand Dollars ($555,000) in partial payment of the
purchase price of 750,000 shares of the Common Stock of Pledgee; and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but
only upon the condition, among others, that Pledgor shall have executed and
delivered to Pledgee this Pledge Agreement and the Collateral (as defined
below):
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees
as follows:
1. As security for the full, prompt and complete payment and
performance when due (whether by stated maturity, by acceleration or
otherwise) of all indebtedness of Pledgor to Pledgee created under the Note
(all such indebtedness being the "Liabilities"), together with, without
limitation, the prompt payment of all expenses, including, without
limitation, reasonable attorneys' fees and legal expenses, incidental to the
collection of the Liabilities and the enforcement or protection of Pledgee's
lien in and to the collateral pledged hereunder, Pledgor hereby pledges to
Pledgee, and grants to Pledgee, a first priority security interest in all of
the following (collectively, the "Pledged Collateral"):
(a) Seven Hundred Fifty Thousand (750,000) shares of Common Stock
of Pledgee represented by Certificate(s) numbered C-156 (the "Pledged
Shares"), and all dividends, cash, instruments, and other property or
proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(b) all voting trust certificates held by Pledgor evidencing the
right to vote any Pledged Shares subject to any voting trust; and
(c) all additional shares and voting trust certificates from time
to time acquired by Pledgor in any manner (which additional shares shall be
deemed to be part of the Pledged Shares), and the certificates representing
such additional shares, and all dividends, cash, instruments, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of such shares.
The term "indebtedness" is used herein in its most comprehensive
sense and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or
1.
<PAGE>
created, whether voluntary or involuntary and whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon such indebtedness may be or hereafter
becomes unenforceable.
2. At any time, without notice, and at the expense of Pledgor,
Pledgee in its name or in the name of its nominee or of Pledgor may, but
shall not be obligated to: (1) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account
of said Pledged Collateral; (2) enter into any extension, reorganization,
deposit, merger or consolidation agreement, or any agreement in any wise
relating to or affecting the Pledged Collateral, and in connection therewith
may deposit or surrender control of such Pledged Collateral thereunder,
accept other property in exchange for such Pledged Collateral and do and
perform such acts and things as it may deem proper, and any money or property
received in exchange for such Pledged Collateral shall be applied to the
indebtedness or thereafter held by it pursuant to the provisions hereof; (3)
insure, process and preserve the Pledged Collateral; (4) cause the Pledged
Collateral to be transferred to its name or to the name of its nominee; (5)
exercise as to such Pledged Collateral all the rights, powers and remedies of
an owner, except that so long as no default exists under the Note or
hereunder Pledgor shall retain all voting rights as to the Pledged Shares.
3. Pledgor agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the Pledged Collateral, and upon the failure of
Pledgor to do so, Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. At the option of Pledgee and without necessity of demand or
notice, all or any part of the indebtedness of Pledgor shall immediately
become due and payable irrespective of any agreed maturity, upon the
happening of any of the following events: (1) failure to keep or perform any
of the terms or provisions of this Pledge Agreement; (2) failure to pay any
installment of principal or interest on the Note when due; (3) the levy of
any attachment, execution or other process against the Pledged Collateral; or
(4) the insolvency, commission of an act of bankruptcy, general assignment
for the benefit of creditors, filing of any petition in bankruptcy or for
relief under the provisions of Title 11 of the United States Code of, by, or
against Pledgor.
5. In the event of the nonpayment of any indebtedness when due,
whether by acceleration or otherwise, or upon the happening of any of the
events specified in the last preceding section, Pledgee may then, or at any
time thereafter, at its election, apply, set off, collect or sell in one or
more sales, or take such steps as may be necessary to liquidate and reduce to
cash in the hands of Pledgee in whole or in part, with or without any
previous demands or demand of performance or notice or advertisement, the
whole or any part of the Pledged Collateral in such order as Pledgee may
elect, and any such sale may be made either at public or private sale at its
place of business or elsewhere, or at any broker's board or securities
exchange, either for cash or upon credit or for future delivery; provided,
however, that if such disposition is at private sale, then the purchase price
of the Pledged Collateral shall be equal to the public market price then in
effect, or, if at the time of sale no public market for the Pledged
Collateral
2.
<PAGE>
exists, then, in recognition of the fact that the sale of the Pledged
Collateral would have to be registered under the Securities Act of 1933 and
that the expenses of such registration are commercially unreasonable for the
type and amount of collateral pledged hereunder, Pledgee and Pledgor hereby
agree that such private sale shall be at a purchase price mutually agreed to
by Pledgee and Pledgor or, if the parties cannot agree upon a purchase price,
then at a purchase price established by a majority of three independent
appraisers knowledgeable of the value of such collateral, one named by
Pledgor within ten (10) days after written request by the Pledgee to do so,
one named by Pledgee within such 10-day period, and the third named by the
two appraisers so selected, with the appraisal to be rendered by such body
within thirty (30) days of the appointment of the third appraiser. The cost
of such appraisal, including all appraiser's fees, shall be charged against
the proceeds of sale as an expense of such sale. Pledgee may be the purchaser
of any or all Pledged Collateral so sold and hold the same thereafter in its
own right free from any claim of Pledgor or right of redemption. Demands of
performance, notices of sale, advertisements and presence of property at sale
are hereby waived, and Pledgee is hereby authorized to sell hereunder any
evidence of debt pledged to it. Any officer or agent of Pledgee may conduct
any sale hereunder.
6. The proceeds of the sale of any of the Pledged Collateral and
all sums received or collected by Pledgee from or on account of such Pledged
Collateral shall be applied by Pledgee to the payment of expenses incurred or
paid by Pledgee in connection with any sale, transfer or delivery of the
Pledged Collateral, to the payment of any other costs, charges, attorneys'
fees or expenses mentioned herein, and to the payment of the indebtedness or
any part hereof, all in such order and manner as Pledgee in its discretion
may determine. Pledgee shall then pay any balance to Pledgor.
7. Upon the transfer of all or any part of the indebtedness Pledgee
may transfer all or any part of the Pledged Collateral and shall be fully
discharged thereafter from all liability and responsibility with respect to
such Pledged Collateral so transferred, and the transferee shall be vested
with all the rights and powers of Pledgee hereunder with respect to such
Pledged Collateral so transferred; but with respect to any Pledged Collateral
not so transferred Pledgee shall retain all rights and powers hereby given.
8. Until all indebtedness shall have been paid in full the power of
sale and all other rights, powers and remedies granted to Pledgee hereunder
shall continue to exist and may be exercised by Pledgee at any time and from
time to time irrespective of the fact that the indebtedness or any part
thereof may have become barred by any statute of limitations, or that the
personal liability of Pledgor may have ceased.
9. Pledgee agrees that so long as no default exists under the Note
or hereunder, the Pledged Shares shall, upon the request of Pledgor, be
released from pledge as the indebtedness is paid. Such releases shall be at
the rate of one share for each Seventy-five Cents ($0.75) of principal amount
of indebtedness paid. Release from pledge, however, shall not result in
release from the provisions of those certain Joint Escrow Instructions, if
any, of even date herewith among the parties to this Pledge Agreement and the
Escrow Agent named therein.
3.
<PAGE>
10. Pledgee may at any time deliver the Pledged Collateral or any
part thereof to Pledgor and the receipt of Pledgor shall be a complete and
full acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
11. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure
or delay by Pledgee in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single
or partial exercise of any right, power or remedy hereunder shall not
preclude the further exercise thereof; and every right, power and remedy of
Pledgee shall continue in full force and effect until such right, power or
remedy is specifically waived by an instrument in writing executed by Pledgee.
12. If any provision of this Pledge Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Pledge Agreement shall be deemed
valid and enforceable to the full extent possible.
13. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of
such State.
Dated: January 1, 2000 PLEDGOR
/s/ Elizabeth Burr
------------------------
Elizabeth Burr
4.
<PAGE>
Exhibit 10.16
HOMESTEAD.COM INCORPORATED
EARLY EXERCISE STOCK PURCHASE AGREEMENT
UNDER THE 1996 STOCK OPTION PLAN
THIS AGREEMENT is made this 16th day of March, 2000 by and between
HOMESTEAD.COM INCORPORATED, a Delaware corporation (the "Company"), and MARK
GARRETT ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option to purchase up to four
hundred seventy-five thousand (475,000) shares of Voting Common Stock
("Common Stock") of the Company at a purchase price of $2.50 per share (the
"Option") pursuant to the Company's 1996 Stock Option Plan (the "Plan"); and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of the Option and desires to exercise the Option on the terms and
conditions contained herein.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. INCORPORATION OF PLAN AND OPTION BY REFERENCE. This
Agreement is subject to all of the terms and conditions as set forth in the
Plan and the Option. If there is a conflict between the terms of this
Agreement and/or the Option and the terms of the Plan, the terms of the Plan
shall control. If there is a conflict between the terms of this Agreement and
the terms of the Option, the terms of the Option shall control. Defined terms
not explicitly defined in this Agreement but defined in the Plan shall have
the same definitions as in the Plan.
2. PURCHASE AND SALE OF COMMON STOCK.
(a) AGREEMENT TO PURCHASE AND SELL COMMON STOCK. Purchaser
hereby agrees to purchase from the Company, and the Company hereby agrees to
sell to Purchaser, an aggregate of four hundred seventy-five thousand
(475,000) shares of Common Stock at $2.50 per share (the "Exercise Price"),
for an aggregate purchase price of $1,187,500.00, payable as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash .................................................................... $4,750.00
Promissory Note in the form set forth in EXHIBIT C, subject to
a Pledge Agreement in the form set forth in EXHIBIT D...................$1,182,750.00
Total Exercise Price....................................................$1,187,500.00
</TABLE>
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<PAGE>
In accordance with the terms of the Option, the purchase price for
the shares of Common Stock is payable by a Promissory Note substantially in
the form set forth in EXHIBIT C, subject to a Pledge Agreement substantially
in the form set forth in EXHIBIT D.
(b) CLOSING. The closing hereunder, including payment for and
delivery of the Common Stock, shall occur at the offices of the Company
immediately following the execution of this Agreement, or at such other time
and place as the parties may mutually.
3. REPURCHASE OPTION
(a) REPURCHASE OPTION. In the event Purchaser's Continuous
Service terminates, then the Company shall have an irrevocable option (the
"Repurchase Option") for a period of ninety (90) days after said termination
(or in the case of shares issued upon exercise of the Option after such date
of termination, within ninety (90) days after the date of the exercise), or
such longer period as may be agreed to by the Company and the Purchaser, to
repurchase from Purchaser or Purchaser's personal representative, as the case
may be, those shares that Purchaser received pursuant to the exercise of the
Option that have not as yet vested as of such termination date (the "Unvested
Shares") in accordance with the provisions of Section 3(b) below
(b) VESTING SCHEDULE.
(i) One hundred percent (100%) of the Option Shares shall
initially be subject to the Repurchase Option. On the date one (1) year from
the vesting commencement date (the "Vesting Anniversary Date") twenty-five
percent (25%) of the Option Shares (118,750 shares) (the "First Year Shares")
subject to the Repurchase Option shall vest and be released from the
Repurchase Option. Thereafter, 1/48th of the Option Shares (9,896 shares)
shall vest and be released from the Repurchase Option on a monthly basis
measured from the Vesting Anniversary Date, until all the Option Shares are
released from the Repurchase Option (provided in each case that Purchaser's
relationship as an employee, director or consultant of the Company (or a
parent or subsidiary of the Company) has not been terminated prior to the
date of such release).
(ii) Notwithstanding the foregoing Section 3(b)(i), if
there is a Corporate Transaction (defined below) in connection with or after
which Purchaser is involuntarily terminated or Purchaser's role within the
surviving company is substantially and materially altered against Purchaser's
will, then the Repurchase Option shall be released for the number of shares
equal to 50% of the remaining shares subject to the Repurchase Option.
(iii) A "Corporation Transaction" shall mean (A) a sale of
substantially all of the assets of the Company; (B) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation in which shareholders immediately before the merger or
consolidation have, immediately after the merger or consolidation, greater
stock voting power); (C) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise (other than a reverse merger in which shareholders immediately
before the merger
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<PAGE>
have, immediately after the merger, greater stock voting power); or (D) any
transaction or series of related transactions in which in excess of 50% of
the Company's voting power is transferred.
(c) SHARES REPURCHASABLE AT PURCHASER'S ORIGINAL EXERCISE PRICE.
The Company may repurchase all or any of the Unvested Shares at a price ("Option
Price") equal to the Purchaser's Exercise Price for such shares.
4. EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be
exercised by written notice signed by an Officer of the Company and delivered
or mailed as provided herein. Such notice shall identify the number of shares
of Common Stock to be purchased and shall notify Purchaser of the time, place
and date for settlement of such purchase, which shall be scheduled by the
Company within the term of the Repurchase Option set forth above. The Company
shall be entitled to pay for any shares of Common Stock purchased pursuant to
its Repurchase Option at the Company's option in cash or by offset against
any indebtedness owing to the Company by Purchaser (including without
limitation any Note given in payment for the Common Stock), or by a
combination of both. Upon delivery of such notice and payment of the purchase
price in any of the ways described above, the Company shall become the legal
and beneficial owner of the Common Stock being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the Common Stock being repurchased by the Company,
without further action by Purchaser.
5. CAPITALIZATION ADJUSTMENTS TO COMMON STOCK. In the event of a
"Adjustment Upon Changes in Stock" affecting the Company's outstanding Common
Stock as a class as designated in Section 10 of the Plan, then any and all
new, substituted or additional securities or other property to which
Purchaser is entitled by reason of Purchaser's ownership of Common Stock
shall be immediately subject to the Repurchase Option and be included in the
word "Common Stock" for all purposes of the Repurchase Option with the same
force and effect as the shares of the Common Stock presently subject to the
Repurchase Option, but only to the extent the Common Stock is, at the time,
covered by such Repurchase Option. While the total Option Price shall remain
the same after each such event, the Option Price per share of Common Stock
upon exercise of the Repurchase Option shall be appropriately adjusted.
6. CHANGE IN CONTROL. In the event of a Corporate Transaction,
then the Repurchase Option may be assigned by the Company to the successor of
the Company (or such successor's parent company), if any, in connection with
such Corporate Transaction. To the extent the Repurchase Option remains in
effect following such Corporate Transaction, it shall apply to the new
capital stock or other property received in exchange for the Common Stock in
consummation of the Corporate Transaction, but only to the extent the Common
Stock was at the time covered by such right. Appropriate adjustments shall be
made to the price per share payable upon exercise of the Repurchase Option to
reflect the Corporate Transaction upon the Company's capital structure;
PROVIDED, HOWEVER, that the aggregate Option Price shall remain the same.
7. ESCROW OF UNVESTED COMMON STOCK. As security for Purchaser's
faithful performance of the terms of this Agreement and to insure the
availability for delivery of Purchaser's Common Stock upon exercise of the
Repurchase Option herein provided for,
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<PAGE>
Purchaser agrees, at the closing hereunder, to deliver to and deposit with
the Secretary of the Company or the Secretary's designee ("Escrow Agent"), as
Escrow Agent in this transaction, three (3) stock assignments duly endorsed
(with date and number of shares blank) in the form attached hereto as EXHIBIT
A, together with a certificate or certificates evidencing all of the Common
Stock subject to the Repurchase Option; said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Company and Purchaser set forth in EXHIBIT B, attached
hereto and incorporated by this reference, which instructions shall also be
delivered to the Escrow Agent at the closing hereunder.
8. RIGHTS OF PURCHASER. Subject to the provisions of the Option,
Purchaser shall exercise all rights and privileges of a stockholder of the
Company with respect to the shares deposited in escrow. Purchaser shall be
deemed to be the holder of the shares for purposes of receiving any dividends
that may be paid with respect to such shares and for purposes of exercising
any voting rights relating to such shares, even if some or all of such shares
have not yet vested and been released from the Company's Repurchase Option.
9. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not sell,
assign, hypothecate, donate, encumber or otherwise dispose of any interest in
the Option Shares while the Option Shares are subject to the Repurchase
Option. After any Option Shares have been released from the Repurchase
Option, Purchaser shall not sell, assign, hypothecate, donate, encumber or
otherwise dispose of any interest in the Option Shares except in compliance
with the provisions herein and applicable securities laws. Furthermore, the
Option Shares shall be subject to any right of first refusal in favor of the
Company or its assignees that may be contained in the Company's Bylaws.
10. RESTRICTIVE LEGENDS. All certificates representing the Option
Shares shall have endorsed thereon legends in substantially the following
forms (in addition to any other legend which may be required by other
agreements between the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER
OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
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<PAGE>
(c) Any legend required by appropriate blue sky officials.
11. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Common Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Common Stock.
Purchaser is acquiring the Common Stock for investment for Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the Common Stock has not been
registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
Common Stock must be held indefinitely unless the Common Stock is
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands
that the Company is under no obligation to register the Common Stock.
Purchaser understands that the certificate evidencing the Common Stock will
be imprinted with a legend that prohibits the transfer of the Common Stock
unless the Common Stock is registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, under the Securities Act, as in effect from time to time, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an affiliate of such
issuer), in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of issuance of the securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the securities exempt under Rule 701 may be
sold by Purchaser ninety (90) days thereafter, subject to the satisfaction of
certain of the conditions specified by Rule 144 and the market stand-off
provision described in Section 12 below.
(e) In the event that the sale of the Common Stock does not
qualify under Rule 701 at the time of purchase, then the Common Stock may be
resold by Purchaser in certain limited circumstances subject to the
provisions of Rule 144, which requires, among other things: (i) the
availability of certain public information about the Company and (ii) the
resale occurring following the required holding period under Rule 144 after
the Purchaser has purchased, and made full payment of (within the meaning of
Rule 144), the securities to be sold.
(f) Purchaser further understands that at the time Purchaser
wishes to sell the Common Stock there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public current information
requirements of Rule 144 or 701, and that, in such event, Purchaser would be
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<PAGE>
precluded from selling the Common Stock under Rule 144 or 701 even if the
minimum holding period requirement had been satisfied.
12. MARKET STAND-OFF AGREEMENT. By exercising the Option Purchaser
agrees that the Company (or a representative of the underwriters) may, in
connection with any underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the
Purchaser not sell, dispose of, transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other
securities of the Company held by Purchaser, for a period of time specified
by the underwriter(s) (not to exceed one hundred eighty (180) days) following
the effective date of the registration statement of the Company filed under
the Securities Act. Purchaser further agrees to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary
to give further effect thereto. In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to Purchaser's
Common Stock until the end of such period.
13. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a)
of the Code, taxes as ordinary income the difference between the amount paid
for the Common Stock and the fair market value of the Common Stock as of the
date any restrictions on the Common Stock lapse. In this context,
"restriction" includes the right of the Company to buy back the Common Stock
pursuant to the Repurchase Option set forth above. Purchaser understands that
Purchaser may elect to be taxed at the time the Common Stock is purchased,
rather than when and as the Repurchase Option expires, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service WITHIN THIRTY (30) DAYS FROM THE DATE OF PURCHASE. Even if
the fair market value of the Common Stock at the time of the execution of
this Agreement equals the amount paid for the Common Stock, the 83(b)
Election must be made to avoid income under Section 83(a) in the future.
PURCHASER UNDERSTANDS THAT FAILURE TO FILE SUCH AN 83(b) ELECTION IN A TIMELY
MANNER MAY RESULT IN ADVERSE TAX CONSEQUENCES FOR PURCHASER. Purchaser
further understands that Purchaser must file an additional copy of such 83(b)
Election with his or her federal income tax return for the calendar year in
which the date of this Agreement falls. Purchaser acknowledges that the
foregoing is only a summary of the effect of United States federal income
taxation with respect to purchase of the Common Stock hereunder, and does not
purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death. Purchaser assumes all responsibility for filing an 83(b)
Election and paying all taxes resulting from such election or the lapse of
the restrictions on the Common Stock.
14. REFUSAL TO TRANSFER. The Company shall not be required (a) to
transfer on its books any shares of Common Stock of the Company which shall
have been transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
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<PAGE>
15. NO EMPLOYMENT RIGHTS. This Agreement is not an employment
contract and nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company (or a parent or subsidiary of the Company)
to terminate Purchaser's employment for any reason at any time, with or
without cause and with or without notice.
16. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal
delivery or sent by telegram or fax or upon deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid,
addressed to the other party hereto at such party's address hereinafter shown
below its signature or at such other address as such party may designate by
ten (10) days' advance written notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Company may assign the Repurchase
Option hereunder at any time or from time to time, in whole or in part.
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the Option Price, pursuant to the terms of this
Agreement, shall be entitled to receive the Common Stock, in specie, in order
to have such Common Stock available for future issuance without dilution of
the holdings of other stockholders. Furthermore, it is expressly agreed
between the parties that money damages are inadequate to compensate the
Company for the Common Stock and that the Company shall, upon proper exercise
of the Repurchase Option, be entitled to specific enforcement of its rights
to purchase and receive said Common Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of California. The
parties agree that any action brought by either party to interpret or enforce
any provision of this Agreement shall be brought in, and each party agrees
to, and does hereby, submit to the jurisdiction and venue of, the appropriate
state or federal court for the district encompassing the Company's principal
place of business.
(e) FURTHER EXECUTION. The parties agree to take all such
further action(s) as may reasonably be necessary to carry out and consummate
this Agreement as soon as practicable, and to take whatever steps may be
necessary to obtain any governmental approval in connection with or otherwise
qualify the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this
Agreement has been prepared on behalf of the Company by Cooley Godward LLP,
counsel to the Company and
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<PAGE>
that Cooley Godward LLP does not represent, and is not acting on behalf of,
Purchaser. Purchaser has been provided with an opportunity to consult with
Purchaser's own counsel with respect to this Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or
revoked, in whole or in part, except by an agreement in writing signed by
each of the parties hereto.
(h) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (i) such provision shall be excluded from this Agreement,
(ii) the balance of the Agreement shall be interpreted as if such provision
were so excluded and (iii) the balance of the Agreement shall be enforceable
in accordance with its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
HOMESTEAD.COM INCORPORATED
By: /s/ JUSTIN S. KITCH
-------------------------------------
JUSTIN S. KITCH
Title: Chief Executive Officer
Address: 3375 Edison Way
Menlo Park, CA 94025
/s/ MARK GARRETT
-------------------------------------------
MARK GARRETT
Address: 19664 Charters Ave
Saratoga, CA 94070
-8-
<PAGE>
ATTACHMENTS:
Exhibit A Stock Assignment Separate from Certificate
Exhibit B Joint Escrow Instructions
Exhibit C Promissory Note
Exhibit D Pledge Agreement
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<PAGE>
EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
<PAGE>
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Mark Garrett hereby sells, assigns and transfers
unto HOMESTEAD.COM INCORPORATED, a Delaware corporation (the "Company"),
pursuant to the Repurchase Option under that certain Early Exercise Stock
Purchase Agreement, dated March 16, 2000 by and between the undersigned and
the Company (the "Agreement"), _______________ (_______________) shares of
Common Stock of the Company standing in the undersigned's name on the books
of the Company represented by Certificate No(s). _______________ and does
hereby irrevocably constitute and appoint the Company's Secretary, Assistant
Secretary or attorney to transfer said Common Stock on the books of the
Company with full power of substitution in the premises. This Assignment may
be used only in accordance with and subject to the terms and conditions of
the Agreement, in connection with the repurchase of shares of Common Stock
issued to the undersigned pursuant to the Agreement, and only to the extent
that such shares remain subject to the Company's Repurchase Option under the
Agreement.
Dated: _______________
/s/ Mark Garrett
--------------------------------------------
(Signature)
MARK GARRETT
--------------------------------------------
(Print Name)
(INSTRUCTION: Please do not fill in any blanks other than the "Signature" line
and the "Print Name" line.)
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
<PAGE>
JOINT ESCROW INSTRUCTIONS
James C. Kitch, Assistant Secretary
Homestead.com Incorporated
c/o Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Dear Mr. Kitch:
As Escrow Agent for both HOMESTEAD.COM INCORPORATED, a Delaware
corporation ("Company"), and the undersigned purchaser of Common Stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Early
Exercise Stock Purchase Agreement ("Agreement"), dated March 16th, 2000 to
which a copy of these Joint Escrow Instructions is attached as Exhibit B, in
accordance with the following instructions:
1. In the event the Company or an assignee shall elect to exercise the
Repurchase Option set forth in the Agreement, the Company or its assignee
will give to Purchaser and you a written notice specifying the number of
shares of Common Stock to be purchased, the purchase price, and the time for
a closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of Common Stock to be transferred, to the Company
against the simultaneous delivery to you of the purchase price (which may
include suitable acknowledgment of cancellation of indebtedness) of the
number of shares of Common Stock being purchased pursuant to the exercise of
the Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of Common Stock to be held by you hereunder
and any additions and substitutions to said shares as specified in the
Agreement. Purchaser does hereby irrevocably constitute and appoint you as
the Purchaser's attorney-in-fact and agent for the term of this escrow to
execute with respect to such securities and other property all documents of
assignment and/or transfer and all stock certificates necessary or
appropriate to make all securities negotiable and complete any transaction
herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of
the Repurchase Option, whichever occurs first.
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<PAGE>
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Company that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act
you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary or Assistant Secretary of the Company or if
you shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of the
Company as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as the Purchaser's
attorney-in-fact and agent to the full extent of your appointment.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
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<PAGE>
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal
has been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery,
including delivery by express courier or five days after deposit in the
United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by
ten days' advance written notice to each of the other parties hereto:
COMPANY: Homestead.com Incorporated
3375 Edison Way
Menlo Park, CA 94025
Attention: Chief Executive Officer
PURCHASER: Mark Garrett
______________________________
______________________________
______________________________
ESCROW AGENT: James C. Kitch, Assistant Secretary
Homestead.com Incorporated
c/o Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
15. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
16. You shall be entitled to employ such legal counsel and other
experts (including without limitation the firm of Cooley Godward LLP) as you
may deem necessary properly to advise you in connection with your obligations
hereunder. You may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation therefor. The Company shall be responsible
for all fees generated by such legal counsel in connection with your
obligations hereunder.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to
the original Escrow Agent and to any and all successor Escrow
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<PAGE>
Agents. It is understood and agreed that the Company may at any time or from
time to time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
18. This Agreement shall be governed by and interpreted and determined
in accordance with the laws of the State of California, as such laws are
applied by California courts to contracts made and to be performed entirely
in California by residents of that state.
Very truly yours,
HOMESTEAD.COM INCORPORATED
By: /s/ JUSTIN S. KITCH
-------------------------------
JUSTIN S. KITCH
Title: Chief Executive Officer
PURCHASER:
/s/ MARK GARRETT
-----------------------------------
MARK GARRETT
ESCROW AGENT:
/s/ JAMES C. KITCH
- -----------------------------------
JAMES C. KITCH
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<PAGE>
EXHIBIT C
PROMISSORY NOTE
<PAGE>
PROMISSORY NOTE
$1,182,750 Menlo Park, California
March 16, 2000
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises
to pay to the order of HOMESTEAD.COM INCORPORATED, a Delaware corporation
(the "Company"), at 3375 Edison Way, Menlo Park, CA 94025, or at such other
place as the holder hereof may designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal
sum of ONE MILLION ONE HUNDRED EIGHTY-TWO THOUSAND SEVEN HUNDRED FIFTY
DOLLARS ($1,182,750) together with interest accrued from the date hereof on
the unpaid principal at the minimum rate allowable to avoid the imputation of
interest (currently 5.77%), as follows:
PRINCIPAL REPAYMENT AND INTEREST PAYMENTS. The outstanding principal
amount hereunder shall be due and payable in full on March 16, 2005
("Principal Repayment Date") and interest shall be compounded annually and
shall be payable in arrears on the Principal Repayment Date and shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed; PROVIDED, HOWEVER, that in the event that the undersigned's
employment by or association with the Company or its affiliates is terminated
for any reason prior to payment in full of this Note, this Note shall be
accelerated and all remaining unpaid principal and interest shall become due
and payable ninety (90) days after such termination.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of
Common Stock of the Company, and is subject to all of the terms and
provisions of the Early Exercise Stock Purchase Agreement and Stock Pledge
Agreement of even date herewith between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due
under this Note are not consumer debt, and are not incurred primarily for
personal, family or household purposes, but are for business and commercial
purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.
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<PAGE>
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
/s/ MARK GARRETT
------------------------
MARK GARRETT
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<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made this 16th
day of March by MARK GARRETT ("Pledgor"), in favor of HOMESTEAD.COM
INCORPORATED, a Delaware corporation ("Pledgee") with its principal place of
business at 3375 Edison Way, Menlo Park, CA 94025.
WHEREAS, Pledgor has concurrently herewith executed that certain
Promissory Note (the "Note") in favor of Pledgee in the amount of One Million
One Hundred Eighty-Two Thousand Seven Hundred fifty Dollars ($1,182,750) in
partial payment of the purchase price of 475,000 shares of the Common Stock
of Pledgee; and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but
only upon the condition, among others, that Pledgor shall have executed and
delivered to Pledgee this Pledge Agreement and the Collateral (as defined
below):
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees
as follows:
1. As security for the full, prompt and complete payment and
performance when due (whether by stated maturity, by acceleration or
otherwise) of all indebtedness of Pledgor to Pledgee created under the Note
(all such indebtedness being the "Liabilities"), together with, without
limitation, the prompt payment of all expenses, including, without
limitation, reasonable attorneys' fees and legal expenses, incidental to the
collection of the Liabilities and the enforcement or protection of Pledgee's
lien in and to the collateral pledged hereunder, Pledgor hereby pledges to
Pledgee, and grants to Pledgee, a first priority security interest in all of
the following (collectively, the "Pledged Collateral"):
(A) Four Hundred Seventy-Five Thousand (475,000) shares of
Common Stock of Pledgee represented by Certificate(s) numbered C-210 (the
"Pledged Shares"), and all dividends, cash, instruments, and other property
or proceeds from time to time received, receivable, or otherwise distributed
in respect of or in exchange for any or all of the Pledged Shares;
(B) all voting trust certificates held by Pledgor evidencing
the right to vote any Pledged Shares subject to any voting trust; and
(C) all additional shares and voting trust certificates from
time to time acquired by Pledgor in any manner (which additional shares shall
be deemed to be part of the Pledged Shares), and the certificates
representing such additional shares, and all dividends, cash, instruments,
and other property or proceeds from time to time received, receivable, or
otherwise distributed in respect of or in exchange for any or all of such
shares.
1.
<PAGE>
The term "indebtedness" is used herein in its most comprehensive
sense and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether recovery upon such
indebtedness may be or hereafter becomes unenforceable.
2. At any time, without notice, and at the expense of Pledgor,
Pledgee in its name or in the name of its nominee or of Pledgor may, but
shall not be obligated to: (1) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account
of said Pledged Collateral; (2) enter into any extension, reorganization,
deposit, merger or consolidation agreement, or any agreement in any wise
relating to or affecting the Pledged Collateral, and in connection therewith
may deposit or surrender control of such Pledged Collateral thereunder,
accept other property in exchange for such Pledged Collateral and do and
perform such acts and things as it may deem proper, and any money or property
received in exchange for such Pledged Collateral shall be applied to the
indebtedness or thereafter held by it pursuant to the provisions hereof; (3)
insure, process and preserve the Pledged Collateral; (4) cause the Pledged
Collateral to be transferred to its name or to the name of its nominee; (5)
exercise as to such Pledged Collateral all the rights, powers and remedies of
an owner, except that so long as no default exists under the Note or
hereunder Pledgor shall retain all voting rights as to the Pledged Shares.
3. Pledgor agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the Pledged Collateral, and upon the failure of
Pledgor to do so, Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. At the option of Pledgee and without necessity of demand or
notice, all or any part of the indebtedness of Pledgor shall immediately
become due and payable irrespective of any agreed maturity, upon the
happening of any of the following events: (1) failure to keep or perform any
of the terms or provisions of this Pledge Agreement; (2) failure to pay any
installment of principal or interest on the Note when due; (3) the levy of
any attachment, execution or other process against the Pledged Collateral; or
(4) the insolvency, commission of an act of bankruptcy, general assignment
for the benefit of creditors, filing of any petition in bankruptcy or for
relief under the provisions of Title 11 of the United States Code of, by, or
against Pledgor.
5. In the event of the nonpayment of any indebtedness when due,
whether by acceleration or otherwise, or upon the happening of any of the
events specified in the last preceding section, Pledgee may then, or at any
time thereafter, at its election, apply, set off, collect or sell in one or
more sales, or take such steps as may be necessary to liquidate and reduce to
cash in the hands of Pledgee in whole or in part, with or without any
previous demands or demand of performance or notice or advertisement, the
whole or any part of the Pledged Collateral in such order as Pledgee may
elect, and any such sale may be made either at public or private sale at its
place of business or elsewhere, or at any broker's board or securities
exchange,
2.
<PAGE>
either for cash or upon credit or for future delivery; provided, however,
that if such disposition is at private sale, then the purchase price of the
Pledged Collateral shall be equal to the public market price then in effect,
or, if at the time of sale no public market for the Pledged Collateral
exists, then, in recognition of the fact that the sale of the Pledged
Collateral would have to be registered under the Securities Act of 1933 and
that the expenses of such registration are commercially unreasonable for the
type and amount of collateral pledged hereunder, Pledgee and Pledgor hereby
agree that such private sale shall be at a purchase price mutually agreed to
by Pledgee and Pledgor or, if the parties cannot agree upon a purchase price,
then at a purchase price established by a majority of three independent
appraisers knowledgeable of the value of such collateral, one named by
Pledgor within ten (10) days after written request by the Pledgee to do so,
one named by Pledgee within such 10-day period, and the third named by the
two appraisers so selected, with the appraisal to be rendered by such body
within thirty (30) days of the appointment of the third appraiser. The cost
of such appraisal, including all appraiser's fees, shall be charged against
the proceeds of sale as an expense of such sale. Pledgee may be the purchaser
of any or all Pledged Collateral so sold and hold the same thereafter in its
own right free from any claim of Pledgor or right of redemption. Demands of
performance, notices of sale, advertisements and presence of property at sale
are hereby waived, and Pledgee is hereby authorized to sell hereunder any
evidence of debt pledged to it. Any officer or agent of Pledgee may conduct
any sale hereunder.
6. The proceeds of the sale of any of the Pledged Collateral and
all sums received or collected by Pledgee from or on account of such Pledged
Collateral shall be applied by Pledgee to the payment of expenses incurred or
paid by Pledgee in connection with any sale, transfer or delivery of the
Pledged Collateral, to the payment of any other costs, charges, attorneys'
fees or expenses mentioned herein, and to the payment of the indebtedness or
any part hereof, all in such order and manner as Pledgee in its discretion
may determine. Pledgee shall then pay any balance to Pledgor.
7. Upon the transfer of all or any part of the indebtedness
Pledgee may transfer all or any part of the Pledged Collateral and shall be
fully discharged thereafter from all liability and responsibility with
respect to such Pledged Collateral so transferred, and the transferee shall
be vested with all the rights and powers of Pledgee hereunder with respect to
such Pledged Collateral so transferred; but with respect to any Pledged
Collateral not so transferred Pledgee shall retain all rights and powers
hereby given.
8. Until all indebtedness shall have been paid in full the power
of sale and all other rights, powers and remedies granted to Pledgee
hereunder shall continue to exist and may be exercised by Pledgee at any time
and from time to time irrespective of the fact that the indebtedness or any
part thereof may have become barred by any statute of limitations, or that
the personal liability of Pledgor may have ceased.
9. Pledgee agrees that so long as no default exists under the Note
or hereunder, the Pledged Shares shall, upon the request of Pledgor, be
released from pledge as the indebtedness is paid. Such releases shall be at
the rate of one share for each Seventy-five Cents ($0.75) of
3.
<PAGE>
principal amount of indebtedness paid. Release from pledge, however, shall
not result in release from the provisions of those certain Joint Escrow
Instructions, if any, of even date herewith among the parties to this Pledge
Agreement and the Escrow Agent named therein.
10. Pledgee may at any time deliver the Pledged Collateral or any
part thereof to Pledgor and the receipt of Pledgor shall be a complete and
full acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
11. The rights, powers and remedies given to Pledgee by this
Pledge Agreement shall be in addition to all rights, powers and remedies
given to Pledgee by virtue of any statute or rule of law. Any forbearance or
failure or delay by Pledgee in exercising any right, power or remedy
hereunder shall not be deemed to be a waiver of such right, power or remedy,
and any single or partial exercise of any right, power or remedy hereunder
shall not preclude the further exercise thereof; and every right, power and
remedy of Pledgee shall continue in full force and effect until such right,
power or remedy is specifically waived by an instrument in writing executed
by Pledgee.
12. If any provision of this Pledge Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Pledge Agreement shall be deemed
valid and enforceable to the full extent possible.
13. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of
such State.
Dated: March 16th, 2000 PLEDGOR
/s/ MARK GARRETT
-------------------------
MARK GARRETT
4.
<PAGE>
EXHIBIT 16.1
April 14, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read the Experts section included in the Registration Statement (Form
S-1), of Homestead.com and are in agreement with the statements contained in
paragraph 2 therein. We have no basis to agree or disagree with other
statements of the registrant contained therein.
/s/ Ernst & Young LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated April 3, 2000 relating to the financial statements of
Homestead.com Incorporated, which appears in such Registration Statement. We
also consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
San Jose, California
May 5, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1998 JAN-31-1999 JAN-31-2000
<PERIOD-END> DEC-31-1998 DEC-31-1999 MAR-31-2000
<CASH> 2,702 2,323 10,922
<SECURITIES> 0 4,727 22,473
<RECEIVABLES> 0 913 1,188
<ALLOWANCES> 0 (100) (288)
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 2,729 12,196 34,789
<PP&E> 1,047 3,929 7,406
<DEPRECIATION> (379) (1,050) (1,228)
<TOTAL-ASSETS> 3,631 16,199 42,341
<CURRENT-LIABILITIES> 282 3,367 4,644
<BONDS> 0 0 0
4,496 22,601 58,144
0 0 0
<COMMON> 13 14 16
<OTHER-SE> (1,552) (11,872) (22,414)
<TOTAL-LIABILITY-AND-EQUITY> 3,631 16,199 42,341
<SALES> 0 0 0
<TOTAL-REVENUES> 947 504 1,142
<CGS> 0 0 0
<TOTAL-COSTS> 609 1,914 1,135
<OTHER-EXPENSES> 3,571 12,696 14,920
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (124) (401) (311)
<INCOME-PRETAX> (3,206) (14,106) (14,913)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (3,082) (13,705) (14,602)
<EPS-BASIC> (0.23) (1.01) (2.11)
<EPS-DILUTED> (0.23) (1.01) (2.11)
</TABLE>
