<PAGE>
As filed with the Securities and Exchange Commission on April 20, 2000
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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IASIAWORKS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
California 4813 94-3228782
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2000 Alameda de las Pulgas, Suite 125
San Mateo, California 94403
(650) 524-1790
(Address, including zip code, and telephone number, including area code, of the
registrant's principal executive offices)
---------------
JoAnn Patrick-Ezzell
Chief Executive Officer
iAsiaWorks, Inc.
2000 Alameda de las Pulgas, Suite 125
San Mateo, California 94403
(650) 524-1790
(Name address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Warren T. Lazarow, Esq. Earl D. Weiner, Esq.
Richard C. Leska, Esq. Sullivan & Cromwell
Derrick N.D. Hansen, Esq. 125 Broad Street
Brian E. Covotta, Esq. New York, N.Y. 10004-2498
Joanna H. Koo, Esq. (212) 558-4000
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
(650) 424-0160
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
---------------
If 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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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- ------------------------------------------------------------------------------
<CAPTION>
Title of Each Class of Securities to be Amount to be Amount of
Registered Registered(1) Registration Fee
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<S> <C> <C>
Common Stock $0.001 par value ........ $230,000,000 $60,720
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o).
---------------
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 Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell nor does it seek an offer to buy these +
+securities in any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated April 20, 2000.
Shares
[LOGO OF IASIAWORKS, INC.]
Common Stock
-----------
This is an initial public offering of shares of iAsiaWorks, Inc. All of the
shares of common stock are being sold by iAsiaWorks.
Prior to this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $ and $ . iAsiaWorks has applied for quotation of the
common stock on the Nasdaq National Market under the symbol "IAWK."
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Initial public offering price...................................... $ $
Underwriting discount.............................................. $ $
Proceeds, before expenses, to iAsiaWorks........................... $ $
</TABLE>
To the extent than the underwriters sell more than shares, the
underwriters have the option to purchase up to an additional shares from
iAsiaWorks at the initial public offering price less the underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co. Morgan Stanley Dean Witter
Salomon Smith Barney
-----------
Prospectus dated , 2000.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our consolidated financial statements and notes to those
statements appearing elsewhere in this prospectus.
Our Business
We offer a broad range of Internet solutions that allow business customers to
build or extend their presence across multiple markets in the Asia-Pacific
region. Our solutions include high-speed, leased-line Internet access, hosting,
co-location, managed services and other value-added services. Our customers
include Asia-Pacific businesses that desire to establish or extend their
Internet operations within the Asia-Pacific region and into the United States
and businesses located outside the region that wish to conduct Internet
operations in the Asia-Pacific region. We help our customers enter markets that
are complex and difficult for non-indigenous businesses to penetrate.
From inception in August 1995 until July 1999, we focused on providing
high-speed Internet access to business customers in selected markets in the
Asia-Pacific region. In July 1999, we began to implement a significant change
in our business strategy to focus on providing dedicated hosting, co-location,
managed services and other value-added services. To facilitate our strategic
business shift, we acquired a Hong Kong Internet business from AT&T in December
1999.
We believe that no company currently offers single source Internet solutions
in as many markets in the Asia-Pacific region as we do. We can deliver
dedicated hosting, co-location, managed services and other value-added services
to customers in Hong Kong, South Korea, Taiwan, Australia, mainland China,
Japan, Singapore, the Philippines, Thailand, New Zealand and the United States.
We currently provide Internet solutions to more than 3,800 business customers,
including more than 120 dedicated hosting and co-location customers. Our
customers include Digital Island, DoubleClick, Outblaze, the Hong Kong Stock
Exchange and Nike.
We have been operating in the Asia-Pacific region since our inception, and we
have the people, experience and relationships in multiple markets in the region
that allow us to address the complexities our customers face with respect to
language, culture, business practices, regulations, politics, currency and
Internet infrastructure. In addition, because we are headquartered in Silicon
Valley and have a significant presence in the Asia-Pacific region, we believe
that we are able to identify, evaluate and introduce the latest technological
developments into the region before other service providers. We also have
access to a pool of highly qualified technical and management professionals in
Silicon Valley who can train our in-country personnel in the Asia-Pacific
region, as well as facilitate the implementation of these technologies.
We believe that the growth in Internet users and e-commerce revenue in the
Asia-Pacific region will increasingly lead businesses to implement and expand
their Internet presence and e-commerce capabilities in the region. However, due
to the lack of adequate interconnection among providers and the congestion and
high cost of international circuits, businesses are frequently finding Internet
connections within the Asia-Pacific region to be slower, less reliable and more
expensive than in the United States. Our hosting and co-location services
address this problem by placing our business customers' Internet content in
close proximity to users in the region to ensure fast, high-quality and less
expensive connectivity.
Our hosting and co-location services utilize our high-quality Internet data
centers located throughout the Asia-Pacific region and in the United States.
These Internet data centers provide
3
<PAGE>
secure and reliable domestic and international Internet connectivity to support
our customers' e-business initiatives. We are in the process of expanding our
Internet data center capacity in most of the major markets in the Asia-Pacific
region. Our new generation of high performance, high-capacity Internet data
centers will utilize the latest technologies available and will be large-scale,
typically exceeding 50,000 square feet.
To complement our dedicated hosting and co-location services and to offer
end-to-end Internet solutions, we provide a broad range of managed and value-
added services. In addition to establishing a customer's Internet presence, we
are able to provide managed services such as 24X7 performance monitoring,
enhanced security and administration services to support its Internet
operations. Additionally, our value-added services allow us to assist our
customers in navigating the complexities of operating in markets with which
they are not familiar. For example, we can help our customers tailor their
Internet content to each local market as well as enable e-commerce solutions
and the associated logistics and distribution fulfillment.
Our goal is to become the pre-eminent single source provider of business
Internet solutions throughout the Asia-Pacific region with a primary focus on
dedicated hosting, co-location and managed services. To achieve this goal, we
intend to pursue a strategy that emphasizes the following elements:
. develop large-scale, high performance Internet data center capacity in
the Asia-Pacific region;
. broaden and deepen our geographic presence in the Asia-Pacific region;
. expand our sales force in the U.S. and the Asia-Pacific region; and
. pursue acquisitions and strategic relationships.
Corporate Information
iAsiaWorks, Inc. was incorporated in California in August 1995 as AUNET
Corporation. In December 1999, we changed our name to iAsiaWorks, Inc. We plan
to reincorporate in Delaware prior to the consummation of this offering.
References in this prospectus to "iAsiaWorks," "we," "our" and "us"
collectively refer to iAsiaWorks, Inc., a Delaware corporation, its
subsidiaries and its California predecessor, and not to the underwriters. Our
principal executive offices are located at 2000 Alameda de las Pulgas, Suite
125, San Mateo, California 94403 and our telephone number is (650) 524-1790.
Our Asia-Pacific regional headquarters are located at Shell Tower, Times
Square, 1 Matheson Street, Causeway Bay, Hong Kong, and the telephone number is
(852) 2511-5828. Our web site can be found at www.iasiaworks.com. Information
contained on our web site is not intended to be a prospectus and does not
constitute a part of this prospectus.
We have filed an application with the United States Patent and Trademark
office seeking to register "iAsiaWorks" as a trademark in the U.S., and
iAsiaWorks(TM) with the accompanying design and the iAsiaWorks logo are
trademarks of iAsiaWorks, Inc. Each trademark, trade name or service mark of
any other company appearing in this prospectus belongs to its holder. The
inclusion of other companies' brand names and products in this prospectus is
not an endorsement by iAsiaWorks. These companies are not involved with the
offering of our securities.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered............................... shares
Common stock to be outstanding after the offering.. shares*
Use of proceeds ................................... For establishment of
Internet data center
facilities, general
corporate purposes and
acquisitions. See "Use of
Proceeds" on page 20.
Proposed Nasdaq National Market symbol............. "IAWK"
</TABLE>
At our request the underwriters have reserved for sale at the assumed initial
public offering price up to shares of our common stock as directed shares
and up to shares for certain strategic investors.
- --------
* The number of shares of common stock to be outstanding after this offering
excludes:
. 15,887,389 shares of common stock issuable upon exercise of stock
options outstanding as of March 31, 2000 at a weighted average exercise
price of $0.2908 per share;
. 25,000,000 shares of common stock reserved for issuance under our 2000
Stock Incentive Plan that incorporates our 1995 Stock Plan;
. 500,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
. 636,043 shares of common stock issuable upon exercise of outstanding
warrants to purchase Series B preferred stock at an exercise price of
$1.50 per share.
For additional information about these items, see "Capitalization," on page 21,
"Benefit Plans," beginning on page 50, and "Description of Capital Stock,"
beginning on page 64.
----------------
Except as set forth in the consolidated financial statements or as otherwise
specified in this prospectus, all information in this prospectus:
. assumes no exercise of the underwriters' over-allotment option;
. assumes the exercise for cash of all outstanding warrants other than
warrants to purchase 636,043 shares of common stock issuable upon
exercise of outstanding warrants to purchase Series B preferred stock at
an exercise price of $1.50 per share;
. gives effect to the automatic conversion of all of our outstanding
preferred stock into 77,001,376 shares of common stock upon the closing
of this offering; and
. reflects our reincorporation from a California corporation into a
Delaware corporation before completion of this offering.
See "Description of Capital Stock" and "Underwriting" beginning on pages 64 and
69, respectively.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
----------------- -----------
Year Ended December 31,
------------------------------
1998 1999 1999**
------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Total revenue.................................. $ 3,490 $ 5,629 $ 15,859
Gross margin................................... (1,131) (189) 1,122
Stock-based compensation....................... 220 4,070 4,070
Other operating expenses....................... 5,302 7,720 17,033
Total operating expenses....................... 5,522 11,790 21,103
Loss from operations........................... (6,653) (11,979) (19,981)
Net loss....................................... (6,823) (12,056) (19,845)
Dividend accretion on preferred stock.......... 1,814 2,287 2,287
Net loss attributable to common stockholders... $(8,637) $(14,343) $(22,132)
Net loss per share attributable to common
stockholders, basic and diluted............... $(10.29) $ (4.87) $ (7.52)
Shares used in computing net loss per share
attributable to common stockholders, basic and
diluted....................................... 839 2,945 2,945
Unaudited pro forma net loss per share
attributable to common stockholders, basic and
diluted *..................................... -- $ (0.36) $ (0.56)
Shares used in computing unaudited pro forma
net loss per share attributable to common
stockholders, basic and diluted............... -- 39,530 39,530
</TABLE>
- -------
* The pro forma net loss per share data reflect the automatic conversion of
preferred stock as described in Note 2 of Notes to Consolidated Financial
Statements--Pro forma net loss per share (unaudited) beginning on page F-12.
** The unaudited summary pro forma combined statement of operations data at
December 31, 1999 reflects the acquisition of AT&T EasyLink as if it had
occurred on January 1, 1999, and after giving effect to purchase accounting
adjustments.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable
securities................................... $ 42,222 $42,250 $
Working capital............................... 40,264 40,292
Total assets.................................. 91,616 91,644
Long-term obligations, net of current
portion...................................... 435 435
Convertible preferred stock................... 114,699 -- --
Total stockholders' equity (deficit).......... (28,940) 85,787
</TABLE>
The consolidated balance sheet data as of December 31, 1999 are set forth:
. on an actual basis;
. on a pro forma basis giving effect to the exercise of warrants to
purchase 1,279,074 shares of common stock at an exercise price of $0.01
per share, the exercise of warrants to purchase 10,000 shares of
Series B preferred stock at an exercise price of $1.50 per share and,
when taken together with the exercise of these Series B warrants, the
automatic conversion of all outstanding shares of the convertible
preferred stock into 76,472,546 shares of common stock upon the closing
of this offering; and
. on a pro forma as adjusted basis to reflect the estimated net proceeds
from the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share after deducting
the estimated underwriting discount and the estimated offering expenses.
See "Use of Proceeds" and "Capitalization" on pages 20 and 21, respectively.
6
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding to invest in shares of our common stock. The
occurrence of any of the following risks could materially and adversely affect
our business, financial condition and operating results. In this case, the
trading price of our common stock could decline, and you may lose part or all
of your investment.
Investing in our common stock may expose you
to the following risks inherent in our business
We may not be successful in implementing a change in our strategic focus from
providing Internet access to providing dedicated hosting, co-location and
managed services.
From inception in August 1995 until July 1999, we focused on providing high-
speed, leased-line Internet access in selected markets in the Asia-Pacific
region. In July 1999, we began to implement a significant change in our
business strategy to focus on providing dedicated hosting, co-location and
managed services throughout the Asia-Pacific region. Our ability to
successfully execute this business strategy is vital to our future growth and
profitability and if we are unsuccessful our business will be adversely
affected.
Our Internet data center expansion plans may be delayed, never be completed or
experience other significant problems, which would delay or prevent us from
realizing our expected growth and ultimate profitability.
The Internet data centers currently operated by us or our strategic partners
are not large-scale facilities. Our anticipated growth and ultimate
profitability is dependent upon the establishment of significant new large-
scale, high performance Internet data center capacity. These expansion plans
may be delayed or never completed and are subject to risks, such as:
. inability to purchase or lease adequate facilities on terms acceptable
to us;
. inability to provision the necessary telecommunication circuits and
capacity into our Internet data centers;
. construction delays;
. inability to procure necessary equipment or to obtain necessary
authorizations on a timely basis;
. failure to engage the necessary project managers, contractors, builders,
electricians, architects and designers; and
. cost estimation errors or overruns.
We do not have a proven track record for the construction or the operation of
large-scale, high performance Internet data centers and therefore will be
dependent upon third party project managers, contractors, other service
providers and strategic partners. In addition, if any of these risks affect our
Internet data center expansion plans, the benefits of our substantial
investment in these Internet data centers may be delayed or never occur. In
that case, we will be delayed or prevented from realizing our expected growth
and ultimate profitability.
Even if we are successful in establishing our significant new large-scale, high
performance Internet data centers, we will need to greatly expand our customer
base to grow and achieve profitability.
We will incur significant costs to establish and operate our new large-scale,
high performance Internet data centers. If we are unable to significantly grow
our customer base, we will not be able to
7
<PAGE>
achieve the economies of scale necessary to offset our fixed and other
operating costs. We have limited experience in attracting and servicing our
hosting, co-location, managed services and other value-added services
customers. Our ability to attract and retain additional customers for these
services depends on a variety of factors, including:
. the willingness of businesses to outsource their Internet operations;
. the quality, reliability and cost-effectiveness of our services; and
. our ability to effectively market our services.
If we are unable to significantly increase our customer base for hosting, co-
location, managed services and other value-added services, we will not realize
our expected growth or profitability.
We expect significant increases in our operating expenses and continuing
losses.
We have never achieved profitability, and we accumulated net losses of $33.8
million during the period from our inception through December 31, 1999. We may
not obtain a large enough customer base utilizing our mission-critical Internet
solutions to generate sufficient revenue and achieve profitability. We believe
that we will continue to incur losses for at least the next several years, and
that our losses will increase significantly from current levels. We intend to
increase our operating expenses substantially as we:
. establish new large-scale, high performance Internet data centers either
alone or jointly with local and/or foreign partners;
. purchase additional capacity on fiber optic cable systems and related
equipment as our traffic flows increase and as we expand our network in
the Asia-Pacific region;
. expand our presence in the Asia-Pacific region through acquisitions and
partnerships;
. increase our general and administrative functions to support our growing
operations; and
. increase our sales and marketing activities, particularly by building
out our worldwide sales organization.
Because we will spend these amounts before we receive significant incremental
revenue from these efforts, our losses will be greater than the losses we would
incur if we developed our business more slowly. In addition, we may find that
these efforts are more expensive than we currently anticipate, which would
further increase our losses.
We have been unable to fund our operations with the cash generated from our
business. If we do not generate cash sufficient to fund our operations, we may
need additional financing to continue our growth or our growth may be
curtailed.
To date, we have not generated sufficient cash from operations to fund our
current operations and have had to rely primarily on the proceeds of the sale
of equity securities. Cash from operations must increase significantly for us
to fund anticipated operating expenses internally. If our cash flows are
insufficient to fund these expenses, we may need to fund our growth through
additional debt or equity financings or reduce costs. Further, we may not be
able to obtain financing on satisfactory terms. Our inability to finance our
growth, either internally or externally, may limit our growth potential and our
ability to execute our business strategy. If we issue securities to raise
capital, our existing stockholders may experience additional dilution or the
new securities may have rights senior to those of our common stock.
8
<PAGE>
We may not be able to compete successfully against current and future
competitors, which could harm our business and our margins.
The market for Internet access, as well as for hosting, co-location and
managed services, is extremely competitive and there are few substantial
barriers to entry. Due to the potential market size for Internet access as well
as for hosting and co-location in the Asia-Pacific region, we anticipate that
competition will continue to intensify from diverse existing businesses
currently operating in different geographic markets as well as from new market
entrants.
We are dependent upon businesses, such as national telecommunications
carriers that are monopolies or have significant regulatory advantages over us,
that provide us with resources we need to provide services in one or more
markets. These businesses currently compete with us or may compete with us in
the future. These businesses have the ability to increase the prices they
charge to us to increase our costs to their competitive advantage or deny us
resources necessary for us to provide services in one or more markets. If they
decide to do so, our business in the relevant markets may be significantly
impaired or completely lost, which would have a significant adverse effect on
our results of operations. In addition, these competitors have the ability to
bundle hosting, co-location, managed services and other value-added services
with basic local and long distance telecommunications services, which could
reduce the overall price of their services relative to ours.
Increasingly, Internet service providers, hosting companies,
telecommunications companies and equipment manufacturers based in North America
have announced plans to enter into or expand their operations in markets in the
Asia-Pacific region. For example, companies such as PSINet, AboveNet
Communications, and its parent Metropolitan Fiber Networks, Exodus
Communications, Inc., Global Crossing Global Center, Level 3, WorldCom and
Intel have announced plans to enter into or expand their current operations in
the Asia-Pacific region. When these companies expand their presence in the
Asia-Pacific region, customers may decide to use their services in the region
instead of ours.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
As a result, certain of these competitors may be able to develop and expand
their network infrastructures and service offerings more quickly, adapt to new
or emerging technologies and changes in customer requirements more readily,
take advantage of acquisition and other opportunities more effectively, devote
greater resources to the marketing and sale of their products and adopt more
aggressive pricing policies than we can. In addition, these competitors have
entered and will likely continue to enter into joint ventures or consortiums to
provide additional value-added services competitive with those provided by us.
There can be no assurance that we will have the resources or expertise to
compete successfully in the future.
New market entrants or the creation of stronger competitors through
combinations could result in increased price competition, which would make it
difficult for us to attract new customers, retain existing customers, or attain
revenue and gross margin levels sufficient to generate a return on our prior
investment in our business.
Our limited operating history makes forecasting difficult. Because most of our
expenses are based on planned operating results, failure to achieve forecast
revenue could cause net losses in a given quarter to be greater than expected.
As a result of our limited operating history, particularly in offering
hosting, co-location and managed services, it is difficult to accurately
forecast our revenue, and we have limited meaningful historical financial data
upon which to base planned operating expenses. We base our current and future
expense levels on our operating plans, the anticipated dates that our new
large-scale, high
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<PAGE>
performance Internet data centers will be completed and available for customer
use, expected use of our new Internet data centers and estimates of future
revenue. In addition, our expenses are to a large extent fixed in the short
term. As a result, we may be unable to adjust our spending in a timely manner
to compensate for any unexpected revenue shortfall. This inability could cause
our net losses in a given quarter to be greater than expected.
Our operating results are volatile and difficult to predict. If we fail to meet
the expectations of public market analysts and investors, the market price of
our common stock may decline significantly.
Our annual and quarterly operating results have fluctuated in the past and
may fluctuate significantly in the future due to a variety of factors, many of
which are outside of our control. For example, for several quarters beginning
in late 1997, our operating results were adversely affected by the economic
crisis in the Asia-Pacific region. Because our operating results are volatile
and difficult to predict, we believe that quarter-to-quarter comparisons of our
operating results are not a good indication of our future performance. It is
possible that, in the future, our quarterly operating results may fall below
the expectations of securities analysts and investors. In this event, the
trading price of our common stock may decline significantly.
We have experienced significant growth in our business in recent periods and
any inability to manage this growth and any future growth could harm our
business.
Our historical growth has placed, and our current expansion plans are likely
to continue to place, a significant strain on our management, administrative
resources and our software and systems. Any failure to manage growth
effectively could seriously harm our business. We have significantly expanded
our operations both in the United States and throughout the Asia-Pacific
region. We have grown from 45 employees as of December 31, 1998, to 95 as of
December 31, 1999 and to 170 as of April 10, 2000, of whom 35 were in the
United States and 135 in the Asia-Pacific region. To be successful, we will
need to continue to implement additional management information systems and
improve our operating, administrative, financing and accounting systems and
controls. We will also need to hire and train new employees and maintain close
coordination among our executive, accounting, finance, marketing, sales and
operations teams. These processes are time consuming and expensive and will
increase management responsibilities. Our inability to manage this growth could
harm our business.
We may be unable to hire and retain the skilled personnel necessary to develop
our business.
We intend to hire a significant number of additional sales, marketing,
technical and management personnel. Competition for these individuals is
intense, and we may not be able to attract, assimilate or retain highly
qualified personnel in the future. Our failure to attract and retain the highly
trained people who are integral to our business may limit our growth rate and
harm our business. We expect to face greater difficulty attracting these
personnel with equity incentives as a public company than we did as a privately
held company.
The expansion of our network is dependent upon the availability of adequate
connectivity with third party providers and failure or delay in obtaining
necessary connectivity would adversely affect our growth.
In building our network we rely upon connectivity and bandwidth from Internet
service providers and local and international telecommunications carriers. In
some of our markets we are dependent on one or a limited number of connectivity
providers. Many of these carriers are our competitors.
10
<PAGE>
There can be no assurance that we will be able to obtain the requisite
network connectivity at commercially viable prices or that the necessary
connectivity will be available on a timely basis or at all. Failure to obtain
this connectivity would jeopardize our ability to conduct our business in the
Asia-Pacific region and would restrict our growth.
We must offer services priced above the overall cost of bandwidth, and any
failure to do so would jeopardize our operating results.
We purchase our bandwidth capacity in amounts based upon projected usage by
our customers on a fixed-price basis in advance of the sale of our services. We
sell our services, by contract, on the basis of actual usage. If we do not
obtain adequate bandwidth capacity on acceptable terms and realize appropriate
customer volume for such bandwidth, we will not achieve positive gross profit.
We expect that the cost of obtaining bandwidth for the transport of data over
our network will decline over time as a result of, among other things, the
large amount of capital currently being invested to build network
infrastructure. We expect the prices we charge for data transported over our
network will also decline over time as a result of, among other things, the
lower cost of obtaining bandwidth and existing and new competition in the
markets we address. If we fail to accurately predict the decline in costs of
bandwidth, are unable to sell our services at acceptable prices, or fail to
offer additional services from which we can derive additional revenue, the
value of our services will be substantially reduced, our revenue will decrease
and our business, results of operations and financial condition will suffer.
We are dependent upon our management, in particular our Chief Executive Officer
and our Chief Financial Officer and President--U.S., for our future success and
our managers are not obligated to stay with us.
Our future success depends to a significant degree on the skills, experience
and efforts of JoAnn Patrick-Ezzell, our Chief Executive Officer, Jonathan
Beizer, our Chief Financial Officer and President--U.S., and other key
personnel. The loss of the services of any of these individuals could harm our
business and operations. In addition, we have not obtained key person life
insurance on any of our key employees. If any of our key employees left or was
seriously injured and unable to work and we were unable to find a qualified
replacement, our business, results of operations and financial condition could
be harmed.
Our participation in strategic relationships may involve risks associated with
inconsistent goals, exposure to unknown liabilities and unexpected obligations.
As part of our expansion throughout the Asia-Pacific region, we have pursued
and plan to continue to pursue strategic relationships in various countries
throughout the region. There is a risk that our strategic partner may at any
time have economic, business or legal interests or goals that are inconsistent
with ours. There is also a risk that our strategic partner may be unable to
meet its financial, operating or management obligations. Our failure to
establish or maintain successful strategic relationships could slow our growth
and harm our business.
We have recently made and intend to continue to make acquisitions and may
encounter significant difficulties in integrating these acquisitions.
We have recently made several acquisitions and intend to make additional
acquisitions as part of our business strategy. We may not realize the
anticipated benefits of these acquisitions nor be able to assimilate the
operations, products and personnel of acquired businesses and train, retain and
motivate key personnel from the acquired businesses. We may be unable to
maintain uniform standards, controls, procedures and policies if we fail in
these efforts. Similarly, the acquisitions may cause disruptions in, or a loss
of momentum of, these businesses, which could adversely affect the
11
<PAGE>
combined operations. Further, our management may have to divert attention from
day-to-day operations, which could impair our relationships with our current
employees, customers and strategic partners. In addition, our profitability may
suffer because of acquisition-related costs or amortization costs for acquired
goodwill and other intangible assets. If we fail to successfully integrate
these companies and any future acquisitions, our business, results of
operations and financial condition could be harmed.
Our operations, facilities and personnel are widely dispersed, which could
result in management difficulties.
Our current operations and facilities are widely dispersed in the Asia-
Pacific region and will become more dispersed as we carry out our expansion
plans. Our operations are conducted in various countries with different
languages, culture and business practices. The inability of our management to
carefully direct, oversee and supervise the actions of all of our operating
facilities and employees could harm our business and future prospects.
We could lose customers and be exposed to liability if our service to our
customers is disrupted or damaged or the security of confidential information
stored in our computer systems is compromised.
Our success, in particular our ability to successfully provide our services
in a high quality and reliable manner, largely depends upon the efficient and
uninterrupted operation of our Internet data centers, including our computer
and communications hardware and software systems and the power and cooling
systems upon which they rely. Our systems and operations are vulnerable to
damage or interruption from:
. earthquake, fire, flood and other natural disasters;
. failure of our internal systems, including failure of our computer
systems or our telecommunications network, operator negligence, improper
operation by or supervision of our employees;
. third party or systemic infrastructure failures, including Internet
network outages, power and utility loss and problems with the satellite
systems used for our data back-up; and
. disruptions due to human intervention, including computer viruses,
interruption, break-ins, security breaches, misappropriation, denial of
service, vandalism and similar disruptive problems caused by our
customers or Internet hackers.
Any of the acts or events described above could lead to interruptions,
physical or electronic loss of data, delays or cessation of service to our
customers or a decrease in responsiveness, which could harm our relationships
with our customers and result in reduced revenue. Furthermore, any
inappropriate use of the network by third parties could potentially jeopardize
the security of confidential information stored in our computer systems and our
customers' computer systems, which may result in liability to us and act as a
deterrent to potential customers. Although we intend to continue to implement
security measures, any measures we implement may be circumvented in the future.
The costs and resources required to eliminate computer viruses and alleviate
other security problems may divert resources from other activities and may
result in interruptions or delays to our customers that could cause our
business, results of operations and financial condition to suffer.
Our customer contracts currently provide for a limited service level warranty
related to the continuous availability of services. As competition increases,
we will likely need to strengthen these service level warranties, thereby
increasing our potential liability to our customers.
In addition, a customer could bring a lawsuit against us claiming lost
profits or indirect or other consequential damages as the result of service
interruption or other Internet solutions, web site or
12
<PAGE>
application problems that the customer may ascribe to us. There can be no
assurance that a court would enforce any limitations on our liability, and the
outcome of any lawsuit would depend upon the specific facts of the case and
legal and policy considerations. Even unsuccessful claims could result in
significant legal fees and other expenses, damage to our reputation, diversion
of management's time and disruptions in our business, especially since we
operate in many jurisdictions within the Asia-Pacific region and may be subject
to litigation in different jurisdictions.
We operate in a relatively new and evolving market with uncertain prospects for
growth.
The market for Internet access, hosting, co-location, managed services and
other value-added services in the Asia-Pacific region has only recently begun
to develop and is evolving rapidly. Projected growth of this market may not be
realized. Our future growth will depend on continued deregulation and the
continued trend of businesses to outsource their Internet operations and to
expand their presence throughout the Asia-Pacific region. It will also depend
on our ability to market our services effectively. There can be no assurance
that the market for our services will grow, that our services will be adopted
or that businesses will use these Internet-based services to the degree or in
the manner that we expect. It is possible that businesses may find it cheaper,
more secure or otherwise preferable to host their web sites and applications
internally and decide not to outsource the management of their web sites and
applications. If we are not able to react quickly to changes in the market, if
the market fails to develop or develops more slowly than expected or if our
services do not achieve market acceptance, we are unlikely to become
profitable.
Because of their significant stock ownership, our officers, directors and
substantial stockholders will be able to exert significant control over our
future direction.
After this offering, our executive officers and directors, their affiliates
and other substantial stockholders will together control approximately % of
our outstanding common stock as a result of their shareholding prior to the
offering and the directed share program and share allocation to certain
strategic partners. We have requested the underwriters to reserve up to % of
the shares in this offering for purchase as directed shares and % of the
shares for purchase by certain strategic partners. These offerees have no
obligation to buy any shares in the offering. All of these stockholders, if
they act together, will be able to control all matters requiring our
stockholders' approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may delay,
prevent or deter a change in control, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of
iAsiaWorks or its assets and might adversely affect the market price of our
common stock. For more information about our principal stockholders, see
"Principal Stockholders" beginning on page 61.
If the protection of our Internet domain name, our trademarks and our
proprietary rights is inadequate, our brand and reputation could be damaged and
we could lose customers.
If we are unable to adequately protect our trademarks, our Internet domain
name and other intellectual property rights, or must incur costs in doing so,
our business could be harmed. The relationship between regulations governing
Internet domain names and laws protecting trademarks and similar proprietary
rights is unclear, and each may be governed by different laws in each
jurisdiction in which we conduct our business. We may be unable to prevent
third parties from acquiring Internet domain names that are similar to,
infringe upon or otherwise decrease the value of our Internet domain name and
we may need to protect our rights through litigation.
Provisions of our certificate of incorporation and bylaws may make changes of
control difficult, even if they would be beneficial to stockholders.
Prior to the consummation of this offering, we plan to reincorporate in
Delaware. Anti-takeover provisions of Delaware law and in our certificate of
incorporation and bylaws may make a change in
13
<PAGE>
control of iAsiaWorks difficult, even if a change in control would be
beneficial to our stockholders. These provisions may allow our board of
directors to prevent or make changes in the management and control of
iAsiaWorks. In particular, our certificate of incorporation and bylaws will
provide, among other things, that:
. our board of directors will be able to issue up to 20,000,000 shares of
preferred stock with rights and privileges that might be senior to our
common stock, without the consent of the holders of the common stock;
. our authorized but unissued common stock will be available for future
issuance without stockholder approval;
. our board of directors will be divided into three classes that will
serve staggered three year terms and the board of directors will be
authorized to fill vacancies, including newly created directorships;
. directors will be removable by the stockholders only for cause and only
upon a two-thirds vote of the outstanding shares of voting stock;
. stockholder actions will have to be effected at a duly called meeting
and may not be effected by written consent; and
. only the board of directors will be permitted to call a special meeting
of the stockholders, 120 days' advance written notice will be required
for stockholders to bring business or to nominate candidates for
election as directors before an annual meeting of stockholders and a
two-thirds vote of the stockholders will be required to amend our
certificate of incorporation or our bylaws.
In addition, under Delaware law, our board of directors may adopt additional
anti-takeover measures in the future. The rights of holders and the price of
our common stock could be adversely affected by these anti-takeover provisions.
For additional information about our capital stock, see "Description of Capital
Stock" beginning on page 64.
Risks specific to the Internet, our industry and our markets
There are risks associated with doing business in the Asia-Pacific region that
may adversely affect our results of operations.
There are certain risks inherent in conducting business in the Asia-Pacific
region, that could affect our profitability, including:
. political and economic instability;
. risk of expropriation;
. export restrictions, tariffs and other trade barriers;
. changes in regulatory requirements;
. legal restrictions on the business practices of United States companies
operating outside of the United States, such as the Foreign Corrupt
Practices Act; and
. potential adverse tax consequences.
In particular, we are subject to the following risks in our key markets:
Hong Kong. Although Hong Kong is a Special Administrative Region under the
government of mainland China, with its own government and legislature, we can
give no assurance that Hong Kong will remain autonomous from mainland China.
Any loss of autonomy could affect the regulation of business in Hong Kong and
adversely affect our business.
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<PAGE>
South Korea. Relations between South Korea and North Korea have been tense
over most of South Korea's history, and any tension or hostility between these
governments may disrupt the Asia-Pacific region and render us unable to
transact business in South Korea and other countries in the region and
adversely affect our business.
Taiwan. The government of mainland China asserts sovereignty over Taiwan and
has indicated that it may use military force to gain control over the island of
Taiwan. Conflict between Taiwan and mainland China may destabilize the Asia-
Pacific region and render us unable to transact business in Taiwan, mainland
China and other countries in the region, and adversely affect our business.
The economic climate in the Asia-Pacific region is volatile and could adversely
affect our business.
We currently operate throughout the Asia-Pacific region. As a result, our
results of operation and future growth depend on the economies in these
markets.
Beginning in mid-1997, many countries in the Asia-Pacific region experienced
significant economic downturns and related difficulties. As a result of the
decline in the value of the region's currencies, many governments in the Asia-
Pacific region and companies operating in the region had difficulties servicing
foreign currency denominated debt and many corporate borrowers defaulted on
their payments. These currency fluctuations, as well as resulting higher
interest rates and other factors, materially and adversely affected the
economies of many countries in the Asia-Pacific region. While the region has
generally shown signs of improvement in recent periods, we can give no
assurance that the economic conditions in the Asia-Pacific region will continue
to improve or any such improvement can be sustained. Any new adverse economic
development in the Asia-Pacific region could materially and adversely affect
our markets and our business.
Governmental regulation and the application of existing laws to the Internet
may slow the Internet's growth, increase our costs of doing business and create
potential liability for the dissemination of information over the Internet.
Laws and regulations directly applicable to Internet communications are
becoming more prevalent. The international nature of the Internet and the
possibility that we may be subject to conflicting laws of, or the exercise of
jurisdiction by, different countries may make it difficult or impossible to
comply with all the laws that may govern our activities. Furthermore, the law
relating to the liability of online service providers for information carried
on or disseminated through their networks is currently unsettled. Uncertainty
and new laws and regulations in our markets could prevent or limit our ability
to operate in certain of our markets, expose us to compliance costs and
substantial liability and could result in costly and time consuming litigation,
all of which could materially harm our business, operating results and
financial condition. The adoption of any additional laws or regulations may
also inhibit the expansion of the Internet, which could harm our business.
Moreover, in addition to new laws and regulations being adopted, existing
laws may be applied to the Internet. New and existing laws may cover issues
that affect our business, such as:
. national sovereignty issues, including controls on foreign ownership of
Internet-related companies, export controls governing encryption-
containing software and national security concerns;
. rights and protection of Internet users, including user privacy, libel
and defamation, consumer protection, and pornography and obscenity laws;
. controls on the Internet as a market place, including sales and other
taxes, pricing, characteristics and quality of products and services,
antitrust and fair trade laws;
. copyright, trademark and patent infringement laws; and
15
<PAGE>
. other laws relating to the nature and content of Internet materials.
To comply with new or existing laws regulating e-commerce and information on
the Internet, we may need to modify the manner in which we do business, which
could result in additional expenses and could slow our growth. We may need to
hire additional personnel to monitor our compliance with applicable laws. Any
liability as a result of a change in laws or failure to comply with laws could
harm our operations and financial condition.
Underdeveloped telecommunications and Internet infrastructure may limit the
growth of the Internet in the Asia-Pacific region and adversely affect our
business.
Access to the Internet requires advanced telecommunications infrastructure.
The telecommunications infrastructure in many parts of the Asia-Pacific region
is not as well developed as in the United States and is owned and operated by
current or former national monopoly telecommunications carriers or may be
subject to a restrictive regulatory environment. The quality and continued
development of telecommunications infrastructure in the Asia-Pacific region
will have a substantial impact on our ability to deliver our services and on
the market use and acceptance of the Internet in general.
In addition, the recent growth in the use of the Internet has caused frequent
periods of performance degradation, requiring the upgrade of routers and
switches, telecommunications links and other components forming the
infrastructure of the Internet by Internet service providers and other
organizations with links to the Internet. Any perceived degradation in the
performance of the Internet as a whole could undermine the benefits of our
services. The quality of our services is ultimately limited by and reliant upon
the speed and reliability of the networks operated by third parties.
Consequently, the emergence and growth of the market for our services is
dependent on improvements being made to the entire Internet infrastructure in
the Asia-Pacific region to alleviate overloading and congestion.
Currency fluctuations could decrease our revenue or increase our costs. In
addition, restrictions on currency exchange may adversely affect our operations
and our financial performance.
We conduct business in multiple countries in the Asia-Pacific region and
generate revenue, expenses and liabilities in multiple Asia-Pacific currencies.
Gains and losses on the conversion of foreign payments may contribute to
fluctuations in our results of operations and fluctuating exchange rates could
cause reduced revenue and gross margins from international sales. We currently
engage only in very limited currency hedging activities. In addition, some of
the countries in which we operate or plan to operate impose exchange controls.
As a result, we may not be able to freely convert the relevant local currencies
into other Asia-Pacific or non-Asia-Pacific currencies, including U.S. dollars.
Currency rate fluctuations and exchange controls may adversely affect our
operations and financial performance.
Our business and prospects will suffer if the Internet does not develop into an
effective commercial and information medium in the Asia-Pacific region.
The market for Internet services in the Asia-Pacific region has only begun to
develop. Because the Internet is an unproven medium for information,
advertising and other commercial services in the Asia-Pacific region, our
future operating results and prospects depend substantially on the increased
acceptance and use of the Internet for publication, distribution and commerce
in the Asia-Pacific region. Many potential customers may have limited
experience with the Internet, may not have devoted a significant portion of
their available funds to web site development and may not find the Internet to
be effective for promoting, distributing or conducting their products and
services relative to
16
<PAGE>
traditional means. Furthermore, critical issues concerning the commercial use
of the Internet in the Asia-Pacific region, such as security, reliability,
cost, ease of deployment, administration and quality of services, may affect
the adoption of the Internet to solve business needs.
If we do not respond to rapid technological changes, our services could become
obsolete and we could lose customers.
To remain competitive, we must continue to enhance and improve the
functionality and features of our services. If competitors introduce new
products and services featuring new technologies, or if new industry standards,
technologies and practices emerge, our existing technology and systems may
become obsolete or the relative benefit of our services to customers may be
diminished. Furthermore, we may use new technologies ineffectively, or we may
be unable to license or otherwise obtain new technologies from third parties.
Risks related to this offering
Our management has broad discretion as to how to use the proceeds from this
offering and the proceeds may not be appropriately used.
We intend to use a substantial portion of the proceeds from this offering to
establish large-scale, high performance Internet data centers. The remainder
will be used for general corporate purposes and acquisitions. We will, in any
case, have broad discretion over how we use these proceeds. You will not have
the opportunity to evaluate the economic, financial or other information on
which we base our decisions regarding how to use the proceeds from this
offering, and we may spend these proceeds in ways with which you may disagree.
Pending any of these uses, we plan to invest the proceeds of this offering in
short-term, investment-grade, interest-bearing securities. We cannot predict
whether these investments will yield a favorable return.
The price of our common stock after this offering may be lower than the
offering price you pay and may be volatile and limit your ability to sell our
common stock at a profit at any given time, or ever, and may subject us to
lawsuits.
Prior to this offering, our common stock has not been sold in a public
market. After this offering, an active trading market in our stock might not
develop. If an active trading market develops, it may not continue. Moreover,
if an active market develops, the trading price of our common stock may
fluctuate widely as a result of a number of factors, many of which are outside
our control. In addition, the stock market has experienced extreme price and
volume fluctuations that have affected the market prices of many technology
companies, particularly Internet-related companies, and that have often been
unrelated or disproportionate to the operating performance of these companies.
These broad market fluctuations could adversely affect the market price of our
common stock. A significant decline in our stock price could result in
substantial losses for individual stockholders and could lead to a costly and
disruptive securities class action lawsuit.
If you purchase shares of our common stock in this offering, you will pay a
price that was not established in a competitive market. Rather, you will pay a
price that we negotiated with the representatives of the underwriters based
upon a number of factors. The price of our common stock that will prevail in
the market after this offering may be higher or lower than the offering price.
You will pay more for our common stock than your pro rata portion of our assets
is worth; as a result, you will likely receive much less than you paid for your
stock if we liquidate our assets and distribute the proceeds.
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of our common stock. Therefore, you will
incur immediate dilution in net tangible
17
<PAGE>
book value of $ per share, at an assumed initial public offering price of
$ per share, because you will pay more for your shares than the underlying
assets are worth. You may incur additional dilution if holders of stock
options, whether currently outstanding or subsequently granted, exercise their
options or if warrantholders exercise their warrants to purchase common stock
at a price less than book value per share. As a result, you will likely receive
much less than you paid for our stock if we liquidate our assets and distribute
the proceeds. For additional information about the dilution you may suffer, see
"Dilution" on page 22.
Substantial amounts of our common stock could be sold in the near future, which
could depress our stock price.
Prior to this offering, there has been no public market for our common stock,
and we cannot predict the effect, if any, that market sales of shares of common
stock or the availability of shares of common stock for sale will have on the
market price of the common stock prevailing from time to time. If our
stockholders sell substantial amounts of our common stock in the public market
following this offering, including shares issued upon the exercise of
outstanding options and warrants, the trading price of our common stock could
fall. These sales also might make it more difficult for us to sell equity
securities or securities exercisable for or convertible into equity securities
in the future at a time and price that we deem appropriate. Upon completion of
this offering, we will have outstanding shares of common stock,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants. All of the shares we are selling in this
offering and additional shares may be resold in the public market
immediately. Another shares are subject to lock-up agreements and
will become available for resale in the public market beginning 180 days after
the date of this prospectus subject, in some cases, to volume limitations. As
restrictions on resale end, our stock price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as
intending to sell them. For additional information about when our outstanding
shares may be sold on the public market, see "Shares Eligible for Future Sale"
beginning on page 67.
After this offering, if various conditions are met, the holders of
approximately shares of common stock and holders of 636,043 shares
of common stock issuable upon the exercise of outstanding warrants to purchase
Series B preferred stock will be entitled to require us to register their
shares under the Securities Act. These stockholders also have the right to
participate in any registration of our shares that we may undertake on our own.
If these stockholders exercise their registration rights, a large number of our
shares may be registered and sold in the public market. This could adversely
affect the trading price for our shares. If we attempt to raise money through a
registration and sale of our stock and these stockholders require us to allow
them to participate in the registration, our ability to raise the amount of
money that we need to execute our business plan could be adversely affected.
For additional information about our obligations to register our outstanding
shares, see "Description of Capital Stock--Registration Rights" beginning on
page 64.
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<PAGE>
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus are forward-looking statements that
reflect our current views and expectations of future events. These forward-
looking statements can be identified by words or phrases such as "may,"
"anticipate," "expect," "intend," "plan," "believe," "seek," "estimate,"
"is/are likely to," "could have" or other similar expressions. The forward-
looking statements included in this prospectus relate to, among other things,
. our goals, strategies and challenges;
. our future business development, results of operations and financial
condition;
. the expected growth of, change in and demand for Internet-related
technologies and services; and
. governmental policies, laws and regulations regarding Internet and
technology.
These forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties and other factors that are difficult to
predict and could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. These risks and
uncertainties include those described in "Risk Factors" and elsewhere in this
prospectus.
The forward-looking statements made in this prospectus relate only to events
or information as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
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<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock offered
will be approximately $ million at the assumed initial public
offering price of $ per share, after deducting the underwriting discount
and estimated offering expenses. If the underwriters' over-allotment option is
exercised in full, the aggregate net proceeds we will receive will be
approximately $ .
We intend to use the net proceeds of this offering over an approximate 12
month period. We estimate that we will use between $75 to $125 million of the
proceeds for the establishment of additional Internet data center facilities,
and the remainder for general corporate purposes and acquisitions. Except for a
memorandum of understanding with respect to an investment of approximately $2.7
million, we have no agreements or commitments with respect to any acquisition
or investment. For additional information on this memorandum, see Note 14 of
Notes to Consolidated Financial Statements on page F-25. Pending these uses, we
will invest the net proceeds of this offering in short-term, interest-bearing,
investment grade securities. For additional information on our use of proceeds,
see "Risk Factors--Our management has broad discretion as to how to use the
proceeds from this offering and the proceeds may not be appropriately used" on
page 17.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We intend
to retain future earnings, if any, to finance operations and the expansion of
our business and do not anticipate declaring or paying cash dividends in the
foreseeable future. Payments of future dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs and plans for expansion.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of iAsiaWorks as of
December 31, 1999:
. on an actual basis;
. on a pro forma basis giving effect to the exercise of warrants to
purchase 1,279,074 shares of common stock at an exercise price of $0.01
per share, the exercise of warrants to purchase 10,000 shares of
Series B preferred stock at an exercise price of $1.50 per share and,
when taken together with the exercise of these Series B warrants, the
automatic conversion of all outstanding shares of the convertible
preferred stock into 76,472,546 shares of common stock upon the closing
of this offering; and
. on a pro forma as adjusted basis to reflect the estimated net proceeds
from the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share after deducting
the estimated underwriting discount and the estimated offering expenses.
This table should be read in conjunction with the consolidated financial
statements and notes to consolidated financial statements appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Long-term obligations.......................... $ 435 $ 435 $435
-------- -------- ----
Convertible preferred stock: $0.001 par value,
authorized: 83,100,000 shares, actual and
pro forma; 20,000,000 shares, pro forma as
adjusted; issued and outstanding,
73,416,854 shares, actual; no shares issued
and outstanding, pro forma or pro forma as
adjusted...................................... 114,699 -- --
-------- -------- ----
Stockholders' equity (deficit):
Common stock: $0.001 par value, authorized:
109,100,000 shares, actual and pro forma;
300,000,000 shares, pro forma as adjusted;
issued and outstanding, 8,747,625 shares,
actual; issued and outstanding 86,499,245
shares, pro forma; issued and outstanding,
shares pro forma as adjusted........... 9 86
Additional paid-in capital................... 19,032 133,682
Deferred stock-based compensation............ (13,242) (13,242)
Accumulated other comprehensive loss......... (900) (900)
Accumulated deficit.......................... (33,839) (33,839)
-------- -------- ----
Total stockholders' equity (deficit)....... (28,940) 85,787
-------- -------- ----
Total capitalization....................... $ 86,194 $ 86,222 $
======== ======== ====
</TABLE>
The number of shares outstanding as of December 31, 1999 excludes:
. 13,432,344 shares of Common Stock issuable upon exercise of stock
options outstanding at a weighted average exercise price of $0.16 per
share;
. 25,000,000 shares of common stock reserved for issuance under the 2000
Stock Incentive Plan that incorporates our 1995 Stock Plan;
. 500,000 shares of common stock reserved for issuance under the 2000
Employee Stock Purchase Plan;
. 636,043 shares of common stock issuable upon exercise of outstanding
warrants to purchase Series B preferred stock at an exercise price of
$1.50 per share.
See "Benefit Plans," "Description of Capital Stock" and Note 7 of Notes to
Consolidated Financial Statements beginning on pages 50, 64 and F-18,
respectively.
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DILUTION
Our pro forma net tangible book value as of March 31, 2000, was approximately
$ , or $ per share. Pro forma net tangible book value per
share represents total tangible assets less total liabilities, divided by the
number of shares of common stock outstanding after giving effect to the
conversion of all outstanding convertible preferred stock. After giving effect
to the sale of shares of common stock being offered at an assumed initial
public offering price of $ per share, and after deducting estimated
underwriting discounts and commissions and estimated offering expenses, our pro
forma net tangible book value at March 31, 2000, would have been $ , or
$ per share. This represents an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution
of $ per share to new investors purchasing shares of common stock in
this offering. Dilution is defined as the diminution in the proportion of
income, or earnings per share, to which each share is entitled due to the
issuance of additional shares. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share as of December 31,
1999............................................................ $
Increase per share attributable to new investors.................
---
Pro forma net tangible book value per share after the offering.....
---
Dilution per share to new investors................................ $
===
</TABLE>
The following table summarizes, as of March 31, 2000, on a pro forma basis,
the total number of shares and consideration paid to us and the average price
per share paid by existing stockholders and by new investors purchasing shares
of common stock in this offering at an assumed initial public offering price of
$ per share (before deducting the estimated underwriting discount and
estimated offering expenses):
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration Average
------------------ ---------------- Price
Number Percent Amount Percent Per Share
---------- ------- -------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 87,441,115 % $110,953 % $1.27
New public investors...........
---------- --- -------- ---
Totals....................... 100% $ 100%
========== === ======== ===
</TABLE>
The foregoing computations are based on the number of shares of common stock
outstanding as of March 31, 2000 and exclude:
. 15,887,389 shares of common stock issuable upon exercise of stock
options outstanding at a weighted average exercise price of $0.2908 per
share;
. 25,000,000 shares of common stock reserved for issuance under the 2000
Stock Incentive Plan that incorporates our 1995 Stock Plan;
. 500,000 shares of common stock reserved for issuance under the 2000
Employee Stock Purchase Plan;
. 636,043 shares of common stock issuable upon exercise of outstanding
warrants to purchase Series B preferred stock at an exercise price of
$1.50 per share.
To the extent that any of these options or warrants are exercised, there
could be further dilution to new investors. See "Capitalization", "Benefit
Plans," "Description of Capital Stock" and Notes 6, 7 and 8 to Notes to
Consolidated Financial Statements beginning on pages 21, 50, 64, F-16, F-18 and
F-20, respectively.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for the fiscal years ended
December 31, 1997, 1998 and 1999 and the consolidated balance sheet data as of
December 31, 1998 and 1999 are derived from our audited consolidated financial
statements included elsewhere in this prospectus. The consolidated statement of
operations data for the fiscal years ended December 31, 1995 and 1996 and the
consolidated balance sheet data as of December 31, 1995, 1996 and 1997 are
derived from our audited consolidated financial statements not included in this
prospectus. The pro forma statement of operations data for the fiscal year
ended December 31, 1999 has been derived from the unaudited pro forma combined
consolidated statement of operations included elsewhere in this prospectus. The
historical results are not necessarily indicative of the operations to be
expected for future periods.
You should read the selected consolidated financial data set forth below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes to consolidated financial statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------- -----------
Years Ended December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999 1999**
------ ------- ------- ------- -------- -----------
(in thousands of dollars
except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue:
Internet access and
related services...... $ -- $ 1 $ 1,597 $ 3,490 $ 5,384 $ 14,591
Hosting, co-location
and other managed
services.............. -- -- -- -- 245 1,268
------ ------- ------- ------- -------- --------
Total revenue.......... -- 1 1,597 3,490 5,629 15,859
Cost of revenue:
Cost of Internet access
and related services.. -- 53 2,199 4,621 5,417 13,497
Cost of hosting, co-
location and other
managed services...... -- -- -- -- 401 1,240
------ ------- ------- ------- -------- --------
Total cost of revenue.. -- 53 2,199 4,621 5,818 14,737
------ ------- ------- ------- -------- --------
Gross margin............ -- (52) (602) (1,131) (189) 1,122
Operating expenses:
Network operations and
support............... -- 330 1,538 1,628 1,539 1,539
Sales and marketing.... 15 923 2,391 1,471 2,372 2,922
General and
administrative........ 149 1,252 1,935 2,203 3,511 5,410
Amortization of
intangible assets..... -- -- -- -- 298 7,162
Stock-based
compensation.......... -- -- -- 220 4,070 4,070
------ ------- ------- ------- -------- --------
Total operating
expenses.............. 164 2,505 5,864 5,522 11,790 21,103
------ ------- ------- ------- -------- --------
Loss from operations.... (164) (2,557) (6,466) (6,653) (11,979) (19,981)
Interest income......... 4 153 353 238 288 289
Interest expense........ (110) (388) (384) (384)
Other income (expense),
net.................... 20 (16) (2) (18) 19 231
------ ------- ------- ------- -------- --------
Loss before provision
for income taxes....... (140) (2,420) (6,225) (6,821) (12,056) (19,845)
Provision for income
taxes.................. -- -- 11 2 -- --
------ ------- ------- ------- -------- --------
Net loss................ (140) (2,420) (6,236) (6,823) (12,056) (19,845)
Dividend accretion on
preferred stock........ (197) (487) (1,376) (1,814) (2,287) (2,287)
------ ------- ------- ------- -------- --------
Net loss attributable to
common stockholders.... (337) (2,907) (7,612) (8,637) (14,343) (22,132)
Other comprehensive
loss:
Change in unrealized
gain (loss) on
marketable
securities............ -- 3 -- 4 (4) (4)
Change in foreign
currency translation
adjustments........... (1) (4) (560) 139 (477) (477)
------ ------- ------- ------- -------- --------
Comprehensive loss...... $ (338) $(2,908) $(8,172) $(8,494) $(14,824) $(22,613)
====== ======= ======= ======= ======== ========
Net loss per share
attributable to common
stockholders, basic and
diluted................ $(0.62) $ (5.38) $(14.10) $(10.29) $ (4.87) $ (7.52)
====== ======= ======= ======= ======== ========
Shares used in computing
net loss per share
attributable to common
stockholders, basic and
diluted................ 540 540 540 839 2,945 2,945
====== ======= ======= ======= ======== ========
Pro forma net loss per
share attributable to
common stockholders,
basic and diluted
(unaudited)*........... $ (0.36) $ (0.56)
======== ========
Shares used in computing
pro forma net loss per
share attributable to
common stockholders,
basic and diluted
(unaudited)............ 39,530 39,530
======== ========
</TABLE>
- --------
* The pro forma net loss per share data reflect the automatic conversion of
preferred stock as described in Note 2 of Notes to Consolidated Financial
Statements--Pro forma net loss per share(unaudited) beginning on page F-12.
** The unaudited summary pro forma combined statement of operations data at
December 31, 1999 reflects the acquisition of AT&T EasyLink as if it had
occurred on January 1, 1999, and after giving effect to purchase accounting
adjustments.
23
<PAGE>
The diluted net loss per share attributable to common stockholders
computation excludes potential shares of common stock (preferred stock,
warrants to purchase preferred stock or common stock, options to purchase
common stock and common stock subject to repurchase rights held by us), since
their effect would be antidilutive. See Note 2 of Notes to Consolidated
Financial Statements--Net loss per share on page F-11 for a detailed
explanation of the determination of the shares used to compute actual and pro
forma basic and diluted net loss per share.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Cash and cash equivalents..... $ 3,227 $ 6,774 $ 1,204 $ 2,654 $ 42,222
Marketable securities......... -- -- -- 4,433 --
Working capital............... 3,180 8,870 2,493 6,506 40,264
Total assets.................. 3,262 10,797 5,314 10,796 91,616
Long-term obligations, net of
current portion.............. -- -- -- 677 435
Convertible preferred stock... 3,536 13,467 15,994 26,712 114,699
Total stockholders' deficit... $ (325) $(3,235) $(11,407) $(18,435) $(28,940)
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the discussion in this prospectus contains
forward-looking statements that involve risks and uncertainties. These forward-
looking statements include, among others, those statements including the words
"expects," "anticipates," "intends," "believes" and similar language.
iAsiaWorks' actual results could differ materially from those discussed in this
prospectus. Factors that could cause or contribute to these differences
include, but are not limited to, the risks discussed in the section entitled
"Risk Factors" in this prospectus.
Overview
From inception in August 1995 until July 1999, we focused on providing
high-speed, leased-line Internet access to business customers in selected
markets in the Asia-Pacific region and derived substantially all of our revenue
from these services. In July 1999, we began to implement a significant change
in our business strategy to focus on providing dedicated hosting, co-location,
managed services and other value-added services. Prior to that time, we derived
virtually no revenue from hosting and co-location services. During the quarter
ended December 31, 1999, hosting and co-location services accounted for 11% of
our revenue. As of April 10, 2000, we had more than 3,800 business customers,
including more than 120 dedicated hosting and co-location customers.
Internet access, hosting, co-location and certain managed services, such as
security and monitoring services, are billed on a monthly basis. Contracts for
these services are generally for an initial one-year term. Certain other
managed services and value-added services are typically billed on a usage
basis.
Cost of revenue consists primarily of the cost of contracting for lines from
telecommunication providers worldwide and, to a lesser extent, the cost of our
network operations. We lease lines under contracts of one year or more. The
leasing of international private lines comprises the largest component of our
telecommunications expense, with additional costs arising from leasing local
circuits into our Internet data centers. In the future, we expect to increase
the size and number of circuits leased as our network volume grows and we
expand geographically.
We intend to establish a network of large-scale, high performance Internet
data centers throughout the Asia-Pacific region. As we establish these
facilities, we will also need to increase substantially our sales, marketing,
product development and network operations support staff and infrastructure to
support our network growth and geographic expansion. Most of these
developmental costs will be incurred prior to the realization of a commensurate
growth in revenue. As a result, we believe that we will continue to incur
operating and net losses for at least the next several years, and that our
losses will increase significantly from current levels.
25
<PAGE>
Results of Operations
We believe that period-to-period comparisons of our historical operating
results are not necessarily meaningful and should not be relied upon as being
indicative of future performance. Our prospects must be considered in light of
the risks, expenses and difficulties frequently experienced by companies in
early stages of development, particularly companies in new and rapidly evolving
markets like ours. Although we have experienced significant revenue growth
recently, this trend may not continue. Furthermore, we may not achieve or
maintain profitability in the future. The following table presents selected
financial data for the periods indicated as a percentage of total revenue.
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Revenue:
Internet access and related services.............. 100.0 % 100.0 % 95.6 %
Hosting, co-location and other managed services... 0.0 0.0 4.4
------ ------ ------
Total revenue................................... 100.0 100.0 100.0
Cost of revenue:
Cost of internet access and related services...... 137.7 132.4 96.3
Cost of hosting, co-location and other managed
services......................................... 0.0 0.0 7.1
Total cost of revenue........................... 137.7 132.4 103.4
------ ------ ------
Gross margin........................................ (37.7) (32.4) (3.4)
------ ------ ------
Operating expenses:
Network operations and support.................... 96.3 46.6 27.3
Sales and marketing............................... 149.7 42.1 42.1
General and administrative........................ 121.2 63.1 62.4
Amortization of intangible assets................. 0.0 0.0 5.3
Stock-based compensation.......................... 0.0 6.4 72.4
------ ------ ------
Total operating expenses........................ 367.2 158.2 209.5
------ ------ ------
Loss from operations................................ (404.9) (190.6) (212.9)
Interest income (expense), net...................... 15.2 (4.3) (1.7)
Other income (expense), net......................... (0.8) (0.6) 0.2
------ ------ ------
Net loss............................................ (390.5%) (195.5%) (214.2%)
====== ====== ======
</TABLE>
Years Ended December 31, 1997, 1998 and 1999
Revenue
Total revenue increased from $1.6 million in 1997 to $3.5 million in 1998,
and to $5.6 million in 1999, which represents an increase of 119% from 1997 to
1998, and of 61% from 1998 to 1999. These increases in revenue were due
primarily to an increase in the number of customers, which more than offset a
decline in average revenue per customer due to decreasing prices for Internet
access. Revenues in 1999 included $409,000 resulting from the acquisition of a
Hong Kong Internet business from AT&T in mid-December 1999, which was accounted
for using the purchase method. Internet access and related services represented
100% of total revenues for 1997 and 1998, and 95.6% of total revenue for 1999.
Hosting, co-location and other managed services, which we began offering in
1999, accounted for $245,000 or 4.4% of total revenue in 1999.
26
<PAGE>
The following table shows our revenue, based on location of customers, for
each of the last three years in the countries shown:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------
1997 1998 1999
------ ------ ------
(in thousands)
<S> <C> <C> <C>
South Korea............................................. $ 22 $ 436 $3,750
Taiwan.................................................. $1,448 $2,700 $1,362
United States........................................... $ 75 $ 220 $ 37
</TABLE>
Aggregate revenue in all countries, excluding the United States, was $1.5
million for 1997, $3.3 million for 1998 and $5.6 million for 1999.
Our South Korea operations were started in late 1997 and have experienced
consistent and rapid growth. Our operations in Taiwan, which were substantially
established in 1997, experienced significant growth in 1998 due to increased
investment in the business and the effect of a large one-time sale. In late
1998, our Taiwanese business was down-sized leading to lower revenues in 1999.
Prior to the current fiscal year, we had not focused on growing our U.S.
revenues. Historic revenue variability in the U.S. is due to the gain or loss
of a few leased-line Internet access customers.
Expenses
Cost of Revenue
Cost of Internet access and related services increased from $2.2 million for
1997 to $4.6 million for 1998 and to $5.4 million for 1999, which represents an
increase of 110% from 1997 to 1998, and of 17% from 1998 to 1999. As a
percentage of revenue from Internet access and related services, cost of
revenue for these services was 137.7% for 1997, 132.4% for 1998 and 100.6% for
1999. The increased gross margin for 1999 was due primarily to economies of
scale in buying bandwidth and equipment and decreased costs of international
private lines.
The negative gross margin for hosting, co-location and other managed services
reflects our initial investment in infrastructure for these services and the
fact that we have not achieved a level of bandwidth usage that will provide
economies of scale. We anticipate that we will continue to have negative
margins until we achieve the necessary revenue growth to offset the significant
front-end costs of establishing facilities and infrastructure to support our
strategic focus on providing these services.
Network Operations and Support
Although network operations and support expenses have been relatively flat
for the last three years, we expect these expenses will increase significantly
as we deploy and staff our planned new large-scale, high performance Internet
data center facilities.
Sales and Marketing
Sales and marketing expenses decreased from $2.4 million in 1997 to $1.5
million in 1998 and increased to $2.4 million in 1999. The decrease in 1998 was
due primarily to downsizing of our sales and marketing staff in reaction to the
Asian economic crisis. The increase in 1999 reflected primarily an increase in
staffing and related expenses both in the Asia-Pacific region and in the United
States. We expect that these expenses will increase significantly as we
continue to expand our Asia-Pacific and U.S.-based sales force and presence.
27
<PAGE>
General and Administrative
General and administrative expenses increased from $1.9 million in 1997 to
$2.2 million in 1998 and to $3.5 million in 1999, which represents an increase
of 14% from 1997 to 1998, and of 59% from 1998 to 1999. The increase from 1998
to 1999 was due primarily to the recruitment and hiring of executive
management. We expect that general and administrative costs will increase
further as we continue to build the organization to support our expansion
plans.
Amortization of Intangible Assets
In connection with the acquisition of a Hong Kong Internet business from AT&T
in mid-December 1999, we recorded amortization of intangible assets of $298,000
in 1999.
Stock-Based Compensation
In connection with the grant of stock options to employees and consultants,
we recorded deferred stock-based compensation of approximately $1.5 million in
the year ended December 31, 1998, compared to $16.1 million in 1999. These
amounts were recorded as a component of stockholders equity and are being
amortized as charges to operations over the vesting periods of the options. We
recorded stock-based compensation of approximately $0.2 million in 1998 and
$4.1 million in 1999. For options granted through December 31, 1999, we expect
to record additional amortization expense for deferred compensation as follows:
$7.0 million in 2000, $3.7 million in 2001, $1.9 million in 2002 and $0.6
million in 2003, assuming no additional stock option cancellations. We will
also record an additional $12.3 million of deferred stock compensation related
to options to purchase 2.9 million shares of common stock granted during the
first quarter of 2000. For additional information on our stock-based
compensation, see Note 7 of Notes to Consolidated Financial Statements
beginning on page F-18.
Interest Income (Expense), Net
Interest income (expense), net was $243,000 in 1997, ($150,000) in 1998, and
($96,000) in 1999. Net interest expense in 1998 reflected an increase in
outstanding debt as compared to 1997. The decrease in interest expense in 1999
reflected primarily interest earned from the investment of the proceeds from
the sale of preferred stock.
Provision for Income Taxes
We have incurred operating losses for all periods from inception through
December 31, 1999. 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 carry-forwards for federal
and state tax purposes of approximately $6.5 million and $238,000,
respectively. These federal and state tax loss carry-forwards are available to
reduce future taxable income and expire at various dates between 2003 and 2018
if not utilized. Under the provisions of the Internal Revenue Code, certain
substantial changes in our ownership may limit the amount of net operating loss
carry-forwards that could be utilized annually in the future to offset taxable
income.
28
<PAGE>
Quarterly Results of Operations
The following tables set forth a summary of our unaudited quarterly operating
results for each of the four quarters in the period ended December 31, 1999.
The information has been derived from our consolidated unaudited financial
statements that, in management's opinion, have been prepared on a basis
consistent with the audited consolidated financial statements contained
elsewhere in this prospectus and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of such
information when read in conjunction with our audited consolidated financial
statements and notes thereto. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
--------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Revenue:
Internet access and related
services......................... $ 831 $ 1,167 $ 1,529 $ 1,857
Hosting, co-location and other
managed services................. 3 7 13 222
------- ------- ------- -------
Total revenue.................... 834 1,174 1,542 2,079
------- ------- ------- -------
Cost of revenue:
Cost of Internet access and
related services................. 1,013 1,153 1,404 1,847
Cost of hosting, co-location and
other managed services........... 86 88 86 141
------- ------- ------- -------
Total cost of revenue............ 1,099 1,241 1,490 1,988
------- ------- ------- -------
Gross margin........................ (265) (67) 52 91
------- ------- ------- -------
Operating expenses:
Network operations and support.... 373 369 317 480
Sales and marketing............... 370 556 657 789
General and administrative........ 721 696 828 1,266
Amortization of intangible
assets........................... 0 0 0 298
Stock-based compensation.......... 244 263 1,527 2,036
------- ------- ------- -------
Total operating expenses......... 1,708 1,884 3,329 4,869
------- ------- ------- -------
Loss from operations................ (1,973) (1,951) (3,277) (4,778)
------- ------- ------- -------
Interest income (expense), net...... 32 12 (93) (47)
Other income (expense), net......... 1 0 (1) 19
------- ------- ------- -------
Net loss............................ (1,940) (1,939) (3,371) (4,806)
Dividend accretion on preferred
stock.............................. (597) (597) (597) (496)
------- ------- ------- -------
Not loss attributable to common
stockholders....................... $(2,537) $(2,536) $(3,968) $(5,302)
======= ======= ======= =======
As a Percentage of Total Revenue:
Revenue:
Internet access and related
services......................... 99.6% 99.4% 99.2% 89.3%
Hosting, co-location and other
managed services................. 0.4 0.6 0.8 10.7
------- ------- ------- -------
Total revenue.................... 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of Internet access and
related services................. 121.4 98.2 91.1 88.8
Cost of hosting, co-location and
other managed services........... 10.3 7.5 5.5 6.8
------- ------- ------- -------
Total cost of revenues........... 131.7 105.7 96.6 95.6
------- ------- ------- -------
Gross margin........................ (31.7) (5.7) 3.4 4.4
------- ------- ------- -------
Operating expenses:
Network operations and support.... 44.7 31.4 20.6 23.1
Sales and marketing............... 44.3 47.4 42.6 38.0
General and administrative........ 86.4 59.2 53.7 60.9
Amortization of intangible
assets........................... 0.0 0.0 0.0 14.3
Stock-based compensation.......... 29.3 22.4 99.0 98.0
------- ------- ------- -------
Total operating expenses......... 204.8 160.4 215.9 234.3
------- ------- ------- -------
Loss from operations................ (236.5) (166.1) (212.5) (229.9)
------- ------- ------- -------
Interest income (expense), net...... 3.8 0.9 (6.0) (2.2)
Other income (expense), net......... 0.1 0.0 (0.1) 0.9
Net loss............................ (232.6) (165.2) (218.6) (231.2)
Divident accretion on preferred
stock.............................. (71.6) (50.9) (38.7) (23.9)
------- ------- ------- -------
Net loss attributable to common
stockholders....................... (304.2%) (216.1%) (257.3%) (255.1%)
======= ======= ======= =======
</TABLE>
29
<PAGE>
The amount and timing of our operating expenses generally will vary from
quarter to quarter depending on our level of actual and anticipated business
activities. Our revenue and operating results are difficult to forecast and
will fluctuate. We believe that period-to-period comparisons of our operating
results will not necessarily be meaningful. As a result, you should not rely
upon them as an indication of future performance.
Liquidity and Capital Resources
From inception, we have financed our operations primarily from private sales
of convertible preferred stock, net of issuance costs, totaling $109.4 million
and, to a lesser extent, from bank borrowings and lease financings.
Net cash used in our operating activities for 1999 was $5.8 million and for
investing activities was $40.1 million. Net cash provided by financing
activities was $85.5 million and is related primarily to the issuance of our
Series D Preferred Stock.
At December 31, 1999, we had cash and cash equivalents aggregating $42.2
million and restricted cash totaling $50,000. Our restricted cash secures a
letter of credit issued in connection with the lease of our corporate offices.
In addition, our debt balance at December 31, 1999 was $598,000, which related
to the remaining balance on a line of credit that expired in 1999.
We expect to devote substantial resources to continue to establish additional
Internet data centers throughout the Asia-Pacific region, expand our sales,
support, marketing and product development organizations and build the
infrastructure necessary to support our growth. In March 2000, the Company
entered into an operating lease agreement for data center space in Hong Kong.
The lease term is 12 years and will commence upon substantial completion of the
building under construction, estimated to be December 2000. Under the terms of
the lease the Company is committed to pay a monthly rental ranging from
$500,000 to $800,000, subject to an option for additional space and certain
escalation clauses over the lease term. The lease agreement provides the
Company with an option to extend the lease term for an additional eight years.
Although we believe that the proceeds of this offering, together with our
current cash and cash equivalents and our borrowing capacity, will be
sufficient to fund our activities for at least the next 12 months, there can be
no assurance that we will not require additional financing within this time
frame or that such additional funding, if needed, will be available on terms
acceptable to us or at all. In addition, we are regularly evaluating potential
acquisitions, and we may need to rely on additional equity or debt financings
to finance future acquisitions.
30
<PAGE>
BUSINESS
The Company
We offer a broad range of Internet solutions that allow business customers to
build or extend their presence across multiple markets in the Asia-Pacific
region. Our solutions include high-speed, leased-line Internet access, hosting,
co-location, managed services and other value-added services. Our customers
include Asia-Pacific businesses that desire to establish or extend their
Internet operations within the Asia-Pacific region and into the United States
and businesses located outside the region that wish to conduct Internet
operations in the Asia-Pacific region. We help our customers enter markets that
are complex and difficult for non-indigenous businesses to penetrate.
From inception in August 1995 until July 1999, we established local business
operations, built Internet data centers and provisioned direct Internet
connectivity to the major Internet service providers. During this period, we
focused nearly exclusively on providing high-speed, leased-line Internet access
to business customers in selected markets in the Asia-Pacific region. In July
1999, we began to implement a significant change in our business strategy to
focus on providing dedicated hosting, co-location, managed services and other
value-added services. At this time, we were operating in Hong Kong, Taiwan,
South Korea and the United States. To enhance our ability to deliver hosting
and co-location services throughout the Asia-Pacific region, we subsequently
established relationships with Internet service providers and hosting companies
in mainland China, Japan, Australia, New Zealand, the Philippines, Thailand and
Singapore.
To facilitate our strategic business shift, we acquired a Hong Kong Internet
business from AT&T in December 1999. This acquisition provided us with an
Internet data center in Hong Kong, substantial local peering and international
interconnectivity, an established hosting and co-location operation serving
businesses in Hong Kong and mainland China, and experienced, knowledgeable
employees in Hong Kong. This year, we have also acquired two hosting companies,
one based in the U.S. and one in Australia, which provide us with
technologically sophisticated hosting capabilities and experienced local
management.
Additionally, to provide a full suite of value-added services to our
customers, we created our Works Group alliance program. Through this program,
we have established contractual relationships with web development,
translation, localization, legal and regulatory compliance, e-commerce
transaction processing, fulfillment and logistics companies, in the United
States and various markets in the Asia-Pacific region.
We currently provide Internet solutions to more than 3,800 business customers
in the Asia-Pacific region, including more than 120 dedicated hosting and co-
location customers, through Internet data centers located in Hong Kong, South
Korea, Taiwan, Australia, mainland China, the Philippines, Thailand,
New Zealand and the United States.
Our goal is to become the pre-eminent single source provider of business
Internet solutions throughout the Asia-Pacific region with a primary focus on
dedicated hosting, co-location and managed services. To achieve this goal, we
intend to establish large-scale, high-performance Internet data centers, expand
our U.S. and Asia-Pacific sales, marketing and customer support services, and
continue to pursue acquisition and strategic partnership opportunities.
Industry Background
The Asia-Pacific and United States Internet Market
International Data Corporation, or IDC, a market research firm, projects that
the Internet market in the Asia-Pacific region will be the fastest growing
major region in the world. IDC estimates that the
31
<PAGE>
number of Internet users in the Asia-Pacific region will grow from 24 million
at the end of 1998 to approximately 138 million by the end of 2003,
representing a compounded annual growth rate, or CAGR, of 41%. This compares
to IDC's estimate that Internet users in the U.S. will grow from 69 million at
the end of 1998 to 197 million by the end of 2003, representing a CAGR of 23%.
Similarly, IDC expects e-commerce revenues in the Asia-Pacific region during
this period to grow from $5.5 billion to $304.5 billion, which represents a
CAGR of 124%, while e-commerce revenue in the U.S. is estimated to increase
from $44.8 billion to $726.1 billion, representing a CAGR of 75%.
This growth in e-commerce and Internet usage has stimulated the demand for
Internet hosting, co-location, managed services and other value-added services
throughout the world. As an indication of the potential of the Internet
hosting market, IDC predicts U.S.-based Internet hosting and co-location
revenue will increase at a CAGR of 87% from $822.7 million in 1998 to $18.9
billion in 2003. While IDC has not reported estimates of hosting and co-
location growth during this period in the Asia-Pacific region, we believe
that, as in the United States, the demand for Internet hosting and co-location
services in the Asia-Pacific region will be closely correlated to the growth
in number of e-commerce and Internet users.
Within the Asia-Pacific region, the 11 markets of Hong Kong, South Korea,
Taiwan, Australia, mainland China, India, Japan, Singapore, the Philippines,
Thailand and New Zealand represent approximately 96% of the Internet user
market, as adjusted for multiple site use. The following regional map provides
an overview of the key Internet growth projections for various countries
within the Asia-Pacific region.
<TABLE>
<CAPTION>
[MAP CONTAINING THE FOLLOWING DATA AND
INFORMATION AS OBTAINED FROM IDC/EIU]
------------------------------
HONG KONG
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 6.7 7.3 1.3%
GDP/Head (US$) 24,830 25,380 0.4%
Internet Users 0.7 2.3 26.9%
Internet Penetration Rate 10.4% 31.5% 24.8%
E-Commerce (US$) 60.8 3,160.3 120.4%
<CAPTION>
------------------------------
SOUTH KOREA
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 46.4 48.5 0.9%
GDP/Head (US$) 6,910 12,470 12.5%
Internet Users 1.7 9.2 39.5%
Internet Penetration Rate 3.7% 18.9% 38.7%
E-Commerce (US$) 56.5 10,290.0 183.2%
<CAPTION>
------------------------------
TAIWAN
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 21.7 22.7 0.9%
GDP/Head (US$) 12,007 18,879 9.5%
Internet Users 1.0 4.5 34.9%
Internet Penetration Rate 4.6% 19.9% 33.8%
E-Commerce (US$) 45.2 5,213.3 158.4%
<CAPTION>
------------------------------
AUSTRALIA
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 18.8 19.8 1.0%
GDP/Head (US$) 19,350 29,080 8.5%
Internet Users 3.8 9.9 21.1%
Internet Penetration Rate 20.2% 50.0% 19.5%
E-Commerce (US$) 432.7 14,222.2 101.1%
<CAPTION>
------------------------------
CHINA
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 1,242.4 1,300.5 0.9%
GDP/Head (US$) 770 970 1.9%
Internet Users 2.4 25.2 60.0%
Internet Penetration Rate 0.2% 1.9% 56.9%
E-Commerce (US$) 8.1 6,547.3 281.4%
<CAPTION>
------------------------------
INDIA
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 970.9 1,046.7 1.5%
GDP/Head (US$) 490 640 5.5%
Internet Users 0.5 11.3 88.8%
Internet Penetration Rate 0.1% 1.1% 61.5%
E-Commerce (US$) 2.9 1,635.2 253.8%
<CAPTION>
------------------------------
JAPAN
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 126.4 128.8 0.4%
GDP/Head (US$) 29,907 40,090 6.0%
Internet Users 11.5 60.3 39.3%
Internet Penetration Rate 9.1% 46.8% 38.8%
E-Commerce (US$) 4,729.7 253,218.2 121.7%
<CAPTION>
------------------------------
SINGAPORE
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 3.2 3.4 1.2%
GDP/Head (US$) 26,672 38,618 7.7%
Internet Users 0.6 1.9 27.3%
Internet Penetration Rate 18.8% 55.9% 24.3%
E-Commerce (US$) 35.2 2,811.4 140.2%
<CAPTION>
------------------------------
PHILIPPINES
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 75.2 83.3 2.1%
GDP/Head (US$) 866 1,116 5.2%
Internet Users 0.3 1.7 42.8%
Internet Penetration Rate 0.4 2.0 37.9%
E-Commerce (US$) 6.8 1,011.6 171.6%
<CAPTION>
------------------------------
THAILAND
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 61.2 64.1 1.0%
GDP/Head (US$) 1,870 2,530 6.2%
Internet Users 0.6 3.0 40.3%
Internet Penetration Rate 1.0 4.7 36.3%
E-Commerce (US$) 9.8 1,345.7 167.9%
<CAPTION>
------------------------------
NEW ZEALAND
------------------------------
1998 2003 CAGR
---- ---- ----
<S> <C> <C> <C>
Population 3.8 4.0 1.0%
GDP/Head (US$) 13,890 16,840 3.9%
Internet Users 0.5 1.8 28.8%
Internet Penetration Rate 13.2 45.0 27.8%
E-Commerce (US$) 39.9 1,565.9 108.3%
</TABLE>
Information contained in the map above reflects all amounts in US$ million
except % and GDP/Head data; Internet user numbers in millions.
32
<PAGE>
In general, we see a number of favorable factors driving the growth of the
Internet in the Asia-Pacific region:
. telecommunications deregulation in what had formerly been monopoly
controlled markets;
. a significant expansion and corresponding cost reduction of
international bandwidth;
. proliferation of lower cost Internet access devices;
. reliance on trade; and
. development of and increase in local language content.
Hong Kong. Hong Kong was one of the first major population centers globally,
as well as in the Asia-Pacific region, to have a fully digital
telecommunications network and is currently expanding its broadband Internet
access capability to meet expected increases in demand. IDC forecasts e-
commerce revenues to increase from $60.8 million in 1998 to $3.2 billion by
2003, which represents a CAGR of 120%. We expect overall Internet growth to be
further enhanced by government driven incentives to encourage the use of the
Internet. Hong Kong is a deregulated market in which there are now three
competitive local exchange carriers competing with Hong Kong Telecom for the
local fixed-line market as well as interconnections with long distance
carriers. We believe this increased level of competition will benefit us by
providing alternative choices for both carriers and providers and will
ultimately result in reduced costs for bandwidth in Hong Kong.
South Korea. The Internet in South Korea is growing rapidly and the Ministry
of Information and Communication in South Korea has indicated that the number
of Internet users could reach 16 million by 2003. IDC forecasts e-commerce
revenues to reach $10.3 billion in 2003, from $56.5 million in 1998, which
represents a CAGR of 183%. We believe South Korea is one of the fastest growing
Internet markets in the Asia-Pacific region, and has disproportionately high
levels of domestic traffic flow compared to other countries in the Asia-Pacific
region, which correlate to lower costs of Internet access.
Taiwan. The Directorate General of Telecommunications has announced plans to
deregulate the fixed-line network in Taiwan. We believe that deregulation of
the fixed-line network market will result in an increase in competition and
will lead to a decline in Internet access costs, which will serve as a catalyst
for further growth in Taiwan's Internet market. E-commerce revenues in Taiwan
have been forecasted by IDC to increase from $45.2 million in 1998 to $5.2
billion by 2003, which represents a CAGR of 158%.
Australia. Australia has the highest Internet penetration rate in the Asia-
Pacific region. According to IDC, the Internet has seen widespread penetration
into the business sector, with the increasing use of internal company networks,
or intranets, as businesses are becoming increasingly cognizant of the
increasing amount of sensitive information available on internal company
networks. IDC forecasts e-commerce revenues to reach $14.2 billion in 2003,
from $432.7 million in 1998, which represents a CAGR of 101%. This increase in
e-commerce revenue will be largely fueled by the increasing sophistication of
secure transaction technology, leading to increasing confidence in online
purchases.
Mainland China. The Internet market in mainland China is expanding rapidly.
We believe that growth in Internet use will be supported by an expected
reduction in access costs and personal computer prices in mainland China. E-
commerce revenues in mainland China have been forecasted by IDC to reach $6.5
billion by 2003 from $8.1 million in 1998, which represents a CAGR of 281%. The
potential for Internet access through television-based Internet access devices,
using telephone lines, cable or satellite technology, may further accelerate
Internet growth.
33
<PAGE>
India. We believe that the Internet in India is poised for rapid growth. We
expect that this growth will be driven by a number of factors, including
decreasing connectivity prices across India, the improvement in the domestic
telecommunications infrastructure and the ongoing encouragement by the Indian
Government of Internet usage across the business and residential markets. IDC
forecasts e-commerce revenues to increase from $2.9 million in 1998 to $1.6
billion in 2003, which represents a CAGR of 254%. The Indian Government is
currently preparing an Electronic Commerce Act and is also initiating a number
of federal and state programs designed to promote the Internet and e-commerce
across India, especially as they relate to the continued growth of the nation's
software and information technology exports.
Japan. The Internet penetration rate in Japan is currently low relative to
Hong Kong and Singapore despite Japan's advanced technological environment. We
believe this may be due, in part, to the high per-minute access charges that
the majority of users have to pay to get online. The Ministry of Post and
Telecommunications, however, is looking to move Japan to a flat-rate Internet
pricing model and is also promoting the deployment of broadband Internet access
technologies, which permit users to access resources on the Internet at much
faster speeds than currently available. We believe that the accelerated
broadband deployment, coupled with the flat Internet access prices, will
stimulate the next wave of Internet adoption and growth in Japan. IDC forecasts
e-commerce revenues to reach $253.2 billion in 2003, from $4.7 billion in 1998,
which represents a CAGR of 122%.
Singapore. Based on the increasing number of government incentives to
encourage business, residential and educational Internet usage, IDC anticipates
continued growth in total spending over the Internet. IDC estimates that e-
commerce revenues will increase from $35.2 million in 1998 to $2.8 billion in
2003, which represents a CAGR of 140%. Singapore's highly developed
communications infrastructure and fully digital telecommunications network
creates a strong base for continued Internet growth and spending.
Philippines. The Internet market in the Philippines is still relatively
nascent; however, due to its size and widespread English proficiency, we
believe that it will be an important market. IDC forecasts e-commerce revenues
to grow from $6.8 million in 1998 to $1.0 billion by 2003, which represents a
CAGR of 172%.
Thailand. IDC expects Internet user growth to accelerate with continued
encouragement from the Thai government for businesses to become Internet
enabled, as well as its promotion of Internet adoption in both homes and
educational establishments. IDC forecasts e-commerce revenues to grow from $9.8
million in 1998 to $1.3 billion by 2003, which represents a CAGR of 168%.
New Zealand. As with Australia, IDC has forecasted e-commerce revenues to
rise to 1.6 billion in 2003 from $39.9 million in 1998, which represents a CAGR
of 108%. IDC also anticipates increasing penetration into the business space
given the continued demand for access to email and corporate websites by all
business participants.
Opportunity
We believe that the growth in e-commerce revenue and Internet users in the
Asia-Pacific region will increasingly lead businesses to implement and expand
their Internet presence and e-commerce capabilities in the region. However, due
to the lack of adequate interconnection among providers and the congestion and
high cost of international circuits, businesses will often find Internet
connections within the Asia-Pacific region to be slower, less reliable and more
expensive than in the United States. For these reasons, businesses will, in our
view, want to place their Internet content in close proximity to users in the
region to ensure fast, high-quality and less expensive connectivity. To deploy
34
<PAGE>
a high-quality and reliable Internet presence in a single market in the Asia-
Pacific region, a business would need, either itself or through service
providers, to perform the following tasks in each market:
. build high performance Internet data center facilities, establish
Internet connectivity with Internet service providers and hire and
supervise technical personnel; or
. lease space in high performance Internet data center facilities and
contract with service providers to monitor the servers and other
equipment.
A business implementing its Internet operations throughout the diverse Asia-
Pacific region would have to repeat these tasks in each market. This complex
process would require the commitment of significant time, expense and
management resources. The business would also have to overcome the challenges
each market poses with respect to language or dialect, culture, business
practices, regulations, politics, currency and Internet infrastructure.
There are a variety of providers of hosting, co-location, managed services
and other value-added services in the Asia-Pacific region that can help a
business accomplish these tasks. However, these providers may deliver only a
subset of the Internet services a business needs. Furthermore, many providers
operate only in a single market or in a limited number of markets in the
region. Unless a business is able to find a single provider that can offer all
the services it requires in each local market it wishes to enter, it will face
an ongoing commitment of resources necessary to monitor and manage multiple
service providers and administer its operations in each market.
We believe a better solution would involve a single service provider that
can:
. arrange, administer and manage all of the Internet services that a
business needs in each major market in the Asia-Pacific region;
. deliver high-quality facilities and services in each market in the Asia-
Pacific region;
. bill for all services on a single invoice in the business' language and
currency of choice; and
. provide 24X7, high quality, responsive customer support in the business'
language of choice.
Our Solution
Our solution provides the following advantages to our customers:
Single source provider across the Asia-Pacific region. We currently can
deliver dedicated hosting, co-location, managed services and other value-added
services to customers in Hong Kong, South Korea, Taiwan, Australia, mainland
China, Japan, Singapore, the Philippines, Thailand, New Zealand and the United
States. We believe that no company currently offers these services in as many
markets in the Asia-Pacific region as we do. We can also provide Internet
access service in Hong Kong, South Korea, Taiwan and the United States.
Local market expertise and resources. We have been serving business customers
in the Asia-Pacific region since we commenced operations, and as of April 10,
2000, 135 of our 170 employees were located in the region. We have people,
experience and relationships in multiple markets in the Asia-Pacific region
that allow us to address the complexities our customers face with respect to
language or dialect, culture, business practices, regulations, politics,
currency and Internet infrastructure. The experience and knowledge of our local
management facilitates our ability to deal with the legal, governmental and
administrative systems of these markets and to establish alliances with local
companies in these markets.
Comprehensive offering of high performance services. Our solutions are
designed to provide the availability and reliability that customers need for
mission-critical Internet operations. In
35
<PAGE>
addition, our solutions are designed to be flexible and scalable to provide
customers with a consistently high level of performance as their Internet
operations expand. Currently we offer:
. geographically distributed Internet data centers;
. strong in-country and international Internet connectivity, traffic
exchange and network access;
. the ability to quickly scale the amount of hosting space, power,
bandwidth and managed services;
. 24X7 managed services and technical support, including administration,
monitoring, security, backup, content distribution and other managed
services; and
. value-added services, such as consulting, system integration, web
development, translation, localization, legal and regulatory compliance,
e-commerce transaction processing, fulfillment and logistics services.
Ready access to new technology and highly qualified personnel. Because we are
headquartered in Silicon Valley, we have early and on-going access to the
latest developments in Internet technology, products and services. As a result
of our significant presence in both Silicon Valley and the Asia-Pacific region,
we believe that we are able to identify, evaluate and introduce these
innovations into the region before other service providers. We also have access
to a pool of highly qualified technical and management professionals in Silicon
Valley who can train our in-country personnel in the Asia-Pacific region, as
well as facilitate the implementation of these technologies. For example, we
believe that we are the first provider of hosting services in the Asia-Pacific
region to employ Cisco's recently introduced Net Flow technology, which allows
us to provide our customers with a detailed profile of their Internet usage
patterns.
Experienced U.S. and local Asia-Pacific management. Our senior management
team, located both in the Asia-Pacific region and the United States, possesses
a deep understanding of the local markets and has extensive business experience
and strong technical knowledge. For example, our Chief Executive Officer, who
is located in Hong Kong, has worked in the region for five years and was
formerly the Chief Executive Officer and President of AT&T Asia/Pacific.
Additionally, our Vice President of Internet and Data Center Technology, who is
located in the U.S., has seven years of experience in building Internet data
centers and the complementary network infrastructure. We believe that the
development of the Internet in the Asia-Pacific region is following many of the
same trends exhibited in the U.S., and that our management team is well
positioned to apply their collective experience to anticipate and take
advantage of the opportunities in the region.
Localized customer service. We provide high quality, responsive, 24X7
customer service. Customers can communicate with us in either English or the
local language of any market we service, whereas many of our competitors are
only equipped to do business in a single language, typically that of the local
market. Additionally, we offer customers the opportunity to meet face-to-face
with our sales staff, network support staff and technical engineers, during all
phases of the implementation process. Our customers benefit from our ability to
provide information about and solutions in the markets we serve without the
time or expense of travelling or the inconvenience of dealing with time-zone
differences.
36
<PAGE>
Our Strategy
Our goal is to become the pre-eminent single source provider of business
Internet solutions throughout the Asia-Pacific region with a primary focus on
dedicated hosting, co-location and managed services. To achieve this goal, we
intend to pursue a strategy that emphasizes the following elements:
Develop large-scale, high performance Internet data center capacity. We
intend to establish large-scale, high performance Internet data center capacity
in most of the major markets in the Asia-Pacific region. Large-scale, high
performance Internet data centers provide scalability, reliability, security
and substantial network capacity. Currently, there is a scarcity of these
Internet data centers in the Asia-Pacific region. We believe that businesses
are going to require these large-scale, high performance Internet data centers
as they increase their reliance upon the Internet for mission-critical business
functions in the region. We expect to have at least three of these large-scale,
high performance Internet data centers operational before the end of the first
quarter 2001. For additional information on our plans to develop large-scale,
high performance Internet data center capacity, see "Our Technology--Internet
Data Centers" on page 39.
Broaden and deepen our geographic presence in the Asia-Pacific region. We
currently offer services in certain countries in the Asia-Pacific region
through our own facilities and personnel and in others, through strategic
partnerships. Where we currently offer services through strategic partnerships,
we intend, where practicable, to establish operations using our own facilities
and personnel. In addition, to maximize our growth, we intend to expand our
operations within each of our current markets in the Asia-Pacific region by
hiring additional personnel, investing in our existing operations, establishing
new facilities, and acquiring companies with complementary businesses. We also
expect to expand into markets in the Asia-Pacific region, where we do not
currently have an operational presence such as India, Indonesia and Malaysia.
Since the beginning of December 1999, we have made three acquisitions and we
are actively pursuing other opportunities.
Expand our sales force in the U.S. and the Asia-Pacific region. We believe
that there is great strategic importance to being the first to provide
solutions to businesses that need to address the complexities of doing business
in multiple markets in the Asia-Pacific region. As a result, we are rapidly
expanding our sales force both in the U.S. and in the Asia-Pacific region. We
feel that an expanded sales force is instrumental to establishing our position
as the leading single source provider of business Internet solutions in
multiple markets in the Asia-Pacific region.
Pursue strategic relationships. We intend to continue to establish strategic
relationships with companies that have the technology, resources, distribution
capability, expertise, relationships and local influence to help us achieve our
business objectives. These relationships will allow us to enhance our service
offerings and provide access to technological developments and to new sales and
business opportunities. One recent example is a strategic alliance with
iAdvantage Limited which is a subsidiary of Sun Hung Kai Properties Ltd., a
major real estate developer in Hong Kong, through which we will obtain
significant high performance Internet data center capacity in Internet data
centers currently under construction in Hong Kong, Beijing and Shanghai.
Another is with Integra, a leading pan-European hosting provider, whereby they
will refer to us, on a commission basis, their customers that desire to
establish a presence in markets in the Asia-Pacific region, and we will do the
same with them in regard to our customers that wish to establish a presence in
major European markets.
Our Services
We currently offer a comprehensive range of Internet access, hosting, co-
location, managed services and other value-added services in the Asia-Pacific
region. We believe that no company currently offers these services in as many
markets in the region as we do. Our goal is to provide all
37
<PAGE>
of the services business customers need to conduct their Internet operations in
multiple markets in the Asia-Pacific region. The specific services we offer in
each market are determined by the needs of the market, our resources within the
market, local regulations and competition.
Internet access services. In Hong Kong, South Korea and Taiwan we provide
high-speed Internet access services to business customers. These services are
provided over leased-line connections with speeds ranging from 64Kbps, or
kilobits per second, to T3, or 45 megabits per second.
In addition to our flat rate leased-lines, we also offer a "burstable," pay-as-
you-go, billing product that allows our customers to purchase additional
bandwidth without prior commitment. We also offer business and consumer dial-up
Internet access in Hong Kong. In addition, we provide business travelers a
global roaming service, which allows our customers to connect to the Internet
from more than 5,000 access points in 150 countries throughout the world. We
offer a managed virtual private network service, which provides our customers
the ability to securely transmit proprietary data between their office
locations using the public Internet and offers a less-expensive alternative
than private networks. We also offer a full range of hardware and software
system integration solutions required to connect our customers to the Internet.
Hosting and co-location services. We offer hosting and co-location services
to business customers throughout the Asia-Pacific region and in the U.S.
Typically, hosting provides businesses a presence on the Internet without the
physical need for wholly-owned and maintained equipment and support personnel.
While we provide both dedicated and shared hosting services, our primary focus
is on dedicated hosting, in which a single customer site is hosted on one or
more of our servers. Shared hosting involves the hosting of multiple customers'
sites on a single server owned by us. Co-location services enable our customers
to house their servers in our Internet data centers and thereby take advantage
of our network access, bandwidth and facilities.
Managed services. We offer our business customers a full range of managed
hosting services, including:
. administration services--installation, configuration and maintenance of
a customer's site or equipment to meet its hardware, software and
network needs;
. monitoring services--monitoring, evaluating and reporting usage and
performance to ensure a high level of service;
. security services--providing security for Internet data center, network
and server infrastructure to protect mission-critical Internet
operations;
. backup services--backup and retrieval services to prevent the loss of
mission-critical data;
. content distribution services--replication and management of traffic
flows for efficient transmission; and
. other managed services--procurement and management of network, equipment
and systems to support our customers' access and hosting needs.
Value-added services. Through strategic relationships we offer a variety of
value-added services. These services include:
. legal and regulatory compliance;
. web design and development, including translation and cultural
adaptation of web sites; and
. enabling of e-commerce, including transaction processing, currency
conversion, logistics and distribution fulfillment.
38
<PAGE>
Our Technology
Network
Currently, we operate Internet network infrastructure and facilities in Hong
Kong, South Korea, Taiwan, and the United States. Our network provides Internet
connections within these markets via extensive peering, purchased transit and a
number of international private lines. The foundation of our network is our
extensive peering relationships. In peering relationships, Internet service
providers agree to carry each others' traffic on their networks, or peer, to
improve performance, reduce congestion and lower costs. Where we do not have
peering relationships, we purchase transit from other providers to maintain a
high level of connectivity for our customers. Currently, our high speed network
comprises peering and transit interconnections with more than 100 providers,
including many of the largest providers in the Asia-Pacific region and the
United States.
Hong Kong. Our facility in Hong Kong consists of a point of presence, or POP,
from which we have OC3, or 155 megabits per second, connections to the Hong
Kong Internet Exchange, or HKIX, augmented by private line transit connections
to major Internet service providers. Within the HKIX, we currently have peering
relationships with more than 50 Internet service providers. In addition, we
have several direct international private lines between our POP in Hong Kong
and our facilities in the United States. We also have a dedicated circuit
between our facilities in Hong Kong and Taiwan.
Taiwan. Our facilities in Taiwan consist of POPs in Taipei, Hsinchu,
Taichung, Kaohsiung and Taoyuan. We peer with virtually all of the major
Internet service providers in Taiwan, via a T3 connection to the Taiwan
Internet Exchange and via another T3 connection to a major Internet service
provider. In support of our Taiwan operation, we also maintain international
private lines between Taipei and our facilities in the United States and
redundant connections via Hong Kong.
South Korea. Our facility in South Korea consists of a centralized POP in
Seoul, from which we have an OC3 connection to the Korean Internet Network
Exchange, or KINX. Our facility in Seoul takes advantage of public peering via
the KINX, where we peer with virtually all of the major Internet service
providers in South Korea. Additionally, we have private T3 connections to the
domestic gateways and private connections to the international gateways of the
two largest Internet providers in Korea.
United States. In the United States, we have facilities in San Francisco,
South San Francisco, San Jose and the Palo Alto Internet Exchange. An OC3
circuit in the South San Francisco location allows us to link all of these
facilities into a high-speed network. This network, in conjunction with our
various U.S.-based peering relationships, provides a centralized transit point
for all of our traffic between the Asia-Pacific region and the United States.
Internet Data Centers
Currently, our Internet data centers, operated directly or by strategic
partners, are located in Hong Kong, South Korea, Taiwan, Australia, mainland
China, Japan, Singapore, the Philippines, Thailand, New Zealand and the United
States. Each of our current facilities is of high-quality and provides
substantial domestic and international Internet connectivity, reliable back-up
power supply and secure network and infrastructure. As is typical of the Asia-
Pacific region, our Internet data centers are not large-scale facilities.
We intend to establish significant additional Internet data center capacity
in most of the major markets in the Asia-Pacific region utilizing the latest
technologies available. These additional Internet data centers will generally
be large-scale, exceeding 50,000 square feet, and will be high performance,
high-capacity, carrier-neutral facilities with interconnection to major
Internet service providers and telecommunication providers in each market.
39
<PAGE>
Customers
We have established a diversified base of customers in a wide range of
industries, including finance, entertainment, high technology, publishing,
Internet, manufacturing and advertising. As of April 10, 2000, we had more than
3,800 business customers. We provide more than 1,200 of these customers with
leased-line Internet access services and more than 120 with dedicated hosting
and co-location services. Most of the remaining customers utilize shared
hosting and dial-up services. The following is a list of five of our largest
customers, all of which utilize our co-location and managed services, and the
markets in which we currently provide services for each of them.
<TABLE>
<CAPTION>
Customer Markets
-------- -------
<C> <S>
Adero..................... Hong Kong, South Korea, Taiwan, mainland China, the
Philippines, Thailand, New Zealand
Digital Island/Sandpiper.. Hong Kong, South Korea, Taiwan, mainland China, the
Philippines, New Zealand
DoubleClick............... South Korea, Taiwan, mainland China
Keynote Systems........... Hong Kong, South Korea, mainland China
Outblaze.................. Hong Kong, Taiwan
</TABLE>
Sales and Marketing
Our sales and marketing objective is to achieve broad market penetration by
targeting business customers in and outside the Asia-Pacific region that desire
to extend their Internet operations across multiple markets in the Asia-Pacific
region. We also target business customers in the Asia-Pacific region who wish
to extend their Internet operations into the United States. As of April 10,
2000, we had 54 employees engaged in sales and 10 in marketing.
Sales
We sell our high-speed Internet access services to businesses through our
direct sales force and through independent distributors. To date, our hosting
and co-location and managed service sales have been made exclusively through
our direct sales force. In addition, we are currently developing indirect sales
channels for these non-access services and our other value-added services. We
are actively seeking to increase our sales distribution capabilities and
coverage both in the United States and throughout the Asia-Pacific region.
Direct Sales
U.S. Based Sales. We have sales offices in San Francisco, Los Angeles, New
York and Boston. We plan to expand our direct sales group over the next 12
months by opening offices in the Washington, D.C. area, Texas, Chicago, Seattle
and Atlanta. When fully operational, we expect each of our U.S.-based sales
organizations to consist of six account managers and one sales engineer and, in
selected markets, one tele-sales representative. Our U.S. direct sales force
currently consists of 14 people, 12 of whom have been hired during the current
fiscal year. All of them have between five and 10 years of proven sales results
within industries such as Internet hosting, co-location, data and
telecommunications network services.
In-Country Based Sales. We have sales offices in Hong Kong, South Korea,
Taiwan and Australia. We have been expanding our sales force in the Asia-
Pacific region significantly and as of April 10, 2000, we had 40 account
managers, 12 in Hong Kong, nine in South Korea, 16 in Taiwan and three in
Australia. Of these, 22 have been hired during the current fiscal year. Most of
our account managers have had substantial experience selling Internet or
telecom related products. Typically, our account managers focus on high-speed,
leased-line Internet access; hosting and co-location; or targeted specific
industries. We also use independent distributors to sell high-speed Internet
access services, primarily in South Korea and Taiwan.
40
<PAGE>
Indirect Sales
In recent months, we have been developing our Works Group alliance program as
a means both to provide value-added services and to develop indirect sales
channels for our hosting, co-location and managed services. Pursuant to this
program, we have established contractual or informal relationships with web
development, translation, localization, legal and regulatory compliance,
e-commerce transaction processing, fulfillment and logistics companies,
primarily in the United States and various markets in the Asia-Pacific region.
Through this program, we have formed alliances with key vendors and value added
service providers, including:
. International Counsel for legal and regulatory compliance;
. Allindia.com for web design and development;
. eTranslate for localization and language translation services;
. FirstEcom for e-commerce payment solutions;
. Cobalt as hardware providers; as well as
. NetCel360 for logistics and distribution fulfillment.
These relationships are structured so that we can work with our indirect
sales channel partners and can cross-market and sell each other's services.
Typically, there is a referral fee, commission or other revenue producing
opportunity for both parties in each relationship.
Marketing
Our marketing organization employs a broad range of marketing communications
and public relations activities to stimulate product demand. Marketing
communications activities have included participation in local trade shows and
Internet conferences. We have been particularly active in a Hong Kong-based
organization called "I-and-I," which brings large groups of Internet business
people together once a week and sponsors Internet conferences around the Asia-
Pacific region. Going forward, we will be coordinating efforts on a regional
basis and regularly sponsoring or participating in major trade shows or trade
conferences throughout the Asia-Pacific region and the United States.
Additionally, we will continue to seek exposure through speaking engagements,
which focus on cultivating industry analysts and media relationships with the
goal of securing broad media coverage and visibility. As an example of this
effort, our Chief Executive Officer has been the keynote speaker in several
trade shows, including Internet World, which is a high-profile Internet
conference. We are also planning to run advertisements and promotions targeted
at companies that are interested in taking advantage of hosting and co-location
services in the Asia-Pacific region.
Business and Product Development
As an adjunct to both our sales and marketing groups, we have recently
established a business and product development group. This group is responsible
for identifying and evaluating the latest Internet technology, products and
services whether from Silicon Valley, the Asia-Pacific region or elsewhere,
with a view to early implementation of these developments in each of our
markets. As of April 10, 2000, we employed seven persons in business and
product development.
Customer Service
We believe that we offer superior customer service by understanding the
technical requirements and business objectives of our customers. We are able to
assist customers from multiple locations, in either English or their local
language. By working closely with each of our customers, we are able to
optimize the performance of their Internet operations, avoid downtime, resolve
quickly any problems that may arise and make appropriate adjustments in
services as the customer's needs change over time.
41
<PAGE>
Our customer service efforts begin before a sale, when we provide technical
support for complex orders. During the installation phase, we assign a
transition team and a project manager, who also retains responsibility for the
account after installation. After installation, our network operations support
staff at each Internet data center's network control center is available 24X7
to answer customer calls, monitor site and network operations and dispatch
teams to solve any problems that arise. As of April 10, 2000, we had 70
employees dedicated to network center operations technical support.
Competition
The market we serve is highly competitive. There are few substantial barriers
to entry, and we expect that we will face additional competition from diverse
existing competitors and new market entrants in the future. The principal
competitive factors in this market include:
. broad geographic presence throughout the Asia-Pacific region;
. network capability, reliability, quality and security and scalability of
service;
. the variety of services offered, pricing and the timing of introductions
of new services to the market;
. customer service support and technical expertise;
. brand name;
. the ability to maintain and expand effective distribution channels;
. financial resources; and
. conformity with developing industry standards.
Our major current competitors are:
. current or former national monopoly telecom providers, such as Korea
Telecom, Chunghwa Telecom in Taiwan, and Hong Kong Telecom;
. global service providers, such as PSINet and WorldCom; and
. smaller intra-country Internet service providers, hosting and co-
location companies, such as Dacom in Korea and SeedNet in Taiwan.
Increasingly, Internet service providers, hosting companies,
telecommunication carriers and equipment manufacturers based in North America
have been announcing plans to enter or expand into markets throughout the Asia-
Pacific region. For example, companies such as PSINet, AboveNet Communications,
and its parent Metropolitan Fiber Networks, Exodus Communication, Inc., Global
Crossing Global Center, Level 3, WorldCom and Intel have all announced plans to
establish Internet data centers in the Asia-Pacific region.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
There is no assurance that customers that use the non-Asia-Pacific based
carriers outside of the Asia-Pacific region will be willing to use our services
in the Asia-Pacific region. As a result, certain of these competitors may be
able to develop and expand their network infrastructures and service offerings
more quickly, adapt to new or emerging technologies and changes in customer
requirements more readily, take advantage of acquisition and other
opportunities more effectively, devote greater resources to the marketing and
sale of their products and adopt more aggressive pricing policies than we can.
In addition, these competitors have entered and will likely continue to enter
into joint ventures or consortiums to provide additional value-added services
competitive with those provided by us.
42
<PAGE>
New market entrants could also include local companies, such as real estate
developers, that may take advantage of their local expertise and relationships
to compete with us. In addition, we believe that our competitors are likely to
combine their efforts in the near future, including through acquisitions, joint
ventures and other alliances. New market entrants or the creation of stronger
competitors through combinations could result in increased price and other
competition, which would make it difficult for us to attract new customers,
retain existing customers, or attain revenue and gross margin levels sufficient
to generate a return on our investments.
For additional information regarding our existing and potential competitors,
see "Risk Factors--We may not be able to compete successfully against current
and future competitors, which could harm our business and our margins" on page
9.
Employees
As of April 10, 2000, we had 170 employees, including 59 employees in
Hong Kong, 34 employees in South Korea, 32 in Taiwan, 10 employees in
Australia, and 35 employees in the United States and all of our other offices.
Of those employees, 54 were in sales, 10 in marketing, seven in business and
product development, 70 in network operations support and 29 in finance and
administration. We are rapidly hiring personnel in the United States and across
the Asia-Pacific region and believe that our future success will depend in part
on our continued ability to attract, hire and retain qualified personnel. None
of our employees is represented by a labor union, and we believe that our
relationships with our employees are good. See "Risk Factors--We may be unable
to hire and retain the skilled personnel necessary to develop our business"
beginning on page 10.
Facilities
Our executive headquarters are located in approximately 3,000 square feet of
leased office space located in San Mateo, California under a lease expiring in
October 2004. Our Internet data center facilities, with approximately 11,000
aggregate gross square footage, are in leased premises in Hong Kong, South
Korea, Taiwan, Australia, mainland China, Japan, Singapore, the Philippines,
Thailand, New Zealand and the United States. These facilities generally are
leased for initial terms of one year or longer, renewable for additional fixed
terms or continuing on a month-to-month basis.
Contingencies
We are not a party to any legal proceedings. However, two service providers
have contacted us with regard to claims for additional cash and stock payments
in relation to their services. If we fail to resolve these claims favorably, we
may incur material charges to operations. For additional information regarding
these claims, see Note 10 of Notes to Consolidated Financial Statements--Claims
on page F-22.
43
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the executive
officers and directors of iAsiaWorks as of December 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
JoAnn F. Patrick-Ezzell.. 46 Chief Executive Officer and Chairman of the Board of Directors
Jonathan F. Beizer....... 35 Chief Financial Officer and President--U.S.
Suzanne S. Chu........... 35 Vice President of Marketing
David S. Holub........... 39 Vice President of Internet and Data Center Technology
Daryl B. Horn............ 33 Vice President of Sales
Jacob D. Gale............ 34 Managing Director of Business Development
Farrokh K. Billimoria.... 44 Director
Daniel A. Carroll........ 39 Director
Robert Lee............... 51 Director
Peter T. Morris.......... 43 Director
William R. Stensrud...... 49 Director
William P. Tai........... 37 Director
</TABLE>
JoAnn F. Patrick-Ezzell has served as our Chairman and Chief Executive
Officer since August 1999. Before joining iAsiaWorks, she spent 24 years with
AT&T, most recently serving as President and Chief Executive Officer of AT&T
Asia/Pacific, responsible for AT&T's multi-billion dollar business throughout
the region. Before that, she was President of AT&T Online Services,
Asia/Pacific. She also served as chairman of AT&T Jens, a joint venture between
AT&T and 25 Japanese corporations. Ms. Patrick-Ezzell holds a B.A. in Economics
from Bucknell University and was a Sloan Fellow at Stanford University's
Graduate School of Business, where she received an M.A. in Management.
Jonathan F. Beizer joined us in September 1998 and currently serves as our
Chief Financial Officer and President--U.S. From 1992 to April 1998, Mr. Beizer
served with Phoenix Network, then a publicly-traded telecommunications services
provider, most recently as Chief Financial Officer. Prior to becoming Chief
Financial Officer of Phoenix Network, Mr. Beizer served as its Vice President
of Corporate Development and was responsible for executing its mergers and
acquisitions strategy. Mr. Beizer holds a B.A. in Psychology and Social
Relations from Harvard University and an M.B.A. from Stanford University's
Graduate School of Business.
Suzanne S. Chu has served as our Vice President of Marketing since February
2000. From September 1998 to November 1999, Ms. Chu served as the Director of
Marketing for Deltathree.com, Inc., an Internet telephony company. From August
1995 to August 1998, Ms. Chu worked at AT&T Communication Services, most
recently as Sales Manager. Ms. Chu holds a B.S. in Electrical Engineering and
Computer Science from the University of California, Berkeley and an M.B.A. from
the Harvard Business School.
David S. Holub has served as our Vice President of Internet and Data Center
Technology since November 1999. Mr. Holub served as a consultant to us from
September 1999 to November 1999. From July 1998 to May 1999, Mr. Holub served
as the Director of Marketing for Vayu Communications, an internet research and
development company. Mr. Holub served as a Vice President of Vixie Enterprises,
an Internet infrastructure company, from May 1997 to July 1998. From December
1993 to May 1997, Mr. Holub served as the President and Chief Technology
Officer of Hooked/Whole Earth Networks, an Internet service provider.
44
<PAGE>
Daryl B. Horn has served as our Vice President of Sales since February 1999.
From April 1998 to January 1999, Mr. Horn served as President of Qwest
Communications' International Callback Division, a provider of
telecommunications services. From October 1996 to March 1998, Mr. Horn was
President of Phoenix Network International, a division of Phoenix Network. From
1994 to September 1996, Mr. Horn worked as a Regional Sales Director for
Phoenix Network. Mr. Horn holds a B.A. in Communications from California State
University, Sacramento.
Jacob D. Gale has served as our Managing Director of Business Development
since August 1999. Mr. Gale served as a Director for Linklaen Pacific, LLC, a
telecom and Internet consulting firm, from June 1998 to July 1999. From June
1996 to May 1998, he served as the Director of International Business
Development for Geotek Communications, a manufacturer and operator of wireless
networks. From July 1994 to May 1996, Mr. Gale was an Associate with Bankers
Trust, an investment banking firm. Mr. Gale holds a B.A. in Ancient Greek and
Latin from Amherst College and a J.D. from the Northwestern University School
of Law.
Farrokh K. Billimoria has served as a member of our board of directors since
December 1999. He is a general partner with Sprout Group, a venture capital
firm that he joined in April 1999. He came to Sprout from Hambrecht & Quist, or
H&Q, where he was a senior technology analyst covering the communication and
networking sector and was actively involved in H&Q's corporate finance and
venture capital initiatives. Mr. Billimoria worked at H&Q from May 1996 to
April 1999. From January 1995 to May 1996, he was an equity analyst at
Unterberg Towbin. Mr. Billimoria currently serves on the boards of Astral Point
Communications, Cyeptics, Net Effect, Silicon Access and Perfecto Technologies.
Mr. Billimoria holds a B.E. in Electrical Engineering from the College of
Engineering, Pune, India and an M.S. in Computer Science from the Stevens
Institute of Technology.
Daniel A. Carroll has served as a member of our board of directors since
December 1999. He is currently Managing Director of Newbridge Capital Group, an
Asian private equity firm he joined in 1995, and a Principal of Texas Pacific
Group. Prior to 1995, Mr. Carroll spent nine years with H&Q, where he played a
key role in the development of that firm's private equity investment operations
in Asia. Mr. Carroll currently serves on the boards of Korea First Bank and
Asiacontent.com, Ltd. Mr. Carroll holds a B.A. in Economics from Harvard
University and an M.B.A from Stanford University's Graduate School of Business.
Robert Lee has served as a member of our board of directors since February
1999. From May 1998 to February 1999, Mr. Lee served as an advisor to us. From
1972 to May 1998, Mr. Lee was employed by Pacific Bell, a telecommunications
provider. His last position with Pacific Bell, which he held from 1996 until
his retirement in 1998, was the President of Business Communications. Mr. Lee
also currently serves on the board of directors of CIDCO and Micron
Electronics. He also serves on the board of directors of several privately held
companies. Mr. Lee holds a B.S. in Electrical Engineering from the University
of Southern California and an M.B.A. from the University of California,
Berkeley.
Peter T. Morris, one of our co-founders, has served as a member or our board
of directors since August 1995. He is a general partner of New Enterprise
Associates, a venture capital investment firm that he joined in 1992. He
specializes in information technologies with a focus on communications and the
internet. His current board memberships include Actelis, Gadzoox, LoanCity.com,
LuxN, Mayan Networks, Network Photonics, Packetcom, Packeteer, Tiara Networks,
Virata Limited and Yipes Communications. Mr. Morris holds a B.S. in Electrical
Engineering from Stanford University and an M.B.A from Stanford University's
Graduate School of Business.
45
<PAGE>
William R. Stensrud has served as a member of our board of directors since
August 1998. He has been a general partner of Enterprise Partners, a
California-based venture-capital company, since January 1997. From 1992 to
1996, he served as CEO of Primary Access. He is a founder of StrataCom, and a
founding director of Juniper Networks, Rhythms Netconnections, GlobeSpan and
Paradyne. His current board memberships include Juniper Networks, Packeteer,
Paradyne and Rhythms NetConnections. Mr. Stensrud also serves on the board of
directors of several privately held companies, including AirFiber, Chromisys
and Ensemble Communications. Mr. Stensrud holds a BS in Electrical Engineering
and Computer Science from the Massachusetts Institute of Technology.
William P. Tai, one of our co-founders, has served as a member of our board
of directors since August 1995. From August 1995 to February 1998, he served as
our founding Chief Executive Officer, and he served as Chairman of the Board
until August 1999. Mr. Tai has been a general partner and managing director of
Institutional Venture Partners, a venture capital firm, since July 1997. From
September 1991 to July 1997, he was affiliated with the Walden Group of Venture
Capital Funds, a venture capital firm. Mr. Tai also serves on the Board of
Directors of Netergy Networks, Inc., a provider of IP telephony solutions, and
several privately held companies, including Chemconnect Inc., Ensemble
Communications, GW Com Inc., Microtune, Inc. and Transmeta Corp. He holds a
B.S. in electrical engineering, with Honors, from the University of Illinois,
and an M.B.A. from the Harvard Graduate School of Business.
Board of Directors and Committees
Following this offering, the board will consist of seven directors divided
into three classes, with each class serving for a term of three years. At each
annual meeting of stockholders, directors will be elected by the holders of
common stock to succeed the directors whose terms are expiring. Messrs. Morris
and Lee are Class I directors whose terms will expire at the 2001 annual
meeting of stockholders, Messrs. Billimoria and Carroll are Class II directors
whose terms will expire at the 2002 annual meeting of stockholders and
Messrs. Tai and Stensrud and Ms. Patrick-Ezzell are Class III directors whose
terms will expire at the 2003 annual meeting of stockholders. The officers
serve at the discretion of the board.
iAsiaWorks has established an audit committee composed of independent
directors that:
. reviews and supervises iAsiaWorks' financial controls, including the
selection of its auditors;
. reviews the books and accounts;
. meets with its officers regarding its financial controls;
. acts upon recommendations of the auditors; and
. takes further actions as the audit committee deems necessary to complete
an audit of iAsiaWorks' books and accounts, as well as other matters
that may come before it or as directed by the board.
The audit committee currently consists of Messrs. Lee, Morris and Tai.
iAsiaWorks has established a compensation committee that reviews and approves
the compensation and benefits for iAsiaWorks' executive officers, administers
its stock plans and performs other duties as may from time to time be
determined by the board. The compensation committee currently consists of
Messrs. Carroll, Stensrud and Tai.
Compensation Committee Interlocks and Insider Participation
The compensation committee consists of Messrs. Carroll, Stensrud and Tai,
none of whom is an employee. None of our executive officers serve as a director
or member of the compensation committee or other board committee performing
equivalent functions of another entity that has one or more executive officers
serving on our board of directors or compensation committee.
46
<PAGE>
Director Compensation
We do not currently compensate any non-employee member of the board.
Directors who are also employees of iAsiaWorks do not receive additional
compensation for serving as directors. However, non-employee directors will be
eligible to receive discretionary option grants and stock issuances under the
2000 Stock Incentive Plan. In addition, under the automatic option grant
program in effect for non-employee directors under the 2000 Stock Incentive
Plan, each non-employee director will receive an automatic option grant for
10,000 shares at each annual stockholders meeting during his or her period of
continued service on the board, and each new non-employee director will
receive, at the time of his or her initial election or appointment to the
board, an automatic option grant for 40,000 shares which is to vest over the
first four years of board service. The 2000 Stock Incentive Plan also contains
a director fee option grant program. Should this program be activated in the
future, each non-employee board member will have the opportunity to apply all
or a portion of any annual retainer fee otherwise payable in cash to the
acquisition of an option with an exercise price at a discount from the then
fair market value. For more information concerning the automatic grant and
director fee option grant programs for the non-employee directors, see "Benefit
Plans" beginning on page 50.
Executive Compensation
Summary Compensation Table
The following table sets forth certain information concerning all
compensation earned during the year ended December 31, 1999 by our current
Chief Executive Officer, our former Chief Executive Officer and each of the
four other most highly compensated executive officers who earned an annualized
salary of more than $100,000 for the fiscal year ended December 31, 1999,
referred to in this prospectus as the named executive officers. No other
individual who would otherwise have been includable in the table on the basis
of salary and bonus earned during 1999 has resigned or otherwise terminated
employment during 1999. The compensation table excludes other compensation in
the form of perquisites and other personal benefits that constitutes the lesser
of $50,000 or 10% of the total annual salary and bonus earned by each of the
named executive officers for fiscal 1999.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------- ------------
Fiscal Other Annual Securities
Name and Principal Year Compensation Underlying
Position Ended Salary ($) Bonus ($) ($) Options (#)
- ------------------ ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
JoAnn F. Patrick-
Ezzell(1)............... 1999 197,582 100,000 50,108 5,976,989
Chief Executive Officer
Jonathan F. Beizer(2).... 1999 211,917 18,045 -- --
Chief Financial Officer
and
President-U.S. and
Interim Chief
Executive Officer
Michael Chan(3).......... 1999 70,917 -- -- --
Chief Executive Officer
Daryl B. Horn(4)......... 1999 83,000 -- 500 110,000
David S. Holub(5)........ 1999 18,750 -- -- 400,000
Jacob D. Gale(6)......... 1999 58,333 -- -- 600,000
</TABLE>
- --------
(1) Ms. Patrick Ezzell joined us in August 1999. Her annualized salary for 1999
was $500,000. She earned an aggregate of $50,108 in perquisites in fiscal
1999, of which $35,250 was for housing expenses, and $13,376 was for a car
allowance.
47
<PAGE>
(2) Mr. Beizer served as our Interim Chief Executive Officer from March 1999 to
August 1999. His annualized salary for 1999 was $211,917.
(3) Mr. Chan served as Chief Executive Officer from February 1998 to February
1999. His annualized salary for 1999 was $185,000.
(4) Mr. Horn received commissions of $500 during 1999. His annualized salary
for 1999 was $90,000.
(5) Mr. Holub joined us in November 1999. His annualized salary for 1999 was
$150,000.
(6) Mr. Gale joined us in August 1999. His annualized salary for 1999 was
$175,000.
Option Grants in the Most Recent Fiscal Year
The following table sets forth certain information with respect to stock
options granted to each of the named executive officers in 1999, including the
potential realizable value over the 10-year term of the options, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. No
stock appreciation rights were granted during 1999.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
Individual Grants at Public Offering Price ($)
------------------------------------------------ -----------------------------
Number of
Securities
Underlying Percent of Total
Options Options Granted Exercise
Granted to Employees in Price Expiration
Name (#) Fiscal 1999 (%) ($/Share) Date 5% 10%
- ---- ---------- ---------------- --------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
JoAnn F. Patrick-
Ezzell................. 5,976,989 51.9 0.15 7/31/09
Option Grants in 1999
Jonathan F. Beizer...... -- -- -- --
Michael Chan............ -- -- -- --
Daryl B. Horn........... 100,000 1.0 0.15 2/1/09
10,000 0.15 11/22/09
David S. Holub.......... 400,000 3.5 0.15 8/12/09
Jacob D. Gale........... 600,000 5.2 0.15 8/1/09
</TABLE>
In 1999, we granted options to purchase up to an aggregate of 11,516,156
shares to employees, directors and consultants under iAsiaWorks' 1995 Stock
Plan at exercise prices equal to the fair market value of our common stock on
the date of grant, as determined in good faith by the board of directors.
Each of the options granted to the named executive officers (other than Ms.
Patrick-Ezzell) will vest and become exercisable for the option shares as
follows: the option will become exercisable for 25% of the shares upon the
officer's completion of one year of service with us, and, as to the remaining
shares, will become exercisable in a series of 36 successive equal monthly
installments during the named executive's term of continuing service. Ms.
Patrick-Ezzell's options will vest and become exercisable for 12.5% of the
option shares upon her completion of six months of service with us, will become
exercisable for another 12.5% upon her completion of one year of service, and
the remaining shares will become exercisable in 36 successive equal monthly
installments upon her completion of each of the 36 months thereafter.
The potential realizable value is calculated assuming the aggregate exercise
price on the date of grant appreciates at the indicated rate for the entire
term of the option and that the option is exercised and sold on the last day of
its term at the appreciated price. All options listed have a term
48
<PAGE>
of 10 years. Stock price appreciation of 5% and 10% is assumed pursuant to the
rules of the Securities and Exchange Commission. We can give no assurance that
the actual stock price will appreciate over the 10-year option term at the
assumed 5% and 10% levels or at any other defined level. Actual gains, if any,
on stock option exercises will be dependent on the future performance of our
common stock. Unless the market price of the common stock appreciates over the
option term, no value will be realized from the option grants made to the named
executive officers.
The following table sets forth stock option grants to our named executive
officers since January 1, 2000 and until March 31, 2000.
<TABLE>
<CAPTION>
Number of
Securities Underlying Exercise Price
Name Options Granted ($/Share)
---- ---------------------- --------------
<S> <C> <C>
Jonathan F. Beizer................. 516,017 0.30
Suzanne S. Chu..................... 250,000 0.30
Daryl B. Horn...................... 30,000 0.30
22,000 2.00
</TABLE>
Each of the options to the named executive officers will vest and become
exercisable for the option shares as follows: the option will become
exercisable for 25% of the shares upon the officer's completion of one year of
service with us, and the balance of the option shares will become exercisable
in a series of 36 successive equal monthly installments upon the officer's
completion of each of the next 36 months thereafter.
Aggregated Option Exercises In The Most Recent Fiscal Year And Year-End Option
Values
The following table sets forth information concerning the number and value of
shares of common stock underlying the unexercised options held by the named
executive officers. No options or stock appreciation rights were exercised
during 1999, and no stock appreciation rights were outstanding as of December
31, 1999. The value realized is based on the fair market value of our common
stock on the date of exercise, as determined by the board, less the exercise
price payable for the shares. The value of unexercised in-the-money options at
December 31, 1999 is calculated on the basis of the assumed initial public
offering price of $ , less the aggregate exercise price of the options.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number Options at December 31, In-the-Money Options at
of Shares 1999 December 31, 1999
Acquired on Value ------------------------- -------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
JoAnn F. Patrick-
Ezzell................. -- -- -- 5,976,989
Jonathan F. Beizer...... -- -- 466,952 1,027,295
Michael Chan............ -- -- -- --
Daryl B. Horn........... -- -- -- 110,000
David S. Holub.......... -- -- -- 400,000
Jacob D. Gale........... -- -- -- 600,000
</TABLE>
49
<PAGE>
BENEFIT PLANS
2000 Stock Incentive Plan
Introduction. Our 2000 Stock Incentive Plan is intended to serve as the
successor equity incentive program to our 1995 Stock Option Plan. Our 2000 plan
was adopted by our board on April 13, 2000 and approved by the stockholders in
2000. Our 2000 plan will become effective on the date on which the
underwriting agreement for this offering stock is signed. At that time, all
outstanding options under the predecessor 1995 Stock Option Plan will be
transferred to our 2000 plan, and no further option grants will be made under
that predecessor plan. The transferred options will continue to be governed by
their existing terms, unless our compensation committee elects to extend one or
more features of our 2000 plan to those options. Except as otherwise noted
below, the transferred options have substantially the same terms as will be in
effect for grants made under the discretionary option grant program of our 2000
plan.
Share Reserve. 25,000,000 shares of common stock have been authorized for
issuance under our 2000 plan. Such share reserve consists of the number of
shares that were authorized under our 1995 Stock Option Plan and that we
estimate will be carried over from this plan, plus an additional increase of
approximately 2,505,814 shares. The number of shares of common stock reserved
for issuance under our 2000 plan will automatically increase on the first
trading day in January of each calendar year, beginning in calendar year 2001,
by an amount equal to 4.5% of the total number of shares of common stock
outstanding on the last trading day in December of the preceding calendar year,
but in no event will any such annual increase exceed 10,000,000 shares. In
addition, no participant in our 2000 plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 2,000,000 shares of common stock per calendar year.
Equity Incentive Programs. Our 2000 plan is divided into five separate
components:
. the discretionary option grant program, under which eligible individuals
in our employ or service may be granted options to purchase shares of
common stock at an exercise price not less than 100% of the fair market
value of those shares on the grant date;
. the stock issuance program, under which such individuals may be issued
shares of common stock directly, through the purchase of such shares at
a price not less than 100% of their fair market value at the time of
issuance or as a bonus tied to the attainment of performance milestones
or the completion of a specified period of service or both;
. the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary each year to the
acquisition of special below-market stock option grants;
. the automatic option grant program, under which option grants will
automatically be made at periodic intervals to our non-employee board
members to purchase shares of common stock at an exercise price equal to
100% of the fair market value of those shares on the grant date; and
. the director fee option grant program, under which our non-employee
board members may be given the opportunity to apply a portion of the
annual retainer fee otherwise payable to them in cash each year to the
acquisition of special below-market option grants.
Eligibility. The individuals eligible to participate in our 2000 plan include
our officers and other employees, our non-employee board members and any
consultants we hire.
Administration. The discretionary option grant program and the stock issuance
program will be administered by the compensation committee. This committee will
determine which eligible
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individuals are to receive option grants or stock issuances under those
programs, the time or times when such option grants or stock issuances are to
be made, the number of shares subject to each such grant or issuance, the
status of any granted option as either an incentive stock option or a non-
statutory stock option under the federal tax laws, the vesting schedule to be
in effect for the option grant or stock issuance and the maximum term for which
any granted option is to remain outstanding. The compensation committee will
also have the exclusive authority to select the executive officers and other
highly compensated employees who may participate in the salary investment
option grant program in the event that program is activated for one or more
calendar years.
Plan Features. Our 2000 plan will include the following features:
. The exercise price for the shares of common stock subject to option
grants made under our 2000 plan may be paid in cash or in shares of
common stock valued at fair market value on the exercise date. The
option may also be exercised through a same-day sale program without any
cash outlay by the optionee. In addition, the plan administrator may
provide financial assistance to one or more optionees in the exercise of
their outstanding options or the purchase of their unvested shares by
allowing such individuals to deliver a full-recourse, interest-bearing
promissory note in payment of the exercise price and any associated
withholding taxes incurred in connection with such exercise or purchase.
. The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including options
transferred from the 1995 Stock Option Plan, in return for the grant of
new options for the same or a different number of option shares with an
exercise price per share based upon the fair market value of our common
stock on the new grant date.
. Stock appreciation rights are authorized for issuance under the
discretionary option grant program. Such rights will provide the holders
with the election to surrender their outstanding options for an
appreciation distribution from us equal to the fair market value of the
vested shares of common stock subject to the surrendered option, less
the aggregate exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of common stock. None of
the outstanding options under our 1995 Stock Option Plan contain any
stock appreciation rights.
. The 2000 plan will include the following change in control provisions,
which may result in the accelerated vesting of outstanding option grants
and stock issuances:
. In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program that
is not to be assumed by the successor corporation will automatically
accelerate in full, and all unvested shares under the discretionary
option grant and stock issuance programs will immediately vest,
except to the extent our repurchase rights with respect to those
shares are to be assigned to the successor corporation.
. The compensation committee will have complete discretion to
structure one or more options under the discretionary option grant
program so those options will vest as to all the option shares in
the event those options are assumed in the acquisition but the
optionee's service with us or the acquiring entity is subsequently
terminated. The vesting of outstanding shares under the stock
issuance program may be accelerated upon similar terms and
conditions.
. The compensation committee will also have the authority to grant
options that will immediately vest in the event we are acquired,
regardless of whether those options are assumed by the successor
corporation.
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The compensation committee may grant options and structure repurchase rights
so that the shares subject to those options or repurchase rights will vest in
connection with a successful tender offer for more than 50% of our outstanding
voting stock or a change in the majority of our board through one or more
contested elections for board membership. Such accelerated vesting may occur
either at the time of such transaction or upon the subsequent termination of
the individual's service. The options currently outstanding under our 1995
Stock Option Plan will immediately vest in the event we are acquired by merger
or sale of substantially all our assets, unless those options are assumed by
the acquiring entity or our repurchase rights with respect to any unvested
shares subject to those options are assigned to such entity. However, a number
of those options also contain a special acceleration provision pursuant to
which the shares subject to those options will immediately vest upon an
involuntary termination of the optionee's employment within 12 months following
an acquisition in which the repurchase rights with respect to those shares are
assigned to the acquiring entity.
Salary Investment Option Grant Program. In the event the compensation
committee elects to activate the salary investment option grant program for one
or more calendar years, each of our executive officers and other highly
compensated employees selected for participation may elect, prior to the start
of the calendar year, to reduce his or her base salary for that calendar year
by a specified dollar amount not less than $10,000 nor more than $50,000. Each
selected individual who files such a timely election will automatically be
granted, on the first trading day in January of the calendar year for which his
or her salary reduction is to be in effect, an option to purchase that number
of shares of common stock determined by dividing the salary reduction amount by
two-thirds of the fair market value per share of our common stock on the grant
date. The option will be exercisable at a price per share equal to one-third of
the fair market value of the option shares on the grant date. As a result, the
option will be structured so that the fair market value of the option shares on
the grant date less the exercise price payable for those shares will be equal
to the amount by which the optionee's salary is reduced under the program. The
option will become exercisable in a series of 12 equal monthly installments
over the calendar year for which the salary reduction is to be in effect.
Automatic Option Grant Program. Under the automatic option grant program,
each individual who first becomes a non-employee board member at any time after
the completion of this offering will automatically receive an option grant for
40,000 shares on the date such individual joins the board, provided such
individual has not been in our prior employ. In addition, on the date of each
annual stockholders meeting held after the completion of this offering, each
non-employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase 10,000 shares of common stock,
provided such individual has served on our board for at least six months.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of our common stock on the grant date and will have a
term of ten years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid
per share, any shares purchased under the option which are not vested at the
time of the optionee's cessation of board service. The shares subject to each
initial 40,000 share automatic option grant will vest in a series of four
successive equal annual installments upon the optionee's completion of each
year of board service over the four-year period measured from the grant date.
The shares subject to each annual 10,000-share automatic option grant will vest
upon the optionee's completion of one year of board service measured from the
grant date. However, the shares will immediately vest in full upon certain
changes in control or ownership or upon the optionee's death or disability
while a board member.
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Director Fee Option Grant Program. Should the director fee option grant
program be activated in the future, each non-employee board member will have
the opportunity to apply all or a portion of any cash retainer fee for the year
to the acquisition of a below-market option grant. The option grant will
automatically be made on the first trading day in January in the year for which
the retainer fee would otherwise be payable in cash. The option will have an
exercise price per share equal to one-third of the fair market value of the
option shares on the grant date, and the number of shares subject to the option
will be determined by dividing the amount of the retainer fee applied to the
program by two-thirds of the fair market value per share of our common stock on
the grant date. As a result, the option will be structured so that the fair
market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the portion of the retainer fee
applied to that option. The option will become exercisable in a series of 12
equal monthly installments over the calendar year for which the election is to
be in effect. However, the option will become immediately exercisable for all
the option shares upon the optionee's death or disability while serving as a
board member.
Our 2000 plan will also have the following features:
. Outstanding options under the salary investment, automatic option and
director fee option grant programs will immediately vest if we are
acquired by a merger or asset sale or if there is a successful tender
offer for more than 50% of our outstanding voting stock or a change in
the majority of our board through one or more contested elections.
. Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights
may also be granted to one or more officers as part of their option
grants under the discretionary option grant program. Options with this
feature may be surrendered to us upon the successful completion of a
hostile tender offer for more than 50% of our outstanding voting stock.
In return for the surrendered option, the optionee will be entitled to a
cash distribution from us in an amount per surrendered option share
based upon the highest price per share of our common stock paid in that
tender offer.
. The board may amend or modify the 2000 plan at any time, subject to any
required stockholder approval. The 2000 plan will terminate no later
than March 31, 2010.
Employee Stock Purchase Plan
Introduction. Our Employee Stock Purchase Plan was adopted by the board on
April 13, 2000 and approved by the stockholders in 2000. The plan
will become effective immediately upon the signing of the underwriting
agreement for this offering. The plan is designed to allow our eligible
employees and the eligible employees our participating subsidiaries to purchase
shares of common stock, at semi-annual intervals, with their accumulated
payroll deductions.
Share Reserve. 500,000 shares of our common stock will initially be reserved
for issuance. The reserve will automatically increase on the first trading day
in January each calendar year, beginning in calendar year 2001, by an amount
equal to 0.5% of the total number of outstanding shares of our common stock on
the last trading day in December in the prior calendar year. In no event will
any such annual increase exceed 1,000,000 shares.
Offering Periods. The plan will have a series of successive overlapping
offering periods, with a new offering period beginning on the first business
day of May and November each year. Each offering period will have a duration of
24 months, unless otherwise determined by the compensation committee. However,
the initial offering period may have a duration in excess of 24 months and will
start on the date the underwriting agreement for this offering is signed and
will end on the last
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business day in April 2002. The next offering period will start on the first
business day in November 2000 and end on the last business day of October 2002.
Eligible Employees. Individuals scheduled to work more than 20 hours per week
for more than 5 calendar months per year may join an offering period on the
start date of that period. However, employees may participate in only one
offering period at a time.
Payroll Deductions. A participant may contribute up to 15% of his or her cash
earnings through payroll deductions, and the accumulated deductions will be
applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per
share on the start date of the offering period in which the participant is
enrolled or, if lower, 85% of the fair market value per share on the semi-
annual purchase date. Semi-annual purchase dates will occur on the last
business day of April and October each year. However, a participant may not
purchase more than 750 shares on any purchase date, and not more than 125,000
shares may be purchased in total by all participants on any purchase date. Our
compensation committee will have the authority to change these limitations for
any subsequent offering period.
Reset Feature. If the fair market value per share of our common stock on any
purchase date is less than the fair market value per share on the start date of
the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.
Change in Control. Should we be acquired by merger or sale of substantially
all of our assets or more than fifty percent of our voting securities, then all
outstanding purchase rights will automatically be exercised immediately prior
to the effective date of the acquisition. The purchase price in effect for each
participant will be equal to 85% of the market value per share on the start of
the offering period in which the participant is enrolled at the time the
acquisition occurs or, if lower, 85% of the fair market value per share
immediately prior to the acquisition.
Plan Provisions. The following provisions will also be in effect under the
plan:
. The plan will terminate no later than the last business day of April
2010; and
. The board may at any time amend, suspend or discontinue the plan.
However, certain amendments may require stockholder approval.
Employment Contracts, Termination of Employment Agreements and Change in
Control Arrangements
We have entered into employment agreements with Ms. Patrick-Ezzell, Mr.
Beizer, Ms. Chu, Mr. Holub, Mr. Horn and Mr. Gale, each of whom are officers of
iAsiaWorks.
JoAnn F. Patrick-Ezzell. On August 9, 1999, JoAnn Patrick-Ezzell, our Chief
Executive Officer and Chairman of the Board of Directors, entered into an
employment agreement with us. This agreement provides for an annual salary of
$500,000. Ms. Patrick-Ezzell received a signing bonus of $100,000 in the form
of an interest free loan which is to be forgiven upon her completion of one
year of service with us or in the event of death, disability or involuntary
termination without cause. In connection with her employment Ms. Patrick-Ezzell
was also granted options to purchase up to 5,976,989 shares of our common stock
at a per share exercise price of $0.15. These options were granted, and vesting
commenced, on August 1, 1999. These options, as of April 13, 2000, are subject
to vesting terms of 12 1/2% after six months and 12 1/2% after another six
months with 1/36 of the remaining options vesting each month thereafter. We
have agreed to provide for monthly living
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expenses for Ms. Patrick-Ezzell in Hong Kong. As of April 13, 2000, for the
first year of Ms. Patick-Ezzell's employment, she will be entitled to a bonus
of $50,000, payable upon her one year anniversary with us. Subsequent annual
bonus amounts will be determined by the Compensation Committee but will not be
less than $100,000. In the event Ms. Patrick-Ezzell were involuntarily
terminated without cause she would be entitled to a lump sum severance payment
equal to 12 months of her base pay. Her employee benefits would also continue
for 12 months. She would also receive a pro rata share of her annual bonus for
time worked during the year of termination, and all of her unvested options
would vest immediately upon termination. In the event Ms. Patrick-Ezzell's
employment is terminated upon a change of control, and Ms. Patrick-Ezzell loses
her job within 12 months of the change of control, she will receive severance
pay equal to 12 months of salary, the full amount of the then current period
bonus plan agreed to with the Compensation Committee of the Board of Directors,
and all of her unvested options would vest immediately upon termination. In
such an event Ms. Patrick-Ezzell would have two years from termination to
exercise her options.
Jonathan F. Beizer. On August 26, 1998, Jonathan F. Beizer, our Chief
Financial Officer and President--U.S., accepted our offer of employment. A
subsequent employment agreement was entered into on April 16, 2000. This offer
and employment agreement provide for an annual salary of $250,000. Mr. Beizer
is also entitled to an annual bonus of up to $100,000. A minimum of $50,000 of
this bonus will be guaranteed, in the form of deferred compensation, to be paid
in two equal, biannual payments. The remaining 50% of the bonus will be based
on performance criteria to be mutually agreed upon between Mr. Beizer and the
Company, and approved by the CEO of the Company. In connection with his
employment, Mr. Beizer was granted options to purchase up to 1,494,247 shares
of our common stock at an exercise price of $0.15. These options were granted,
and vesting commenced, on September 1, 1998. These options are subject to our
standard vesting terms of 25% after twelve months with 1/36 of the then
unvested options vesting each month thereafter. In the event Mr. Beizer were
involuntarily terminated without cause, he would be entitled to a lump sum
severance payment equal to 9 months of his base salary. He would also receive a
pro-rata share of his annual bonus for time worked during the year of
termination, and all of his unvested options would vest immediately upon
termination. In the event of a change of control in which Mr. Beizer is
terminated without cause, Mr. Beizer will receive severance pay equal to
9 months of salary, the full amount of his target bonus for the year in which
he is terminated, and all of his unvested options would vest immediately upon
termination. Upon the filing of this registration statement, Mr. Beizer became
eligible to receive an option to purchase shares representing one-half of one
percent of the then fully diluted stock of iAsiaWorks.
Suzanne S. Chu. On February 18, 2000, Suzanne S. Chu, our Vice President of
Marketing, accepted our offer of employment. This offer provided for an annual
salary of $150,000. Ms. Chu is also eligible for an end-of-year bonus not to
exceed $37,500. In connection with her employment, Ms. Chu was granted options
to purchase up to 250,000 shares of our common stock at an exercise price of
$0.30. These options were granted, and vesting commenced, on February 10, 2000.
These options are subject to our standard vesting terms of 25% after twelve
months with 1/36 of the then unvested options vesting each month thereafter.
David S. Holub. On August 9, 1999, David Holub, our Vice President of
Internet and Data Center Technology signed our employment offer providing for
his employment with us as a consultant for an initial period of 90 days.
Thereafter, on November 3, 1999, an offer letter for the position of Vice
President of Internet and Data Center Technology was presented to Mr. Holub and
Mr. Holub accepted the terms therein. On November 29, 1999, Mr. Holub became a
full time employee with us. As per the terms specified in the offer letter, Mr.
Holub's annual salary is $150,000. In connection with his employment, we
granted Mr. Holub options to purchase up to 400,000 shares of our common stock
at a per share exercise price of $ 0.30. These options were granted on
December 23,
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1999 and vesting commenced on August 12, 1999. These options are subject to our
standard vesting terms of 25% after twelve months with 1/36 of the then
unvested options vesting each month thereafter. Mr. Holub is eligible for
bonuses of up to $60,000 and 150,000 additional options to purchase Company
common stock. In order to be eligible for these bonuses, Mr. Holub must
complete each of three sets of Data Centers within prescribed time frames and
budgets. For each set completed as prescribed, Mr. Holub will receive one-third
of the above mentioned bonus amount. In the event Mr. Holub were involuntarily
terminated without cause, during the first 12 months of his employment, a
portion of Mr. Holub's unvested shares proportionate to his length of service
with the Company will immediately vest.
Daryl B. Horn. On January 15, 1999, Daryl Horn, our Vice President of Sales,
entered into an employment agreement with us. This agreement provided for an
annual salary of $90,000. As of March 1, 2000, Mr. Horn's annual salary was
increased to $100,000. Mr. Horn is also eligible for commissions on a monthly
basis upon achievement of specified revenue-based milestones. In connection
with his employment agreement, we granted Mr. Horn options to purchase up to
100,000 of our common stock at a per share exercise price of $0.15. These
options were granted, and vesting commenced, on February 1, 1999. These options
are subject to our standard vesting terms of 25% after twelve months with 1/36
of the then unvested options vesting each month thereafter. In addition, Mr.
Horn can earn additional stock option grants based upon sales group revenue
performance. In the event Mr. Horn were involuntarily terminated without cause,
he would be entitled to a lump sum severance payment equal to four months of
his base salary. In the event of a change of control, in which Mr. Horn is
terminated without cause, all of Mr. Horn's unvested options would vest
immediately upon termination.
Jacob D. Gale. On June 11, 1999, Jacob Gale, our Managing Director of
Business Development, entered into an employment agreement with us. This
agreement provided for an annual salary of $175,000. Mr. Gale is also eligible
for a performance bonus based on his success in closing acquisitions. During
the first year, the maximum bonus Mr. Gale may earn is $100,000 and up to
750,000 additional stock options. In connection with his employment agreement,
we granted to Mr. Gale options to purchase up to 600,000 shares of our common
stock at a per share exercise price of $0.15. These options were granted, and
vesting commenced, on August 1, 1999. These options are subject to our standard
vesting terms of 25% after twelve months with 1/36 of the then unvested options
vesting each month thereafter. In addition, we will pay a tax equalization
amount if Mr. Gale must pay aggregate taxes that exceed the taxes which would
otherwise have been paid had the employee lived in the State of New York. In
the event that Mr. Gale is terminated for any reason other than cause after 180
days of full time employment in any given calendar year, Mr. Gale will receive
a severance amount equal to six months of salary. If we are sold, merged or
there is a change in control and Mr. Gale loses his job within twelve months of
the change of control, Mr. Gale will be entitled to six months of severance
salary and all of his unvested options will immediately vest upon termination.
If Mr. Gale does not lose his job, options will be honored by the acquiring
company and will continue to vest according to the original schedule.
Limitation of Liability and Indemnification
Our certificate of incorporation eliminates, to the maximum extent allowed by
the Delaware General Corporation Law, subject to certain exceptions, directors'
personal liability to us or our stockholders for monetary damages for breaches
of fiduciary duties. The certificate of incorporation does not, however,
eliminate or limit the personal liability of a director for the following:
. 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;
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. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that we shall indemnify our directors and executive
officers to the fullest extent permitted under the Delaware General Corporation
Law and may indemnify our other officers, employees and other agents as set
forth in the Delaware General Corporation Law. In addition, we have entered
into an indemnification agreement with each of our directors and officers. The
indemnification agreements contain provisions that require us, among other
things, to indemnify our directors and executive officers against certain
liabilities (other than liabilities arising from intentional or knowing and
culpable violations of law) that may arise by reason of their status or service
as directors or executive officers of iAsiaWorks or other entities to which
they provide service at our request and to advance expenses they may incur as a
result of any proceeding against them as to which they could be indemnified. We
believe that these bylaw provisions and indemnification agreements are
necessary to attract and retain qualified directors and officers. Prior to the
consummation of the offering, we will obtain an insurance policy covering
directors and officers for claims they may otherwise be required to pay or for
which we are required to indemnify them, subject to certain exclusions.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards against our directors
and officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of iAsiaWorks where indemnification will
be required or permitted, and we are not aware of any threatened litigation or
proceeding that may result in a claim for indemnification.
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TRANSACTIONS AND RELATIONSHIPS WITH RELATED PARTIES
Sales of Securities
Since August 1995, we have been a party to several transactions in which the
amount involved exceeded $60,000 and in which the following persons had a
direct or indirect material interest:
. any of our directors or executive officers;
. any nominee for election as one of our directors;
. any person or entity who is known by us to own beneficially more than
five percent of our outstanding stock; or
. any member of the immediate family of any of the foregoing persons.
These transactions include:
. In August 1995 and November 1995, we issued to various investors,
including New Enterprise Associates VI Limited Partnership and entities
affiliates with Walden Capital Partners II, L.P. an aggregate of
13,500,000 shares of our Series A preferred stock for an aggregate
consideration of $3,375,000. Mr. William Tai, one of our founders and
then serving as our Chief Executive Officer, is a limited partner in the
general partner which manages Walden Capital Partners II, L.P. and
Walden Technology Ventures II, L.P. Mr. Peter Morris, another of our
founders, is a general partner of New Enterprise Associates VI Limited
Partnership. At the time of this transaction, Mr. Tai became one of our
directors as did Mr. Peter Morris.
. In October 1996 and April 1997, we issued to various investors,
including Zesiger Capital Group L.L.C., who became a five percent
stockholder as a result of the investment, entities affiliated with
Walden Group and entities affiliated with New Enterprise Associates an
aggregate of 6,782,567 shares of our Series B preferred stock and
warrants to purchase an additional 1,199,867 shares of Series B
preferred stock at an exercise price of $1.50 per share for an aggregate
consideration of $10,173,851.
. In August 1998, we issued to various investors including Enterprise
Partners IV, L.P. and Institutional Venture Partners VIII, L.P., both of
which became five percent stockholders as a result of the investment and
entities affiliated with New Enterprise Associates and entities
affiliated with Zesiger Capital Group L.L.C. an aggregate of
9,807,047 shares of our Series C preferred stock and warrants to
purchase an additional 8,535,765 shares of our common stock for an
aggregate consideration of $9,807,047. At the time of the transaction,
Mr. William Stensrud, a general partner of Enterprise Management
Partners IV, L.P., became one of our directors.
. In August 1999, we issued to various investors including entities
affiliated with Enterprise Partners, entities affiliated with
Institutional Venture Partners and entities affiliated with Zesiger
Capital Group L.L.C. warrants to purchase 302,147 shares of our common
stock and convertible promissory notes in the aggregate principal amount
of $2,014,322.
. In December 1999, we issued to various investors including Newbridge
Asia II, L.P. and Sprout Group L.P. both of which became five percent
stockholders as a result of the investment and entities affiliated with
Enterprise Partners, entities affiliated with Institutional Venture
Partners, entities affiliated with New Enterprise Associates, entities
affiliated with PacVen Walden Ventures IV, L.P. and entities affiliated
with Zesiger Capital Group L.L.C., an aggregate of 41,780,100 shares of
our Series D preferred stock for an aggregate consideration of
approximately $85,000,000, including cancellation of outstanding
indebtedness. At the time of the transaction, Mr. Farrokh Billimoria, a
general partner of Sprout Group, L.P., became one of our directors as
did Mr. Daniel Carroll, a partner of Newbridge Asia II, L.P .
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The following table summarizes the shares of common stock and preferred stock
purchased by our executive officers, directors and five percent stockholders
and persons associated with them since January 1996. The number of total shares
reflects the conversion to common stock for each share of Series A, Series A1,
Series B, Series C and Series D preferred stock, on an as converted basis,
including any necessary adjustments as a result of the antidilution provisions
of the preferred stock.
<TABLE>
<CAPTION>
Warrants to Total Shares
Series A Series A1 Series B Series C Series D Purchase on an
Common Preferred Preferred Preferred Preferred Preferred Common As-Converted
Investor Stock Stock Stock Stock Stock Stock Stock Basis
-------- --------- --------- --------- --------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Entities affiliated with
Enterprise Partners.... 2,912,660 2,260,371 760,992 -- 3,201,914 1,507,783 -- 10,643,720
Entities affiliated with
Institutional Venture
Partners............... 3,978,271 739,629 249,008 -- 4,426,233 1,507,783 -- 11,050,924
Entities affiliated with
New Enterprise
Associates............. 847,907 4,440,000 -- 518,257 767,382 1,211,295 -- 7,784,841
Entities affiliated with
Newbridge Capital
Group.................. -- -- -- -- -- 18,678,166 -- 18,678,166
Entities affiliated with
Sprout Group........... -- -- -- -- -- 9,830,614 -- 9,830,614
Entities affiliated with
Walden................. 360,000 3,200,000 -- 518,256 -- 1,474,592 -- 5,552,848
Entities affiliated with
Zesiger Capital Group.. -- -- -- 4,015,949 507,984 963,392 485,862 5,973,187
Peter Morris............ -- 40,000 -- -- -- -- -- 40,000
WT Technology........... -- 2,270,860 -- -- -- 241,335 -- 2,512,195
Jonathan F. Beizer...... 350,000 -- -- -- -- -- -- 350,000
William P. Tai.......... 266,470 -- -- -- -- -- -- 266,470
</TABLE>
Holders of shares of preferred stock are entitled to registration rights in
respect of the common stock issued or issuable upon conversion thereof. See
"Description of Capital Stock--Registration Rights" beginning on page 64.
The following members of our board of directors are affiliated with the
investors set forth above in the manner prescribed below:
William Stensrud, a member of our board of directors, is a general partner of
Enterprise Partners. William Tai, a member of our board of directors, is a
general partner and managing director of Institutional Venture Partners and,
from September 1991 until July 1997, he was affiliated with Walden. William Tai
or his immediate family members may be deemed the beneficial owners of shares
held by WT Technology. Peter Morris, a member of our board of directors, is a
general partner of New Enterprise Associates. Daniel Carroll, a member of our
board of directors, is a managing director of Newbridge Capital. Farrokh
Billimoria, a member of our board of directors, is a general partner with
Sprout Group.
Agreements with Executive Officers and Directors
In January 1999 we issued a loan in the amount of $60,000 to Jonathan Beizer,
our Chief Financial Officer and President-U.S. Including interest, Mr. Beizer
was never in debt to us for more than $62,277. The loan, and all accrued
interest, was paid off by December 31, 1999. The interest rate charged on the
loan was 5%.
We have entered into employment arrangements with our executive officers. See
"Management--Employment Contracts, Termination of Employment Agreements and
Change in Control Arrangements" beginning on page 54.
59
<PAGE>
We have granted options and issued common stock to our executive officers and
directors. In January 1996, we granted options to purchase 70,000 shares of our
common stock at an exercise price of $0.15 per share to Mr. William Tai. In
July 1999, we granted options to purchase 1,178,819 shares of our common stock
at an exercise price of $0.15 per share to Mr. William Tai and options to
purchase 1,178,819 shares of our common stock at an exercise price of $0.15 per
share to Mr. William Stensrud. See "Management--Director Compensation" and
"Principal Stockholders" beginning on pages 47 and 61 respectively.
We have entered into an indemnification agreement with each of our executive
officers and directors containing provisions that may require us, among other
things, to indemnify our officers and directors against certain liabilities
that may arise by reason of their status or service as officers or directors
(other than liabilities arising from willful misconduct of a culpable nature)
and to advance expenses incurred as a result of any proceeding against them as
to which they could be indemnified. See "Management--Limitation of Liability
and Indemnification" beginning on page 56.
We have entered into non-competition and confidentiality agreements with our
officers.
We believe that all of the transactions set forth above were made on terms no
less favorable to us than could have been otherwise obtained from unaffiliated
third parties. All future transactions, including loans, if any, between us and
our officers, directors and principal stockholders and their affiliates and any
transactions between us and any entity with which our officers, directors or
five percent stockholders are affiliated will be approved by a majority of the
board of directors, including a majority of the independent and disinterested
outside directors of the board of directors and will be on terms no less
favorable to us than could be obtained from unaffiliated third parties.
60
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership of
our common stock as of March 31, 2000, by the following individuals or groups:
. each person or entity who is known by us to own beneficially more than
five percent of our outstanding stock,
. each of the named executive officers,
. each of our directors, and
. all directors and executive officers as a group.
Each stockholder's percentage ownership in the following table is based on
87,441,115 shares of common stock outstanding as of March 31, 2000, which
includes shares of common stock issuable upon the conversion of all outstanding
shares of preferred stock and the exercise of all outstanding warrants, other
than warrants to purchase 636,043 shares of common stock, upon the closing of
this offering, and treating as outstanding all options exercisable within 60
days of March 31, 2000 held by the particular stockholder and that are included
in the first column. The numbers shown in the table below assume no exercise by
the underwriters of their over-allotment option and the other assumptions set
forth on page 5 hereof.
Unless otherwise indicated, the principal address of each of the stockholders
below is c/o iAsiaWorks, Inc., 2000 Alameda de las Pulgas, Suite 125, San
Mateo, CA 94403. Except as otherwise indicated, and subject to applicable
community property laws, the persons named in the table have sole voting and
investment power with respect to all shares of common stock held by them.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Beneficially Owned
Shares ----------------------
Beneficially Prior to After the
Name and Address of Beneficial Owner Owned Offering (%) Offering
------------------------------------ ------------ ------------ ---------
<S> <C> <C> <C>
Entities affiliated with Enterprise
Partners(1).............................. 11,822,539 13.5
Entities affiliated with Institutional
Venture Partners(2)...................... 14,661,938 16.7
Entities affiliated with New Enterprise
Associates(3)............................ 7,784,841 8.9
Entities affiliated with Newbridge Capital
Group(4)................................. 18,678,166 21.3
Entities affiliated with Sprout Group(5).. 9,830,614 11.2
Entities affiliated with Walden
International Investment Group(6)........ 9,313,862 10.6
Entities affiliated with Zesiger Capital
Group L.L.C.(7).......................... 5,973,187 6.8
JoAnn F. Patrick-Ezzell(8)................ 747,124 *
Jonathan F. Beizer(9)..................... 654,859 *
Suzanne S. Chu............................ -- --
David S. Holub............................ -- --
Daryl B. Horn(10)......................... 33,125 --
Jacob D. Gale............................. -- --
Robert Lee(11)............................ 275,000 *
Peter T. Morris(3)........................ 7,784,841 8.9
William R. Stensrud(12)................... 11,822,539 13.5
William P. Tai(2)(6)...................... 20,214,786 23.0
Daniel A. Carroll(4)...................... 18,678,166 21.3
Farrokh K. Billimoria(5).................. 9,830,614 11.2
All directors and executive officers as a
group (12 persons)(13)................... 70,041,054 79.8
</TABLE>
- --------
* Less than 1%.
61
<PAGE>
(1) Includes 9,792,222 shares held by Enterprise Partners IV, L.P., and
851,498 shares held by Enterprise Partners IV Associates, L.P. Mr. William
Stensrud is a General Partner of each of these stockholders, and as such
may be deemed to be the beneficial owner of these shares. Mr. Stensrud
disclaims beneficial ownership of these shares except for his pecuniary
interest therein. Also includes options to purchase 1,178,819 shares of
common stock held by Mr. Stensrud, which are exercisable within 60 days of
March 31, 2000. Some of these shares are subject to repurchase rights by
iAsiaWorks. The business address of Enterprise Partners is 7979 Ivanhoe
Avenue, Suite 550, La Jolla, CA 92037.
(2) Includes 10,645,446 shares held by Institutional Venture Partners VIII,
L.P., 135,436 shares held by IVM Investment Fund VIII, L.L.C. 37,254
shares held by IVM Investment Fund VIII-A L.L.C., and 82,788 shares held
by IVP Founders Fund I, L.P. William P. Tai is a general partner or
managing director of funds managed by Institutional Venture Partners, and
as such may be deemed to be the beneficial owner of these shares. Mr. Tai
disclaims beneficial ownership of these shares except for his pecuniary
interest therein. Also includes options to purchase 1,248,819 shares of
common stock held by Mr. Tai, which are exercisable within 60 days of
March 31, 2000, and 2,512,195 shares held by WT Technology, which Mr. Tai
or his family members may be deemed to beneficially own. The business
address of Institutional Venture Partners is 3000 Sand Hill Road, Building
2, Suite 290, Menlo Park, CA 94025.
(3) Consists of 40,000 shares held by NEA Ventures 1995, and 7,744,841 shares
held by New Enterprise Associates VI, Limited Partnership. Peter Morris is
a general partner of NEA Ventures 1995 and New Enterprise Associates VI,
Limited Partnership, and as such may be deemed to be the beneficial owner
of these shares. Mr. Morris disclaims beneficial ownership of these shares
except for his pecuniary interest therein. The business address of New
Enterprise Associates is 2490 Sand Hill Road, Menlo Park, CA 94025.
(4) Consists of 17,203,574 shares held by Newbridge Asia II, L.P., and
1,474,592 shares held by Tarrant Ventures Partners. Daniel Carroll holds a
general partnership interest in Newbridge Asia II, L.P. The business
address of Newbridge Asia II is 201 Main Street, Fort Worth, Texas.
(5) Consists of 28,509 shares held by DLJ Capital Corporation for the benefit
of an employee deferred compensation plan, 743,637 shares held by DLJ ESC
II, L.P. for the benefit of an employee deferred compensation plan,
512,743 shares held by Sprout Venture Capital L.P. and 8,545,725 shares
held by Sprout Capital VIII, L.P. Farrokh Billimoria is a general partner
of Sprout Group Venture Capital and as such may be deemed to be the
beneficial owner of these shares. Mr. Billimoria disclaims beneficial
ownership of these shares except for his pecuniary interest therein. The
business address of the Sprout Group is 3000 Sand Hill Road, Building 3,
Suite 170, Menlo Park, CA 94025.
(6) Consists of 1,445,147 shares held by International Venture Capital
Investment Corp., 1,351,709 shares held by PacVen Walden Ventures IV, L.P.
and PacVen Walden Ventures IV Associates Fund, L.P., 2,357,060 shares held
by Walden Capital Partners II, L.P., and 398,932 shares held by Walden
Technology Ventures II, L.P. William P. Tai is a limited partner in the
general partnership of funds managed by Walden, a shareholder in Walden
International Investment Group, the manager of International Venture
Capital Investment Corp. and PacVen Walden Ventures IV, L.P., and as such
may be deemed to be the beneficial owner of these shares. Mr. Tai
disclaims beneficial ownership of these shares except for his pecuniary
interest therein. This amount also includes options to purchase 1,248,819
shares of common stock held by Mr. Tai, which are exercisable within 60
days of March 31, 2000, and 2,512,195 shares owned by WT Technology, which
Mr. Tai or his family members may be deemed to beneficially own. The
business address of Walden International Investment Group is 750 Battery
Street, 7th Floor, San Francisco, CA 94111.
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<PAGE>
(7) Includes 5,487,325 shares and warrants to purchase 485,862 shares of
common stock for which Zesiger Capital Group, L.L.C. is a registered
investment advisor with the Securities and Exchange Commission under the
Investment Advisors Act of 1940. These shares are held in numerous
investment advisory accounts and members accounts. Zesiger Capital Group,
in its capacity as investment advisor, exercises sole voting and sole
investment power over such shares. Zesiger Capital Group, L.L.C. disclaims
beneficial ownership of these shares. The business address of Zesiger
Capital Group is 320 Park Avenue, New York, NY 10022.
(8) Consists of 747,124 shares of common stock subject to options exercisable
within 60 days of March 31, 2000.
(9) Consists of 654,859 shares of common stock subject to options exercisable
within 60 days of March 31, 2000.
(10) Consists of 33,125 shares of common stock subject to options exercisable
within 60 days of March 31, 2000.
(11) Consists of 275,000 shares of common stock subject to options exercisable
within 60 days of March 31, 2000.
(12) Consists of 1,178,819 shares of common stock subject to options
exercisable within 60 days of March 31, 2000 as well as 10,643,720 shares
held by entities affiliated with Enterprise Partners.
(13) Consists of 4,137,746 shares of common stock subject to options
exercisable within 60 days of March 31, 2000, 2,512,195 shares held by WT
Technology, 7,784,841 shares owned by entities affiliated with New
Enterprise Associates, 10,643,720 shares owned by entities affiliated with
Enterprise Partners, 10,900,924 shares held by entities affiliated with
Institutional Venture Partners, 5,552,848 shares held by entities
affiliated with Walden International Investment Group, 18,678,166 shares
owned by entities affiliated with Newbridge Capital Group and
9,830,614 shares owned by entities affiliated with Sprout Group.
63
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At the closing of this offering, we will be authorized to issue 300,000,000
shares of common stock, $0.001 par value, and 20,000,000 shares of undesignated
preferred stock, $0.001 par value, after giving effect to the amendment of our
certificate of incorporation to delete references to the existing preferred
stock following conversion of that stock. The following description of capital
stock gives effect to the certificate of incorporation to be filed upon closing
of this offering. Immediately following the closing of this offering, and
assuming no exercise of the underwriters' over-allotment option, an aggregate
of shares of common stock will be issued and outstanding, and no shares
of preferred stock will be issued and outstanding.
The following description of our capital stock is subject to and qualified by
our certificate of incorporation and bylaws and by the provisions of the
applicable Delaware law.
Common Stock
The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock that may come into existence,
the holders of common stock are entitled to receive ratably those dividends, if
any, as may be declared from time to time by the board of directors out of
funds legally available for dividends. See "Dividend Policy" on page 20. In the
event of liquidation, dissolution or winding up of iAsiaWorks, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred
stock, if any, then outstanding. The common stock has 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, and the shares of common
stock to be outstanding upon completion of this offering will be fully paid and
nonassessable.
Preferred Stock
Our board of directors is authorized to issue from time to time, without
stockholder authorization, in one or more designated series, any or all of the
authorized but unissued shares of our preferred stock with any dividend,
redemption, conversion and exchange provisions as may be provided in the
particular series. Any series of preferred stock may possess voting, dividend,
liquidation and redemption rights superior to those of the common stock. The
rights of the holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be
issued in the future. Issuance of a new series of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of entrenching our board of
directors and making it more difficult for a third party to acquire, or
discourage a third party from acquiring, a majority of outstanding voting
stock. We have no present plans to issue any shares of or designate any series
of preferred stock.
Warrants
As of March 31, 2000, there were warrants outstanding to purchase a total of
636,043 shares of common stock issuable upon exercise of outstanding warrants
to purchase Series B preferred stock at an exercise price of $1.50 per share
expiring through May 2001.
Registration Rights
Upon closing of the offering, the holders of an aggregate of approximately
77,001,376 shares of common stock and 636,043 shares of common stock issuable
upon the exercise of outstanding
64
<PAGE>
warrants to purchase Series B preferred stock at an exercise price of $1.50 per
share will be entitled to certain rights with respect to the registration of
the shares under the Securities Act. Under the terms of the registration rights
agreement, if we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders
exercising registration rights, these holders are entitled to notice of the
registration and are entitled to include shares of common stock in the
registration. The rights are subject to conditions and limitations, among them
the right of the underwriters of an offering subject to the registration to
limit the number of shares included in the registration. Holders of these
rights may also require us to file a registration statement under the
Securities Act of 1933 at our expense with respect to their shares of common
stock, and we are required to use our best efforts to effect the registration,
subject to conditions and limitations. Furthermore, stockholders with
registration rights may require us to file additional registration statements
on Form S-3, subject to conditions and limitations.
Antitakeover Effects of Provisions of the Certificate of Incorporation, Bylaws
and Delaware Law
Our certificate of incorporation authorizes the board to establish one or
more series of undesignated preferred stock, the terms of which can be
determined by the board at the time of issuance. For additional information on
our preferred stock, see "--Preferred Stock" on page 64. The certificate of
incorporation also provides that all stockholder action must be effected at a
duly called meeting of stockholders and not by written consent. In addition,
the certificate of incorporation and bylaws do not permit our stockholders to
call a special meeting of stockholders. Only our Chief Executive Officer,
President, Chairman of the Board or a majority of the board of directors are
permitted to call a special meeting of stockholders. The certificate of
incorporation also provides that the board of directors is divided into three
classes, with each director assigned to a class with a term of three years, and
that the number of directors may only be determined by the board of directors.
The bylaws also require that stockholders give advance notice to our Secretary
of any nominations for director or other business to be brought by stockholders
at any stockholders' meeting, and that the Chairman has the authority to
adjourn any meeting called by the stockholders. The bylaws also require a
supermajority vote of members of the board of directors and/or stockholders to
amend some bylaw provisions. These provisions of our certificate of
incorporation and the bylaws could discourage potential acquisition proposals
and could delay or prevent a change in control of iAsiaWorks. These provisions
also may have the effect of preventing changes in our management. See "Risk
Factors--Provisions of our certificate of incorporation and bylaws may make
changes of control difficult" beginning on page 13.
We are subject to Section 203 of the Delaware General Corporation Law, that,
subject to exceptions, prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years following the time that the stockholder became an interested stockholder,
unless:
. prior to that time, 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
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned:
. by persons who are directors and also officers; and
. by employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer; or
65
<PAGE>
. at or subsequent to that time, the business combination is approved by
the board of directors of the corporation and authorized at an annual or
special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder.
Section 203 defines "business combination" to include the following:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by 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.
Generally, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision would be expected
to have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
66
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock,
and we cannot predict the effect, if any, that market sales of shares of common
stock or the availability of shares of common stock for sale will have on the
market price of the common stock prevailing from time to time. Nevertheless,
sales of substantial amounts of common stock in the public market could
adversely affect the market price of our common stock and could impair our
future ability to raise capital through the sale of our equity securities.
Upon the closing of this offering, we will have shares of common
stock outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options and warrants. Of the outstanding
shares, all of the shares sold in this offering will be freely tradable, except
that any shares held by our "affiliates," as that term is defined in Rule 144
promulgated under the Securities Act, may only be sold in compliance with the
limitations described below. The remaining 87,033,303 shares of common stock
will be deemed "restricted securities" as defined under Rule 144. Restricted
shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act, which rules are summarized below. Subject to the
lock-up agreements described below and the provisions of Rules 144, 144(k) and
701, additional shares will be available for sale in the public market as
follows:
<TABLE>
<CAPTION>
Approximate
Shares
Eligible
for Future
Relevant Dates Sale* Comment
-------------- ----------- -------
<C> <C> <S>
On the date of this prospectus.............. Shares sold in this
offering.
90 days after the date of this prospectus... Shares tradeable under
Rules 144 and 701.
180 days after the date of this prospectus.. All shares subject to
lock-up released; shares
tradeable under Rule 144
and 701.
</TABLE>
- --------
* Assumes no exercise of the Underwriters' option to purchase additional
shares in the offering.
Lock-up Agreements
We have agreed, and each of our officers, directors, employees and
substantially all of our securityholders have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any shares of
our common stock, or any of our securities that are substantially similar to
the common stock, including but not limited to any securities convertible into
or exchangeable for, or represent the right to receive shares of our common
stock or any such securities, for a period of 180 days after the date of this
prospectus; except that in the case of our securityholders, if they acquire
less than 10,000 shares of common stock following the date of the final
prospectus, then such shares will be exempt from the above lock-up
restrictions. Transfers or dispositions can be made sooner:
. with prior written consent of Goldman, Sachs & Co.;
. as a bona fide gift; or
. to any trust for the benefit of any officer, director or security holder
or his or her immediate family.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or a group of persons whose shares are
required to be aggregated), including any of our affiliates, who has
beneficially owned shares for at least one year, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
. 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering;
or
67
<PAGE>
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of such sale is filed on Form 144 with the Securities and
Exchange Commission.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years (including the holding period
of any prior owner then an affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k)"
shares may be sold immediately upon the completion of this offering.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each
of our employees, consultants or advisors who purchases shares of our common
stock from us in connection with a compensatory share plan or other written
agreement is eligible to resell such shares 90 days after the effective date of
this offering in reliance on Rule 144, but without compliance with some
restrictions, including the holding period, contained in Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than "affiliates", as defined in Rule 144, subject only to the manner of
sale provisions of Rule 144 and by "affiliates" under Rule 144 without
compliance with its one year minimum holding period requirement.
Stock Options
As of March 31, 2000, options to purchase a total of 15,887,389 shares of
common stock were outstanding, 4,112,079 of which were then exercisable. We
intend to file a Form S-8 registration statement under the Securities Act to
register all shares of common stock issuable under our 2000 Stock Incentive
Plan and our 2000 Employee Stock Purchase Plan. Accordingly, shares of common
stock underlying these options will be eligible for sale in the public markets,
subject to vesting restrictions or the lock-up agreement described above. See
"Benefit Plans" beginning on page 50.
Registration Rights
Following this offering, under specified circumstances and subject to
customary conditions, holders of 77,001,376 shares of our outstanding common
stock and 636,043 shares of our common stock issuable upon the exercise of
outstanding warrants will have certain demand registration rights with respect
to their shares of common stock, subject to the 180-day lock-up arrangement
described above, to require us to register their shares of common stock under
the Securities Act, and certain rights to participate in any future
registration of securities by us. If the holders of these registrable
securities request that we register their shares, and if the registration is
effected, these shares will become freely tradable without restriction under
the Securities Act. Any sales of securities by these stockholders could have a
material adverse effect on the trading price of our common stock. See
"Description of Capital Stock--Registration Rights" beginning on page 64.
68
<PAGE>
UNDERWRITING
iAsiaWorks and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to the conditions
in the underwriting agreement, each underwriter has severally agreed to
purchase the number of shares indicated in the following table. Goldman, Sachs
& Co., Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc. are the
representatives of the underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Morgan Stanley & Co. Incorporated ..........................
Salomon Smith Barney Inc. ..................................
----
Total.....................................................
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from us to cover such sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the underwriters will
separately purchase shares in approximately the same proportion as set forth in
the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by iAsiaWorks. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by iAsiaWorks
------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total............................................ $ $
</TABLE>
Shares sold by the underwriters to the public initially will be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
iAsiaWorks, its directors, officers, employees and principal stockholders
have agreed with the underwriters not to dispose of or hedge any of their
common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of Goldman, Sachs & Co. See "Shares Available for Future
Sale" for a discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated between iAsiaWorks and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be historical performance, estimates of the business potential
and earnings prospects of iAsiaWorks, an assessment of iAsiaWorks' management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
iAsiaWorks' has applied for quotation of the common stock on the Nasdaq
National Market under the symbol "IAWK."
69
<PAGE>
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short-sale covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
At the request of iAsiaworks, the underwriters are reserving up to
shares of common stock for sale at the initial public offering price to
directors, officers, employees and friends through a directed share program.
iAsiaWorks has also requested that the underwriters reserve up to shares of
common stock for sale, at the initial public offering price, to certain
strategic partners. The number of shares of common stock available for sale to
the general public in the public offering will be reduced to the extent these
persons purchase these reserved shares. Any shares not so purchased will be
offered by the underwriters to the general public on the same basis as other
shares offered hereby.
Morgan Stanley Dean Witter Equity Fund, Ltd., an affiliate of Morgan Stanley
& Co. Incorporated, holds 938,061 shares of our Series D preferred stock, which
will convert into 983,061 shares of our common stock upon closing of this
offering. Salomon Smith Barney Inc. holds 266,098 shares of our Series D
preferred stock and 1,100,000 shares of our Series B preferred stock, which
will convert, in aggregate, into 1,820,869 shares of our common stock upon
closing of this offering.
The underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.
iAsiaWorks estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .
iAsiaWorks has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
70
<PAGE>
VALIDITY OF SECURITIES
The validity of the common stock offered will be passed upon for us by
Brobeck, Phleger & Harrison LLP, Palo Alto, California and for the underwriters
by Sullivan & Cromwell, New York, NY. Brobeck, Phleger & Harrison LLP and
persons affiliated with it beneficially own an aggregate of 36,864 shares of
our common stock and hold options to purchase an additional 39,000 shares of
common stock.
EXPERTS
The consolidated financial statements of iAsiaWorks, Inc. as of December 31,
1998 and 1999 and for each of the three years in the period ended December 31,
1999 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of AT&T EasyLink Services Asia/Pacific Limited
(subsequently renamed as iAsiaWorks (HK) Limited) as of December 31, 1998 and
November 30, 1999 and for the year ended December 31, 1998 and for the eleven
months ended November 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers Hong Kong,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act a registration statement on Form S-1 relating
to the common stock offered. This prospectus does not contain all of the
information set forth in the registration statement and its exhibits and
schedules. For further information with respect to us and the shares we are
offering pursuant to this prospectus you should refer to the registration
statement and its exhibits and schedules. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and you should refer to the copy of
that contract or other document filed as an exhibit to the registration
statement. You may read or obtain a copy of the registration statement at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. The Commission maintains a web
site that contains reports, proxy information statements and other information
regarding registrants that file electronically with the Commission. The address
of this Web site is http://www.sec.gov.
We intend to furnish holders of our common stock with annual reports
containing, among other information, audited consolidated financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited condensed consolidated financial information for the first
three quarters of each fiscal year. We intend to furnish other reports as we
may determine or as may be required by law.
We maintain a web site at http://www.iasiaworks.com. Information contained in
our web site is not a prospectus and does not constitute a part of this
prospectus.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
iAsiaWorks, Inc.
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Stockholders' Deficit......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Pro Forma Combined Financial Statements
Overview................................................................. F-27
Unaudited Pro Forma Combined Statement of Operations..................... F-28
AT&T Easy Link Services Asia/Pacific Limited
Report of Independent Accountants........................................ F-29
Balance Sheets........................................................... F-30
Statements of Operations................................................. F-31
Statements of Changes in Deficit on Owner's Equity....................... F-32
Statements of Cash Flows................................................. F-33
Notes to Financial Statements............................................ F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
iAsiaWorks, Inc.
The reincorporation described in Note 14 to the consolidated financial
statements has not been consumated at the date of our opinion. When the
reincorporation has been consumated, we will be in a position to furnish the
following report, assuming that from April 14, 2000 to the date of such
reincorporation, no other material events have occurred that would affect the
accompanying consolidated financial statements or required disclosures therein:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and comprehensive loss, of
stockholders' deficit and of cash flows present fairly, in all material
respects, the financial position of iAsiaWorks, Inc. and its subsidiaries
(the Company) at December 31, 1998 and 1999, and the results of their
operations and their 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 audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
April 14, 2000, except for Note 14 as to which the date is , 2000
F-2
<PAGE>
IASIAWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
------------------ December 31,
1998 1999 1999
-------- -------- -------------
(unaudited)
(Note 2)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 2,654 $ 42,222
Marketable securities...................... 4,433 --
Restricted cash............................ 186 50
Accounts receivable, less allowance for
doubtful accounts of $228 and $554........ 414 2,735
Prepaids and other current assets.......... 661 679
-------- --------
Total current assets...................... 8,348 45,686
Property and equipment, net.................. 2,127 5,585
Goodwill, intangibles and other assets....... 321 40,345
-------- --------
Total assets.............................. $ 10,796 $ 91,616
======== ========
LIABILITIES, CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable........................... $ 1,238 $ 3,178
Accrued liabilities........................ 273 1,516
Deferred revenue........................... 115 275
Current portion of capital lease
obligations............................... -- 56
Current portion of long-term debt.......... 216 397
-------- --------
Total current liabilities................. 1,842 5,422
Capital lease obligations.................... -- 234
Long-term debt............................... 677 201
-------- --------
2,519 5,857
-------- --------
Convertible preferred stock:
Convertible preferred stock; 83,100,000
shares authorized, $0.001 par value;
31,099,614 and 73,416,854 shares issued
and outstanding in 1998 and 1999,
respectively; no shares pro forma
(unaudited) (Liquidation value:
$109,646,680)............................. 26,712 114,699 $ --
-------- --------
Commitments and contingencies (Notes 10 and
13)
Stockholders' deficit:
Common stock, $0.001 par value, 109,100,000
shares authorized; 1,006,395 and 8,747,625
shares issued and outstanding in 1998 and
1999, respectively; 85,206,037 shares
issued and outstanding, pro forma
(unaudited)............................... 1 9 85
Additional paid-in capital................. 2,716 19,032 133,655
Deferred stock-based compensation.......... (1,237) (13,242) (13,242)
Accumulated other comprehensive loss....... (419) (900) (900)
Accumulated deficit........................ (19,496) (33,839) (33,839)
-------- -------- --------
Total stockholders' equity (deficit)...... (18,435) (28,940) $ 85,759
-------- -------- ========
Total liabilities, convertible preferred
stock and stockholders' deficit.......... $ 10,796 $ 91,616
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
IASIAWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Revenue:
Internet access and related services.......... $ 1,597 $ 3,490 $ 5,384
Hosting, co-location and other managed
services..................................... -- -- 245
-------- -------- ---------
Total revenue............................... 1,597 3,490 5,629
Cost of revenue:
Cost of Internet access and related services.. 2,199 4,621 5,417
-------- -------- ---------
Cost of hosting, co-location and other managed
services..................................... -- -- 401
-------- -------- ---------
Total cost of revenue....................... 2,199 4,621 5,818
-------- -------- ---------
Gross margin................................ (602) (1,131) (189)
-------- -------- ---------
Operating expenses:
Network operations and support (excluding
stock-based compensation of $0, $20 and $454
in 1997, 1998 and 1999, respectively)........ 1,538 1,628 1,539
Sales and marketing (excluding stock-based
compensation of $0, $4 and $130 in 1997, 1998
and 1999, respectively)...................... 2,391 1,471 2,372
General and administrative (excluding stock-
based compensation of $0, $196 and $3,486 in
1997, 1998 and 1999, respectively) .......... 1,935 2,203 3,511
Amortization of intangible assets............. -- -- 298
Stock-based compensation...................... -- 220 4,070
-------- -------- ---------
Total operating expenses.................... 5,864 5,522 11,790
-------- -------- ---------
Loss from operations............................ (6,466) (6,653) (11,979)
Interest income................................. 353 238 288
Interest expense................................ (110) (388) (384)
Other income (expense), net..................... (2) (18) 19
-------- -------- ---------
Loss before provision for income taxes.......... (6,225) (6,821) (12,056)
Provision for income taxes...................... 11 2 --
-------- -------- ---------
Net loss........................................ (6,236) (6,823) (12,056)
Dividend accretion on preferred stock........... (1,376) (1,814) (2,287)
-------- -------- ---------
Net loss attributable to common stockholders.... (7,612) (8,637) (14,343)
Other comprehensive loss:
Change in unrealized gain (loss) on marketable
securities................................... -- 4 (4)
Change in foreign currency translation
adjustments.................................. (560) 139 (477)
-------- -------- ---------
Comprehensive loss.............................. $ (8,172) $ (8,494) $ (14,824)
======== ======== =========
Net loss per share attributable to common
stockholders, basic and diluted................ $ (14.10) $ (10.29) $ (4.87)
======== ======== =========
Shares used in computing net loss per share
attributable to common stockholders, basic and
diluted........................................ 540 839 2,945
======== ======== =========
Pro forma net loss per share attributable to
common stockholders, basic and diluted
(unaudited).................................... $ (0.36)
=========
Shares used in computing pro forma net loss per
share attributable to common stockholders,
basic and diluted (unaudited)(Note 2).......... 39,530
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
IASIAWORKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Deferred Other Total
---------------- Paid-in Stock-based Comprehensive Accumulated Stockholders'
Shares Amount Capital Comprehensive Loss Deficit Deficit
--------- ------ ---------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997.................... 540,000 $ 1 $ 13 $ -- $ (2) $ (3,247) $ (3,235)
Change in foreign
currency translation
adjustment.............. -- -- -- -- (560) -- (560)
Dividend accretion on
preferred stock......... -- -- -- -- -- (1,376) (1,376)
Net loss................ -- -- -- -- -- (6,236) (6,236)
--------- ---- ------- -------- ------ -------- --------
Balance at December 31,
1997.................... 540,000 1 13 -- (562) (10,859) (11,407)
Issuance of common stock
warrants in connection
with Series C preferred
stock................... -- -- 1,208 -- -- -- 1,208
Issuance of shares of
common stock upon
exercise of options..... 466,395 -- 38 -- -- -- 38
Deferred compensation
expense in connection
with issuances of stock
options................. -- -- 1,457 (1,457) -- -- --
Amortization of deferred
compensation............ -- -- -- 220 -- -- 220
Change in unrealized
gain on marketable
securities.............. -- -- -- -- 4 -- 4
Change in foreign
currency translation
adjustment.............. -- -- -- -- 139 -- 139
Dividend accretion on
preferred stock......... -- -- -- -- -- (1,814) (1,814)
Net loss................ -- -- -- -- -- (6,823) (6,823)
--------- ---- ------- -------- ------ -------- --------
Balance at December 31,
1998.................... 1,006,395 1 2,716 (1,237) (419) (19,496) (18,435)
Issuance of common stock
warrants in connection
with bridge financing... -- -- 149 -- -- -- 149
Issuance of shares of
common stock upon
exercise of options..... 182,392 -- 24 -- -- -- 24
Issuance of shares of
common stock upon
exercise of warrants.... 7,558,838 8 68 -- -- -- 76
Deferred compensation
expense in connection
with issuances of stock
options................. -- -- 16,075 (16,075) -- -- --
Amortization of deferred
compensation............ -- -- -- 4,070 -- -- 4,070
Change in unrealized
gain on marketable
securities.............. -- -- -- -- (4) -- (4)
Change in foreign
currency translation
adjustment.............. -- -- -- -- (477) -- (477)
Dividend accretion on
preferred stock......... -- -- -- -- -- (2,287) (2,287)
Net loss................ -- -- -- -- -- (12,056) (12,056)
--------- ---- ------- -------- ------ -------- --------
Balance at December 31,
1999.................... 8,747,625 $ 9 $19,032 $(13,242) $ (900) $(33,839) $(28,940)
========= ==== ======= ======== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
IASIAWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,236) $(6,823) $(12,056)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 368 654 1,234
Stock-based compensation....................... -- 220 4,070
Warrant accretion.............................. -- 158 149
Provision for doubtful accounts................ 189 260 325
Loss on sale of property and equipment......... 1 42 8
Changes in operating assets and liabilities:
Accounts receivable.......................... (714) (301) (898)
Prepaids and other assets.................... (872) (29) 234
Accounts payable and accrued liabilities..... 85 815 1,009
Deferred revenue............................. 76 38 159
------- ------- --------
Net cash used in operating activities...... (7,103) (4,966) (5,766)
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (842) (1,093) (3,326)
Change in marketable securities.................. 1,435 (3,379) 4,433
Proceeds on sale of assets....................... 1 27 180
Business acquisition, net of cash acquired....... -- -- (41,446)
Change in restricted cash and deposits........... -- (2) 48
------- ------- --------
Net cash provided by (used in) investing
activities................................ 594 (4,447) (40,111)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock........... -- 38 100
Proceeds from issuance of preferred stock and
preferred stock warrants, net................... 1,151 9,749 85,700
Proceeds from (repayments of) long-term debt..... -- 1,105 (287)
------- ------- --------
Net cash provided by financing activities.. 1,151 10,892 85,513
------- ------- --------
Effect of exchange rate changes on cash............ (212) (28) (68)
Net increase (decrease) in cash and cash
equivalents....................................... (5,570) 1,451 39,568
Cash and cash equivalents at beginning of year..... 6,773 1,203 2,654
------- ------- --------
Cash and cash equivalents at end of year........... $ 1,203 $ 2,654 $ 42,222
======= ======= ========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest....................................... $ -- $ 300 $ 219
======= ======= ========
Taxes.......................................... $ 12 $ 11 $ 2
======= ======= ========
Disclosure of noncash activities:
Assets acquired under capital lease.............. $ -- $ -- $ 369
======= ======= ========
Dividend accretion on preferred stock............ $(1,376) $(1,814) $ (2,287)
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY:
iAsiaWorks, Inc. was incorporated in August 1995 as AUNET Corporation. In
December 1999, the Company changed its name to iAsiaWorks, Inc. The Company
offers a broad range of Internet solutions that allow business customers to
build or extend their presence across multiple markets in the Asia-Pacific
region. These Internet solutions include high-speed, leased-line Internet
access, hosting, co-location, managed services and other value added services.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
Business risks and uncertainties
The Company operates in the Internet services industry, which is
characterized by intense competition, rapid technological advances and evolving
regulatory requirements and industry standards. Factors that could affect the
Company's future operating results and cause actual results to vary materially
from expectations include, but are not limited to, dependence on an industry
that is new, characterized by rapid technological changes, fluctuations in end-
user demands, evolving industry standards, competition, and risks associated
with foreign currencies. Failure by the Company to anticipate or respond
adequately to technological developments in its industry, changes in customer
or supplier requirements or changes in regulatory requirements or industry
standards could have a material adverse effect on the Company's business and
operating results.
The Company's operations are concentrated in the Asia-Pacific region and
are subject to the laws, regulations and statutes of the countries in which it
does business. Changes in, or new interpretations of, existing laws or
regulations or other consequences of doing business outside the U.S. may have a
material adverse effect on the Company's business and operating results. The
Company operates in certain countries that maintain foreign currency exchange
regulations that place restrictions on the flow of foreign funds into and out
of those countries. The Company is required to comply with these regulations
when entering into transactions in foreign currencies.
The Company has generated net losses and negative cash flows since its
inception and has relied primarily on equity financing to fund its operations
and investing activity to date. Management forecasts that significant
additional financing will be required to fund operating activities and
anticipated capital expenditures. There can be no assurance that such financing
will be available to the Company.
During the Asian financial crisis which began in 1997, the economies of
many countries in the Asia-Pacific region experienced economic contractions, a
reduction in the availability of credit, increased interest rates, increased
inflation, negative fluctuations in currency exchange rates, increased
incidence of bankruptcies and increased unemployment. Recently, economic
conditions in several Asian countries have improved; however, significant
uncertainties still exist related to the economies in the Asia-Pacific region.
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
F-7
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
Initial public offering
In April 2000, the Board of Directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If the
initial public offering is closed under the terms presently anticipated, all of
the preferred stock as of December 31, 1999, will automatically convert into
76,458,412 shares of common stock. Unaudited pro forma stockholders' equity, as
adjusted for the assumed conversion of the preferred stock, is set forth on the
balance sheet.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are deposited in demand and money market
accounts in various financial institutions in the United States and Asia,
principally in Hong Kong and Korea. Deposits held with financial institutions
may exceed the amount of insurance provided on such deposits. The Company has
not experienced any losses on its deposits of cash and cash equivalents.
The Company extends credit to its customers, which are primarily comprised
of small to medium sized private companies in the Asia-Pacific region. The
Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral. The Company maintains an
allowance for doubtful accounts receivable based upon the expected
collectibility of individual accounts.
Foreign currency translation
Assets and liabilities of foreign operations where the functional currency
is the local currency are translated into U.S. dollars using the exchange rates
at the balance sheet date; income and expenses are translated at the average
rates of exchange prevailing during the year. The related translation
adjustments have been included in stockholders' equity as a component of
accumulated other comprehensive loss. Foreign currency transaction gains and
losses are included in net loss.
Financial instruments
Carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, marketable securities, accounts receivable
and accounts payable approximate fair value due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of its debt obligations approximates fair
value.
The Company considers all highly liquid investments with an original
maturity at date of purchase of three months or less to be cash equivalents.
Cash and cash equivalents includes cash on hand, money market funds,
certificates of deposit and short-term commercial paper.
The Company's marketable securities are categorized as available-for-sale
securities, as defined by Statement of Financial Accounting Standards ("SFAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
Unrealized holding gains and losses are reflected as a net
F-8
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
amount in equity as a component of accumulated other comprehensive loss until
realized. For the purpose of computing realized gains and losses, cost is
identified on a specific identification basis.
Available-for-sale securities at December 31, 1998 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Unrealized Market
Cost Gains Value
------ ---------- ------
<S> <C> <C> <C>
U.S. government obligations..................... $2,500 $ 4 $2,504
Corporate obligations........................... 1,929 -- 1,929
------ ---- ------
$4,429 $ 4 $4,433
====== ==== ======
</TABLE>
Each marketable security has a contractual maturity of one year or less.
There were no marketable securities at December 31, 1999.
Restricted cash
In connection with a lease line arrangement with a telecommunications
company, the Company is required to maintain certificates of deposit of
$50,000.
Property and equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets
as follows:
<TABLE>
<S> <C>
Equipment.................................................. 3 to 5 years
Computers.................................................. 3 years
Furniture and fixtures..................................... 5 to 10 years
</TABLE>
Leasehold improvements are amortized over their estimated useful lives, or
the remaining lease term, whichever is shorter, using the straight-line
method. Upon sale or retirement, the asset's cost and related accumulated
depreciation are removed from the accounts and any related gain or loss is
reflected in operations.
Depreciation charges of $129,000, $376,000 and $ 844,000 are included in
cost of revenues during the years ended December 31, 1997, 1998 and 1999,
respectively.
Goodwill and other intangible assets
Intangible assets arose from the Company's acquisition of AT&T EasyLink
Services Asia/Pacific Limited. Goodwill is being amortized on a straight-line
basis over six years. Other intangible assets consist of acquired work force
and customer lists, which are being amortized on a straight-line basis over
their estimated useful lives of three years, respectively.
Long-lived assets
Long-lived assets and certain intangible assets are reviewed for
impairment when events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability is measured by
comparison of the asset's carrying amount to future net undiscounted cash
flows that the assets are expected to generate. If such assets are considered
to be impaired,
F-9
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the projected discounted future net cash flows
arising from the asset.
Revenue recognition
The Company's revenues consist of contracts for Internet access and related
services and monthly fees from customer use of Internet data center sites,
managed services, and professional services and use of equipment and software
provided by the Company. Currently, substantially all of the Company's revenue
is derived from Internet access fees. Internet access, hosting and co-location
revenues are generally billed and recognized ratably over the term of the
contract, which is generally one year. Internet access related services include
installation fees and equipment sales. Installation fees are typically deferred
and recognized over the contract term, and equipment revenues are recognized
when the equipment is delivered to the customer or placed into service at one
of the Company's Internet data centers.
Managed and other value-added services include administration, monitoring,
security, data backup and consulting services. The Company recognizes revenue
from maintenance fees for ongoing customer support ratably over the period of
the maintenance contract. Payment for maintenance fees are generally made in
advance and are non-refundable. Consulting revenue is generally billed on a
time and materials basis, and is recognized as the consulting services are
rendered.
Income taxes
The Company accounts for income taxes under the liability method whereby
deferred tax liabilities and assets are determined based on the difference
between the financial statement and the tax bases of assets and liabilities
using enacted tax rates in effect for the year the differences are expected to
affect taxable income. A valuation allowance is provided, when necessary, to
reduce deferred tax assets to the amounts expected to be realized.
Advertising costs
The Company expenses advertising costs as they are incurred. Advertising
expense for the years ended December 31, 1997, 1998 and 1999 was approximately
$461,000, $371,000 and $303,000, respectively.
Comprehensive income
The Company has adopted the provisions of SFAS No. 130, Comprehensive
Income. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components for general-purpose financial
statements. Comprehensive income is defined as net income plus all revenues,
expenses, gains and losses from non-owner sources that are excluded from net
income in accordance with generally accepted accounting principles.
Derivative instruments and hedging
Beginning in March 2000, forward foreign exchange contracts have been
entered into by the Company to hedge certain operational ("cash-flow" hedges)
and balance sheet ("fair value" hedges) exposures resulting from changes in
foreign currency exchange rates. Such exposures primarily
F-10
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
result from portions of the Company's operations and assets that are
denominated in currencies other than the U.S. dollar. Initially, the Company
has used forward foreign exchange contracts to hedge against the Korean Won.
These foreign exchange contracts are entered into to hedge anticipated cash
funding and recorded accounts receivable made in the normal course of business,
and accordingly, are not speculative in nature. As part of its overall strategy
to manage the level of exposure to the risk of foreign currency exchange rate
fluctuations, the Company will hedge a portion of its foreign currency
exposures anticipated over the ensuing twelve-month period.
SFAS No. 133 requires that all derivatives, including foreign currency
exchange contracts, be recognized on the balance sheet at fair value.
Derivatives that are not hedges must be recorded at fair value through
earnings. If a derivative is a hedge, and depending on the nature of the hedge,
changes in the fair value of the derivative are either offset against the
change in fair value of assets, liabilities or firm commitments through
earnings or recognized in other comprehensive income until the hedged currency
is recognized in earnings. The ineffective portion of a derivative's change in
fair value is to be immediately recognized in earnings.
Beginning in 2000, the Company will record its foreign currency exchange
contracts at fair value in its consolidated balance sheet as accrued and other
current liabilities and the related gains or losses on these contracts will be
deferred as a component of other comprehensive income. These deferred gains and
losses will be reflected in operations in the period in which the underlying
anticipated transaction occurs. Unrealized gains and losses resulting from the
impact of currency exchange rate movements on forward foreign exchange
contracts designated to offset certain non-U.S. dollar denominated assets will
be recognized as other income or expense in the period in which the exchange
rates change and offset the foreign currency losses and gains on the underlying
exposures being hedged.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees, and Financial Accounting
Standards Board Interpretation ("FIN") No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans, and has
adopted the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation. Under APB No. 25, compensation expense is based on the
difference, if any, on the date of grant, between the fair value of the
Company's common stock and the exercise price. SFAS No. 123 defines a "fair
value" based method of accounting for an employee stock option or similar
equity investment. The pro forma disclosures of the difference between the
compensation expense included in net loss and the related cost measured by the
fair value method are presented in Note 7. The Company accounts for equity
instruments issued to nonemployees 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.
Net loss per share
Basic net loss per share attributable to common stockholders is computed by
dividing the net loss attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period. Diluted
net loss per share attributable to common stockholders is computed by dividing
the net loss for the period by the weighted average number of shares of common
stock and potential common stock outstanding during the period. However,
because the
F-11
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company generated net losses in all periods presented, potential common stock,
comprised of incremental shares of common stock issuable upon the exercise of
stock options and warrants and upon conversion of convertible preferred stock,
are not included in diluted net loss per share attributable to common
stockholders because such shares are anti-dilutive.
The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Numerator
Net loss attributable to common
stockholders.............................. $(7,612) $(8,637) $(14,343)
======= ======= ========
Denominator
Shares used in computing net loss per share
attributable to common stockholders, basic
and diluted............................... 540 839 2,945
======= ======= ========
Net loss per share attributable to common
stockholders, basic and diluted........... $(14.10) $(10.29) $ (4.87)
======= ======= ========
</TABLE>
The following table sets forth potential shares of common stock that are
not included in the diluted net loss per share calculation above because to do
so would be anti-dilutive for the period indicated (in thousands):
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Weighted average effect of
common stock equivalents
Options to purchase common
stock.................... 1,658 2,504 7,890
Shares resulting from the
conversion of:
Series A preferred
stock.................. 13,500 13,500 13,500
Series A1 preferred
stock.................. 1,010 1,010 1,010
Series B preferred
stock.................. 9,311 9,587 9,638
Series C preferred
stock.................. -- 3,918 9,807
Series D preferred
stock.................. -- -- 2,630
Warrants to purchase
preferred stock.......... 1,242 1,651 1,385
Warrants to purchase
common stock............. -- 3,433 6,865
------ ------ ------
26,721 35,603 52,725
====== ====== ======
</TABLE>
Pro forma net loss per share (unaudited)
Pro forma net loss per share attributable to common stockholders for the
year ended December 31, 1999 is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the automatic
conversion of convertible preferred stock into common stock effective upon the
closing of the Company's initial public offering as if such conversion occurred
on January 1, 1999, or at the date of original issuance, if later.
F-12
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the computation of pro forma basic and
diluted net loss per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
(unaudited)
<S> <C>
Numerator
Net loss attributable to common stockholders.............. $(14,343)
========
Denominator
Weighted average shares used in computing basic and
diluted net loss per share attributable to common
stockholders............................................. 2,945
Adjustment to reflect assumed conversion of all preferred
stock from date of issuance.............................. 36,585
--------
Shares used in computing pro forma basic and diluted net
loss per share attributable to common stockholders....... 39,530
========
Basic and diluted pro forma net loss per share attributable
to common stockholders..................................... $ (0.36)
========
</TABLE>
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year's presentation. These reclassifications had no impact on total
assets or net loss.
Recently issued accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. SFAS No.
133, as amended by SFAS No. 137, is effective for fiscal years beginning after
June 15, 2000, with earlier application encouraged. The Company is evaluating
the possible impact, if any, that SFAS No. 133 may have on its financial
statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, Revenue Recognition, which provides
guidance on the recognition, presentation and disclosure on revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. The Company believes that its current
revenue recognition policy is in compliance with SAB 101.
NOTE 3--ACQUISITION:
Effective December 14, 1999, the Company acquired all outstanding shares of
AT&T EasyLink Services Asia/Pacific Limited ("EasyLink"), a company based in
Hong Kong which provides Internet services. The acquisition has been accounted
for using the purchase method of accounting. The total purchase consideration
was $42,030,000, consisting of cash of $42,000,000 and acquisition costs of
approximately $30,000. The purchase price was allocated to the tangible and
intangible assets acquired and liabilities assumed on the basis of their
respective fair values on the acquisition date.
F-13
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The excess of the purchase price over the fair value of the net tangible and
identifiable intangible assets acquired has been recorded as goodwill. The fair
value of net assets acquired was determined using a combination of the cost and
market approach by an independent appraiser. The allocation of the purchase
price is summarized below (in thousands):
<TABLE>
<S> <C>
Assembled workforce............................................... $ 580
Customer list..................................................... 2,074
Net assets acquired............................................... 1,775
Goodwill.......................................................... 37,601
-------
Total purchase price............................................ $42,030
=======
</TABLE>
The following unaudited pro forma summary financial information reflects
the consolidated results of operations of the Company for the year ended
December 31, 1999 as if the acquisition of EasyLink had occurred on January 1,
1999, and after giving effect to purchase accounting adjustments. The unaudited
pro forma summary financial information has been prepared for comparative
purposes only and does not purport to be indicative of what the Company's
operating results would have been had the acquisition actually taken place on
January 1, 1999, and may not be indicative of future operating results (in
thousands, except per share date):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Net revenue................................................ $ 15,859
Loss from operations....................................... (19,981)
Net loss attributable to common stockholders............... (22,132)
Basic and diluted net loss per share attributable to common
stockholders.............................................. $ (7.52)
</TABLE>
NOTE 4--BALANCE SHEET ACCOUNTS:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- ------
<S> <C> <C>
Equipment................................................ $ 2,291 $5,320
Computers................................................ 491 1,477
Furniture and fixtures................................... 84 239
Leasehold improvements................................... 174 312
------- ------
Total property and equipment........................... 3,040 7,348
Less: Accumulated depreciation and amortization.......... (913) (1,763)
------- ------
$ 2,127 $5,585
======= ======
</TABLE>
F-14
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Goodwill, intangibles and other assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
---- -------
<S> <C> <C>
Assembled workforce....................................... $-- $ 580
Customer list............................................. -- 2,074
Goodwill.................................................. -- 37,601
Other assets.............................................. 321 388
---- -------
321 40,643
Less: accumulated amortization attributable to goodwill
and intangibles.......................................... -- (298)
---- -------
$321 $40,345
==== =======
Accrued liabilities consist of the following (in thousands):
<CAPTION>
December 31,
------------
1998 1999
---- -------
<S> <C> <C>
Accrued payments to vendors............................... $224 $ 1,146
Accrued payroll benefits.................................. 49 340
Other..................................................... -- 30
---- -------
$273 $ 1,516
==== =======
</TABLE>
NOTE 5--LONG-TERM DEBT:
In November 1997, the Company entered into a loan and security agreement
(the "loan facility"). The loan and security agreement had a total capacity of
$6,000,000 and converted to term debt in December 31, 1998. Borrowings under
the loan facility bear interest at 11.81% per annum with principal and interest
payable monthly for 42 months. The final payment includes a terminal payment
equal to 15.0% of the original principal amount of the loan. The effective
interest rate, including the per annum interest payment and terminal payment,
equals 18.16%. Substantially all of the Company's assets are pledged as
collateral and the Company is required to comply with certain restrictive
covenants including a restriction on dividend payments. In connection with the
loan facility, the Company issued the lender warrants to purchase 450,000
shares of Series B preferred stock with an exercise price of $1.50 (see Note
8).
Long-term debt consists of the following (in thousands):
<TABLE>
<S> <C>
Note payable bearing interest @ 18.16%, principal and interest
payable monthly through July 2001.............................. $ 233
Note payable bearing interest @ 18.16%, principal and interest
payable monthly through July 2001.............................. 365
-----
598
Less: current portion........................................... (397)
-----
$ 201
=====
Principal payments on long-term debt are as follows at December 31, 1999
(in thousands):
2000............................................................ $ 397
2001............................................................ 201
-----
$ 598
=====
</TABLE>
F-15
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 6--CONVERTIBLE PREFERRED STOCK:
Under the Company's articles of incorporation, as amended, the Company's
convertible preferred stock is issuable in series and the Company's Board of
Directors is authorized to determine the rights, preferences, and terms of each
series.
Convertible preferred stock consists of the following series at December
31, 1999:
<TABLE>
<CAPTION>
Common
Shares
Reserved
Issued and for
Authorized Outstanding Conversion Liquidation
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Series A........................ 13,500,000 13,500,000 13,500,000 $ 3,375,000
Series A-1...................... 1,010,000 1,010,000 1,010,000 505,000
Series B........................ 7,842,501 7,357,002 10,398,560 11,035,503
Series C........................ 10,000,000 9,807,047 9,807,047 9,807,047
Series D........................ 43,000,000 41,742,805 41,742,805 84,924,130
Undesignated.................... 7,747,499 -- -- --
---------- ---------- ---------- ------------
83,100,000 73,416,854 76,458,412 $109,646,680
========== ========== ========== ============
</TABLE>
In October 1996, the Company issued 5,999,333 shares of Series B preferred
stock raising gross proceeds of approximately $9.0 million. Additionally, in
April 1997, the Company completed the second closing of the Series B
convertible preferred stock financing. The Company issued 783,234 shares of
Series B convertible preferred stock at $1.50 per share for gross cash proceeds
of $1,174,851.
In August 1998, the Company completed the issuance of its Series C
preferred stock financing. The Company issued 9,807,047 shares of Series C
convertible preferred stock and warrants to purchase 8,535,765 shares of common
stock (Note 8) at an aggregate unit price of $1.00 per share raising gross cash
proceeds of $9,807,407.
In December 1999, the Company issued 40,752,712 shares of Series D
convertible preferred stock at approximately $2.03 per share for gross cash
proceeds of $82,909,808. In August 1999, the Company obtained a $2.0 million
bridge loan from certain investors, which was converted into 990,093 shares of
Series D preferred stock at the time of the Series D financing.
Dividends
The holders of shares of Series A, A1, B, C and D convertible preferred
stock are entitled to receive non-cumulative dividends, when and if declared by
the Board of Directors, at a rate of $0.015, $0.03, $0.09, $0.06 and $0.12 per
share, respectively, per annum, prior and in preference to any declaration or
payment of any dividend on the common stock of the Company. No dividends or
other distributions may be made with respect to Series A, A1, B or C
shareholders until all such dividends have been paid or set apart for payment
to Series D shareholders.
As of December 31, 1999, no dividends on convertible preferred stock or
common stock have been declared.
Liquidation
In the event of any liquidation, dissolution, or winding up of the Company,
either voluntary or involuntary, the holders of the holders of Series D
convertible preferred stock are entitled to receive, prior and in preference to
any distribution of any assets of the Company to the holders of common stock,
Series A, Series A1, Series B and Series C convertible preferred stock, an
amount per share
F-16
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
equal to approximately $2.03 for each share of Series D convertible preferred
stock plus declared but unpaid dividends. Upon payment in full of the
liquidation preference on the Series D convertible preferred stock, the holders
of Series C convertible preferred stock are entitled to receive, prior and in
preference to any distribution of any of the assets of the Company to the
holders of common stock, Series A, Series A1 and Series B convertible preferred
stock, an amount per share equal to $1.00 for each outstanding share of Series
C convertible preferred stock plus declared but unpaid dividends. Upon payment
in full of the liquidation preference on the Series C convertible preferred
stock, the holders of Series B convertible preferred stock are entitled to
receive, prior and in preference to any distribution of any of the assets of
the Company to the holders of Series A and Series A1 Stock an amount per share
equal to $1.50, plus declared but unpaid dividends. Upon payment in full of the
liquidation preference on the Series B convertible preferred stock, the holders
of Series A and Series A1 convertible preferred stock are entitled to receive,
prior and in preference to any distribution of any of the assets of the Company
to the holders of Common Stock an amount per share equal to $0.25 and $0.50,
respectively, plus declared but unpaid dividends.
If the assets and funds thus distributed among the holders of Series D
convertible preferred stock are insufficient to permit the payment to such
holders of the full preferential amount, then the entire amount of the assets
and funds of the Company legally available for distribution shall be
distributed ratably to the holders of Series D preferred stock. If after the
holders of Series D convertible preferred stock have received their preference
amounts and the assets and funds thus distributed among the holders of Series C
convertible preferred stock are insufficient to permit the payment to such
holders of the full preferential amount, then the entire amount of the
remaining assets and funds of the Company legally available for distribution
shall be distributed ratably to the holders of Series C convertible preferred
stock. If after the holders of Series C convertible preferred stock have
received their preference amounts and the assets and funds thus distributed
among the holders of Series B convertible preferred stock are insufficient to
permit the payment to such holders of the full preferential amount, then the
entire amount of the remaining assets and funds of the Company legally
available for distribution shall be distributed ratably to the holders of
Series B convertible preferred stock. If after payment of the Series D, Series
C and Series B preferential amounts, the assets and fund are insufficient to
permit the payment of the full preferential amount to the holders of Series A
and Series A1 convertible preferred stock, then the entire amount of the
remaining assets and funds of the Company legally available for distribution
shall be distributed ratably to the holders of Series A and Series A1
convertible preferred stock. After payment has been made to the holders of
convertible preferred stock in the full preferential amounts set forth above,
the entire remaining assets and funds of the Company legally available for
distribution, if any, shall be distributed ratably among the holders of
convertible preferred stock and the holders of common stock.
Mergers
A merger, reorganization, or sale of all, or substantially all, of the
assets of the Company in which the shareholders of the Company immediately
prior to the transactions possess less than 50% of the voting power of the
surviving entity (or its parent) immediately after the transaction shall be
deemed to be a liquidation, dissolution or winding up.
Voting
The holder of each share of Series A, Series A1, Series B, Series C and
Series D convertible preferred stock is entitled to the number of votes equal
to the number of shares of common stock
F-17
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
into which such shares of convertible preferred stock could be converted except
as otherwise required by law, and has voting rights and powers equal to the
voting rights and powers of the common stock.
Conversion
Each share of Series A, Series A1, Series B, Series C and Series D
convertible preferred stock is convertible, at the option of the holder, into
the number of fully paid and nonassessable shares of common stock which results
from dividing the conversion price per share in effect for the preferred stock
at the time of conversion into the per share conversion value of such shares.
The initial conversion price per share and the per share conversion value of
Series A, Series A1, Series B, Series C and Series D convertible preferred
stock is $0.25, $0.50, $1.061, $1.00 and $2.03, respectively, subject to
adjustments. Conversion is automatic at the then effective conversion rate
immediately upon the closing of a firm commitment 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 in which the
public offering price equals or exceeds $6.50 per share and the aggregate
proceeds raised equal or exceed $20,000,000.
Redemption
Shares of Series A, Series A1, Series B and Series C convertible preferred
stock are redeemable if the Company has not completed an initial public
offering by January 1, 2002 involving an aggregate offering price to the public
of $20,000,000 with an offering price of $4.00 per share upon notification of a
majority of the preferred stockholders. The redemption price with respect to
Series A, Series A1, Series B, Series C and Series D convertible preferred
stock is equal to approximately $0.25, $0.50, $1.50, $1.00 and $2.03,
respectively, plus all declared but unpaid dividends including an amount equal
to a 10% annual dividend of the convertible preferred stock purchase price.
The Company recorded $1,376,000, $1,814,000 and $2,287,000 in accreted
dividends relating to the convertible preferred stock for the years ended
December 31, 1997, 1998 and 1999, respectively. In connection with the issuance
of Series D preferred stock in December 1999, the stockholders agreed to
terminate the redemption rights and related dividend of the Series A,
Series A1, Series B and Series C convertible preferred stock.
NOTE 7--STOCK OPTION PLAN:
The Company has a stock plan (the "Plan") under which 16,668,612 shares of
the Company's common stock have been reserved for the grant of stock options to
employees, directors, or consultants under terms and provisions established by
the Board of Directors. Under terms of the Plan, incentive options may be
granted to employees and nonstatutory options may be granted to employees and
non-employees, at prices not less then 100% and 85%, respectively, of the fair
market value of the Company's common stock at the date of grant, as determined
by the Board of Directors. If the employees or non-employees own stock
representing more than 10% of the voting power of all classes of stock of the
Company or a parent or subsidiary of the Company, the price of the options
granted must equal at least 110% of the fair market value of the common shares
on the date of the grant. Stock options granted under the Plan, which have a
term of 10 years, generally become exercisable over a four year period with 25%
of the options becoming exercisable one year after the grant and the remainder
ratably each month over 36 months.
F-18
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the activity under the Company's stock option plan during the
three years ended December 31, 1999 and information with respect to stock
options that have been granted is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------
Weighted
Shares Average
Available Number Aggregate Exercise
for Grant of Shares Price Price
----------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Balances at January 1, 1997...... 1,246,000 1,154,000 $ 92,200 $0.08
Options granted................ (1,227,000) 1,227,000 184,050 0.15
Options cancelled.............. 80,000 (80,000) (12,000) 0.15
----------- ---------- ----------
Balances at December 31, 1997.... 99,000 2,301,000 264,250 0.11
Options authorized............. 11,768,612
Options granted................ (3,668,945) 3,668,945 550,342 0.15
Options exercised.............. -- (466,395) (38,018) 0.08
Options cancelled.............. 1,265,605 (1,265,605) (146,432) 0.12
----------- ---------- ----------
Balances at December 31, 1998.... 9,464,272 4,237,945 630,142 0.15
Options authorized............. 2,500,000
Options granted................ (11,516,156) 11,516,156 1,848,103 0.16
Options exercised.............. -- (182,392) (23,703) 0.13
Options cancelled.............. 2,139,365 (2,139,365) (320,342) 0.15
----------- ---------- ----------
Balances at December 31, 1999.... 2,587,481 13,432,344 $2,134,200 $0.16
=========== ========== ==========
</TABLE>
The options outstanding and currently exercisable by exercise price at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Options Currently
Options Outstanding Exercisable
------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.05 112,813 6.01 years $0.05 107,354 $0.05
$0.15 12,515,002 9.36 years $0.15 991,428 $0.15
$0.30 804,529 9.70 years $0.30 5,000 $0.30
---------- ---------
13,432,344 1,103,782
========== =========
</TABLE>
The weighted average fair value of options granted during each of the years
ended December 31, 1997, 1998 and 1999 was $0.04, respectively.
The fair value of each option grant is estimated on the grant date using
the minimum value method with the following assumptions:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expected life (years)....................... 5 5 5
Risk-free interest rate..................... 6.02% 5.50% 5.55%
Dividend yield.............................. 0% 0% 0%
</TABLE>
F-19
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Had compensation cost for the Plan
been determined based on the fair value at the grant date for awards during
1997, 1998 and 1999, consistent with the provisions of SFAS No. 123, the
Company's pro forma net loss and pro forma net loss per share would have been
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss attributable to common
stockholders............................... $(7,612) $(8,637) $(14,343)
======= ======= ========
Pro forma net loss attributable to common
stockholders--SFAS No. 123 adjusted........ $(7,624) $(8,681) $(14,619)
======= ======= ========
Net loss per share attributable to common
stockholders--as reported (Note 2)
Basic and diluted......................... $(14.10) $(10.29) $ (4.87)
======= ======= ========
Pro forma net loss per share attributable to
common stockholders--SFAS No. 123 adjusted
Basic and diluted......................... $(14.12) $(10.35) $ (4.96)
======= ======= ========
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure may not
be indicative of future amounts.
During 1998 and 1999, the Company recorded a total of approximately $17.5
million of deferred stock compensation in accordance with APB No. 25, SFAS No.
123 and EITF 96-18, related to options granted to employees and non-employees.
For options granted to non-employees during 1998 and 1999, the Company
determined the fair value using the Black Scholes option pricing model with the
following assumptions: expected volatility of 70%, risk-free interest rate of
5.55% and deemed values of common stock between $0.50 and $7.00 per share.
Stock compensation expense is being recognized in accordance with FIN 28 over
the vesting periods of the related options, generally four years. The Company
recognized stock compensation expense of approximately $0, $220,000 and
$4,070,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
NOTE 8--WARRANTS:
In conjunction with the Company's issuance of Series B convertible
preferred stock, the Company issued warrants to purchase 1,199,867 shares of
Series B convertible preferred stock for $1.50 per share. All of these warrants
were immediately exercisable. At December 31, 1999, of these warrants, warrants
to purchase 10,000 shares of Series B convertible preferred stock were
outstanding.
In connection with the Series C preferred stock financing, the Company
issued warrants to purchase 8,535,765 shares of the Company's common stock at
an exercise price of $0.01 per share and an expiration date of August 31, 2001.
The warrants issued had a fair value of $0.14 per warrant at the time of
issuance using the Black Scholes pricing model. The aggregate fair value of
these common stock warrants of approximately $1,207,829 has reduced the Series
C preferred stock consideration. During 1999, warrants to purchase 7,307,220
shares of common stock were exercised for aggregate proceeds of approximately
$73,000.
F-20
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the Company's loan facility (Note 5), the Company issued
warrants to purchase 450,000 shares of the Company Series B preferred stock at
an exercise price of $1.50 per share with an expiration period of 6 years. The
warrants issued had a fair value of $0.82 per warrant at the time of issuance
using the Black Scholes valuation model. The aggregate fair value of these
warrants amounting to $369,000 has been recorded as a debt discount and is
being amortized over the term of the loan facility.
In connection with a bridge loan received by the Company in August 1999,
the Company issued warrants to purchase 302,147 shares of common stock for
$0.01 per share. The warrants expire on the earlier of 2001 or within 2 years
after an initial public offering. The warrants issued had a fair value of $0.49
per warrant at the time of issuance using the Black-Scholes valuation model.
The aggregate fair value of these warrants amounting to $148,000 has been
charged to interest expense over the term of the loan. During 1999, warrants to
purchase 251,618 shares of common stock were exercised for aggregate proceeds
of approximately $2,000.
In connection with the Series D preferred stock financing in December 1999,
the Company issued warrants to purchase 594,935 shares of Series B preferred
stock for $1.50 per share. The warrants expired six days after issuance. The
fair value of the warrants issued was not material at the time of issuance
using the Black-Scholes valuation model.
During December 1999, warrants to purchase 574,435 shares of Series B
convertible preferred stock were exercised for aggregate proceeds of
approximately $862,000.
NOTE 9--RELATED PARTY TRANSACTIONS:
The Company had an agreement to lease international circuits from UUNET, a
former stockholder. In consideration, the Company recognized charges amounting
to $1,543,547 for these circuits in 1998. In January 1999, the Company
terminated this agreement with UUNET.
On August 9, 1999, the Chief Executive Officer and Chairman of the Board of
Directors, entered into an employment agreement with the Company. The officer
received a signing bonus of $100,000 in the form of an interest free loan which
is due to be forgiven upon completion of one year of service. As of December
31, 1999 the Company has recorded a note receivable balance for $100,000.
NOTE 10--COMMITMENTS AND CONTINGENCIES:
The Company leases equipment and office space in the United States and in
various countries in the Asia-Pacific region under operating and capital lease
agreements. Rent expense was approximately $379,000, $445,000 and $564,000 for
1997, 1998 and 1999, respectively.
F-21
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999, the aggregate future minimum lease payments under
all noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Capital Operating
Years Ending December 31, Leases Leases
------------------------- ------- ---------
<S> <C> <C>
2000.................................................... $144 $1,473
2001.................................................... 144 265
2002.................................................... 82 191
2003.................................................... -- 135
2004.................................................... -- 104
---- ------
Total minimum lease payments............................ 370 $2,168
======
Less: Amounts representing interest..................... (80)
----
Present value of capital lease obligations.............. 290
Less: Current portion................................... 56
----
Long-term portion....................................... $234
====
</TABLE>
The Company leases capacity on transcontinental telecommunication lines
from several communications companies in the Asia-Pacific region. Some of the
agreements provide for monthly lease terms. Under other agreements, the Company
is committed to lease capacity on lines for periods ranging from three to five
years. Future lease payments under these long-term agreements, determined using
1999 currency exchange rates, are presented below (in thousands). Actual
payments will vary based on changes in foreign currency exchange rates.
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
2000...................................... $2,971
2001...................................... 2,533
2002...................................... 2,090
2003...................................... 764
2004...................................... 382
------
$8,740
======
</TABLE>
Claims
The Company has been notified by two service providers of claims in 1999.
One provider seeks payment of approximately $1.1 million for amounts payable
for services rendered including cancellation fees and other disputed penalties,
a portion of which has been accrued by the Company as of December 31, 1999. The
second provider seeks payment for services by way of a grant of options to
purchase approximately 168,000 shares of the Company's common stock at an
exercise price of $0.15 per share. If granted, such options would result in a
charge to operations equal to the difference between the fair value of the
Company's stock as of the grant date and the exercise price. Because the
outcome of these claims is uncertain and the future value of the Company's
stock is unknown, the ultimate impact on the Company of these claims presently
cannot be estimated. In the event the Company is unsuccessful in resolving
these claims, additional payments or issuance of stock may be required and the
resulting charges to operations may be material.
F-22
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 11--INCOME TAXES:
Temporary differences which give rise to significant portions of deferred
tax assets and liabilities at December 31, 1998 and 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forwards.................... $ 4,543 $ 11,876
Capitalized start-up costs........................... 210 130
Accrued expenses..................................... 100 169
Depreciation......................................... 27 174
Other................................................ 16 115
------- --------
4,896 12,464
Less: Valuation allowance............................ (4,896) (12,464)
------- --------
Total.............................................. $ -- $ --
======= ========
</TABLE>
Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its deferred tax assets. At such times as it is determined that it is
more likely than not that the deferred tax assets are realizable, the valuation
allowance will be reduced.
At December 31, 1999, the Company had U.S. federal, state and foreign net
operating loss carryforwards of approximately $18.0 million, $3.4 million and
$32.9 million, respectively, available to offset future regular, alternative
minimum and foreign taxable income, if any. The operating loss carryforwards
expire between 2003 and 2018, except for certain foreign net operating loss
carryforward which are available indefinitely. For the years ended December 31,
1997, 1998 and 1999, the Company's effective income tax rate has differed from
the U.S. federal income tax rate of 34% due primarily to state and foreign
taxes, as well as the change in the deferred tax valuation allowance. Also
during these years, the provision for the valuation allowance amounted to
$2,655,000, $1,146,000 and $5,531,000, respectively.
For federal and state tax purposes, a portion of the Company's net
operating loss carryforwards are subject to certain limitations on annual
utilization due to a change in ownership, as defined by federal and state tax
law.
NOTE 12--SEGMENT INFORMATION:
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information effective December 31, 1998. SFAS No. 131
establishes standards for disclosure about operating segments and related
disclosures about products and services, geographic areas and major customers.
Comparative information has been provided for prior years. The Company operates
in two geographic segments. The Company sells its products and services
directly to customers in the United States and Asia-Pacific region.
F-23
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue for geographic regions reported below are based upon the customers'
locations. Long-lived assets, predominately property and equipment, are
reported based on the location of the assets. Following is a summary of the
geographic information related to revenues, long-lived assets and information
related to significant customers for the years ended December 31, 1997, 1998
and 1999:
<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Revenue
Asia-Pacific............................................ $1,521 $3,270 $ 5,592
North America and other ................................ 76 220 37
------ ------ -------
Total................................................. $1,597 $3,490 $ 5,629
====== ====== =======
Long-lived assets
Asia-Pacific............................................ $1,563 $2,139 $45,328
North America and other ................................ 78 309 602
------ ------ -------
Total................................................. $1,641 $2,448 $45,930
====== ====== =======
</TABLE>
Accounts Receivable
No customers accounted for more than 10% of accounts receivable as of
December 31, 1997, 1998 and 1999, respectively. The Company does not segregate
information related to operating income generated by its export sales.
NOTE 13--EMPLOYEE WELFARE PLANS:
United States
In February 1996, the Company adopted a defined contribution plan under
section 401(k) of the Internal Revenue Code (the "401(k) Plan"). All full-time
domestic employees of the Company who are at least 21 years of age and have
been employed with the Company for at least three months are eligible to
participate in the 401(k) Plan. The 401(k) Plan allows employees to contribute
up to 15% of their salaries on a pre-tax basis. The Company may make matching
or discretionary contributions at the end of the Plan year to eligible
participants. There were no Company contributions for 1998 and 1999.
Retirement Benefit Plan
The Company's Hong Kong subsidiary operates a defined contribution
retirement plan which is available to all eligible employees. Contributions to
the plan by the Company and the employees are calculated as 5% of the
employees' basic salaries. The Company's contributions to the retirement plan
are expensed as incurred and are reduced by contributions forfeited by those
employees who leave the plan prior to vesting fully in the contributions. The
assets of the plan are held separately from those of the Company in an
independently administered fund. Contributions to the plan during 1999 were
insignificant.
Severance Benefit Plan--Korea
Employees and directors of the Company's subsidiary in Korea with more than
one year of service are entitled to receive a lump-sum payment upon termination
of their employment, based on
F-24
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
their length of service and rate of pay at the time of termination. Accrued
severance benefits are adjusted annually for all eligible employees based on
their employment as of the balance sheet date. In accordance with the Korean
National Pension Act, a certain portion of severance benefits are required to
be remitted to the National Pension Fund and deducted from accrued severance
benefits. The amounts contributed will be refunded to employees from the
National Pension Fund upon retirement. The expense for severance benefits for
the years ended December 31, 1997, 1998 and 1999 amounted to approximately $0,
$13,000, and $36,000, respectively. Severance benefits are funded approximately
4% and 5% at December 31, 1998 and 1999, respectively through deposits to a
group severance insurance plan with several life insurance companies. The
amounts funded under this insurance plan are classified as long-term severance
deposits. The Company may fund subsequent accruals at its discretion. Accrued
severance benefits amount to $17,000, and $31,000 at December 31, 1998, and
1999, respectively.
NOTE 14--SUBSEQUENT EVENTS:
Reincorporation
In April 2000, the Company's board of directors approved the Company's
reincorporation in the State of Delaware prior to the effectiveness of the
public offering of the Company's stock. All references to the Company and the
share and par value information included in these consolidated financial
statements have been adjusted to reflect this proposed reincorporation.
Acquisitions
In January 2000, the Company acquired certain assets and liabilities of Web
Professionals, Inc. ("Web Professionals"). The total purchase consideration of
approximately $2.0 million consisted of cash in the amount of $0.8 million,
393,224 shares of Series D preferred stock with a deemed value of $2.91 per
share and acquisition costs of approximately $25,000. The acquisition will be
accounted for using the purchase method of accounting and the purchase price
will be allocated to the tangible and intangible assets acquired and
liabilities assumed on the acquisition date. The former owner of Web
Professionals is entitled to an earn-out of $200,000 and 98,306 additional
shares of Series D preferred stock based upon his continued employment with the
Company through June 30, 2000. Additionally, the Company will pay the former
owner of Web Professionals cash consideration up to $1.75 million and 860,178
shares of Series D preferred stock upon achievement of certain financial
milestones, as defined in the Asset Purchase Agreement, through June 30, 2000.
Also in March 2000, the Company signed a Memorandum of Understanding to
purchase 19.5% of the outstanding stock (975,000 shares) of an independent
company ("acquiree") for approximately $2.7 million. In the event the acquiree
does not complete an initial public offering by August 31, 2000, the Company
may sell back the 975,000 shares to the acquiree at the original purchase price
or increase its ownership in the acquiree to 40% of the outstanding stock. If
an initial public offering has not occurred by March 31, 2001, the Company will
have the option to increase its ownership to 51% of the outstanding common
stock of the acquiree.
In April 2000, the Company acquired all the outstanding shares of Cyberhost
Pty Limited ("Cyberhost"). The total purchase consideration of approximately
$2.6 million consisted of cash in the amount of $0.6 million, 300,000 shares of
common stock with a value of $6.69 per share, assumed liabilities of
approximately $20,000 and acquisition costs of approximately $25,000. The
acquisition will be accounted for using the purchase method of accounting and
the purchase price will be allocated to the tangible and intangible assets
acquired and liabilities assumed on the acquisition date.
F-25
<PAGE>
IASIAWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Forward contracts
In April 2000, the Company entered into forward contracts with a financial
institution to buy Korean Won. Under these contracts, the Company will buy
approximately $400,000 of Korean Won per month at pre-determined rates ranging
from 1,101 and 1,104 Korean Won, for twelve months from April 2000. The Company
has not entered into any other foreign exchange contracts.
Property Leases
In March 2000, the Company signed a binding letter of intent to lease
office space in Hong Kong. The lease term is three years. The Company is
committed to monthly rental and related costs of approximately $50,000.
In March 2000, the Company signed a binding letter of intent to lease data
center space in Hong Kong. The lease term is twelve years and will commence
upon substantial completion of the building under construction, estimated to be
December 2000. Under the terms of the lease the Company is committed to pay a
monthly rental of approximately $500,000 to $800,000, subject to an option for
additional space and certain escalation clauses over the lease term. The lease
agreement provides the Company with an option to extend the lease term for an
additional eight years.
F-26
<PAGE>
IASIAWORKS, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
OVERVIEW
Effective December 14, 1999, the Company acquired all outstanding shares of
AT&T EasyLink Services Asia/Pacific Limited ("EasyLink"), which provides
Internet services. The acquisition has been accounted for using the purchase
method of accounting. The total purchase consideration was $42,030,000,
consisting of cash of $42,000,000 and acquisition costs of approximately
$30,000. The purchase price was allocated to the tangible and intangible assets
acquired and liabilities assumed on the basis of their respective fair values
on the acquisition date. The excess of the purchase price over the fair value
of the net tangible and identifiable intangible assets acquired has been
recorded as goodwill. The fair value of net assets acquired was determined
using a combination of the cost and market approach by an independent
appraiser. The allocation of the purchase price is summarized below (in
thousands):
<TABLE>
<S> <C>
Assembled workforce............................................... $ 580
Customer list..................................................... 2,074
Net assets acquired............................................... 1,775
Goodwill.......................................................... 37,601
-------
Total purchase price............................................ $42,030
=======
</TABLE>
Goodwill and other identifiable intangible assets are being amortized on a
straight-line basis over their estimated useful economic lives of six and three
years, respectively.
The following unaudited pro forma combined consolidated financial
information reflects the results of operations for the year ended December 31,
1999 as if the acquisition of EasyLink had occurred on January 1, 1999, and
after giving effect to purchase accounting adjustments. This pro forma result
has been prepared for comparative purposes only and does not purport to be
indicative of what the Company's operating results would have been had the
acquisition actually taken place on January 1, 1999, and may not be indicative
of future operating results. The unaudited pro forma combined consolidated
statement of operations should be read in conjunction with the historical
consolidated financial statements and related notes of the Company and EasyLink
included elsewhere herein.
F-27
<PAGE>
IASIAWORKS, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------
iAsiaWorks EasyLink Adjustment Pro Forma
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue:
Internet access and related
services........................ $ 5,384 $19,541 $(10,334)(A) $ 14,591
Hosting, co-location and other
managed services................ 245 1,023 -- 1,268
-------- ------- -------- --------
Total revenue.................. 5,629 20,564 (10,334) 15,859
Cost of Internet access and
related services................ 5,417 13,378 (5,298)(A) 13,497
Cost of hosting, co-location and
other managed services.......... 401 839 1,240
-------- ------- -------- --------
5,818 14,217 (5,298) 14,737
-------- ------- -------- --------
Gross margin................... (189) 6,347 (5,036) 1,122
-------- ------- -------- --------
Operating expenses:
Network operations and support... 1,539 -- 1,539
Sales and marketing.............. 2,372 2,859 (2,309)(A) 2,922
General and administrative....... 3,511 3,920 (2,021)(A) 5,410
Amortization of intangible
assets.......................... 298 -- 6,864 (B) 7,162
Stock-based compensation......... 4,070 -- 4,070
-------- ------- -------- --------
Total operating expenses....... 11,790 6,779 2,534 21,103
-------- ------- -------- --------
Loss from operations............... (11,979) (432) (7,570) (19,981)
Interest income.................... 288 62 (61)(A) 289
Interest expense................... (384) -- -- (A) (384)
Other income (expense), net........ 19 517 (305)(A) 231
-------- ------- -------- --------
Net loss........................... (12,056) 147 (7,936) (19,845)
Dividend accretion on preferred
stock............................. (2,287) -- -- (2,287)
-------- ------- -------- --------
Net loss attributable to common
stockholders...................... $(14,343) $ 147 $ (7,936) $(22,132)
======== ======= ======== ========
Net loss per share attributable to
common stockholders, basic and
diluted........................... $ (7.52)
========
Weighted average shares used in
computing net loss per share
attributable to common
stockholders, basic and diluted... 2,945
========
</TABLE>
- --------
(A) The pro forma iAsiaWorks and EasyLink financial information for 1999 were
adjusted to eliminate results of operations of non-acquired divisions of
AT&T EasyLink. AT&T transferred certain businesses during 1999 to
affiliates of AT&T prior to the acquisition of EasyLink. EasyLink's
accounting systems and records were designed to record separately the
revenues, costs of sales and costs of the acquired and the non-acquired
businesses. Accordingly, most revenues and costs were specifically
identifiable with individual businesses. Other operating costs of the non-
acquired businesses have been allocated based on the following:
. Rental expenses have been allocated between the acquired and non-
acquired businesses based on the fixed monthly rentals and the estimated
space occupied by each individual business.
. Administrative costs have been allocated based upon the estimated time
spent on each business's affairs by the individuals involved.
. Salaries and related costs have been allocated to individual businesses
based on the principal responsibilities and activities of the employees
concerned.
(B) The pro forma iAsiaWorks and EasyLink financial information for 1999 were
adjusted to record the amortization of intangible assets and goodwill
related to iAsiaWorks' acquisition of EasyLink as if the transaction
occurred January 1, 1999. Acquired intangible assets and goodwill amounting
to $40.3 million are to be amortized over their estimated useful life of 3
and 6 years, respectively, resulting in annual amortization of
approximately $7,162,000.
F-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AT&T EasyLink Services
Asia/Pacific Limited
In our opinion, the accompanying balance sheets and the related statements
of operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of AT&T EasyLink Services
Asia/Pacific Limited (the Company) at December 31, 1998 and November 30, 1999,
and the results of its operations and its cash flows for the year ended
December 31, 1998 and the eleven months ended November 30, 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 Hong Kong, which are substantially
similar to International Standards of Auditing and which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
December 14, 1999,
except for Note 14 as
to which the date is
April 14, 2000
F-29
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
BALANCE SHEETS
(in thousands of Hong Kong dollars)
<TABLE>
<CAPTION>
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... HK$17,924 HK$ 4,048
Accounts receivable, less allowance for doubtful
accounts of HK$296 at December 31, 1998 and
HK$2,946 at November 30, 1999..................... 15,723 12,779
Due from affiliates................................ 2,875 782
Due from holding company........................... 5,865 --
Inventories........................................ -- 382
Prepaid expenses and other assets.................. 1,194 917
--------- ---------
Total current assets............................. 43,581 18,908
Property, plant and equipment (Note 6)............... 19,609 9,956
--------- ---------
Total assets..................................... HK$63,190 HK$28,864
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........... HK$33,960 HK$ 7,700
Due to affiliates.................................. 4,918 15,193
--------- ---------
Total current liabilities........................ 38,878 22,893
Long term loan from an affiliate..................... 79,905 60,000
Long term loan from holding company.................. 194,015 --
--------- ---------
312,798 82,893
--------- ---------
Commitments and contingencies (Note 12)
Deficit on owner's equity:
Share capital, share of HK$10, authorized, issued
and fully paid.................................... 100 194,115
Accumulated deficit................................ (249,708) (248,144)
--------- ---------
Total deficit on owner's equity.................. (249,608) (54,029)
--------- ---------
Total liabilities and deficit on owner's equity.. HK$63,190 HK$28,864
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(in thousands of Hong Kong dollars)
<TABLE>
<CAPTION>
Eleven months
Year ended ended
December 31, November 30,
1998 1999
------------ -------------
<S> <C> <C>
Net revenues......................................... HK$87,239 HK$72,936
Cost of revenues..................................... 67,665 64,025
--------- ---------
Gross profits.................................... 19,574 8,911
Operating expenses
Research and development........................... -- --
Sales and marketing................................ 8,971 13,262
General and administration......................... 16,740 4,024
--------- ---------
Total operating expenses......................... 25,711 17,286
--------- ---------
Operating (loss)/profit.............................. (6,137) (8,375)
Interest............................................. -- --
Other income and expenses, net....................... -- 1,639
--------- ---------
Net (loss)/profit for continuing operations.......... (6,137) (6,736)
Profit from discontinued operations.................. 8,925 5,792
--------- ---------
Net (loss)/profit.................................... HK$ 2,788 HK$ (944)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
STATEMENTS OF CHANGES IN DEFICIT ON OWNER'S EQUITY
(in thousands of Hong Kong dollars, except share data)
<TABLE>
<CAPTION>
Share capital
--------------------- Accumulated
Shares Amount deficit Total
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Owner's deficit as of January
1, 1998...................... 10,000 HK$ 100 HK$(252,496) HK$(252,396)
Net profit from statement of
operations................... -- -- 2,788 2,788
---------- ---------- ----------- -----------
Owner's deficit as of December
31, 1998..................... 10,000 100 (249,708) (249,608)
Net loss from statement of
operations................... -- -- (944) (944)
Capitalisation of loan from
holding company.............. 19,401,553 194,015 -- 194,015
Waiver of amount payable to
affiliate.................... -- -- 2,508 2,508
---------- ---------- ----------- -----------
Owner's deficit as of November
30, 1999..................... 19,411,553 HK$194,115 HK$(248,144) HK$ (54,029)
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
STATEMENTS OF CASH FLOWS
(in thousands of Hong Kong dollars)
<TABLE>
<CAPTION>
Period from
January 1,
Year ended 1999 to
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net profit/(loss) applicable to common
shareholders...................................... HK$ 2,788 HK$ (944)
Adjustments to reconcile net profit to net cash
used in operating activities:
Release of deferred costs........................ -- 663
Depreciation of tangible assets.................. 11,067 7,198
Loss on disposal of property, plant and
equipment....................................... 62 159
Interest income.................................. (846) (476)
Allowance for doubtful accounts receivable 601 (435)
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable and
prepayments................................... 10,994 (30,080)
(Increase)/decrease in due from affiliates and
holding company............................... 14,092 7,725
(Increase)/decrease in inventories............. 2,722 (893)
Increase/(decrease) in accounts payable and
accrued liabilities........................... 6,038 (5,677)
Increase/(decrease) in due to affiliates....... (52,590) 12,332
--------- --------
Net cash used in operating activities........ (5,072) (10,428)
--------- --------
Cash flows provided by financing activities:
Advances from an affiliate......................... 12,475 --
Interest received.................................. 846 476
--------- --------
Net cash provided by financing activities........ 13,321 476
--------- --------
Cash flows used in investing activities:
Cash paid for property, plant and equipment........ (9,065) (3,924)
Proceeds from sale of property, plant and
equipment......................................... 191 --
--------- --------
Net cash used in investing activities............ (8,874) (3,924)
--------- --------
Net decrease in cash and cash equivalents............ (625) (13,876)
Cash and cash equivalents, beginning of period....... 18,549 17,924
--------- --------
Cash and cash equivalents, end of period............. HK$17,924 HK$4,048
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS
(in thousands of Hong Kong dollars, except share data)
1 The Company
AT&T EasyLink Services Asia/Pacific Limited (the Company) was incorporated
in Hong Kong in April 1988. The Company has two operations. The on-line Hong
Kong business provides internet related and electronic communications services
in Hong Kong and Mainland China. The non-online business provides
telecommunications services to third parties, provides support services to
related companies and sells telecommunications hardware and software in Asia-
Pacific. The assets and operations of the non-online business were sold to a
fellow subsidiary with effect from November 1, 1999.
2 Basis of preparation
The Company has incurred losses regularly and at November 30, 1999 had a
deficit on shareholders' equity of HK$54,029,000 and an excess of current
liabilities over current assets of HK$3,985,000. Nonetheless, these accounts
have been prepared on the going concern basis, which assumes the continued
financial support of the ultimate holding company, AT&T Corp. The directors
have satisfied themselves that the ultimate holding company is prepared to
provide sufficient additional support to the Company to enable it to carry on
its existing operations and to meet its liabilities as they fall due for at
least twelve months from the date of approval of these accounts. A fellow
subsidiary has also provided long term advances to the Company in order to
assist its operating activities. The advances are unsecured, interest free and
are not due within the next twelve months.
3 Significant accounting policies
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. The significant accounting
policies are summarized as follows:
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, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation, except that amounts less than HK$78,000 are expensed as incurred.
Cost represents the purchase price of the asset and other costs incurred to
bring the asset into its existing use.
Leasehold improvements are depreciated over the periods of the lease or
their expected useful lives to the Company whichever is shorter. Other fixed
assets are depreciated over their estimated useful lives on a straight line
basis. The principal annual rates of depreciation are as follows:
<TABLE>
<S> <C>
Furniture and office equipment.............................. 20% - 33 1/3%
Computer equipment.......................................... 20%
Leasehold improvements...................................... 40%
</TABLE>
F-34
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
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.
Inventories
Inventories of equipment are stated at the lower of cost and net realisable
value. Cost is determined on the first-in, first-out basis. Net realisable
value is the price at which inventory can be sold in the normal course of
business, after costs of realisation.
Allowances for doubtful accounts
An allowance for doubtful accounts is provided based on an evaluation of
the recoverability of the receivables at the balance sheet date. Trade accounts
receivable are stated net of such allowance.
Revenue recognition
Revenue from the provision of telecommunication and support services is
recognised upon delivery of the services.
Revenue from the sale of telecommunication hardware and software is
recognised on the transfer of ownership.
Interest income is recognised on a time proportion basis, taking into
account the principal amounts outstanding and the interest rates applicable.
Advertising and promotion costs
Advertising and promotion costs are expensed as incurred.
Retirement benefit plans
The Company operates a defined contribution retirement scheme which is
available to all entitled employees. Contributions to the scheme by the Company
and the employees are calculated as 5% of the employees' basic salaries. The
Company's contributions to the defined contribution retirement scheme are
expensed as incurred and are reduced by contributions forfeited by those
employees who leave the scheme prior to vesting fully in the contributions. The
assets of the scheme are held separately from those of the Company in an
independently administered fund.
The retirement contributions incurred and borne by the Company were
HK$1,262,000 and HK$1,091,000 for the period from January 1, to November 30,
1999 and the year 1998 respectively.
Deferred income
Subscription income and income billed in advance is deferred and credited
to the statement of operations on a straight line basis over the related
period.
F-35
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
Operating leases
The Company leases certain office facilities under non-cancellable short
term leases. Rentals applicable to such operating leases are charged to the
statement of operations on a straight line basis over the lease term.
Translation of foreign currencies
The functional currency of the Company's operations is the Hong Kong
dollar.
Transactions in currencies other than the functional currency are
translated at exchange rates ruling at the transaction dates. Monetary assets
and liabilities expressed in foreign currencies at the balance sheet date are
translated at rates of exchange ruling at the balance sheet date. All exchange
differences arising are dealt with in the statement of operations.
Income taxes
The Company accounts for deferred income taxes using the liability method
under which the expected future tax consequences of temporary differences
between the financial reporting and the tax bases of its assets and
liabilities are recognised as deferred tax assets or liabilities. A valuation
allowance is established for any deferred tax asset when it is more likely
than not that the deferred tax asset will not be received.
4 Financial assets and liabilities
Financial assets of the Company include cash and cash equivalents, trade
accounts receivable, other assets, prepaid costs, amount due from holding
company and amounts due from affiliates under the common control of AT&T Corp.
Financial liabilities of the Company include accounts payable, accrued
liabilities, long term loan from holding company and affiliates under the
common control of AT&T Corp, amounts due to affiliates under the common
control of AT&T Corp. It is not practicable to estimate the fair value of the
long term loan from holding company and affiliates, and balances with holding
company and affiliates under the common control of AT&T Corp without incurring
excessive cost. The fair value of all other financial instruments approximate
their carrying amounts due to the nature or short maturity of these
instruments.
5 Concentration of credit risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents,
trade receivables and deposits, prepayments and other receivables.
Cash and cash equivalents--substantially all the Company's cash and bank
balances are placed with a number of international banks in Hong Kong to which
the Company believes its exposure to risk is limited.
Trade receivables--these mainly represent service fee receivables from
numerous third parties.
Deposits, prepayments and other receivable--these are spread among
numerous third parties.
F-36
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
6 Property, plant and equipment
Property, plant and equipment comprises the following:
<TABLE>
<CAPTION>
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Computer equipment................................ HK$65,658 HK$50,586
Leasehold improvements............................ 4,778 4,778
Office furniture and equipment.................... 6,051 5,157
--------- ---------
76,487 60,521
Less: accumulated depreciation.................... (56,878) (50,565)
--------- ---------
Property plant and equipment at net book value.... HK$19,609 HK$ 9,956
========= =========
</TABLE>
7 Current assets:
Prepaid expenses and other assets comprise the following:
<TABLE>
<CAPTION>
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Prepayments........................................ HK$ 729 HK$137
Deposits........................................... 486 191
Others............................................. (21) 589
-------- ------
HK$1,194 HK$917
======== ======
</TABLE>
Due from affiliates and holding company
The amounts due from the affiliates and holding company are unsecured,
non-interest bearing and have no fixed repayment terms.
8 Current liabilities:
Accounts payable and accrued liabilities comprise the following:
<TABLE>
<CAPTION>
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
External accounts payable.......................... HK$ 3,600 HK$3,385
Accruals........................................... 22,988 3,114
Temporary receipts................................. 5,693 1,201
Royalties payable.................................. 1,679 --
--------- --------
HK$33,960 HK$7,700
========= ========
</TABLE>
Due to affiliates
The amounts due to affiliates are unsecured, interest free and have no
fixed repayment terms.
Long term loan from an affiliate
The long term loan from an affiliate is unsecured, interest free and has
no fixed repayment terms.
F-37
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
Long term loan from holding company
The amount is unsecured, interest free and has no fixed repayment terms.
During the year the loan was settled by the issue of new shares to the holding
company (Note 9).
9 Share capital
The authorised share capital of the Company comprises 19,411,533 ordinary
shares of HK$10 each (1998: 10,000). In November 1999, 19,401,533 Class A
shares of HK$10 each were issued to the holding company at par in full
settlement of the long term loan from the holding company. Those shares rank
pari passu with the existing issued shares.
10 Related party transactions
During the period, the Company undertook the following transactions with
related parties:
<TABLE>
<CAPTION>
Period from
January 1,
Year ended 1999 to
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Management service fees received from holding company
(Note a)............................................ HK$59,192 HK$41,474
--------- ---------
Network annual channel fee and transmission charges
payable to holding company (Note b)................. 18,748 15,127
--------- ---------
Recharges of operating leases, utilities,
administration expenses payable to a fellow
subsidiary (Note c)................................. 22,503 11,871
--------- ---------
Telecommunication income receivable from a fellow
subsidiary (Note d)................................. 5,667 2,393
--------- ---------
Circuit costs recoverable from a fellow subsidiary
(Note e)............................................ 7,628 3,720
--------- ---------
Commission income received from a fellow subsidiary
(Note f)............................................ 1,853 5,806
--------- ---------
IP Telephony management fee received from a fellow
subsidiary (Note g)................................. -- 2,326
--------- ---------
</TABLE>
- --------
(a) The management service fee received from holding company was determined
based on an agreed percentage of total reimbursable items recorded in the
non-online Hong Kong business.
(b) The network annual channel fee and transmission charges were based on an
agreed rate for the total actual usage.
(c) The recharges of operating leases, utilities, administration expenses were
made by a fellow subsidiary based on an agreed rate for the occupancy of
the office premises located at Times Square, Hong Kong.
(d) Telecommunication income was charged to a fellow subsidiary based on a
monthly contracted amount.
(e) Circuit costs were charged to a fellow subsidiary based on a monthly
contracted amount.
(f) Commission income was charged based on an agreed rate of the debt collected
on behalf of the fellow subsidiary.
(g) IP Telephony management fee was charged to a fellow subsidiary based a
fixed monthly contracted amount.
F-38
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
11 Income taxes
The Company had no taxable income for the eleven months period ended
November 30, 1999.
Deferred income tax reflects the tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes and tax loss carryforwards.
There is no limitation in Hong Kong on the period in which the Company's tax
loss carryforwards can be utilized.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31, November 30,
1998 1999
------------ ------------
<S> <C> <C>
Tax losses--assets............................... HK$ 40,318 HK$ 39,164
Accelerated depreciation, allowances and
liabilities..................................... (2,012) (1,133)
---------- ----------
38,306 38,031
---------- ----------
Less: valuation allowance........................ (38,306) (38,031)
---------- ----------
HK$ -- HK$ --
========== ==========
</TABLE>
12 Commitments and contingencies
The Company leases space for its equipment under a non-cancellable
operating lease, which expires March 2001.
As of November 30, 1999, estimated future minimum lease payments on all
operating leases are approximately as follows:
<TABLE>
<S> <C>
For the year ending November 30,
2000............................................................ HK$ 762
2001............................................................ 254
--------
HK$1,016
========
</TABLE>
The Company leases circuits from telecommunication providers based in Hong
Kong under various (non-cancellable) operating leases.
As of November 31, 1999, the estimated future minium payments on all
circuit leases are approximately as follows:
<TABLE>
<S> <C>
For the year ending November 30,
2000................................................................ HK$4,515
Thereafter.......................................................... --
========
</TABLE>
No contingencies existed as of November 30, 1999.
F-39
<PAGE>
AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(in thousands of Hong Kong dollars, except share data)
13 Supplementary cash flow information
The discontinued operations' assets and related net liabilities were
transferred to/assumed by a fellow subsidiary as at November 1, 1999. The
assets and liabilities of the operation comprised:
<TABLE>
<S> <C>
Fixed assets....................................................... HK$5,556
Inventories........................................................ 511
Accounts receivable and prepayments................................ 33,736
Accounts payable and accruals...................................... (20,582)
Amounts due to fellow subsidiaries................................. (21,962)
Amounts due from fellow subsidiaries............................... 233
--------
Net liabilities.................................................... (2,508)
========
Satisfied by increase in amount due to fellow subsidiary........... HK$2,508
========
</TABLE>
The Company's leasehold improvements and its cash balances were deemed to
be wholly attributable to the continuing business.
The resulting amount due to the fellow subsidiary was subsequently waived
by the fellow subsidiary.
14 Subsequent events
Subsequent to the period end, in accordance with a share sale and purchase
agreement dated December 4, 1999, the Company was acquired from AT&T
Communication Services International Inc by iAsiaWorks Inc. for a total cash
consideration of US$42 million. Shortly thereafter, the name of AT&T EasyLink
Services Asia/Pacific Limited was changed to iAsiaWorks (HK) Limited.
In March 2000, the Company signed a binding letter of intent to lease
office space in Hong Kong. The lease term is for three years. The Company is
committed to monthly rental and related costs of approximately HK$387.
In March 2000, the Company signed a binding letter of intent to lease data
center space in a new development in Hong Kong. The lease term is twelve years
and will commence upon substantial completion of the building, estimated to be
December 2000. Under the terms of the lease, the Company is committed to pay a
monthly rental of approximately US$500,000 to US$800,000, subject to an option
for additional space and certain escalation clauses over the lease terms. The
lease agreement provides this Company with an option to extend the lease term
for an additional eight years.
F-40
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Summary Consolidated Financial Data...................................... 6
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 31
Management............................................................... 44
Executive Compensation................................................... 47
Aggregated Option Exercises in the Most Recent Fiscal Year and Year-End
Option Values........................................................... 49
Benefit Plans............................................................ 50
Transactions and Relationships with Related Parties...................... 58
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 64
Shares Available for Future Sale......................................... 67
Underwriting............................................................. 69
Validity of Securities................................................... 71
Experts.................................................................. 71
Additional Information................................................... 71
</TABLE>
---------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
iAsiaWorks, Inc.
Common Stock
---------------
[LOGO OF IASIAWORKS, INC.]
---------------
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
Representatives of the Underwriters
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 iAsiaWorks in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration Fee................................................ $60,720
NASD Filing Fee..................................................... 23,500
Nasdaq National Market Listing Fee.................................. 1,000
Printing and Engraving Expenses..................................... *
Legal Fees and Expenses............................................. *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Transfer Agent Fees................................................. *
Miscellaneous....................................................... *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit this
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VIII of iAsiaWorks' bylaws provides
for mandatory indemnification of its directors and officers and permissible
indemnification of employees and other agents to the maximum extent permitted
by the Delaware General Corporation Law. iAsiaWorks' certificate of
incorporation provides that, subject to Delaware law, its directors will not be
personally liable for monetary damages for breach of the directors' fiduciary
duty as directors to iAsiaWorks and its stockholders. This provision in the
certificate of incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to iAsiaWorks or its stockholders for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. iAsiaWorks has entered
into indemnification agreements with its officers and directors, a form of
which will be filed with the Securities and Exchange Commission (the
"Commission") as an exhibit to the registrant's registration statement on Form
S-1 (No. 333- ). The indemnification agreements provide
iAsiaWorks' officers and directors with further indemnification to the maximum
extent permitted by the Delaware General Corporation Law. Reference is also
made to Section II of the Rights Agreement contained in Exhibit 4.2 hereto,
indemnifying certain of iAsiaWorks' stockholders, including controlling
stockholders, against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
During the past three years, the registrant has issued unregistered
securities to a limited number of persons as described below:
(a) In November 1997, the registrant issued to Venture Lending & Leasing I
and II warrants to purchase an aggregate of 450,000 shares of our Series B
preferred stock at an exercise price of $1.50 per share.
(b) In August 1998, the registrant issued and sold 9,807,047 shares of its
Series C preferred stock, and warrants to purchase 8,535,765 shares of its
common stock at an exercise price of $0.01 per share, to entities affiliated
with Enterprise Partners, entities affiliated with Generation Capital Partners,
entities affiliated with Institutional Venture Partners, entities affiliated
with New Enterprise Associates, Greenacre Ventures L.L.P., entities affiliated
with Zesiger Capital Group, L.L.C., and various other investors at a price of
$1.00 per share.
(c) In October 1996 and April 1997, the registrant issued and sold 6,782,567
shares of its Series B preferred stock, and warrants to purchase 1,199,867
shares of its Series B preferred stock at a an exercise price of $1.50 per
share, to entities affiliated with Zesiger Capital Group L.L.C., entities
affiliated with Generation Capital Partners, L.P., Salomon Brothers Inc. and
other various investors at a price of $1.50 per share.
(d) In August 1999, the registrant issued to various investors warrants to
purchase an aggregate of 302,147 shares of its common stock at an exercise
price of $0.01 per share. Warrants for 125,809 shares were exercised by
Institutional Venture Partners in September 1999 and 115,744 shares were
exercised in October 1999 by Enterprise Partners IV, L.P. and 10,065 shares
were exercised in October 1999 by Enterprise Partners IV Associates, L.P.
(e) In September 1999, warrants to purchase 3,852,462 shares of common stock
were exercised by Institutional Venture Partners III, L.P., Institutional
Venture Management Investment Fund VIII, L.L.C., Institutional Venture
Management Investment Fund VIII-A, L.L.C., and Institutional Venture Partners
Founders Fund I, L.P. for an aggregate consideration of $38,525.
(f) In October 1999, warrants to purchase 2,786,851 shares of common stock
were exercised by Enterprise Partners IV, L.P. and Enterprise Partners IV
Associates, L.P. for an aggregate consideration of $27,869.
(g) In December 1999, the registrant issued and sold 40,790,007 shares of its
Series D preferred stock at an aggregate purchase price of $82,988,680 to
entities affiliated with NewBridge Capital Limited, entities affiliated with
Sprout Group L.P., Internet Elite Limited and various other investors at a
price of $2.034461 per share.
(h) In December 1999, the registrant issued to various investors, including
Enterprise Partners IV, L.P., Westcoast Co., and Mellon Bank NA custodian
PERSI-Zesiger Capital, convertible promissory notes in the aggregate principal
amount of $2,014,322 were converted to 990,093 shares of Series D preferred
stock.
(i) In December 1999, the registrant issued to various investors, including
entities affiliated with Zesiger Capital, Generation Partners and Salomon Smith
Barney Inc., warrants to purchase 840,881 shares of its Series B preferred
stock at a price of $1.50 per share, all but 28,974 of such warrants were
immediately exercised.
(j) In January 2000, the registrant issued 491,535 shares of Series D
preferred stock to Web Professionals, Inc. in connection with the registrant's
acquisition of the assets of same.
(k) Since its inception, and as of March 31, 2000, the registrant has in the
aggregate granted 20,540,208 stock options to its employees, directors and
consultants under its 1995 Stock Option Plan. Of these granted options,
3,590,992 have since been cancelled and returned to the plan by the
II-2
<PAGE>
registrant, 1,061,827 have been exercised, and 15,887,389 shares remain
outstanding with exercise prices ranging from $0.05 to $2.00 per share.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and the registrant believes
that each transaction was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated
thereunder or Rule 701 pursuant to compensatory benefit plans and contracts
relating to compensation as provided under Rule 701. The recipients in these
transactions represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in these transactions. All recipients had
adequate access, through their relationships with the registrant, to
information about the registrant.
Item 16. Exhibits and Financial Statement Schedules
The exhibits listed in the Exhibit Index are filed as part of this
Registration Statement.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Purchase Agreement for AT&T EasyLink Services Asia/Pacific Limited.
3.1 Amended and Restated Certificate of Incorporation, to be effective
prior to the closing of this offering.
3.2* Second Amended and Restated Certificate of Incorporation, to be
effective after the closing of this offering.
3.3 Amended and Restated Bylaws, to be effective upon consummation of this
offering.
3.4* Second Amended and Restated Bylaws, to be effective after consummation
of this offering.
4.1* Form of Registrant's Specimen Common Stock Certificate.
4.2 Amended and Restated Rights Agreement dated December 8, 1999.
5.1* Opinion of Brobeck, Phleger & Harrison LLP, counsel for the
registrant, with respect to the common stock being registered.
10.1 Registrant's 1995 Stock Option Plan.
10.2 Registrant's 2000 Stock Incentive Plan.
10.3 Registrant's 2000 Employee Stock Purchase Plan.
10.4 Form of registrant's Directors and Officers' Indemnification
Agreement.
10.5** Value Added Network Services Agreement, dated March 13, 2000 by and
between the registrant and Taiwan Telecommunications Network.
10.6** Memorandum of Understanding dated March 28, 2000 by and between the
registrant and Integra.
10.7 Lease, dated March 15, 2000, by and between the registrant and Monance
Limited.
10.8 Sublease, dated August 31, 1999 by and between the registrant and
California Casualty Management Company.
10.9** Lease, dated October 12, 1999 by and between the registrant and Cable
& Wireless HK Limited.
10.10** Lease, dated May 3, 1999 by and between the registrant and Hong Kong
Telecom International Limited.
10.11 Lease, dated October 28, 1998 by and among the registrant and Pai-yuan
Chiang, Jen-hang Chiang and Chou-p'ing Chiang.
10.12* Employment Agreement, dated April , 2000, by and between the
registrant and JoAnn Patrick-Ezzell.
10.13* Employment Agreement, dated April , 2000, by and between the
registrant and David Holub.
10.14* Employment Agreement, dated April , 2000, by and between the
registrant and Jacob Gale.
10.15 Employment Agreement, dated April 16, 2000, by and between the
registrant and Jonathan Beizer.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
10.16* Employment Agreement, dated April , 2000, by and between the
registrant and Suzanne Chu.
10.17* Employment Agreement, dated April , 2000, by and between the
registrant and Daryl Horn.
10.18*/** Letter of Intent, dated March 20, 2000, by and between the
registrant's subsidiary iAsiaWorks (HK) Limited and iAdvantage
Limited.
21.1* Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
23.2 Consent of PricewaterhouseCoopers, LLP, Independent Accountants for
AT&T Easy Link Services Asia/Pacific Limited.
23.3* Consent of Brobeck, Phleger & Harrison LLP (contained in their
opinion filed as Exhibit 5.1).
24.1 Power of Attorney - See Part II, pages 5 and 6.
27.1 Financial Data Schedule for iAsiaWorks, Inc. (In EDGAR format only).
</TABLE>
- --------
* To be filed by amendment
** Confidential treatment requested.
(b) Financial Statement Schedule
<TABLE>
<S> <C>
Report of Independent Accountants........................................ S-1
Schedule II--Valuation & Qualifying Accounts............................. S-2
</TABLE>
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of iAsiaWorks
pursuant to the Delaware General Corporation Law, the certificate of
incorporation or the bylaws of iAsiaWorks, indemnification agreements entered
into between iAsiaWorks and its officers and directors, the underwriting
agreement, or otherwise, iAsiaWorks has been advised that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act, and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by iAsiaWorks
of expenses incurred or paid by a director, officer, or controlling person of
iAsiaWorks 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, iAsiaWorks will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(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 iAsiaWorks 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 certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Mateo, State of California, on this 20th
day of April 2000.
IASIAWORKS, INC.
By: /s/ JoAnn Patrick-Ezzell
-----------------------------------
JoAnn Patrick-Ezzell
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, JoAnn Patrick-Ezzell and
Jonathan F. Beizer, and each one of them, his true and lawful attorneys-in-fact
and agents, each with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
sign any registration statement for the same offering covered by this
registration statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all post-
effective amendments thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that each of said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the persons whose signatures appear
below, which persons have signed such registration statement in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JoAnn Patrick-Ezzell Chief Executive Officer and April 20, 2000
____________________________________ Chairman of the Board of
JoAnn Patrick-Ezzell Directors (Principal
Executive Officer)
/s/ Jonathan Beizer Chief Financial Officer and April 20, 2000
____________________________________ President--U.S. (Principal
Jonathan Beizer Accounting Officer)
/s/ Robert Lee Director April 20, 2000
____________________________________
Robert Lee
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Peter Morris Director April 20, 2000
____________________________________
Peter Morris
/s/ William Stensrud Director April 20, 2000
____________________________________
William Stensrud
/s/ William Tai Director April 20, 2000
____________________________________
William Tai
/s/ Farrokh Billimoria Director April 20, 2000
____________________________________
Farrokh Billimoria
/s/ Daniel Carroll Director April 20, 2000
____________________________________
Daniel Carroll
</TABLE>
II-6
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
iAsiaWorks, Inc.
Our audits of the consolidated financial statements referred to in our
report dated April 14, 2000 appearing in the Form S-1 of iAsiaWorks, Inc. also
included an audit of the financial statement schedule listed in Item 16(b) of
this Form S-1. In our opinion, the financial statement schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
San Jose, California
April 14, 2000
S-1
<PAGE>
iAsiaWorks, Inc.
SCHEDULE II--VALUATION & QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions Other(1) of Period
----------- ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1997:
Allowance for doubtful
accounts................ $ -- $ 189 $ (22) $ -- $ 167
Valuation allowance for
deferred tax assets..... $ 1,095 $ 2,655 $ -- $ -- $ 3,750
Year Ended December 31,
1998:
Allowance for doubtful
accounts................ $ 167 $ 260 $(199) $ -- $ 228
Valuation allowance for
deferred tax assets..... $ 3,750 $ 1,146 $ -- $ -- $ 4,896
Year Ended December 31,
1999:
Allowance for doubtful
accounts................ $ 228 $ 325 $(193) $ 194 $ 554
Valuation allowance for
deferred tax assets..... $ 4,896 $ 5,531 $ -- $2,037 $12,464
</TABLE>
- --------
(1) Reflects AT&T EasyLink reserves acquired.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Purchase Agreement for AT&T EasyLink Services Asia/Pacific Limited.
3.1 Amended and Restated Certificate of Incorporation, to be effective
prior to the closing of this offering.
3.2* Second Amended and Restated Certificate of Incorporation, to be
effective after the closing of this offering.
3.3 Amended and Restated Bylaws, to be effective upon consummation of
this offering.
3.4* Second Amended and Restated Bylaws, to be effective after
consummation of this offering.
4.1* Form of Registrant's Specimen Common Stock Certificate.
4.2 Amended and Restated Rights Agreement dated December 8, 1999.
5.1* Opinion of Brobeck, Phleger & Harrison LLP, counsel for the
registrant, with respect to the common stock being registered.
10.1 Registrant's 1995 Stock Option Plan.
10.2 Registrant's 2000 Stock Incentive Plan.
10.3 Registrant's 2000 Employee Stock Purchase Plan.
10.4 Form of registrant's Directors and Officers' Indemnification
Agreement.
10.5** Value Added Network Services Agreement, dated March 13, 2000 by and
between the registrant and Taiwan Telecommunications Network.
10.6** Memorandum of Understanding dated March 28, 2000 by and between
registrant and Integra.
10.7 Lease, dated March 15, 2000, by and between the registrant and
Monance Limited.
10.8 Sublease, dated August 31, 1999 by and between the registrant and
California Casualty Management Company.
10.9** Lease, dated October 12, 1999 by and between the registrant and
Cable & Wireless HK Limited.
10.10** Lease, dated May 3, 1999 by and between the registrant and Hong Kong
Telecom International Limited.
10.11 Lease, dated October 28, 1998 by and among the registrant and Pai-
yuan Chiang, Jen-hang Chiang and Chou-p'ing Chiang.
10.12* Employment Agreement, dated April , 2000, by and between the
registrant and JoAnn Patrick-Ezzell.
10.13* Employment Agreement, dated April , 2000, by and between the
registrant and David Holub.
10.14* Employment Agreement, dated April , 2000, by and between the
registrant and Jacob Gale.
10.15 Employment Agreement, dated April 16, 2000, by and between the
registrant and Jonathan Beizer.
10.16* Employment Agreement, dated April , 2000, by and between the
registrant and Suzanne Chu.
10.17* Employment Agreement, dated April , 2000, by and between the
registrant and Daryl Horn.
10.18*/** Letter of Intent, dated March 20, 2000, by and between the
registrant's subsidiary iAsiaWorks (HK) Limited and iAdvantage
Limited.
21.1* Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
23.2 Consent of PricewaterhouseCoopers, LLP, Independent Accountants for
AT&T Easy Link Services Asia/Pacific Limited.
23.3* Consent of Brobeck, Phleger & Harrison LLP (contained in their
opinion filed as Exhibit 5.1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
24.1 Power of Attorney - See Part II, pages 5 and 6.
27.1 Financial Data Schedule for iAsiaWorks, Inc. (In EDGAR format only).
</TABLE>
- --------
* To be filed by amendment
** Confidential treatment requested.
<PAGE>
Exhibit 1.1
iAsiaWorks, Inc.
Common Stock (par value $0.001 per share)
---------------
Underwriting Agreement
----------------------
________, 2000
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
iAsiaWorks, Inc., a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of [15,000,000]
shares (the "Firm Shares") and, at the election of the Underwriters, up to
[2,250,000] additional shares (the "Optional Shares") of its Common Stock, par
value $0.001 per share ("Stock"). The Firm Shares and the Optional Shares that
the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-_______) (the
"Initial Registration Statement") in respect of the Shares has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you, and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and no
stop order suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the Act is hereinafter called
a "Preliminary Prospectus"; the
1
<PAGE>
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid,
2
<PAGE>
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(f) Since the date of the latest audited financial statements included in
the Prospectus, neither the Company nor any of its subsidiaries has (i) entered
into or assumed, or made any material amendment to, any contract, (ii) incurred
or assumed, or agreed to incur or assume, any liability (including any
contingent liability) or other obligation or (iii) acquired or disposed of, or
agreed to acquire or dispose of, any business or any other asset that, in each
case individually or in the aggregate, would be materially adverse to the
Company and its subsidiaries, taken as a whole, and that is not described in the
Prospectus;
(g) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such jurisdiction;
(h) Immediately prior to the merger (the "Merger") of iAsiaWorks, Inc.
(formerly named AUNET Corporation), a California corporation (the "California
Company"), with and into the Company on __________, 2000, the California Company
was duly incorporated and was validly existing as a corporation in good standing
under the laws of California, with power and authority (corporate and other) to
own its properties and conduct its business. Immediately prior to the Merger,
all of the issued shares of capital stock of the California Company had been
duly and validly authorized and issued and were fully paid and non-assessable;
(i) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the capital stock contained in the Prospectus;
and all of the issued shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims;
(j) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(k) The issue and sale of the Shares by the Company and the compliance by
the Company with all of the provisions of this Agreement and the consummation of
the transactions herein
3
<PAGE>
contemplated will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or By-
laws of the Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares or
the consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws or by the National Association
of Securities Dealers, Inc. in connection with the purchase and distribution of
the Shares by the Underwriters;
(l) Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or By-laws (or other constituent documents) or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(m) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(n) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; and, to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(o) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company", as such term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act");
(p) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its subsidiaries and AT&T Easy Links Services
Asia/Pacific Limited, are independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder;
(q) Except as described in the Prospectus, the Company and its
subsidiaries own, possess or have the right to employ sufficient patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
software, systems or procedures), trademarks, service marks and trade names,
inventions, computer programs, technical data and information (collectively, the
"Intellectual Property
4
<PAGE>
Rights") reasonably necessary to conduct their businesses as now conducted; and
the expected expiration of any such Intellectual Property Rights would not,
individually or in the aggregate, result in a Material Adverse Effect or any
development that could reasonably be expected to result in a Material Adverse
Effect. Except as described in the Prospectus, the Intellectual Property Rights
presently employed by the Company and its subsidiaries in connection with the
businesses now operated by them or which are proposed to be operated by them, as
described in the Prospectus, are owned, to the Company's knowledge, free and
clear of and without violating any right, claimed rights, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other person
and neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing except as would not reasonably be expected to individually or
in the aggregate, result in a Material Adverse Effect, or any development that
could reasonably be expected to result in a Material Adverse Effect, whether or
not arising from transactions in the ordinary course of business. Except as
described in the Prospectus, to the Company's knowledge, the use of the
Intellectual Property in connection with the business and operations of the
Company and its subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to individually or in the aggregate
result in a Material Adverse Effect, or any development that could reasonably be
expected to result in a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business;
(r) The Company and each of its subsidiaries have all necessary
authorizations, approvals, orders, consents, certificates, permits,
registrations or qualifications of and from all applicable regulatory
authorities to conduct its businesses as described in the Prospectus, or is
subject to no material liability or disability by reason of the failure to have
such authorizations, approvals, orders, consents, licenses, certificates,
permits, registrations or qualifications; and none of the Company or any of its
subsidiaries has received any notification from any regulatory authority to the
effect that any additional authorization, approval, order, consent, license,
certificate, permit, registration or qualification from such regulatory
authority is needed to be obtained by any of the Company or its subsidiaries
except as would not reasonably be expected to individually or in the aggregate,
result in a Material Adverse Effect, or any development that could reasonably be
expected to result in a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business;
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to include any securities of the Company with the Shares
registered pursuant to the Registration Statement, except as otherwise disclosed
in the Prospectus or as have been validly waived in writing by such person in
connection with the offering of the Shares contemplated hereby;
(t) There are no contracts, agreements or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by rules and regulations thereunder which
have not been described or filed as required; and the contracts so described in
the Prospectus are in full force and effect, and neither the Company, any of its
subsidiaries nor, to the best of the Company's knowledge, any other party is in
breach of or default in any material respect under any of such contracts;
(u) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed and access to assets is permitted in accordance with
management's general or specific authorizations,
5
<PAGE>
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, and (iii) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences; and
(v) The directed share program as referred to under the caption
"Underwriting" in the Prospectus, when instituted and administered in accordance
with its terms, including the distribution of any Preliminary Prospectus and the
Prospectus to the participants in such program and all communications and
dealings by the Company, its officers, directors, employees and affiliates and
any person acting on its or their behalf in connection therewith, do not and
will not contravene applicable laws, regulations or rules of the relevant
jurisdictions; and no consent, approval, authorization, order, registration,
clearance or qualification of or with any Governmental Agency of any of the
relevant jurisdictions is required in connection with the offering or sale of
any shares of Common Stock pursuant to the directed share program.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $________, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to [2,250,000] Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering sales
of shares in excess of the number of Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against payment by or
on behalf of such Underwriter of the purchase price therefor by wire transfer of
Federal (same-day)
6
<PAGE>
funds to the account specified by the Company to Goldman, Sachs & Co. at least
forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on ______, 2000 or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing, and, with respect to the Optional Shares,
9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co. in the
written notice given by Goldman, Sachs & Co. of the Underwriters' election to
purchase such Optional Shares, or such other time and date as Goldman, Sachs &
Co. and the Company may agree upon in writing. Such time and date for delivery
of the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Brobeck
Phleger & Harrison LLP, 2200 Geng Road, Two Embarcadero Road, Palo Alto, CA
94303 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at .......p.m., New York City time, on the New York Business
Day next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 4,
"New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may
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request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a prospectus
is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the Shares
and if at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or supplement the
Prospectus, to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine months
or more after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to offer,
sell, contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), to make available to its stockholders
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and
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financial statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National Market
System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
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(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex III(a) hereto), dated such Time of Delivery,
with respect to such matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Brobeck Phleger & Harrison LLP, U.S. counsel for the Company,
shall have furnished to you their written opinion (a draft of such opinion
is attached as Annex III(b) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority (corporate and other) to
own its properties and conduct its business as described in the
Prospectus;
(ii) Immediately prior to the Merger of the California Company
with and into the Company on __________, 2000, the California Company
was duly incorporated and was validly existing as a corporation in
good standing under the laws of California, with power and authority
(corporate and other) to own its properties and conduct its business;
(iii) Immediately prior to the Merger, all of the issued shares
of capital stock of the California Company had been duly and validly
authorized and issued and were fully paid and non-assessable;
(iv) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(v) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
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counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(vi) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares and except as otherwise set
forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect to
matters of fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates);
(vii) The Company and its subsidiaries have good and marketable
title in fee simple to all real property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such counsel may
state that no examination of record titles for the purpose of such
opinion has been made, and that they are relying upon a general
review of the titles of the Company and its subsidiaries, upon
opinions of local counsel and abstracts, reports and policies of
title companies rendered or issued at or subsequent to the time of
acquisition of such property by the Company or its subsidiaries, upon
opinions of counsel to the lessors of such property and, in respect
to matters of fact, upon certificates of officers of the Company or
its subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions, abstracts, reports, policies and certificates);
(viii) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(ix) This Agreement has been duly authorized, executed and
delivered by the Company;
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(x) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any
of the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(xi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares
by the Underwriters;
(xii) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws (or
equivalent corporate documents) or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(xiii) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete
and fair;
(xiv) The Company is not an "investment company", as such term is
defined in the Investment Company Act; and
(xvi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred
to in the opinion in subsection (xi) of this section 7(c), they have
no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related
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schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement
or the Prospectus which are not filed or described as required.
(d) Each of (A) [___________________], Hong Kong counsel for the
Company and its subsidiaries, (B) [____________], Taiwan counsel for the
Company and its subsidiaries and (C) [______________], South Korean counsel
for the Company and its subsidaries shall have furnished to you their
written opinion (a draft of each such opinion is attached as Annex III(c),
(d) and (e) hereto, respectively), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Each of the subsidiaries (each, a "Relevant Subsidiary") of
the Company organized under the laws of the corresponding
jurisdiction set forth in Schedule II (the "Relevant Jurisdiction")
has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the Relevant Jurisdiction, with
power and authority (corporate and other) to own its properties and
conduct its business;
(ii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the
laws of the Relevant Jurisdiction in which it owns or leases
properties or conducts any business in the Relevant Jurisdiction so
as to require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified in
the Relevant Jurisdiction;
(iii) All of the issued shares of capital stock of each Relevant
Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and (except for directors' qualifying
shares and except as otherwise set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to rely
in respect of to matters of fact upon certificates of officers of the
Company or the Relevant Subsidiary); and
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(iv) The Relevant Subsidiary has good and marketable title in fee
simple to all real property owned by is, in each case free and clear
of all liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to
be made of such property by the Relevant Subsidiary; and any real
property and buildings held under lease by Relevant Subsidiary is
held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the
Relevant Subsidiary (in giving the opinion in this clause, such
counsel may state that no examination of record titles for the
purpose of such opinion has been made, and that they are relying upon
a general review of the titles of the Relevant Subsidiary, reports
and policies of title companies rendered or issued at or subsequent
to the time of acquisition of such property by the Relevant
Subsidiary, upon opinions of counsel to the lessors of such property,
and in respect to matters of fact, upon certificates of officers of
the Relevant Subsidiary, provided that such counsel shall state that
they believe that both you and they are justified in relying upon
such opinions, abstracts, reports, policies and certificates);
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP shall have furnished to you a letter or letters
with respect to each of the Company and AT&T EasyLink Services Asia/Pacific
Limited dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annexes I and II
hereto (the executed copies of the letters delivered prior to the execution
of this Agreement are attached as Annexes I and II hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities or preferred stock by
any "nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
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(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii)
a general moratorium on commercial banking activities declared by either
Federal or New York or California State authorities; or (iv) the outbreak
or escalation of hostilities involving the United States or the declaration
by the United States of a national emergency or war, if the effect of any
such event specified in this clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time
of Delivery on the terms and in the manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on NASDAQ; and
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each of its directors and officers and each
stockholder listed on Schedule II hereto, substantially to the effect set
forth in Subsection 5(e) hereof in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(l) The Company shall have furnished or caused to be furnished to you at
such Time of Delivery certificates of officers of the Company satisfactory
to you as to the accuracy of the representations and warranties of the
Company herein at and as of such Time of Delivery, as to the performance by
the Company of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, as to the matters set forth in subsections (a)
and (e) of this Section and as to such other matters as you may reasonably
request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
15
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based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such
16
<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or
17
<PAGE>
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on
18
<PAGE>
behalf of any Underwriter made or given by you jointly or by Goldman, Sachs &
Co. on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
19
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
iAsiaWorks, Inc.
By:...................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
By:..................................
Goldman, Sachs & Co.
On behalf of each of the Underwriters
20
<PAGE>
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
Goldman, Sachs & Co................
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
--------------- ------------------
Total...................
=============== ==================
21
<PAGE>
EXHIBIT 2.1
AT&T COMMUNICATIONS SERVICES INTERNATIONAL, INC.
AND
AUnet CORPORATION
---------------------------------------------
SHARE SALE AND PURCHASE AGREEMENT
-----------------------------------------------------------
EXECUTION COPY
--------------
December 4, 1999
----------------
Boughton Peterson Yang Anderson
1702 Dina House, Ruttonjee Center, 11 Duddell Street, Central
Hong Kong
Tel: (852) 2877 3088 Fax: (852) 2525 1099
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
Number Clause Headings Page
- ------ --------------- ----
<C> <S> <C>
1. Definitions and Interpretation...................................... 3
2. Sale of Shares...................................................... 7
3. Consideration....................................................... 7
4. [Intentionally Left Blank]
5. Completion.......................................................... 7
6. Vendor's Warranties, Covenants and Indemnities...................... 9
7. Retirement Scheme................................................... 13
8. Purchaser's Warranties, Covenants and Indemnity..................... 13
9. Restriction on Announcements........................................ 14
10. Further Assurance and Attorney...................................... 15
11. Information......................................................... 15
12. Cost................................................................ 15
13. General............................................................. 15
14. Notices............................................................. 16
15. Time Square Offices................................................. 16
16. Governing Law and Submission to Jurisdiction........................ 17
</TABLE>
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
SCHEDULE 1 Details of the Company
SCHEDULE 2 Vendor's Individuals with Knowledge
SCHEDULE 3 Vendor's Warranties
SCHEDULE 4 Property
SCHEDULE 6 Contracts
SCHEDULE 6.2.2 HK IP Address Space and AS Number
SCHEDULE 6.2.4 Service Provider and Vendor Agreements to be Cancelled
SCHEDULE 6.2.8 List of Circuits
SCHEDULE 6.2.9 Sales Alliance Agreement
SCHEDULE 6.2.10 Dealership Agreements to be Cancelled
SCHEDULE 6.2.14 Interim Services Agreement
SCHEDULE 6.2.15 Employee Retention Plan
SCHEDULE 6.2.17 MySite and Related Migration Plans
SCHEDULE 7 Licenses
</TABLE>
2
<PAGE>
DATE: December 4, 1999
PARTIES:
(1) AT&T COMMUNICATIONS SERVICES INTERNATIONAL, INC., a company incorporated in
the State of New Jersey whose principal place of business is at 412 Mount
Kemble Avenue, Morristown, New Jersey, U.S.A. (the "Vendor"); and
(2) AUnet CORPORATION, a company incorporated in California whose principal
place of business is at 2000 Alameda De Las Pulgas, Suite 125, San Mateo,
CA 94403, U.S.A. (the "Purchaser").
RECITALS:
(A) The Vendor is the legal and beneficial owner of all of the issued shares in
the capital of AT&T EasyLink Services Asia/Pacific Limited (the "Company").
Particulars of the Company are set out in Schedule 1.
(B) The Vendor wishes to sell and the Purchaser wishes to purchase the said
shares on the terms and conditions set out in this Agreement.
TERMS AGREED:
1. Definitions and Interpretation
------------------------------
1.1 In this Agreement where the context so admits the following words
and expressions shall have the following meanings:
"Accounting Date" 31 August 1999;
"Accounts" The Business Accounts and the Company
Accounts;
"Affiliated Company" means in relation to the Vendor, any
subsidiary or holding company of the
Vendor, any subsidiary of any such
holding company, and any company in
which the Vendor or any such holding
company holds or controls directly or
indirectly not less than 20% of the
issued share capital. All Affiliated
Companies of the Vendor are listed at
the URL: www.att.com as of the date
-----------
hereof;
"Auditors" PricewaterhouseCoopers of 22nd Floor,
Prince's Building, Central, Hong Kong;
"Board" the board of directors of the Company
for the time being;
"Business" the online services Hong Kong business
unit of the Company, which consists of
EasyLink Services, MySite and
dedicated Internet access;
"Business Accounts" the financial statements of the online
services Hong Kong business unit of
the Company as at and for the
3
<PAGE>
accounting period which ended on the
Accounting Date which have been
prepared by the Company based on the
management accounts of the Company as
at and for the accounting period which
ended on the Accounting Date;
"Companies Ordinance" the Companies Ordinance (Chapter 32 of
the Laws of Hong Kong);
"Company Accounts" the financial statements of the
Company as at and for the accounting
period which ended on the Accounting
Date which have been prepared by the
Company based on the management
accounts of the Company as at and for
the accounting period which ended on
the Accounting Date;
"Completion" the performance of all obligations of
the Parties hereto as set out in
Clause 5;
"Completion Date" Ten business days after the execution
hereof;
"Consideration" the total consideration for the Shares
being the sum specified in Clause 3;
"Directors" the persons listed as directors of the
Company in Schedule 1;
"Disclosure Letter" the letter of today's date from the
Vendor to the Purchaser relating to
the Warranties;
"Employees" those individuals employed by the
Vendor and named in the document
headed "Current Staff Listing" annexed
to the Disclosure Letter;
"Encumbrance" any interest or equity (including any
retention of title, right to acquire,
option or right of pre-emption) or any
mortgage, charge, pledge, lien, claim
or assignment or any other
encumbrance, priority or security
interest or arrangement of whatsoever
nature;
"Hong Kong" the Hong Kong Special Administrative
Region of the People's Republic of
China;
"Including" means including without limitation;
"Lease" in respect of a Property, the lease or
tenancy agreement under which it is
held and includes every deed varying
such lease or tenancy agreement and
every license granted under such lease
or tenancy agreement;
"Nominee" AT & T Asia/Pacific Group Limited
(formerly known as AT&T Hong Kong
Limited), which is
4
<PAGE>
registered as holder of one Class "A"
ordinary shares of the Company as
nominee in trust for the Vendor;
"Occupational An occupational retirement scheme
Retirement Scheme" within the meaning given to that term
in section 2 of the Occupational
Retirement Schemes Ordinance (Chapter
426 of the Laws of Hong Kong);
"Parties" the named parties to this Agreement
and their respective successors and
assigns;
"Properties" the leasehold land and premises of the
Company, short details of which are
set out in Schedule 4 and "Property"
means any one of them and includes
every part of it;
"Purchaser's Completion The written resolutions of the board
Board Resolutions" of directors of the Purchaser in the
agreed form;
"Purchaser's Solicitors" Boughton Peterson Yang Anderson of
1702 Dina House, Ruttonjee Center, 11
Duddell Street, Hong Kong;
"Retirement Scheme" the Occupational Retirement Scheme
established by a deed of trust dated
20 January 1998 and all rates and
regulations made in connection
therewith;
"Schedules" the attached schedules;
"Shares" the 19,406,633 Class "A" ordinary
shares and the 4,900 Class "B"
ordinary shares in the issued share
capital of the Company;
"Subscribers" customers of the Business;
"Taxation or Tax" any liability for any form of
taxation, deductions, withholdings,
duties, imports levies, charges, and
rates levied or any amount payable to
receivers, customs or fiscal
authorities of any part of the world
whether federal state or local
(including United States) wherever
created or imposed and includes
profits tax, provisional profits tax,
interest tax, salaries tax, property
tax, taxes on income, capital duty,
capital gains tax, stamp duty, payroll
tax, withholding tax, value added tax,
rates, customs and other import and
export duties and excise duties of
Hong Kong;
"Tax Returns" means any return, declaration, report,
claim for refund, or information
return or statement relating to Taxes,
including any schedule or attachment
thereto, and including any amendment
thereof,
5
<PAGE>
"To the best of Vendor's (or any similar phrase used in this
knowledge" Agreement, or in the Schedules
attached hereto) shall mean the actual
knowledge of the individuals listed on
Schedule 2;
"Transaction" means the purchase by the Purchaser of
all of the Shares;
"US$" United States dollars;
"Vendor's Completion Board the written resolutions of the board
Resolutions" of directors of the Vendor in the
agreed form;
"Vendor's Solicitors" Baker & McKenzie of 14th Floor,
Hutchison House, 10 Harcourt Road,
Central, Hong Kong;
"Warranties" the representations, warranties,
covenants and undertakings of the
Vendor contained or referred to in
Clause 6 and Schedule 3; and
"Warranty Claim" a claim under any indemnity given by,
or in respect of any breach of any
obligation, warranty, representation
or undertaking (including the
Warranties) on the part of the Vendor
under or pursuant to this Agreement.
1.2 Save where the context otherwise requires, words and phrases, the
definitions of which are contained or referred to in the Companies
Ordinance, shall be construed as having the meaning thereby
attributed to them.
1.3 Unless specified, any references, express or implied, to statutes
or statutory provisions shall be construed as references to
Ordinances of Hong Kong as those statutes or provisions are
respectively amended or re-enacted or as their application is
modified from time to time by other provisions (whether before or
after the date hereof) and shall include any statutes or provisions
of which they are re-enactments (whether with or without
modification) and any orders, regulations, instruments or other
subordinate legislation under the relevant statute or statutory
provision. References to sections of consolidating legislation
shall wherever necessary or appropriate in the context be construed
as including references to the sections of the previous legislation
from which the consolidating legislation has been prepared.
1.4 References in this Agreement to Clauses and Schedules are to
clauses in and schedules to this Agreement (unless the context
otherwise requires). The Recitals and Schedules to this Agreement
shall be deemed to form part of this Agreement.
1.5 The Index and Clause Headings are inserted for convenience only and
shall not affect the construction or interpretation of this
Agreement.
1.6 The expressions "the Vendor" and "the Purchaser" shall, where the
context permits, include their respective successors and permitted
assigns.
1.7 References to "persons" shall include bodies corporate,
unincorporated associations and partnerships (whether or not having
separate legal personality).
1.8 References to writing shall include any methods of producing or
reproducing words in a legible and non-transitory form.
6
<PAGE>
1.9 The masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa.
1.10 In construing this Agreement:
1.10.1 the rule known as tile ejusdem generis rule shall not apply
and, accordingly, general words introduced by the word
"other" shall not be given a restrictive meaning by reason
of the fact that they are preceded by words indicating a
particular class of acts, matters or things; and
1.10.2 general words shall not be given a restrictive meaning by
reason of the fact that they are followed by particular
examples intended to be embraced by the general words.
2. Sale of Shares
2.1 Subject to the terms of this Agreement, the Vendor as beneficial
owner shall sell, and the Purchaser shall purchase the Shares free
from Encumbrance together with all rights of any nature which are
now or which may at any time prior to Completion become attached to
the Shares or accrue in respect of the Shares including all
dividends and distributions declared, payable or made in respect of
the Shares prior to Completion.
2.2 The Vendor hereby waives and agrees to procure the waiver of any
restrictions on transfer (including pre-emption rights) which may
exist in relation to the Shares, whether under the articles of
association of the Company or otherwise.
3. Consideration
3.1 The total consideration payable for the Shares shall be US$ Forty-
Two Million (US$42,000,000), which shall be paid to the Vendor as
set forth in Section 5.2.2 hereof.
3.2 On Completion, the Purchaser shall pay the Consideration to the
Vendor or to such other patty as the Vendor may direct in writing,
and any such payment shall be a good and sufficient discharge of
the Purchaser for such sums.
4. [INTENTIONALLY LEFT BLANK]
5. Completion
Completion shall take place on the Completion Date at the offices of the
Vendor's Solicitors, or at such other location as the parties shall
mutually agree when all (but not some only) of the following shall take
place:
5.1 The Vendor shall deliver to the Purchaser:
5.1.1 Instruments of transfer and sold notes in respect of all
the Shares duly executed by the Vendor and the Nominee,
as applicable, in favor of the Purchaser or its nominee
together with the relevant share certificates;
5.1.2 the relevant share certificates (or an express indemnity
in a form satisfactory to the Purchaser in the event of
any found to be missing) in respect of the Shares;
5.1.3 the written resignations of each of the Directors and the
secretary of the Company and in each case acknowledging
under seal that he or it (as the case
7
<PAGE>
may be) has no claim against the Company whether for loss of
office or otherwise;
5.1.4 all the statutory and other books and records of the
Business duly written up to date of the Completion and its
certificate of incorporation, certificate of incorporation
on change of name current business registration certificate
and common seat chops and books of account of the Business
made up to the Completion Date; and
5.1.5 minutes or resolutions of the Board approving the
registration of the Purchaser or its nominee as members of
the Company subject only to the production of duly stamped
and completed-transfers in respect of the Shares;
5.1.6 minutes or resolutions of the Board to cause such persons as
the Purchaser may nominate to be validly appointed as
directors of the Company and accepting the resignations of
the Directors and the Secretary of the Company from their
respective offices;
5.1.7 copies of all authorized bank signature cards given by the
Company;
5.1.8 bank statements dated not earlier than 7 calendar days
before Completion for all bank accounts of the Company
together with cash book balances of the Company as at
Completion and reconciliation statements reconciling such
balances with the bank statements;
5.1.9 all credit cards if any in the name of or for the account of
the Company in the possession of any person resigning from
his office or employment on the Completion Date, or
certification of cancellation confirming that such credit
cards have been cancelled;
5.1.10 the Leases together with the written approval and consent
(in a form and content reasonably acceptable to the
Purchaser) of the landlords of the Properties specified in
Schedule 4 to the change in control of the Company as
contemplated by this Agreement, provided and to the extent
that such consent is required by the terms of the Leases in
respect of those Properties; and
---
5.1.11 certified copies of any powers of attorney under which this
Agreement is executed or other evidence satisfactory to the
Purchaser of the authority of the person signing on the
Vendor's behalf.
5.2 At Completion, the Purchaser shall:
5.2.1 deliver to the Vendor, the Purchaser's Completion Board
Resolutions; and
5.2.2 cause the Consideration in the amount of US$ Forty Two
Million to be paid to the Vendor as follows:
. HK$60 million to be paid by electronic funds
transferred to the account of AT&T Asia/Pacific Group
Ltd. as the repayment of the outstanding intercompany
loan from the Company:
Bank Name/Address: Citibank N.A., 49/F Citibank
Tower,
Citibank Plaza, Central, Hong
Kong
Account Name: AT&T Asia/Pacific Group Ltd.
SWIFT code: CITIHKHX
Bank code: 006
8
<PAGE>
Branch code: 391
Account Number: 08606544
Ref: Repayment of loan from AT&T
EasyLink
Services Asia/Pacific Ltd.
. the balance (i.e. US$42 million minus HK$60 million),
which is US$4,278,986 based on the exchange rate of 1
USD to 7.771 HKD as posted in the Asian Wall Street
Journal on November 30, 1999, to be paid by electronic
funds transferred to the Vendor's account at Chase
Manhattan Bank New York, New York, f/a AT&T Comm. Svc.
Int'l Inc., a/c #910-2763647, CHIPS No. 0002, Ref:
Sales Proceeds from EasyLink HK
or in such other manner as the Vendor may direct, and
Purchaser shall deliver written notice and remittance
instructions issued by the Purchaser's remittance bank to
Vendor; and
5.2.3 deliver to the Vendor certified copies of any powers of
attorney under which this Agreement is executed or other
evidence satisfactory to the Vendor of the authority of the
person signing on the Purchaser's behalf.
5.3 If for any reason the provisions of clause 5.1 are not fully complied
with, the Purchaser may elect (in addition to and without prejudice to
all other rights or remedies available to it) to fix a new date for
Completion.
5.4 The bought and sold notes and instruments of transfer referred to in
sub-clause 5.1.1 shall be submitted to the Stamp Office for
adjudication by the Purchaser's Solicitors as soon as practicable
after Completion (but in any event within two working days of
Completion). The Vendor will, at Completion, provide to the
Purchaser's Solicitors certified true copies of the memorandum and
articles of association of the Company, the Accounts of the Company
and will, following Completion, promptly provide to the Purchaser's
Solicitors any other documentation which are required by the Stamp
Office for the adjudication of the stamp duty payable for this
Transaction. Each of the Purchaser and the Vendor undertakes to the
other that it will provide to the Purchaser's Solicitors a cheque in
favor of "The Government of the Hong Kong Special Administrative
Region" equal to one half of the total stamp duty adjudged payable by
the Stamp Office immediately on demand by the Purchaser's Solicitors.
6. Vendor's Warranties, Covenants and Indemnities
6.1 The Vendor represents, warrants and undertakes to and with the
Purchaser that:
6.1.1 save as disclosed in the Disclosure Letter, each of the
Warranties set out in Schedule 3 is true and accurate in all
material respects and will be true and accurate in all
material respects up to and including the Completion Date;
6.1.2 to the best of Vendor's knowledge, the information contained
in the Disclosure Letter is accurate in all material
respects;
6.1.3 each of the Warranties shall be construed as a separate and
independent Warranty;
6.1.4 the Warranties shall survive Completion and the rights and
remedies of the Purchaser in respect of any material breach
of any of the Warranties shall continue to subsist for a
period of one year following Completion;
9
<PAGE>
6.1.5 the Warranties shall not be deemed in any way modified or
discharged by reason of any investigation made or to be made
by or on behalf of the Purchaser or by reason of any
information relating to the Company of which the Purchaser
or any of its professional advisers has knowledge (actual,
implied or constructive) except only such information as is
disclosed in the Disclosure Letter.
6.2 To the extent not performed prior to Completion, as certified by the
Vendor to the Purchaser in writing, the Vendor covenants that:
6.2.1 for a period of 45 days following Completion, the Vendor
will pay any fees owing to iPass with respect to those
Subscribers and users who access the iPass network through
the att.hk.net domain, and the Vendor will subsequently
invoice the Company for such fees and provide the Company
with billing information so that the Company can recover
such costs from the Subscribers and users, provided that the
Company shall pay forthwith to the Vendor all such fees by
the end of the said 45 day period;
6.2.2 upon delivery of evidence satisfactory to the Vendor that
the Purchaser already has a valid APNIC membership, Vendor
will issue a notice to APNIC advising that all allocated
Hong Kong address space and Hong Kong AS numbers and rights
thereto, as identified in Schedule 6.2.2, will be assigned
to the Purchaser at no additional cost to the Purchaser;
6.2.3 the Company has entered into an arm's length agreement with
GCSI for the provision of services to the Apple Daily Ltd.
customer. The Company has entered into an agreement with
GCSI for facilities management at the Geary Street site for
the Apple Daily Ltd. customer. Copies of both agreements
have been made available to the Purchaser;
6.2.4 prior to the Completion Date, the Vendor will cause the
Company, at its expense, to cancel any agreements with
service providers and vendors which the Purchaser identifies
to the Vendor on Schedule 6.2.4 hereto;
6.2.5 the Vendor will at its own expense notify Lemon that it must
cease using the AT&T logos, service marks and trademarks and
ensure that this Transaction and the requirements placed
upon the Company as a result of this Transaction do not
disrupt the features, performance, or overall quality of
MySite or otherwise cause a material adverse effect on the
work regularly performed by Lemon for MySite to become more
difficult or costly for Lemon;
6.2.6 the Company has entered into an AT&T International IP
Services Agreement dated September 28, 1999, as amended,
with GCSI, a copy of which has been made available to the
Purchaser. The Vendor will procure that GCSI does not
increase the price under this Agreement by more than 10% per
annum, over the next three years;
6.2.7 the Vendor will assist the Company in exercising an option,
pursuant to the Tenancy Agreement of Room 381, 3/rd/ Floor,
Telecom House attached in Schedule 4, on an additional 4000
square feet of space in Telecom House, such that the Company
will be able to secure tenancy rights to all of that space
after Completion. In the event that Completion does not
occur, for whatever reason, and the Vendor has exercised the
option at the direction of the Purchaser, the Purchaser
solely will assume any rights to tenancy, subject to the
landlord's consent, and solely will assume any continuing
obligations under the Tenancy Agreement with respect to the
additional 4000 square feet;
10
<PAGE>
6.2.8 the Vendor will cause the Company, at its own expense, to
cancel those circuit contracts listed on Schedule 6.2.8
hereto under the heading "IPLC to be terminated," on or
before the Completion Date;
6.2.9 the Vendor has procured or will procure an EasyLink Services
Sales Alliance Agreement between GCSI and the Company,
substantially in the form attached hereto as Schedule 6.2.9
(the "ELS Sales Alliance Agreement")The Vendor shall provide
that the migration from a Hong Kong node-based systems to a
US-based system and that satisfactory testing of this new
system is accomplished before Completion;
6.2.10 the Vendor will, at its own expense, inform each of its
dealers to return or destroy, and certify destruction of,
all marketing and promotional materials containing the AT&T
or EasyLink logos, service marks and trade marks. From the
date of this Agreement until Completion and provided that
the Purchaser so instructs the Vendor to do so in writing
the Vendor will cease all contact and activity with current
or prospective dealers relating to the Business, as defined
in the Dealership Agreement. At the Purchaser's option, and
at the expense of the Vendor, the Vendor will terminate the
dealership agreements that the Purchaser identifies in
writing on Schedule 6.2.10 hereto. Any dealership agreements
that continue after the Completion Date shall become an
obligation of the Company and the Purchaser;
6.2.11 the Vendor has arranged or will arrange for AT&T Global
Clearinghouse to enter into an arm's length agreement with
the Company such that the Company will enjoy a relationship
with the AT&T Global Clearinghouse which is substantially
similar to that previously enjoyed by the Vendor and shall
ensure that the brokerage fees paid by the Company to AT&T
Global Clearinghouse will be identical to those paid by the
Vendor before Completion for a period not to exceed one year
after Completion;
6.2.12 the Vendor has arranged or will arrange for the AT&T
Asia/Pacific Group Ltd. to enter into an arm's length
licensing agreement with the Company such that the Company
can obtain and utilize a MIFS license for a period of one
year from the Completion Date;
6.2.13 neither the Vendor nor any Affiliated Company in Hong Kong,
other than any Concert entity, will solicit the employment
of any of the employees of the Business as listed in the
document headed "Current Staff Listing" annexed to the
Disclosure Letter for a period of twelve months after
Completion;
6.2.14 contemporaneous with Completion, AT&T Asia/Pacific Group
Ltd. will enter into an agreement with the Company,
substantially in the form attached hereto as Schedule
6.2.14, for interim services to be provided by AT&T
Asia/Pacific Group Ltd. to the Company for a period of six
months after Completion;
6.2.15 the Vendor will, at its expense, put in place the retention
program described in Schedule 6.2.15 to ensure retention of
all permanent employees of the Company for a period of
twelve months following Completion;
6.2.16 the Vendor will migrate the www.att.net.hk,
www.attmysite.com and www.mis.att.net.hk homes pages, and
user access ID's and e-mail ID's within 180 days of
Completion to a domain identified to the Vendor by the
Purchaser according to a schedule and specifications as
described in Schedule 6.2.16;
11
<PAGE>
6.2.17 the Vendor will deliver to Purchaser duly executed deeds of
release, or any other appropriate document, releasing the
Company from any liability whatsoever (actual or
contingent,) which may be owing to any Affiliated Company by
the Company as of the Completion Date, except for:
liabilities incurred in the ordinary course of business,
ongoing liabilities arising from those contracts which are
intended to continue after Completion or the HK$60 million
owed by the Company to AT&T Asia/Pacific Group Ltd. which
will be paid off on the Completion Date;
6.2.18 the Vendor will deliver all material documents relevant to
the operation of the Business. To the extent that the Vendor
does not deliver such documents to Purchaser at (completion,
Vendor shall make such documents available to the Purchaser
in accordance with Section 11 hereof,
6.3 Subject to Sections 6.4 and 6.5 below, in the event of any breach or
non-fulfillment of any of the Warranties resulting in either:
------
6.3.1 the value of any of the Company's assets being or becoming
less than it would have been had the relevant circumstances
been as so warranted; or
6.3.2 the Company having incurred or incurring any liability which
it would not have incurred had the relevant circumstances
been as so warranted or had the Vendor performed its
obligations as covenanted;
then the Purchaser shall submit a written request to Vendor for
payment of direct damages resulting from any breach of the Warranties,
and the Vendor agrees:
6.3.3 to respond to such request within 15 calendar days of
receipt thereof with payment, or, in the event that Vendor
disputes such payment request, the parties agree to resolve
such dispute through direct negotiation between
representatives of each of the parties, each of whom has
decision-making authority. If the conflict persists for more
than 30 calendar days from the date in which the matter is
first raised, the parties the parties agree to submit the
dispute to a sole mediator selected by the parties or, at
any time at the option of a party, to conciliation pursuant
to the Conciliation Rules of the United Nations Commission
on International Trade Law ("UNCITRAL"); and
6.3.4 to indemnify and keep indemnified the Purchaser in full from
and against all liabilities, losses, damages, fines,
penalties, claims, costs and expenses (including legal costs
and expenses on a full indemnity basis) incurred by the
Purchaser and arising, whether directly or indirectly, as a
consequence of any breach by the Vendor of any of its
obligations, commitments, undertakings, agreements, any
Warranties, indemnities and covenants under or pursuant to
this Agreement;
6.3.5 In the event that the parties cannot agree on the value of
the change to Company's assets under Section 6.3. 1, the
parties agree to submit the dispute to a sole mediator
selected by the parties or, at any time at the option of a
party, to conciliation pursuant to the Conciliation Rules of
the United Nations Commission on International Trade Law
("UNCITRAL"), with costs to be shared between the parties.
6.4 In the absence of fraud by the Vendor, the liability of the Vendor in
respect of all Warranty Claims shall:
12
<PAGE>
6.4.1 be limited to a maximum aggregate amount of US$ Four Million
($4,000,000) paid herein; and
6.4.2 cease one (1) year after the date hereof.
6.5 The Vendor shall not be liable for any Warranty Claim unless the
liability of the Vendor in respect of any such Warranty Claim or
claims exceeds US$ Fifty Thousand ($50,000) in aggregate, provided
however that no individual claim shall be less than US$ Ten Thousand
($10,000).
6.6 The Vendor shall not be liable for any Warranty Claim in respect of
any fact, matter, event or circumstances to the extent that:
6.6.1 such fact, matter, event or circumstance has been disclosed in
the Disclosure Letter; or
6.6.2 allowance, provision or reserve has been made for such fact,
matter, event or circumstance in the Accounts or to the extent
that payment or discharge of the relevant matter has been
taken into account in the Accounts or to the extent that such
matter was specifically referred to in the Accounts;
Nothing in this Agreement shall in any way restrict or limit the general
obligation at law of the Purchaser to mitigate any loss or damage which it
may suffer in consequence of any fact, matter, event or circumstance giving
rise to a Warranty Claim.
7. Retirement Scheme
The Retirement Scheme operated in respect of the employees of the Company
shall be dealt with in accordance with Schedule 8.
8. Purchaser's Warranties, Covenants and Indemnity
8.1 The Purchaser represents, warrants and undertakes to and with the
Vendor that:
8.1.1 the Purchaser has been duly incorporated and is validly
existing and no order has been made or petition presented or
resolution passed for the winding up of the Purchaser and no
distress, execution or other process has been levied on any of
its assets. The Purchaser is not insolvent or unable to pay
its debts for the purposes of Section 178 of the Companies
Ordinance or any applicable law and no receiver or receiver
and manager has been appointed by any person of its business
or assets or any part thereof and no power to make any such
appointment has arisen;
8.1.2 the Purchaser has all the requisite corporate power to
execute, deliver and perform, and has taken all necessary
corporate or other action to authorize the execution, delivery
and performance of this Agreement. This Agreement constitutes
a legal, valid and binding obligation of the Purchaser
enforceable in accordance with its terms; and
8.1.3 the Purchaser shall procure that after the Completion with
respect to each contract, commitment, arrangement and
understanding (including but not limited to those in relation
to customers, suppliers, employees or leases) to which the
Company is party or by which it is bound as of the date hereof
and after Completion:
13
<PAGE>
8.1.3.1 the (company shall duly perform and comply with all
material respects of each of its obligations
thereunder; and
8.1.3.2 there shall be no material delay, negligence or other
default on the part of the Company of each of its
obligations thereunder.
8.2 The Purchaser covenants that after Completion:
8.2.1 the Company, and the Purchaser and all their affiliated
companies shall not infringe on any of the trade names,
trademarks, service marks or any other intellectual property
rights of the Vendor or of any of the Affiliated Companies;
8.2.2 except to the extent provided in other agreements between the
Company and the Affiliated Companies, the Company and the
Purchaser and all their affiliated companies shall not as of
the date hereof in relation to any trade, business or company
use a name, trademark or service mark, including the word
"AT&T" or "EasyLink" or their Chinese equivalent or any word
or symbol confusingly similar thereto in such a way as to be
capable of or likely to be confused with the name or any trade
name of the Vendor or of any of the Affiliated Companies and
the Company and the Purchaser and all their affiliated
companies shall procure that no such name, trademark or
service mark shall be used by any person, firm or company with
which the Company has a contractual relationship. The Company
and the Purchaser specifically undertake to remove the words
"AT&T" and "EasyLink" from the Company name by applying to the
Hong Kong Companies Registry within 5 business days after the
Completion Date; and
8.2.3 the Purchaser shall procure that the Company shall, within 60
days from Completion remove and cease use of and remove any
AT&T or EasyLink logos, service marks or trademarks from all
materials of the Company, including advertising, marketing and
promotional materials, and the MySite website, customer
invoices, billing materials and stationery, except to the
extent permitted by the ELS Sales Alliance Agreement.
8.3 The Purchaser shall indemnify Vendor and keep indemnified the Vendor
in full from and against any and all liabilities, losses, damages,
fines, penalties, claims, costs and expenses (including legal costs
and expenses on a full indemnity basis) incurred by the Vendor and
arising, whether directly or indirectly, after the Completion out of:
8.3.1 each contract, commitment, arrangement and understanding
(including but not limited to those in relation to customers,
suppliers, employees or leases) to which the Company is party
or by which it is bound as of the Completion Date;
notwithstanding the above, this obligation shall not apply
with respect to claims that arise solely from events which
occur prior to the Completion Date; or
8.3.2 the breach, inaccuracy or failure by the Company to fulfill
any of its obligations under any of the clauses or subclauses
of this Clause 8.
9. Restriction on Announcements
9.1 Each Party undertakes that it will not (save as required by law or by
any securities exchange or any supervisory or regulatory body to whose
rules it is subject) make any announcement in connection with this
Agreement unless the other shall have given its consent in writing to
such announcement (which consent may not be unreasonably withheld or
delayed and may be given either generally or in a specific case or
cases and
14
<PAGE>
may be subject to conditions). Notwithstanding the above, in no event
will either party disclose the Consideration or the terms of this
Agreement under any circumstances.
10. Further Assurance and Attorney
10.1 Upon and after Completion, the Parties shall each at the request of
the other do and execute or procure to be done and executed all such
acts, deeds, documents and things as may be necessary to give full
effect to this Agreement.
10.2 In relation to the Company, the Vendor and the Purchaser shall
procure the convening of ail meetings, the giving of all waivers and
consents and the passing of all resolutions as are necessary under
the Companies Ordinance (or other applicable legislation in any
jurisdiction), its articles of association or any agreement or
obligations affecting it to give effect to this Agreement.
10.3 For so long after Completion as it (or its nominee) remains the
registered holder of any of the Shares, the Vendor shall hold (or
procure the holding of) them and any distributions, property and
rights deriving from them in trust for the Purchaser and shall deal
(or procure the dealing) with the Shares and any distributions,
property and rights deriving from them as the Purchaser directs; in
particular, the Vendor shall exercise (or procure the exercise of) an
instrument of proxy or other document which enables the Purchaser or
its representative to attend and vote at any meetings of the Company
and the Subsidiaries.
11. Information
11.1 For purposes of responding to any enquiry from any regulatory or tax
authorities, and to any legal proceedings, the Vendor shall, upon
presentation of evidence reasonably satisfactory to the Vendor, for
the lesser of seven (7) years or the relevant Hong Kong statute of
limitations following the date of each relevant event, provide or
procure to be provided to the Purchaser all such information in its
possession or under its control as the Purchaser shall from time to
time reasonably require relating to the business and affairs of the
Company and in any case where such information is not the exclusive
property of the Company will give or use reasonable efforts procure
to be given to the Purchaser, its directors and agents access to such
information and will permit the Purchaser to take copies of the same
provided always that the disclosure of such information shall not in
any way operate to modify or discharge any of the Warranties or
otherwise to limit the liability of the Vendor under this Agreement,
provided that all such information shall be subject to existing
confidentiality and other relevant existing obligations.
12. Cost
12.1 Each Party to this Agreement shall pay its own costs of and
incidental to this Agreement and the sale and purchase hereby agreed
to be made.
13. General
13.1 This Agreement shall be binding upon and enure for the benefit of the
successors and permitted assigns of the Parties.
13.2 This Agreement (together with any documents referred to herein or
executed contemporaneously by the Parties in connection herewith)
constitutes the whole agreement between the Parties hereto and
supersedes and renders null and void any previous conflicting
agreements or arrangements between them relating to the subject
matter hereof, it is expressly declared that no variations hereof
shall be effective unless made in writing signed by duly authorized
representatives of the Parties.
15
<PAGE>
13.3 All of the provisions of this Agreement shall remain in full force
and effect notwithstanding Completion (except insofar as they set out
obligations which have been fully performed at Completion).
13.4 No failure of a Party to exercise, and no delay or forbearance in
exercising, any right or remedy in respect of any provision of this
Agreement shall operate as a waiver of such right or remedy.
13.5 If any provision or part of a provision of this Agreement shall be,
or be found by any authority or court of competent jurisdiction to
be, invalid or unenforceable, such invalidity or unenforceability
shall not affect the other provisions or parts of such provisions of
this Agreement, all of which shall remain in full force and effect.
13.6 This Agreement may be executed in one or more counterparts, and by
the Parties on separate counterparts, but shall not be effective
until each Party has executed at least one counterpart and each such
counterpart shall constitute an original of this Agreement but all
the counterparts shall together constitute one and the same
instrument.
14. Notices
Each notice, demand or other communication given under this Agreement shall
be in writing and delivered or sent to the relevant Party at its address or
fax number set out below (or such other address or fax number as the
addressee has by five (5) days' prior written notice specified to the other
Party):
To the Vendor: AT&T Communications Services International, Inc.
412 Mount Kemble Avenue
Morristown, New Jersey, U.S.A.
Attention: Mr. Michael Berg
Fax Number: 908-221-4408
To the Purchaser: AUnet Corporation
2000 Alameda De Las Pulgas
Suite 125
San Mateo, CA 94403
Attention: Mr. Jon Beizer
Fax Number: 650-524-1799
Any notice, demand or other communication so addressed to the relevant
Party shall be deemed to have been delivered (a) if given or made by
letter, when actually delivered to the relevant address; and (b) if given
or made by fax when dispatched with a confirmed transmission report.
15. Time Square Offices
The Purchaser shall procure that the Company will re-locate from the
Company's current Times Square offices within six months from the
Completion Date. Notwithstanding the above, if AT&T Asia Pacific Group Ltd.
relocates for any reason, the Purchaser shall procure that the Company will
(unless it has made independent arrangements with the landlord of the
Company's Times Square offices) also relocate at the same time or before
AT&T Asia/Pacific Group Ltd. AT&T Asia Pacific hereby covenants that it
will not relocate from its current Time Square offices before 31/st/ March
2000.
16
<PAGE>
16. Governing Law and Submission to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of Hong Kong and the Parties hereto irrevocably submit to the non-
exclusive jurisdiction of the courts of Hong Kong for the purpose of
enforcing any claim arising hereunder.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the date
appearing at the head hereof.
EXECUTED BY:
Signature: /s/ Alex Ng
---------------------------------
Name (Print): Alex Ng
---------------------------------
On behalf of: AT&T Communications Services International Inc.
Signature: /s/ JoAnn Patrick-Ezzell
---------------------------------
Name (Print): JoAnn Patrick-Ezzell
---------------------------------
On behalf of: AUnet Corporation
17
<PAGE>
SCHEDULE I
----------
Details of the Company
----------------------
THE COMPANY
- ------------
1. Registered Number: 213190
2. Address of registered office: 30/th/ Floor, Shell Tower, Times
Square, 1 Matheson Street,
Causeway Bay, Hong Kong
3. Date and place of incorporation: 8 April 1988, Hong Kong
4. Authorized share capital: HK$194,115,330.00 divided into
19,406,633 Class "A" ordinary
shares and 4,900 Class "B"
ordinary shares of HK$10.00
each.
5. Issued share capital: HK$194,115,330.00 divided into
19,406,633 Class "A" ordinary
shares and 4,900 Class "B"
ordinary shares of HK$10.00
each.
6. Directors: NG Wing Chuen
TAY Beng Yen
CHUNG Lena Wan
7. Secretary: Gytho Company Limited
8. Annual Accounting Date: 31 December
9. Auditors: PricewaterhouseCoopers
<PAGE>
SCHEDULE 2
----------
Vendor's Individuals with Knowledge
Alex Ng
Timothy Lo
John Mulligan
Grace Tay
Francis Lim
Trini Chan
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
IASIAWORKS, INC.
(Pursuant to Sections 242 and 245 of the Delaware General Corporations Law)
Jonathan F. Beizer and Warren T. Lazarow certify that:
A. The name of this Corporation is iAsiaWorks, Inc., which was
incorporated in the State of Delaware on March 28, 2000.
B. They are the President and Secretary, respectively, of iAsiaWorks,
Inc., a Delaware corporation (the "Corporation").
C. The Certificate of Incorporation (the "Articles") of this Corporation
is amended and restated to read as follows:
ARTICLE I.
The name of this corporation is iAsiaWorks, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III.
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV.
This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock, $0.001 par value and Preferred Stock,
$0.001 par value. The total number of shares of Common Stock the Corporation
shall have authority to issue is 109,100,000 and the total number of shares of
Preferred Stock the Corporation shall have authority to issue is 83,100,000.
Preferred Stock shall be divided into five series.
The first series of Preferred Stock shall be designated Series A Preferred
Stock (the "Series A Preferred"), shall consist of 13,500,000 shares and shall
have the rights, preferences, privileges and restrictions set forth in this
Article IV. The second series of Preferred Stock shall be designated Series Al
Preferred Stock (the "Series A1 Preferred"), shall consist of 1,010,000 shares
and shall have the rights, preferences, privileges and restrictions set forth in
this Article IV. The third series of Preferred Stock shall be designated Series
B preferred stock (the "Series B Preferred"), shall consist of 7,842,501 shares
and shall have the rights, preferences, privileges
<PAGE>
and restrictions set forth in this Article IV. The fourth series of Preferred
Stock shall be designated Series C Preferred Stock (the "Series C Preferred"),
shall consist of 10,000,000 shares and shall have the rights, preferences,
privileges and restrictions set forth in this Article III. The fifth series of
preferred stock shall be designated Series D Preferred Stock (the "Series D
Preferred"), shall consist of 46,100,000 shares and shall have the rights,
preferences, privileges and restrictions set forth in this Article IV.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to per unit conversion of Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or
imposed upon the respective classes of Common Stock and Preferred Stock or the
holders thereof are as follows:
Section 1. Dividends. The holders of outstanding shares of Preferred
---------
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of any assets at the time legally available therefor dividends at
the rate of (i) $0.015 per annum for each share of Series A Preferred held by
them, (ii) $0.03 per annum for each share of Series A1 Preferred held by them,
(iii) $0.09 per annum for each share of Series B Preferred held by them, (iv)
$0.06 per annum for each share of Series C Preferred held by them and (v) $0.12
per annum for each share of Series D Preferred held by them, payable in
preference and priority to any payment of any dividend or other distribution on
Common Stock of the Corporation. Such dividends may be paid as and when declared
by the Board of Directors and shall not be cumulative. No dividends or other
distributions shall be made with respect to the Series C Preferred until all
declared and unpaid dividends on the Series D Preferred have been paid or set
aside for payment. No dividends or other distributions shall be made with
respect to Series B Preferred until all declared and unpaid dividends on Series
D Preferred and Series C Preferred have been paid or set apart for payment. No
dividends or other distributions shall be made with respect to Series A
Preferred or Series A-l Preferred until all declared and unpaid dividends on
Series D Preferred, Series C Preferred and Series B Preferred have been paid or
set apart for payment. No dividends or other distributions shall be made with
respect to Common Stock until all declared and unpaid dividends on Series D
Preferred, Series C Preferred, Series B Preferred, Series A Preferred and Series
A-l Preferred have been paid or set apart for payment.
For purposes of this Section 1, unless the context otherwise requires, a
"distribution" shall mean the transfer of cash or other property without
consideration whether by way of dividend or otherwise, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
issued to or held by employees, officers, directors or consultants of the
Corporation or its subsidiaries upon termination of their employment or services
pursuant to agreements providing for the right of said repurchase) for cash or
property.
As authorized by Section 402.5(c) of the California Corporations Code, the
provisions of Sections 502 and 503 of the California Corporations Code shall not
apply with respect to repurchases by the Corporation of shares of Common Stock
issued to or held by employees,
<PAGE>
officers, directors or consultants of the Corporation or its subsidiaries upon
termination of their employment or services pursuant to agreements providing for
the right of said repurchase.
Dividends may be paid on Common Stock as and when declared by the Board of
Directors, subject to the prior dividend rights of Preferred Stock. The
aggregate amount per share of dividends and other distributions made with
respect to Common Stock in any fiscal year shall not, however, exceed the amount
of dividends per share (on an as-converted into Common Stock basis) and other
distributions made with respect to any of the Series A Preferred, Series Al
Preferred, Series B Preferred, Series C Preferred or Series D Preferred in such
fiscal year.
Section 2. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution, or winding up of the Corporation (or the deemed occurrence of such
event pursuant to subsection 2.3 below), either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
2.1 Amount of Preferred Liquidation Preference. The holders of the
------------------------------------------
Series D Preferred shall be entitled to receive upon any liquidation,
dissolution or winding up, prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of Series C
Preferred, Series B Preferred, Series Al Preferred, Series A Preferred or Common
by reason of their ownership of such stock, an amount equal to the sum of (1)
the amount of two dollars and three cents ($2.03) per share for each share of
Series D Preferred then held by them, subject to adjustment in the event of any
stock dividend, stock split, combination, reorganization, recapitalization or
other similar event involving a change in the capital structure of the Series D
Preferred (the "Series D Original Purchase Price"); plus (2) an amount equal to
all declared but unpaid dividends on the Series D Preferred (collectively, the
"Series D Preferential Amount").
If the assets and funds thus available for distribution among the holders
of the Series D Preferred shall be insufficient to permit the full payment to
such holders of the Series D Preferential Amount, then the entire amount of the
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series D Preferred in such a manner
that the amount to be distributed to each holder of Series D Preferred shall
equal the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the number of shares of Series D Preferred then held
by the holder and the denominator of which shall be the total then outstanding
number of shares of Series D Preferred.
After payment in full of the Series D Preferential Amount, the holders of
the Series C Preferred shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation to the
holders of the Series B Preferred, Series A Preferred, Series Al Preferred or
Common by reason of their ownership of such stock, an amount equal to the sum of
(1) the amount of one dollar ($1.00) per share for each share of Series C
Preferred then held by them, subject to adjustment in the event of any stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Series C Preferred (the "Series C Original Purchase
<PAGE>
Price"), plus (2) an amount equal to all declared but unpaid dividends on the
Series C Preferred (collectively, the "Series C Preferential Amount").
If the assets and funds thus available for distribution among the holders
of the Series C Preferred shall be insufficient to permit the payment to such
holders of the Series C Preferential Amount, then the entire amount of the
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series C Preferred in such a manner
that the amount to be distributed to each holder of Series C Preferred shall
equal the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the number of shares of Series C Preferred then held
by the holder and the denominator of which shall be the total then outstanding
number of shares of Series C Preferred.
After payment in full of the Series D Preferential Amount and the Series C
Preferential Amount, the holders of the Series B Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Series A Preferred,
Series Al Preferred or Common by reason of their ownership of such stock, an
amount equal to the sum of (1) the amount of one dollar and fifty cents ($1.50)
per share for each share of Series B Preferred then held by them, subject to
adjustment in the event of any stock dividend, stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the capital structure of the Series B Preferred (the
"Series B Original Purchase Price"), plus (2) an amount equal to all declared
but unpaid dividends on the Series B Preferred (collectively, the "Series B
Preferential Amount").
If the assets and funds thus available for distribution among the holders
of the Series B Preferred shall be insufficient to permit the payment to such
holders of the Series B Preferential Amount, then the entire amount of the
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series B Preferred in such a manner
that the amount to be distributed to each holder of Series B Preferred shall
equal the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the number of shares of Series B Preferred then held
by the holder and the denominator of which shall be the total then outstanding
number of shares of Series B Preferred.
After payment in full of the Series D Preferential Amount, the Series C
Preferential Amount and the Series B Preferential Amount, the holders of the
Series A Preferred and Series Al Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common an amount equal to the sum of (1) the
amount of twenty-five cents ($0.25) per share for each share of Series A
Preferred then held by them and the amount of fifty cents ($0.50) per share for
each share of Series Al Preferred then held by them, subject to adjustment in
the event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in
the capital structure of the Series A Preferred or Series Al Preferred (the
"Series A Original Purchase Price" and "Series A1 Original Purchase Price,"
respectively), plus (2) an amount equal to all declared but unpaid dividends on
the Series A Preferred or Series Al
<PAGE>
Preferred, as the case may be (collectively, the "Series A and Series Al
Preferential Amounts").
If the assets and funds thus available for distribution among the holders
of the Series A Preferred and Series A1 Preferred shall be insufficient to
permit the payment to such holders of the Series A and Series A1 Preferential
Amounts, then the entire amount of the assets and funds of the Corporation
legally available for distribution to the holders of Series A Preferred and
Series A1 Preferred shall be distributed ratably among the holders of the Series
A Preferred and Series A1 Preferred in such a manner that the amount to be
distributed to each holder of Series A Preferred and Series A1 Preferred shall
equal the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution to the holders of Series A
Preferred and Series A1 Preferred hereunder by a fraction, the numerator of
which shall be the sum of the products obtained by multiplying the number of
shares of Series A Preferred and Series A1 Preferred, then held by the holder by
the respective liquidation preference of such respective series of Preferred
Stock, and the denominator of which shall be sum of the products obtained by
multiplying the total then outstanding number of shares of Series A Preferred
and Series A1 Preferred by the respective liquidation preference of such
respective series of Preferred Stock.
2.2 Distribution after Payment of Preferred Liquidation Preference.
--------------------------------------------------------------
After payment has been made to the holders of Preferred Stock of the full
preferential amounts set forth in Section 2.1 above, the entire remaining assets
and funds of the Corporation legally available for distribution, if any, shall
be distributed ratably among the holders of then outstanding Common Stock in a
manner such that the amount distributed to each holder of Common Stock shall
equal the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution pursuant to this Section 2.2 by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock then held by the holder, and the denominator of which shall be the
sum of the total number of shares of Common Stock then outstanding.
2.3 Deemed Liquidation. For purposes of this Section 2 and upon the
------------------
vote and written consent of at least a majority of the holders of outstanding
shares of Preferred Stock, a merger or consolidation of the Corporation with or
into any other corporation or corporations (except where a majority of the
outstanding equity securities of the surviving corporation immediately after the
merger or consolidation (in respect of outstanding shares of capital stock of
the Corporation immediately prior to the merger or consolidation) is held by
persons who were shareholders of this Corporation immediately prior to the
merger or consolidation), or a sale or other transfer of all or substantially
all of the assets of the Corporation (or any series of related transactions
resulting in the sale or other transfer of all or substantially all of the
assets of the Corporation), shall be treated as a liquidation, dissolution or
winding up.
2.4 Value of Deemed Liquidation. In any of the events specified in
---------------------------
subsection 2.3, if the consideration received by this Corporation is other than
cash, its value will be deemed its fair market value. Any securities shall be
valued as follows:
<PAGE>
(A) Securities not subject to investment letter or other similar
restrictions on free marketability:
(i) If traded on a securities exchange or The Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange or market over the thirty-day period
ending three (3) days prior to the closing;
(ii) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(iii) If there is no active public market, the value shall
be the fair market value thereof, as determined by the Board of Directors in
good faith.
(B) Securities subject to investment letter or other
restrictions on free marketability (other than restrictions arising solely by
virtue of a shareholder's status as an affiliate or former affiliate): the value
shall reflect an appropriate discount from the market value determined as in
subsections 2(d) (i) (A), (B) or (C) to reflect the approximate fair market
value thereof, as determined by the Board of Directors in good faith.
2.5 Consent. Each holder of an outstanding share of Preferred Stock
-------
shall be deemed to have consented, for purposes of Sections 502 and 503 of the
General Corporation Law of California, to distributions made by the Corporation
in connection with the repurchase of shares of Common Stock issued to or held by
employees or consultants upon termination of their employment or services
pursuant to agreements between the Corporation and such persons providing for
the Corporation's right of said repurchase.
Section 3. Voting Rights. Except as otherwise required by law, each share
-------------
of Common Stock issued and outstanding shall have one vote and each share of
Preferred Stock issued and outstanding shall have the number of votes equal to
the number of shares of Common Stock into which such share of the Preferred
Stock could be converted at the record date for determination of the
shareholders entitled to vote on such matters, or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not
separately as a class. Holders of Common Stock and Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the Corporation, except as otherwise provided herein.
Section 4. Redemption. The Preferred Stock shall not be redeemable.
----------
Section 5. Conversion. The holders of the Series A Preferred, Series A1
----------
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
have the following applicable conversion rights (the "Conversion Rights"):
5.1 Right to Convert. Each share of Series A Preferred, Series A1
----------------
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
be convertible, without the
<PAGE>
payment of any additional consideration by the holder thereof, at the option of
the holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for Preferred Stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing $0.25 by the Series A Conversion Price, $0.50 by the Series A1
Conversion Price, $1.50 by the Series B Conversion Price, $1.00 by the Series C
Conversion Price and $2.03 by the Series D Conversion Price, determined in each
case as hereinafter provided, in effect at the time of conversion. Subject to
adjustment after the date of these Amended and Restated Articles as provided
herein, the price at which shares of Common Stock shall be deliverable upon
conversion of shares of Series A Preferred, without the payment of any
additional consideration by the holders thereof, shall be $0.25 per share of
Common Stock (the "Series A Conversion Price"), the price at which shares of
Common Stock shall be deliverable upon conversion of shares of Series A1
Preferred, without payment of any additional consideration by the holders
thereof, shall be $0.50 per share of Common Stock (the "Series A1 Conversion
Price"), the price at which shares of Common Stock shall be deliverable upon
conversion of shares of Series B Preferred, without payment of any additional
consideration by the holders thereof, shall be $1.06124829 per share of Common
Stock (the "Series B Conversion Price"), the price at which shares of Common
Stock shall be deliverable upon conversion of shares of Series C Preferred,
without payment of any additional consideration by the holders thereof, shall be
$1.00 per share of Common Stock (the "Series C Conversion Price"), and the price
at which shares of Common Stock shall be deliverable upon conversion of shares
of Series D Preferred, without payment of any additional consideration by the
holders thereof, shall be $2.03 per share of Common Stock (the "Series D
Conversion Price" and referred to collectively with the Series A Conversion
Price, the Series A1 Conversion Price, the Series B Conversion Price and the
Series C Conversion Price as the "Conversion Prices"). Upon conversion, all
declared but unpaid dividends on Preferred Stock shall be paid either in cash or
in shares of Common Stock of the Corporation, at the election of the
Corporation, wherein the shares of Common Stock shall be valued at the fair
market value at the time of such conversion, as determined by the Board of
Directors of the Corporation.
5.2 Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at its then effective
Conversion Price upon the earlier of (1) the date specified by written consent
or agreement of the holders of a majority of the shares of Preferred Stock then
outstanding, or (2) the closing of a firm commitment 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 to the
public involving an aggregate offering price to the public of not less than
$20,000,000 for the account of the Corporation, at a per share offering price of
$6.50 or more (subject to adjustment in the event of any stock dividend, stock
split, combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the capital structure of the Preferred
Stock) (a "Qualified Public Offering"). In the event of the automatic conversion
of Preferred Stock upon a public offering as aforesaid, the person(s) entitled
to receive Common Stock issuable upon such conversion of Preferred Stock shall
not be deemed to have converted such Preferred Stock until immediately prior to
the closing of such sale of securities.
<PAGE>
5.3 Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled (after aggregating all of
any fractional shares to which such holder is entitled by virtue of all
Preferred Stock held by the holder), the Corporation at its election shall
either (i) pay cash equal to such fraction multiplied by the then effective
Conversion Price, or (ii) issue one whole share of Common Stock for each
fractional share to which the holder would otherwise be entitled.
Before any holder of Preferred Stock shall be entitled to convert the same
into full shares of Common Stock pursuant to Section 5.1 above, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for Preferred Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same; provided, however, that, in the event of an
-------- -------
automatic conversion pursuant to Section 5.2, the outstanding shares of
Preferred Stock shall be converted automatically without any further action by
the holders of such shares and regardless of whether the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, and, provided further, that the Corporation shall not be obligated to
-------- -------
issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of Preferred
Stock are either delivered to the Corporation or its transfer agent as provided
above or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation against any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable following such delivery, issue and deliver at such office to
such holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with a check, if applicable, payable to the holder in the amount of any
cash amount payable as the result of any fractional share resulting from the
conversion of Preferred Stock into Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, or in the
case of automatic conversion on the date of closing of the offering, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
5.4 Adjustments to Conversion Prices for Diluting Issues.
-----------------------------------------------------
(A) Special Definitions. For purposes of this subsection 5.4,
-------------------
the following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
------
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Convertible Securities" shall mean any evidences of
----------------------
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(3) "Common Stock Outstanding" shall mean, for purposes of
------------------------
Section 5 only, the number of shares of Common Stock actually issued and
outstanding on a
<PAGE>
given date, which shall include for the purposes hereof the aggregate number of
shares of Common Stock issuable on conversion of all outstanding shares of
Preferred Stock of the Corporation at the Conversion Price then in effect,
shares of Common Stock reserved but not actually issued in respect of
Convertible Securities other than the Preferred Stock, and shares of Common
Stock issuable upon the exercise of outstanding Options.
(4) "Current Market Price" shall mean the closing price per
--------------------
share of a security, on the business day prior to a given event, as announced by
the national exchange on which a security is listed, or, if the security is not
so listed, then the Fair Market Value thereof; provided, however, that "Current
-------- -------
Market Price" shall be deemed in any case not to be less than the Conversion
Price.
(5) "Fair Market Value" shall be as reasonably determined
-----------------
in good faith by the Board of Directors of the Corporation. In the event of any
dispute between the holders of the Preferred Stock and the Corporation regarding
the determination of fair market value, at the option of holders of a majority
of the outstanding shares of any series of Preferred Stock, the Corporation
shall engage a consulting firm or investment banking firm selected by holders of
a majority of the outstanding shares of such series of Preferred Stock to
prepare an independent appraisal of fair market value. The expenses of such
appraisal shall be borne by the Corporation.
(6) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued by the Corporation after the date of these Amended
and Restated Articles of Incorporation, other than shares of Common Stock issued
or issuable:
(a) upon conversion of shares of Preferred Stock or
issued in connection with a Qualified Public Offering or issued
in connection with an acquisition of a business or any assets or
properties or technology by the Company that is approved by the
affirmative vote of a majority of the Corporation's Board of
Directors, which shall include the persons designated by the
holders of a majority of the outstanding shares of Series D
Preferred;
(b) as a dividend or distribution on Preferred Stock;
(c) issued to equipment lessors or financial
institutions in accordance with plans or arrangements approved by
the Board of Directors;
(d) to directors, officers and employees of, and
consultants to, the Corporation pursuant to the Corporation's
1995 Stock Option Plan or other compensatory arrangements
approved by the Corporation's Board of Directors or in an amount
not in excess of 16,082,134 shares of Common Stock (net of
cancellations, terminations, repurchases and the like);
<PAGE>
(e) upon exercise of warrants of the Corporation for
Series B Preferred;
(f) upon exercise of warrants for Common Stock issued
pursuant to that certain Series C Preferred Stock and Warrant
Purchase Agreement of the Corporation; or
(g) upon exercise of warrants for Common Stock issued
in connection with the issuance of promissory notes of the
Corporation during August 1999; or
(h) pursuant to any event for which adjustment is made
pursuant to subparagraph 5.4(B)(1), (2), (3), (4) or (5) hereof.
(B) Adjustment of Conversion Prices upon Certain Events. The
---------------------------------------------------
Conversion Prices shall be adjusted from time to time as follows:
(1) Adjustments for Stock Dividends, Distributions,
----------------------------------------------
Subdivisions, Combinations or Consolidation Stock. In the event the
- -------------------------------------------------
Corporation at any time or from time to, time after the date of these Amended
and Restated Articles shall declare or pay any dividend or make any other
distribution on Common Stock payable in Common Stock, or in the event the
outstanding shares of Common Stock shall be subdivided (by stock split or
otherwise), into a greater number of shares of Common Stock (and the shares of
each series of Preferred Stock are not so subdivided to an equivalent extent),
the Conversion Price for each series of Preferred Stock then in effect shall,
concurrently with the effectiveness of such dividend, distribution, or
subdivision, be proportionately decreased. In the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock (and the shares of
each series of Preferred Stock are not so combined or consolidated to an
equivalent extent), the Conversion Price for each series of Preferred Stock then
in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(2) Adjustments for Other Distributions. In the event
-----------------------------------
that the Corporation at any time or from time to time after the date of these
Amended and Restated Articles makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive any distribution
payable in securities of the Corporation other than shares of Common Stock and
other than as otherwise adjusted in this Section 5.4, then and in each such
event provision shall be made so that the holders of Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Corporation that
they would have received had their Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the date of conversion, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5.4 with
respect to the rights of the holders of Preferred Stock.
<PAGE>
(3) Adjustments for Reclassification, Exchange and
----------------------------------------------
Substitution. If at any time or from time to time after the date of these
- ------------
Amended and Restated Articles, Common Stock issuable upon conversion of
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Prices then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that Preferred Stock shall be convertible into, in
lieu of the number of shares of Common Stock that the holders would otherwise
have been entitled to receive, a number of shares of such other class or classes
of stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of Preferred Stock immediately
before that change.
(4) Reorganization, Mergers, Consolidations, or Sales of
----------------------------------------------------
Assets. Subject to Section 2 hereof, if at any time or from time to time after
- ------
the date of these Amended and Restated Articles there shall be a capital
reorganization of Common Stock (other than a subdivision, combination,
reclassification, or exchange of shares provided for elsewhere in this Section
5) or a merger or consolidation of this Corporation with or into another
corporation, or the sale of all or substantially all of this Corporation's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock held by them, the number of shares of stock or
other securities or property of this Corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled upon
such capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of Preferred Stock
after the reorganization, merger, consolidation, or sale to the end that the
provisions of this Section 5 (including adjustment of the Conversion Prices then
in effect and the number of shares purchasable upon conversion of Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(5) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Convertible Securities or Option. In the event that at any time or from time
- --------------------------------
to time after the date of these Amended and Restated Articles the Corporation
shall in any manner (whether directly or by assumption in a merger in which the
Corporation is the surviving corporation) have issued or sold Convertible
Securities or granted Options, regardless of whether the rights to exchange,
convert or exercise thereunder are immediately exercisable (other than in
issuances pursuant to which an adjustment is made under Section 5.4(B)(1), (2),
(3), or (4) or pursuant to any employee, consultant or director incentive or
benefit plan approved by the Board of Directors of the Corporation not in excess
of 16,082,134 shares or to equipment lessors or financial institutions in
accordance with plans or arrangements approved by the Board of Directors) for a
consideration having a Conversion Price on the date of such issuance, sale or
grant, less than the Conversion Price of such Convertible Securities or Options
on the date of such issuance, sale or grant, then the Conversion Price shall be
adjusted to equal the product of the Conversion Price immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the
<PAGE>
Current Market Price per share of Common Stock at the date of such issuance
minus the Per Share Deficiency (as defined below) and (B) the denominator of
which shall be the Current Market Price per share of Common Stock at the date of
such issuance. The "Per Share Deficiency" shall mean (x) the Conversion Price of
such Convertible Securities or Options on the date of such issuance, sale or
grant minus the Fair Market Value of the consideration received by the Company
in respect of such issue, sale or grant divided by (y) the number of shares of
Common Stock Outstanding on the date of such issuance, sale or grant.
(6) Adjustment of Conversion Price in the Event of Pro Rata
-------------------------------------------------------
Repurchases. In the event that at any time or from time to time after the date
- -----------
of these Amended and Restated Articles the Corporation or any subsidiary thereof
shall make a pro rata repurchase of shares of Common Stock, the Conversion Price
in effect immediately prior to such action shall be adjusted (but shall not be
increased) by multiplying such price by a fraction, the numerator of which shall
be (i) the product of (x) the number of shares of Common Stock Outstanding
immediately before such pro rata repurchase and (y) the Current Market Price of
the Common Stock as of the close of business on the business day immediately
preceding the first public announcement by the Corporation of the intent to
effect such pro rata repurchase minus (ii) the aggregate purchase price of the
pro rata repurchase; and the denominator of which shall be the product of (i)
the number of shares of Common Stock outstanding immediately before such pro
rata repurchase minus the number of shares of Common Stock repurchased by the
Corporation or any subsidiary thereof in such pro rata repurchase and (ii) the
Current Market Price of the Common Stock as of the close of the business day
immediately preceding the first public announcement by the Company of the intent
to effect such pro rata repurchase. Such adjustment shall become effective
immediately after the effective date of such pro rata repurchase.
(7) Adjustment of Conversion Price for Other Issuance of
----------------------------------------------------
Additional Shares of Common Stock. In the event that at any time or from time
- ---------------------------------
to time after the date of these Amended and Restated Articles the Corporation
shall issue Additional Shares of Common Stock (excluding Additional Shares of
Common Stock issued or deemed to be issued for which an adjustment is made under
Section 5.4(B)(1), (2), (3), (4) or (5)) for consideration in an amount per
Additional Share of Common Stock less than the Current Market Price, then the
Conversion Price shall be adjusted to equal the product obtained by multiplying
the Conversion Price immediately prior to such issuance or sale by a fraction
(A) the numerator of which shall be the number of shares of Common Stock
Outstanding immediately prior to such issuance or sale plus the number of shares
which the aggregate offering price of the total number of such Additional Shares
of Common Stock would purchase at the then Current Market Price and (B) the
denominator of which shall be the number of shares of Common Stock Outstanding
immediately after such issue or sale.
(8) Other Action Affecting Common Stock. In case at any
-----------------------------------
time or from time to time after the date of these Amended and Restated Articles
the Corporation shall take any action in respect of its Common Stock, other than
any action described in this Section 5.4, then, unless such action will not have
a materially adverse effect upon the rights of the holders of Preferred Stock,
the Conversion Price shall be adjusted in such manner as may be equitable in the
circumstances.
<PAGE>
(C) Determination of Consideration. For purposes of this
------------------------------
subsection 5.4, the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(a) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued
dividends;
(b) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such
issue as determined in good faith by the Board of Directors of
the Corporation; and
(c) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets
of the Corporation for consideration that covers both, be the
proportion of such consideration so received, computed as
provided in clauses (b) and (c) above, as determined in good
faith by the Board of Directors.
5.5 No Impairment. Except as provided for in Section 6 below, the
-------------
Corporation will not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
5.6 Certificate as to Adjustment. Upon the occurrence of each
----------------------------
adjustment or readjustment of the Conversion Price of any series of Preferred
Stock pursuant to this Section 5, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of such series of Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect
for each series of Preferred Stock, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of any series of Preferred Stock.
5.7 Status of Converted Stock. In case any shares of Preferred Stock
-------------------------
shall be converted pursuant to this Section 5, the shares so converted shall be
canceled, shall not be reissuable and shall cease to be a part of the authorized
capital stock of the Corporation.
5.8 Fractional Shares. In lieu of any fractional shares to which the
-----------------
holder of Preferred Stock would otherwise be entitled upon conversion after
aggregating all Preferred shares of such holder, the Corporation shall pay cash
equal to such fraction multiplied by the fair
<PAGE>
market value of one share of Common Stock as determined by the Board. The number
of whole shares issuable of each holder upon such conversion shall be determined
on the basis of the number of shares of Common Stock issuable upon conversion of
the total number of shares of Preferred Stock held by such holder at the time of
converting into Common Stock.
5.9 Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock. 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 Preferred Stock and other
securities convertible into shares of Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these Amended and Restated Articles of Incorporation.
5.10 Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend that is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of Preferred Stock at least ten (10) days prior to the date specified
herein, a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.
Section 6. Protective Provisions.
----------------------
6.1 Preferred Stock and Series D Preferred.
---------------------------------------
This Corporation shall not, without first obtaining the approval (by vote
or written consent, as provided by law) of (i) so long as any shares of
Preferred Stock are outstanding, the holders of more than 50% of the then
outstanding shares of Preferred Stock, voting together as a single class, and
(ii) so long as any shares of Series D Preferred are outstanding, the holders of
more than 50% of the then outstanding shares of Series D Preferred:
(A) increase or decrease the number of authorized shares of
any series of Preferred Stock;
(B) effect a merger, consolidation, or reorganization (except
where a majority of the outstanding equity securities of the surviving
corporation immediately after the merger, consolidation or reorganization is
held by persons who were shareholders of this Corporation immediately prior to
such merger, consolidation or reorganization), or effect sale of all or
substantially all of the assets of this Corporation;
(C) redeem any or all shares of any series of Preferred
Stock; or
<PAGE>
(D) amend the bylaws of this Corporation to reduce the size of
its board of directors to less than seven members.
6.2 Series D Preferred. So long as any shares of Series D
------------------
Preferred Stock are outstanding, this Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of not less than a majority of the then outstanding shares of Series D
Preferred:
(A) authorize or issue, or obligate itself to issue, any
shares of any class or series of stock (or reclassify any existing class or
series of stock) or any securities convertible into stock having any preference
or priority as to dividend, redemption, voting or conversion rights, liquidation
preferences, or otherwise, superior to or on a parity with any such preference
or priority to which the Series D Preferred is entitled hereunder;
(B) enter into material business activities not contemplated
in the original business plan presented to the holders of Series D Preferred or
in any revised business plan approved by such holders, including, without
limitation any acquisition or disposition for consideration in excess of five
million dollars ($5,000,000).
6.3 Preferred Stock. This Corporation shall not, without first
---------------
obtaining the approval (by vote or written consent, as provided by law) of the
holders of not less than a majority of the then outstanding shares of such
series of Preferred Stock, voting as a separate class, alter or change the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of such series of Preferred Stock in these Amended and Restated
Articles so as to affect materially and adversely the shares of such series of
Preferred Stock.
ARTICLE V.
1. Limitation of Directors' Liability. The liability of the
----------------------------------
directors of the Corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. Indemnification of Agents. The Corporation is authorized to
-------------------------
provide indemnification of its agents (as defined in Section 317 of General
Corporation Law of California) to the fullest extent permissible under
California law.
3. Repeal or Modification. Any repeal or modification of the
----------------------
foregoing provisions of this Article shall not adversely affect any right of
indemnification or limitation of liability of an agent of the Corporation
relating to acts or omissions occurring prior to such repeal or modification."
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
<PAGE>
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the General Corporation Law of
California. The total number of outstanding shares of Common Stock of the
Corporation is 1,000. No shares of Series A Preferred Stock are outstanding. No
shares of Series Al Preferred Stock are outstanding. No shares of Series B
Preferred Stock are outstanding. No shares of Series C Preferred Stock are
outstanding. No shares of Series D Preferred Stock are outstanding. The number
of shares voting in favor of the Amended and Restated Articles of Incorporation
equaled or exceeded the vote required. The percentage vote required was more
than 50% of the Common voting separately. As no shares of Series A, Series A1,
Series B, Series C or Series D Preferred Stock are outstanding no vote of the
preferred shareholders was necessary.
<PAGE>
The undersigned declare under penalty of perjury that the matters set forth
in the foregoing Articles are true of their own knowledge.
Executed at _______________________________ on April __, 2000.
________________________________
Jonathan F. Beizer
President
________________________________
Warren T. Lazarow
Secretary
<PAGE>
Exhibit 3.3
AMENDED AND RESTATED
BYLAWS
OF
IASIAWORKS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
----------
County of New Castle, State of Delaware.
Section 2. The corporation 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
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
----------
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date
----------
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. At each annual meeting, the stockholders
shall elect directors to succeed those directors whose terms expire in that year
and shall transact such other business as may properly be brought before the
meeting.
1
<PAGE>
Section 3. Written notice of the annual meeting stating the place,
----------
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
----------
corporation shall prepare and make available, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
----------
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may only be called by the Board.
Section 6. Written notice of a special meeting stating the place,
----------
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
----------
shall be limited to the purposes stated in the notice.
2
<PAGE>
Section 8. The holders of a majority of the stock issued and
----------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, either the Chairman of the
Board, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted that might have been
transacted at the meeting as originally notified. 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 9. When a quorum is present at any meeting, the vote of the
----------
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
-----------
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three (3) years from its date, unless the proxy provides for a longer
period.
3
<PAGE>
Section 11. Nominations for election to the Board of Directors must
-----------
be made by the Board of Directors or by a committee appointed by the Board of
Directors for such purpose or by any stockholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Nominations by stockholders must be preceded by notification in writing received
by the secretary of the corporation not less than one-hundred twenty (120) days
prior to any meeting of stockholders called for the election of directors. Such
notification shall contain the written consent of each proposed nominee to serve
as a director if so elected and the following information as to each proposed
nominee and as to each person, acting alone or in conjunction with one or more
other persons as a partnership, limited partnership, syndicate or other group,
who participates or is expected to participate in making such nomination or in
organizing, directing or financing such nomination or solicitation of proxies to
vote for the nominee:
(a) the name, age, residence, address, and business address of
each proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type of
business and address of the corporation or other organization in which such
employment is carried on of each proposed nominee and of each such person;
(c) the amount of stock of the corporation owned beneficially,
either directly or indirectly, by each proposed nominee and each such person;
and
(d) a description of any arrangement or understanding of each
proposed nominee and of each such person with each other or any other person
regarding future employment or any future transaction to which the corporation
will or may be a party.
4
<PAGE>
The presiding officer of the meeting shall have the authority to
determine and declare to the meeting that a nomination not preceded by
notification made in accordance with the foregoing procedure shall be
disregarded.
Section 12. At any meeting of the stockholders, only such business
-----------
shall be conducted as shall have been brought before the meeting (a) pursuant to
the corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the corporation who is a stockholder of
record at the time of giving of the notice provided for in this Bylaw, who shall
be entitled to vote at such meeting and who complies with the notice procedures
set forth in this Bylaw.
For business to be properly brought before any meeting by a
stockholder pursuant to clause (c) above of this Section 12, 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
less than one hundred twenty (120) days prior to the date of the meeting. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf of the proposal is made and (d) any material
interest of such stockholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such business.
5
<PAGE>
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 12. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by this Section 12, and if such person should so determine, such
person shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted. Notwithstanding the
foregoing provisions of this Section 12, a stockholder shall also comply with
all applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the matters set forth
in this Section 12.
Section 13. Effective upon the closing of the corporation's initial
-----------
public offering of securities pursuant to a registration statement filed under
the Securities Act of 1933, as amended, the stockholders of the Corporation may
not take action by written consent without a meeting but must take any such
actions at a duly called annual or special meeting in accordance with these
Bylaws and the Certificate of Incorporation.
ARTICLE III
DIRECTORS
Section 1. The number of directors of this corporation that shall
----------
constitute the whole board shall be determined by resolution of the Board of
Directors; provided, however, that no decrease in the number of directors shall
have the effect of shortening the term of an incumbent director. The Board of
Directors shall be classified, with respect to the time for which they severally
hold office, into three classes, as nearly equal in number as possible, as
determined by the Board of Directors, one class ("Class I") to hold office
initially for a term
6
<PAGE>
expiring at the annual meeting to be held in 2001, another class ("Class II") to
hold office initially for a term expiring at the annual meeting of stockholders
held in 2002 and another class ("Class III") to hold office initially for a term
expiring at the annual meeting of stockholders to be held in 2003, with the
members of each class to hold office until their successors are elected and
qualified. At each annual meeting of stockholders, the successors of the class
of directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the third year
following the year of their election.
Section 2. Vacancies and newly created directorships resulting from
----------
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, even if less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
election of the class for which such directors were chosen and until their
successors are duly elected and qualified or until earlier resignation or
removal. If there are no directors in office, then an election of directors may
be held in the manner provided by statute.
Section 3. The business of the corporation shall be managed by or
----------
under the direction of its Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
----------
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
----------
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to
7
<PAGE>
constitute the meeting, provided a quorum shall be present. In the event of the
failure of the stockholders to fix the time or place of such first meeting of
the newly elected Board of Directors, or in the event such meeting is not held
at the time and place so fixed by the stockholders, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
----------
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
----------
Chairman of the Board or the president on twelve (12) hours' notice to each
director either personally or by telephone, telegram, facsimile or electronic
mail; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of a majority of the Board
unless the Board consists of only one director, in which case special meetings
shall be called by the Chairman of the Board, the president or secretary in like
manner and on like notice on the written request of the sole director. A
written waiver of notice, signed by the person entitled thereto, whether before
or after the time of the meeting stated therein, shall be deemed equivalent to
notice.
Section 8. At all meetings of the board a majority of the directors
----------
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may
8
<PAGE>
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. 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 or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
-----------
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
-----------
majority of the whole board, designate one (1) or more committees, each
committee to consist of one (1) or more of the directors of the corporation.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
In the absence of disqualification of a 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.
9
<PAGE>
Any such committee, to the extent 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 that may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
-----------
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
-----------
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
10
<PAGE>
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
-----------
incorporation or bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
----------
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice (except as provided in Section 7 of Article III of these Bylaws), but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telephone, telegram or facsimile.
Section 2. Whenever any notice is required to be given under the
----------
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
----------
Board of Directors and shall be a president, a chief financial officer and a
secretary. The Board of Directors may elect from among its members a Chairman
of the Board. The Board of Directors
11
<PAGE>
may also choose one or more vice-presidents, assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
----------
annual meeting of stockholders shall choose a president, a chief financial
officer, and a secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
----------
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers of the corporation shall be
----------
fixed by the Board of Directors or any committee established by the Board of
Directors for such purpose. The salaries of agents of the corporation shall,
unless fixed by the Board of Directors, be fixed by the president or any vice-
president of the corporation.
Section 5. The officers of the corporation shall hold office until
----------
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
----------
meetings of the Board of Directors and of the stockholders at which he/she shall
be present. He/she shall have and may exercise such powers as are, from time to
time, assigned to him/her by the Board and as may be provided by law.
12
<PAGE>
Section 7. In the absence of the Chairman of the Board, the
----------
president, shall preside at all meetings of the Board of Directors and of the
stockholders at which he shall be present. He shall have and may exercise such
powers as are, from time to time, assigned to him by the Board and as may be
provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
----------
corporation unless such title is assigned to another officer of the corporation;
and in the absence of the Chairman of the Board he/she shall preside at all
meetings of the stockholders and the Board of Directors; he/she shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect.
Section 9. The president or any vice president shall execute bonds,
----------
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 10. In the absence of the president or in the event of his
-----------
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
13
<PAGE>
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
-----------
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He/she shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he/she shall be. He/she shall have custody
of the corporate seal of the corporation and he/she, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 12. The assistant secretary, or if there be more than one,
-----------
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE CHIEF FINANCIAL OFFICER
Section 13. The chief financial officer shall be the chief financial
-----------
officer and treasurer of the corporation, shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the
14
<PAGE>
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors.
Section 14. He/she shall disburse the funds of the corporation as may
-----------
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. Along with the president or any vice president, he/she
-----------
shall be authorized to execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 16. If required by the Board of Directors, he/she shall give
-----------
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his/her office and for the
restoration to the corporation, in case of his/her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his/her control
belonging to the corporation.
Section 17. The assistant treasurer, or if there shall be more than
-----------
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the chief financial officer or in the event of his
inability or refusal to act, perform the duties and exercise the powers
15
<PAGE>
of the chief financial officer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 a vice-president and the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the corporation, certifying the number of shares owned by him/her in the
corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate that the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating,
16
<PAGE>
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.
Any of or all the signatures on the certificate may be facsimile. 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 by the corporation with the same effect as if he/she were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 2. The Board of Directors may direct a new certificate or
----------
certificates to 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his/her
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum 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.
TRANSFER OF STOCK
Section 3. Upon surrender to the corporation or the transfer agent of
----------
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a
17
<PAGE>
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
FIXING RECORD DATE
Section 4. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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 shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
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.
REGISTERED STOCKHOLDERS
Section 5. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares 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.
18
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. 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 at any regular or special meeting, pursuant
to law. 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 2. 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
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
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
----------
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
----------
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
----------
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal,
19
<PAGE>
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
----------
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the corporation or
any other person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon
20
<PAGE>
receipt of an undertaking by or on behalf of such director to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the corporation as authorized by relevant sections of the General Corporation
Law of Delaware. Notwithstanding the foregoing, the corporation shall not be
required to advance such expenses to an agent who is a party to an action, suit
or proceeding brought by the corporation and approved by a majority of the Board
of Directors of the corporation which alleges willful misappropriation of
corporate assets by such agent, disclosure of confidential information in
violation of such agent's fiduciary or contractual obligations to the
corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section
21
<PAGE>
6, be interpreted as follows: an "other enterprise" shall be deemed to include
such an employee benefit plan, including without limitation, any plan of the
corporation which is governed by the Act of Congress entitled "Employee
Retirement Income Security Act of 1974," as amended from time to time; the
corporation shall be deemed to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
----------
bylaws may be adopted by the affirmative vote of holders of at least 66-2/3%
vote of the outstanding voting stock of the corporation. These bylaws may also
be altered, amended or repealed or new bylaws may be adopted by the Board of
Directors, when such power is conferred upon the Board of Directors by the
certificate of incorporation. The foregoing may occur at any regular meeting of
the stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal bylaws is conferred
upon the Board of Directors by the certificate of incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal bylaws.
22
<PAGE>
CERTIFICATE OF ADOPTION BY THE
SECRETARY OF
IASIAWORKS, INC.
The undersigned, Warren T. Lazarow, hereby certifies that he is the
duly elected and acting Secretary of iAsiaWorks, Inc., a Delaware corporation
(the "Corporation"), and that the Amended and Restated Bylaws attached hereto
constitute the Bylaws of said Corporation as duly adopted by the Board of
Directors and the Stockholders of the Corporation and as in effect on the date
hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
this _____ day of April, 2000.
_____________________________________
Warren T. Lazarow
Secretary
23
<PAGE>
EXHIBIT 4.2
AMENDED AND RESTATED
RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "Agreement") is made as of
this 8th day of December, 1999, by and among (a) AUNET Corporation, a California
corporation (the "Corporation"), (b) the purchasers of Series A Preferred Stock
(the "Series A Purchasers"), the purchasers of Series Al Preferred Stock (the
"Series Al Purchasers"), the purchasers of Series B Preferred Stock and warrants
to purchase Series B Preferred Stock (the "Series B Warrants") ("Series B
Purchasers"), the purchasers of Series C Preferred Stock and Warrants for Common
Stock (the "Common Warrants") (the "Series C Purchasers") and the holders of
warrants to purchase Common Stock issued in connection with the issuance of
Promissory Notes dated on or about August 5, 1999 (the "Debt Warrants" and,
collectively with the Common Warrants and the Series B Warrants, the
"Warrants"), the "Warrants") (the "Warrant Holders," and collectively with the
Series A Purchasers, the Series Al Purchasers, the Series B Purchasers and the
Series C Purchasers, the "Original Purchasers") as listed on Schedule I attached
----------
hereto, (c) the purchasers of Series D Preferred Stock (the "Series D
Purchasers") listed on Schedule II attached hereto (the Series A Purchasers, the
-----------
Series Al Purchasers, the Series B Purchasers, the Series C Purchasers, the
Warrant Holders and the Series D Purchasers being collectively referred to as
the "Purchasers"); and (e) the holders of Common Stock listed on Schedule III
------------
attached hereto (the "Common Holders"). This Agreement amends and restates that
certain Amended and Restated Registration Rights Agreement dated August 5, 1998
by and among the Corporation, the Series A Purchasers, the Series Al Purchasers,
the Series B Purchasers and the Series C Purchasers (the "Amended Agreement").
RECITALS
A. The Amended Agreement gives the Purchasers certain registration rights,
rights of first refusal and other rights.
B. Concurrent with the execution and deliver of this Agreement, the Series
D Purchasers are purchasing up to 43,000,000 shares of the Corporation's Series
D Preferred Stock (the "Series D Preferred") pursuant to a Series D Preferred
Stock Purchase Agreement dated the date hereof (the "Series D Purchase
Agreement").
C. The Series D Purchasers have required that the other parties hereto
execute and deliver this Agreement pursuant to Section 5.4 of the Series D
Purchase Agreement dated the date hereof.
D. The Corporation wishes to grant and the Series D Purchasers wish to
receive certain registration rights, rights of first refusal and other rights,
and the Corporation and the Original Purchasers desire to conform such rights of
all Purchasers in accordance with the terms and conditions of this Agreement.
E. The Corporation and the Purchasers contemplate an additional closing
with respect to the sale of additional shares of the Series D Preferred which
may occur on before March 1, 2000 and accordingly, this Agreement shall be
automatically amended so that Agreement shall apply by its terms to the
Purchasers of such additional shares of Series D Preferred.
<PAGE>
Page 2
NOW, THEREFORE, in reliance on the foregoing recitals, and in and for the
mutual covenants and consideration set forth herein, the; parties hereto agree
as follows:
1. Certain Definitions. As used in this Agreement, the following term
-------------------
shall have the following respective meanings:
1.1 "Affiliate" and "Affiliated" shall refer to any person who is an
--------- ----------
"affiliate" as defined in Rule l2b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended. For purposes of this
definition, "person" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental authority or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
1.2 "Commission" shall mean the Securities and Exchange Commission
----------
or any other federal agency at the time administering the Securities Act.
1.3 "Common Stock" shall mean the Corporation's Common Stock, no par
------------
value.
1.4 "Conversion Stock" means the Common Stock issued or issuable
----------------
pursuant to conversion of the Preferred Stock.
1.5 "Holder" shall mean (a) any Series A Purchaser, (b) any Series
------
Al Purchaser, (c) any Series B Purchaser, (d) any Series C Purchaser (e) any
Series D Purchaser or (f) any holder of Warrants, in each case holding
Registrable Securities and any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section 14
hereof.
1.6 "Initiating Holders" shall mean any Holder or Holders (other
------------------
than the Warrant Holders in their capacity as holders of Warrants) holding, in
the aggregate, not less than fifty percent (50%) of the then outstanding
Registrable Securities.
1.7 "Major Holder" shall mean each Holder who is a holder of at
------------
least 250,000 shares of Registrable Securities (as adjusted for any stock split,
stock dividend or similar capital reorganization), and permitted assignees under
Section 17.2(d) hereof. For the purpose of determining a Major Holder's rights
under this Agreement, all shares beneficially owned by Affiliated entities or
persons shall be aggregated together and all shares held by investors for whom
the Zesiger Capital Group LLC ("Zesiger") is acting hereunder shall be
aggregated together. In the event of any such aggregation, the aggregating
persons and entities shall designate in writing from time to time one of all
aggregating persons and entities, and the Corporation shall be entitled to rely
upon the authority of such designee as the legal representative hereunder of all
such persons and entities.
1.8 "Preferred Stock" shall mean (i) the Corporation's Series A
---------------
Preferred Stock, no par value, issued pursuant to those certain Series A
Purchase Agreements dated August 10, 1995, November 1, 1995 and November 30,
1995, (ii) the Corporation's Series Al Preferred Stock, no par value, issued
pursuant to the exercise of the Series A1 Preferred Stock Warrant on December
23, 1996, (iii) the Corporation's Series B Preferred Stock, no par value, issued
pursuant to the Series B Purchase Agreements dated October 11, 1996 and April 1,
1997, and issuable upon exercise of the
<PAGE>
Page 3
Series B Warrants, (iv) the Corporation's Series C Preferred Stock, no par
value, issued pursuant to the Series C Preferred Stock and Warrant Purchase
Agreement dated August 5, 1998, and (v) the Corporation's Series D Preferred
Stock, no par value, issued pursuant to the Series D Purchase Agreement dated on
or about the date hereof.
1.9 "Registrable Securities" means (i) the Conversion Stock, (ii)
----------------------
the Common Stock issuable upon exercise of the Warrants, and (iii) any Common
Stock of the Corporation issued or issuable in respect of the Conversion Stock
or the Common Stock issuable upon exercise of the Warrants, upon any stock
split, stock dividend, recapitalization or similar event or otherwise issued or
issuable in respect of the Conversion Stock or Common Stock issuable upon
exercise of the Warrants; provided, however, that shares of Common Stock or
-----------------
other securities shall only be treated as Registrable Securities until the
earlier of (A) such time as such securities have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction or (B) such time as all securities held by a Holder may be sold
under Rule 144 within a three-month period or such securities are otherwise
available for sale in the opinion of counsel to the Corporation in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act such that a transfer restrictions and restrictive legends with
respect thereto may be removed upon the consummation of such sale.
1.10 The terms "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 the
effectiveness of such registration statement.
1.11 "Registration Expenses" shall mean all expenses, except as
---------------------
otherwise stated below, incurred by the Corporation in complying with Sections
5, 6 and 7 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Corporation and the reasonable fees and
expenses of counsel to the Purchasers, if any, blue sky fees and expenses and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Corporation which shall be paid in any event by the Corporation and Selling
Expenses).
1.12 "Restricted Securities" shall mean the securities of the
---------------------
Corporation required to bear the legend set forth in Section 3 hereof.
1.13 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall in effect at the time.
1.14 "Selling Expenses" shall mean all underwriting discounts,
----------------
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders.
1.15 "Significant Holder" shall mean each Holder who is a holder of
------------------
at least 500,000 shares of Registrable Securities (as adjusted for any stock
split, stock dividend or similar capital reorganization and the like), and
permitted assignees under Section 17.2(d) hereof. For the purpose of determining
a Significant Holder's rights under this Agreement, all shares beneficially
owned by Affiliated entities or persons shall be aggregated together and all
shares held by investors for whom the Zesiger Capital Group LLC ("Zesiger") is
acting hereunder shall be aggregated together. In the event of any such
aggregation, the aggregating persons and entities shall designate in
<PAGE>
Page 4
writing from time to time one of all aggregating persons and entities, and the
Corporation shall be entitled to rely upon the authority of such designee as the
legal representative hereunder of all such persons and entities.
1.16 "Warrant Common" shall mean any Common Stock of the Corporation
--------------
issued or issuable upon exercise of the Common Warrants or the Debt Warrants.
2. Restrictions on Transferability. The Preferred Stock, the shares of
-------------------------------
Common Stock issuable upon exercise of the Warrants and the Conversion Stock
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Purchaser will cause any
proposed purchaser, assignee, transferee or pledgee of the Preferred Stock, the
shares of Common Stock issuable upon exercise of the Warrants or such Common
Stock held by such Purchaser to agree to take and hold such securities subject
to the provisions and upon the conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Preferred
------------------
Stock, (ii) the Conversion Stock, (iii) the Warrant Common, (iv) the Warrants,
and (v) any other securities issued in respect of the Preferred Stock, the
Conversion Stock, the Warrant Common or the Warrants upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event shall (unless
otherwise permitted by the provisions of Section 4 below) be stamped or
otherwise imprinted with the following legend (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE) BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION."
Each Purchaser consents to the Corporation making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock,
the Warrant Common, the Common Stock or the Warrants in order to implement the
restrictions on transfer established in this Registration.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities
<PAGE>
Page 5
(other than (i) a transfer not involving a change in beneficial ownership or
(ii) in transactions involving the distribution without consideration of
Restricted Securities by any of the Purchasers to any of its (A) constituent
partners or members, or retired constituent partners or members, or to the
estate of any of such partners or members or retired partners or members or (B)
at least majority-owned subsidiaries, so long as each such transferee agrees in
writing to be bound by the terms of this Agreement, the Series A Purchase
Agreement, the Series A1 Purchase Agreement, the Series B Purchase Agreement,
the Series C Preferred Stock and Warrant Purchase Agreement, the Warrants or the
Series D Purchase Agreement, as applicable), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Corporation of such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied, at such
holder's expense by either (a) an unqualified written opinion of legal counsel
who shall and whose legal opinion shall be, reasonably satisfactory to the
Corporation addressed to the Corporation, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration under
the Securities Act or (b) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Corporation. Notwithstanding the foregoing, no
such "no action" letter or opinion of counsel shall be necessary for a transfer
by a Purchaser if the Purchaser is a partnership or limited liability
corporation to a constituent partner or member of such entity or retired
constituent partner or member, or the transfer by gift, will or intestate
succession of any such entity partner or member to his or her spouse or to the
siblings, lineal descendents or ancestors of such partner or member or his or
her spouse. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 3 above, except that
such certificate shall not bear such restrictive legend if, in the opinion of
counsel for such Holder and the Corporation, such legend is not required in
order to establish compliance with any provision of the Securities Act.
5. Demand Registration
-------------------
5.1 Notice of Registration; Registration. In case the Corporation
------------------------------------
shall receive from Initiating Holders a written request that the Corporation
effect any registration, qualification or compliance (other than a registration
on Form S-3 or any successor form) with respect to at least 50% of the
Registrable Securities (or any lesser percentage if the aggregate offering price
to the public would be more than $10,000,000), the Corporation will:
(a) promptly give written notice of the proposed registration to
all other Holders; and
(b) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations; issued under the Securities
Act) as way be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified
<PAGE>
Page 6
in a written request given within fifteen (15) days after receipt of such
written notice from the Corporation; provided that the Corporation shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 5:
(1) In any particular jurisdiction in which the Corporation
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Corporation
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(2) Prior to the earlier of January 1, 2003 or the date one
hundred eighty (180) days after the effective date of the registration statement
pertaining to the first underwritten firm commitment public offering of
securities of the Corporation for its own account (other than a registration
relating solely to a Commission Rule 145 transaction or a registration relating
solely to employee benefit plans);
(3) After the Corporation has effected two (2) registrations
(other than registrations on Form S-3 or any successor form) pursuant to this
Section 5 and such registrations have been declared or ordered effective and the
securities offered pursuant to such registrations have been sold; or
(4) If at the time of the request to register Registrable
Securities the Corporation gives notice within fifteen (15) days of such request
that it is engaged or has fixed plans to engage within ninety (90) days of the
time of the request in a firmly underwritten registered public offering as to
which the Holders may include Registrable Securities pursuant to Section 5, 6 or
7 hereof.
Subject to the foregoing clauses (1) through (4) and to Section 5.3, the
Corporation shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request of the Initiating Holders.
5.2 Underwriting.
------------
(a) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Corporation as a part of their request made pursuant to Section 5 and
the Corporation shall include such information in the written notice referred to
in Section 5.1. The right of any Holder to registration pursuant to Section 5
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 requested (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
(b) The Corporation shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
(the "Underwriter") selected for such underwriting by a majority in interest of
the Initiating Holders and consented to by the Corporation, which consent shall
not be unreasonably withheld. Notwithstanding any other provision of this
Section 5, if the Underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten and so advises the
Initiating Holders in writing, then the Initiating Holders shall so advise all
Holders (except those Holders who have indicated to the Corporation their
decision not to distribute any of
<PAGE>
Page 7
their Registrable Securities through such underwriting) and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all such Holders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities owned by
such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the Underwriters'
marketing limitation shall be included in such registration.
(c) If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Corporation, the
Underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
-------- -------
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the Underwriter), then the Corporation shall offer to all Holders who have
included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportions used above in
determining the Underwriter limitation.
(d) If the Underwriter has not limited the number of Registrable
Securities to be underwritten the Corporation may include securities for its own
account or the account of others in such registration if the Underwriter so
agrees and if the number of Registrable Securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
5.3 Delay of Registration. If the Corporation shall furnish to the
---------------------
Initiating Holders a certificate signed by the President of the Corporation
stating that, in the good faith judgment of the Board of Directors of the
Corporation, it would be not in the best interests of the Corporation and its
shareholders for such registration statement to be filed on or before the date
filing would be required and it is therefore appropriate to defer the filing of
such registration statement, then the Corporation may direct that such request
for registration be delayed for a period not in excess of one hundred twenty
(120) days, such right to delay a request to be exercised by the Corporation not
more than once in any twelve (12) month period.
6. Company Registration
--------------------
6.1 Notice of Registration. If at any time or from time to time the
----------------------
Corporation shall determine to register any of its equity securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Rule 145 transaction, the Corporation will:
(a) promptly give to each Holder written notice thereof; and
(b) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within fifteen (15) days after receipt of such written notice
from the Corporation, by any Holder.
6.2 Underwriting. If the registration of which the Corporation gives
------------
notice is for a registered public offering involving an underwriting, the
Corporation shall so advise the Holders as
<PAGE>
Page 8
a part of the written notice given pursuant to Section 6.1(a). In such event,
the right of any Holder to registration pursuant to this Section 6 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Corporation and other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the Underwriter selected for such underwriting by the
Corporation. Notwithstanding any other provision of this Section 6, if the
Underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the Underwriter may limit the Registrable
Securities to be included in such registration; provided, however, that in no
-------- -------
public offering shall other holders of "piggyback" registration rights or other
security holders participate in such offering unless the Holders (other than any
Company officers who may be Holders) have participated to the full extent
requested. The Corporation shall so advise all Holders and other holders
distributing their securities through such underwriting. So long as all Holders
have participated in the offering to the extent requested, then the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among such other holders in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such other holders at the time of filing the registration statement. To
facilitate the allocation of shares in accordance with the above provisions, the
Corporation may round the number of shares allocated to any Holder or holder to
the nearest one hundred (100) shares. If any Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Corporation and the Underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the Underwriter may require.
6.3 Right to Terminate Registration. The Corporation shall have the
-------------------------------
right to terminate or withdraw any registration initiated by it under this
Section 6 prior to the effectiveness of such registration regardless of whether
any Holder has elected to include securities in such registration.
7. Registration on Form S-3
------------------------
7.1 If any Holder or Holders request that the Corporation file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $2,500,000, and the Corporation is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Corporation shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the
-------- -------
Corporation shall not be required to effect more than two (2) registrations
pursuant to this Section 7 in any twelve (12) mouth period. The substantive
provisions of Section 5.2 shall be applicable to each registration initiated
under this Section 7.
7.2 Notwithstanding the foregoing, the Corporation shall not be
obligated to take any action pursuant to this Section 7: (i) in any particular
jurisdiction in which the Corporation would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless the Corporation is already subject to service in such
jurisdiction
<PAGE>
Page 9
and except as may be required by the Securities Act, (ii) if the Corporation,
within fifteen (15) days of the receipt of the request of the Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration Statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities) in which such
Holders can exercise their rights pursuant to Section 6 hereof, (iii) during the
period starting with the date ninety (90) days prior to the Corporation's
estimated date of filing of, and ending on the date one hundred eighty (180)
days immediately following, the effective date of any registration statement
pertaining to securities of the Corporation (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Corporation is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Corporation shall furnish to such Holder a certificate signed by the
President of the Corporation stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Corporation or its
shareholders for registration statements to be filed in the near future, then
the Corporation's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed one hundred twenty (120)
days from the receipt of the request to file such registration by such Holder
such right to delay a request to be exercised by the Corporation not more than
once in any twelve (12) month period.
8. Limitations on Subsequent Registration Rights. From and after the date
---------------------------------------------
of this Agreement, the Corporation shall not, without the consent of Holders of
a majority of the Registrable Securities, enter into any agreement granting any
holder or prospective holder of any securities of the Corporation registration
rights with respect to such securities. Upon such consent, such holder shall
execute a counterpart of this Agreement, and upon execution thereof by such
additional party and by the Corporation, shall be considered a Holder for all
purposes of this Agreement.
9. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with all registrations pursuant to Sections 5, 6 and 7 shall be borne
by the Corporation. All Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders of such securities pro rata
on the basis of the number of shares so registered. Notwithstanding anything in
this Section 9 to the contrary, if the Corporation and/or others include
securities for their own account pursuant to Section 5.2, then the Corporation
and such others shall bear their pro rata share of the Selling Expenses. In
connection with any registration pursuant to Sections 5, 6 and 7, the
Corporation will pay reasonable fees and disbursements of one special counsel to
the Holders incurred in so representing such participating Holders.
10. Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Corporation pursuant to this
Agreement, the Corporation will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense, the Corporation will:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for at least one hundred eighty (180)
days or until the distribution described in the Registration Statement has been
completed;
(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
<PAGE>
Page 10
be necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement;
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities and such other information
necessary to allow the Holders participating in such registration to remain
reasonably informed about the public offering.
(d) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering; each Holder participating
in such underwriting also shall enter into and perform its obligations under
such an agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days;
(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number far all such
Registrable Securities, in each case not later than the effective date of such
registration statement; and
(i) use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 10,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 10, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
<PAGE>
Page 11
11. Indemnification
---------------
11.1 To the extent permitted by law, the Corporation will indemnify
each Holder, each of its officers and directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading or any violation or alleged violation by the
Corporation of the Securities Act or any rule or regulation promulgated under
the Securities Act applicable to the Corporation in connection with any such
registration, qualification or compliance, and the Corporation will reimburse
each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred as
such expenses are incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Corporation will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Corporation by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
11.2 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, qualification or compliance is being effected, indemnify the
Corporation, each of its directors and officers, each underwriter, if any, of
the Corporation's securities covered by such a registration statement, each
person who controls the Corporation or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Corporation, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred as such expenses are incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Corporation by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection 11.2 shall be limited to an amount equal to
the net proceeds received by such Holder from the sale of Registrable Securities
hereunder, unless such liability arises out of or is based on willful conduct by
such Holder.
<PAGE>
Page 12
11.3 Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
11.4 Each party entitled to indemnification under this Section 11 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and, provided further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Agreement unless the failure to give such notice
is materially prejudicial to an Indemnifying Party's ability to defend such
action and, provided further, that the Indemnifying Party shall not assume the
defense for matters as to which there is a conflict of interest or separate and
different defenses. 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.
11.5 The obligations of the Company and Holders under this Section 11
shall survive the completion of any offering of Registrable Securities pursuant
to this Agreement.
12. Information by Holder. The Holder or Holders of Registrable Securities
---------------------
included in any registration shall furnish to the Corporation such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Corporation may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission that may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Corporation, the
Corporation agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the date that the Corporation becomes subject to the reporting requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Corporation under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);
(c) So long as a Purchaser owns any Restricted Securities to furnish
to the Purchaser forthwith upon request a written statement by the Corporation
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of
<PAGE>
Page 13
the first registration statement filed by the Corporation for an offering of its
securities to the general public), and of the Securities Act and 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 Corporation, and such
other reports and documents of the Corporation and other information in the
possession of or reasonably obtainable by the Corporation as a Purchaser may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Purchaser to sell any such securities without
registration.
14. Transfer of Registration Rights. The rights to cause the Corporation
--------------------------------
to register securities granted Holders under Sections 5, 6 and 7 may be assigned
to a transferee or assignee reasonably acceptable to the Corporation in
connection with any transfer or assignment of Registrable Securities by a
Holder, provided that: (i) such transfer may otherwise be effected in accordance
with applicable securities laws, (ii) such assignee or transferee acquires at
least 100,000 shares of Preferred Stock and/or Common Stock issued upon
conversion thereof (as may be appropriately adjusted upon any stock, split,
stock dividend, recapitalization, merger, consolidation or similar event), and
(iii) such assignee or transferee agrees to be bound by the terms of this
Agreement and assumes all of the obligations of the transferring Holder
hereunder. Notwithstanding the foregoing, the rights to cause the Corporation to
register securities may be assigned to any constituent partner or member of a
Holder (including spouses and ancestors, final descendants and siblings of such
partners or members or spouses who acquire registered securities by gift, will
or intestate succession) without compliance with items (ii) or (iii) above,
provided written notice thereof is promptly given to the Corporation.
15. Standoff Agreement. Each holder of Registrable Securities (including
------------------
any transferee thereof) agrees in connection with the first two underwritten
registrations of the Corporation's equity securities with the Securities and
Exchange Commission, other than (i) a registration relating solely to employee
benefit plans or (ii) a registration relating solely to a Rule 145 transaction
upon request of the underwriters managing such underwritten offering of the
Corporation's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any of the Corporations
securities, including any Registrable Securities (other than those included in
the registration), without the prior written consent of such underwriters for
such period of time (not to exceed one hundred eighty (180) days in the case of
an initial public offering and ninety (90) days in the case of any subsequent
public offering) from the effective date of such registration, as may be
requested by the underwriters. Each such holder further agrees to execute any
agreement reflecting the above as may be requested by the underwriters at the
time of the public offering; provided, however, that the officers and directors
of the Corporation who own stock of the Corporation also agree to such
restrictions.
16. Termination of Registration Rights. The rights granted pursuant to
----------------------------------
Sections 1 through 14 of this Agreement shall terminate as to any Holder five
(5) years after the closing of the first firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock to the public at a per share public
offering price (prior to underwriter commissions and expenses) of $6.50
(adjusted for stock splits and the like) or more and total gross offering
proceeds to the Corporation of not less than $20 million (a "Qualified Public
Offering").
<PAGE>
Page 14
17. Right of First Refusal
----------------------
17.1 Amendment and Waiver of Prior Right. The holders of Series A
------------------------------------
Preferred, Series A1 Preferred, Series B Preferred and Series C Preferred
entering into this Agreement hereby agree, on behalf of all Major Holders under
the Amended Agreement, to amend the rights of first refusal of the Major Holders
set forth in Section 17 of the Amended Agreement (the "Prior Right") so that
such rights shall not apply to the Series D Preferred being issued and sold at
one or more closings pursuant to the Series D Purchase Agreement (together with
the Common Stock issuable upon conversion of such Series D Preferred), to the
extent such securities are issued and sold at one or more closings pursuant to
such agreement. The parties acknowledge that the amendment and waiver herein is
necessary to enable the Corporation to secure adequate financing, while
preserving the relative rights of the Major Holders as among themselves. In
addition, each Purchaser entering into this Agreement hereby waives its Prior
Right with respect to the Series D Preferred being issued and sold at one or
more closings pursuant to the Series D Purchase Agreement. The waiver and
amendment of the Major Holders' Prior Right as provided herein shall apply only
to the issuance of Series D Preferred as contemplated hereby and the underlying
Common Stock, and the Major Holders' rights with respect to future equity
issuances by the Company shall be as set forth below.
17.2 New Issuances. The Corporation hereby grants to each Major Holder
-------------
a right of first refusal (the "Right of First Refusal") to purchase all (or any
part) of such Major Holder's pro rata portion of any New Securities (as defined
in this Section 17), that the Corporation may, from time to time propose to sell
and issue. Such pro rata portion, for purposes of this Right of First Refusal,
shall be the ratio of (x) the number of shares of Common Stock issued and
issuable upon the conversion of the shares of Preferred Stock held by such Major
Holder or the exercise of Warrants held by such Major Holder to (y) the sum of
the total number of shares of Common Stock held or capable of being held by all
Stockholders, Warrant Holders and Option Holders of the Corporation (assuming
full exercise and conversion of all exercisable and convertible securities).
This Right of First Refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock or Preferred Stock of
--------------
the Corporation regardless of whether authorized on the date hereof; rights,
options, warrants to purchase Common Stock or Preferred Stock together with
securities of any type issued in conjunction with any such rights, options or
warrants and securities of any type whatsoever that are, or may become,
convertible into or exchangeable for Common Stock or Preferred Stock, provided,
--------
however, that New Securities does not include the following:
- ------- ---
(i) any shares of Series D Preferred issuable pursuant to the
Series D Purchase Agreement;
(ii) shares of Common Stock issuable upon conversion of the
Corporation's Preferred Stock;
(iii) shares of Common Stock or Series B Preferred Stock issuable
upon exercise of the Warrants;
(iv) securities of the Corporation issued or deemed issued
pursuant to the acquisition of a business, technology or product line by the
Corporation by merger,
<PAGE>
Page 15
purchase of assets, or other acquisition or reorganization approved by the
Corporation's Board of Directors;
(v) securities of the Corporation issued in connection
with equipment lease arrangements or bank financing transactions approved by the
Corporation's Board of Directors; or
(vi) shares of Common Stock, or options to purchase shares
of Common Stock, issued or granted to officers, directors, employees and
consultants of the Corporation pursuant to stock plans, option plans or other
arrangements approved by the Corporation's Board of Directors;
(vii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Corporation; and
(viii) shares of Common Stock issued in connection with the
Corporation's initial public offering of the Common Stock to the general public
effected pursuant to a registration statement filed with and declared effective
by the Commission under the Securities Act.
(b) In the event that the Corporation proposes to undertake an
issuance of New Securities, it shall give each Major Holder written notice of
its intention, describing the type of New Securities, the aggregate number of
such shares, the price, and the general terms upon which the Corporation
proposes to issue the same. Each Major Holder shall have twenty (20) business
days after receipt of such notice to agree to purchase its pro rata share of
such New Securities at the price and upon the terms specified in the notice by
giving written notice to the Corporation and stating therein the quantity of New
Securities to be purchased. If any Major Holder fails to agree to purchase its
full pro rata share (calculated pursuant to the first paragraph of Section 17.2)
within such twenty (20) business day period, the Corporation will give the Major
Holders who did so agree (the "Electing Major Holders") notice of the number of
shares that were not subscribed for. Such notice may be by telephone if
followed by written confirmation within two (2) days. The Electing Major
Holders shall have ten (10) business days from the date of such written notice
(or telephonic notification confirmed in writing) to agree to purchase the New
Securities not purchased by such non-purchasing Major Holders.
(c) In the event that all of the Major Holders fail to exercise
in full the Right of First Refusal within the twenty (20) business days plus ten
(10) business day period specified above, the Corporation shall have ninety (90)
days thereafter to sell (or enter into an agreement pursuant to which the sale
of New Securities covered thereby shall be closed, if at all, within sixty (60)
days from the date of said agreement) the New Securities respecting which the
rights of the Major Holders were not exercised at a price and upon terms no more
favorable to the purchasers thereof than specified in the Corporation's notice.
In the event the Corporation has not sold the New Securities within such ninety
(90) day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of such agreement), the
Corporation shall not thereafter issue or sell any Now Securities, without first
offering such New Securities to the Major Holders in the manner provided above.
(d) The Right of First Refusal hereunder is not assignable, in
whole or in part, except (i) by a Major or Holder that is a partnership to any
of its partners, (ii) by a Major or
<PAGE>
Page 16
Holder that is any venture capital group, private equity group or fund to an
Affiliated entity or person or (iii) by a Major Holder that is a corporation to
any of its shareholders.
(e) The Right of First Refusal granted under this Agreement
shall expire upon the first to occur of the following: (i) the closing of an
initial public offering of the Common Stock of the Corporation to the general
public which is effected pursuant to a registration statement filed with, and
declared effective by, the Commission under the Securities Act and (ii) as to a
specific Major Holder when such Major Holder holds fewer than 250,000 shares of
Registrable Securities.
18. Affirmative Covenants. The Corporation and each Purchaser hereby
---------------------
covenants and agrees as follows:
18.1 Financial Information
---------------------
(a) The Corporation shall furnish the following reports to each
Purchaser who holds at least 500,000 shares of Registrable Securities (as
adjusted for any stock split, stock dividend or similar capital reorganization
and the like):
(i) As soon as practicable after the end of each fiscal
year, and in any event within one hundred twenty (120) days thereafter, a copy
of the annual audit report (prepared in accordance with generally accepted
accounting principles) for such year for the Corporation and any subsidiary,
including therein consolidated balance sheets of the Corporation and any such
subsidiary as of the end of such fiscal year, consolidated statements of income
and shareholders equity and statements of cash flow of the Corporation and any
such subsidiary for such fiscal year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, all duly certified
by an independent public accounting firm selected by the Corporation's Board of
Directors;
(ii) As soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Corporation, and in any event within thirty (30) days thereafter, a consolidated
balance sheet of the Corporation as of the end of each such quarterly period,
and consolidated statements of income and shareholders equity and consolidated
statements of cash flows of the Corporation and any subsidiary for such period
and for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), subject to
changes resulting from year-end audit adjustments, and signed by the principal
financial or accounting officer of the Corporation; and
(iii) With respect to the financial statements called for in
subsections (i) and (ii) of this Section 18.1(a), an instrument executed by the
Chief Financial Officer or President of the Corporation and certifying that such
financial statements were prepared in accordance with generally accepted
accounting principles consistently applied with prior practice for earlier
periods (with the exception of footnotes that may be required by generally
accepted accounting principles) and fairly present the financial condition of
the Corporation and its results of operation for the period specified, subject
to period-end adjustment,
(b) The Corporation shall furnish the following reports to each
Major Holder:
<PAGE>
Page 17
(i) As soon as practicable after the end of each month,
and in any event within thirty (30) days thereafter, consolidated balance sheets
of the Corporation and any subsidiary as of the and of such month, and
consolidated statements of income and shareholders' equity for each month and
for the current fiscal year to date, and comparing such results to the then
current business plan, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes), subject to changes resulting
from year-end audit adjustments and signed by the principal financial or
accounting officer of the Corporation;
(ii) As soon as available (but in any event at least twenty
(20) days before the commencement of its fiscal year), an annual budget and
business plan prepared on a monthly basis for each fiscal year, and any
modifications thereto adopted through such fiscal year;
(iii) As soon as available (but in any event at least thirty
(30) days before the commencement of each fiscal quarter), a quarterly budget
and comprehensive operating budget forecasting the Company's revenue, expenses
and cash position prepared on a monthly basis for the upcoming fiscal quarter;
and
(iv) Such other information relating to the financial
condition, business, prospects or corporate affairs of the Corporation as the
Major Holder may from time to time reasonably request.
(c) The Corporation shall also afford each Major Holder, at the
principal offices of the Corporation, reasonable access to material documents of
the Corporation and rights to examine without undue disruption the facilities
and offices of the Corporation, upon at least five (5) days notice in advance of
such visit to the Corporation from such Major Holder and upon receipt of a
request from such Major Holder specifying which documents, offices and
facilities such Major Holder wishes to inspect five (5) days in advance of such
visit; but, in any event, not more than once every fiscal quarter.
(d) The covenants set forth in this Section 18.1 shall terminate
and be of no further force or effect at such time as the Corporation is required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
(e) Notwithstanding any other provisions of this Section 18.1,
the Corporation may require as a condition precedent to any Major Holder's
rights under this Section 18.1, that each person proposing to attend any meeting
of the Board of Directors and each person to have access to any of the
information provided by the Corporation to its Board of Directors shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so received during such meetings or otherwise; and, provided,
--------
further, that the Corporation reserves the right not to provide such information
- -------
to a Major Holder or its representative (or not to provide to a Major Holder
such portions the information which is sensitive vis a vis such Major Holder)
and to exclude such Major Holder or, its representative from any meeting or
portion thereof to the extent necessary to prevent the breach of attorney-client
privilege or if such Major Holder or its representative is affiliated with any
competitor (or serves on the Board of Directors of any competitor) of the
Corporation (including any of its direct or indirect subsidiaries).
18.2 Confidential Information. Each Purchaser agrees that any
------------------------
information obtained by such Purchaser pursuant to Section 18.1 which is marked
or identified as proprietary to
<PAGE>
Page 18
the Corporation or otherwise confidential will not be disclosed without the
prior written consent of the Corporation. Notwithstanding the foregoing, each
Purchaser may disclose such information, on a need to know basis, to its
employees, accountants or attorneys, or to the employees, accountants or
attorneys of its general partner or investment manager (so long as each such
person to whom confidential information is disclosed agrees in writing to keep
such information confidential), in compliance with a court order or when
otherwise necessary to enforce any of the Purchases rights hereunder. Such
information may also be disclosed to a Purchaser's constituent partners, members
or shareholders (so long as each such person to whom confidential information is
disclosed agrees to keep such information confidential). Each Purchaser further
acknowledges and understands that any information will not be utilized by such
Purchaser in connection with purchases and/or sales of the Corporation's
securities except in compliance with applicable state and federal antifraud
statutes.
18.3 Assignment of Rights to Financial Information. The rights and
---------------------------------------------
obligations pursuant to Sections 18.1 and 18.2 may be assigned or otherwise
conveyed by any Significant Holder, Major Holder or Purchaser, as the case may
be, or by any subsequent transferee of any such rights to a transferee, upon
prior written notice to the Corporation, upon the transfer by such Significant
Holder of at least 500,000 shares, by such Major Holder of at least 250,000
shares or upon the transfer by such Purchaser of at least 50,000 shares, as the
case may be, of Registrable Securities to any transferee other than a competitor
or customer of the Corporation (including any of its direct or indirect
subsidiaries); provided, however, that the Corporation shall not be obligated
-------- -------
under Section 18.1 to provide information to any transferee that the Board of
Directors of the Corporation determines in good faith to be (or be affiliated
with or serve on the Board of Directors of) an actual or potential competitor,
customer or vendor of the Corporation.
18.4 Satisfaction of Management Rights Requirements. The Corporation
----------------------------------------------
shall accord the following rights to any Major Holder:
(a) upon their request, the right to receive the same
information as is provided to members of the Board of Directors of the
Corporation;
(b) upon a reasonable request of any such Major Holder and at
times during normal business hours, to receive income statements, balance
sheets, budgets, business plans, and other financial information, and to inspect
the books and records of the Corporation; and
(c) upon a reasonable request of any such Major Holder and at
times during normal business hours, to meet and consult with management with
respect to the business of the Corporation.
The Corporation and such Major Holders shall reasonably cooperate in good
faith to agree upon mutually satisfactory management rights from time to time.
19. Voting Agreement
----------------
(a) For so long as the Series D Purchasers hold not fewer than an
aggregate of 10,000,000 shares of Series D Preferred (as appropriately adjusted
for all stock splits, dividends, combinations, reclassifications and the like),
each of the Purchasers agrees to vote all of the shares of Common Stock, Series
A Preferred, Series A1 Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or other securities of the Corporation entitled to vote in the
election of directors,
<PAGE>
Page 19
to elect to the Corporation's Board of Directors a slate of nominees that
includes at least two (2) persons designated by holders of a majority of the
Series D Preferred.
(b) For so long as funds managed or advised by New Enterprise
Associates (or any successor) hold not fewer than an aggregate of 3,000,000
shares of Series A Preferred, Series B Preferred and Series C Preferred (as
appropriately adjusted for all stock splits, dividends, combinations,
reclassifications and the like), each of the Purchasers agrees to vote all of
the shares of Common Stock, Series A Preferred, Series A1 Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or other securities of the
Corporation entitled to vote in the election of directors, to elect to the
Corporation's Board of Directors a slate of nominees that includes at least one
(1) person designated by funds managed or advised by New Enterprise Associates
(or any successor).
(c) For so long as funds managed or advised by Enterprise Partners
(or any successor) hold not fewer than an aggregate of 1,500,000 shares of
Series C Preferred (as appropriately adjusted for all stock splits, dividends,
combinations, reclassifications and the like), each of the Purchasers agrees to
vote all of the shares of Common Stock, Series A Preferred, Series A1 Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or other securities
of the Corporation entitled to vote in the election of directors, to elect to
the Corporation's Board of Directors a slate of nominees that includes at least
one (1) person designated by funds managed or advised by Enterprise Partners (or
any successor).
(d) For so long as funds managed or advised by Institutional Venture
Partners (or any successor) hold not fewer than an aggregate of 2,000,000 shares
of Series C Preferred (as appropriately adjusted for all stock splits,
dividends, combinations, reclassifications and the like), each of the Purchasers
agrees to vote all of the shares of Common Stock, Series A Preferred, Series A1
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or other
securities of the Corporation entitled to vote in the election of directors, to
elect to the Corporation's Board of Directors a slate of nominees that includes
at least one (1) person designated by funds managed or advised by Institutional
Venture Partners (or any successor).
(e) Each of the Purchasers agrees to vote all of the shares of Common
Stock, Series A Preferred, Series A1 Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or other securities of the Corporation entitled to
vote in the election of directors, to elect to the Corporation's Board of
Directors a slate of nominees that includes the Chief Executive Officer of the
Corporation and one (1) person who is an industry expert appointed by a majority
of the other directors, who initially shall be Bob Lee.
(f) The Corporation shall maintain the size of the Compensation
Committee of the Board of Directors at three (3) persons, all of whom shall be
outside directors and one (1) of whom shall be designated by holders of a
majority of the Series D Preferred. The Compensation Committee shall make
decisions regarding compensation of senior management, which shall not exceed
what is reasonable and customary.
(g) The Corporation shall reimburse the reasonable expenses of Board
meeting attendance by the representatives of the Purchasers.
(h) In the event that any person designated to the Board of Directors
in accordance with this section resigns or otherwise ceases to be a director, a
replacement director shall
<PAGE>
Page 20
be designated by the Purchasers in the manner set forth in this section and the
terms of this section shall apply to any such replacement director for so long
as it would otherwise apply to the initial director.
(i) Each of the Purchasers agrees to be present, in person or by
proxy, at all meetings of shareholders of the Corporation so that all shares of
voting securities held by such Purchaser may be voted for the election of the
directors as set forth in this section.
(j) So long as the provisions of this section are in effect, each
certificate evidencing shares of voting securities held by the Purchasers shall
bear a legend in substantially the following form:
"THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON VOTING AS SET
FORTH IN AN AMENDED AND RESTATED RIGHTS AGREEMENT BETWEEN THE
CORPORATION AND THE ORIGINAL HOLDER OF SUCH SHARES. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS
AND ITS REGISTERED OFFICE."
(k) The provisions of this section shall terminate upon the closing
of the Corporation's initial public offering of Common Stock pursuant to a
registration statement declared effective by the Commission.
20. Holders' Rights of Refusal and Co-Sale
--------------------------------------
20.1 Definitions. For purposes of this Section 20 only, the following
-----------
definitions shall apply:
(a) "Common Stock Equivalents" shall mean the Corporation's
Common Stock then outstanding plus the shares of Common Stock then issuable upon
conversion of the outstanding shares of Preferred Stock.
(b) A "Permitted Transferee" shall mean a shareholder's spouse,
child or grandchild (whether natural or adopted), or any trust for the benefit
of the shareholder or any of the foregoing.
(c) "Transaction" shall mean any transfer of shares of Common
Stock or Preferred Stock, whether in one or more related transactions, which
require the giving of notice by a Holder in accordance with this Section 20.
20.2 Notice of Proposed Transfer. In the event that a Common Holder
---------------------------
(the "Selling Holder") proposes to make any sale or transfer of Common Stock to
a third-party (a "Transfer") otherwise permitted pursuant to this Agreement,
then prior to effecting such sale or transfer the Selling Holder shall deliver
to the Corporation and to each Holder a written notice (the "Transfer Notice")
stating (i) the Selling Holder's bona fide intention to sell or otherwise
transfer such Common Stock; (ii) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (iii) the number of shares of Common Stock
to be transferred to each Proposed Transferee (the aggregate number of such
shares for all Proposed Transferees, the "Offered
<PAGE>
Page 21
Shares"); and (iv) the bona fide cash price or other consideration for which the
Selling Holder proposes to transfer the Common Stock (the "Offered Price").
20.3 Right of Offer.
--------------
(a) Following the decline by the Company (and any of its
assignees) of their rights of first offer, if applicable, the Holders shall have
an option for a period of thirty (30) days from the later of the Holder's
receipt of the Transfer Notice from the Selling Holder set forth in Section 20.2
or the Company's decline of its first offer right to purchase their or its pro
rata shares of the Offered Shares at the same price and subject to the same
material terms and conditions as described in the Transfer Notice. Each of such
persons may exercise such purchase option and, thereby, purchase all or any
portion of his or its pro rata shares (with any reallotments as provided below)
of the Offered Shares, by notifying the Selling Holder in writing, before
expiration of the initial thirty (30) day period as to the number of such shares
which he or it wishes to purchase. Each Holder's pro rata share of the Offered
Shares shall be a fraction of the Offered Shares, of which the number of shares
of Common Stock held by such Holder (assuming full exercise and conversion of
all convertible or exercisable securities) on the date of the Holder's receipt
of the Transfer Notice from the Selling Holder (the "Notice Date") shall be the
numerator and the total number of shares of Common Stock held by all Holders
(assuming full exercise and conversion of all convertible or exercisable
securities) on the Notice Date shall be the denominator. Each Holder shall have
a right of overallotment such that, if any other Holder fails to exercise the
right to purchase its full pro rata share of the Offered Shares, the other
participating Holders may, before the date ten (10) days following the
expiration of the initial thirty (30) day period, exercise an additional right
to purchase, on a pro rata basis, the Offered Shares not previously purchased
(which the Selling Holder shall notify the participating Holders of promptly
following the expiration of the thirty (30) day period set forth above) by so
notifying the Selling Holder and the Company, in writing, within such ten (10)
day period. Each Holder shall be entitled to apportion the Offered Shares to be
purchased among its partners and affiliates, provided that such Holder notifies
the Selling Holder of such allocation. If a Holder gives the Selling Holder
notice that it desires to purchase its share and, as the case may be, its
overallotment, then payment for the Offered Shares shall be by check or wire
transfer, against delivery of the Offered Shares to be purchased at a place
agreed upon between the parties and at the time of the scheduled closing
therefor.
(b) If the Holders fail to purchase all of the Offered Shares by
exercising the options granted in this Section 20.3 within the periods provided,
then, subject to the Holders' co-sale rights under Section 20.4, the Selling
Holder shall be entitled for a period of ninety (90) days thereafter to complete
the proposed Transfer of the balance of such shares not purchased by the Holders
upon the terms and conditions specified in the Transfer Notice. If the Selling
Holder has not so transferred the Offered Shares during such period, the Selling
Holders shall not thereafter make a Transfer of shares without again first
offering such shares to the other parties in the manner provided in this Section
20.3.
20.4 Co-Sale Right.
-------------
(a) A Holder shall have the right, exercisable upon written
notice to the Selling Holder within fifteen (15) days after receipt of the
Transfer Notice by the Holders, to the extent the Offered Shares are not
purchased by the Company or by the Holders pursuant to Section 20.3, to
participate in the Selling Holder's sale of Common Stock pursuant to the
specified terms and
<PAGE>
Page 22
conditions of such Transaction. To the extent that one or more of the Holders
exercise such right of participation in accordance with the terms and conditions
set forth below, the number of shares of Common Stock that the Selling Holder
may sell in the Transaction shall be correspondingly reduced. The right of
participation of each of the Holders shall be subject to the following terms and
conditions:
(i) Each of the Holders may sell all or any part of that
number of shares of Common Stock Equivalents owned by such Holder equal to the
product obtained by multiplying (x) the aggregate number of shares of Common
Stock proposed to be sold in the Transaction by the Selling Holder by (y) a
fraction, the numerator of which is the number of shares of Common Stock
Equivalents owned by the Holder immediately prior to the Transaction, and the
denominator of which is the number of shares of Common Stock Equivalents owned
by all Holders who desire to participate in the Transaction, plus the number of
shares of Common Stock Equivalents held by the Selling Holder immediately prior
to the Transaction.
(ii) Each of the Holders shall effect its participation in
the sale by delivering to the Selling Holder for transfer to the Proposed
Transferee one or more certificates, properly endorsed for transfer, which
represent the number of shares of Common Stock Equivalents that the Holder
elects to sell pursuant to this Section 20.4.
(b) The certificates that the Holders deliver to the Selling
Holder pursuant to Section 20.3(a) shall be transferred by the Selling Holder to
the Proposed Transferee upon consummation of the sale in the Transaction
pursuant to the terms and conditions specified in the Transfer Notice, and the
Selling Holder shall promptly, and in any event no later than five (5) days
thereafter, remit to each Holder that portion of the sale proceeds to which the
Holder is entitled by reason of its participation in such sale.
(c) The exercise or non-exercise of the rights of the Holders
hereunder to participate in one or more Transactions shall not adversely affect
their rights to participate in subsequent Transactions. In the event that a
Transaction does not occur with respect to any shares of Conversion Stock, the
Selling Holder shall have no obligation to any Holder other than to return any
stock certificates delivered to the Selling Holder pursuant to Section
20.4(a)(ii) in anticipation of such Transaction.
20.5 Prohibited Transfer. Any attempt by a Selling Holder to transfer
-------------------
Common Stock in violation of Section 20.3 or 20.4 of this Agreement shall be
void and the Corporation agrees that 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 the Holders that hold at least 50% of the Common Stock Equivalents.
20.6 Future Stock Subject. All shares of capital stock of the
--------------------
Corporation acquired by the Common Holders in the future shall be subject to the
provisions of this Section 20.
20.7 Permitted Transactions. The restrictions set forth in this
----------------------
Section 20 shall not apply in the following cases:
<PAGE>
AUNET Corporation
Rights Agreement
Page 23
(a) Each Common Holder may transfer shares of Common Stock to its
heirs by the estate of the deceased Common Holder; provided that in each case
such transferee agrees to be bound by this Agreement.
(b) Each Common Holder may transfer any shares to the Corporation
pursuant to (i) the exercise of any right of first refusal to such shares held
by the Corporation, (ii) the grant of (or exercise of rights to enforce) a
security interest in the shares granted to the Corporation or (iii) the exercise
of any right of repurchase to such shares held by the Corporation.
(c) Each Common Holder may transfer any shares to a Permitted
Transferee, provided that (i) such Common Holder shall bear its own expenses and
the expenses of the Company in connection with such transfer, (ii) such
Permitted Transferee agrees to be bound by this Agreement and (iii) such
transfer is effected solely for the purposes of such shareholder's tax or estate
planning.
(d) In the event that a Purchaser on behalf of whom Zesiger
executed the Series B Preferred Stock Purchase Agreement or Series C Preferred
Stock and Warrant Purchase Agreement as attorney in fact determines in good
faith either not to continue as a client of Zesiger or to dispose of all private
equity investments held by such Purchaser, such Purchaser may transfer any
shares to Zesiger or another client of Zesiger; provided that Zesiger or such
other client of Zesiger agrees to be bound by this Agreement with respect to
such shares.
20.8 Termination of Rights. The rights of refusal and co-sale granted
---------------------
under this Agreement shall expire immediately prior to the closing of an initial
public offering of the Common Stock of the Corporation to the general public
which is effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the Securities Act.
20.9 Legends. All certificates representing any Common Stock held by a
-------
Common Holder shall have endorsed thereon the following legend, in additional to
any legends required by applicable state securities laws or otherwise:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERABLE ONLY UPON COMPLIANCE WITH THE TERMS AND CONDITIONS
OF THE REFUSAL AND CO-SALE PROVISIONS OF AN AMENDED AND RESTATED
RIGHTS AGREEMENT AMONG THE CORPORATION, THE HOLDER AND CERTAIN OTHER
SHAREHOLDERS OF THE CORPORATION, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION AND MAY BE OBTAINED BY WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
21. Miscellaneous
-------------
21.1 Governing Law. This Agreement shall be governed in all respects
-------------
by the internal laws of the State of California without reference to its
provisions regarding conflicts of law. The parties hereto expressly stipulate
that any litigation under this Agreement shall be brought in the state courts of
the County of San Mateo, California and in the United States District Court for
the
<PAGE>
AUNET Corporation
Rights Agreement
Page 24
Northern District of California. The parties agree to submit to the jurisdiction
and venue of those courts.
21.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
21.3 Successors and Assigns. Except as otherwise 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.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
21.4 Entire Agreement: Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the Parties hereto with regard to the subjects hereof and
thereof, and superceded in its entirety the Amended Agreement, and no such party
shall be liable or bound to any other Party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the Party against whom enforcement of any such amendment,
waiver, discharge or termination is sought; provided, however, that any
provision of this Agreement may be amended, waived or modified with the written
consent of the Corporation and the holders of at least a majority of the
outstanding Registrable Securities; provided, further, that any such amendment,
waiver or modification shall apply by its terms to all Purchasers; provided,
further, that any Purchaser or assignee hereunder may waive any of such
Purchaser's rights or the Corporation's obligations hereunder without obtaining
the consent of any other Purchaser or assignee; provided, further, that the
attached Schedules I, II, III and IV shall be automatically amended to add (i)
--------------------------
any person or entity who purchases Preferred Stock subsequent to the date hereof
and the shares purchased by such person or entity pursuant to this Series D
Purchase Agreement and (ii) the shares purchased by any person or entity in
connection with exercise of the Warrants.
21.5 Effect of Amendment or Waiver. Each Purchaser acknowledges that
-----------------------------
by the operation of Section 21.4 hereof the holders of a majority of the
outstanding shares of Registrable Securities will have the right and power to
diminish or eliminate all rights of the Purchasers under this Agreement.
21.6 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to a Purchaser, such Purchaser's address as set forth
beneath his signature to this Agreement, and (ii) if to the Corporation, at the
address of its principal corporate
<PAGE>
AUNET Corporation
Rights Agreement
Page 25
offices (attention: Secretary), or at such other address as a party may
designate by ten days' advance written notice to the other party pursuant to the
provisions above.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
21.7 Delays or Omissions. Except as expressly provided herein, no
-------------------
delay or omission to exercise any right, power or remedy accruing to any holder
of any Preferred Stock, Conversion Stock, Warrants or Warrant Common, upon any
breach or default of the Corporation under this Agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any such holder of any breach or default
under this Agreement, or any waiver on the part of any such holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
such holder, shall be cumulative and not alternative.
21.8 Expenses. Except as otherwise provided in Section 9 or in the
--------
Series D Preferred Stock Purchase Agreement, the Corporation and each Purchaser
shall bear its own expenses incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby.
21.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the signers actually executing such
counterparts, and all of which together shall constitute one instrument.
21.10 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
21.11 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE>
AUNET Corporation
Rights Agreement
The foregoing agreement is hereby executed as of the date first above
written.
"CORPORATION"
AUNET CORPORATION
By:________________________________
Title:_____________________________
PURCHASERS"
WALDEN CAPITAL PARTNERS II, L.P.
By:________________________________
Title:_____________________________
WALDEN TECHNOLOGY VENTURES II, L.P.
By:________________________________
Title:_____________________________
INTERNATIONAL VENTURE CAPITAL
INVESTMENT CORPORATION
By:________________________________
Title:_____________________________
NEW ENTERPRISE ASSOCIATES VI
LIMITED PARTNERSHIP
By:________________________________
Title:_____________________________
W. T. TECHNOLOGIES
By:________________________________
Title:_____________________________
<PAGE>
AUNET Corporation
Rights Agreement
W.T. TECHNOLOGY
By:________________________________
Title:_____________________________
ENTERPRISE PARTNERS (MING KUANG LU)
___________________________________
WS INVESTMENT COMPANY 95B
By:________________________________
Title:_____________________________
RICHARD C. DEGOLIA
___________________________________
CHEN SUNG CHIANG
___________________________________
PETER MORRIS
___________________________________
NEA VENTURES 1995
By:________________________________
Title:_____________________________
<PAGE>
AUNET Corporation
Rights Agreement
ENTERPRISE PARTNERS (HSING-CHUNG
SZU)
By:________________________________
Title:_____________________________
ANDREW MATTHES
-----------------------------------
JOHN HAWKINS
___________________________________
W.T. TECHNOLOGY II
By:________________________________
Title:_____________________________
ENTERPRISE PARTNERS (UUNET
TECHNOLOGIES INC.)
By:________________________________
Title:_____________________________
<PAGE>
ZESIGER CAPITAL GROUP LLC, as
attorney-in-fact
By: _____________________________________________
Title:___________________________________________
As attorney-in-fact for the following purchasers:
The Jennifer Altman Foundation
Asphalt Green, Inc.
Dean Witter Foundation
Andrew Heiskell
James F. Cleary
Peter Looram
Murray Capital, LLC
Domenic J. Mizio
NFIB Corporate Account
Public Employee Retirement System of Idaho
Roanoke College
State of Oregon PERS/ZCG
Susan Uris Halpern
Wolfson Investment Partners LP
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P., its general partner
By: Generation Capital Corporation, its
general partner
_________________________________________________
John Hawkins
SALOMON BROTHERS INC
By:______________________________________________
Title:___________________________________________
WALDEN CAPITAL PARTNERS II, L.P.
By:______________________________________________
Title:___________________________________________
<PAGE>
WALDEN TECHNOLOGY VENTURES II, L.P.
By:__________________________________________
Title:_______________________________________
NEW ENTERPRISE ASSOCIATES VI
LIMITED PARTNERSHIP
By:__________________________________________
Title:_______________________________________
ABS EMPLOYEES' VENTURE FUND
LIMITED PARTNERSHIP
By:__________________________________________
Title:_______________________________________
Bayview Investors, Ltd.
By:__________________________________________
Title:_______________________________________
David F. Marquardt as Trustee, Under T/A/D
March 4, 1992
By:__________________________________________
Title:_______________________________________
Van Loben Sels Fdtn
By:__________________________________________
Title:_______________________________________
Orefund
By:__________________________________________
Title:_______________________________________
Mueller Family Trust
By:__________________________________________
<PAGE>
Title:_______________________________________
Huang, Margaret J. and George
By:__________________________________________
Sen Lin Lee
By:__________________________________________
Gabriella S. Sarlo
By:__________________________________________
Susan G. Sarlo
By:__________________________________________
W.T. TECHNOLOGY II
By:__________________________________________
Title:_______________________________________
<PAGE>
KELLY PAN
__________________________________________________
ALEX BROWN CAPITAL ADVISORY & TRUST CO.,
as attorney-in-fact
By:_______________________________________________
Title:____________________________________________
As attorney-in-fact for the following purchasers:
Mary Raiser and Mary Van Schuyler Raiser
NEW ENTERPRISE ASSOCIATES VI LIMITED
PARTNERSHIP
By:_______________________________________________
Title:____________________________________________
BAYVIEW INVESTORS
By:_______________________________________________
Title:____________________________________________
DAVID F. MARQUARDT AS TRUSTEE, UNDER T/A/D
MARCH 4, 1992
By:_______________________________________________
Title:____________________________________________
GEORGE BOLTON
__________________________________________________
<PAGE>
Institutional Venture Partners VIII, L.P.
by its General Partner,
Institutional Venture Management VIII, LLC
_____________________________________________
William Tai
Managing Director
IVM Investment Fund VIII, LLC
by its Manager,
Institutional Venture Management VIII, LLC
_____________________________________________
William Tai
Managing Director
IVM Investment Fund VIII-A, LLC
by its Manager,
Institutional Venture Management VIII, LLC
_____________________________________________
William Tai
Managing Director
IVP Founders Fund I, L.P.
by its General Partner,
Institutional Venture Management VI, LLC
_____________________________________________
William Tai
Managing Director
RICHARD DEGOLIA
_____________________________________________
<PAGE>
JOHN KAO
_____________________________________________
ENTERPRISE PARTNERS IV, L.P.
By:__________________________________________
Title:_______________________________________
ENTERPRISE PARTNERS ASSOCIATES IV, L.P.
By:___________________________________________
Title:________________________________________
ZESIGER CAPITAL GROUP LLC, as
attorney-in-fact
By:____________________________________________
Title:_________________________________________
As attorney-in-fact for the following
purchasers: Albert L. Zesiger, Andrew D. Zacks,
Barrie Ramsay Zesiger, Brearley School General
Investment Fund, Butler Family LLC, City of
Milford Pension & Retirement Plan, City of
Stamford Firemen's Pension, David C. Halpert,
Murray Capital, LLC, Dean Witter Foundation,
Harold & Grace Willens JTWROS, Helen Hunt,
Lazar Foundation, Wolfson Investment Partners
LP, Morgan Trust Co. of the Bahamas Ltd.,
Norwalk Employees' Pension Plan, PERSI-Zesiger
Capital, Psychology Associates, State of Oregon
PERS/ZCG, The Meehan Investment Partnership I,
L.P., Trustees of Amherst College, Wells Family
LLC, Patricia Blackman and Kevin Rodick JTWROS,
James Cleary, Mary Estabil, The Jennifer Altman
Foundation, John Kayola, Westcoast & Co. and
Roanoke College
<PAGE>
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P., its general partner
By: Generation Capital Corporation, its general
partner
_____________________________________________________
John Hawkins
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P., its general partner
By: Generation Capital Company LLC, as
General Partner
By:________________________________________
John Hawkins
Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Parallel Management Partners L.P.,
as Manager
By: Generation Capital Company LLC, as
General Partner
By:________________________________________
John Hawkins
Managing Director
<PAGE>
GENERATION PARALLEL MANAGEMENT
PARTNERS, L.P.
By: Generation Capital Company,
LLC, as General Partner
By:_________________________
John Hawkin
Managing Director
GREENACRE VENTURES LLC
By:____________________________
Title:_________________________
HUANG, MARGARET J. AND GEORGE
By:____________________________
Title:_________________________
ANDREW MATTHES
By:____________________________
Title:_________________________
Halpert, David C.
By:____________________________
Title:_________________________
<PAGE>
NEWBRIDGE ASIA II, L.P.
________________________________
By: Newbridge Asia GenPar II,
L.P.
its: General Partner
By: Newbridge Asia Advisors, Inc.
Its: General Partner
By:_____________________________
Title:__________________________
<PAGE>
DLJ CAPITAL CORP.
________________________________
By:_____________________________
Title:__________________________
DLJ ESC II, L.P.
________________________________
By: DLJ LBO Plans Management
Corporation
Its:General Partner
By:_____________________________
Title:__________________________
SPROUT CAPITAL VIII, L.P.
________________________________
By: DLJ Capital Corp.
Its: Managing General Partner
By:_____________________________
Title:__________________________
<PAGE>
SPROUT VENTURE CAPITAL, L.P.
________________________________
By: DLJ Capital Corp.
Its: General Partner
By:_____________________________
Title:__________________________
<PAGE>
SAMSUNG CORPORATION
_______________________________
By:____________________________
Title:_________________________
SAMSUNG AMERICA
_______________________________
By:____________________________
Title:_________________________
SAMSUNG HONG KONG LTD.
_______________________________
By:____________________________
Title:_________________________
<PAGE>
KTB VENTURE CAPITAL
_______________________________
By:____________________________
Title:_________________________
MORGAN STANLEY DEAN
WITTER EQUITY FUND
_______________________________
By:____________________________
Title:_________________________
BECHTEL ENTERPRISES
HOLDINGS, INC.
_______________________________
By:____________________________
Title:_________________________
<PAGE>
H&Q AUNET INVESTORS, LLC
_______________________________
By:____________________________
Title:_________________________
HAMBRECHT & QUIST CALIFORNIA
_______________________________
By:____________________________
Title:_________________________
H&Q EMPLOYEE VENTURE FUND
2000, L.P.
_______________________________
By:____________________________
Title:_________________________
_________________________
<PAGE>
ACCESS TECHNOLOGY
PARTNERS, L.P.
_____________________________
By:__________________________
Title:_______________________
<PAGE>
ACCESS TECHNOLOGY
PARTNERS BROKERS FUND, L.P.
_____________________________
By:__________________________
Title:_______________________
INTERNET ELITE LIMITED
_____________________________
By:__________________________
Mico Chung
Title:_______________________
Director
PACIFIC RIM WALDEN 4 LP
_____________________________
By:__________________________
Title:_______________________
_____________________________
Susie Sarlo
<PAGE>
TARRANT VENTURE PARTNERS, L.P.
______________________________
Address:
By:___________________________
Title:________________________
<PAGE>
Second Closing
_______________________________
Warren Lazarow
_______________________________
Brobeck, Phleger & Harrison LLP
<PAGE>
Common Holders
_______________________________
JoAnn Patrick Ezzell
_______________________________
Jon Beizer
<PAGE>
SCHEDULE I
----------
Schedule of Original Purchasers
AUNET Corporation
<TABLE>
<CAPTION>
Shareholder Common Series Series Series Series C Common Common Series
Stock A A1 B Preferred Stock Stock B
Bridge C Warrant
Financing Financing
Warrant Warrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ABS Employee's Ventrue Fund Limited 383,300 4,655
Partnership
An, Rou-Sue 24,375
Atwell & Co. / Wells Family LLC 100,000 19,579 2,142 17,041
Aulis & Co. / Mary M. Raiser (Alex. Brown) 50,000
Aulis & Co. / Mary Van Schuyler Raiser 25,000
(Alex. Brown)
Batrus & Co. 9,789 8,520
Bayview Investors 1,642 1,429
Bayview Investors, Ltd. 13,300
Blackman, Patricia and Kevin JTWROS 3,400 579
Bolton, George 50,000 43,519
Chang, Jen-Wen 3,833
Chang, Lin-Tung 10,417
Chen, John 25,000
Chiang, Chen Sung 89,140
Chiang, I Fan 15,625
Chu, Che-Sheng 4,333
Chu, Namsik 2,500
Chu, Thomas 26,667
Chung, Peter E. 13,125
City of Milford Pension & Retirement Plan 100,000 19,579 2,142 17,041
City of Stamford Firemen's Pension Fund 125,000 24,473 2,678 21,301
Cleary, James 3,400 665 579
Cudd & Co. / Helen Hunt (Zesiger Group) 25,000 4,895 4,260
Daly & Co. / Butler Family LLC (Zesiger Group) 75,000 14,684 1,607 12,781
Daly & Co. / Dean Witter Foundation (Zesiger) 75,000 14,684 12,781
David F. Marquardt as Trustee, Under 53,300 6,579 5,726
T/A/D March 4, 1992
DeGolia, Richard C. 76,000
DeGolia, Richard D. 9,380 8,164
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shareholder Common Series Series Series Series C Common Common Series
Stock A A1 B Preferred Stock Stock B
Bridge Warrant Warrant
Financing C
Warrant Financing
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dengel & Co./ Trustees of Amherst College 100,000 19,579 17,041
Dengel & Co./ Brearley School 5,874 5,113
General Investment
Enterprise Partners IV Associates, L.P. 233,013 240,000 80,800 256,153
Enterprise Partners IV L.P. 2,679,647 2,760,000 929,200 93,761
Estabil, Mary 3,400 665 579
Foley, Matthew 43,000
Generation Capital Partners L.P. 1,753,367 308,017 268,089
Generation Parallel Management 110 96
Partners L.P.
Giarman, Keith 10,000
Greenacre Ventures LLC 250,000 217,592
Halpert, David C. 30,000 5,874 643 5,113
Hare & Co. / Lazar Foundation 25,000 4,895 4,260
(Zesiger Group)
Hare & Co. / Norwalk Employee's Pension Plan 100,000 19,579 2,142 17,041
(Zesiger Group)
Hare & Co. / Van Loben Sels 75,000
Foundation (Zesiger)
Hawkins, John 80,000 9,874 8,594
Huang, Margaret J. and George 6,650 821 715
Institutional Venture Partners 125,809
Institutional Venture Partners VIII, L.P. 3,756,151 4,315,577
International Venture Capital 122,264 1,200,000
Investment Corp.
IVM Investment Fund VIII, LLC 40,450 46,475
IVM Investment Fund VIII-A, LLC 17,336 19,918
IVP Founders Fund I, L.P. 38,525 2,896,263
Kao, John 250,000 217,592
Kayola, John 3,400 665 579
Lee, David 25,000
Lee, Sen Lin 16,650
Lee, Timothy 195,000
Lee, Wen 15,000
Leu, Der Jang 11,250
Lippy, Stephen R.-Manager Warren Otologic 25,000 5,000
Group Inc PSP (BT Alex. Brown) W H
Lippy AG Shuring 3 F M Rizer T
Lister, Ian 44,583
Matthes, Andrew 40,000 4,297 3,740
McCormac, Suzanne Koumantzalis 20,833
McNulty, Paul 10,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shareholder Common Series Series Series Series Common Common Series
Stock A A1 B C Stock Stock B
Bridge Warrant Warrant
Financing C
Warrant Financing
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mellon Bank NA custodian for 501,000 98,088 10,733 85,373
PERSI-Zesiger Capital
Morgan Trust Co. of the Bahamas Ltd. 75,000
Morgan Trust Co. of the Bahamas 14,684 1,607 12,781
Ltd. As Trustees U/A/D 11/30/93
Morris, Peter 40,000
Mu, Sheau-Fen 3,333
Mueller Family Trust 53,334
Murray Capital, LLC 25,000 4,895 4,260 5,000
Murray, John 2,148
NEA Ventures 1995 40,000
New Enterprise Associates VI Limited 180,000 4,400,000 333,333 767,382 667,907
Partnership
Orefund 700,000
Pan, Kelly 6,500
Patricia Blackman & Kevin Rodick 665
Psychology Associates 10,000 1,958 1,704
Reese, Martin 50,000
Roanoke College 50,000
Shih, Bine Jhy 1,896
Salomon Brothers Inc. 1,000,000
Sarlo, Gabriella S. 16,650
Sarlo, Susannah G. 16,650
State Board of Administration of Florida 10,856 9,449
The Brearley School 30,000
The Jennifer Altman Foundation 50,000
The Meehan Investment Partnership I, L.P. 50,000 9,789 8,520
Venture Lending & Leasing, Inc. 180,000
Venture Lending & Leasing II, Inc. 270,000
W.T. Technoligies 55,430
W.T. Tehcnology 2,215,430
W.T. Tehcnology II 120,000
Walden Capital Partners II, L.P. 206,602 1,750,000 277,767
Walden Technology Ventures II, L.P. 31,134 250,000 55,566
Westcoast & Co. 137,050 14,997 119,284
Willens JTWROS, Harold & Grace JTWROS 25,000 4,895 4,260
Winsal & Co. 9,789 8,520
Wolfson Investment Partners LP 20,000 3,916 429 3,408
WS Investment Company 95B 144,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shareholder Common Series Series Series Series Common Common Series
Stock A A1 B C Stock Stock B
Bridge Warrant Warrant
Financing C
Warrant Financing
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wu, Liang-Ying 6,333
Yeh, Chien-Liang 5,625
Yeo, Woon 12,500
Zacks, Andrew D. 10,000 1,958 1,704
Zesiger, Albert L. 215,000 42,092 4,606 36,636
Zesiger, Barrie Ramsay 75,000 14,684 12,781
Zesiger Capital Group Pension Fund 16,600
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 8,017,409 13,500,000 1,010,000 6,782,567 9,807,047 50,529 1,896,452 460,000
</TABLE>
<PAGE>
SCHEDULE II
-----------
Schedule of Series D Purchasers (First Closing)
AUNET Corporation
<TABLE>
<CAPTION>
Series D
Purchasers Preferred
- ---------------------------------------------------------------------------------
<S> <C>
NewBridge Asia II, L.P. 17,203,574
- ---------------------------------------------------------------------------------
DLJ Capital Corp. (Sprout Group) 28,509
- ---------------------------------------------------------------------------------
DLJ ESC II, L.P. (Sprout Group) 743,637
- ---------------------------------------------------------------------------------
Sprout Capital VIII, L.P. 8,545,725
- ---------------------------------------------------------------------------------
Sprout Venture Capital, L.P. 512,743
- ---------------------------------------------------------------------------------
Samsung America 245,765
- ---------------------------------------------------------------------------------
Samsung Corporation 491,531
- ---------------------------------------------------------------------------------
Samsung Hong Kong Ltd. 245,765
- ---------------------------------------------------------------------------------
Korea Technology Banking Corp. 491,531
- ---------------------------------------------------------------------------------
Morgan Stanley Dean Witter Equity Funding 983,061
- ---------------------------------------------------------------------------------
Bechtel Enterprises Holdings, Inc. 737,296
- ---------------------------------------------------------------------------------
H & Q AUNET Investors, LLC 61,933
- ---------------------------------------------------------------------------------
Hambrecht & Quist California 36,865
- ---------------------------------------------------------------------------------
H&Q Employee Venture Fund 2000, L.P. 36,865
- ---------------------------------------------------------------------------------
Access Technology Partners, L.P. (Hambrecht & Quist) 589,836
- ---------------------------------------------------------------------------------
Access Technology Partners Brokers Fund, L.P. (Hambrecht) 11,797
- ---------------------------------------------------------------------------------
Internet Elite Limited 1,474,592
- ---------------------------------------------------------------------------------
International Venture Capital Investment Corporation 122,883
- ---------------------------------------------------------------------------------
PACVEN Walden Ventures IV, Associates Fund L.P. 24,736
- ---------------------------------------------------------------------------------
PACVEN Walden Ventures IV, L.P. 1,326,973
- ---------------------------------------------------------------------------------
Enterprise Partners IV Associates, L.P. 87,642
- ---------------------------------------------------------------------------------
Enterprise Partners IV, L.P. 1,007,882
- ---------------------------------------------------------------------------------
Institutional Venture Partners VIII, L.P. 1,075,256
- ---------------------------------------------------------------------------------
Institutional Venture Management Investment Fund VIII, LLC 20,268
- ---------------------------------------------------------------------------------
ABS Employees Venture Fund Limited Partnership 101,996
- ---------------------------------------------------------------------------------
Generation Capital Partners L.P. 509,092
- ---------------------------------------------------------------------------------
Generation Parallel Management Partners L.P. 175
- ---------------------------------------------------------------------------------
State Board of Administration of Florida 17,354
- ---------------------------------------------------------------------------------
New Enterprise Associates (NEA) 1,211,295
- ---------------------------------------------------------------------------------
Salomon Smith Barney Inc. 266,098
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series D
Purchasers Preferred
- ---------------------------------------------------------------------------------
<S> <C>
W.T. Technology 241,335
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Zesiger Capital Group
- ------------------------------------------------------------------------------------------------------------
Purchaser Record Holder
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Jennifer Altman Foundation Batrus & Co. 15,000
- ------------------------------------------------------------------------------------------------------------
Asphalt Green Inc, Cudd & Co. 15,000
- ------------------------------------------------------------------------------------------------------------
Dean Witter Foundation Daly & Co. 25,000
- ------------------------------------------------------------------------------------------------------------
Andrew Heiskell Aulis & Co. 70,000
- ------------------------------------------------------------------------------------------------------------
James F. Cleary James F. Cleary 4,000
- ------------------------------------------------------------------------------------------------------------
Peter Looram Peter Looram 16,000
- ------------------------------------------------------------------------------------------------------------
Murray Capital, LLC Murray Capital, LLC 15,000
- ------------------------------------------------------------------------------------------------------------
Domenic J. Mizio Domenic J. Mizio 65,000
- ------------------------------------------------------------------------------------------------------------
NFIB Corporate Account Houvis & Co. FBO NFIB 60,000
Corporate Account
- ------------------------------------------------------------------------------------------------------------
Public Employee Retirement System of Idaho Mellon Bank NA Custodian for 100,000
PERSI-Zesiger Capital
- ------------------------------------------------------------------------------------------------------------
Roanoke College FirstUnion & Co/Winsal & Co. 25,000
- ------------------------------------------------------------------------------------------------------------
State of Oregon PERS/ZCG Westcoast & Co. 350,000
- ------------------------------------------------------------------------------------------------------------
Susan Uris Halpern Hare & Co. 40,000
- ------------------------------------------------------------------------------------------------------------
Wolfson Investment Partners LP Wolfson Investment Partners LP 20,111
- ------------------------------------------------------------------------------------------------------------
Sub Total 820,111
- ------------------------------------------------------------------------------------------------------------
Susie Sarlo 4,430
- ------------------------------------------------------------------------------------------------------------
Conversion of Bridge Notes 990,093
- ------------------------------------------------------------------------------------------------------------
Total 40,268,644
- ------------------------------------------------------------------------------------------------------------
Second Closing
- ------------------------------------------------------------------------------------------------------------
Tarrant Venture Partners 1,474,592
- ------------------------------------------------------------------------------------------------------------
Brobeck, Phleger & Harrison LLP 24,576
- ------------------------------------------------------------------------------------------------------------
Warren Lazarow 12,288
- ------------------------------------------------------------------------------------------------------------
Total 1,511,456
- ------------------------------------------------------------------------------------------------------------
Grand Total 41,780,100
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE III
------------
Schedule of Common Holders
AUNET Corporation
<TABLE>
<CAPTION>
Common
Name of Common Holder Equivalents
- ------------------------------------------------------- ---------------------
<S> <C>
JoAnn Patrick-Ezzell 5,976,989
Jon Beizer 1,494,247
---------------------
Total 7,471,236
</TABLE>
<PAGE>
EXHIBIT 10.1
AUNET CORPORATION
1995 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means AUNET Corporation, a California corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not. If the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include Directors who are not compensated for their services or
are paid only a Director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. A leave of
absence approved by the Company shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company.
For purposes of Incentive Stock Options, no such leave may exceed 90 days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, on the expiration of
the three (3)-month period following the 91st
<PAGE>
day of such leave any Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option.
(i) "Director" means a member of the Board of Directors of the
--------
Company.
(j) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Option Exchange Program" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
2
<PAGE>
(r) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(s) "Optionee" means an Employee or Consultant who receives an Option
--------
or a Stock Purchase Right.
(t) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1995 Stock Plan.
----
(v) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(w) "Section 16(b)" means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(x) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(y) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 16,668,612 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be construed a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.
3
<PAGE>
(b) Plan Procedure After the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers and Employees who are neither Director nor Officers.
(ii) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options and Stock Purchase Rights to Employees who are also
Officers or Directors of the Company, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in compliance with the rules under
Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
16-b-3") relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted to comply with the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Employees and
--------------------------------------------------
Consultants. With respect to grants of Options and Stock Purchaser Rights to
- -----------
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(1) of the Plan;
4
<PAGE>
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the
5
<PAGE>
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 200,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options and Stock Purchase Rights to purchase up to an
additional 200,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option or Stock Purchase Right is cancelled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 12), the cancelled Option or
Stock Purchase Right shall be counted against the limit set forth in subsection
(i) above. For this purpose, if the exercise price of an Option or Stock
Purchase Right is reduced, such reduction will be treated as a cancellation of
the Option or Stock Purchase Right and the grant of a new Option or Stock
Purchase Right.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
6
<PAGE>
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonable expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan, but in no case at a rate of less than 20% per year over five (5) years
from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such
7
<PAGE>
Shares, no right to vote, receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of the
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination.
If such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the day three months and one day following such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of termination,
or if the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death. 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 immediately revert to the Plan. If, after the Optionee's death, the
Optionee's estate or a person who acquires the right to exercise the Option by
bequest or inheritance does not exercise the Option within the
8
<PAGE>
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as my be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
--------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within such person must accept such
offer, which shall in no event exceed ninety (90) days from the date upon which
the Administrator makes the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock purchase agreement in
the form determined by the Administrator. Shares purchased pursuant to the grant
of a Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. the repurchase option shall lapse at such rate as the
Administrator may determine, but in no case at a rate of less than 20% per year
over five years from the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when
9
<PAGE>
his or her purchase is entered upon the records of the duly authorized transfer
agent of the Company. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock or any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, each outstanding Option or Stock Purchase Right may be
assumed or an equivalent option or right may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If, in such
event, an Option or Stock Purchase Right is not assumed or substituted, the
Option or Stock Purchase Right shall terminate as of the date of the closing of
the merger. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger, the Option or Stock
Purchase Right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Common Stock for each Share held
on the effective date of the transaction (and if the holders are offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares). If such consideration received in the
merger is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option of Stock
Purchase Right, to be solely common
10
<PAGE>
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option of Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
11
<PAGE>
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such forms as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. Information to Optionees and Purchasers. The Company shall provide
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
12
<PAGE>
EXHIBIT 10.2
IASIAWORKS, INC.
2000 STOCK INCENTIVE PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
iAsiaWorks, Inc., a Delaware corporation, by providing eligible persons in the
Corporation's service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity incentives
programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary),
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at designated
intervals over their period of continued Board service, and
- the Director Fee Option Grant Program under which non-
employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.
B. The provisions of Articles One and Seven shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee must be authorized by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any stock option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive authority
to determine which Section 16 Insiders and other highly compensated Employees
shall be eligible for participation in the Salary Investment Option Grant
Program for one or more calendar years. However, all option grants under the
Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
2
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive such issuances, the time or times when the issuances are
to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such
shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members on or after the Underwriting Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after the
Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but shall be eligible to
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to participate
in the Director Fee Option Grant Program.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall not exceed Twenty-Five
Million shares. Such reserve shall consist of (i) the number of shares estimated
to remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders, including
the shares subject to outstanding options under the Predecessor Plan, (ii) plus
an additional increase of approximately Four Million (4,000,000) shares to be
approved by the Corporation's stockholders prior to the Underwriting Date.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2001, by
an amount equal to four and one-half percent (4.5%) of the total number of
shares of Common Stock outstanding on the last trading day in December of the
immediately preceding calendar year, but in no event shall any such annual
increase exceed Ten Million (10,000,000) shares.
C. No one person participating in the Plan may receive stock
options, separately exercisable stock appreciation rights and direct stock
issuances for more than Two Million (2,000,000) shares of Common Stock in the
aggregate per calendar year.
D. Shares of Common Stock subject to outstanding options (including
options transferred to this Plan from the Predecessor Plan) shall be available
for subsequent issuance under the Plan to the extent (i) those options expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently cancelled or repurchased
by the Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance. Shares of
Common Stock underlying one or more stock appreciation rights exercised under
Section IV of Article Two, Section III of Article Three, Section II of Article
Five or Section III of Article Six of the Plan shall not be available for
subsequent issuance under the Plan.
4
<PAGE>
E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan, (v) the number and/or class of securities and exercise
price per share in effect under each outstanding option transferred to this Plan
from the Predecessor Plan and (vi) the maximum number and/or class of securities
by which the share reserve is to increase automatically each calendar year
pursuant to the provisions of Section V.B of this Article One. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
5
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
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<PAGE>
B. Exercise and Term of Options. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but no
such option shall be exercisable after the expiration of the option term.
(ii) Any option held by the Optionee at the time of death
and exercisable in whole or in part at that time may be subsequently
exercised by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance or by the Optionee's designated
beneficiary or beneficiaries of that option.
(iii) Should the Optionee's Service be terminated for
Misconduct or should the Optionee otherwise engage in Misconduct while
holding one or more outstanding options under this Article Two, then all
those options shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
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<PAGE>
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. Non-Statutory Options shall be subject to the
same restriction, except that a Non-Statutory Option may be assigned in whole or
in part during the Optionee's lifetime to one or more members of the Optionee's
family or to a trust established exclusively for one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
---
8
<PAGE>
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Dollar Limitation. The aggregate Fair Market Value of the
-----------------
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option under the Discretionary Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become exercisable for all the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully vested shares of Common Stock. However, an
outstanding option shall not become exercisable on such an accelerated basis if
and to the extent: (i) such option is, in connection with the Corporate
Transaction, to be assumed by the successor corporation (or parent thereof) or
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Corporate Transaction on any shares for which the option is not otherwise at
that time exercisable and provides for subsequent payout in accordance with the
same exercise/vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.
B. All outstanding repurchase rights under the Discretionary Option
Grant Program shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent: (i) those repurchase rights
are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Discretionary Option Grant
Program shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof).
9
<PAGE>
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year and (iv) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar
year. To the extent the actual holders of the Corporation's outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, the successor corporation may, in connection with the
assumption of the outstanding options under the Discretionary Option Grant
Program, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all the shares of Common
Stock at the time subject to those options and may be exercised for any or all
of those shares as fully vested shares of Common Stock, whether or not those
options are to be assumed in the Corporate Transaction. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of
the Corporation's repurchase rights under the Discretionary Option Grant Program
so that those rights shall not be assignable in connection with such Corporate
Transaction and shall accordingly terminate upon the consummation of such
Corporate Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become exercisable for all the shares of
Common Stock at the time subject to those options in the event the Optionee's
Service is subsequently terminated by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those options are assumed
and do not otherwise accelerate. In addition, the Plan Administrator may
structure one or more of the Corporation's repurchase rights so that those
rights shall immediately terminate with respect to any shares held by the
Optionee at the time of his or her Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.
10
<PAGE>
G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Change in Control, become exercisable for all the shares of Common Stock at
the time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of
the Corporation's repurchase rights under the Discretionary Option Grant Program
so that those rights shall terminate automatically upon the consummation of such
Change in Control, and the shares subject to those terminated rights shall
thereupon vest in full. Alternatively, the Plan Administrator may condition the
automatic acceleration of one or more outstanding options under the
Discretionary Option Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or a different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and
11
<PAGE>
the surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (a) the Fair Market Value
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be made
in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof)
on the option surrender date and may exercise such rights at any time prior
to the later of (a) five (5) business days after the receipt of the
-----
rejection notice or (b) the last day on which the option is otherwise
exercisable in accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than ten (10)
years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock at the time subject to such option (whether or not the option
is otherwise at that time vested and exercisable for those shares) over (B)
the aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any subsequent exercise of
that right in accordance with the terms of this Paragraph C. Accordingly, no
further approval of the Plan Administrator or the Board shall be required at the
time of the actual option surrender and cash distribution.
12
<PAGE>
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Option Grant Program on the first trading day in January of the
calendar year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.
A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
13
<PAGE>
A is the dollar amount by which the Optionee's base salary is to
be reduced for the calendar year pursuant to his or her election under
the Salary Investment Option Grant Program, and
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. Exercise and Term of Options. The option shall become
----------------------------
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of the option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten (10)-
-------
year option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon the
Optionee's cessation of Service for any reason, terminate and cease to remain
outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed shall remain exercisable for the fully vested
shares until the earlier of (i) the expiration of the ten (10)-year option term
-------
or (ii) the expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Service.
14
<PAGE>
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. The option shall remain so exercisable until the
earliest to occur of (i) the expiration of the ten (10)-year option term, (ii)
- --------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Service, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over while the Optionee
remains in Service, such Optionee shall have a thirty (30)-day period in which
to surrender to the Corporation each outstanding option held by him or her under
the Salary Investment Option Grant Program. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to the surrendered option (whether or not the option is otherwise at the
time exercisable for those shares) over (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. The Primary
Committee shall, at the time the option with such limited stock appreciation
right is granted under the Salary Investment Option Grant Program, pre-approve
any subsequent exercise of that right in accordance with the terms of this
Paragraph C. Accordingly, no further approval of the Primary Committee or the
Board shall be required at the time of the actual option surrender and cash
distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Salary Investment Option Grant Program, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
15
<PAGE>
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
16
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.
A. Purchase Price.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or
17
<PAGE>
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards under the Stock Issuance
Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under one
or more outstanding share right awards as to which the designated performance
goals have not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.
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<PAGE>
B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, either upon the occurrence of a Change in Control
or upon the subsequent termination of the Participant's Service by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of that Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
19
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
-----------
below:
1. Each individual who is first elected or appointed as a non-
employee Board member at any time on or after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase Forty Thousand (40,000) shares of Common Stock,
provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting held after the
Underwriting Date, each individual who is to continue to serve as a non-employee
Board member, whether or not that individual is standing for re-election to the
Board at that particular Annual Meeting, shall automatically be granted a Non-
Statutory Option to purchase Ten Thousand (10,000) shares of Common Stock,
provided such individual has served as a non-employee Board member for at least
six (6) months. There shall be no limit on the number of such 10,000-share
option grants any one non-employee Board member may receive over his or her
period of Board service, and non-employee Board members who have previously been
in the employ of the Corporation (or any Parent or Subsidiary) or who have
otherwise received one or more stock option grants from the Corporation prior to
the Underwriting Date shall be eligible to receive one or more such annual
option grants over their period of continued Board service.
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any unvested shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. The shares subject to each initial
40,000-share grant shall vest, and the Corporation's repurchase right shall
20
<PAGE>
lapse, in a series of four (4) successive equal annual installments upon the
Optionee's completion of each year of service as a Board member over the four
(4)-year period measured from the option grant date. The shares subject to each
annual 10,000-share option grant shall vest in one installment upon the
Optionee's completion of the one (1)-year period of service measured from the
grant date.
E. Limited Transferability of Options. Each option under this Article
----------------------------------
Five may be assigned in whole or in part during the Optionee's lifetime to one
or more members of the Optionee's family or to a trust established exclusively
for one or more such family members or to Optionee's former spouse, to the
extent such assignment is in connection with the Optionee's estate plan or
pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate. The Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options under this Article Five, and those options shall, in accordance with
such designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those options. Such
beneficiary or beneficiaries shall take the transferred options subject to all
the terms and conditions of the applicable agreement evidencing each such
transferred option, including (without limitation) the limited time period
during which the option may be exercised following the Optionee's death.
F. Termination of Board Service. The following provisions shall govern
----------------------------
the exercise of any options held by the Optionee at the time the Optionee ceases
to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or the
laws of inheritance or the designated beneficiary or beneficiaries of such
option) shall have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for any or all of those shares as fully vested
shares of Common Stock.
21
<PAGE>
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve (12)-
month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service for any
reason other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of a Corporate Transaction while the Optionee remains
a Board member, the shares of Common Stock at the time subject to each
outstanding option held by such Optionee under this Automatic Option Grant
Program but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the option shares as fully vested shares
of Common Stock and may be exercised for any or all of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
B. In the event of a Change in Control while the Optionee remains a
Board member, the shares of Common Stock at the time subject to each outstanding
option held by such Optionee under this Automatic Option Grant Program but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the option shares as fully vested shares of Common Stock and
may be exercised for any or all of those vested shares. Each such option shall
remain exercisable for such fully vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights under this under this Automatic
Option Grant Program shall automatically terminate, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over while the Optionee
remains a Board member, such Optionee shall have a thirty (30)-day period in
which to surrender to the Corporation each of his or her outstanding options
under this Automatic Option Grant Program. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those
22
<PAGE>
shares) over (ii) the aggregate exercise price payable for such shares. Such
cash distribution shall be paid within five (5) days following the surrender of
the option to the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Automatic Option Grant Program, substitute one or more shares
of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
F. The grant of options under the Automatic Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
23
<PAGE>
ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may irrevocably elect to apply all or any
portion of the annual retainer fee otherwise payable in cash for his or her
service on the Board for that year to the acquisition of a special option grant
under this Director Fee Option Grant Program. Such election must be filed with
the Corporation's Chief Financial Officer prior to the first day of the calendar
year for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the retainer fee election is in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall become immediately due upon exercise
of the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the non-
employee Board member's election under this Director Fee Option Grant
Program, and
24
<PAGE>
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. Exercise and Term of Options. The option shall become exercisable
----------------------------
in a series of twelve (12) equal monthly installments upon the Optionee's
completion of each calendar month of Board service during the calendar year for
which the retainer fee election is in effect. Each option shall have a maximum
term of ten (10) years measured from the option grant date.
D. Limited Transferability of Options. Each option under this Article
----------------------------------
Six may be assigned in whole or in part during the Optionee's lifetime to one or
more members of the Optionee's family or to a trust established exclusively for
one or more such family members or to Optionee's former spouse, to the extent
such assignment is in connection with Optionee's estate plan or pursuant to a
domestic relations order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Six, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
E. Termination of Board Service. Should the Optionee cease Board
----------------------------
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
- -------
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
F. Death or Permanent Disability. Should the Optionee's service as a
-----------------------------
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully vested shares until the earlier of (i) the expiration of the ten
-------
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from
25
<PAGE>
the date of such cessation of Board service. To the extent such option is held
by the Optionee at the time of his or death, that option may be exercised by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the designated beneficiary or beneficiaries of such option.
Should the Optionee die after cessation of Board service but while
holding one or more options under this Director Fee Option Grant Program, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Board service
(less any shares subsequently purchased by Optionee prior to death), by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the designated beneficiary or beneficiaries of such option.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Board
service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed and shall remain exercisable for the fully
vested shares until the earliest to occur of (i) the expiration of the ten (10)-
--------
year option term, (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Board service or the surrender of the
option in connection with a Hostile Take-Over.
B. In the event of a Change in Control while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. The option shall remain so exercisable until the
earliest to occur of (i) the expiration of the ten (10)-year option term, (ii)
- --------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the surrender of the option in
connection with a Hostile Take-Over.
26
<PAGE>
C. Upon the occurrence of a Hostile Take-Over while the Optionee
remains a Board member, such Optionee shall have a thirty (30)-day period in
which to surrender to the Corporation each outstanding option held by him or her
under the Director Fee Option Grant Program. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the option is otherwise at
the time exercisable for those shares) over (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required at the time of
the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the outstanding options under the Director Fee Option Grant Program, substitute
one or more shares of its own common stock with a fair market value equivalent
to the cash consideration paid per share of Common Stock in such Corporate
Transaction.
E. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
27
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest-bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant or Director Fee Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their options
or the vesting of their shares. Such right may be provided to any such holder in
either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the
--------------
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
28
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan Effective
Date. However, the Salary Investment Option Grant Program and the Director Fee
Option Grant Program shall not be implemented until such time as the Primary
Committee may deem appropriate. Options may be granted under the Discretionary
Option Grant at any time on or after the Plan Effective Date, and the initial
option grants under the Automatic Option Grant Program shall also be made on the
Plan Effective Date to any non-employee Board members eligible for such grants
at that time. However, no options granted under the Plan may be exercised, and
no shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the Plan Effective Date, then all options previously
granted under this Plan shall terminate and cease to be outstanding, and no
further options shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and
no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be transferred to the Plan
at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so transferred shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such transferred options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options transferred from the Predecessor
Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i) March
--------
31, 2010, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Should
the Plan terminate on March 31, 2010, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
29
<PAGE>
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
30
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option
------------------------------
grant program in effect under Article Five of the Plan.
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
A-1.
<PAGE>
G. Corporation shall mean iAsiaWorks, Inc., a Delaware corporation,
-----------
and any corporate successor to all or substantially all of the assets or voting
stock of iAsiaWorks, Inc. which shall by appropriate action adopt the Plan.
H. Director Fee Option Grant Program shall mean the special stock
---------------------------------
option grant in effect for non-employee Board members under Article Six of the
Plan.
I. Discretionary Option Grant Program shall mean the discretionary
----------------------------------
option grant program in effect under Article Two of the Plan.
J. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
L. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market and published in The Wall Street Journal. If there is no
-----------------------
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange and published in The Wall Street Journal. If
-----------------------
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
A-2.
<PAGE>
M. Hostile Take-Over shall mean the acquisition, directly or
-----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
O. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her duties and responsibilities or the level of management to which
he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
P. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
R. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
S. Optionee shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.
A-3.
<PAGE>
T. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
V. Permanent Disability or Permanently Disabled shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
W. Plan shall mean the Corporation's 2000 Stock Incentive Plan, as
----
set forth in this document.
X. Plan Administrator shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. Plan Effective Date shall mean the date the Plan shall become
-------------------
effective and shall be coincident with the Underwriting Date.
Z. Predecessor Plan shall mean the Corporation's 1995 Stock Option
----------------
Plan in effect immediately prior to the Plan Effective Date hereunder.
AA. Primary Committee shall mean the committee of two (2) or more non-
-----------------
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders and
to administer the Salary Investment Option Grant Program solely with respect to
the selection of the eligible individuals who may participate in such program.
BB. Salary Investment Option Grant Program shall mean the salary
--------------------------------------
investment option grant program in effect under Article Three of the Plan.
CC. Secondary Committee shall mean a committee of one or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
A-4.
<PAGE>
DD. Section 16 Insider shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. Service shall mean the performance of services for the Corporation
-------
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
FF. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
GG. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
HH. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under Article Four of the Plan.
II. Subsidiary shall mean any corporation (other than the Corporation)
----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
JJ. Take-Over Price shall mean the greater of (i) the Fair Market
--------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
KK. 10% Stockholder shall mean the owner of stock (as determined under
---------------
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
LL. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
MM. Underwriting Date shall mean the date on which the Underwriting
-----------------
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
NN. Withholding Taxes shall mean the Federal, state and local income
-----------------
and employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.
A-5.
<PAGE>
EXHIBIT 10.3
IASIAWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of iAsiaWorks, Inc., a Delaware corporation, by providing eligible employees
with the opportunity to acquire a proprietary interest in the Corporation
through participation in a payroll deduction-based employee stock purchase plan
designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall be limited to Five Hundred
Thousand (500,000) shares.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2001, by
an amount equal to one-half percent (0.5%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
One Million (1,000,000) shares.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in total by all Participants on any one Purchase Date,
(iv) the maximum number
<PAGE>
and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the provisions of Section III.B of
this Article One and (v) the number and class of securities and the price per
share in effect under each outstanding purchase right in order to prevent the
dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of overlapping offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. Offering periods shall commence at semi-
annual intervals on the first business day of May and November each year over
the term of the Plan. Accordingly, two (2) separate offering periods shall
commence in each calendar year the Plan remains in existence. However, the
initial offering period shall commence at the Effective Time and terminate on
the last business day in October 2002.
C. Each offering period shall consist of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in May to the last business day in October each year and from the
first business day in November each year to the last business day in April in
the following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and terminate on
the last business day in October 2000.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within a particular offering period be less than the Fair Market
Value per share of Common Stock on the start date of that offering period, then
that offering period shall automatically terminate immediately after the
purchase of shares of Common Stock on such Purchase Date, and a new offering
period shall commence on the next business day following such Purchase Date. The
new offering period shall have a duration of twenty (24) months, unless a
shorter duration is established by the Plan Administrator within five (5)
business days following the start date of that offering period. All individuals
participating in the terminated offering period shall automatically be
transferred to the new offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date. However, an Eligible Employees may participate in only one offering period
at a time.
2.
<PAGE>
B. Except as provided in Section IV.D. above, an Eligible Employee
must, in order to participate in a particular offering period, complete the
enrollment forms prescribed by the Plan Administrator (including a stock
purchase agreement and a payroll deduction authorization) and file such forms
with the Plan Administrator (or its designate) on or before the start date of
that offering period.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an offering period may be any multiple
of one percent (1%) of the Cash Earnings paid to the Participant during each
Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent (15%)
maximum) shall become effective on the start date of the first Purchase
Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day
administratively feasible following the start date of the offering period and
shall (unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. Grant of Purchase Rights. A Participant shall be granted a separate
------------------------
purchase right for each offering period in which he or she is enrolled. The
purchase right shall be granted on the start date of the offering period and
shall provide the Participant with the right to purchase shares of Common Stock,
in a series of successive installments during that offering period, upon the
terms set forth below. The Participant shall execute a stock purchase agreement
embodying such terms and such other provisions (not inconsistent with the Plan)
as the Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. Purchase Price. The purchase price per share at which Common Stock
--------------
will be purchased on the Participant's behalf on each Purchase Date within the
particular offering period in which he or she is enrolled shall be equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the start date of that offering period or (ii) the Fair Market
Value per share of Common Stock on that Purchase Date.
D. Number of Purchasable Shares. The number of shares of Common Stock
----------------------------
purchasable by a Participant on each Purchase Date during the particular
offering period in which he or she is enrolled shall be the number of whole
shares obtained by dividing the amount collected from the Participant through
payroll deductions during the Purchase Interval ending with that Purchase Date
by the purchase price in effect for the Participant for that Purchase Date.
However, the maximum number of shares of Common Stock purchasable per
Participant on any one Purchase Date shall not exceed Seven Hundred Fifty (750)
shares, subject to periodic adjustments in the event of certain changes in the
Corporation's capitalization. In addition, the maximum number of shares of
Common Stock purchasable in total by all Participants in the Plan on any one
Purchase Date shall not exceed One Hundred Twenty-Five Thousand (125,000)
shares, subject to periodic adjustments in the event of certain changes in the
Corporation's capitalization. However, the Plan Administrator shall have the
discretionary authority, exercisable prior to the start of any offering period
under the Plan, to increase or decrease the limitations to be in effect for the
number of shares purchasable per Participant and in total by all Participants
enrolled in that particular offering period on each Purchase Date which occurs
during that offering period.
4.
<PAGE>
E. Excess Payroll Deductions. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in
total by all Participants on the Purchase Date shall be promptly refunded.
F. Termination of Purchase Right. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period in which he or she is enrolled,
terminate his or her outstanding purchase right by filing the appropriate
form with the Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during the
Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the purchase of
shares on the next Purchase Date. If no such election is made at the time
such purchase right is terminated, then the payroll deductions collected
with respect to the terminated right shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must re-
enroll in the Plan (by making a timely filing of the prescribed enrollment
forms) on or before the start date of that offering period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business
day of the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for that
Purchase Interval or (b) have such funds held for the purchase of shares on
his or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return to
active service (x) within ninety (90) days following the commencement of
such leave or (y) prior to the expiration of any longer period for which
such Participant's right
5.
<PAGE>
to reemployment with the Corporation is guaranteed by statute or contract,
his or her payroll deductions under the Plan shall automatically resume at
the rate in effect at the time the leave began, unless the Participant
withdraws from the Plan prior to his or her return. An individual who
returns to active employment following a leave of absence that exceeds in
duration the applicable (x) or (y) time period will be treated as a new
Employee for purposes of subsequent participation in the Plan and must
accordingly re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before the start date of any subsequent
offering period in which he or she wishes to participate.
G. Change in Control. Each outstanding purchase right shall
-----------------
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the start date of the offering period in which such individual is
enrolled at the time of such Change in Control or (ii) the Fair Market Value per
share of Common Stock immediately prior to the effective date of such Change in
Control. However, the applicable limitation on the number of shares of Common
Stock purchasable per Participant shall continue to apply to any such purchase,
but not the limitation applicable to the maximum number of shares of Common
Stock purchasable in total by all Participants on any one Purchase Date.
The Corporation shall use its best efforts to provide at least ten
(10) days' prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. Proration of Purchase Rights. Should the total number of shares of
----------------------------
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. The purchase right shall be exercisable only by the
-------------
Participant and shall not be assignable or transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder rights
------------------
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
6.
<PAGE>
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Code Section 423)) of the Corporation or any Corporate Affiliate, would
otherwise permit such Participant to purchase more than Twenty-Five Thousand
Dollars ($25,000.00) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period in which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one or more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000.00) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions that the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on April 11, 2000, and shall
become effective at the Effective Time, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock
7.
<PAGE>
exchange (or the Nasdaq National Market, if applicable) on which the Common
Stock is listed for trading and all other applicable requirements established by
law or regulation. In the event such stockholder approval is not obtained, or
such compliance is not effected, within twelve (12) months after the date on
which the Plan is adopted by the Board, the Plan shall terminate and have no
further force or effect, and all sums collected from Participants during the
initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in October, 2010, (ii) the date
on which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Change in Control. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the Corporation to recognize
compensation expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments or
revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
8.
<PAGE>
C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.
9.
<PAGE>
Schedule A
Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------
iAsiaWorks, Inc.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
-----
B. Cash Earnings shall mean (i) the regular base salary paid to a
-------------
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, profit-sharing distributions or
other incentive-type payments received during such period. Such Cash Earnings
shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any contributions made by the Participant to any Code
Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. However, Cash Earnings shall not include any contributions made by
the Corporation or any Corporate Affiliate on the Participant's behalf to any
employee benefit or welfare plan now or hereafter established (other than Code
Section 401(k) or Code Section 125 contributions deducted from such Cash
Earnings).
C. Change in Control shall mean a change in ownership of the
-----------------
Corporation pursuant to any of the following transactions :
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly, by a person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
A-1
<PAGE>
F. Corporate Affiliate shall mean any parent or subsidiary corporation
-------------------
of the Corporation (as determined in accordance with Code Section 424), whether
now existing or subsequently established.
G. Corporation shall mean iAsiaWorks, Inc., a Delaware corporation,
-----------
and any corporate successor to all or substantially all of the assets or voting
stock of iAsiaWorks, Inc. that shall by appropriate action adopt the Plan.
H. Effective Time shall mean the time at which the Underwriting
--------------
Agreement is executed and the Common Stock priced for the initial public
offering of such Common Stock. Any Corporate Affiliate that becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section 3401
(a).
J. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market and published in The Wall Street Journal. If there is no
-----------------------
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange and published in The Wall Street Journal. If
-----------------------
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(iii) For purposes of the initial offering period that begins at
the Effective Time, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public offering
pursuant to the Underwriting Agreement.
K. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
A-2
<PAGE>
L. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
M. Participating Corporation shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
N. Plan shall mean the Corporation's 2000 Employee Stock Purchase
----
Plan, as set forth in this document.
O. Plan Administrator shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.
P. Purchase Date shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date shall be October 31, 2000.
Q. Purchase Interval shall mean each successive six (6)-month period
-----------------
within a particular offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
R. Stock Exchange shall mean either the American Stock Exchange or the
--------------
New York Stock Exchange.
S. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3
<PAGE>
Exhibit 10.4
IASIAWORKS, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this day of , 2000 between iAsiaWorks, Inc., a
Delaware corporation (the "Company"), and ("Name") ("Indemnitee").
WHEREAS, Indemnitee, a member of the Board of Directors or an officer,
employee or agent of the Company, performs a valuable service in such capacity
for the Company;
WHEREAS, the stockholders of the Company have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors,
employees and agents of the Company to the maximum extent authorized by Section
145 of the Delaware General Corporation Law, as amended (the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature,
permit contracts between the Company and the members of its Board of Directors,
officers, employees or agents with respect to indemnification of such directors,
officers, employees or agents;
WHEREAS, in accordance with the authorization as provided by the Code,
the Company either has purchased and presently maintains or intends to purchase
and maintain a policy or policies of Directors and Officers Liability Insurance
("D & O Insurance") covering certain liabilities which may be incurred by its
directors and officers in the performance of their duties as directors and
officers of the Company;
WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or officers,
employees or agents by such D & O Insurance and by statutory and bylaw
indemnification provisions; and
WHEREAS, in order to induce Indemnitee to continue to serve as a
member of the Board of Directors, officer, employee or agent of the Company, the
Company has determined and agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as
a director, officer, employee or agent after the date hereof, and for other good
and valid consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification of Indemnitee. The Company hereby agrees to hold
-----------------------------
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the provisions of the Code, as may be amended from time to time.
<PAGE>
2. Additional Indemnity. Subject only to the exclusions set forth
--------------------
in Sections 3 and 6(c) hereof, the Company hereby further agrees to hold
harmless and indemnify Indemnitee:
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company) to which
Indemnitee is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Indemnitee is, was or at any time becomes a
director, officer, employee or agent of the Company or any subsidiary of the
Company, or is or was serving or at any time serves at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the non-exclusivity provisions of Article VII,
Section 6 of the Bylaws of the Company and the Code.
3. Limitations on Additional Indemnity.
-----------------------------------
(a) No indemnity pursuant to Section 2 hereof shall be paid by
the Company:
(i) in respect to remuneration paid to Indemnitee if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(ii) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
(iii) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest or to
constitute willful misconduct;
(iv) on account of Indemnitee's conduct which is the subject
of an action, suit or proceeding described in Section 6(c)(ii) hereof;
(v) on account of any action, claim or proceeding (other
than a proceeding referred to in Section 7(b) hereof) initiated by the
Indemnitee unless such action, claim or proceeding was authorized in the
specific case by action of the Board of Directors;
(vi) if a final decision by a Court having jurisdiction in
the matter shall determine that such indemnification is not lawful (and, in this
respect, both the Company and Indemnitee have been advised that the Securities
and Exchange Commission
2
<PAGE>
believes that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication); and
(vii) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of (a) such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof and (b) any additional
amount paid to the Indemnitee pursuant to any D & O Insurance purchased and
maintained by the Company.
(b) No indemnity pursuant to Section 1 or 2 hereof shall be
paid by the Company if the action, suit or proceeding with respect to which a
claim for indemnity hereunder is made arose from or is based upon any of the
following:
(i) Any solicitation of proxies by Indemnitee, or by a group
of which he was or became a member consisting of two or more persons that had
agreed (whether formally or informally and whether or not in writing) to act
together for the purpose of soliciting proxies, in opposition to any
solicitation of proxies approved by the Board of Directors.
(ii) Any activities by Indemnitee that constitute a breach
of or default under any agreement between Indemnitee and the Company.
4. Contribution. If the indemnification provided in Sections 1 and
------------
2 hereof is unavailable by reason of a Court decision described in Section
3(a)(vi) hereof based on grounds other than any of those set forth in paragraphs
(i) through (v) of Section 3 (a) hereof, then in respect of any threatened,
pending or completed action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or
proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
5. Notification and Defense of Claim. Not later than thirty (30)
---------------------------------
days after receipt by Indemnitee of notice of the commencement of any action,
suit or proceeding, Indemnitee shall, if a claim in respect thereof is to be
made against the Company under this Agreement, notify the Company of the
commencement thereof; but Indemnitee's omission so to notify the Company will
not relieve the Company from any liability which it may have to
3
<PAGE>
Indemnitee otherwise than under this Agreement. With respect to any such action,
suit or proceeding as to which Indemnitee notifies the Company of the
commencement thereof:
(a) The Company will be entitled to participate therein at its
own expense.
(b) Except as otherwise provided below, to the extent that it
may wish, the Company shall, jointly with any other indemnifying party similarly
notified, be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee. After notice from the Company to Indemnitee of its
election to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ its own counsel in such action, suit or
proceeding, but the fees and expenses of such counsel incurred after notice from
the Company of the Company's assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Company; (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action; or (iii) the Company shall not in
fact have employed counsel to assume the defense of such action; in each of
which cases the fees and expenses of Indemnitee's separate counsel shall be paid
by the Company. The Company shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will unreasonably withhold
its consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Indemnitee employs his or her own counsel
pursuant to Sections 5(b)(i) through (iii) above, the Company shall advance to
Indemnitee, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving from Indemnitee copies of invoices presented to Indemnitee
for such expenses.
(a) Indemnitee agrees that Indemnitee will reimburse the Company
for all reasonable expenses paid by the Company in investigating or defending
any civil or criminal action, suit or proceeding against Indemnitee in the event
and only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Indemnitee is not
entitled, under the provisions of the Code, the Bylaws, this Agreement or
otherwise, to be indemnified by the Company for such expenses.
4
<PAGE>
(b) Notwithstanding the foregoing, the Company shall not be
required to advance such expenses to Indemnitee in respect of any action arising
from or based upon any of the matters set forth in subsection (b) of Section 3
or if Indemnitee (i) commences any action, suit or proceeding as a plaintiff
unless such advance is specifically approved by a majority of the Board of
Directors or (ii) is a party to an action, suit or proceeding brought by the
Company and approved by a majority of the Board which alleges willful
misappropriation of corporate assets by Indemnitee, disclosure of confidential
information in violation of Indemnitee's fiduciary or contractual obligations to
the Company, or any other willful and deliberate breach in bad faith of
Indemnitee's duty to the Company or its shareholders.
7. Enforcement.
-----------
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on the Company
hereby in order to induce Indemnitee to continue as a director, officer,
employee or other agent of the Company, and acknowledges that Indemnitee is
relying upon this Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse Indemnitee for all Indemnitee's
reasonable fees and expenses, including attorney's fees, in bringing and
pursuing such action.
8. Subrogation. In the event of payment under this agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
9. Continuation of Obligations. All agreements and obligations of
---------------------------
the Company contained herein shall commence upon the date that Indemnitee first
became a member of the Board of Directors or an officer, employee or agent of
the Company, as the case may be, and shall continue during the period Indemnitee
is a director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Indemnitee was a director, officer, employee or agent of the Company or
serving in any other capacity referred to herein.
10. Survival of Rights. The rights conferred on Indemnitee by this
------------------
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
11. Non-Exclusivity of Rights. The rights conferred on Indemnitee by
-------------------------
this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of the Company's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office; provided, however, that this
5
<PAGE>
Agreement shall supersede and replace any prior indemnification agreements
entered into by and between the Company and Indemnitee and that any such prior
indemnification agreement shall be terminated upon the execution of this
Agreement.
12. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the Company
to indemnify the Indemnitee to the full extent provided by the Bylaws or the
Code.
13. Governing Law. This Agreement shall be interpreted and enforced
-------------
in accordance with the laws of the State of Delaware.
14. Binding Effect. This Agreement shall be binding upon Indemnitee
--------------
and upon the Company, its successors and assigns, and shall inure to the benefit
of Indemnitee, his or her heirs, personal representatives and assigns and to the
benefit of the Company, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
-------------------------
termination or cancellation of this Agreement shall be effective unless it is in
writing and is signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
IASIAWORKS, INC.
a Delaware corporation
By: __________________________________
INDEMNITEE
______________________________________
((Name)), ((Title))
Address: ______________________________________
______________________________________
6
<PAGE>
Exhibit 10.5
Taiwan Telecommunication Network
Value Added Network Services
March 13, 2000
- --------------------------------------------------------------------------------
iAsiaWorks
New Addition:
Special Leasing Case -- Renting of Machine Room Space:
Originally 10 cabinets were rented in Chi-nan Road machine room; 24 more
cabinets to be rented from February 1 to October 31.
1. Initial fixed monthly rental fee for cabinets: * per cabinet per
month. * discount for each cabinet from second cabinet onward at
* per month for a total leasing period of three years. Three
months' rent to be collected for each cabinet as security deposit,
with 10% discount on total monthly rental fee. Should leasing period
of three years not be completed, lessee must make up the shortfall of
10% concession on all monthly rental fees already paid (for details
see standard prices on full price list for network services).
2. During the life of the contract, following concessions apply to rental
of cabinets depending on number of cabinets leased:
a. In case of leasing 12 or more cabinets (inclusive):
Refund of * ,being one month's security deposit from the three
months' security deposit collected in advance (on the basis of *
per cabinet),
b. In case of leasing 24 or more cabinets:
Refund of * being one month's security deposit from the two
months' security deposit collected in advance (on the basis of *
per cabinet). Monthly rental for 24 cabinets is to be subject to
an additional 2% discount, to be refunded together with refund of
one month's security deposit.
c. After leasing 24 cabinets, monthly rental fee is to be calculated
at * per cabinet (refer to Contract No. 8900057-001).
3. If the number of cabinets rented has not reached the quantity in this
special leasing case by October 31, this number shall nevertheless be
[*] - CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1
<PAGE>
deemed to have been rented for use, and leasing fee for 24 cabinets
will be included on the bill for November (on the basis of Contract
No, 8900057-001), to be paid in full by the lessee the following
month.
4. Should this agreement be terminated prematurely during the life of the
contract (February 1, 2000 to October 31, 2000), the security deposit
shall not be refunded.
New Addition Service Fees:
<TABLE>
<S> <C> <C> <C>
One-time Payment * Communication Services Fee 0
Communication Equipment Rental Fee 0
Fee for Access to Logistics Support 0
Other Monthly Rental Fees *
CIR/Connection Monthly Rental Fee 0
----------------------------------------------------------------------------------------------
One-time Payment * Total Monthly Rental Fee * /mo
5% VAT * 5% VAT *
Sum incl. Tax * Sum incl. Tax * /mo
</TABLE>
Remarks:
1. Service fees shall apply from the actual date the rent becomes
effective.
2. Terms of Payment: Invoice for each month shall be issued the same
month, to be paid in cash or by check payable at sight.
3. There shall be two counterparts of this contract, each of which shall
constitute an original, with both parties holding one copy each.
<TABLE>
<S> <C> <C> <C>
Sales Representative of: Li Chien-ying Client No.: 10000941-007
TTN
Position: Sales Specialist Contract No.: 8900057
Immediate Supervisor: Signature of Client's Representative:
Department Head: Company Seals:
</TABLE>
Dated: Month Day, Year
----------------
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2
<PAGE>
Taiwan Telecommunication Network
Network Services Price List
Attachment 2
<TABLE>
<S> <C> <C>
Client Name: iAsiaWorks
Client Code: 10000941-007 Contract Code: 8900057
Service Category: Machine room space
Service Code 107970
Communication Protocol N/A
Transmission Speed N/A
Start Terminal AUNET Chinan Station
End Terminal Taipei Chi-nan machine room
One-time Payment *
Communication Services Fee *
Communication Equipment Rental Fee *
Fee for Access to Logistics Support *
Other Monthly Rental Fees *
CIR Monthly Rental Fee *
*
Subtotal *
Total Monthly Rental Fee *
</TABLE>
Remarks:
1. Standard specifications of each of this company's cabinets: each
cabinet has five racks.
Specifications of each rack: 191cm (L) * 60cm (W) * 60cm (D)
2. Standard power for each of this company's cabinets: Voltage 100V,
Current 20A.
3. Temperature of this company's Chi-nan machine room 22 degrees Celsius,
relative humidity 50%.
4. Extra power fee shall apply for those requiring extra power in
addition to standard power suplied.
5. When leasing this company's machine room space listed above, the
leasing security deposit must be paid to this company in advance. Each
cabinet shall be calculated at NT$ * only, and this company shall
issue a custody slip to the client. Said security deposit shall, when
presented by the custody slip, be refunded to the client without
interest, provided that the client has paid all monies owed in full.
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
3
<PAGE>
6. Terms of payment for fees listed above: This company shall issue an
invoice for the rent for each month at the beginning of that month,
Upon receipt of the invoice, the client should pay the fee in cash or
by check payable at sight by the end of the month.
7. An additional 5% VAT applies to prices listed above.
4
<PAGE>
Page 1 March 13, 2000
Full Price List for TTN-ENS/DPP Network Services
Client Name: AUNET (Taiwan) Ltd.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Start End Category/ One-time Monthly Rent Concession Subtotal
Terminal Terminal Speed Payment for
Long-distance
Circuit
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taipei Hsinchu Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Taipei Taoyuan Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Taoyuan Hsinchu Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Hsinchu Taichung Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Taichung Kaohsiung Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Taipei Kaohsiung Private line * 85% *
768K
- ---------------------------------------------------------------------------------------------------------
Total NT$ * NT$ *
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Place Cabinet One Time First Cabinet Second Subtotal
Quantity Payment Cabinet
Onward
at 20%
Discount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Chi-nan Road, Taipei 10 * * NT$ *
- ----------------------------------------------------------------------------------------------
Taoyuan 1 * NT$ *
- ----------------------------------------------------------------------------------------------
Hsinchu 2 * * NT$ *
- ----------------------------------------------------------------------------------------------
Taichung 1 * NT$ *
- ----------------------------------------------------------------------------------------------
Kaohsiung 1 * NT$ *
- ----------------------------------------------------------------------------------------------
Total NT$0 NT$ * NT$ * NT$ *
- ----------------------------------------------------------------------------------------------
</TABLE>
Added Leasing Section at Chi-nan Machine Room
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Place Cabinet One Time First Cabinet Second Subtotal
Quantity Payment Cabinet
Onward
at 20%
Discount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taipei Chi-nan 24 * * NT$ *
Total NT$ * NT$ * NT$ *
- ----------------------------------------------------------------------------------------------
</TABLE>
One-time Payment Total NT$ *
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
5(I)
<PAGE>
Monthly Rental Fees NT$ *
Upon completion of three-year services,
10% discount applies to total monthly rental fees, thus NT$ *
Remarks:
1. The validity of the contract is for three years of services. Should
three-year period not be completed, client must make up the shortfall
of 10% concession on all monthly rental fees.
2. For leasing of all cabinets in machine room, fee for first cabinet
shall be NT$ * each, while fee for second cabinet onward shall be
NT$ * each.
3. A one-time installation fee applies.
4. Once the supplementary use section of the Taipei Chi-nan Road machine
room has reached 24 cabinets, a * % discount shall apply to these 24
cabinets and to all subsequent supplementary use sections.
5. Value added network services include circuits and related
communications equipment.
6. An additional 5% VAT applies to prices listed above.
7. Terms of payment: Invoice for each month shall be issued the same
month, to be paid in cash or by check payable at sight.
8. Services fee shall apply from the date installation is completed.
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
6
<PAGE>
Exhibit 10.6
MEMORANDUM OF UNDERSTANDING
---------------------------
This Memorandum of Understanding (the "MOU") is made this 28th day of March
2000 ("Effective Date") by and between iAsiaWorks, Inc., a company incorporated
in the State of California, U.S.A. ("iAW") and Integra a French company
("Integra"). iAW and Integra are individually referred to as a "party" and
collectively as the "parties."
RECITALS
A. iAW is engaged in the business of providing internet facilities and
services in the United States and Asia and possesses strategic, operational
and financial capabilities in the development and operation of a broad
variety of Internet related businesses.
B. Integra is engaged in the business of providing Internet facilities and
services in Europe and possesses strategic, operational and financial
capabilities in the development and operation of a broad variety of
Internet related businesses.
C. The parties intend to co-operate with each other to their mutual benefit
and to undertake certain and various activities together.
NOW, THEREFORE in view of the foregoing premises, the parties hereby mutually
agree as follows:
1. General Undertaking
-------------------
1.1 iAW will offer to Integra for the benefit of Integra or its customers the
following services ("Services") at such locations in the United States and
Asia-Pacific as iAW may be located from time to time, including but not
limited to the United States, Australia, China, Hong Kong, Japan, New
Zealand, The Philippines, Singapore, Taiwan and Thailand.
(a) Hosting Services;
(b) Professional Services;
(c) remote-hands maintenance service and systems administration service
("Administration Services") 24 hours per day and 7 days per week.
1.2 Integra will offer to iAW for the benefit of iAW or its customers the
following services ("Services") at such locations in the European region as
Integra may be located from time to time, including but not limited to
France, United Kingdom, Germany, Italy, Spain, Netherlands, Denmark,
Norway, Sweden and Iceland;
(a) Hosting Services;
(b) Professional Services;
(c) remote-hand maintenance service and systems administration service
("Administration Services") 24 hours per day and 7 days per week.
1.3 In consideration of iAW providing:
(a) the Hosting Services, Professional Services and Administration
Services to customers referred to iAW by Integra, iAW will pay Integra
a commission based upon * % of the monthly revenues to provide such
services.
1.4 In consideration of Integra providing:
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 1(i)
<PAGE>
(a) the Hosting Services, Professional Services and Administration
Services to customers referred to Integra by iAW, Integra will pay iAW a
commission based upon * % of the monthly revenues to provide such services.
2. Preferred Partnership
---------------------
2.1 Each party recognizes that, as between the parties, the relationship is
non-exclusive.
2.2 Each party further recognizes the need to establish a close business
relationship, and to that end, shall endeavor to utilize the services of
the other and recommend the same to its respective customers where and when
possible.
2.3 Although not exclusive in nature, the parties shall refer to the business
relationship as a Preferred Partnership.
3. Confidentiality
---------------
3.1 Each party undertakes to refrain from disclosing (a) the existence, nature
or terms of this MOU and/or the terms of the transactions referred to
herein, or (b) the confidential documents and information exchanged by the
parties in furtherance of the actions contemplated to this MOU (hereinafter
"Confidential Information"), without prior written consent form the other
party, except in the following circumstances:
(a) in the event that any Confidential Information is known to the party
receiving the same prior to the disclosure thereof by the disclosing
party or becomes known to the party receiving such information from a
third party not involving any breach of this MOU;
(b) in the event that either of the parties is required to disclose the
Confidential Information in order to comply with any law, rule, order,
administrative or court resolution or arbitration decision;
(c) in the event that the Confidential Information is generally known by
the public or has been publicly disclosed; or
(d) the parties agree in writing that it be disclosed to specified person,
upon such terms and conditions as the parties may agree and specify.
3.2 The foregoing obligations regarding Confidential Information shall not
prohibit disclosure to (a director, employees or advisors and the other
representatives of either party whose duties require them to know the
Confidential Information (such persons shall be required by the party with
whom they are employed or associated to uphold the confidentiality of
Confidential Information made available to them); (b) potential sources of
financing; or (c) potential parties to the Agreement who, in term, shall be
required by the party providing Confidential information to it to uphold
the confidentiality of the Confidential Information made available to it.
3.3 Each party undertakes to refrain from making any public announcement on
matters contained in this MOU without prior written notice to and approval
thereof by the other party. The parties shall mutually agree upon the
content of any such disclosure.
4. Expenses
--------
Each party will bear its own costs and expenses incurred in connection with
the matters contemplated in this MOU.
[*] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 2
<PAGE>
5. Press Announcements
-------------------
5.1 Neither party will make any public announcement in any form without the
express and written authority of the other party.
5.2 The parties agree to jointly prepare and publish a press release announcing
the initial terms and conditions of this MOU, at their earliest
opportunity.
6. Effect of this MOU
------------------
For the avoidance of doubt, the provisions in this MOU are, and are
intended to be, legally binding.
7. General Terms
-------------
7.1 This MOU represents the full and complete agreement between the parties
with respect to the subject matter hereof and supersedes all prior
agreements (whether written or oral) between the parties herein.
7.2 This MOU shall be governed by and construed under the Laws of the State of
California.
8. Termination
-----------
8.1 Either party may terminate this MOU upon giving a written notice to the
other party of at least 60 calendar days.
8.2 Notwithstanding termination in accordance with clause 8.1 or at law the
obligations under clause 3, for a period of 12 months from the date of
valid termination.
IN WITNESS WHEREOF, the parties have herein set their hand on the date and place
first above written.
iAsiaWorks, Inc. INTEGRA Ltd.
By: /s/ Dan Weirich By: /s/ Aymeric de Cardes
------------------------------ ------------------------------
Its: V.P. of Business Development Its: V.P. of Business Development
----------------------------- -----------------------------
Page 3
<PAGE>
EXHIBIT 10.7
Dated the day of 2000
-------------------------------------------
MONANCE LIMITED
(as Landlord)
AND
IASIAWORKS (HK) LIMITED
(as Tenant)
------------------------------------------------
TENANCY AGREEMENT
of
27th Floor of Hongkong Telecom Tower,
979 King's Road, Quarry Bay, Hong Kong
------------------------------------------------
<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
------------------------------------
PART I
------
LANDLORD : MONANCE LIMITED
REGISTERED OFFICE : 39th Floor, Hongkong Telecom Tower, Taikoo Place,
979 King's Road, Quarry Bay, Hong Kong
TENANT : IASIAWORKS (HK) LIMITED
PLACE OF : HONG KONG
INCORPORATION
REGISTERED OFFICE/ : 31st Floor, Shell Tower, Times Square, Causeway Bay,
PRINCIPAL PLACE Hong Kong
OF BUSINESS
PART II
-------
THE BUILDING : The multi-storeyed commercial/office building erected
as part of the Development erected on Section S and The
Remaining Portion of Quarry Bay Marine Lot No. 1 and
known as:
HONGKONG TELECOM TOWER.
Taikoo Place,
979 King's Road,
Quarry Bay,
Hong Kong.
-62-
<PAGE>
: All Those 27th Floor of the Building which for the
purposes of identification only are shown and coloured
Pink on the 27th Floor Plan hereto annexed.
PART III
--------
TERM : A term of three (3) years commencing on the 15/th/ day of
March 2000 and expiring on the 14/th/ day of March 2003
(both days inclusive).
PART IV
-------
RENT FREE PERIOD : Notwithstanding anything to the contrary herein, a rent
free period of seven (7) months in the following manner
shall be given :
First three (3) months in year 1, i.e. 15.3.2000 to
14.6.2000, First two (2) months in year 2, i.e. 15.3.2001
to 14.5.2001 and First two (2) months in year 3, i.e.
15.3.2002 to 14.5.2002, during which rent free period the
Tenant
(a) shall not be required to pay rent or, subject to
sub-clause (c) below, Air-Conditioning Charges;
-63-
<PAGE>
(b) but shall be obliged to pay rates and Management
Charges and other outgoings payable by the Tenant in
manner hereinafter mentioned; and
(c) in the event of air-conditioning being supplied to
any part of the Premises at the request of the
Tenant during the rent-free period, the Tenant
shall pay Air-Conditioning Charges at the rate set
out in Part II of the Second Schedule hereto for the
airconditioning supply during Normal Business Hours,
and at the rate mentioned in Section IV, Clause
4.06(b) hereof for any supply outside Normal
Business Hours.
-64-
<PAGE>
THE SECOND SCHEDULE ABOVE REFERRED TO
-------------------------------------
PART I
------
RENT
----
The rent shall be Hong Kong Dollars THREE HUNDRED AND THREE THOUSAND TWO
HUNDRED AND SIXTY-ONE Only (HK$303,261.00) per calendar month.
PART II
-------
PARTICULARS OF AIR-CONDITIONING CHARGES
---------------------------------------
The Air-Conditioning Charge that will be payable with effect from the
commencement of the Term for air-conditioning supplied to the Premises during
Normal Business Hours will be HK$50,543.50 per month (subject to review).
PART III
--------
MANAGEMENT CHARGES
------------------
The Management Charge that will be payable with effect from the commencement of
the Term as a due proportion of the cost to the Landlord of providing the
management services to the Common Areas and services of the Development will be
HK$33,214.30 per month (subject to review).
PART IV
-------
DEPOSIT
-------
The amount of the deposit that shall be paid to the Landlord in cash on the
signing hereof in accordance with Clause 9.01 of Section IX shall be in the sum
HK$1,161,056.40.
-65-
<PAGE>
THE THIRD SCHEDULE ABOVE REFERRED TO
------------------------------------
USER
----
The Tenant will use the Premises for commercial offices for the purposes of the
business of the Tenant and/or its Related Companies only and for no other
purpose whatsoever.
-66-
<PAGE>
THE FOURTH SCHEDULE ABOVE REFERRED TO
-------------------------------------
SPECIAL CONDITIONS
HANDING OVER OF POSSESSION
--------------------------
1.1 Vacant possession of the Premises shall be given by the Landlord to the
Tenant on the date of commencement of the Term.
1.2 Possession of the Premises shall be handed over by the Landlord to the
Tenant in the "as is" condition with the following fixtures and fittings.
(a) Fully fitted suspended ceilings light boxes, air conditioning grills,
diffusers, ducting, sprinkler system, grid and tiles.
(b) A raised floor system incorporating floor tiles and the underfloor power
grid.
(c) The voice/data cable, subject to the Tenant and Landlord agreeing a fair
purchase price. If no agreement can be reached, the voice/data cable shall
be left in situ at no cost to the Tenant.
(d) All pantries in an "as is" condition with the exception of the moveable
fittings.
(e) Blinds around the windows.
1.3 From the date of possession of the Premises handed over to the
-67-
<PAGE>
Tenant until the date of commencement of the Term the Premises shall be
deemed to be held by the Tenant as the Landlord's licensee free of payment
of rent but subject to payment by the Tenant during such period of all
rates, Air-Conditioning Charges and Management Charges which would be
payable in respect of the Premises during the Term, and to the observance
and performance by the Tenant of the same terms and conditions of this
Agreement which the Tenant would be obliged to observe and perform during
the Term.
2. TENANT'S RIGHT OF SUB-LETTING
-----------------------------
Notwithstanding the provisions of Clause 5.22 of this Agreement, the
Tenant may (subject to obtaining the prior written consent of the Head Landlord
and the Landlord such consent not to be unreasonably withheld) sublet the
Premises to any third party Provided that:
(a) if the Tenant shall be desirous of sub-letting any portion of the Premises
it shall notify the Landlord in writing of its intention so to do and
shall provide to the Landlord particulars of:-
(i) the name and address of the proposed sub-tenant,
(ii) the portion of the Premises proposed to be sub-let ("the Sub-Let
Portion) accompanied by a plan showing the position and dimensions
thereof,
(iii) the business proposed to be carried on by the proposed sub-tenant at
the Sub-Let Portion;
(iv) the term of the proposed sub-letting,
(v) the proposed rent and other charges to be paid by the
-68-
<PAGE>
proposed sub-tenant PROVIDED THAT the rent payable by the sub-tenant
shall not be less than the then current market rental and shall in
any event not be less than the PSF Tenant's Rental as defined in
sub-clause (d)(ii) hereof;
(b) no sub-tenancy shall be granted for a period which would extend beyond
the expiry date of the Term;
(c) the lettable floor area of the Sub-Let Portion, when aggregated with the
lettable floor area of all portions of the Premises in respect of which
there shall be a subsisting sub-tenancy granted pursuant to this Special
Condition 2, shall not exceed 5,776 square feet in the aggregate;
(d) if the Tenant shall derive a profit from the sub-letting of the Sub-Let
Portion, the Tenant shall be required to share such profit with the
Landlord in accordance with the following formula:-
(i) the rent per square foot of the lettable floor area of the Sub-Let
Portion derived by the Tenant from the sub-letting ("the PSF Sub-
Letting Rental") shall be reasonably determined by the Landlord;
(ii) the rent per square foot of the lettable floor area of the Premises
payable by the Tenant under this Agreement ("the PSF Tenant's
Rental") shall be reasonably determined by the Landlord;
(iii) if the PSF Sub-Letting Rental exceeds the PSF Tenant's Rental, the
Tenant will in respect of each square foot of the lettable floor
area of the Sub-Let Portion share the
-69-
<PAGE>
excess equally with the Landlord;
(iv) payment of the proportion of the PSF Sub-Letting Rental to which the
Landlord is entitled under this sub-clause shall be made to the
Landlord within 7 days from the date the relevant sub-letting rental
is received by the Tenant;
(v) Air-Conditioning Charges and Management Charges shall not be taken
into account for the purposes of this Clause and the Tenant will
pass on all Air-Conditioning Charges and Management Charges and
rates to its sub-tenant(s) at cost;
(e) prior to entering into any sub-letting permitted hereunder, the Tenant
shall procure that the sub-tenant enter into:
(i) direct covenants with the Head Landlord to perform and observe all
the lessee's covenants and the other provisions of the Head Lease
insofar as they relate to the Sub-Let Portion;
(ii) direct covenants with the Landlord to perform and observe all the
covenants and conditions herein contained and on the Tenant's part
to be performed and observed, insofar as they relate to the Sub-Let
Portion;
(f) any sub-letting permitted hereunder shall be on terms and conditions in
every respect compatible with and contain covenants and restraints on the
part of the sub-tenant no less onerous than those imposed upon the Tenant
in this Agreement and the sub-tenant shall have no further right of sub-
letting whatsoever;
-70-
<PAGE>
(g) The PSF Sub-Letting Rental exceeds the PSF Tenant's Rental, then all legal
costs, stamp duty, registration fee and agency fee reasonably incurred by
the Landlord and/or the Tenant in connection with any sub-letting permitted
hereunder shall be shared equally between the Landlord and the Tenant and
shall be paid out of the Sub-Letting Rental received by the Tenant before
any sharing is made pursuant to Special Condition 2(d)(iii) hereof;
(h) if the PSF Sub-Letting Rental is less than the PSF Tenant's Rental, the
Tenant shall upon production of the relevant receipt(s) reimburse to the
Landlord all reasonable legal costs incurred by the Landlord in respect of
the approval of the sub-tenancy agreement;
(i) the Tenant shall not erect upon the Premises or the Building or any part
thereof any sign or other display advertising the availability of the
Premises or any part thereof for letting or sub-letting or issue any
pamphlet, publicity or advertisement in any form whatsoever with regard to
any proposed letting or subletting without the prior written consent of the
Landlord which may be withheld or granted subject to conditions at the
entire discretion of the Landlord;
(j) the Tenant shall upon the reasonable request of the Landlord use its best
endeavours to enforce the terms and conditions of the sub-tenancy on the
part of the sub-tenant to be observed and performed.
-71-
<PAGE>
MONANCE LIMITED (the Landlord) )
)
In the presence of: )
)
)
SIGNED by JoAnn Patrick-Ezzell, )
) For and on behalf of
its Director ) iAsiaWorks (H.K.) Limited
)
for & on behalf of IASIAWORKS (HK) LIMITED ) /s/ JoAnn Patrick-Ezzell
-----------------------------
) Authorized Signature
(the Tenant) )
)
in the presence of: )
/s/ illegible
HR DIRECTOR
RECEIVED the day and year first above written )
)
the sum of HONG-KONG DOLLARS ONE MILLION ONE ) HK$1,161,056.40
) ===============
HUNDRED AND SIXTY ONE THOUSAND AND FIFTY SIX )
)
AND FORTY CENTS ONLY being the Deposit payable )
)
by the Tenant hereunder on signing hereof in )
)
accordance with Section IX Clause 9.01 hereof )
)
and Part IV of the Second Schedule hereto. )
-72-
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT 10.8
SUBLEASE AGREEMENT
------------------
THIS SUBLEASE AGREEMENT is made effective as of August 31, 1999
between California Casualty Management Company, a California corporation
(hereinafter called "Sublessor") and AUNET Corporation, a California corporation
(hereinafter called "Sublessee").
WITNESSETH
WHEREAS, Sublessor is the Tenant under a written Office Lease dated as
of March 18, 1998 wherein OTR (hereinafter called "Prime Landlord") leased to
Sublessor certain real property located in 2000 Alameda de las Pulgas, City of
San Mateo, County of San Mateo, State of California. This Office Lease is
referred to as the "Prime Lease" and is incorporated herein by reference. Any
term in this Sublease with an initial capital letter, not specifically defined
herein, shall have the meaning given it in the Prime Lease.
WHEREAS, the Premises under the Prime Lease contains Suite 125
consisting of approximately 3,004 rentable square feet (RSF) in 2000 Alameda de
las Pulgas, San Mateo, California.
WHEREAS, Sublessor desires to sublease Suite 125 (the "Sublet
Premises") to Sublessee under the terms and conditions contained in this
Sublease Agreement, and Sublessee desires to sublease from Sublessor the Sublet
Premises as set forth in the Prime Lease and as set fort herein.
NOW THEREFORE, Sublessor and Sublessee agree as follows:
1. Sublease.
--------
Upon and subject to the terms and conditions of this Sublease and
applicable provisions of the Prime Lease, Sublessor subleases Sublet Premises
consisting of approximately 3,004 RSF in the Premises to Sublessee, and
Sublessee subleases Sublet Premises of the Premises from Sublessor, together
with all easements, appurtenances and amenities necessary or convenient for the
enjoyment of the Premises, to the extent available to Sublessor under the Prime
Lease.
2. Term.
----
Unless sooner terminated in accordance with the provisions of
this Sublease, the team of this Sublease shall commence on October 15, 1999 and
terminate on October 14, 2004.
1
<PAGE>
3. Delivery of Sublet Premises.
---------------------------
Sublessor shall deliver the Sublet Premises to Sublessee free of
tenants with existing Building systems in good working condition as of the
Commencement Date.
4. Rent.
----
(a) Sublessee shall pay to Sublessor monthly rent ("Monthly Rent") for
each month during the Term. Monthly rent shall be comprised of base monthly
rent plus a pro rata share of Building operating expenses.
(b) The monthly base full service rental rate for the Term is $3.40
per RSF. Commencing on the first day of the second year of the Term, and
annually thereafter, the monthly base rent shall increase by 3% per annum. The
monthly base rent for the term is as follows:
Months Monthly Base Rent Full Service
- ------ ------------------------------
1-12 $10,213.60
13-24 $10,520.01
25-36 $10,835.61
37-48 $11,160.68
49-60 $11,495.50
(c) In addition to the monthly base rent, Sublessee shall be
responsible for its pro rata share of Building operating expense passthroughs
over a Base Year of 1999.
(d) Monthly Rent shall be prorated based on actual days elapsed for
any partial calendar month occurring at the delivery of possession of any Space
or at the end of the term of this Sublease.
(e) Monthly Rent shall be paid by Sublessee to Sublessor without prior
notice or demand in advance on or before the first day of each and every month
during the Term of this Sublease.
(f) The late fee for delinquent Monthly Rent is $500 per delinquent
installment due plus interest on the delinquent Monthly Rent at the prime rate
(as then published by the Wall Street Journal) plus 2%. Monthly Rent shall be
considered delinquent if Sublessee fails to pay on or before five (5) days after
the date the Monthly Rent is due.
5. Security Deposit/First Month's Rent.
-----------------------------------
Concurrent with the execution of this Sublease, Sublessee shall provide
Sublessor with a security deposit in an amount equal to three month's monthly
base rent ($30,640.00), which shall be refunded to Sublessee upon full
satisfaction of the terms and conditions of this Sublease. In
2
<PAGE>
addition, Sublessee shall provide the first month's monthly base rent
($10,213.60) to Sublessor upon execution of this Sublease.
6. Sublessee Improvements.
----------------------
Sublessor, at its cost, shall paint the walls, replace damaged ceiling
tiles, and replace the carpets in the Sublet Premises. Subject to Prime
Landlord's approval, Sublessor shall permit Sublessee to add additional offices
in the Sublet Premises, with Sublessor constructing said offices at Sublessee's
cost. Any such improvements shall be constructed in accordance with mutually-
acceptable construction drawings. Whenever Sublessor constructs improvements at
Sublessee's expense, Sublessee shall, prior to construction commencing, provide
Sublessor with a deposit equal to the total estimated cost of constructing the
improvements.
7. Use and Condition.
-----------------
Sublessee may use the Sublet Premises only for general office purposes
as permitted by the Prime Lease and for no other purpose, Sublessor shall
maintain the Sublet Premises in its current condition, reasonable weal and tear
excepted, from the effective date hereof until the date of delivery of
possession. To the best of Sublessor's knowledge, there are no material defects
in the Sublet Premises or any reason they cannot be used for the purposes
intended for the term of this Sublease. Upon expiration of the term of this
Sublease, Sublessee shall return the Sublet Premises to Sublessor in the same
condition as when possession was granted, reasonable wear and tear excepted.
8. Assignment and Subletting.
-------------------------
(a) Notwithstanding anything to the contrary contained in the Prime
Lease or this Sublease, Sublessee may further sublet or assign this Sublease if
Prime Landlord and Sublessor consent to such subleasing or assignment in
accordance with the Prime Lease. Consent by Sublessor shall not be unreasonably
withheld.
(b) Notwithstanding any assignment and assumption by the assignee of
the obligations of Sublessee hereunder, or any subletting, Sublessee shall
remain liable, jointly and severally, with its assignee or Sublessee for the
performance and observance of Sublessee's obligations hereunder.
9. Administrative Details and Additional Services.
----------------------------------------------
If Sublessee procures any additional services from the Prime Landlord
(such as custodial, maintenance or repair services), Sublessee shall pay Prime
Landlord directly for such additional services. Except in connection with day-
to-day administrative details and procurement of such additional services and as
otherwise expressly provided herein, Prime Landlord shall not be obligated to
deal directly with Sublessee and Sublessee shall have no landlord-tenant
relationship with Prime Landlord.
3
<PAGE>
10. Prime Lease.
-----------
(a) Sublessor represents that it is not in default under the Prime
Lease and that, to the best of its knowledge, the Prime Landlord is not in
default thereunder. Sublessor further represents that the attached redacted
copy of the Prime Lease is a true and correct copy thereof. This Sublease is
subject and subordinate to the Prime Lease, however, Sublessee has no liability
for non-compliance with the redacted portions of the Prime Lease. The Prime
Lease shall control any conflict or inconsistency between the terms, covenants
and conditions of this Sublease and the terms, covenants and conditions of the
Prime Lease. All the terms, covenants and conditions contained in the Prime
Lease shall be applicable to this Sublease with the same force and effect as if
Sublessor were the Landlord under the Prime Lease and Sublessee were the Tenant
under the Prime Lease.
(b) In case of any breach of this Sublease by Sublessee, Sublessor
shall have all the rights against Sublessee as would be available to the Prime
Landlord against the Tenant for Tenant's breach of the Prime Lease. Any breach
of this Sublease by Sublessee which would constitute a breach of the Prime Lease
if Sublessee were the Tenant under the Prime Lease shall constitute a breach of
the Prime Lease and Prime Landlord may exercise all rights and remedies
available under the Prime Lease against Sublessor and Sublessee, and may enforce
all provisions of this Sublease, including those pertaining to the collection of
Rent.
(c) This Sublease may not be modified without Prune Landlord's prior
written consent. Any modification without Prime Landlord's written consent
shall be null and void.
(d) If the Prime Lease is terminated or Prime Landlord re-enters or
repossesses the Sublet Premises, then Prime Landlord may, at its option, assume
Sublessor's right, title and interest as the Sublessor under this Sublease and,
at Prime Landlord's option, Sublessee will attorn to Prime Landlord.
Notwithstanding any such assumption, Prime Landlord shall: (i) have no
liabilities for any previous acts or omissions of Sublessor under this Sublease;
(ii) not be subject to any existing defense or offset against Sublessor, (iii)
not be bound by any previous modification of this Sublease made without Prime
Landlord's prior written consent, or (iv) have no liabilities for any prepayment
of more than one-month's rent under this Sublease.
11. Indemnity.
---------
(a) Sublessee shall not do or permit anything to be done which would
be a breach or default under the Prime Lease or which would cause the Prime
Lease to be terminated or forfeited, and Sublessee shall indemnify, defend and
hold Sublessor harmless from and against any and all claims and losses resulting
from any such breach or default by Sublessee under this Sublease or the Prime
Lease.
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<PAGE>
(b) Sublessor shall indemnify, defend and hold Sublessee harmless
from and against any and all claims and losses resulting from any breach or
default by Sublessor under this Sublease or the Prime Lease.
12. Insurance.
---------
(a) At all times during the Term, Sublessee will carry and maintain,
at Sublessee's expense, the following insurance, in the amounts specified below
or such other amounts as Sublessor may from time to time reasonably request,
with insurance companies and on forms satisfactory to Sublessor:
(i) Commercial General Liability "occurrence form," or
equivalent, covering the Premises and operations of the Sublessee, including
personal injury and contractual liability, with combined single limit for bodily
injury and property damage of not less than $1,000,000 per occurrence,
$1,000,000 annual aggregate, naming Sublessor, its agents and employees, Prime
Landlord, its agents and employees and any others specified from time to time by
Sublessor, as Additional insured under such policy. Such policy will be primary
insurance, and any similar insurance which may be purchased by the Sublessor
shall be excess of Sublessee's policy, and not contributory therewith.
(ii) Insurance covering all of Sublessee's furniture and
fixtures, machinery, equipment, stock, and any other personal property owned or
used in Sublessee's business in an amount not less than the full replacement
value, against Basic Form Causes of Loss (fire and extended coverage). All
policy proceeds will be used for the repair or replacement of the damaged or
destroyed property.
(iii) Worker's compensation insurance insuring against and
satisfying Sublessee's obligations and liabilities under the Workers'
Compensation laws of the state of California, including Employer's Liability
insurance with a limit of not less than $1,000,000.
(iv) If Sublessee operates owned, hired, or non-owned vehicles
on the project, Automobile Liability insurance with limits not less than
$1,000,000.
(b) Sublessee will not do or permit to be done any act or thing upon
the Sublet Premises or the Building which would:
(i) jeopardize or be in conflict with fire insurance policies
covering the Building and personal property in the Building;
(ii) increase the rate of fire insurance applicable to the
Building to an amount higher than it would otherwise be for general office use;
or
(iii) Subject Sublessor to any liability or responsibility for
injury to any person or persons or to property by reason of any business or
operation being carried on upon the Premises or in the Building.
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(c) Certificates of insurance, providing for ten (10) days advance
notice of cancellation, together with copies of the endorsements, when
applicable, naming Sublessor, Prime Landlord and any others specified by
Sublessor as additional insured on General Liability, will be delivered to
Sublessor prior to Sublessee's occupancy of the Premises and from time to time
at least 10 days prior to the expiration of the Term of each such policy. Such
policies shall be placed with an insurer with an A. M. Bests' Rating of not less
than B+:V.
(d) Sublessor and Sublessee each waive any and all rights to recover
against the other and the Prime Landlord, and against the officers, directors,
shareholders or employees of such parties, for any loss or damage to such
waiving party arising from any cause covered by any property insurance carried
by such party, or required by this Sublease to be carried by such party.
13. Possession.
----------
If Sublessor fails or is unable to deliver possession on the date
required by this Sublease then rent, additional rent and any other charges with
respect to such space shall abate until Sublessor delivers possession.
14. Sites.
-----
Sublessee may post signs on or about the Sublet Premises at
Sublessee's sole cost, in accordance with Prime Landlord's signage requirements.
15. Alterations.
-----------
Sublessee may make alterations or additions to the interior or
exterior of the Sublet Premises if Prime Landlord consents to such alterations
or additions in accordance with the Prime Lease. Alterations and additions
shall be at Sublessee's sole expense. Sublessee shall indemnify, defend, and
hold Sublessor harmless from and against any and all claims and losses resulting
from such alterations and additions. At the expiration or earlier termination
of this Sublease, Sublessee shall remove all of its personal properly located in
or about the Sublet Premises, including, without limitation, (i) its signs, (ii)
all movable furniture, trade fixtures, office equipment, and any of Sublessee's
personal belongings; and (iii) all telecommunication and other communication
cabling, including, without limitation, all copper wiring, coaxial wiring,
ethernet wiring, and fiber optic lines, as well as related conduit and
telecommunications equipment (e.g., routers, switches and relays) installed by
Sublessee beyond the minimum point of entry. In addition, Sublessee will return
the Sublet Premises to the condition at the time Sublessee took possession,
reasonable wear and tear excepted.
16. Parking.
-------
Sublessee shall have the non-exclusive right to use unreserved parking
spaces at a ratio of 4 per 1,000 RSF free of charge during the Sublease term.
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<PAGE>
17. Prime Landlord's Consent.
-------------------------
This Sublease shall not become effective and binding until Prime
Landlord has executed and delivered its consent thereto in the form attached to
this Sublease.
18. Miscellaneous.
--------------
18.1 If, within the first 36 months of the Term of this Sublease,
the Prime Lease is terminated and Sublessee is forced to move, Sublessor agrees
to pay for all of Sublessee's moving expenses to a maximum of $30,000.
18.2 All notices, demands, requests, approvals, payments and other
communications between the parties (collectively "Notices") shall be in writing
at the address set forth below. Notices shall be sufficiently given if, and
shall be deemed not given unless, deposited in the United States mail postage
prepaid in certified or registered form, return receipt requested, or personally
served or delivered addressed as follows.
If to Sublessor:
California Casualty Management Company
Real Estate Department
1650 Telstar Drive
Colorado Springs, CO 80920-1004
Attn: Manager of Real Estate
If to Sublessee:
AUNET Corporation
2000 Alameda de las Pulgas, Suite 125
San Mateo CA 94403
If notices are personally delivered, copies also shall be mailed. Notices
shall be deemed given when personally served or delivered two days after deposit
with Federal Express, or other similar overnight carrier, or five days after
deposit in the United States mail, postage-paid.
18.3 The covenants and agreements contained in this Sublease shall
bind and inure to the benefit of Sublessor, Sublessee and their respective
successors and assigns. This Sublease shall be interpreted for all purposes
under California law. The prevailing party in any action arising from this
Sublease shall be entitled to recover reasonable attorneys' fees.
18.4 All prior understandings and agreements between the parties
respecting the Sublet Premises are merged in this Sublease which alone fully and
completely sets forth the understanding of the parties. This Sublease may not be
changed or amended orally or in any manner other than by a written agreement
signed by the parties, and approved in writing by Prime Landlord.
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<PAGE>
18.5 If either party hereto (i) makes a general assignment for the
benefit of creditors, (ii) admits in writing its inability to pay its debts as
they become due, files a petition in bankruptcy, (iii) is adjudicated as
bankrupt or solvent, (iv) files a petition in any proceeding seeking any
reorganization, liquidation, dissolution or similar relief under any law, (v)
files an answer admitting the material allegations of a petition' filed against
it in such proceeding, (vi) seeks, consents to or acquiesces in the appointment
of any trustee, receiver or liquidator, or (vii) within ninety (90) days aver
the commencement of any proceeding against such party seeking any
reorganization, liquidation, dissolution or similar relief, has not been
dismissed or if within ninety days (90) aver the appointment without the consent
or acquiescence of such party of any trustee, receiver or liquidator, such
appointment shall not have been vacated, then such party shall be deemed in
default hereunder and the other party may terminate this Sublease at any time
thereafter. In the event Sublessee files for bankruptcy protection, all
remaining payments under this Sublease constitute "rent reserved" under
applicable law.
18.6 Sublessor and Sublessee acknowledge that Cornish & Corey
Commercial represents Sublessor and that Wayne Mascia Associates represents
Sublessee. All real estate commissions arising from this transaction shall be
paid by Sublessor as part of its agreement with Cornish & Corey Commercial.
IN WITNESS WHEREOF, the parties have executed this Sublease effective as of
the date first set forth above.
SUBLESSEE: AUNET
--------- -----
Date August 31, 1999 By: /s/ Jon Beizer
------------------------- ----------------------------
Its: Chief Financial Officer
----------------------------
SUBLESSOR: California Casualty Management Company
--------- --------------------------------------
Date September 1, 1999 By: /s/ [ILLEGIBLE]^^
------------------------- ----------------------------
Its: Ass't V.P. & Real Estate Manager
--------------------------------
8
<PAGE>
CONSENT OF PRIME LANDLORD
-------------------------
1. OTR, an Ohio general partnership ("Prime Landlord"), landlord under
the Prime Lease, consents to the foregoing Sublease in 2000 Alameda de las
Pulgas, Suite 125, between California Casualty Management Company and AUNET
Corporation; provided, however, that except as specifically provided herein,
this Consent shall not: (1) constitute a waiver, amendment or modification of
any term or condition of the Prime Lease with respect to either Sublessor or
Sublessee; or (2) limit the obligations of Sublessor or the rights of Prime
Landlord under the Lease; or (3) make Prime Landlord a party to the Sublease.
2. Prime Landlord represents that (i) it is not in default under the
Prime Lease; (ii) to the best of its knowledge, Sublessor is not in default
under the Prime Lease; (iii) Sublessor has not paid rent for more than one month
in advance; and (iv) Sublessor's last rental payment was made September 7, 1999
for the month of September, 1999.
OTR, an Ohio general partnership
Date September 13, 1999 By: /s/ [ILLEGIBLE]^^
--------------------------- ----------------------------------
Its: Senior Asset Management Officer
----------------------------------
9
<PAGE>
Exhibit 10.9
AN AGREEMENT made this 12th day of October One Thousand Nine Hundred and Ninety
Nine between CABLE & WIRELESS HKT INTERNATIONAL LIMITED a body incorporated in
and under the laws of Hong Kong whose registered address is situate at 39/F,
Hongkong Telecom Tower, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong
(hereinafter called "the Landlord" which expression shall where the context
admits include their Successors in title and assigns) of the one part and AT&T
ASIA PACIFIC GROUP LIMITED whose registered address is situate at 30/F, Shell
Tower, Times Square, Hong Kong (hereinafter called "the Tenant") of the other
part.
WHEREBY IT IS AGREED as follows:-
1. The Landlord shall let and the Tenant shall take All That Portion of the
building (hereinafter referred to as "the said building") erected on the
piece of parcel of landlord registered at the Land Office as Inland Lot No.
8250 (hereinafter referred to as "the said Lot") which said portion
comprising ROOM NO. 381A, 3rd Floor, Telecom House, 3 Gloucester Road,
Wanchai, Hong Kong is more particularly delineated on the plan annexed
hereto and thereon coloured Pink and is hereinafter referred to as "the
said premises" for a term commencing from the 16th day of November 1999 and
expiring on the 31st day of March 2002 at the rent of *****************
*************************************************************** per
calendar month exclusive of rates and subject to the First Schedule hereof
the monthly air-conditioning charges of *********************************
************************************************* per calendar month, and
further the sum of *********
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1
<PAGE>
*********************************************************************** per
calendar month management charges, in advance clear of all deductions on
the first (1st) day of each calendar month, the first of such payments to
be made on the commencement of the said term.
2. The Tenant to the intent that the obligations hereunder shall continue
throughout the said term hereby agrees with the Landlord as follows:
(a) To pay the said rent and, air-conditioning and management charges, on the
days and in manner herein before provided for payment hereof and in
banknotes if so demanded.
(b) To pay and discharge all rates, taxes, assessments, duties, charges,
impositions and outgoings of an annual or recurring nature now or
hereafter to be assessed, imposed or charged by the Government of Hong Kong
or other lawful authority upon the said premises or upon the owner or
occupier hereof (Government Rent and Property Tax and outgoings of a
capital or non-recurring nature only excepted).
(c) To keep all the interior of the said premises including the Landlord's
fixtures therein in good, clean, tenantable repair and condition fair wear
and tear and structural inherent and latent defects excepted and to deliver
up the same to the Landlord fair wear and tear and structural inherent and
latent defects excepted at the expiration or sooner determination of the
term.
(d) To permit the Landlord and all persons authorized by them at all reasonable
times but only upon reasonable prior written notice during the day to
enter and view the said premises provided that the Landlord and all persons
authorized by them are escorted at all times whilst on or viewing the said
premises by the Tenant or its duly authorized representative.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2
<PAGE>
(e) Not without the previous written Consent of the Landlord which consent
shall not be unreasonably withheld or delayed to erect, install or alter
any fixtures, partitioning or other erection or installation in the said
premises or any part thereof.
(f) Not to use or permit or suffer the said premises or any part thereof to be
used except only for the purposes of telecommunication or news coverage and
related activities.
(g) Not to do or permit or suffer to be done any act or thing which may be or
become a nuisance or annoyance to the Landlord or to the tenants or
occupiers of other premises in the said building or in any adjoining or
neighboring building.
(h) Not to use or permit or suffer the said premises to be used for any illegal
or immoral purpose.
(i) Not without the previous written consent of the Landlord which consent
shall not be unreasonably withheld or delayed, to affix or display or
permit or suffer to be affixed or displayed within or outside the said
premises any signboard, sign, decoration or other device whether
illuminated or not which may be visible from outside the said premises.
(j) Not to assign, underlet or part with the possession of the said premises or
any part thereof nor to enter into, permit or suffer any arrangement
whereby any person who is not a party to the agreement obtains the use or
possession of the said premises or any part there of irrespective or
whether any rental or other consideration is given for such use or
possession. Notwithstanding the foregoing, the Tenant shall have the right
to assign this Agreement to its affiliate or successor in interest.
(k) To obey and comply with and to indemnify the Landlord against the breach of
all ordinances, regulations, by-laws, rules and requirements of any
Governmental or other competent authority relating to the conduct and
carrying on of the Tenants'
3
<PAGE>
business on the said premises or to any other act, deed, matter or thing
done, permitted, suffered or omitted therein by the Tenant or any employee,
agent or licensee of the Tenant.
(l) Quietly to yield up the said premises with all landlord's fixtures fittings
and additions therein and thereto at the expiration or sooner determination
of this Agreement in good clean and tenantable repair and condition fair
wear and tear and structural inherent and latent defects excepted in
accordance with the stipulations herein contained Provided that where the
Tenant has made any alterations or installed any fixtures or additions to
or any air-conditioning or fire-fighting equipment in the said premises
with or without the Landlord's written consent the Landlord may at its
discretion require the Tenant to reinstate remove or do away with such
alterations fixtures additions or equipment or any part or portion thereof
and make good and repair in a proper and workmanlike manner any damage to
the said premises and the Landlord's fixtures and fittings therein as a
result thereof before delivering up the said premises to the Landlord.
(m) To permit the Tenant to search the equipment box or suit case or other
articles carried by or belonging to or accompanying the Landlord, its
agents, officers, subcontractors, representatives or employees prior to
permitting their access to the said premises pursuant to the terms of this
Agreement.
3. THE LANDLORD HEREBY AGREES WITH THE TENANT as follows:-
(a) To pay the Government rent and premium payable in respect of the said Lot
and the Property tax and outgoings of a capital or non-recurring nature
payable in respect of the said building.
4
<PAGE>
(b) To keep the roof of the said building and the main structure, walls,
drains, pipes and cables and lifts therein in a proper state of repair
Provided that the Landlord shall not incur any liability under this Clause
unless and until written notice of any defect or want of repair has been
given by the Tenant to the Landlord and the Landlord shall have failed to
make reasonable steps to repair or remedy the same after a lapse of a
reasonable time from the date of service or such notice.
(c) To pay the cost of cleaning and lighting all the windows lifts air-
conditioning plant staircases and other like areas used in common with
other tenants and occupiers of the said building.
(d) That the Tenant paying the rent, management and air-conditioning charges
hereby agreed to be paid on the days and in manner herein provided for
payment of the same and observing and performing the agreements,
stipulations and conditions herein contained and on the Tenant's part to be
observed or performed shall peaceably hold and enjoy the said premises
during the said term without any interruption by the Landlord or any person
lawfully claiming under or in trust of the Landlord.
(e) All Landlord's personnel or representatives entering the said premises of
the Tenant must be accompanied by the Tenant or its employee or
representative.
(f) To keep confidential and not disclose to any third party details of this
tenancy or the fact that the Tenant is a tenant of the Landlord and not to
display any sign or notice of the Tenant's occupation and to procure that
its employees, agents, officers and representatives comply with such
undertaking.
(g) To permit the Tenant in its absolute discretion to deny access to the said
Premises to any cleaners, air-conditioning or other service contractors of
the Landlord and to
5
<PAGE>
permit the Tenant instead to appoint its own cleaners, air-conditioning or
service contractors the costs of which shall thereafter be fully borne by
the Tenant.
(h) That the raised floor loading of the said premises is at least 180 pounds
per square foot and is adequate to support the equipment of the Tenant
details of which have been provided to the Landlord and that there are no
restrictions on where such equipment should be placed.
(i) No-break AC power supply access point will be provided by the Landlord
within the said premises for tenant's use upon tenant's request and
requirements of which have been provided to and approved by the Landlord.
(j) That the Tenant shall be at liberty to install such security and other
devices as it in its absolute discretion deems necessary or desirable in
order to isolate and secure the said premises so that the same are totally
within its control and access thereto is at the total discretion of the
Tenant. The Landlord further covenants that it will at no time hinder or
impede or in any way interfere with or prevent the access by the Tenant,
subcontractors, agents, employees and representatives to the said premises
and furthermore the Landlord undertakes that it will at no time seek access
directly or indirectly for itself, officers, employees, agents,
subcontractors, maintenance or other staff or permit or encourage such
persons themselves to seek access directly or indirectly to the said
premises without first giving prior written notice to the Tenant and in any
event without being accompanied at all times whilst on the said premises by
a representative of the Tenant. This restriction shall not apply to any
attempt to gain access via the security entrance to the said premises and
via any windows, pipes, ducts, cables or other indirect means including for
example without limitation through air conditioning ducts of the ceiling of
the said premises.
6
<PAGE>
4. IT IS HEREBY FURTHER AGREED AND DECLARED as follows:
(a) If the rent and/or other charges hereby agreed to be paid or any part
thereof shall be unpaid for ten (10) days after the same shall become
payable (whether legally or formally demanded or not) or if the Tenant
shall fail or neglect to observe or perform any of the agreements,
stipulations or conditions herein contained and on the Tenant's part to be
observed and performed or if the Tenant shall become bankrupt, or being a
corporation shall go into liquidation or any edition shall be filed for the
winding up of the Tenant, or if the Tenant shall otherwise become insolvent
or make any composition or arrangement with creditors or shall suffer any
execution to be levied on the said promises or otherwise on the Tenant's
goods, then and in any such case it shall be lawful for the Landlord at
anytime thereafter to re-enter on the said premises subject to clause 3(e)
above or any part thereof in the name of the whole whereupon this Agreement
shall absolutely cease and determine but without prejudice to any right of
action by the Landlord in respect of any outstanding breach or
nonobservance or nonperformance of any of the agreements, stipulations and
conditions herein contained and on the Tenant's part to be observed and
performed notwithstanding the terms of this clause prior to re-entry by the
Landlord the Landlord agrees to give written notice to the Tenant
specifying the details thereof and the Tenant after receipt of such notice
shall have (i) ten (10) days to make such payment and (ii) a reasonable
time to cure any other failure or neglect.
(b) Acceptance of rent and/or other charges by the Landlord shall not be deemed
to operate as a waiver by the Landlord of any right to proceed against the
Tenant in respect of any breach non-observance or non-performance by the
Tenant of any of the
7
<PAGE>
agreements, stipulations and conditions herein contained and on the
Tenant's part to be observed and performed.
(c) If the said premises or any part thereof shall be destroyed or so damaged
by fire, typhoon, Act of God, Force Majeure or other cause beyond control
of the Landlord as to be rendered unfit for use or occupation, the rent
hereby agreed to be paid or a part thereof proportionate to the damage
sustained shall cease to be payable until the said premises shall have been
restored or reinstated Provided Always that the Landlord shall be under no
obligation to repair or reinstate the said premises if, in its opinion, it
is not reasonably economical or practical so to do And Provided Further
that if the said premises shall not have been repaired and reinstated
within three (3) months of the occurrence of the destruction or damage the
Tenant shall be entitled at any time before the same are so repaired and
reinstated to terminate this Agreement by notice in writing to the
Landlord.
(d) The Landlord shall not under any circumstances be liable to the Tenant for
any defect in or breakdown of the lights or air-conditioning system nor
shall the rent or air-conditioning charges abate or cease to be payable on
account thereof Provided that if the air-conditioning system shall wholly
breakdown or cease to operate for any period of one or more consecutive
days, the air-conditioning charges, but not the rent or other charges,
shall cease to be payable from the first (1st) day after the end of such
period of one consecutive day until the air-conditioning system again
commences operating.
(e) For the purpose of these presents any act, default, neglect or omission of
any servant, agent or licensee (as hereinbefore defined) of the Tenant
shall be deemed to be the act, default, neglect or omission of the Tenant.
8
<PAGE>
(f) Any notice required to be observed hereunder shall, if to be served on the
Tenant, be sufficiently served if addressed to the Tenant and sent by
prepaid post to or delivered to the Tenant's last known place of business
in Hong Kong and, if to be served on the Landlord, shall be sufficiently
served by prepaid post to or delivered at the Landlord's office in the said
building.
(g) The stamp duty on this Agreement and its Counterpart shall be borne equally
between the parties. Each party shall pay its own legal costs (if any) of
and incidental to the preparation and completion of this Agreement.
(h) Unless the context otherwise requires, words herein importing the masculine
gender shall include the feminine and neuter and words herein in the
singular shall include the plural and vice versa.
(i) The charge for the supply of air-conditioning shall be subject to increase
according to the costs of providing the same and the parties hereto agree
that the receipt for and/or other vouchers evidencing payment of such
charges by the Landlord shall be conclusive proof of such increase.
(j) The Landlord hereby grants to the Tenant an option to lease further space
adjacent to and upon the same floor as the said premises. Such option is
to take upon lease additional space up to a maximum of a further 2,500
square feet which said option may be exercised at any time during the said
term by giving to the Landlord by the Tenant of not less than 90 days prior
written notice. In exercising the option, the Tenant is entitled to take
all of the said 2,500 square feet or at its option to elect to take the
said space in portions and to exercise the right to take part only up to a
maximum of five times provided that each area with respect of which the
options exercised should not be less than 500 square feet.
9
<PAGE>
The terms upon which such further space shall be leased shall be
identical to those herein contained save for the rent payable which rent
shall be agreed between the parties and in the absence of agreement shall
be determined by an independent chartered valuer or surveyor to be
nominated and appointed jointly by the parties or failing such agreement to
such joint appointment by the Chairman or President for the time being with
the Royal Institute of Chartered Surveyors (Hong Kong Branch). The decision
of such arbitrator shall be binding upon the parties and the costs should
be borne equally between them.
(k) In the event of the Landlord being desirous of redeveloping the promises,
the Landlord may be six (6) month's notice in writing served upon the
Tenant terminate the term hereby granted and upon expiration of such
notice, the tenancy hereby created shall cease and be deemed null void and
of no further effect but without prejudice to the rights and remedies of
either party against the other in respect of any antecedent claim or breach
of the agreements stipulations terms and conditions herein contained and
the Tenant shall forthwith vacate and deliver up vacant possession of the
Premises to the Landlord.
(l) (i) The Tenant shall on the signing hereof deposit with the Landlord the
sum of * to secure the due observance and performance by the Tenant of
the agreements stipulations terms and conditions herein contained and
on the part of the Tenant to be observed and performed which said
deposit shall be held by the Landlord throughout the currency of this
Agreement free of interest to the Tenant with the right for the
Landlord (without prejudice to any other right or remedy hereunder) to
deduct therefrom the amount of any rent rates and other charges
payable hereunder and any costs expenses loss or
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10
<PAGE>
damage sustained by the Landlord as a result of any nonobservance or
nonperformance by the Tenant of any of the said agreements
stipulations obligations or conditions. In the event of any deduction
being made by the Landlord from the said deposit in accordance
herewith during the currency of the Agreement the Tenant shall
forthwith on demand by the Landlord make a further deposit equal to
the amount so deducted and failure by the Tenant so to do shall
entitle the Landlord forthwith to re-enter upon the Premises and to
determine this Agreement as hereinbefore provided.
(ii) The said deposit and any further deposit paid shall be refunded to the
Tenant by the Landlord without interest 30 days after the expiration
or sooner determination of this Agreement and delivery of vacant
possession to the Landlord and after settlement of the last
outstanding claim by the Landlord against the Tenant for any arrears
of rent rates and other charges and for any breach nonobservance or
nonperformance of any of the agreements stipulations terms and
conditions herein contained and on the part of the Tenant to be
observed or performed whichever shall be the later.
5. Neither party shall be liable to the other for any indirect, special,
incidental, consequential or punitive loss or damage of any kind, including
lost profits (whether or not such party has been advised of the possibility
of such loss or damage), by reason of any act or omission of the parties in
the performance of this Agreement.
6. Not withstanding any of the foregoing provisions, the granting of this
tenancy is subject to the necessary approval of relevant government
authorities.
11
<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
------------------------------------
(AIR-CONDITIONING CHARGE)
-------------------------
The provision of air-conditioning service to the said premises at the air-
conditioning charge hereinbefore provided for in Clause One is governed in
accordance with the following terms and conditions:-
Cable & Wireless HKT will take all due care and responsibility to provide the
cooling capacity of air-conditioning system of 200,000 BTU at 22 degree Celsius
+/- 2 degree and 55% relative humidity +/- 10%.
Cable & Wireless HKT cannot be liable for UPS failure, air-conditioning failure
and other accidents to maintain the room temperature and humidity unless the
same result from the negligence of Cable Wireless HKT International Limited, its
officers, agents or employees.
12
<PAGE>
AS WITNESS the hands of the parties hereto the day and year for above written.
<TABLE>
<S> <C>
SIGNED by )
) For and on Behalf of
CABLE AND WIRELESS HKT INTERNATIONAL LIMITED
for and on behalf of the Landlord )
in the presence of:-
) /s/ Leung Kong-Yui
------------------------------------
LEUNG KONG-YUI
GENERAL MANAGER PROPERTY & TRANSPORT
)
/s/ Lolita Au
- -------------
Lolita Au
Property Manager
SIGNED by )
) For and on Behalf of
AT&T ASIA/PACIFIC GROUP LTD.
for and on behalf of the Tenant )
in the Presence of:- ) /s/ signature illegible
------------------------------------
(Authorized Signature)
)
RECEIVED the day and year first )
above written the sum of ) *
-------------
*
* ) For and on Behalf of
CABLE AND WIRELESS HKT INTERNATIONAL LIMITED
* )
being the Deposit payable by the Tenant /s/ Leung Kong-Yui
------------------------------------
hereunder on signing hereof in accordance ) LEUNG KONG-YUI
with Clause 4(l) hereto. GENERAL MANAGER PROPERTY & TRANSPORT
</TABLE>
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
[FLOOR PLAN]
[TMH - 3RD FLOOR PLAN]
<PAGE>
Exhibit 10.10
AN A G R E E M E N T made this 3rd day of May One Thousand Nine Hundred and
Ninety Nine BETWEEN HONG KONG TELECOM INTERNATIONAL LIMITED a body corporate
incorporated in and under the laws of Hong Kong whose registered office is
situate at 39/F, Hongkong Telecom Tower, Taikoo Place, 979 King's Road, Quarry
Bay, Hong Kong (hereinafter called "the Landlord" which expression shall where
the context admits include their successors in title and assigns) of the one
part and AT&T EASYLINK SERVICES ASIA/PACIFIC LIMITED (hereinafter called "the
Tenant") of the other part.
WHEREBY IT IS AGREED as follows:
1. The Landlord shall let and the Tenant shall take All That portion of the
building (hereinafter referred to as "the said building") erected on the piece
or parcel of land registered at the Land Office as Inland Lot No. 8250
(hereinafter referred to as "the said Lot") which said portion comprising ROOM
NO. 381, 3rd Floor, Telecom House, 3 Gloucester Road, Wanchai, Hong Kong is more
particularly delineated on the plan annexed hereto and thereon coloured Pink and
is hereinafter referred to as "the said premises" for a term of Three (3) YEARS
from the 1st day of April 1999 at the rent of * per calendar month exclusive of
rates and subject to the First Schedule hereof the monthly air-conditioning
charges of * per calendar month, and further the sum of * per calendar
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1
<PAGE>
month management charges, in advance clear of all deductions on the First (1st)
day of each calendar month, the first (1st) of such payments to be made on the
commencement of the said term.
2. The Tenant to the intent that the obligations hereunder shall continue
throughout the said term hereby agrees with the Landlord as follows:
(a) To pay the said rent and, air-conditioning charges, on the days and in
manner hereinbefore provided for payment thereof and in banknotes if so
demanded.
(b) To pay and discharge all rates, taxes, assessments, duties, charges,
impositions and outgoings of an annual or recurring nature now or hereafter
to be assessed, imposed or charged by the Government of Hong Kong or other
lawful authority upon the said premises or upon the owner or occupier
thereof (Government Rent and Property Tax and outgoings of a capital or
non-recurring nature only excepted).
(c) To keep all the interior of the said premises including the Landlord's
fixtures therein in good, clean, tenantable repair and condition fair wear
and tear and structural inherent and latent defects excepted and to deliver
up the same to the Landlord fair wear and tear and structural inherent and
latent defects excepted at the expiration or sooner determination of the
term.
(d) To permit the Landlord and all persons authorized by them at all reasonable
times but only upon reasonable prior written notice during the day to enter
and view the said premises provided that the Landlord and all persons
authorized by them are escorted at all times whilst on or viewing the said
premises by the Tenant or its duly authorized representative.
2
<PAGE>
(e) Not without the previous written consent of the Landlord which consent
shall not be unreasonably withheld or delayed to erect, install or alter
any fixtures, partitioning or other erection or installation in the said
premises or any part thereof.
(f) Not to use or permit or suffer the said premises or any part thereof to be
used except only for the purposes of telecommunication or news coverage and
related activities.
(g) Not to do or permit or suffer to be done any act or thing which may be or
become a nuisance or annoyance to the Landlord or to the tenants or
occupiers of other premises in the said building or in any adjoining or
neighboring building.
(h) Not to use or permit or suffer the said premises to be used for any illegal
or immoral purpose.
(i) Not without the previous written consent of the Landlord which consent
shall not be unreasonably withheld or delayed, to affix or display or
permit or suffer to be affixed or displayed within or outside the said
premises any signboard, sign, decoration or other device whether
illuminated or not which may be visible from outside the said premises.
(j) Not to assign, underlet or part with the possession of the said premises or
any part thereof nor to enter into, permit or suffer any arrangement
whereby any person who is not a party to this Agreement obtains the use or
possession of the said premises or any part thereof irrespective or whether
any rental or other consideration is given for such use or possession.
Notwithstanding the foregoing, the Tenant shall have the right to assign
this Agreement to its affiliate or successor in interest.
(k) To obey and comply with and to indemnify the Landlord against the breach of
all ordinances, regulations, bye-laws, rules and requirements of any
Governmental or other competent authority relating to the conduct and
carrying on of the Tenant's
3
<PAGE>
business on the said premises or to any other act, deed, matter or thing
done, permitted, suffered or omitted therein or thereon by the Tenant or
any employee, agent or licensee of the Tenant.
(l) Quietly to yield up the said premises with all landlords fixtures fittings
and additions therein and thereto at the expiration or sooner determination
of this Agreement in good clean and tenantable repair and condition fair
wear and tear and structural inherent and latent defects excepted in
accordance with the stipulations herein contained Provided that where the
Tenant has made any alterations or installed any fixtures or additions to
or any air-conditioning or fire-fighting equipment in the said premises
with or without the Landlord's written consent the Landlord may at its
discretion require the Tenant to reinstate remove or do away with such
alterations fixtures additions or equipment or any part or portion thereof
and make good and repair in a proper and workmanlike manner any damage to
the said premises and the Landlord's fixtures and fittings therein as a
result thereof before delivering up the said premises to the Landlord.
(m) To permit the Tenant to search the equipment box or suit case or other
articles carried by or belonging to or accompanying the Landlord, its
agents, officers, subcontractors, representatives or employees prior to
permitting their access to the said premises pursuant to the terms of this
Agreement.
3. THE LANDLORD HEREBY AGREES WITH THE TENANT as follows:
(a) To pay the Government Rent and premium payable in respect of the said Lot
and the Property Tax and outgoings of a capital or non-recurring nature
payable in respect of the said building.
4
<PAGE>
(b) To keep the roof of the said building and the main structure, walls,
drains, pipes and cables and lifts therein in a proper state of repair
Provided that the Landlord shall not incur any liability under this Clause
unless and until written notice of any defect or want of repair has been
given by the Tenant to the Landlord and the Landlord shall have failed to
take reasonable steps to repair or remedy the same after a lapse of a
reasonable time from the date of service of such notice.
(c) To pay the cost of cleaning and lighting all the windows lifts air-
conditioning plant staircases and other like areas used in common with
other tenants and occupiers of the said building.
(d) That the Tenant paying the rent and air-conditioning charges hereby agreed
to be paid on the days and in manner herein provided for payment of the
same and observing and performing the agreements, stipulations and
conditions herein contained and on the Tenant's part to be observed and
performed shall peaceably hold and enjoy the said premises during the said
term without any interruption by the Landlord or any person lawfully
claiming under or in trust for the Landlord.
(e) All Landlord's personnel or representatives entering the said premises of
the Tenant must be accompanied by Tenant or its employee or representative.
(f) To keep confidential and not disclose to any third party details of this
tenancy or the fact that the Tenant is a tenant of the Landlord and not to
display any sign or notice of the Tenants occupation and to procure that
its employees, agents, officers and representatives comply with such
undertaking.
(g) To permit the Tenant in its absolute discretion to deny access to the said
Premises to any cleaners, air-conditioning or other service contractors of
the Landlord and to
5
<PAGE>
permit the Tenant instead to appoint its own cleaners, air-conditioning or
service contractors the costs of which shall thereafter be fully borne by
the Tenant.
(h) That the raised floor loading of the said Premises is at least 180 pounds
per square foot and is adequate to support the equipment of the Tenant
details of which have been provided to the Landlord and that there are no
restrictions on where such equipment should be placed.
(i) No-break AC power supply access point will be provided by the Landlord
within said premises for tenant's use. It should be able to provide a
minimum of 150 AMPs three phase at 230 volts +/- 10% and 50Hz +/- 2%.
(j) That the Tenant shall be at liberty to install such security and other
devices as it in its absolute discretion deems necessary or desirable in
order to isolate and secure the said premises so that the same are totally
within its control and access thereto is at the total discretion of the
Tenant. The Landlord further covenants that it will at no time hinder or
impede or in any way interfere with or prevent the access by the Tenant,
its subcontractors, agents, employees and representatives to the said
premises and furthermore the Landlord undertakes that it will at no time
seek access directly or indirectly for itself, its officers, employees,
agents, subcontractors, maintenance or other staff or permit or encourage
such persons themselves to seek access to the said premises without first
giving prior written notice to the Tenant and in any event without being
accompanied at all times whilst on the said premises by a representative of
the Tenant. This restriction shall apply to any attempt to gain access via
the security entrance to the said premises and via any windows, pipes,
ducts, cables or other indirect means including for example without
limitation through air-conditioning ducts or the ceiling of the said
premises.
6
<PAGE>
4. IT IS HEREBY FURTHER AGREED AND DECLARED as follows:
(a) If the rent and/or other charges hereby agreed to be paid or any part
thereof shall be unpaid for ten (10) days after the same shall become
payable (whether legally or formally demanded or not) or if the Tenant
shall fail or neglect to observe or perform any of the agreements,
stipulations or conditions herein contained and on the Tenant's part to be
observed and performed or if the Tenant shall become bankrupt, or being a
corporation shall go into liquidation or any edition shall be filed for the
winding up of the Tenant, or if the Tenant shall otherwise become insolvent
or make any composition or arrangement with creditors or shall suffer any
execution to be levied on the said premises or otherwise on the Tenant's
goods, then and in any such case it shall be lawful for the Landlord at
anytime thereafter to re-enter on the said premises subject to clause 3(e)
above or any part thereof in the name of the whole whereupon this Agreement
shall absolutely cease and determine but without prejudice to any right of
action by the Landlord in respect of any outstanding breach or non-
observance or non-performance of any of the agreements, stipulations and
conditions herein contained and on the Tenant's part to be observed and
performed notwithstanding the terms of this Clause prior to re-entry by the
Landlord the Landlord agrees to give written notice to the Tenant
specifying the details thereof and the Tenant after receipt of such notice
shall have (i) ten (10) days to make such payment and (ii) a reasonable
time to cure any other failure or neglect.
(b) Acceptance of rent and/or air-conditioning charges by the Landlord shall
not be deemed to operate as a waiver by the Landlord of any right to
proceed against the Tenant in respect of any breach non-observance or non-
performance by the Tenant
7
<PAGE>
of any of the agreements, stipulations and conditions herein contained and
on the Tenant's part to be observed and performed.
(c) If the said premises or any part thereof shall be destroyed or so damaged
by fire, typhoon, Act of God, Force Majeure or other cause beyond control
of the Landlord as to be rendered unfit for use and occupation, the rent
hereby agreed to be paid or a part thereof proportionate to the damage
sustained shall cease to be payable, until the said premises shall have
been restored or reinstated Provided Always that the Landlord shall be
under no obligation to repair or reinstate the said premises if, in its
opinion, it is not reasonably economical or practical so to do And Provided
Further that if the said premises shall not have been repaired and
reinstated within three (3) months of the occurrence of the destruction or
damage the Tenant shall be entitled at any time before the same are so
repaired and reinstated to terminate this Agreement by notice in writing to
the Landlord.
(d) The Landlord shall not under any circumstances be liable to the Tenant for
any defect in or breakdown of the lights or air-conditioning system nor
shall the rent or air-conditioning charges abate or cease to be payable on
account thereof Provided that if the air-conditioning system shall wholly
breakdown or cease to operate for any period of one or more consecutive
days, the air-conditioning charges, but not the rent or other charges,
shall cease to be payable from the first (1st) day after the end of such
period of one consecutive days until the air-conditioning system again
commences operating.
(e) For the purpose of these presents any act, default, neglect or omission of
any servant, agent or licensee (as hereinbefore defined) of the Tenant
shall be deemed to be the act, default, neglect or omission of the Tenant.
8
<PAGE>
(f) Any notice required to be served hereunder shall, if to be served on the
Tenant, be sufficiently served if addressed to the Tenant and sent by
prepaid airmail post to or delivered to the Tenant's last known place of
business in Hong Kong and, if to be served on the Landlord, shall be
sufficiently served by prepaid post to or delivered at the Landlord's
office in the said building.
(g) The stamp duty on this Agreement and its counterpart shall be borne equally
between the parties. Each party shall pay its own legal costs (if any) of
and incidental to the preparation and completion of this Agreement.
(h) Unless the context otherwise requires, words herein importing the masculine
gender shall include the feminine and neuter and words herein in the
singular shall include the plural and vice versa.
(i) The charge for the supply of air-conditioning shall be subject to increase
according to the costs of providing the same and the parties hereto agree
that the receipt for and/or other vouchers evidencing payment of such
charges by the Landlord shall be conclusive proof of such increase.
(j) The Landlord hereby grants to the Tenant an option to lease further space
adjacent to and upon the same floor as the said premises. Such option is to
take upon lease additional space up to a maximum of a further 4,000 square
feet which said option may be exercised at any time during the said term by
the giving to the Landlord by the Tenant of not less than 90 days prior
written notice. In exercising the option, the Tenant is entitled to take
all of the said 4,000 square feet or at its option to elect to take the
said space in portions and to exercise the right to take part only up to a
maximum of eight times provided that each area with respect of which the
option is exercised should not be less than 500 square feet.
9
<PAGE>
The terms upon which such further space shall be leased shall be
identical to those herein contained save for the rent payable which rent
shall be agreed between the parties and in the absence of agreement shall
be determined by an independent chartered valuer or surveyor to be
nominated and appointed jointly by the parties or failing such agreement to
such joint appointment by the Chairman, or President for the time being
with the Royal Institute of Chartered Surveyors (Hong Kong Branch). The
decision of such arbitrator shall be binding upon the parties and the costs
should be borne equally between them.
(k) In the event of the Landlord being desirous of redeveloping the premises,
the Landlord may by six (6) months' notice in writing served upon the
Tenant terminate the term hereby granted and upon expiration of such
notice, the tenancy hereby created shall cease and be deemed null void and
of no further effect but without prejudice to the rights and remedies of
either party against the other in respect of any antecedent claim or breach
of the agreements stipulations terms and conditions herein contained and
the Tenant shall forthwith vacate and deliver up vacant possession of the
Premises to the Landlord.
(l) (i) The Tenant shall on the signing hereof deposit with the Landlord the
sum of * to secure the due observance and performance by
the Tenant of the agreements stipulations terms and conditions herein
contained and on the part of the Tenant to be observed and performed
which said deposit shall be held by the Landlord throughout the
currency of this Agreement fee of interest to the Tenant with the
right for the Landlord (without prejudice to any other right or remedy
hereunder) to deduct therefrom the amount of any rent rates and other
charges payable hereunder
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
10
<PAGE>
and any costs expenses loss or damage sustained by the Landlord as a
result of any non-observance or non-performance by the Tenant of any
of the said agreements stipulations obligations or conditions. In the
event of any deduction being made by the Landlord from the said
deposit in accordance herewith during the currency of this Agreement
the Tenant shall forthwith on demand by the Landlord made a further
deposit equal to the amount so deducted and failure by the Tenant so
to do shall entitle the Landlord forthwith to re-enter upon the
Premises and to determine this Agreement as hereinbefore provided.
(ii) The said deposit and any further deposit paid shall be refunded to the
Tenant by the Landlord without interest 30 days after the expiration
or sooner determination of this Agreement and delivery of vacant
possession to the Landlord and after settlement of the last
outstanding claim by the Landlord against the Tenant for any arrears
of rent rates and other charges and for any breach non-observance or
non-performance of any of the agreements stipulations terms and
conditions herein contained and on the part on the Tenant to be
observed or performed whichever shall be the later.
5. Neither party shall be liable to the other for any indirect, special,
incidental, consequential or punitive loss or damage of any kind, including
lost profits (whether or not such party has been advised of the possibility
of such loss or damage), by reason of any act or omission of the parties in
the performance of this Agreement.
6. Not withstanding any of the foregoing provisions, the granting of this
tenancy is subject to the necessary approval of relevant Government
authorities.
11
<PAGE>
THE FIRST SCHEDULE ABOVE REFERRED TO
------------------------------------
(AIR CONDITIONING CHARGE)
-------------------------
The provision of air-conditioning service to the said premises at the air-
conditioning charge herein before provided for in Clause One is governed in
accordance with the following terms and conditions:
Hong Kong Telecom will take all due care and responsibility to provide the
cooling capacity of air conditioning system of 200,000 BTU at 22 degree Celsius
+/- 2 degree and 55% relative humidity +/-10%.
Hong Kong Telecom cannot be liable for UPS failure, air-conditioning failure and
other accidents to maintain the room temperature and humidity unless the same
result from the negligence of Hong Kong Telecom International Limited, its
officers, agents or employees.
12
<PAGE>
AS WITNESS the hands of the parties hereto the day and year for above written.
<TABLE>
<S> <C> <C>
SIGNED by )
)
)
)
HONG KONG TELECOM INTERNATIONAL LTD.
for and on behalf of the ) /s/ Leung Kong-Yui
----------------------------------------
Leung Kong-Yui
Landlord in the Presence of: ) General Manager Property
)
)
/s/ Lolita Au
- -------------------------------
LOLITA AU
PROPERTY MANAGER
HONGKONG TELECOMMUNICATIONS LTD
SIGNED by /s/ [ILLEGIBLE]^^ )
)
)
) Signed on behalf of
for and on behalf of the ) AT&T EasyLink Services Asia/Pacific Ltd.
)
) /s/ [ILLEGIBLE]^^
----------------------------------------
Tenant in Presence of: ) Authorized Signatory
)
)
/s/ Patricia Siu
- -------------------------------
Patricia Siu
Office Administrator
</TABLE>
13
<PAGE>
[TMH - 3RD FLOOR PLAN]
<PAGE>
EXHIBIT 10.11
House Rental Contract
Article 1 Subject and Conditions of Rental
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lessor (Party A) Chiang Pai-yuan ID Card Number A121978362 Contact Address 7F, 4 Lane 370,
Chiang Jen-hang A121897219 Shipai Road Section
Chiang Chou p'ing A121897228 Two, Taipei City
- -----------------------------------------------------------------------------------------------------------------------------
Lessee (Party B) AUNET (US company) Chairman Tseng Ping-ti Company Reg. No. 96971524
- -----------------------------------------------------------------------------------------------------------------------------
Subject of Rental 12F, 6 Minchuan East Road Section Three, Taipei City Rental Area 234.59 ping
- ------------------------------------------------------------------------------
Deposit NT$3.2 million (including public
facilities)
- -----------------------------------------------------------------------------------------------------------------------------
Monthly Rental NT$563,016 Rental per Ping NT$2,400
- -----------------------------------------------------------------------------------------------------------------------------
Rental Period Two years, from November 1, 1998 to October 31, 2000
- -----------------------------------------------------------------------------------------------------------------------------
Method of Payment Rent to be paid every three months (the two year rental period shall be divided into eight payment
periods; on the first day of the first month of each period, Party B shall make payment to Party A with
a check for three months' rent, payable at sight).
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Article 2 Deposit and Method of Payment of Rent
1. On the expiry of the rental period, Party A shall return to Party B
(without interest) the deposit of NT$3.2 million paid by Party B to Party
A, provided that Party B has returned the rental property in its original
condition, has paid to Party A all expenses payable to them; and has
submitted to Party A the rental tax withholding slips and a copy of the
certificate proving that Party B has changed their registered business
address to a new address.
2. Rent shall be payable beginning on November 1, 1998. Both parties agree
that the property shall be handed over to Party B in the same condition as
it was handed over to Party A by Mei Fu Construction.
Article 3 Stipulations Governing the Use of the Rental Property
1. The whole of Party A's rental property as noted in this agreement,
including the interior of the property and that portion of public
facilities allocated to Party A (the total area being that noted in Article
1) shall be rented to Party B for use as offices; it may not be used for
any other purpose. Party B may not use the property for any other purpose,
or for any purpose not covered by the areas of business noted on Party B's
business registration license, without the permission of Party A. Party B
further undertakes not to use rental property as the place of business of a
securities firm, futures company, illegal investment company or any other
business which would entail large numbers of the general public entering
and
2
<PAGE>
leaving the property; violation of this restriction will be treated as
breach of contract. Party B may not sub-let, underlease, lend out, invite
purchase of or in any other way make the use of the rental property, in
part or in whole, available to a third party.
2. The rental property may not be used for illegal purposes, or for the
storage of dangerous articles, nor may it be used in such a way as to
affect public safety or public health, or to cause disturbance. Party B may
not install telecommunications antennae etc. without permission.
3. Any signs set up by Party B bearing their company name must be in
accordance with the uniform regulations for the whole building. Party B may
not undertake decoration in, place advertisements on or store articles in
the stairways, elevators, corridors and other public places, or on the
external walls of the building, etc, so as avoid obstructing public use and
passage.
4. On the expiry of the rental period, Party B must immediately return the
rental property. They may not require payment of removal fees or any other
expenses from Party A.
Article 4 Custody and Maintenance of the Rental Property
1. Party B shall make use of and maintain the rental property as a responsible
custodian. In the event of any damage being caused to the property or its
facilities by Party B, their family, employees or customers, whether
willfully or as the result of oversight, Party B shall be required to pay
compensation.
2. If Party B wishes to undertake any major redecoration or alteration of the
facilities, they must submit a written application (with the relevant plans
and design contents appended) to Party A and the building management
committee; only when their approval has been obtained may the work be
undertaken. No harm may be caused to the original building, nor may the
building structure or original architectural design be affected. On the
expiry of the rental period, Party B must return the property to its
original condition; they may request no compensation for this, in the event
of any violation of these stipulations, Party B shall be required to
restore the property completely and to pay compensation; Party A also has
the right to arrange for repairs to be made themselves, in which case Party
B
3
<PAGE>
shall be required to pay all expenses incurred.
3. Party B and their employees may not engage in any illegal behavior or
behavior such as to violate public order within the rental property. In the
event that this stipulation is violated, resulting in harm to Party A, the
building or the subject property, Party B shall be required to accept joint
responsibility.
4. Party A has the right to enter the rental property to undertake testing,
inspection, maintenance or repair of the original facilities, provided that
notification is given to Party B in advance. Party B shall be responsible
for the cost of maintenance of the facilities. In the event that breakdown
of machinery is due to the age of the machinery rather than deliberate
damage by Party B, Party A shall be responsible for the cost of repair.
5. If, during the rental period, a fire or injury occurs as the result of the
actions of Party B or their employees, whether deliberately or through
oversight, all responsibility and liability for compensation shall be borne
by Party B; Party A shall bear no responsibility.
Article 5 Tax and Other Expenses
1. A11 rental income tax payable by Party A shall be withheld by Party B and
paid monthly in accordance with the provisions of the Income Tax Law. The
original copy of the annual tax return shall be submitted to Party A in
February of the following year.
2. With the exception of business use land tax, house tax and other taxes
which the law requires be paid by Party A, all other water and electricity
charges, cleaning fees, management fees, gas charges, telecommunications
charges and other miscellaneous expenses relating to the management and use
of the property, as well as all taxes payable as a result of Party B's
business activities, shall be paid by Party B beginning on the date on
which the rental property was transferred to Party B by Party A.
Article 6 Breach of Contract and Penalties.
1. In the event that either party wishes to terminate the rental contract
prior to the expiry of the rental period, they must notify the other party
by registered post at least six months in advance. If the party
4
<PAGE>
wishing to terminate the contract fails to provide this notification, this
shall be treated as breach of contract. The party having committed breach
of contract shall pay the other party an amount equivalent to one month's
rent as penalty for breach of contract.
2. In the event that Party B fails to pay the rent on time, or makes payment
with a note which is dishonored, this shall be treated as breach of
contract. In addition to being required to pay the rent immediately, Party
B shall also be required to pay compensation for breach of contract to the
amount of three times the daily rental payment for each day by which
payment of rent is overdue.
3. In the event that there is any change in Party B's business registration or
chairman during the rental period, they must notify Party A, and must also
arrange to have the rental terms re-notarized by the court, otherwise this
shall be viewed as breach of contract.
Article 7 Termination of Rental Relationship
1. In the event that any of the following applies to Party B, Party A may
terminate this rental contract at any time; in this case, Party B must
immediately return the rental property to Party A in its original
condition:
2. Where Party B is declared bankrupt by a court, has their property
sequestered or leaves the rental property vacant with no business activity
being undertaken for a period of two months or more.
3. Where Party B violates any of the provisions of Article 3 or Article 4, and
fails to make improvement after being notified to do so.
4. Where Party B is overdue in payment of rent by one month, and violates any
of the provisions of Article 1 or Article 6.
5. On the expiry of the rental period, the rental relationship shall
automatically be terminated. Party A is not required to notify Party B.
Party B shall immediately return the rental property to Party A in its
original condition.
Article 8 Points to Note Regarding the Expiry of the Rental Period or
Termination of the Rental Contract
1. On the day following the expiry of the rental period or termination of the
rental contract, Party B shall return the rental property to Party A
5
<PAGE>
in its original condition. If there is any damage to the rental property or
its facilities, Party B shall unconditionally be required to repair the
damage or make compensation.
2. Within five days of the expiry of the rental period or termination of the
rental contract, in the event that any objects, documents or furniture have
been left in the rental property by Party B, these shall be treated as
having been abandoned, and may be disposed of by Party A as the latter sees
fit; Party B shall be required to pay the cost of disposal. Party B may
raise no objection to this, and gives up the right of defense.
Article 9 Additional Provisions
1. In the event that Party B wishes to extend the contract, they shall notify
Party A at least two months prior to the expiry of the rental period. Party
B shall have priority in the extension of contract only if no breach of
contract occurred during the rental period. The amount of rental payment
shall be agreed separately between the two parties.
2. In the event that breach of contract by Party B results in a lawsuit, all
legal expenses and lawyers' fees incurred by Party A shall be paid by Party
B. Both parties agree that Taipei District Court, Taiwan ROC shall be taken
as the court of first instance.
3. Both parties agree that this contract shall not take effect until notarized
by Taipei, District Court, Taiwan ROC. Notarization expenses shall be split
50-50 between the two parties.
4. Any written communication between the two parties shall be sent to the
addresses noted in this contract. Communications shall be sent by
registered post. In the event that either party refuses to accept delivery
of a communication, the communication shall be treated as having been
delivered.
5. Any matters not covered by this contract shall be settled fairly in
accordance with the relevant laws and regulations, normal practice and the
principle of integrity.
6. There are three copies of this contract, one each to be retained by Party A
and Second Party, and one to be retained by the court after notarization.
6
<PAGE>
Signatories:
Party A:
Lessor: Chiang Pai-yuan (1/3 holding)
Address: 3F, 215-1 Chungshan North Road Section
Seven, Shihlin District, Taipei City
ID Card No.: A129783625
Lessor: Chiang Jen-hang (1/3 holding)
Address: 5F, 6 Lane 81, Chungshan North Road Section
Seven, Shihlin District, Taipei City
ID Card No.: A121897219
Lessor: Chiang Chou-p'ing (1/3 holding)
Address: 3F, 215-1 Chungshan North Road Section
Seven, Shihlin District, Taipei City
ID Card No.: A121897228
Party B:
Lessee: AUNET (Taiwan) Ltd.
Person-in-Charge: Tseng Ping-ti
Address: 12F, 6 Minchuan East Road; Section
Three, Taipei City
Representative: An Juo-ch'u
October 29, 1998
7
<PAGE>
Taipei District Court of Taiwan
Division of Notary Public
Statement of Notary Public
Date: Oct. 29, 1998
Ref. No.: (Jen)-87-#173351
Applicant: Lessor Chiang Pai-yuan
Sex: Male
Native Place: Taipei City
DOB: May 1, 1963
Occupation: Business
ID#: A121978362
Address: 3F #215-1, Chung-shan N. Rd., Sec. 7, Taipei City
Applicant: Lessor Chiang Yen-hang
Sex: Male
Native Place: Taipei City
DOB: Oct. 30, 1965
Occupation: Business
ID#: A121897219
Address: 5F #6, Lane 82, Chung-shan N. Rd, Sec. 7, Taipei City
Applicant: Lessor Chiang Chou-p'ing
Sex: Male
Native Place: Taipei City
DOB: May 6, 1967
Occupation: Business
ID#: A121897228
Address: 5F #6, Lane 82, Chung-shan N. Rd., Sec. 7, Taipei City
Remarks
Applicant: Lessee AUNET (Taiwan) Ltd. (USA)
1
<PAGE>
By: Tseng Ping-ti (Person-in-Charge)
Sex: Male
Native Place: USA
DOB: Oct. 4, 1942
Occupation: Business
ID#: D53471124
Address: 12F, #6, Minchuan E. Road, Sec. 3, Taipei City
Remarks
Agent for the Lessee: An Juo-ch'u
Sex: Male
Native Place: Taipei City
DOB: Aug. 20, 1958
Occupation: Business
ID#: F122234597
Address: 3F #9-3, Lane 140, Minchuan E. Rd., Sec. 3, Taipei City
Remarks
Legal act or private fact applied for notary public:
On account of the aforementioned housing rental contract executed between
the Lessors and the Lessee named in the said contract whereas both parties have
agreed to observe and execute each and every provision set forth in the said
contract, both parties now have sought this notary public in order to legally
protect the parties hereto and avoid litigation.
Intent of the Compulsory Enforcement under Application:
Where the Lessee agrees to pay the rental or fine for breach of contract
and vacate the leased premises upon expiry of the contract and the Lessors agree
to refund the security deposit as agreed upon, compulsory enforcement shall be
put into effect in the event that failure to perform such agreement is noticed
to exist. The compulsory enforcement shall apply also to the joint guarantor,
if any.
Intent of this notary public and legal basis:
The attached private agreement is being notarized in pursuance of Articles
4(1) and 11(1)(1) and 11(1)(3) of the Notary Public Law upon the presentation of
the concerned documents that were verified to be true and correct in the
presence of all interested parties.
2
<PAGE>
Date and location this statement of notary public is sanctioned:
Oct. 29, 1998, Division of Notary Public, Taipei District Court of Taiwan
This statement of notary public has been acknowledged by the parties present at
the scene whose signatures are shown here below:
Lessor Chiang Pai-yuan (signed and with seal)
Lessor Chiang Jen-hang (signed and with seal)
Lessor Chiang Chou-p'ing (signed and with seal)
Lessee AUNET (Taiwan) Ltd. (USA)
By: Tseng Ping-ti (Person-in-Charge) (signed and with seal)
Agent for the Lessee: An Juo-ch'u (signed and with seal)
Cheng Hui-chia (signed)
Notary Public
Division of Notary Public
Taipei District Court of Taiwan
(With Official Seal)
3
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of April 16, 2000, by and between
Jon Beizer ("Executive") and iAsiaWorks, Inc., a California corporation (the
"Company").
1. Duties and Scope of Employment.
------------------------------
(a) Position and Duties. For the term of his employment
-------------------
under this Agreement, the Company agrees to employ Executive in the position of
President - U.S. and Chief Financial Officer ("CFO"). Executive shall report to
the Company's Chief Executive Officer ("CEO"), and his position will be based at
the Company's corporate headquarters in San Mateo, California. Executive will be
responsible for the management of the Company's U.S. business, including
managing the Company's financial functions such as reporting, fundraising,
merger and acquisition activities and other projects as assigned by the CEO. In
performing his duties to the Company, Executive shall spend no more than twenty
percent (20%) of his time travelling.
(b) Obligations to the Company. During the term of his
--------------------------
employment, Executive shall devote his full business efforts and time to the
Company; provided, however, that this shall not preclude Executive from serving
as a member of the board of directors of up to three other companies, with the
prior consent of the Company's Chief Executive Officer and Board of Directors,
to the extent such other companies do not compete with the Company and to the
extent such service does not materially impact the ability of Executive to
fulfill his obligations to the Company. Executive shall comply with the
Company's policies and rules, as they may be in effect from time to time during
the term of his employment.
(c) No Conflicting Obligations. Executive represents and
--------------------------
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use or disclose,
in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person or entity. Executive represents and warrants to the Company that he
has returned all property and confidential information belonging to any prior
employers.
(d) Commencement Date. The employment of Executive by the
-----------------
Company shall be governed by this Agreement beginning as of the date first
written above ("Effective Date.")
2. Term of Employment.
------------------
(a) Basic Rule. The Company agrees to continue Executive's
----------
employment, and Executive agrees to remain in employment with the Company, from
the Commencement Date set forth in Section 1(d) until the date when Executive's
employment terminates pursuant to Subsection (b) below (the "Employment
Period"). Executive's
<PAGE>
employment with the Company shall be "at will," which means that either
Executive or the Company may terminate Executive's employment at any time, for
any reason, with or Without Cause. Any contrary representations, which may have
been made to Executive shall be superseded by this Agreement. This Agreement
shall constitute the full and complete agreement between Executive and the
Company of the "at will" nature of Executive's employment, which may only be
changed in an express written agreement signed by Executive and a duly
authorized officer of the Company.
(b) Termination. The Company or Executive may terminate
-----------
Executive's employment at any time for any reason (or no reason), and with
"Cause" or "Without Cause," by giving the other party fourteen (14) days' notice
in writing. Executive's employment shall terminate automatically in the event of
his death.
3. Cash and Incentive Compensation.
-------------------------------
(a) Salary. The Company shall pay Executive as
------
compensation for his services an annual base salary of $250,000 payable bi-
monthly and in accordance with the Company's standard payroll schedule. (The
compensation specified in this Subsection (a), together with any increases in
such compensation that the Company may grant from time to time, are referred to
in this Agreement as "Base Salary.")
(b) Bonus. Executive will be eligible to earn an annual
-----
bonus (the "Target Bonus") equal to a maximum of forty percent (40%) of his Base
Salary. At least fifty percent (50%) of the Target Bonus will be a guaranteed
bonus, to be paid to Executive in the form of deferred compensation, in two
equal, bi-annual payments. Half of the guaranteed bonus will be paid on July 1,
2000 and the remainder of the guaranteed bonus will be paid on January 1, 2001.
Increase of the guaranteed bonus must be approved by the Board, upon the
recommendation of the CEO.
Beginning January 1, 2001, Executive will be eligible to
earn the remaining portion of the Target Bonus, which will be based on
Executive's achievement of performance criteria to be mutually agreed upon by
the parties, and approved by the CEO of the Company.
(c) Stock Option. The unvested shares of Executive's stock
------------
option granted by the Company under the Stock Option Plan, dated _____ 1995 (the
"Plan") shall continue to vest pursuant to the Plan. Upon the filing of an
initial public offering, Executive shall receive a stock option to purchase
shares representing one-half (1/2) of one percent (1%) of the then fully diluted
stock of the Company.
(i) Termination Following Change of Control. If, within
---------------------------------------
one year following a "Change of Control," Executive resigns for "Good Reason" or
the Company terminates Executive's employment "Without Cause," then Executive
shall receive: (A) a lump sum severance payment equal to nine (9) months of his
Base Salary; (B) the full amount of his Target Bonus for the year in which
Executive is terminated; and (C) immediate vesting of the unvested shares of all
options currently held by Executive, with the Company's repurchase right lapsing
as to such shares.
2
<PAGE>
(ii) Termination Outside Change of Control. If the Company
-------------------------------------
terminates Executive's employment "Without Cause" or Executive resigns for "Good
Reason" outside a Change of Control, then Executive shall receive: (A) a lump
sum severance payment equal to nine (9) months of his Base Salary; (B) immediate
vesting of the unvested shares of all options currently held by Executive, with
the Company's repurchase right lapsing as to such shares; and (C) a pro-rated
portion of Executive's full Target Bonus, based on Executive's length of service
to the Company during the calendar year in which he is terminated. In other
words, upon this termination event, Executive is to receive the full Target
Bonus representing forty percent (40%) of his Base Salary, an amount which is to
be adjusted according to the fraction of the year in which Executive was
employed immediately prior to his termination.
(iii) Effect of Change of Control on Stock Option Value. In
-------------------------------------------------
the event that a Change of Control renders Executive's stock option worthless,
the Board shall engage in good faith negotiations with Executive to determine
and implement a fee payable to Executive for his services in assisting with the
transaction ("Success Fee"). The Company shall pay Executive the Success Fee
upon the closing date of the Change of Control. This section 3(c)(vi) shall
only apply while the Company is private.
(iv) Definitions.
(a) "Change of Control." For all purposes under this
-----------------
Agreement, "Change of Control" shall mean (i) a merger or consolidation in which
securities possessing at least fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such transaction, or (ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
(b) "Good Reason." For all purposes under this
-----------
Agreement, "Good Reason" for Executive's resignation will exist if he resigns
within sixty (60) days of any of the following events: (i) any reduction in his
Base Salary or Target Bonus; (ii) any material reduction in his benefits; (iii)
a change in his position with the Company or a successor company which reduces
his duties or level of responsibility, other than Executive no longer being the
Chief Financial Officer of the Company so long as he remains its President -
U.S.; (iv) a requirement that Executive travel more than twenty percent (20%) of
his time; or (v) any requirement that he relocate his place of employment by
more than thirty-five (35) miles from his then current office, provided such
reduction, change or relocation is effected by the Company without his written
consent. A resignation by Executive under any other circumstance or for any
other reason will be a resignation without "Good Reason."
(c) Termination for "Cause." For all purposes under
----------------------
this Agreement, a termination for "Cause" shall mean a good faith determination
by the Company's Board of Directors that Executive's employment be terminated
for any of the following reasons: (i) willful misconduct which materially
damages the Company; (ii) misappropriation of the assets of the Company; or
(iii) conviction of, or a plea of "guilty" or "no contest" to a felony under the
laws of the United States or any state thereof. A termination of Executive's
employment in any other circumstance or for any other reason will be a
termination "Without Cause."
3
<PAGE>
4. Vacation and Executive Benefits. During the term of his
-------------------------------
employment, Executive shall be eligible for three (3) weeks of paid vacation
each year, in accordance with the Company's standard policy for similarly
situated employees, as it may be amended from time to time. During the term of
his employment, Executive shall be eligible to participate in any employee
benefit plans maintained by the Company for similarly situated employees,
subject in each case to the generally applicable terms and conditions of the
plan in question and to the determinations of any person or committee
administering such plan.
5. Business Expenses. During the term of his employment, Executive
-----------------
shall be authorized to incur necessary and reasonable travel and other business
expenses in connection with his duties hereunder. The Company shall reimburse
Executive for such expenses upon presentation of an itemized account and
appropriate supporting documentation, all in accordance with the Company's
generally applicable policies.
6. Non-Solicitation and Non-Disclosure.
-----------------------------------
(a) Non-Solicitation. During the period commencing on the
----------------
date of this Agreement and continuing until the first anniversary of the date
when Executive's employment terminates for any reason, Executive shall not
directly or indirectly, personally or through others, solicit or attempt to
solicit (on Executive's own behalf or on behalf of any other person or entity)
for hire any employee or consultant of the Company or any of the Company's
affiliates.
(b) Non-Disclosure. As a condition of employment,
--------------
Executive will execute the Company's standard Proprietary Information Agreement,
a copy of which is attached.
7. Successors.
----------
(a) Company's Successors. This Agreement shall be binding
--------------------
upon any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Executive's Successors. This Agreement and all rights
----------------------
of Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Indemnity. The Company will indemnify and provide a defense to
---------
Executive to the full extent permitted by law and its bylaws with respect to any
claims arising out of the performance of his duties as an employee, director or
officer of the Company. To the same extent, the Company will pay, and subject
to any legal limitations, advance all expenses, including reasonable attorney
fees and costs of court-approved settlements, actually and
4
<PAGE>
necessarily incurred by Executive in connection with the defense of any action,
suit or proceeding and in connection with any appeal, which has been brought
against Executive by reason of his service as an officer, director or agent of
the Company, or his acceptance of this Agreement or the performance of his
duties thereunder. The Company shall use its best efforts to obtain coverage for
Executive under a liability insurance policy or policies that cover the actions
of officers and directors of the Company.
10. Arbitration. Any controversy between the parties hereto
-----------
involving the construction or application of any terms, covenants or conditions
of this Agreement, or any claims arising out of or relating to this Agreement or
the breach thereof or your employment with the Company or any termination of
that employment, will be submitted to and settled by final and binding
arbitration in Palo Alto, California, in accordance with the Model Employment
Dispute Resolution Rules of the American Arbitration Association (the "Rules"),
or any other applicable rules of the AAA then in effect. Any arbitrator shall be
selected pursuant to such Rules and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
11. Miscellaneous Provisions.
------------------------
(a) Notice. Notices and all other communications
------
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by overnight courier,
U.S. registered or certified mail, return receipt requested and postage prepaid.
Mailed notices shall be addressed to Executive at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Modifications and Waivers. No provision of this
-------------------------
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by Executive and by an
authorized officer of the Company (other than Executive). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No other agreements, representations
---------------
or understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement, the Proprietary
Information Agreement, and applicable stock option agreements and stock plans,
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) Taxes. All payments made under this Agreement shall be
-----
subject to reduction to reflect taxes or other charges required to be withheld
by law.
(e) Choice of Law. The validity, interpretation,
-------------
construction and performance of this Agreement shall be governed by the laws of
the State of California (except provisions governing the choice of law).
5
<PAGE>
(f) Severability. The invalidity or unenforceability of
------------
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) No Assignment. This Agreement and all rights and
-------------
obligations of Executive hereunder are personal to Executive and may not be
transferred or assigned by Executive at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or a substantial
portion of the Company's assets to such entity.
(h) Headings. The headings of the paragraphs contained in
--------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of any provision of this Agreement.
(i) Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
EXECUTIVE
____________________________________
Jon Beizer
iAsiaworks Corporation
By:__________________________________
Title:_______________________________
6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated April 14, 2000 relating to the financial statements and
financial statement schedule of iAsiaWorks, Inc. which appears in such
Registration Statement. We also consent to the reference to us under the
headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
April 20, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated December 14, 1999, except for Note 14, as to which the date is
April 14, 2000, relating to the financial statements of AT&T Easylink Services
Asia/Pacific Limited which appears in such Registration Statement. We also
consent to the reference to us under the headings "Experts" in such
Registration Statement.
PricewaterhouseCoopers
Hong Kong
April 20, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 2,654 42,222
<SECURITIES> 4,433 0
<RECEIVABLES> 642 3,289
<ALLOWANCES> (228) (554)
<INVENTORY> 0 0
<CURRENT-ASSETS> 8,348 45,686
<PP&E> 3,040 7,348
<DEPRECIATION> (913) (1,763)
<TOTAL-ASSETS> 10,796 91,616
<CURRENT-LIABILITIES> 1,842 5,422
<BONDS> 0 0
0 0
22,838 108,538
<COMMON> 1 9
<OTHER-SE> (14,562) (22,788)
<TOTAL-LIABILITY-AND-EQUITY> 10,796 91,616
<SALES> 3,490 5,629
<TOTAL-REVENUES> 3,490 5,629
<CGS> 4,621 5,818
<TOTAL-COSTS> 4,621 5,818
<OTHER-EXPENSES> 5,522 11,790
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (388) (384)
<INCOME-PRETAX> (6,821) (12,056)
<INCOME-TAX> 2 0
<INCOME-CONTINUING> (6,823) (12,056)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,823) (12,056)
<EPS-BASIC> (8.13) (4.09)
<EPS-DILUTED> (8.13) (4.09)
</TABLE>
