<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _____________ TO _____________
Commission file number 000-25374
---------
GENERAL MAGIC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0250147
(State of incorporation) (IRS Employer Identification Number)
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(Address and telephone number of principal executive offices)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
36,922,296 shares of the registrant's Common Stock, $0.001 par value,
were outstanding as of April 30, 1999.
1
<PAGE> 2
GENERAL MAGIC, INC.
FORM 10-Q, March 31, 1999
C O N T E N T S
<TABLE>
<CAPTION>
Item Number Page
- ----------- ----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a. Condensed Consolidated Balance Sheets - March 31, 1999, and
December 31, 1998 3
b. Condensed Consolidated Statements of Operations - Three-Month
Periods Ended March 31, 1999 and 1998 4
c. Condensed Consolidated Statements of Cash Flows - Three-Month
Periods Ended March 31, 1999 and 1998 5
d. Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 27
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 30
Exhibits
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
----------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash
of $1,824 and $2,280 in 1999 and 1998, respectively) $ 36,982 $ 21,845
Short-term investments 4,019 12,075
Other current assets 4,057 1,700
--------------------------
Total current assets 45,058 35,620
--------------------------
Property and equipment, net 8,274 7,507
Other assets 2,324 4,171
--------------------------
Total assets $ 55,656 $ 47,298
==========================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 2,881 $ 1,348
Accrued expenses 10,115 9,980
Current portion of long-term debt 2,333 2,333
Other current liabilities 35 54
--------------------------
Total current liabilities 15,364 13,715
Deferred revenue, noncurrent 2,000 2,000
Long-term debt 3,194 3,778
Other long-term liabilities 626 683
--------------------------
Total liabilities 21,184 20,176
--------------------------
Commitments
Redeemable, convertible Series D preferred stock, $0.001 par value
Stated at involuntary liquidation preference
Authorized: 2 shares
Issued and outstanding: 1999 - 2; 1998 - None 20,000 --
Redeemable, convertible Series C preferred stock, $0.001 par value
Stated at involuntary liquidation preference
Authorized: 3 shares
Issued and outstanding: 1999 - 1; 1998 - 2 15,549 20,658
Redeemable, convertible Series B preferred stock, $0.001 par value
Stated at involuntary liquidation preference
Authorized: 12 shares
Issued and outstanding: 1999 - 4; 1998 - 6 4,782 7,577
Stockholders' deficit:
Convertible Series A preferred stock, $0.001 par value
Liquidation preference: 1999 - $4,500; 1998 - $4,500
Authorized: 50 shares
Issued and outstanding: 1999 - 50; 1998 - 50 -- --
Preferred stock, $0.001 par value
Authorized: 435 shares
Issued and outstanding: 1999 and 1998 - None -- --
Common stock, $0.001 par value
Authorized: 100,000 shares
Issued and outstanding: 1999 - 35,499; 1998 - 33,400 35 33
Additional paid-in capital 218,061 208,557
Deficit accumulated during development stage (223,752) (209,500)
--------------------------
(5,656) (910)
Less treasury stock, at cost: 1999 and 1998 - 46 (203) (203)
--------------------------
Total stockholders' deficit (5,859) (1,113)
--------------------------
$ 55,656 $ 47,298
==========================
</TABLE>
The Notes to Condensed Consolidated Financial Statements are an integral part of
these financial statements.
3
<PAGE> 4
GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three-Month Periods Ended
March 31,
-------------------------
1999 1998
----------------------
<S> <C> <C>
Revenue:
Service revenue $ 137 $ --
Licensing revenue 18 1,510
Other revenue -- 185
----------------------
Total revenue 155 1,695
----------------------
Operating expenses:
Cost of other revenue -- 147
Network operations 1,912 --
Research and development 3,566 4,710
Selling, general and administrative 5,906 3,177
Depreciation and amortization 973 704
Write-off of in-process research and development -- 2,050
----------------------
Total costs and expenses 12,357 10,788
----------------------
Loss from operations (12,202) (9,093)
----------------------
Total other income (expense), net (1,493) 2,670
----------------------
Loss before income taxes (13,695) (6,423)
Income taxes 22 --
----------------------
Net loss $(13,717) $ (6,423)
Warrants issuance on Series D preferred stock (251) --
Dividends on preferred stock (283) (27)
Favorable conversion rights on convertible Series
A preferred stock -- (3,665)
Favorable conversion and redemption rights on
redeemable, convertible Series B preferred
stock and favorable exercise rights on warrants -- (1,701)
----------------------
Loss applicable to common stockholders (14,251) (11,816)
Basic and diluted loss per share $ (0.41) $ (0.43)
======================
Shares used in computing per share amounts 34,386 27,403
======================
</TABLE>
The Notes to Condensed Consolidated Financial Statements are an integral part of
these financial statements.
4
<PAGE> 5
GENERAL MAGIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three-Month Periods Ended
March 31,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(13,717) $ (6,423)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 973 704
Equity in net loss of unconsolidated affiliate 1,796 --
Deferred revenue -- (2,186)
Amortization of deferred compensation -- 140
Write-off of in-process research and development -- 1,850
Changes in items affecting operations:
Other current assets 528 (530)
Accounts payable and accrued expenses 1,649 (1,292)
-------------------------
Net cash used in operating activities (8,771) (7,737)
-------------------------
Cash flows from investing activities:
Purchases of short-term investments (3,077) (2,034)
Proceeds from sales and maturities of short-term investments 11,133 4,959
Purchases of property and equipment (1,688) (483)
Other assets (2,886) (834)
-------------------------
Net cash provided by investing activities 3,482 1,608
-------------------------
Cash flows from financing activities:
Repayment of debt (584) (106)
Proceeds from sale of common stock 701 454
Proceeds from sale of Series D preferred stock 20,000 --
Proceeds from sale of Series B preferred stock -- 4,926
Proceeds from sale of Series A preferred stock -- 4,463
Other long-term liabilities 309 (55)
-------------------------
Net cash provided by financing activities 20,426 9,682
-------------------------
Net increase in cash and cash equivalents 15,137 3,553
Cash and cash equivalents, beginning of period 21,845 17,414
-------------------------
Cash and cash equivalents, end of period $ 36,982 $ 20,967
=========================
Supplemental disclosures of cash flow information:
Income taxes paid during the period $ 22 $ --
Interest paid during the period 137 855
Noncash investing and financing activity:
Deferred compensation for restricted stock issuances $ -- $ 393
Purchase of technology in exchange for shares of common stock -- 1,850
Conversion of Series B preferred stock into common stock 2,877 --
Conversion of Series C preferred stock into common stock 5,309 --
Preferred stock redemption and conversion rights and dividends 283 5,393
</TABLE>
The Notes to Condensed Consolidated Financial Statements are an integral part of
these financial statements.
5
<PAGE> 6
GENERAL MAGIC, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). In the opinion of management, the accompanying
unaudited condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of the Company's financial condition, results of operations
and cash flows for the periods presented. These financial statements should be
read in conjunction with the Company's audited consolidated financial statements
as of December 31, 1998 and 1997, and for each of the three years ended December
31, 1998, including notes thereto, included in the Company's Annual Report on
Form 10-K which was filed with the SEC on March 31, 1999.
The results of operations for the three-month period ended March 31, 1999,
are not necessarily indicative of the results expected for the current year or
any other period.
Effective January 1, 1999, the Company has reclassified the presentation of
its statement of operations in order to more accurately portray the operating
costs of providing voice-enabled services and to allow for better comparison
with other companies in the service industry. As a result, certain line items
have been added and expenses have been reclassified in prior periods to be
consistent with this new presentation. The following line items have been added:
Service revenue: Service revenue consists of all revenue from the Company's
Portico(TM) service and will include revenue from other voice-enabled services
as they become commercially available.
Network operations: Network operations expense consists of personnel and
related costs associated with running the network operations center and
providing customer support and billing, access costs associated with the
telephony and data network, and royalties paid to software and content
providers.
Depreciation and amortization: Depreciation and amortization expense consists
of all depreciation on property and equipment as well as amortization of
intangible assets from certain acquisitions.
NOTE 2: CONSOLIDATED FINANCIAL STATEMENT DETAILS
PROPERTY AND EQUIPMENT
A summary of property and equipment follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------------
<S> <C> <C>
Network operations center $ 6,674 $ 5,357
Office equipment and computers 7,757 7,818
Furniture and fixtures 2,373 2,373
Leasehold improvements 1,429 996
------------------------
18,233 16,544
Less accumulated depreciation and amortization 9,959 9,037
------------------------
$ 8,274 $ 7,507
========================
</TABLE>
6
<PAGE> 7
ACCRUED EXPENSES
A summary of accrued expenses follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------------
<S> <C> <C>
Prepaid royalty payment and accrued interest $ 4,252 $4,217
Employee compensation 2,780 3,688
Other 3,083 2,075
------------------------
$10,115 $9,980
========================
</TABLE>
TOTAL OTHER INCOME (EXPENSE), NET
A summary of other income follows (in thousands):
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
------------------------
<S> <C> <C>
Equity in net loss of DSI $(1,796) $ --
Gain on sale of Starfish, Inc. 157 --
Gain on AltoCom transactions -- 2,446
Interest Income 274 351
Interest Expense (150) (130)
Other 22 3
------------------------
$(1,493) $ 2,670
========================
</TABLE>
NOTE 3: COMPREHENSIVE INCOME/LOSS
Effective January 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
requires disclosure of comprehensive loss in interim periods and additional
disclosures of the components of comprehensive loss on an annual basis.
Comprehensive loss includes all changes in equity during a period except those
resulting from investments by and distributions to the Company's stockholders.
For the three-month periods ended March 31, 1999 and 1998, there were no
material differences between the Company's comprehensive loss and net loss.
NOTE 4: NET LOSS PER SHARE
The computation of diluted loss per share does not include common stock
issuable upon (i) the exercise of outstanding stock options and stock purchase
warrants and (ii) the conversion of preferred stock, because the inclusion of
these securities would have an anti-dilutive effect.
NOTE 5: PREFERRED STOCK
On March 30, 1999, the Company entered into a financing transaction with a
group of private investors that provided $20,000,000 in cash to the Company from
the sale of 2,000 shares of its Series D Convertible Preferred Stock. Each share
of Series D preferred stock has special voting rights with respect to matters
that adversely affect the rights of holders of Series D preferred stock and
otherwise has no voting rights except as may be required by law. Each share of
Series D preferred stock accrues dividends quarterly at a rate of 5% per annum
of the stated value ($10,000 per share). The liquidation preference of Series D
preferred stock is $10,000 per share plus any accrued but unpaid dividends and
unpaid default interest on cash dividends, and is payable pari passu with the
Series A, Series B and Series C preferred
7
<PAGE> 8
stock and in preference to the holders of common stock. Each share of Series D
preferred stock is convertible into shares of the Company's common stock at a
conversion rate obtained by dividing the liquidation preference by an amount
(the "Conversion Price") equal to (i) 110% of the average of the closing bid
prices during the ten consecutive trading days immediately after, at the option
of the Company, May 29, 1999 or June 28, 1999 or (ii) in the event that a Major
Transaction (as defined below) occurs prior to the date the initial Conversion
Price is set in accordance with (i), $4.50. The Conversion Price is subject to
adjustment upon certain events, including, without limitation, adjustment
following the last day of each September and March until March 30, 2002 and on
December 31, 1999 and June 30, 2000 to an amount equal to 110% of the average of
the closing bid prices of the Company's common stock during the ten trading days
immediately after each such date (the "Reset Price") if the Reset Price is less
than the then-effective Conversion Price.
Subject to certain conditions, the Company may redeem all of the Series D
preferred stock upon a consolidation, merger or other business combination in
which the Company's stockholders do not retain sufficient voting power of the
surviving entity to elect a majority of such entity's board of directors (a
"Change of Control") at a price equal to, subject to limited exceptions, 115% of
the liquidation value. In addition, subject to certain conditions, in the event
that a Reset Price is less than 50% of the initial Conversion Price, the Company
may redeem all of the Series D preferred stock at liquidation value.
In the event of a Change of Control, the sale of substantially all of the
assets of the Company, or a purchase, tender or exchange offer made to and
accepted by holders of more than 50% of the common stock of the Company which is
approved or recommended by the Company's board of directors (each a "Major
Transaction"), the holders of Series D preferred stock may require the Company
to redeem any or all of their shares at the greater of (i) 125% of the
liquidation preference or (ii) a price based on the market value of the common
stock at the time of the public announcement of such Major Transaction. However,
in the event of a Change of Control, the holders of the Series D preferred stock
may not exercise their rights of redemption if the Company has previously
delivered its notice of redemption upon a Change of Control. The holders of the
Series D preferred stock are also entitled to require the Company to redeem some
or all of their shares at a per share price equal to 130% of the liquidation
preference, or in certain cases, the greater of (i) 130% of the liquidation
preference or (ii) a price based on the closing bid price of the Company's
common stock at the time of any of the following events, among other events: (x)
the Company's failure to use its best efforts to maintain registration of the
common stock issuable upon conversion of the Series D preferred stock; (y) the
Company's failure to use its reasonable best efforts to maintain the listing of
its common stock on Nasdaq National Market ("Nasdaq"), The American Stock
Exchange, Inc. ("AMEX") or The New York Stock Exchange ("NYSE"); or (z) the
Company's failure to timely convert the Series D preferred stock. In addition,
the holders of the Series D preferred stock are entitled to require the Company
to redeem some or all of their shares at a per share price equal to the
liquidation preference at the time of any of the following events: (w) the
Company's failure to maintain the registration statement for resale of the
common stock issuable upon conversion of the Series D preferred stock; (x) the
Company's failure to maintain listing of its common stock on Nasdaq, AMEX or
NYSE; (y) the Company's failure to obtain stockholder approval for issuances of
common stock upon conversion of the Series D preferred as required by the
Marketplace Rules of the Nasdaq National Market; or (z) a purchase, tender or
exchange offer made to and accepted by holders of more than 50% of the Company's
common stock which is not approved or recommended by the Company's board of
directors. As part of the financing transaction, the Company issued warrants to
acquire 150,000 shares of common stock at a price of $5.073 per share. The
warrants have a three-year term and are immediately exercisable.
During the three-month period ended March 31, 1999, 2,100 shares of the 5
1/2% Cumulative Convertible Series B Preferred Stock were converted into 926,000
shares of common stock. As of March 31, 1999, 3,500 shares of the Series B
preferred stock were outstanding. During the three-month period ended March 31,
1999, 397 shares of the Series C Convertible Preferred Stock were converted into
852,000 shares of common stock. As of March 31, 1999, 1,152 shares of the Series
C preferred stock were outstanding.
8
<PAGE> 9
NOTE 6: INVESTMENT IN DATAROVER MOBILE SYSTEMS, INC.
Effective October 1998, the Company divested its DataRover handheld
communications device division ("DataRover Division") in a transaction with
DataRover Mobile Systems, Inc. ("DSI"). Pursuant to the transaction, the Company
contributed cash and certain other assets of the DataRover Division totaling
$3,361,000 in value to DSI. The Company also licensed certain of its
technologies to DSI. In consideration therefor, the Company received non-voting,
non-redeemable preferred stock and 49% of the outstanding common stock of DSI.
The majority of DSI's common stock is owned by employee founders of DSI. The
Company did not recognize any gain or loss as a result of the divestiture of the
DataRover Division, and has accounted for its investment in DSI under the equity
method. As of March 31, 1999, the Company had recorded a decrease of $1,796,000
in the value of its investment to reflect its equity in loss incurred by DSI
since December 31, 1998.
During the three-month period ended March 31, 1999, the Company purchased the
remaining units from Oki Electric Industry Co., Ltd. ("Oki Electric") for DSI
under an existing letter of credit for a total of $2,179,000. As of March 31,
1999, there was no remaining commitment to purchase units for DSI. DSI is
obligated to reimburse the Company the actual cost of such units upon the
earlier of: five (5) days following the sale of the units by DSI or 120 days
following shipment by Oki Electric. DSI's obligation to reimburse the Company is
secured by all personal property of DSI. The Company has also agreed to provide
office space to DSI at a discount to market value for a period of one year. As
of March 31, 1999, the receivable from DSI, reflected in other assets in the
accompanying condensed consolidated financial statements, was $2,884,000,
comprised of purchases made from Oki Electric by the Company on behalf of DSI.
NOTE 7: COMMITMENTS
PURCHASE COMMITMENTS
In April 1998, the Company entered into an agreement with Qwest
Communications International, Inc. to purchase telecommunications services at
fixed prices for an initial term of three years. The Company is obligated to
purchase $13,000,000 in telecommunications services during the three-year period
ending April 30, 2001. The charges underlying this commitment will be expensed
in the periods in which they occur.
LONG-TERM DEBT
In December 1997, the Company entered into a $4,000,000 term loan with a
financial institution. The loan bears interest at 0.25% above the financial
institution's prime rate (7.75% as of March 31, 1999), and has a term of 40
months with interest only due in the first four months and principal and
interest due monthly thereafter. This loan is secured by all of the assets of
the Company, including its intellectual property. As of March 31, 1999,
$2,777,000 was outstanding under this term loan.
In June 1998, the Company secured a $3,000,000 term loan with the same
financial institution. The loan bears interest at the financial institution's
prime rate (7.75% as of March 31, 1999), and has a term of 42 months with
interest only due in the first six months and principal and interest due monthly
thereafter. This loan is secured by all of the assets of the Company, including
its intellectual property. As of March 31, 1999, $2,750,000 was outstanding
under this term loan.
As of March 31, 1999, the current and non-current portions due under these
loans were $2,333,000 and $3,194,000, respectively. Both of these term loans
contain customary covenants and events of default. As of March 31, 1999, the
Company was in full compliance with all loan covenants.
9
<PAGE> 10
NOTE 8: SEGMENT REPORTING
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual financial statements.
Operating segments are defined as components of an enterprise about which
separate financial information is available and is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company's chief operating decision maker is its Chief
Operating Officer ("COO"). Financial information for separate components of the
Company's business is not available to the COO for review and analysis.
Allocation of resources and assessment of performance is based on the Company's
consolidated financial information, which is available to the COO in
substantially the form presented in the accompanying condensed consolidated
statement of operations. The Company therefore operates in a single operating
segment, voice-enabled services. Total revenue for both the three-month periods
ended March 31, 1999 and 1998, was reported under the voice-enabled services
product offering.
NOTE 9: SUBSEQUENT EVENTS
On April 19, 1999, the remaining 3,500 outstanding shares of Series B
preferred stock were converted into 1,524,000 shares of common stock. From May
3-5, 1999, the remaining 1,152 outstanding shares of Series C preferred stock
were converted into 4,026,000 shares of common stock.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes a number of forward-looking statements that reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties,
including those discussed in the Risk Factors section of this Item 2 that could
cause actual results to differ materially from historical results or those
anticipated. In this report, the words "anticipates," "believes," "expects,"
"future," "intends," and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
General Magic, Inc. (the "Company") develops and markets voice-enabled
services designed to make it easy and convenient for subscribers to access and
act on information important to them. The Company's primary offerings are the
Portico(TM) virtual assistant service, introduced in 1998, and voice-enabled
services for the Web. One of the Company's core technology assets is its
magicTalk(TM) voice user interface, used both in the Portico service and for
voice enabling Web content. The Company hosts operations for voice-enabled
services in its network operations center, located in Sunnyvale, California.
The Portico service provides many of the services of a human assistant on an
around-the-clock basis. Subscribers -- who today are principally mobile
professionals -- may access voice mail, email, calendar, address book, news and
stock quotes, either over any telephone or using a standard Web browser from a
personal computer. When accessing the Portico service over the telephone,
subscribers interact with magicTalk, a personality-rich, natural language voice
user interface. With magicTalk, a user doesn't need to remember special voice
commands or navigate lengthy push-button menus. The virtual assistant recognizes
a full range of conversational commands, from "Call John Smith" to "Would you
please call John Smith at home."
The Company distributes the Portico virtual assistant service through a
nationwide network of resellers, as well as direct to consumers through signup
on the Web. The Company is also conducting trials of the service with
telecommunications carriers, including BellSouth Mobility, Inc. and Qwest
Communications Corporation. The Company expects to host customized,
private-label versions of the Portico service for those carriers that elect to
make the service commercially available to their customers.
Voice enabling Web content is an emerging growth opportunity for the Company.
The Web offers a broad base of potential subscribers, including consumers who
may find voice to be an easy way to keep in touch with their favorite Web
content when away from home. In 1998, the Company announced an agreement with
Intuit(R) Inc. to voice enable certain features of Intuit's Quicken.com(TM)
personal finance Web site.
The Company is at an early stage of development in its strategy to develop
and market voice-enabled services, and is subject to all of the risks inherent
in the establishment of a new business enterprise. In order to succeed, the
Company must, among other things, secure adequate financial and human resources
to meet its requirements; meet the challenges inherent in the timely development
and deployment of complex technologies; establish and maintain relationships
with telecommunications carriers, device manufacturers, Internet companies and
other partners for resale, remarketing and distribution of its services; achieve
market acceptance for its Portico service and other voice-enabled services;
generate sufficient revenues from its services to permit the Company to operate
profitably; expand its network operations center to timely accommodate any
demand for its services; ensure that third-party developers timely develop,
license, deliver and support technologies upon which the Company's services
depend; respond effectively to competitive developments; and protect its
intellectual property. Any failure to achieve these objectives could have a
material adverse effect on the Company's business, operating results and
financial condition.
11
<PAGE> 12
RESULTS OF OPERATIONS
The Company has made certain changes in the format of its financial
statements in order to more accurately portray the operating costs of providing
voice-enabled services. These changes include the addition of certain line items
to the consolidated statement of operations. Certain line items in the prior
year period have been reclassified to be consistent with these changes.
For the three-month period ended March 31, 1999, the Company incurred a net
loss of $13.7 million, or $0.41 per share, compared to a net loss of $6.4
million, or $0.43 per share, for the three-month period ended March 31, 1998.
The net loss per share for the three-month period ended March 31, 1999, included
the net loss for the period and $534 thousand in adjustments to accumulated
deficit related to warrants on preferred stock issued during the period and
dividends earned on preferred stock during the period. The net loss per share
for the three-month period ended March 31, 1998, included the net loss for the
period and $5.4 million in adjustments to accumulated deficit related to
preferred stock and warrants issued during the period with favorable conversion
and exercise rights, respectively.
TOTAL REVENUE
Total revenue for the three-month period ended March 31, 1999, was $155
thousand compared to $1.7 million for the three-month period ended March 31,
1998. Total revenue for the three-month period ended March 31, 1999, consists of
service revenue from subscription fees for the Portico service and licensing
revenue for certain of the Company's technologies. Licensing revenue for the
three-month period ended March 31, 1998, included a $1.5 million nonrefundable
fee from Microsoft Corp. for the license of certain of the Company's
technologies. The Company anticipates that revenue from the Portico service will
grow gradually in the first half of 1999 due to its efforts to further support
the reseller channel and to direct sales over the Web, spurred by affiliate
marketing programs and banner advertising. The Company expects significant
revenue growth in the second half of the year as its partners launch commercial
services. If the market for voice-enabled services does not develop or if the
Company is unable to capture a significant portion of that market, the Company's
revenues and results of operations will be materially adversely affected.
NETWORK OPERATIONS
Network operations expense consists of personnel and related costs associated
with running the network operations center which includes providing customer
support and billing, access costs associated with the telephony and data
network, and royalties paid to software and content providers. For the
three-month period ended March 31, 1998, this expense was classified as research
and development since the Company's Portico service had not yet achieved
commercial feasibility. The Company expects network operations expense to
continue to increase in subsequent periods as infrastructure is added to support
the anticipated growing base of subscribers and partners utilizing the Company's
voice-enabled services.
RESEARCH AND DEVELOPMENT
Research and development expense for the three-month period ended March 31,
1999, was $3.6 million, compared to $4.7 million for the three-month period
ended March 31, 1998. The decrease was due to the reclassification of costs into
network operations commencing with commercial feasibility of the Portico service
and a reduction of spending due to the divestiture of the DataRover handheld
communications device division during the fourth quarter of 1998. The Company
expects research and development expense to increase through the remainder of
1999 as the Company continues to develop the Portico service and other
voice-enabled services.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense for the three-month period ended
March 31, 1999, was $5.9 million, compared to $3.2 million for the three-month
period ended March 31, 1998. The increase
12
<PAGE> 13
was due to staffing increases and additional marketing and advertising expenses
associated with efforts to develop market demand and distribution channels for
the Portico service and other voice-enabled services. The Company expects that
selling, general and administrative expense will increase modestly in 1999
compared to 1998 as the Company continues to market and develop its offerings of
voice-enabled services.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the three-month period ended March
31, 1999, was $973 thousand, compared to $704 thousand for the three-month
period ended March 31, 1998. The increase was due to equipment purchases related
to the expansion of the Company's network operations center and amortization of
intangible assets associated with a prior acquisition. The Company expects
depreciation and amortization expense to continue to increase in 1999 compared
to 1998 as the network operations center is expanded to accommodate up to
500,000 active users by year-end.
WRITE-OFF OF ACQUIRED TECHNOLOGY AND IN-PROCESS RESEARCH AND DEVELOPMENT
During the three-month period ended March 31, 1998, the Company recognized a
$2.1 million charge for the write-off of acquired in-process research and
development in connection with the acquisition of all of the outstanding stock
of NetPhonic Communications, Inc., a development stage enterprise.
TOTAL OTHER INCOME (EXPENSE), NET
The Company had other expense of $1.5 million in the three-month period ended
March 31, 1999, and other income of $2.7 million in the three-month period
ending March 31, 1998. During the three-month period ended March 31, 1999, the
Company recorded a loss of $1.8 million to account for 100% of the equity in net
losses of DataRover Mobile Systems, Inc. ("DSI"). During the three-month period
ended March 31, 1998, the Company recognized $2.4 million in other income for
consideration received pursuant to an agreement concluded during the period with
AltoCom, Inc. ("AltoCom"). Excluding the transactions associated with DSI and
AltoCom, other income (expense), net consisted primarily of interest income and
expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are its cash, cash equivalents
and short-term investment balances that totaled $41.0 million as of March 31,
1999, up $7.1 million from $33.9 million as of December 31, 1998.
On March 30, 1999, the Company entered into a financing transaction with a
group of private investors that provided $20.0 million in cash to the Company
from the sale of 2,000 shares of its Series D Convertible Preferred Stock. Each
share of Series D preferred stock has special voting rights with respect to
matters that adversely affect the rights of holders of Series D preferred stock
and otherwise has no voting rights except as may be required by law. Each share
of Series D preferred stock accrues dividends quarterly at a rate of 5% per
annum of the stated value ($10,000 per share). The liquidation preference of
Series D preferred stock is $10,000 per share plus any accrued but unpaid
dividends and unpaid default interest on cash dividends, and is payable pari
passu with the Series A, Series B and Series C preferred stock and in preference
to the holders of common stock. Each share of Series D preferred stock is
convertible into shares of the Company's common stock at a conversion rate
obtained by dividing the liquidation preference by an amount (the "Conversion
Price") equal to (i) 110% of the average of the closing bid prices during the
ten consecutive trading days immediately after, at the option of the Company,
May 29, 1999 or June 28, 1999 or (ii) in the event that a Major Transaction (as
defined below) occurs prior to the date the initial Conversion Price is set in
accordance with (i), $4.50. The Conversion Price is subject to adjustment upon
certain events, including, without limitation, adjustment following the last day
of each September and March until March 30, 2002 and on December 31, 1999 and
June 30, 2000 to an amount equal to 110% of the average of the closing bid
prices of the Company's
13
<PAGE> 14
common stock during the ten trading days immediately after each such date (the
"Reset Price") if the Reset Price is less than the then-effective Conversion
Price.
Subject to certain conditions, the Company may redeem all of the Series D
preferred stock upon a consolidation, merger or other business combination in
which the Company's stockholders do not retain sufficient voting power of the
surviving entity to elect a majority of such entity's board of directors (a
"Change of Control") at a price equal to, subject to limited exceptions, 115% of
the liquidation value. In addition, subject to certain conditions, in the event
that a Reset Price is less than 50% of the initial Conversion Price, the Company
may redeem all of the Series D preferred stock at liquidation value.
In the event of a Change of Control, the sale of substantially all of the
assets of the Company, or a purchase, tender or exchange offer made to and
accepted by holders of more than 50% of the common stock of the Company which is
approved or recommended by the Company's board of directors (each a "Major
Transaction"), the holders of Series D preferred stock may require the Company
to redeem any or all of their shares at the greater of (i) 125% of the
liquidation preference or (ii) a price based on the market value of the common
stock at the time of the public announcement of such Major Transaction. However,
in the event of a Change of Control, the holders of the Series D preferred stock
may not exercise their rights of redemption if the Company has previously
delivered its notice of redemption upon a Change of Control. The holders of the
Series D preferred stock are also entitled to require the Company to redeem some
or all of their shares at a per share price equal to 130% of the liquidation
preference, or in certain cases, the greater of (i) 130% of the liquidation
preference or (ii) a price based on the closing bid price of the Company's
common stock at the time of any of the following events, among other events: (x)
the Company's failure to use its best efforts to maintain registration of the
common stock issuable upon conversion of the Series D preferred stock; (y) the
Company's failure to use its reasonable best efforts to maintain the listing of
its common stock on Nasdaq National Market ("Nasdaq"), The American Stock
Exchange, Inc. ("AMEX") or The New York Stock Exchange ("NYSE"); or (z) the
Company's failure to timely convert the Series D preferred stock. In addition,
the holders of the Series D preferred stock are entitled to require the Company
to redeem some or all of their shares at a per share price equal to the
liquidation preference at the time of any of the following events: (w) the
Company's failure to maintain the registration statement for resale of the
common stock issuable upon conversion of the Series D preferred stock; (x) the
Company's failure to maintain listing of its common stock on Nasdaq, AMEX or
NYSE; (y) the Company's failure to obtain stockholder approval for issuances of
common stock upon conversion of the Series D preferred as required by the
Marketplace Rules of the Nasdaq National Market; or (z) a purchase, tender or
exchange offer made to and accepted by holders of more than 50% of the Company's
common stock which is not approved or recommended by the Company's board of
directors. As part of the financing transaction, the Company issued warrants to
acquire 150,000 shares of common stock at a price of $5.073 per share. The
warrants have a three-year term and are immediately exercisable.
During the three-month period ended March 31, 1999, 2,100 shares of the 5
1/2% Cumulative Convertible Series B Preferred Stock were converted into 926
thousand shares of common stock. As of March 31, 1999, 3,500 shares of the
Series B preferred stock were outstanding. During the three-month period ended
March 31, 1999, 397 shares of the Series C Convertible Preferred Stock were
converted into 852 thousand shares of common stock. As of March 31, 1999, 1,152
shares of the Series C preferred stock were outstanding.
In April 1998, the Company entered into an agreement with Qwest
Communications International, Inc. to purchase telecommunications services at
fixed prices for an initial term of three years. The Company is obligated to
purchase $13.0 million in telecommunications services during the three-year
period ending April 30, 2001. The charges underlying this commitment will be
expensed in the periods in which they occur.
During the three-month period ended March 31, 1999, the Company purchased the
remaining units from Oki Electric Industry Co., Ltd. ("Oki Electric") for DSI
under an existing letter of credit for a total of $2.2 million. As of March 31,
1999, there was no remaining commitment to purchase units for DSI.
14
<PAGE> 15
DSI is obligated to reimburse the Company the actual cost of such units upon the
earlier of: five (5) days following the sale of the units by DSI or 120 days
following shipment by Oki Electric. DSI's obligation to reimburse the Company is
secured by all personal property of DSI. The Company has also agreed to provide
office space to DSI at a discount to market value for a period of one year. As
of March 31, 1999, the receivable from DSI, reflected in other assets in the
accompanying condensed consolidated financial statements, was $2.9 million,
comprised of purchases made from Oki Electric by the Company on behalf of DSI.
In December 1997, the Company entered into a $4.0 million term loan with a
financial institution. The loan bears interest at 0.25% above the financial
institution's prime rate (7.75% as of March 31, 1999), and has a term of 40
months with interest only due in the first four months and principal and
interest due monthly thereafter. This loan is secured by all of the assets of
the Company, including its intellectual property. As of March 31, 1999, $2.8
million was outstanding under this term loan.
In June 1998, the Company secured a $3.0 million term loan with the same
financial institution. The loan bears interest at the financial institution's
prime rate (7.75% as of March 31, 1999), and has a term of 42 months with
interest only due in the first six months and principal and interest due monthly
thereafter. This loan is secured by all of the assets of the Company, including
its intellectual property. As of March 31, 1999, $2.8 million was outstanding
under this term loan.
As of March 31, 1999, the current and non-current portions due under these
loans were $2.4 million and $3.2 million, respectively. Both of these term loans
contain customary covenants and events of default. As of March 31, 1999, the
Company was in full compliance with all loan covenants.
In connection with its prior strategy, the Company entered into Magic Cap
master license agreements with eight of its stockholders. The Company has
satisfied its obligations under five of these agreements, and is subject to the
following obligations under the remaining three agreements. The Company must
refund to one licensee a prepaid royalty, together with interest, which totaled
$2.8 million as of March 31, 1999. This amount will be paid upon demand, and was
classified in accrued expenses as of March 31, 1999. The Company has agreed to
refund a second licensee the amount of a $1.5 million unrecouped prepaid
royalty. The refund is secured by a license in certain of the Company's
intellectual property, is non-interest bearing and is payable in August 1999.
The amount of this refund was also classified in accrued expenses as of March
31, 1999. Finally, the Company has agreed to refund the third licensee any
amount of a $2.0 million prepaid royalty not recouped by January 1, 2003, plus
accrued interest. The amount of any such refund is payable on or before December
31, 2003. As of March 31, 1999, this obligation was classified in noncurrent
deferred revenue. There can be no assurance that the third such licensee will
develop products that incorporate the Company's Magic Cap technology. It is
uncertain when prepaid royalties currently classified as non-current deferred
revenue will be recognized as licensing revenue or if they will ever be fully
recouped, if at all.
The Company expects that its cash, cash equivalents and short-term investment
balances of $41.0 million as of March 31, 1999, along with the revenues expected
in the second half of 1999, will be adequate to fund the Company's operations
through the second half of 1999. However, the Company will continue to evaluate
additional sources of capital. The Company's capital requirements will depend on
many factors, including, but not limited to, the market acceptance and
competitive position of its Portico service and other voice-enabled services;
the equipment required to support the network operations for these services; the
levels of promotion and advertising required to market the Company's products
and services and attain a competitive position in the marketplace; the extent to
which the Company invests in new technology and management and staff
infrastructure to support its business; and the response of competitors to the
Company's services. To the extent that the Company needs additional public or
private financing, no assurance can be given that additional financing will be
available or that, if available, it will be available on terms favorable to the
Company or its stockholders. If adequate funds are not available to satisfy the
Company's short-term or long-term capital requirements, the Company may be
required to significantly limit its operations, which would have a material
adverse effect on the Company's business, financial condition and results of
15
<PAGE> 16
operations. In the event the Company raises additional equity financing, further
dilution to the Company's stockholders will result.
As part of its business strategy, the Company assesses opportunities to enter
joint ventures, to acquire or sell businesses, products or technologies and to
engage in other like transactions. The Company has made no significant
commitment or agreement with respect to any such transaction at this time.
YEAR 2000
Status. Like many companies and organizations, the Company faces risks
related to the inability of computer systems to accurately identify and process
dates beyond the year 1999. The Company is currently taking steps to ensure its
year 2000 readiness by addressing these risks for all of its computer systems,
including its internal systems and systems supplied to it by third parties.
These systems include those that are commonly thought of as information
technology systems, such as billing, accounting and network systems. In
addition, these systems include those that are non-information technology
systems, such as building control systems, building safety systems and
communications systems.
The Company has assembled a year 2000 project team and engaged outside
consultants to advise it on year 2000 issues. The year 2000 project team has
developed a plan to evaluate and to mitigate the risks related to year 2000
issues for (i) systems related to the Company's Portico virtual assistant
service and (ii) all other systems. The plan includes each of the following
phases for both Portico and other systems:
o creation of an inventory of all potentially date-sensitive systems,
including third-party systems;
o evaluation and/or testing of all systems;
o remediation or replacement of systems which are not year 2000 ready;
o verification of corrected systems;
o development and implementation of configuration control procedures to
assure that systems remain year 2000 ready once they have been determined
to be year 2000 ready; and
o development and implementation of a contingency plan in the event that the
Company or its suppliers fail for any reason to attain year 2000
readiness.
The Company's year 2000 plan has executive sponsorship, is regularly reviewed
by senior management, and includes progress reports to the board of directors on
a regular basis.
For all systems related to the Portico service, the Company has completed the
inventory and has initiated evaluation and/or testing of the systems identified.
The Company believes that certain of these systems are year 2000 ready, and is
now in the process of remediating or replacing systems which are not. The
Company expects to begin verification of corrected Portico systems during the
second quarter of 1999.
The Company has completed the inventory for all other systems and is now in
the process of evaluating and/or testing such systems. The Company believes that
certain of these systems are year 2000 ready. The Company expects to complete
remediation or replacement of the systems which are not year 2000 ready during
the second quarter and to begin verification of corrected systems by the end of
the second quarter of 1999.
The Company expects to complete all phases of the year 2000 plan for systems
related to Portico and for all other of its systems by the end of the third
quarter of 1999, except that the contingency plan will be developed and
implemented during the third and fourth quarters of 1999.
16
<PAGE> 17
In the process of evaluating its systems, the Company has contacted certain
of its key suppliers to determine whether their operations and the products and
services they provide are year 2000 ready. During the second quarter, the
Company will request written assurances of year 2000 readiness from all
significant suppliers who have not otherwise provided sufficient written
assurances. Based on its inquiries to date, the Company believes that certain
third-party systems will require remediation or replacement. If remediation or
replacement is not practicable, the Company will seek alternative suppliers
whose products and services are year 2000 ready.
Costs. The Company believes that the costs related to its year 2000 effort
will not exceed $600,000, approximately 14% of its actual and anticipated
information technology operating budget for fiscal years 1998 and 1999. The
Company estimates that the total costs will include approximately $160,000 for
external consultants and advisers, approximately $100,000 for replacement of
systems which are not year 2000 ready and approximately $330,000 for the direct
costs of internal employees working on the year 2000 project. The Company does
not expect to incur any costs related to delay of its non-year 2000 information
technology efforts or to the acceleration of system upgrades or replacements.
Risks. Based on currently available information, the Company does not believe
that year 2000 issues will have a material adverse impact on its results of
operations or financial condition. However, the Company may fail to identify all
critical year 2000 problems, may not properly assess, remediate or test its
systems, and may encounter unexpected delays or costs associated with its year
2000 effort. In addition, the Company has not completed its assessment of the
year 2000 readiness of significant suppliers. The Company believes that products
and services supplied by third parties present the greatest year 2000 risks to
the Company. The Company relies on third-party suppliers for a significant
number of systems related to its Portico service, such as:
o the calendar and contact software;
o the voice recognition software;
o the text-to-speech software;
o the billing system; and
o the network operations center equipment.
In addition, the Company relies on third parties for key services, such as
telecommunications, Internet access and power. In the most reasonably likely
worst case scenario, one of the Company's critical systems and/or one of the
critical systems supplied by a third party could prove to be noncompliant and
fail. Such a failure could lead to interruptions in the Company's operations and
service offerings. Such interruptions could lead to lost sales, loss of
relationships with partners and damage to the Company's business reputation. Due
to the large number of variables involved, the Company cannot provide an
estimate of the damages it may suffer if it or its suppliers are not year 2000
ready.
Note: The foregoing discussion of year 2000 issues shall be considered "Year
2000 Readiness Disclosure" for purposes of the Year 2000 Information and
Readiness Disclosure Act.
17
<PAGE> 18
RISK FACTORS
In this section we summarize certain risks regarding our business and
industry. Readers should carefully consider the following risk factors in
conjunction with the other information included in this report on Form 10-Q.
OUR BUSINESS STRATEGY IS NEW, AND WE MAY BE UNABLE TO IMPLEMENT IT SUCCESSFULLY.
In early 1997, we changed our business strategy to focus on the marketing and
sale of voice-enabled services. We are still at an early stage in the
implementation of our new strategy. We face many of the risks faced by new
businesses, especially companies in new and rapidly evolving markets. Such risks
include, among others:
o our business model has not been tested;
o the market for voice-enabled services is not established;
o we may not be able to capture a significant part of the market;
o we may not be able to anticipate and adapt to changes in the market; and
o we may be unable to secure profitable relationships with additional
partners, including telecommunications carriers, device manufacturers, and
Internet companies.
In order to compete successfully as a provider of voice-enabled services,
among other things, we believe we must:
o develop and maintain at reasonable cost a significant subscriber base for
our Portico and other voice-enabled services;
o establish and maintain relationships with companies seeking to
private label our services and with companies seeking to voice enable
their services;
o enhance the features and functionality of the Portico(TM) service to
address the preferences and requirements of our subscribers, and to
respond to competitive developments;
o develop and enhance our core technologies, including our magicTalk(TM)
voice user interface platform, our network operations center, and our
second-generation agent technology, both to enhance the performance and
lower the cost of our services; and
o continue to attract, retain and motivate qualified personnel.
We may not have the resources necessary to fully execute each of these goals.
If we fail to accomplish any of them or otherwise address the risks stated
above, our ability to compete as a provider of voice-enabled services may be
compromised.
WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
We may never achieve and sustain profitability. Since our inception, we have
generated only minimal revenues. We have incurred significant losses, and we
have substantial negative cash flow. As of March 31, 1999, we had an accumulated
deficit of $223.8 million, with a net loss of $13.7 million for the three-month
period ended March 31, 1999.
Historically, we have derived a large percentage of our total revenue from
license fees and customer support fees. As a consequence of our 1997 change in
business strategy, we expect to derive a significant
18
<PAGE> 19
portion of any future revenues from sales of services and products by us and by
our partners and not from license fees. Although the Portico service was
released on July 30, 1998, we expect to incur significant losses through the
year 1999, and we may never achieve or sustain significant revenues or become
profitable.
THE ACCEPTANCE OF OUR PRODUCTS AND SERVICES IS UNCERTAIN.
Our future financial performance depends in large part on growth in demand
for the Portico service and our other voice-enabled services and products. If
the market for voice-enabled services does not develop or if we are unable to
capture a significant portion of that market either directly or through our
partners, our revenues and our results of operations will be adversely affected.
The market for voice-enabled services is still evolving. Currently, there are
only a limited number of products and applications in this industry. Negative
consumer perceptions regarding reliability, cost, ease-of-use and quality of
speech-based products affects consumer demand and may impact the growth of the
market. As a result, we cannot guarantee that the market for voice-enabled
services and products will grow or that consumers will accept any of the
services or products built on our magicTalk voice user interface platform.
In particular, our success is dependent upon the number of subscribers to our
services that we are able to attract and retain, and the number of subscribers
to private-label and other voice-enabled services that our partners are able to
attract and retain. Although Portico was launched in July 1998, revenues from
Portico subscriptions to date have not been significant. In addition, although
we have entered into arrangements with Qwest Communications Corporation,
Intuit(R) Inc., Wireless Knowledge, and BellSouth Mobility, Inc. we cannot
guarantee that any of the services contemplated by these companies will be
commercially launched. Even if these services were commercially launched, our
partners may not be able to attract and retain a sufficient number of
subscribers to attain profitability. If we and our partners are not able to
attract and retain a sufficient number of subscribers, our revenues and results
of operations will be adversely affected.
WE WILL NEED TO EXPAND OUR DISTRIBUTION CHANNELS IN ORDER TO EXPAND OUR
BUSINESS, AND WE ARE DEPENDENT ON DISTRIBUTION RELATIONSHIPS.
We plan to distribute our services through multiple channels. If we do not
successfully implement this multi-channel strategy, our revenues and results of
operations may be adversely affected. We believe that to successfully market our
services, we must:
o undertake a marketing campaign to identify and successfully pursue
effective ways to market General Magic-labeled services to mobile
professionals and other users;
o identify, establish and maintain arrangements with telecommunications
carriers, device manufacturers and other companies seeking private-label
versions of our services; and
o identify, establish and maintain arrangements with Internet companies and
other companies seeking to voice enable Web content and other
network-based services.
If one or more of these distribution channels fails, development and sales of
our products and services could be adversely affected.
Competition for relationships with telecommunications carriers, device
manufacturers and Internet companies is extremely intense. In addition,
decisions by these third parties, particularly telecommunications carriers, to
enter into distribution relationships can be a lengthy, expensive process, with
no assurance of success.
19
<PAGE> 20
On November 6, 1998, we entered into an agreement with Intuit Inc. to develop
voice access to certain financial services and information on Intuit's
Quicken.com(TM) Web site. The agreement provides for an initial two-year term,
with automatic one-year renewal terms unless either party provides written
notice to the other 60 days prior to the end of the then current term. However,
the agreement will automatically terminate if the services to be provided under
the agreement are not commercially released by December 31, 1999. We cannot
guarantee that this deadline will be met. In addition, Intuit may terminate the
agreement if we fail to perform or observe any material term or obligation under
the agreement.
On November 11, 1998, we entered into an agreement with Qwest Communications
Corporation to develop a Qwest-branded version of our Portico service. The
agreement provides for an initial six-month term, with automatic one-year
renewal terms thereafter. However, either party has the right to terminate the
agreement for any reason by providing written notice of non-renewal 60 days
prior to the end of the then current term. We cannot guarantee that Qwest will
renew the agreement in any given year. In addition, Qwest may terminate the
agreement if we fail to perform or observe any material term or obligation under
the agreement.
In February 1999, we, along with Wireless Knowledge LLC, announced plans to
provide Revolv service users with voice-enabled access to information and
corporate groupware. Although we have signed a letter of intent with Wireless
Knowledge, the letter of intent is non-binding. Wireless Knowledge may terminate
the arrangement at any time.
In May 1999, BellSouth announced its intention to begin a 3-4 month initial
deployment of the Portico service in the Atlanta area, and if the initial
deployment is successful, to expand the availability of the service in Atlanta
and other markets. We cannot guarantee that the initial deployment will be
successful. In addition, BellSouth may terminate the arrangement at any time.
We may not succeed in maintaining these distribution relationships. In
addition, we may not be successful in establishing additional relationships.
Even if we are able to establish and maintain these relationships, these
companies may be unable to successfully remarket our voice-enabled services. Our
control over the marketing efforts of Qwest, Intuit, Wireless Knowledge, and
BellSouth is limited under our arrangements. We cannot guarantee that Qwest,
Intuit, Wireless Knowledge, BellSouth or any future partner will actively market
the services incorporating our technology.
OUR LIMITED RESOURCES MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO IMPLEMENT
OUR NEW STRATEGY.
Building, maintaining and enhancing our Portico and other voice-enabled
services, and developing private-label services with third parties are complex
processes that require significant financial and other resources. Among other
things, we must:
o enhance the features and functionality of the Portico service to address
the preferences and requirements of our subscribers, and to respond to
competitive developments;
o develop and deploy private-label versions of the Portico service for
existing and future partners;
o develop and deploy our magicTalk voice user interface to voice enable Web
content and other network-based services, such as Intuit's Quicken.com Web
site;
o continue to identify, establish and maintain relationships with
telecommunications carriers, device manufacturers, Internet firms and
other companies for the resale, remarketing and distribution of our
services;
o enhance our core technologies, including our magicTalk voice user
interface platform, network operations center, second-generation agent
technology and Internet appliance; and
20
<PAGE> 21
o undertake related marketing and advertising campaigns.
We have limited technical, business development, sales and marketing staffs
and such personnel may not be able to manage and successfully complete all of
the tasks necessary to support the various aspects of our business.
In addition, we must conserve cash because we have generated minimal revenues
to date and do not expect to generate significant revenues until the second half
of 1999, if at all. As a result, we may not be able to fund all of the product
development and marketing efforts required to successfully introduce all of our
services.
WE WILL HAVE TO SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE NEEDS, AND THE
AVAILABILITY OF ADDITIONAL FINANCING IS UNCERTAIN.
If expenditures required to achieve our plans are greater than projected or
if we are unable to generate adequate cash flow from sales of our Portico
services, private-label Portico services and services built on our magicTalk
voice user interface platform, we will need to seek additional sources of
capital. The Portico service was introduced in July 1998, and to date we have
not generated significant revenue. In addition, although we have entered into
arrangements with Qwest, Intuit, Wireless Knowledge, and BellSouth, we cannot
guarantee that we will be able to generate significant revenue from these
arrangements. We have no commitments or arrangements to obtain any additional
funding. We may not be able to obtain such additional funding if it becomes
necessary. The unavailability or timing of any financing could prevent or delay
the continued development and marketing of our services and may require us to
curtail our operations.
WE ARE DEPENDENT ON THE INTERNET, AND WE ARE NOT CERTAIN THAT THE BUSINESS MODEL
FOR SERVICES TO BE PROVIDED THROUGH THE INTERNET WILL SUCCEED.
Voice enabling content on the Internet is a key element of our strategy, and
we plan to seek additional partnerships with Internet companies. However, the
business model common among Internet companies is untested. Many Internet
companies provide free services which are supported by advertising revenue and
revenue generated from upgrades to fee-based services. We expect to be required
to adopt a similar business model, and we cannot guarantee that revenue
generated from advertising or from upgrades to fee-based services, if any, will
be sufficient to offset the cost of providing a free baseline service to users.
In addition, our future success is in part dependent upon continued growth in
the use of the Internet. The Internet may prove not to be a viable means of
conducting commerce or communications for a number of reasons, including
potentially unreliable network infrastructure and poor performance. In addition,
if the Internet continues to experience significant growth in the number of
users and level of use, the Internet infrastructure may not be able to support
the demands placed on it by such growth. Failure of the Internet as a mode of
conducting commerce and communications could have an adverse effect on our
business.
WE MAY EXPERIENCE INTERRUPTIONS IN SERVICE DUE TO ERRORS IN OUR SOFTWARE AND
SYSTEM ARCHITECTURE, AND OUR NETWORK OPERATIONS CENTER MAY NOT BE ABLE TO
ACCOMMODATE POTENTIAL GROWTH.
The ability to provide the Portico service and the services of our partners
depends on the integrity of our software, computer hardware systems and network
infrastructure. Since launching the Portico service, we have encountered errors
in our software and our system design which have resulted in interruptions of
service. Although we were able to correct such errors, we may encounter
additional errors. These errors may be expensive to correct, and may lead to
substantial interruptions in our service.
In addition, in the event that the number of subscribers to our services
increases substantially in a short period of time or we are successful in
establishing a relationship with a partner with a large existing customer base,
our network operations center may not be capable of meeting the resulting
increase in
21
<PAGE> 22
demand. Although we believe that our systems are scalable, we cannot test
conclusively for scalability. A sudden increase in demand could lead to
slow-downs or failures in our services.
Currently, our only network operations center is located at our headquarters
in Sunnyvale, California. Operation of our Portico and other voice-enabled
services is dependent upon our ability to protect the network operations center
against physical damage from power outages, telecommunications failures,
physical break-ins and other similar events. Northern California historically
has been vulnerable to certain natural disasters and other risks, such as
earthquakes, fires and floods, which at times have disrupted the local economy
and pose physical risks to our property. We presently do not have redundant,
multiple site capacity in the event of a technical failure of our services or a
natural disaster.
Any damage to or failure of our systems could lead to interruptions in
service and/or the loss of customer information. Such interruptions or loss
could damage our reputation and ability to attract and retain subscribers and
partners. In addition, we may experience negative publicity that could adversely
affect our stock price.
CONVERSION OF PREFERRED STOCK OR ISSUANCE OF OTHER SECURITIES WOULD DILUTE
CURRENT STOCKHOLDERS.
We have two series of preferred stock outstanding as of May 7, 1999, both of
which are convertible into common stock. We cannot predict the price of the
common stock in the future. If the price of our common stock decreases over
time, the number of shares of common stock issuable upon conversion of the
preferred stock will increase and the holders of common stock would experience
substantial dilution of their investment. The following shares of preferred
stock are currently outstanding:
o 50,000 shares of Series A preferred stock. Each share of Series A
preferred stock is convertible into 72.58 shares of common stock, subject
to adjustment for stock splits, dividends and similar events and for
future issuances of stock at a price below $1.24 per share. The 50,000
shares of Series A preferred stock outstanding as of May 7, 1999, would be
convertible into approximately 3,629,000 shares of common stock.
o 2,000 shares of Series D preferred stock. Each share of Series D preferred
stock is convertible into that number of shares of common stock equal to:
(A) $10,000 plus accrued but unpaid dividends divided by (B) 110% of the
average of closing bid prices of a share of common stock during the ten
trading days after, at our sole election, May 29, 1999 or June 28, 1999.
The number of shares of common stock issuable upon conversion is subject
to adjustment: for stock splits, dividends and similar events; for future
issuances of stock at a price below the initial conversion price; on
December 31, 1999, June 30, 2000, and on the last day of each September
and March through March 2002, depending on the closing bid prices of our
common stock at such times; for future issuances of convertible stock with
a variable conversion price; and in the event we fail to comply with
certain requirements. Assuming a conversion price based on the average of
the closing sale prices during the ten consecutive trading days
immediately after March 30, 1999 ($3.33), the 2,000 shares of Series D
preferred stock outstanding as of May 7, 1999, would be convertible into
approximately 6,037,265 shares of common stock.
In order to comply with the rules of the Nasdaq Stock Market, we must obtain
stockholder approval prior to issuing shares of common stock upon conversion of
our Series D preferred stock in excess of 19.9% of our common stock outstanding
as of March 30, 1999, the date of issuance of the Series D preferred stock. If
we do not obtain approval, we could in certain circumstances be required to
redeem the outstanding shares of the Series D preferred stock. In addition,
certain other events could require us to redeem Series D preferred stock.
Redemption of any series of preferred stock could significantly deplete our cash
reserves, which would materially adversely affect our financial condition.
Our board of directors has the authority to issue 433,000 additional shares
of preferred stock that are convertible into common stock without any action by
our stockholders. In addition, our board of
22
<PAGE> 23
directors may sell additional shares of common stock or other equity securities
that are convertible into common stock without any action by our stockholders.
The issuance and conversion of any such preferred stock or equity securities
would further dilute the percentage ownership of our stockholders.
WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT.
Any delays in product development or market launch could adversely affect our
revenues or results of operations. To be successful, we must, among other
things, develop technology to enable us to provide, bill for and enhance our
Portico services and other voice-enabled services, including those we agree to
supply for third parties. Software product development schedules are difficult
to predict because they involve creativity and the use of new development tools
and learning processes. Our software development efforts have been delayed in
the past. In addition to software development delays, we may also experience
delays in other aspects of product development. Any product development delays
could delay or prevent successful introduction or marketing of new or improved
products or services or the delivery of new versions of our products or
services.
WE ARE DEPENDENT ON THIRD-PARTY TECHNOLOGIES AND SERVICES.
We have incorporated technology developed by third parties in the Portico
service and the services to be provided to our partners. We will continue to
incorporate third-party technology in future products and services. We have
limited control over whether or when these third-party technologies will be
developed or enhanced. In addition, our competitors may acquire interests in
these third parties or their technologies, which may render the technology
unavailable to us. If a third party fails or refuses to timely develop, license
or support technology necessary to our services, market acceptance of our
services could be adversely affected. In addition, we rely and will continue to
rely on services supplied by third parties such as telecommunications, Internet
access and power. If these services fail to meet industry standards for quality
and reliability, market acceptance of our services could be adversely affected.
THE MARKET FOR VOICE-ENABLED SERVICES IS EXTREMELY COMPETITIVE.
The market for voice-enabled services is intensely competitive and subject to
rapid technological change. We may be unable to compete with existing companies
or new companies entering the market. Many of these companies have greater
financial resources, name recognition, research and development capabilities,
sales and marketing staffs, and better developed distribution channels than we
do. The services that we offer may not achieve sufficient quality, functionality
or cost-effectiveness to compete with existing or future alternatives.
Furthermore, our competitors may succeed in developing competing products or
services which are more effective and cheaper or which render our services or
technology obsolete. If we are unable to compete effectively, our business would
be adversely affected.
TECHNOLOGY CHANGES RAPIDLY IN OUR MARKET, AND OUR FUTURE SUCCESS WILL DEPEND ON
OUR ABILITY TO MEET THE NEEDS OF OUR CUSTOMERS.
The telecommunications services market is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. The introduction of products or
services embodying new technologies and the emergence of new industry standards
could render our voice-enabled services obsolete and unmarketable. If we fail to
timely develop and introduce new products and services in response to changing
market conditions or consumer requirements our business would be adversely
affected.
Our success will depend upon our ability to timely develop and introduce new
products and services, as well as enhancements to our existing products and
services, to keep pace with technological developments and emerging industry
standards and address the changing needs of users. We may not be successful in
developing and marketing new products and services that respond to technological
changes, or evolving industry standards. We may experience difficulties that
could delay or prevent the successful
23
<PAGE> 24
development, introduction and marketing of new products and services. In
addition, our new products and services may not adequately meet the requirements
of the marketplace or achieve market acceptance.
WE ARE DEPENDENT ON KEY PERSONNEL.
Our success depends in part on our ability to attract, retain and motivate
qualified personnel. Silicon Valley remains a highly competitive job market, and
our key management, technical, marketing, sales, administrative and customer
support personnel may not remain with us. In addition, we may be unable to
attract sufficient additional personnel to execute our business plan.
OUR INVESTMENT IN AND OTHER COMMITMENTS TO DATAROVER MOBILE SYSTEMS, INC. MAY
RESULT IN A SIGNIFICANT LOSS TO US.
Effective October 1998, we divested our DataRover handheld communications
device division in a transaction with DataRover Mobile Systems, Inc. ("DSI"). In
connection with the transaction, we made an investment in DSI totaling
$3,361,000, and received non-voting, non-redeemable preferred stock and 49% of
the outstanding common stock of DSI. We accounted for our investment under the
equity method, requiring us to record 100% of the losses incurred by DSI up to a
total of $3,361,000. As of March 31, 1999, we had recorded a decrease of
$2,521,000 in the value of our investment to reflect our equity in the losses
incurred by DSI through that date. In the event that DSI incurs further losses
in any future period, we will be required to record a corresponding decline in
the value of our investment. In addition, if we determine that the value of our
investment in DSI has been impaired, we will be required to write off our
investment, in whole or in part.
In connection with this transaction, we also had agreed to purchase DataRover
840 units for DSI from Oki Electric Industry Co., Ltd.("Oki Electric") under an
existing letter of credit. During March 1999, the Company purchased all units
which it was obligated to purchase from Oki Electric. As of March 31, 1999,
DSI's obligation to us was valued at $2,884,000. We are to be reimbursed by DSI
the cost of such units upon the earlier of five days following the sale of the
units by DSI, or 120 days following shipment by Oki Electric. DSI's obligation
to reimburse us is secured by all of its personal property. We cannot guarantee
that DSI will be able to reimburse us, or that our security interest in their
personal property will be adequate to satisfy their obligation to us.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS UNCERTAIN.
We believe that our success depends, in part, on our ability to protect our
intellectual property. In order to do that, we must take the following measures:
o obtain patent, copyright and trademark protection where appropriate;
o preserve our trade secrets;
o defend our patents, copyrights, trademarks and trade secrets against
infringement;
o operate without infringing the intellectual property rights of others; and
o prevent unauthorized disclosure of confidential information through the
use of confidentiality agreements with employees, consultants and
partners.
We may be unable to accomplish these measures. In addition, we cannot be
certain that they will be adequate to protect our intellectual property. In
spite of our efforts, third parties may successfully copy our products or use
our confidential information. Furthermore, third parties may assert claims of
infringement against us. These claims may lead to litigation and/or require us
to significantly modify or even discontinue sales of our products or services.
24
<PAGE> 25
OUR SERVICE MAY RAISE SECURITY ISSUES.
The implementation of our voice-enabled services poses several security
issues, including the possibility of break-ins and other similar disruptions.
Failure to provide a secure service may result in significant liability to us.
In addition, failure to provide a secure service may deter potential users of
our services, and potential channel and strategic partners and may adversely
affect market acceptance.
Security vulnerabilities and weaknesses may be discovered in our services or
licensed technology incorporated into a service or in the media by which
subscribers access the service. Any security problems in a service or the
licensed technology incorporated in the service may require us to expend
significant capital and other resources to alleviate the problems. In addition,
these problems could limit the number of subscribers to our Portico service and
to services of our partners, which could lead to decreased revenues and
termination of our relationships with partners. These problems may also cause
interruptions or delays in the development of enhancements to our services and
those of third parties and may result in lawsuits against us.
We will continue to incorporate authentication, encryption and other security
technologies in our services. However, such technologies may not be adequate to
prevent break-ins. In addition, weaknesses in the media by which users access
these services, including the Internet, land-line telephones, cellular phones
and other wireless devices, may compromise the security of the electronic
information accessed from the service. We intend to continue to limit our
liability to end users and to our partners, including liability arising from
failure of the authentication, encryption and other security technologies
incorporated into our services, through contractual provisions. However, such
limitations may not eliminate liability. We do not currently have liability
insurance to protect against risks associated with forced break-ins or
disruptions.
A PRODUCT LIABILITY CLAIM ASSERTED AGAINST US COULD MATERIALLY AND ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We may be subject to claims for damages related to system errors and other
defects in our services. Agreements with end users of our services typically
contain provisions designed to limit exposure to potential product liability
claims. However, these provisions may not be sufficient to protect us from
liability. We currently have liability insurance to protect against certain
risks associated with system errors and other defects in our services. However,
we cannot guarantee that such insurance will be sufficient.
OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE.
The market price of our common stock has been and may continue to be
extremely volatile. Since our initial public offering in February 1995, the
closing price of our common stock has ranged from a high of $26.625 to a low of
$0.938 per share. The following factors may have a significant impact on the
market price of our common stock:
o any shortfall in our revenue or net income or in the revenue or net income
expected by securities analysts;
o conversion of preferred stock into common stock that results in
substantial dilution to the holders of our common stock;
o quarterly fluctuations in our financial results or the results of other
companies in our industry;
o changes in analyst's estimates of our financial performance or the
financial performance of our competitors;
o delays in product development or disruptions in our service;
25
<PAGE> 26
o investments by large equity partners;
o the announcement of arrangements with channel or strategic partners by us
or our competitors;
o the announcement of technological innovations by us or our competitors;
o the introduction of new products or services by us or our competitors;
o sales of large blocks or significant short selling of our common stock;
and
o conditions in the financial markets in general and in our industry in
particular.
WE MAY HAVE YEAR 2000 COMPLIANCE ISSUES.
We face risks related to the inability of computer systems to accurately
identify and process dates beyond the year 1999. We are currently taking steps
to address these risks for all of our computer systems, including internal
systems and systems supplied to us by third parties. These systems include those
that are commonly thought of as information technology systems, such as our
billing, accounting and network systems. In addition, these systems include
those that are non-information technology systems, such as our building control
systems, building safety systems and communications systems. Based on currently
available information, we do not believe that year 2000 issues will have a
material adverse impact on our results of operations or financial condition.
However, we may fail to identify all critical year 2000 problems, may not
properly assess, remediate or test our systems, and may encounter unexpected
delays or costs associated with our year 2000 effort. In addition, we have not
completed our assessment of the year 2000 readiness of significant suppliers. We
believe that noncompliance of products and services supplied to us by third
parties presents the most significant year 2000 risk. We rely on third-party
suppliers for a significant number of systems related to our Portico service,
such as:
o the calendar and contact software;
o the voice recognition software;
o the text-to-speech software;
o the billing system; and
o the network operations center equipment.
In addition, we rely on third parties for key services, such as
telecommunications, Internet access and power. In the event that we, or any of
our third-party suppliers, are not year 2000 ready, we could experience
significant disruptions in our operations and service offerings. Such
interruptions could lead to lost sales, loss of relationships with partners and
damage to our business reputation.
DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CHARTER DOCUMENTS MAY INHIBIT
POTENTIAL ACQUISITION BIDS.
Certain provisions of Delaware law and certain provisions of our charter may
inhibit potential acquisition bids for General Magic. We are subject to the
antitakeover provisions of the Delaware General Corporation Law, which could
delay a merger, tender offer or proxy contest or make such a transaction more
difficult. In addition, certain provisions of our certificate of incorporation
and bylaws may have the effect of delaying or preventing a change in control or
in management, or may limit the price that certain investors may be willing to
pay in the future for shares of common stock. Furthermore, certain series of our
preferred stock provide holders rights to redemption of their preferred stock
upon a change in control, which could make an acquisition more difficult.
26
<PAGE> 27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have limited exposure to financial market risks, including changes in
interest rates. The fair value of our investment portfolio or related income
would not be significantly impacted by a 100 basis point increase or decrease in
interest rates due mainly to the short-term nature of the major portion of our
investment portfolio. An increase or decrease in interest rates would not
significantly increase or decrease interest expense on debt obligations.
27
<PAGE> 28
GENERAL MAGIC, INC.
FORM 10-Q, March 31, 1999
Part II--Other Information
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On March 30, 1999, the Company issued 2,000 shares of the Series D
Convertible Preferred Stock and warrants to purchase 150,000 shares of
common stock for an aggregate cash consideration of $20.0 million to
accredited investors. The terms of the conversion and exercise of these
securities are incorporated by reference to Part I- Item 1-Note 5 of the
Notes to Condensed Consolidated Financial Statements of this Quarterly
Report on Form 10-Q. These securities were not registered under the
Securities Act of 1933, as amended (the "Securities Act") in reliance
upon the exemption provided by section 4(2) of the Securities Act and/or
Regulation D promulgated thereunder for transactions by an issuer not
involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders of General Magic, Inc. was held on
January 21, 1999.
Proposal 1: To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized Common stock of the Company
from 60,000,000 shares to 100,000,000 shares was approved by the
stockholders.
The proposal received the following votes:
<TABLE>
<S> <C>
For: 30,869,349
Against: 1,595,704
Abstain: 802,156
</TABLE>
Proposal 2: To approve the issuance of shares of the Company's Common
Stock upon (i) the conversion of the Company's Series C Convertible
Preferred Stock and (ii) the exercise of warrants for the purchase of
shares of the Company's Common Stock was approved by the stockholders.
The proposal received the following votes:
<TABLE>
<S> <C>
For: 19,720,818
Against: 1,420,450
Abstain: 290,135
</TABLE>
28
<PAGE> 29
Proposal 3: To approve an amendment to the Company's Certificate of
Incorporation to modify the terms of the Series C Convertible Preferred
Stock was approved by the stockholders.
The proposal received the following votes:
<TABLE>
<S> <C>
For: 19,709,639
Against: 1,364,656
Abstain: 357,108
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits have been filed with this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
10.2 The Company's Amended and Restated 1990 Stock Option Plan, as
amended through April 16, 1998, and related forms of agreement
10.4 The Company's 1994 Outside Directors Stock Option Plan, as
amended through April 16, 1998, and related forms of agreement
10.20 Lease Agreement dated February 20, 1998 between Aetna Life
Insurance Company, as Landlord, and Classifieds2000, Inc., as
Tenant
10.21 Consent to Subletting dated December 7, 1998 between Aetna Life
Insurance Company, as Landlord, Classifieds2000, Inc., as
Tenant, and the Company, as Subtenant
10.22 Sublease dated December 4, 1998 between Classifieds2000, Inc.,
as Sublandlord, and the Company, as Subtenant, under Master
Lease dated February 20, 1998 between Aetna Life Insurance
Company and Classifieds2000, Inc.
10.23 Sub-Sublease dated February 8, 1999 between the Company, as
Sub-Sublessor, and DataRover Mobile Systems, Inc., as
Sub-Sublessee
10.24(1) License Agreement dated April 30, 1998 between the Company and
Portal Information Network, Inc., as amended
10.25(1) Prototype Development Agreement dated March 3, 1997 between the
Company and Nuance Communications, as amended
10.26(1) Development and License Agreement dated May 12, 1997 between
the Company and Starfish Software, Inc.
10.27(1) Software Support and Maintenance Agreement dated January 1, 1999
between the Company and Starfish Software, Inc.
10.28(1) Software License and Services Agreement dated October 6, 1997
between the Company and Oracle Corporation, as amended
10.29(1) Master Agreement for Internetworking Services dated September
4, 1998 between the Company and GTE Internetworking
Incorporated, as amended
10.30(1) Flagship License Agreement dated March 31, 1998 between the
Company and Isocor, as amended
10.31(1) Agreement dated August 18, 1998 between the Company and
Paymentech Merchant Services, Inc.
10.32 Agreement dated February 19, 1999 between the Company and James
P. McCormick
10.33 Agreement dated February 5, 1999 between the Company and Kevin
J. Surace
27.1 Financial Data Schedule
</TABLE>
- ----------------
(1) Certain portions of this document are subject to an Application for
Confidential Treatment filed with the Commission on May 17, 1999.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
29
<PAGE> 30
GENERAL MAGIC, INC.
FORM 10-Q, March 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: May 14, 1999 /s/ STEVEN MARKMAN
-------------------------------------
Name: Steven Markman
Title: Chairman and Chief Executive
Officer (Principal Executive Officer)
DATE May 14, 1999 /s/ JAMES P. McCORMICK
-------------------------------------
Name: James P. McCormick
Title: Chief Financial Officer
(Principal Financial and
Accounting Officer)
30
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
10.2 The Company's Amended and Restated 1990 Stock Option Plan, as
amended through April 16, 1998, and related forms of agreement
10.4 The Company's 1994 Outside Directors Stock Option Plan, as
amended through April 16, 1998, and related forms of agreement
10.20 Lease Agreement dated February 20, 1998 between Aetna Life
Insurance Company, as Landlord, and Classifieds2000, Inc., as
Tenant
10.21 Consent to Subletting dated December 7, 1998 between Aetna Life
Insurance Company, as Landlord, Classifieds2000, Inc., as
Tenant, and the Company, as Subtenant
10.22 Sublease dated December 4, 1998 between Classifieds2000, Inc.,
as Sublandlord, and the Company, as Subtenant, under Master
Lease dated February 20, 1998 between Aetna Life Insurance
Company and Classifieds2000, Inc.
10.23 Sub-Sublease dated February 8, 1999 between the Company, as
Sub-Sublessor, and DataRover Mobile Systems, Inc., as
Sub-Sublessee
10.24(1) License Agreement dated April 30, 1998 between the Company and
Portal Information Network, Inc., as amended
10.25(1) Prototype Development Agreement dated March 3, 1997 between the
Company and Nuance Communications, as amended
10.26(1) Development and License Agreement dated May 12, 1997 between
the Company and Starfish Software, Inc.
10.27(1) Software Support and Maintenance Agreement dated January 1, 1999
between the Company and Starfish Software, Inc.
10.28(1) Software License and Services Agreement dated October 6, 1997
between the Company and Oracle Corporation, as amended
10.29(1) Master Agreement for Internetworking Services dated September
4, 1998 between the Company and GTE Internetworking
Incorporated, as amended
10.30(1) Flagship License Agreement dated March 31, 1998 between the
Company and Isocor, as amended
10.31(1) Agreement dated August 18, 1998 between the Company and
Paymentech Merchant Services, Inc.
10.32 Agreement dated February 19, 1999 between the Company and James
P. McCormick
10.33 Agreement dated February 5, 1999 between the Company and Kevin
J. Surace
27.1 Financial Data Schedule
</TABLE>
- ----------------
(1) Certain portions of this document are subject to an Application for
Confidential Treatment filed with the Commission on May 17, 1999.
<PAGE> 1
EXHIBIT 10.2
GENERAL MAGIC, INC.
AMENDED AND RESTATED
1990 STOCK OPTION PLAN
(As Amended through April 16, 1998)
1. Introduction.
(a) Establishment. The General Magic, Inc. 1990 Stock Option
Plan (the "Initial Plan") was adopted on August 2, 1990. On June 10, 1991, the
Initial Plan was amended and restated in its entirely as the "Amended and
Restated 1990 Stock Option Plan" (the "Plan").
(b) Purpose. The Plan is established to create additional
incentive for key employees, directors and consultants or advisors of General
Magic, Inc. and any successor corporation thereto (collectively referred to as
the "Company"), and any present or future parent and/or subsidiary corporations
of such corporation (all of whom along with the Company being individually
referred to as a "Participating Company" and collectively referred to as the
"Participating Company Group"), to promote the financial success and progress of
the Participating Company Group. For purposes of the Plan, a parent corporation
and a subsidiary corporation shall be as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
(a) Administration by Board and/or Compensation Committee.
The Plan shall be administered by the Board of Directors of the Company (the
"Board") and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the Board
shall also mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted herein, including, without
limitation, the power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law. All questions
of interpretation of the Plan or of any options granted under the Plan (an
"Option") shall be determined by the Board, and such determinations shall be
final and binding upon all persons having an interest in the Plan and/or any
Option.
(b) Options Authorized. Options may be either incentive
stock options as defined in Section 422 of the Code ("Incentive Stock Options")
or options not intended to qualify as Incentive Stock Options ("Nonqualified
Stock Options").
(c) Authority of Officers. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
1
<PAGE> 2
(d) Disinterested Administration. With respect to the
participation in the Plan of employees who are also officers or directors of the
Company subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Plan shall be administered by the Board in compliance
with the "disinterested administration" requirement of Rule 16b-3, as
promulgated under the Exchange Act and amended from time to time or any
successor rule or regulation ("Rule 16b-3").
3. Eligibility.
(a) Eligible Persons. Except as otherwise provided in
paragraph 3(b) below, Options may be granted only to employees (including
officers) and directors of the Participating Company Group or to individuals who
are rendering services as consultants, advisors, or other independent
contractors to the Participating Company Group. The Board shall, in the Board's
sole discretion, determine which persons shall be granted Options (an
"Optionee"). A director of the Company shall be eligible to be granted only a
Nonqualified Stock Option unless the director is also an employee of the
Company. An individual who is rendering services as a consultant, advisor, or
other independent contractor shall be eligible to be granted only a Nonqualified
Stock Option. An Optionee may, if otherwise eligible, be granted additional
Options.
(b) Outside Directors. Notwithstanding anything herein to
the contrary, a director who is not also an employee of the Company may not be
granted an Option under the Plan on or after the effective date of the Company's
registration of its Common Stock under Section 12 of the Exchange Act (the
"Registration Date").
4. Shares Subject to Option. Options shall be options for the
purchase of the authorized but unissued Common Stock of the Company at such time
as the Company is a California corporation or for the purchase of the authorized
but unissued Common Stock or treasury shares of Common Stock of the Company at
such time as the Company is a Delaware corporation (the "Stock"), subject to
adjustment as provided in paragraph 10 below. The maximum number of shares of
Stock which may be issued under the Plan shall be twelve million eight hundred
seventy thousand (12,870,000) shares. In the event that any outstanding Option
for any reason expires or is terminated or canceled and/or shares of Stock
subject to repurchase are repurchased by the Company, the shares allocable to
the unexercised portion of such Option, or such repurchased shares, may again be
subject to an Option grant. Notwithstanding the foregoing any such shares shall
be made subject to a new Option only if the grant of such new Option and the
issuance of such shares pursuant to such new Option would not cause the Plan or
any Option granted under the Plan to contravene Rule 16b-3.
5. Time for Granting Options. All Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by
the Board or the date the Plan is duly approved by the shareholders of the
Company.
6. Terms, Conditions and Form of Options. Subject to the provisions
of the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option price of the Option, the exercisability and vesting of the Option,
the time of expiration of the Option, the effect of the Optionee's
2
<PAGE> 3
termination of employment or service, whether the Option is to be treated as an
Incentive Stock Option or as a Nonqualified Stock Option, the method for
satisfaction of any tax withholding obligation arising in connection with an
Option, including by withholding or delivery of shares of stock, and all other
terms and conditions of the Option not inconsistent with the Plan. Options
granted pursuant to the Plan shall be evidenced by written agreements specifying
the number of shares of Stock covered thereby, in such form as the Board shall
from time to time establish, which agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
(a) Option Price. The option price for each Option shall be
established in the sole discretion of the Board; provided, however, that (i) the
option price per share for an Incentive Stock Option shall be not less than the
fair market value, as determined by the Board, of a share of Stock on the date
of the granting of the Option, (ii) the option price per share for a
Nonqualified Stock Option shall not be less than eighty-five percent (85%) of
the fair market value, as determined by the Board, of a share of Stock on the
date of the granting of the Option; provided, however that the Board may grant
one or more Nonqualified Stock Options having an option price of less than
eighty-five percent (85%) but not less than fifty percent (50%) of the fair
market value to persons otherwise eligible under the Plan who are not officers
or directors of the Company or whose transactions in the common stock of the
Company are subject to Section 16 of the Exchange Act, (iii) no Incentive Stock
Option granted to an Optionee who at the time the Option is granted owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of a Participating Company within the meaning of Section
422(b)(6) of the Code (a "Ten Percent Owner Optionee") shall have an option
price per share less than one hundred ten percent (110%) of the fair market
value of a share of Stock on the date the Option is granted, and (iv) no
Nonqualified Stock Option granted to a Ten Percent Owner Optionee before the
Registration Date shall have an option price per share less than one hundred ten
percent (110%) of the fair market value of a share of Stock on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonqualified Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying with the provisions of Section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the
power to set the time or times within which each Option shall be exercisable or
the event or events upon the occurrence of which all or a portion of each Option
shall be exercisable and the term of each Option; provided, however, that (i) no
Option shall be exercisable after the expiration of ten (10) years after the
date such Option is granted and (ii) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five (5)
years after the date such Option is granted.
(c) Payment of Option Price.
(i) Forms of Payment Authorized. Payment of the
option price for the number of shares of Stock being purchased pursuant to any
Option shall be made (1) in cash, by check, or cash equivalent, (2) by tender to
the Company of shares of the Company's stock owned by the Optionee having a
value, as determined by the Board (but without regard to any
3
<PAGE> 4
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company), not
less than the option price, (3) by the Optionee's recourse promissory note, (4)
by the assignment of the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System), or (5) by
any combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the forms of standard option agreement described
in paragraph 7 below, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the option
price and/or which otherwise restrict one (1) or more forms of consideration.
(ii) Tender of Company Stock. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
the Company's stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's stock. Unless otherwise provided by the Board,
an Option may not be exercised by tender to the Company of shares of the
Company's stock unless such shares of the Company's stock either have been owned
by the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(iii) Promissory Notes. No promissory note shall be
permitted if an exercise using a promissory note would be a violation of any
law. Any permitted promissory note shall be due and payable not more than five
(5) years after the Option is exercised, and interest shall be payable at least
annually and be at least equal to the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. The Board
shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired on
exercise of the Option and/or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, in the event the Company at any time
becomes subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
(iv) Assignment of Proceeds of Sale. The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to establish, decline to approve and/or terminate any program and/or
procedures for the exercise of Options by means of an assignment of the proceeds
of a sale of some or all of the shares of Stock to be acquired upon such
exercise.
7. Standard Forms of Stock Option Agreement.
(a) Incentive Stock Options. Unless otherwise provided for
by the Board at the time an Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement attached
hereto (i) as Exhibit A and incorporated herein by reference if it is granted
4
<PAGE> 5
before the Registration Date or (ii) as Exhibit B and incorporated herein by
reference if it is granted on or after the Registration Date.
(b) Nonqualified Stock Options. Unless otherwise provided
for by the Board at the time an Option is granted, an Option designated as an
"Nonqualified Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of nonqualified stock option agreement attached
hereto (i) as Exhibit C and incorporated herein by reference if it is granted
before the Registration Date or (ii) as Exhibit D and incorporated herein by
reference if it is granted on or after the Registration Date.
(c) Standard Term for Options. Unless otherwise provided for
by the Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the standard option agreements described in
paragraph 7 above either in connection with the grant or amendment of an
individual Option or in connection with the authorization of a new standard form
or forms; provided, however, that the terms and conditions of such revised or
amended standard form or forms of stock option agreement shall be in accordance
with the terms of the Plan. Such authority shall include, but not by way of
limitation, the authority to grant Options which are immediately exercisable.
9. Fair Market Value Limitation. To the extent that the aggregate
fair market value (determined at the time the Option is granted) of stock with
respect to which Incentive Stock Options are exercisable by an Optionee for the
first time during any calendar year (under all stock option plans of the
Company, including the Plan) exceeds One Hundred Thousand Dollars ($100,000),
such options shall be treated as Nonqualified Stock Options. This paragraph 9
shall be applied by taking Incentive Stock Options into account in the order in
which they were granted.
10. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of Stock subject to
the Plan and to any outstanding Options and in the option price of any
outstanding Options in the event of a stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to outstanding Options are
exchanged for, converted into, or otherwise become (whether or not pursuant to a
Transfer of Control (as defined below)) shares of another corporation (the "New
Shares"), the Company may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price of the outstanding
Options shall be adjusted in a fair and equitable manner.
11. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Control Company. For purposes of applying this paragraph 11, the "Control
Company" shall mean the Participating Company whose stock is subject to the
Option.
5
<PAGE> 6
(a) the direct or indirect sale or exchange by the
shareholders of the Control Company of all or substantially all of the stock of
the Control Company where the shareholders of the Control Company before such
sale or exchange do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Control Company after such
sale or exchange;
(b) a merger in which the shareholders of the Control
Company before such merger do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the Control Company
after such merger; or
(c) the sale, exchange, or transfer (including, without
limitation, pursuant to a liquidation or dissolution) of all or substantially
all of the Control Company's assets (other than a sale, exchange, or transfer to
one (1) or more corporations where the shareholders of the Control Company
before such sale, exchange, or transfer retain, directly or indirectly, at least
a majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to either assume the Company's rights and obligations under
outstanding stock option agreements or substitute options for the Acquiring
Corporation's stock for such outstanding Options. Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as of
the date of the Transfer of Control.
12. Provision of Information. Each Optionee shall be provided with
copies of financial statements of the Company at least annually. The Company
shall not be required to deliver such information to persons whose duties in
connection with the Company assure their access to equivalent information.
13. Options Non-Transferable. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
14. Transfer of Company's Rights. In the event any Participating
Company assigns, other than by operation of law, to a third person, other than
another Participating Company, any of the Participating Company's rights to
repurchase any shares of Stock acquired on the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be not
less than the fair market value of the shares of Stock which may be repurchased
under such right (as determined by the Company) minus the repurchase price of
such shares. The requirements of this paragraph 14 regarding the minimum
consideration to be received by the assigning Participating Company shall not
inure to the benefit of the Optionee whose shares of Stock are being
repurchased. Failure of a Participating Company to comply with
6
<PAGE> 7
the provisions of this paragraph 14 shall not constitute a defense or otherwise
prevent the exercise of the repurchase right by the assignee of such right.
15. Termination or Amendment of Plan or Options. The Board,
including any duly appointed committee of the Board, may terminate or amend the
Plan or any Option at any time; provided, however, that without the approval of
the Company's shareholders, there shall be (a) no increase in the total number
of shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 10 above), (b) no change in the class of persons eligible to receive
Incentive Stock Options, (c) no expansion in the class of persons eligible to
receive Nonqualified Stock Options, and (d) no amendment to the Plan which in
the opinion of the Board would require shareholder approval in order to comply
with Rule 16b-3 in the event that the Company's securities are subject to the
Exchange Act. In any event, no amendment may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of
the Optionee, unless such amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option.
16. Continuation of Initial Plan as to Outstanding Options.
Notwithstanding any other provision of the Plan to the contrary, the terms of
the Initial Plan shall remain in effect and apply to Options granted pursuant to
such Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the General Magic, Inc. Amended and Restated 1990
Stock Option Plan as amended through April 16, 1998.
/s/Mary E. Doyle
----------------------------------------
7
<PAGE> 8
GENERAL MAGIC, INC.
INCENTIVE STOCK OPTION AGREEMENT
General Magic, Inc. (the "Company"), granted to the individual named
below an option to purchase certain shares of Common Stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. SUMMARY & DEFINITIONS:
SUMMARY
Optionee: Employee's name:
Employee's ID#:
Date of Option Grant:
Number of Option Shares: ___________ shares of Common Stock of
the Company as adjusted from time to
time pursuant to paragraph 9 below.
Exercise Price of Options: $__________________
DEFINITIONS
"Initial Vesting Date" - Date occurring one year after the Date of Option Grant.
"Initial Exercise Date" - Date occurring one year after the Date of Option
Grant.
"Determination of Vested Ratio"
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
On Initial Vesting Date, 1/4
provided the Optionee is
continuously employed by a
Participating Company from the
Date of Option Grant until the
Initial Vesting Date
Plus
For each full calendar month of 1/48
the Optionee's continuous
employment by a Participating
Company from the Initial Vesting
Date
</TABLE>
"Option Term Date" -- Ten years after the Date of Option Grant.
1
<PAGE> 9
"Code" -- Internal Revenue Code of 1986, as amended.
"Company" -- General Magic, Inc., a Delaware corporation, and any successor
corporation thereto.
"Participating Company" -- The Company and any present or future parent and/or
subsidiary corporation of the Company while such corporation is a parent or
subsidiary of the Company. For purposes of this Option Agreement, a parent
corporation and a subsidiary corporation shall be as defined in Sections 424(e)
and 424(f) of the Code.
"Participating Company Group" -- At any point in time all corporations
collectively which are then a Participating Company.
"Plan" -- General Magic, Inc. Amended and Restated 1990 Stock Option Plan.
2. Status of the Option. The Option is intended to be an incentive
stock option as described in Section 422 of the Code, but the Company does not
represent or warrant that the Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under Section 422 of the Code, including, but not limited to, holding period
requirements. (NOTE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other incentive stock options held by the Optionee
(whether granted pursuant to the Plan or any other stock option plan of the
Participating Company Group) is greater than $100,000, the Optionee should
contact the Chief Financial Officer of the Company to ascertain whether the
entire Option qualifies as an incentive stock option.)
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
4. Exercise of the Option.
(a) Right to Exercise. Except as provided in paragraph 4(f)
below, the Option shall first become exercisable on the Initial Exercise Date.
The Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option in the amount equal to the Number of Option
Shares multiplied by the Vested Ratio as set forth in paragraph 1 above
2
<PAGE> 10
less the number of shares previously acquired upon exercise of the Option. In no
event shall the Option be exercisable for more shares than the Number of Option
Shares. In addition to the foregoing, in the event that the adoption of the Plan
or any amendment of the Plan is subject to the approval of the Company's
stockholders in order for the Option to comply with the requirements of Rule
16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Option shall not be exercisable prior to such stockholder
approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless
the Board, in its sole discretion, approves the exercise of the Option prior to
such stockholder approval.
(b) Method of Exercise. The Option shall be exercisable by
written notice to the Company which shall state the election to exercise the
Option, the number of shares for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person, by certified or registered mail, return receipt
requested, or by facsimile transmission to the Chief Financial Officer of the
Company, or other authorized representative of the Participating Company Group,
prior to the termination of the Option as set forth in paragraph 6 below,
accompanied by full payment of the exercise price for the number of shares being
purchased.
(c) Form of Payment of Exercise Price. Payment of the
exercise price for the number of shares for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the
Company of shares of the Company's Common Stock owned by the Optionee and having
a fair market value not less than the exercise price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's Common Stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's Common Stock. "Immediate Sales Proceeds" shall
mean the assignment in form acceptable to the Company of the proceeds of a sale
of some or all of the shares acquired upon the exercise of the Option pursuant
to a program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve any such program and/or
procedure.
(d) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes payroll withholding and otherwise agrees to make
adequate provision for foreign, federal and state tax withholding obligations of
the Participating Company Group, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired on exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired on exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Participating Company Group's withholding obligations are satisfied.
Accordingly, the Optionee may not be
3
<PAGE> 11
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares.
(e) Certificate Registration. Except in the event the
exercise price is paid by Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
foreign, federal or state law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the Company. As
a condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be
an employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee ceases to be an
employee of
4
<PAGE> 12
the Participating Company Group because of the death of the Optionee or
disability of the Optionee within the meaning of Section 422(c) of the Code, the
Option may be exercised, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
employment. Except as provided in this paragraph 7(a), the Option shall
terminate and may not be exercised after the Optionee ceases to be an employee
of the Participating Company Group.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) Exercise Prevented by Law. Except as provided in this
paragraph 7, the Option shall terminate and may not be exercised after the
Optionee's employment with the Participating Company Group terminates unless the
exercise of the Option in accordance with this paragraph 7 is prevented by the
provisions of paragraph 4(f) above. If the exercise of the Option is so
prevented, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but
in any event no later than the Option Term Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisors as to the tax
consequences to the Optionee of any such delayed exercise.
(d) Optionee Subject to Section 16(b). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Exchange Act, the Option shall remain exercisable until the earliest to occur of
(i) the tenth (10th) day following the date on which the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of employment, or (iii) the Option Term Date.
The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof,
the "Control Company" shall mean the Participating Company whose stock is
subject to the Option. An
5
<PAGE> 13
"Ownership Change" shall be deemed to have occurred in the event any of the
following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the
stockholders of the Control Company of all or substantially all of the stock of
the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without
limitation, pursuant to a liquidation or dissolution) of all or substantially
all of the Control Company's assets (other than a sale, exchange, or transfer to
one (1) or more corporations where the stockholders of the Control Company
before such sale, exchange, or transfer retain, directly or indirectly, at least
a majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which
the stockholders of the Control Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Control Company after such transaction or in which
the Control Company is not the surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock for the
Option. The Option shall terminate effective as of the date of the Transfer of
Control to the extent that the Option is neither assumed nor substituted for by
the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
10. Rights as a Stockholder or Employee. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the Option has been exercised pursuant to paragraph 4(b) above and the Company
has received full payment for the shares for which the Option has been
exercised. No adjustment shall be made for dividends or distributions or other
rights for which the record date is prior to the date of exercise and payment in
full, except as provided in paragraph 9 above. Nothing in the Option shall
confer upon the Optionee
6
<PAGE> 14
any right to continue in the employ of a Participating Company or interfere in
any way with any right of the Participating Company Group to terminate the
Optionee's employment at any time.
11. Legends. The Company may at any time place legends referencing
any applicable federal, state and/or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to effectuate
the provisions of this paragraph 11. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN
INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED ("ISO"). IN ORDER TO OBTAIN THE
PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD
NOT BE TRANSFERRED PRIOR TO ____________. SHOULD THE REGISTERED
HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE
AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE
REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF
ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS
DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering
of stock made by the Company pursuant to an effective registration statement
filed under the Securities Act, the Optionee shall not offer, sell, contract to
sell, pledge, hypothecate, grant any option to purchase or make any short sale
of, or otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in such public
offering under the Securities Act.
13. Binding Effect. This Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
14. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time; provided, however, that no such termination or amendment may
adversely affect the Option or any unexercised
7
<PAGE> 15
portion hereof without the consent of the Optionee unless such amendment is
required to enable the Option to qualify as an incentive stock option.
15. Integrated Agreement. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group other than those as set forth
or provided for herein. To the extent contemplated herein, the provisions of
this Option Agreement shall survive any exercise of the Option and shall remain
in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
GENERAL MAGIC, INC.
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
Name:
-----------------------------------
Date:
-----------------------------------
8
<PAGE> 16
GENERAL MAGIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
General Magic, Inc. (the "Company"), granted to the individual named
below an option to purchase certain shares of Common Stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. Summary & Definitions:
SUMMARY
Optionee: Employee's name:
Employee's ID#:
Date of Option Grant:
Number of Option Shares: _________ shares of Common Stock of the
Company as adjusted from time to time
pursuant to paragraph 9 below.
Exercise Price of Options: $_________________
DEFINITIONS
"Initial Vesting Date" - Date occurring one year after the Date of Option Grant.
"Initial Exercise Date" - Date occurring one year after the Date of Option
Grant.
"Determination of Vested Ratio"
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
On Initial Vesting Date, 1/4
provided the Optionee is
continuously employed by a
Participating Company from the
Date of Option Grant until the
Initial Vesting Date
Plus
For each full calendar month 1/48
of the Optionee's continuous
employment by a Participating
Company from the Initial
Vesting Date
</TABLE>
"Option Term Date" -- Ten years after the Date of Option Grant.
1
<PAGE> 17
"Code" -- Internal Revenue Code of 1986, as amended.
"Company" -- General Magic, Inc., a Delaware corporation, and any successor
corporation thereto.
"Participating Company" -- The Company and any present or future parent and/or
subsidiary corporation of the Company while such corporation is a parent or
subsidiary of the Company. For purposes of this Option Agreement, a parent
corporation and a subsidiary corporation shall be as defined in Sections 424(e)
and 424(f) of the Code.
"Participating Company Group" -- At any point in time all corporations
collectively which are then a Participating Company.
"Plan" -- General Magic, Inc. Amended and Restated 1990 Stock Option Plan.
2. Status of the Option. The Option is intended to be a
nonqualified stock option and shall not be treated as an incentive stock option
as described in Section 422 of the Code.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
4. Exercise of the Option.
(a) Right to Exercise. Except as provided in paragraph 4(f)
below, the Option shall first become exercisable on the Initial Exercise Date.
The Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option in the amount equal to the Number of Option
Shares multiplied by the Vested Ratio as set forth in paragraph 1 above less the
number of shares previously acquired upon exercise of the Option. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares. In addition to the foregoing, in the event that the adoption of the Plan
or any amendment of the Plan is subject to the approval of the Company's
stockholders in order for the Option to comply with the requirements of Rule
16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Option shall not be exercisable prior to such stockholder
approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless
the Board, in its sole discretion, approves the exercise of the Option prior to
such stockholder approval.
2
<PAGE> 18
(b) Method of Exercise. The Option shall be exercisable by
written notice to the Company which shall state the election to exercise the
Option, the number of shares for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person, by certified or registered mail, return receipt
requested, or by facsimile transmission to the Chief Financial Officer of the
Company, or other authorized representative of the Participating Company Group,
prior to the termination of the Option as set forth in paragraph 6 below,
accompanied by full payment of the exercise price for the number of shares being
purchased.
(c) Form of Payment of Exercise Price. Payment of the
exercise price for the number of shares for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the
Company of shares of the Company's Common Stock owned by the Optionee and having
a fair market value not less than the exercise price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's Common Stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's Common Stock. "Immediate Sales Proceeds" shall
mean the assignment in form acceptable to the Company of the proceeds of a sale
of some or all of the shares acquired upon the exercise of the Option pursuant
to a program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve any such program and/or
procedure.
(d) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes payroll withholding and otherwise agrees to make
adequate provision for foreign, federal and state tax withholding obligations of
the Participating Company Group, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired on exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired on exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Participating Company Group's withholding obligations are satisfied.
Accordingly, the Optionee may not be able to exercise the Option when desired
even though the Option is vested, and the Company shall have no obligation to
issue a certificate for such shares.
(e) Certificate Registration. Except in the event the
exercise price is paid by Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
3
<PAGE> 19
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
foreign, federal or state law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the Company. As
a condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be
an employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee ceases to be an
employee of the Participating Company Group because of the death of the Optionee
or disability of the Optionee within the meaning of Section 422(c) of the Code,
the Option may be exercised, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
employment. Except as provided in this paragraph 7(a), the Option
4
<PAGE> 20
shall terminate and may not be exercised after the Optionee ceases to be an
employee of the Participating Company Group.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) Exercise Prevented by Law. Except as provided in this
paragraph 7, the Option shall terminate and may not be exercised after the
Optionee's employment with the Participating Company Group terminates unless the
exercise of the Option in accordance with this paragraph 7 is prevented by the
provisions of paragraph 4(f) above. If the exercise of the Option is so
prevented, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but
in any event no later than the Option Term Date.
(d) Optionee Subject to Section 16(b). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Exchange Act, the Option shall remain exercisable until the earliest to occur of
(i) the tenth (10th) day following the date on which the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of employment, or (iii) the Option Term Date.
(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof,
the "Control Company" shall mean the Participating Company whose stock is
subject to the Option. An "Ownership Change" shall be deemed to have occurred in
the event any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the
stockholders of the Control Company of all or substantially all of the stock of
the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without
limitation, pursuant to a liquidation or dissolution) of all or substantially
all of the Control Company's assets (other than a sale, exchange, or transfer to
one (1) or more corporations where the stockholders of the Control Company
before such sale, exchange, or transfer retain, directly or indirectly, at least
a majority
5
<PAGE> 21
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which
the stockholders of the Control Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Control Company after such transaction or in which
the Control Company is not the surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock for the
Option. The Option shall terminate effective as of the date of the Transfer of
Control to the extent that the Option is neither assumed nor substituted for by
the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
10. Rights as a Stockholder or Employee. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the Option has been exercised pursuant to paragraph 4(b) above and the Company
has received full payment for the shares for which the Option has been
exercised. No adjustment shall be made for dividends or distributions or other
rights for which the record date is prior to the date of exercise and payment in
full, except as provided in paragraph 9 above. Nothing in the Option shall
confer upon the Optionee any right to continue in the employ of a Participating
Company or interfere in any way with any right of the Participating Company
Group to terminate the Optionee's employment at any time.
11. Legends. The Company may at any time place legends referencing
any applicable federal, state and/or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to effectuate
the provisions of this paragraph 11.
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering
of stock made by the Company pursuant to an effective registration statement
filed under the Securities Act, the Optionee shall
6
<PAGE> 22
not offer, sell, contract to sell, pledge, hypothecate, grant any option to
purchase or make any short sale of, or otherwise dispose of any shares of stock
of the Company or any rights to acquire stock of the Company for such period of
time from and after the effective date of such registration statement as may be
established by the underwriter for such public offering; provided, however, that
such period of time shall not exceed one hundred eighty (180) days from the
effective date of the registration statement to be filed in connection with such
public offering. The foregoing limitation shall not apply to shares registered
in such public offering under the Securities Act.
13. Binding Effect. This Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
14. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time; provided, however, that no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee.
15. Integrated Agreement. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group other than those as set forth
or provided for herein. To the extent contemplated herein, the provisions of
this Option Agreement shall survive any exercise of the Option and shall remain
in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
GENERAL MAGIC, INC.
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
7
<PAGE> 23
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
Name:
-----------------------------------
Date:
-----------------------------------
8
<PAGE> 1
EXHIBIT 10.4
GENERAL MAGIC, INC.
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
(As Amended through April 16, 1998)
1. Purpose. The General Magic, Inc. 1994 Outside Directors Stock
Option Plan (the "Plan") is established effective as of November 22, 1994 (the
"Effective Date"). The purpose of the Plan is to create additional incentive for
the non-employee directors of General Magic, Inc., and any successor corporation
thereto (collectively referred to as the "Company") to promote the financial
success and progress of the Company and any present or future parent and/or
subsidiary corporations of the Company (all of whom along with the Company being
individually referred to as a "Participating Company" and collectively referred
to as the "Participating Company Group"). For purposes of the Plan, a parent
corporation and a subsidiary corporation shall be as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
(a) General. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of the Plan or of
any option granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon everyone having
an interest in the Plan and/or any Option.
(b) Limitations on Authority of the Board. Notwithstanding
any other provision herein to the contrary, the Board shall have no authority,
discretion, or power to select the non-employee directors of the Company who
will receive Options, to set the exercise price of Options, to determine the
number of shares of Common Stock to be granted under Options or the time at
which such Options are to be granted, to establish the duration of Options, or
to alter any other terms or conditions specified in the Plan, except in the
sense of administering the Plan subject to the provisions of the Plan.
(c) Authority of Officers. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
3. Eligibility and Type of Option. Options may be granted only to
Eligible Outside Directors of the Company. "Eligible Outside Directors" shall be
all directors except:
<PAGE> 2
(a) any director who, at the time of such grant, is an
employee of the Company or of any parent or subsidiary corporation of the
Company,
(b) any director whose employer is a shareholder of the
Company or whose employer is a parent or subsidiary corporation of a shareholder
of the Company; and
(c) any director whose employer has a technology license
from the Company or whose employer is a parent or subsidiary corporation of an
entity which has a technology license from the Company.
Options granted to Eligible Outside Directors shall be
nonqualified stock options; that is, options which are not treated as having
been granted under Section 422(b) of the Code.
4. Shares Subject to Option. Options shall be for the purchase of
the authorized but unissued Common Stock of the Company at such time as the
Company is a California corporation or for the purchase of the authorized but
unissued Common Stock or treasury shares of Common Stock of the Company at such
time as the Company is a Delaware corporation (the "Stock"), subject to
adjustment as provided in paragraph 8 below. The maximum number of shares of
Stock which may be issued under the Plan shall be five hundred fifty thousand
(550,000) shares. In the event that any outstanding Option for any reason
expires or is terminated and/or shares of Stock subject to repurchase are
repurchased by the Company, the shares allocable to the unexercised portion of
such Option, or such repurchased shares, may again be subject to an Option
grant. Notwithstanding the foregoing, any such shares shall be made subject to a
new Option only if the grant of such new Option and the issuance of such shares
pursuant to such new Option would not cause the Plan or any Option granted under
the Plan to contravene Rule 16b-3, as promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), as amended, and amended from time to time or
any successor rule or regulation ("Rule 16b-3").
5. Time for Granting Options. All Options shall be granted within
ten (10) years from the Effective Date.
6. Terms, Conditions and Form of Options. Options granted pursuant
to the Plan shall be evidenced by written agreements specifying the number of
shares of Stock covered thereby, in substantially the forms attached hereto as
Exhibits A, B and C (the "Option Agreements"), which written agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
(a) Automatic Grant of Options. Subject to execution by an
Eligible Outside Director of an appropriate Option Agreement, Options shall be
granted automatically and without further action of the Board, as follows:
(i) Initial Grant. Each person who is first elected
or appointed as an Eligible Outside Director after the effective date of the
registration by the Company of its common stock under Section 12 of the Exchange
Act (the "Registration Date") and prior to the date of the annual meeting of the
stockholders of the Company held in 1996 (the "1996 Annual
2
<PAGE> 3
Meeting") shall be granted an Option on the day immediately following such
initial election or appointment to purchase Twenty Thousand (20,000) shares of
Stock. Each person who is first elected or appointed as an Eligible Outside
Director on or after the date of the 1996 Annual Meeting shall be granted an
Option on the day immediately following such initial election or appointment to
purchase Forty Thousand (40,000) shares of Stock. An Option granted pursuant to
this paragraph 6(a)(i) is hereinafter referred to as an "Initial Grant."
(ii) Anniversary Date Grant. Each Eligible Outside
Director shall be granted on the Anniversary Date of such director occurring
prior to the 1996 Annual Meeting an Option to purchase Five Thousand (5,000)
shares of Stock. Each Eligible Outside Director shall be granted on the
Anniversary Date of such director occurring on or after the 1996 Annual Meeting
an Option to purchase Ten Thousand (10,000) shares of Stock. An Option granted
pursuant to this paragraph 6(a)(ii) is hereinafter referred to as an
"Anniversary Date Grant." An Eligible Outside Director's "Anniversary Date"
shall be the following date:
(A) With respect to an Eligible Outside
Director granted an Initial Grant,
twelve (12) months after the date of
such Director's Initial Grant and
successive anniversaries thereof.
(B) With respect to an Eligible Outside
Director not granted an Initial Grant,
twelve (12) months after the date of the
most recent grant of an option under the
General Magic, Inc. Amended and Restated
1990 Stock Option Plan prior to the
Registration Date and successive
anniversaries thereof.
(iii) Past Service Grant. Each Eligible Outside
Director whose service on the Board commenced prior to the date of the 1996
Annual Meeting shall be granted on the date of the 1996 Annual Meeting an Option
to purchase that number of shares of Stock equal to the difference between forty
thousand (40,000) and the number of shares of Stock for which options were
previously granted by the Company to such director, whether or not pursuant to
the Plan, excluding shares of Stock for which Anniversary Date Grants were
previously made to such director (a "Past Service Grant").
(iv) Notwithstanding the foregoing, any Eligible
Outside Director may elect not to receive an Option granted pursuant to this
paragraph 6(a) by delivering written notice of such election to the Board (A) in
the case of an Initial Grant, no later than the date upon which such Eligible
Outside Director is first appointed or elected to the Board and (B) in the case
of an Anniversary Date Grant or Past Service Grant, no later than six (6) months
prior to the date upon which such Option would otherwise be granted.
(v) Notwithstanding any other provision of the Plan
to the contrary, no Option shall be granted to any individual on a day when he
or she is no longer serving as an Eligible Outside Director of the Company.
(b) Exercise Price. The exercise price per share of Stock
subject to an Option shall be the fair market value of a share of Stock on the
date the Option is granted. Where there
3
<PAGE> 4
is a public market for the Stock, the fair market value per share of Stock shall
be the mean of the bid and asked prices of the Stock on the date the Option is
granted, as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System) or, in the event the Stock is listed on the NASDAQ
National Market System or a national or regional securities exchange, the fair
market value per share of Stock shall be the closing price of the Stock on such
National Market System or exchange on the date the Option is granted, as
reported in the Wall Street Journal. If the date an Option is granted does not
fall on a day on which the Stock is traded on NASDAQ, the NASDAQ National Market
System or other national or regional securities exchange, the date on which the
Option exercise price per share shall be established shall be the last day on
which the Stock was so traded prior to the date the Option was granted.
(c) Exercise Period and Vesting of Options. An Option
granted pursuant to the Plan shall be exercisable to the extent vested for a
term of ten (10) years from the date of grant unless earlier terminated pursuant
to the terms of the Plan or the Option Agreement. Options granted pursuant to
the Plan shall first become vested on the Initial Vesting Date as set forth
below. The Option shall become vested cumulatively on and after the Initial
Vesting Date in an amount equal to the number of Option Shares multiplied by the
Vested Ratio as set forth below. In no event shall the Vested Ratio exceed 1/1.
(i) Initial Grants and Past Service Grants. With
respect to an Initial Grant or Past Service Grant, the "Initial Vesting Date"
shall be one (1) year from the date the Option is granted, and the Vested Ratio
shall be determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/4
provided the Optionee has
continuously served as a
director of the Company
from the date the Option was
granted until the Initial
Vesting Date.
Plus
For each full month 1/48
of the Optionee's continuous
service as a director of the
Company from the Initial
Vesting Date.
</TABLE>
(ii) Anniversary Date Grants. With respect to an
Anniversary Date Grant, the Initial Vesting Date shall be the date which is
three (3) years from the date on which the Option was granted, and the Vested
Ratio shall be determined as follows:
4
<PAGE> 5
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
For each full month of the 1/12
Optionee's continuous service
as a director of the Company
from the Initial Vesting Date
</TABLE>
(d) Payment of Exercise Price. Payment of the exercise price
for the number of shares of Stock being purchased pursuant to any Option shall
be made (i) in cash, by check, or in cash equivalent, (ii) by the assignment of
the proceeds of a sale of some or all of the shares being acquired upon the
exercise of an Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System), or (iii) by any
combination thereof. The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedure for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
(e) Transfer of Control. A "Transfer of Control" shall be
deemed to have occurred in the event any of the following occurs with respect to
the Company:
(i) a merger or consolidation in which the Company
is not the surviving corporation;
(ii) a merger or consolidation in which the Company
is the surviving corporation where the shareholders of the Company before such
merger or consolidation do not retain, directly or indirectly, as a result of
their ownership of shares of the Company prior to such event, at least a
majority of the beneficial interest in the voting stock of the Company after
such merger or consolidation;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company other than a sale, exchange, or
transfer to one (1) or more subsidiary corporations (as defined in paragraph 1
above) of the Company;
(iv) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where the shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, as a result of their ownership of shares of
the Company prior to such event, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange; or
(v) a liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its
sole discretion, may arrange with the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), for the Acquiring Corporation to assume the Company's
rights and obligations under outstanding Options or substitute options for the
Acquiring Corporation's stock for such outstanding Options. Any
5
<PAGE> 6
Options which are neither assumed or substituted for by the Acquiring
Corporation nor exercised as of the date of the Transfer of Control shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control.
7. Authority to Vary Terms. Subject to the limitations set forth in
paragraph 2(b) above, the Board shall have the authority from time to time to
vary the terms of the Option Agreements either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
such revised or amended standard form or forms of stock option agreement shall
be in accordance with the terms of the Plan. Such authority shall include, but
not by way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by the Optionee on exercise of an Option in the event such
Optionee's service as a director of the Company is terminated for any reason. In
no event shall the Board be permitted to vary the terms of the Option Agreements
if such change would cause the Plan to cease to qualify as a formula plan
pursuant to Rule 16b-3.
8. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made (i) in the number and class of shares of Stock subject
to the Plan, to an Initial Grant and an Anniversary Date Grant and to any
outstanding Options and (ii) in the Option exercise price of any outstanding
Options in the event of a stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or like change in the capital
structure of the Company. In the event a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to a Transfer
of Control) shares of another corporation (the "New Shares"), the Company may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price of the outstanding Options shall be adjusted in a
fair and equitable manner.
9. Options Nontransferable. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
10. Termination or Amendment of Plan or Options. The Board,
including any duly appointed committee of the Board, may terminate or amend the
Plan or any Option at any time; provided, however, that without the approval of
the shareholders of the Company, there shall be (a) no increase in the total
number of shares of Stock covered by the Plan (except by operation of the
provisions of paragraph 8 above), and (b) no expansion in the class of persons
eligible to receive Options; and provided, further, that the provisions of the
Plan addressing eligibility to participate in the Plan and the amount, price and
timing of grants of Options shall not be amended more than once every six (6)
months, other than to comport to changes in the Code, or the rules thereunder.
In addition to the foregoing, the approval of the Company's shareholders shall
be sought for any amendment to the Plan for which the Board deems shareholder
approval necessary in order to comply with Rule 16b-3. In any event, no
termination or amendment may adversely affect any then outstanding Option, or
any unexercised portion thereof, without the consent of the Optionee.
6
<PAGE> 7
11. Shareholder Approval. Any Option granted pursuant to the Plan
shall be subject to obtaining shareholder approval of the Plan no later than the
first Annual Meeting of Shareholders of the Company after the Effective Date.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing General Magic, Inc. 1994 Outside Directors Stock Option Plan
was duly adopted by the Board of Directors of the Company on the 22nd day of
November, 1994.
----------------------------------------
Secretary
7
<PAGE> 8
EXHIBIT A
GENERAL MAGIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(INITIAL GRANT)
General Magic, Inc. (the "Company") granted to ___________ (the
"Optionee") an option to purchase a total of Forty Thousand (40,000) shares of
the common stock of the Company (the "Number of Option Shares") under the
General Magic, Inc. 1994 Outside Directors Stock Option Plan (the "Plan"), at an
exercise price of $______ per share and in the manner and subject to the
provisions of this Option Agreement (the "Option"). The grant, in all respects,
is subject to the terms and conditions of this Option Agreement and the Plan,
the provisions of which are incorporated by reference herein. Unless otherwise
provided in this Option Agreement, defined terms shall have the meaning given to
such terms in the Plan.
1. Grant of the Option. The Option is granted effective as of
___________ (the "Date of Option Grant"). The Number of Option Shares and the
exercise price per share of the Option are subject to adjustment from time to
time as provided in the Plan.
2. Status of the Option. The Option is intended to be a
nonqualified stock option and shall not be treated as an incentive stock option
as described in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
3. Term of the Option. The Option shall terminate and may no longer
be exercised on the first to occur (the "Option Termination Date") of (i) the
date ten (10) years after the Date of Option Grant, (ii) the last date for
exercising the Option following termination of the Optionee's service as a
director of the Company as described in paragraph 6 below, or (iii) upon a
Transfer of Control of the Company as described in the Plan.
4. Exercise of the Option.
(a) Right to Exercise.
(i) The Option first becomes exercisable on the day
which is one (1) year from the Date of Option Grant (the "Initial Vesting Date")
provided the Optionee has continuously served as a director of the Company from
the Date of Option Grant until the Initial Vesting Date. The Option shall be
exercisable on and after the Initial Vesting Date and prior to the termination
of the Option in the amount equal to the Number of Option Shares multiplied by
the Vested Ratio as set forth in paragraph 4(a)(ii), below, less the number of
shares previously acquired upon exercise of the Option.
1
<PAGE> 9
<TABLE>
<CAPTION>
(ii) Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/4
provided the Optionee has
continuously served as a
director of the Company
from the date the Option was
granted until the Initial
Vesting Date.
Plus
For each full month 1/48
of the Optionee's continuous
service as a director of the
Company from the Initial
Vesting Date.
</TABLE>
(iii) In no event shall the Option be exercised for
more shares than the Number of Option Shares. In addition to the foregoing, in
the event that the adoption of the Plan or any amendment of the Plan is subject
to the approval of the shareholders of the Company in order for the Option to
comply with the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not be
exercisable in the absence of such shareholder approval.
(b) Method of Exercise. The Option may be exercised by
written notice to the Company which must state the election to exercise the
Option, the number of shares of stock for which the Option is being exercised
and such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the provisions
of this Option Agreement and the Plan. The written notice must be signed by the
Optionee and must be delivered in person or by certified or registered mail,
return receipt requested, to the Chief Financial Officer of the Company, or
other authorized representative of the Company, prior to the termination of the
Option as set forth in paragraph 3 above, accompanied by full payment of the
exercise price for the number of shares of stock being purchased in a form
permitted under the terms of the Plan.
(c) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee shall make adequate provision for the foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares of stock acquired on exercise of the Option, or (iii) the
lapsing of any restriction with respect to any shares acquired on exercise of
the Option.
2
<PAGE> 10
(d) Certificate Registration. Except in the event the exercise
price is paid by the assignment of the proceeds of a sale of some or all of the
shares of Stock to be acquired upon exercise of the Option as provided in the
Plan, the certificate or certificates for the shares of stock as to which the
Option shall be exercised shall be registered in the name of the Optionee, or,
if applicable, the heirs of the Optionee.
(e) Restriction on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of stock on exercise
of the Option shall be subject to compliance with all of the applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares of stock issuable upon exercise of the Option, or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon exercise
of the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. As a
condition to the exercise of the Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(f) Fractional Shares. The Company shall not be required to
issue fractional shares of stock upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of Service as a Director.
(a) Termination of Director Status. If the Optionee ceases
to be a director of the Company for any reason except death or disability within
the meaning of Section 22(e)(3) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a director, may be exercised by the Optionee at any time prior to
the expiration of nine (9) months from the date on which the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Termination Date. If the Optionee ceases to be a director of the Company
because of the death or disability of the Optionee within the meaning of Section
22(e)(3) of the Code, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee ceased to be a director, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date on which the
Optionee's service as a director of the Company terminated, but in any event no
later than the Option Termination Date. Except as provided in this paragraph 6,
an Option shall terminate and may not be exercised after the Optionee ceases to
be a director of the Company.
3
<PAGE> 11
(b) Extension of Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented because the issuance of shares of stock upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or regulation, the Option shall remain exercisable
until three (3) months after the date the Optionee is notified by the Company
that the Option is exercisable, but in any event no later than the Option
Termination Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of service as a director
of the Company and (iii) the Option Termination Date.
7. Rights as a Shareholder; No Right to Serve as a Director. The
Optionee shall have no rights as a shareholder with respect to any shares of
stock covered by the Option until the date of the issuance of a certificate or
certificates for the shares for which the Option has been exercised. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such stock certificate or
certificates are issued, except as provided in the Plan. Nothing herein shall
confer upon the Optionee any right to continue to serve as a director of the
Company.
8. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
9. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Company:
(a) a merger or consolidation in which the Company is not
the surviving corporation;
(b) a merger or consolidation in which the Company is the
surviving corporation where the shareholders of the Company before such merger
or consolidation do not retain, directly or indirectly, as a result of their
ownership of shares of the Company prior to such event, at least a majority of
the beneficial interest in the voting stock of the Company after such merger or
consolidation;
4
<PAGE> 12
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations (as defined in paragraph 1 above) of the
Company);
(d) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where the shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, as a result of their ownership of shares of
the Company prior to such event, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange; or
(e) A liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), for the Acquiring Corporation to assume the Company's rights and
obligations under the Option or substitute options for the Acquiring
Corporation's stock for the Option. To the extent the Option is neither assumed
or substituted for by the Acquiring Corporation in connection with the Transfer
of Control nor exercised as of the date of the Transfer of Control, the Option
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
10. Legends. The Company may at any time place legends referencing
any applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares of stock acquired pursuant
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph.
11. Binding Effect. This Option Agreement shall inure to the benefit
of the successors and assigns of the Company and be binding upon the Company and
the Optionee and the Optionee's heirs, executors, administrators, successors and
assigns.
12. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time subject to any limitations described in the Plan; provided,
however, that no such termination or amendment may adversely affect the Option
or any unexercised portion hereof without the consent of the Optionee.
13. Integrated Agreement. This Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the
Company with respect to the subject matter contained herein and therein, and
there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Company other than those as set forth or
provided for herein or therein. To the extent contemplated herein and therein,
the provisions of this Option Agreement and the Plan shall survive any exercise
of the Option and shall remain in full force and effect.
5
<PAGE> 13
14. Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
GENERAL MAGIC, INC.
By:
-------------------------------------
Title:
----------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and the Plan and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Option Agreement or the Plan.
The undersigned acknowledges receipt of a copy of the Plan.
Date:
---------------------------- ----------------------------------------
Signature
6
<PAGE> 14
NONSTATUTORY STOCK OPTION
NOTICE OF EXERCISE
To: Chief Financial Officer
General Magic, Inc.
I hereby exercise my Option to purchase the number of shares (the
"Shares") of Common Stock of General Magic, Inc. (the "Company") set opposite my
signature below. Full payments for the Shares in the manner set forth in my
Option Agreement accompanies this notice.
I hereby authorize payroll withholding and otherwise will make adequate
provision for foreign, federal and state tax withholding obligations, if any, as
more fully set forth in my Option Agreement.
I understand that the Shares are being purchased pursuant to the terms
of the General Magic, Inc. 1994 Outside Directors Stock Option Plan and my
Option Agreement, copies of which I have received and carefully read and
understand.
Date of Exercise:
---------------------------
Date of Option Agreement:
-------------------
Shares Being Purchased:
---------------------
Price per Share: $
--------------------------
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Social Security Number
----------------------------------------
Address
----------------------------------------
<PAGE> 15
EXHIBIT B
GENERAL MAGIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(ANNIVERSARY DATE GRANT)
General Magic, Inc. (the "Company") granted to __________ (the
"Optionee") an option to purchase a total of Ten Thousand (10,000) shares of the
common stock of the Company (the "Number of Option Shares") under the General
Magic, Inc. 1994 Outside Directors Stock Option Plan (the "Plan"), at an
exercise price of $______ per share and in the manner and subject to the
provisions of this Option Agreement (the "Option"). The grant, in all respects,
is subject to the terms and conditions of this Option Agreement and the Plan,
the provisions of which are incorporated by reference herein. Unless otherwise
provided in this Option Agreement, defined terms shall have the meaning given to
such terms in the Plan.
1. Grant of the Option. The Option is granted effective as of
__________ (the "Date of Option Grant"). The Number of Option Shares and the
exercise price per share of the Option are subject to adjustment from time to
time as provided in the Plan.
2. Status of the Option. The Option is intended to be a
nonqualified stock option and shall not be treated as an incentive stock option
as described in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
3. Term of the Option. The Option shall terminate and may no longer
be exercised on the first to occur of (i) the date ten (10) years after the Date
of Option Grant (the "Option Termination Date"), (ii) the last date for
exercising the Option following termination of the Optionee's service as a
director of the Company as described in paragraph 6 below, or (iii) upon a
Transfer of Control of the Company as described in the Plan.
4. Exercise of the Option.
(a) Right to Exercise.
(i) The Option first becomes exercisable on the day
which is three (3) years from the Date of Option Grant (the "Initial Vesting
Date") provided the Optionee has continuously served as a director of the
Company from the Date of Option Grant until the Initial Vesting Date. The Option
shall be exercisable on and after the Initial Vesting Date and prior to the
termination of the Option in the amount equal to the Number of Option Shares
multiplied by the Vested Ratio as set forth in paragraph 4(a)(ii), below, less
the number of shares previously acquired upon exercise of the Option.
1
<PAGE> 16
<TABLE>
<CAPTION>
(ii) Vested Ratio
------------
<S> <C>
For each full month 1/12
of the Optionee's continuous
service as a director of the
Company from the Initial
Vesting Date.
</TABLE>
(iii) In no event shall the Option be exercised for
more shares than the Number of Option Shares. In addition to the foregoing, in
the event that the adoption of the Plan or any amendment of the Plan is subject
to the approval of the shareholders of the Company in order for the Option to
comply with the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not be
exercisable in the absence of such shareholder approval.
(b) Method of Exercise. The Option may be exercised by
written notice to the Company which must state the election to exercise the
Option, the number of shares of stock for which the Option is being exercised
and such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the provisions
of this Option Agreement and the Plan. The written notice must be signed by the
Optionee and must be delivered in person or by certified or registered mail,
return receipt requested, to the Chief Financial Officer of the Company, or
other authorized representative of the Company, prior to the termination of the
Option as set forth in paragraph 3 above, accompanied by full payment of the
exercise price for the number of shares of stock being purchased in a form
permitted under the terms of the Plan.
(c) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee shall make adequate provision for the foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares of stock acquired on exercise of the Option, or (iii) the
lapsing of any restriction with respect to any shares acquired on exercise of
the Option.
(d) Certificate Registration. Except in the event the
exercise price is paid by the assignment of the proceeds of a sale of some or
all of the shares of Stock to be acquired upon exercise of the Option as
provided in the Plan, the certificate or certificates for the shares of stock as
to which the Option shall be exercised shall be registered in the name of the
Optionee, or, if applicable, the heirs of the Optionee.
(e) Restriction on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of stock on exercise
of the Option shall be subject to compliance with all of the applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the
2
<PAGE> 17
Option be in effect with respect to the shares of stock issuable upon exercise
of the Option, or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the
terms of an applicable exemption from the registration requirements of the
Securities Act. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
(f) Fractional Shares. The Company shall not be required to
issue fractional shares of stock upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of Service as a Director.
(a) Termination of Director Status. If the Optionee ceases
to be a director of the Company for any reason except death or disability within
the meaning of Section 22(e)(3) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a director, may be exercised by the Optionee at any time prior to
the expiration of nine (9) months from the date on which the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Termination Date. If the Optionee ceases to be a director of the Company
because of the death or disability of the Optionee within the meaning of Section
22(e)(3) of the Code, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee ceased to be a director, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of six (6) months from the date on which the Optionee's
service as a director of the Company terminated, but in any event no later than
the Option Termination Date. The Optionee's service as a director of the Company
shall be deemed to have terminated on account of death if the Optionee dies
within three (3) months after the Optionee's termination of service as a
director of the Company. Except as provided in this paragraph 6, an Option shall
terminate and may not be exercised after the Optionee ceases to be a director of
the Company.
(b) Extension of Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented because the issuance of shares of stock upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or regulation, the Option shall remain exercisable
until twelve (12) months after the date the Optionee is notified by the Company
that the Option is exercisable, but in any event no later than the Option
Termination Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day
3
<PAGE> 18
after the Optionee's termination of service as a director of the Company and
(iii) the Option Termination Date.
7. Rights as a Shareholder; No Right to Serve as a Director. The
Optionee shall have no rights as a shareholder with respect to any shares of
stock covered by the Option until the date of the issuance of a certificate or
certificates for the shares for which the Option has been exercised. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such stock certificate or
certificates are issued, except as provided in the Plan. Nothing herein shall
confer upon the Optionee any right to continue to serve as a director of the
Company.
8. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
9. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Company:
(a) a merger or consolidation in which the Company is not
the surviving corporation;
(b) a merger or consolidation in which the Company is the
surviving corporation where the shareholders of the Company before such merger
or consolidation do not retain, directly or indirectly, as a result of their
ownership of shares of the Company prior to such event, at least a majority of
the beneficial interest in the voting stock of the Company after such merger or
consolidation;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations (as defined in paragraph 1 above) of the
Company);
(d) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where the shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, as a result of their ownership of shares of
the Company prior to such event, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange; or
(e) A liquidation or dissolution of the Company.
4
<PAGE> 19
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), for the Acquiring Corporation to assume the Company's rights and
obligations under the Option or substitute options for the Acquiring
Corporation's stock for the Option. To the extent the Option is neither assumed
or substituted for by the Acquiring Corporation in connection with the Transfer
of Control nor exercised as of the date of the Transfer of Control, the Option
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
10. Legends. The Company may at any time place legends referencing
any applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares of stock acquired pursuant
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph.
11. Binding Effect. This Option Agreement shall inure to the benefit
of the successors and assigns of the Company and be binding upon the Company and
the Optionee and the Optionee's heirs, executors, administrators, successors and
assigns.
12. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time subject to any limitations described in the Plan; provided,
however, that no such termination or amendment may adversely affect the Option
or any unexercised portion hereof without the consent of the Optionee.
13. Integrated Agreement. This Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the
Company with respect to the subject matter contained herein and therein, and
there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Company other than those as set forth or
provided for herein or therein. To the extent contemplated herein and therein,
the provisions of this Option Agreement and the Plan shall survive any exercise
of the Option and shall remain in full force and effect.
14. Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
GENERAL MAGIC, INC.
By:
-------------------------------------
Title:
----------------------------------
5
<PAGE> 20
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and the Plan and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Option Agreement or the Plan.
The undersigned acknowledges receipt of a copy of the Plan.
Date:
----------------------------- ----------------------------------------
Signature
6
<PAGE> 21
NONSTATUTORY STOCK OPTION
NOTICE OF EXERCISE
To: Chief Financial Officer
General Magic, Inc.
I hereby exercise my Option to purchase the number of shares (the
"Shares") of Common Stock of General Magic, Inc. (the "Company") set opposite my
signature below. Full payments for the Shares in the manner set forth in my
Option Agreement accompanies this notice.
I hereby authorize payroll withholding and otherwise will make adequate
provision for foreign, federal and state tax withholding obligations, if any, as
more fully set forth in my Option Agreement.
I understand that the Shares are being purchased pursuant to the terms
of the General Magic, Inc. 1994 Outside Directors Stock Option Plan and my
Option Agreement, copies of which I have received and carefully read and
understand.
Date of Exercise:
---------------------------
Date of Option Agreement:
-------------------
Shares Being Purchased:
---------------------
Price per Share: $
--------------------------
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Social Security Number
----------------------------------------
Address
----------------------------------------
<PAGE> 22
EXHIBIT C
GENERAL MAGIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(PAST SERVICE GRANT)
General Magic, Inc. (the "Company") granted to __________ (the
"Optionee") an option to purchase a total of ______ shares of the common stock
of the Company (the "Number of Option Shares") under the General Magic, Inc.
1994 Outside Directors Stock Option Plan (the "Plan"), at an exercise price of
$______ per share and in the manner and subject to the provisions of this Option
Agreement (the "Option"). The grant, in all respects, is subject to the terms
and conditions of this Option Agreement and the Plan, the provisions of which
are incorporated by reference herein. Unless otherwise provided in this Option
Agreement, defined terms shall have the meaning given to such terms in the Plan.
1. Grant of the Option. The Option is granted effective as of
__________ (the "Date of Option Grant"). The Number of Option Shares and the
exercise price per share of the Option are subject to adjustment from time to
time as provided in the Plan.
2. Status of the Option. The Option is intended to be a
nonqualified stock option and shall not be treated as an incentive stock option
as described in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
3. Term of the Option. The Option shall terminate and may no longer
be exercised on the first to occur (the "Option Termination Date") of (i) the
date ten (10) years after the Date of Option Grant, (ii) the last date for
exercising the Option following termination of the Optionee's service as a
director of the Company as described in paragraph 6 below, or (iii) upon a
Transfer of Control of the Company as described in the Plan.
4. Exercise of the Option.
(a) Right to Exercise.
(i) The Option first becomes exercisable on the day
which is one (1) year from the Date of Option Grant (the "Initial Vesting Date")
provided the Optionee has continuously served as a director of the Company from
the Date of Option Grant until the Initial Vesting Date. The Option shall be
exercisable on and after the Initial Vesting Date and prior to the termination
of the Option in the amount equal to the Number of Option Shares multiplied by
the Vested Ratio as set forth in paragraph 4(a)(ii), below, less the number of
shares previously acquired upon exercise of the Option.
1
<PAGE> 23
<TABLE>
<CAPTION>
(ii) Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/4
provided the Optionee has
continuously served as a
director of the Company
from the date the Option was
granted until the Initial
Vesting Date.
Plus
For each full month 1/48
of the Optionee's continuous
service as a director of the
Company from the Initial
Vesting Date.
</TABLE>
(iii) In no event shall the Option be exercised for
more shares than the Number of Option Shares. In addition to the foregoing, in
the event that the adoption of the Plan or any amendment of the Plan is subject
to the approval of the shareholders of the Company in order for the Option to
comply with the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not be
exercisable in the absence of such shareholder approval.
(b) Method of Exercise. The Option may be exercised by
written notice to the Company which must state the election to exercise the
Option, the number of shares of stock for which the Option is being exercised
and such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the provisions
of this Option Agreement and the Plan. The written notice must be signed by the
Optionee and must be delivered in person or by certified or registered mail,
return receipt requested, to the Chief Financial Officer of the Company, or
other authorized representative of the Company, prior to the termination of the
Option as set forth in paragraph 3 above, accompanied by full payment of the
exercise price for the number of shares of stock being purchased in a form
permitted under the terms of the Plan.
(c) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee shall make adequate provision for the foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares of stock acquired on exercise of the Option, or (iii) the
lapsing of any restriction with respect to any shares acquired on exercise of
the Option.
2
<PAGE> 24
(d) Certificate Registration. Except in the event the
exercise price is paid by the assignment of the proceeds of a sale of some or
all of the shares of Stock to be acquired upon exercise of the Option as
provided in the Plan, the certificate or certificates for the shares of stock as
to which the Option shall be exercised shall be registered in the name of the
Optionee, or, if applicable, the heirs of the Optionee.
(e) Restriction on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of stock on exercise
of the Option shall be subject to compliance with all of the applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares of stock issuable upon exercise of the Option, or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon exercise
of the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. As a
condition to the exercise of the Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(f) Fractional Shares. The Company shall not be required to
issue fractional shares of stock upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of Service as a Director.
(a) Termination of Director Status. If the Optionee ceases
to be a director of the Company for any reason except death or disability within
the meaning of Section 22(e)(3) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a director, may be exercised by the Optionee at any time prior to
the expiration of nine (9) months from the date on which the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Termination Date. If the Optionee ceases to be a director of the Company
because of the death or disability of the Optionee within the meaning of Section
22(e)(3) of the Code, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee ceased to be a director, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date on which the
Optionee's service as a director of the Company terminated, but in any event no
later than the Option Termination Date. Except as provided in this paragraph 6,
an Option shall terminate and may not be exercised after the Optionee ceases to
be a director of the Company.
3
<PAGE> 25
(b) Extension of Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented because the issuance of shares of stock upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or regulation, the Option shall remain exercisable
until three (3) months after the date the Optionee is notified by the Company
that the Option is exercisable, but in any event no later than the Option
Termination Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of service as a director
of the Company and (iii) the Option Termination Date.
7. Rights as a Shareholder; No Right to Serve as a Director. The
Optionee shall have no rights as a shareholder with respect to any shares of
stock covered by the Option until the date of the issuance of a certificate or
certificates for the shares for which the Option has been exercised. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such stock certificate or
certificates are issued, except as provided in the Plan. Nothing herein shall
confer upon the Optionee any right to continue to serve as a director of the
Company.
8. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
9. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Company:
(a) a merger or consolidation in which the Company is not
the surviving corporation;
(b) a merger or consolidation in which the Company is the
surviving corporation where the shareholders of the Company before such merger
or consolidation do not retain, directly or indirectly, as a result of their
ownership of shares of the Company prior to such event, at least a majority of
the beneficial interest in the voting stock of the Company after such merger or
consolidation;
4
<PAGE> 26
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations (as defined in paragraph 1 above) of the
Company);
(d) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where the shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, as a result of their ownership of shares of
the Company prior to such event, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange; or
(e) A liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), for the Acquiring Corporation to assume the Company's rights and
obligations under the Option or substitute options for the Acquiring
Corporation's stock for the Option. To the extent the Option is neither assumed
or substituted for by the Acquiring Corporation in connection with the Transfer
of Control nor exercised as of the date of the Transfer of Control, the Option
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
10. Legends. The Company may at any time place legends referencing
any applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares of stock acquired pursuant
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph.
11. Binding Effect. This Option Agreement shall inure to the benefit
of the successors and assigns of the Company and be binding upon the Company and
the Optionee and the Optionee's heirs, executors, administrators, successors and
assigns.
12. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or the
Option at any time subject to any limitations described in the Plan; provided,
however, that no such termination or amendment may adversely affect the Option
or any unexercised portion hereof without the consent of the Optionee.
13. Integrated Agreement. This Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the
Company with respect to the subject matter contained herein and therein, and
there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Company other than those as set forth or
provided for herein or therein. To the extent contemplated herein and therein,
the provisions of this Option Agreement and the Plan shall survive any exercise
of the Option and shall remain in full force and effect.
5
<PAGE> 27
14. Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
GENERAL MAGIC, INC.
By:
-------------------------------------
Title:
----------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and the Plan and hereby accepts the Option
subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Option Agreement or the Plan.
The undersigned acknowledges receipt of a copy of the Plan.
Date:
---------------------------- ----------------------------------------
Signature
6
<PAGE> 28
NONSTATUTORY STOCK OPTION
NOTICE OF EXERCISE
To: Chief Financial Officer
General Magic, Inc.
I hereby exercise my Option to purchase the number of shares (the
"Shares") of Common Stock of General Magic, Inc. (the "Company") set opposite my
signature below. Full payments for the Shares in the manner set forth in my
Option Agreement accompanies this notice.
I hereby authorize payroll withholding and otherwise will make adequate
provision for foreign, federal and state tax withholding obligations, if any, as
more fully set forth in my Option Agreement.
I understand that the Shares are being purchased pursuant to the terms
of the General Magic, Inc. 1994 Outside Directors Stock Option Plan and my
Option Agreement, copies of which I have received and carefully read and
understand.
Date of Exercise:
---------------------------
Date of Option Agreement:
-------------------
Shares Being Purchased:
---------------------
Price per Share: $
--------------------------
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Social Security Number
----------------------------------------
Address
----------------------------------------
<PAGE> 1
EXHIBIT 10.20
LEASE AGREEMENT
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY,
A CONNECTICUT CORPORATION
AS LANDLORD
AND
CLASSIFIEDS2000, INC.,
A CALIFORNIA CORPORATION
AS TENANT
DATED FEBRUARY 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Basic Lease Information..............................................................iv
1. Demise...........................................................................1
2. Premises.........................................................................1
3. Term.............................................................................2
4. Rent.............................................................................3
5. Utility Expenses.................................................................8
6. Late Charge......................................................................8
7. Letter of Credit.................................................................9
8. Security Deposit................................................................11
9. Possession......................................................................11
10. Use Of Premises.................................................................12
11. Acceptance Of Premises..........................................................14
12. Surrender.......................................................................15
13. Alterations And Additions.......................................................16
14. Maintenance and Repairs Of Premises.............................................18
15. Landlord's Insurance............................................................19
16. Tenant's Insurance..............................................................20
17. Indemnification.................................................................21
18. Subrogation.....................................................................22
19. Signs...........................................................................22
20. Free From Liens.................................................................23
21. Entry By Landlord...............................................................23
22. Destruction And Damage..........................................................23
23. Condemnation....................................................................26
24. Assignment And Subletting.......................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
25. Tenant's Default................................................................31
26. Landlord's Remedies.............................................................33
27. Landlord's Right to Perform Tenant's Obligations................................36
28. Attorney's Fees.................................................................36
29. Taxes...........................................................................37
30. Effect Of Conveyance............................................................37
31. Tenant's Estoppel Certificate...................................................37
32. Subordination...................................................................38
33. Environmental Covenants.........................................................38
34. Notices.........................................................................42
35. Waiver..........................................................................43
36. Holding Over....................................................................43
37. Successors And Assigns..........................................................43
38. Time............................................................................44
39. Brokers.........................................................................44
40. Limitation Of Liability.........................................................44
41. Financial Statements............................................................45
42. Rules And Regulations...........................................................45
43. Mortgagee Protection............................................................45
44. Entire Agreement................................................................46
45. Interest........................................................................46
46. Construction....................................................................46
47. Representations And Warranties Of Tenant........................................46
48. Security........................................................................47
49. Jury Trial Waiver...............................................................47
50. Option to Renew.................................................................48
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Exhibit
<S> <C>
A Diagram of the Premises
B Tenant Improvements
B-1 Final Plans and Specifications for Tenant
Improvements
C Commencement and Expiration Date
Memorandum
D Rules and Regulations
E Sign Criteria
F Hazardous Materials Disclosure Certificate
</TABLE>
iii
<PAGE> 5
LEASE AGREEMENT
BASIC LEASE INFORMATION
- --------------------------------------------------------------------------------
Lease Date: February 20, 1998
- --------------------------------------------------------------------------------
Landlord: AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
- --------------------------------------------------------------------------------
Landlord's Address: c/o Allegis Realty Investors LLC
455 Market Street, Suite 1540
San Francisco, California 94105
- --------------------------------------------------------------------------------
All notices sent to Landlord under this Lease
shall be sent to the above address, with copies
to:
Insignia Commercial Group, Inc.
160 West Santa Clara Street, Suite 1350
San Jose, California 95113
- --------------------------------------------------------------------------------
Tenant: CLASSIFIEDS2000, INC.
a California corporation
- --------------------------------------------------------------------------------
Tenant's Contact Person: Sani El-Fishawy
- --------------------------------------------------------------------------------
Tenant's Address and
Telephone Number:
- --------------------------------------------------------------------------------
Prior to 617 Palomar Avenue
Commencement Date: Sunnyvale, California 94086
(408) 748-9696
- --------------------------------------------------------------------------------
From and after Commencement 955 Benecia Avenue
Date: Sunnyvale, California 94086
(408) 748-9696
- --------------------------------------------------------------------------------
Premises Square Footage: Approximately twenty thousand (20,000) rentable
square feet
- --------------------------------------------------------------------------------
Premises Address: 955 Benecia Avenue
Sunnyvale, California
- --------------------------------------------------------------------------------
Project: 955 Benecia Avenue, Sunnyvale, California,
together with the land on which the Project is
situated and all Common Areas
- --------------------------------------------------------------------------------
iv
<PAGE> 6
- --------------------------------------------------------------------------------
Building (if not the same
as the Project): Same as the Project
- --------------------------------------------------------------------------------
Length of Term: Sixty (60) months
- --------------------------------------------------------------------------------
Estimated Commencement Date: April 1, 1998
- --------------------------------------------------------------------------------
Estimated Expiration Date: March 31, 2003
- --------------------------------------------------------------------------------
Rent Commencement Date: April 1, 1998
- --------------------------------------------------------------------------------
Monthly Base Rent: Monthly Base Monthly Base
Months Sq. Ft. Rate Rent
------- ------ ------------ -------------
1-12 20,000 x $1.80 = $36,000.00
- --------------------------------------------------------------------------------
13-60 Monthly Base Rent to be increased in
accordance with the Consumer Price Index
Price (see Paragraph 4(a) of the Lease)
- --------------------------------------------------------------------------------
Prepaid Rent: Thirty-Six Thousand Dollars ($36,000.00)
- --------------------------------------------------------------------------------
Prepaid Additional Rent: One Thousand Six Hundred Ninety and 58/100
Dollars ($1,690.58)
- --------------------------------------------------------------------------------
Month to which Prepaid Base
Rent and Additional Rent
will be Applied: First (1st) month of the Term
- --------------------------------------------------------------------------------
Security Deposit: Thirty-Six Thousand Dollars ($36,000.00)
- --------------------------------------------------------------------------------
Permitted Use: General office use, including sales and marketing
of on-line classified advertising
- --------------------------------------------------------------------------------
Unreserved Parking Spaces: Seventy-four (74) nonexclusive and undesignated
parking spaces
- --------------------------------------------------------------------------------
Broker(s): Cornish & Carey Commercial ("LANDLORD'S BROKER")
CPS ("TENANT'S BROKER")
- --------------------------------------------------------------------------------
Tenant Improvements One Hundred Thousand Dollars ($100,000.00)
Allowance: (viz., $5.00 per rentable square foot)
- --------------------------------------------------------------------------------
Architect: Vincent Wong & Associates
- --------------------------------------------------------------------------------
v
<PAGE> 7
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between Landlord and
Tenant on the Lease Date. The defined terms used in this Lease which are defined
in the Basic Lease Information attached to this Lease Agreement ("BASIC LEASE
INFORMATION") shall have the meaning and definition given them in the Basic
Lease Information. The Basic Lease Information, the exhibits, the addendum or
addenda described in the Basic Lease Information, and this Lease Agreement are
and shall be construed as a single instrument and are referred to herein as the
"LEASE".
1. DEMISE
In consideration for the rents and all other charges and payments payable
by Tenant, and for the agreements, terms and conditions to be performed by
Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES
HEREBY HIRE AND TAKE FROM LANDLORD, the Premises described below (the
"PREMISES"), upon the agreements, terms and conditions of this Lease for the
Term hereinafter stated.
2. PREMISES
The Premises demised by this Lease is located in that certain building (the
"BUILDING") specified in the Basic Lease Information, which Building is located
in that certain real estate development (the "PROJECT") specified in the Basic
Lease Information. The Premises has the address and contains the square footage
specified in the Basic Lease Information. The location and dimensions of the
Premises are depicted on EXHIBIT A, which is attached hereto and incorporated
herein by this reference. Tenant shall have the non-exclusive right (in common
with the other tenants, Landlord and any other person granted use by Landlord)
to use the Common Areas (as hereinafter defined), except that, with respect to
parking, Tenant shall have only a license to use the number of non-exclusive and
undesignated parking spaces set forth in the Basic Lease Information in the
Project's parking areas (the "PARKING AREAS"); provided, however, that Landlord
shall not be required to enforce Tenant's right to use such parking spaces; and,
provided further, that the number of parking spaces allocated to Tenant
hereunder shall be reduced on a proportionate basis in the event any of the
parking spaces in the Parking Areas are taken or otherwise eliminated as a
result of any Condemnation (as hereinafter defined) or casualty event affecting
such Parking Areas. No easement for light or air is incorporated in the
Premises. For purposes of this Lease, the term "COMMON AREAS" shall mean all
areas and facilities outside the Premises and within the exterior boundary line
of the Project that are provided and designated by Landlord for the
non-exclusive use of Landlord, Tenant and other tenants of the Project and their
respective employees, guests and invitees.
1
<PAGE> 8
The Premises demised by this Lease shall include the Tenant Improvements
(as that term is defined in EXHIBIT B attached hereto) to be constructed by
Landlord within the interior of the Premises. Landlord shall construct the
Tenant Improvements on the terms and conditions set forth in EXHIBIT B. Landlord
and Tenant agree to and shall be bound by the terms and conditions of EXHIBIT B.
Landlord has the right, in its sole discretion, from time to time, to: (a)
make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors and
walkways; (b) close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available; (c) add
additional buildings and improvements to the Common Areas or remove existing
buildings or improvements therefrom; (d) use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or any
portion thereof; and (e) do and perform any other acts or make any other changes
in, to or with respect to the Common Areas and the Project as Landlord may, in
its sole discretion, deem to be appropriate, provided only that such actions do
not materially interfere with Tenant's use of the Building.
3. TERM
The term of this Lease (the "TERM") shall be for the period of months
specified in the Basic Lease Information, commencing on the earliest to occur of
the following dates (the "COMMENCEMENT DATE"):
(a) The date the Tenant Improvements are substantially completed, as
indicated by approval by the appropriate governmental agency as being in
accordance with its building code and the building permit issued for such
improvements, as evidenced by the issuance of a final building inspection
approval; provided, however, in no event shall the date determined pursuant to
this Paragraph 3(a) be earlier than April 1, 1998; or
(b) The date Landlord's architect and general contractor have both
certified in writing to Tenant that the Tenant Improvements have been
substantially completed in accordance with the plans and specifications
therefor; provided, however, in no event shall the date determined pursuant to
this Paragraph 3(b) be earlier than April 1, 1998; or
(c) The date Tenant commences occupancy of the Premises; provided, however,
that Tenant shall not be deemed to have commenced occupancy of the Premises for
purposes of this Paragraph 3(c) if Tenant enters upon the Premises prior to the
Commencement Date solely to fixturize the Premises for Tenant's business
operations in accordance with Paragraph 9(b) below.
2
<PAGE> 9
In the event the actual Commencement Date, as determined pursuant to the
foregoing, is a date other than the Estimated Commencement Date, then Landlord
and Tenant shall promptly execute a Commencement and Expiration Date Memorandum
in the form attached hereto as EXHIBIT C (the "COMMENCEMENT DATE MEMORANDUM"),
wherein the parties shall specify the Commencement Date and the date on which
the Term expires (the "EXPIRATION DATE").
4. RENT
(a) BASE RENT. Tenant shall pay to Landlord, in advance on the first day of
each month commencing on the Rent Commencement Date (as hereinafter defined),
without further notice or demand and without offset or deduction, the monthly
installments of rent specified in the Basic Lease Information (the "BASE RENT").
As used herein, "RENT COMMENCEMENT DATE" means the earlier to occur of the
Commencement Date or April 1, 1998. Tenant understands and agrees that Base Rent
and Additional Rent shall accrue and be payable hereunder commencing on the Rent
Commencement Date irrespective of whether or not the Term has commenced by such
date and that Landlord would not have entered into this Lease but for Tenant's
willingness to pay Base Rent and Additional Rent to Landlord commencing on the
Rent Commencement Date.
The Base Rent under this Paragraph 4(a) shall be adjusted, as stated below,
on April 1 of each year during the Term commencing on April 1, 1999 to reflect
percentage increases in the cost of living. The Consumer Price Index (U.S.
Department of Labor Consumer Price Index (all items) for Urban Wage Earners and
Clerical Workers, San Francisco Bay Area (1982-1984=100), hereinafter referred
to as the "INDEX") published for the month immediately preceding each such
adjustment date (each, an "ADJUSTMENT INDEX") and the Index published for the
month immediately preceding the Commencement Date of this Lease ("BASE INDEX")
shall be compared and the percentage difference between the Adjustment Index and
the Base Index shall be determined. The initial Base Rent specified in the Basic
Lease Information shall be increased by adding to said initial Base Rent the
percentage amount of said initial Base Rent equal to the percentage difference
between the Base Index and the applicable Adjustment Index; provided, however,
in no event shall the initial Base Rent hereunder be increased by less than four
percent (4%) or more than seven percent (7%) for any one year. When the adjusted
Base Rent is determined after each adjustment date, Landlord shall give Tenant
written notice indicating the amount thereof and the method of computation. If
the Consumer Price Index is changed or discontinued, Landlord shall substitute
an official index published by the Bureau of Labor Statistics or its successor
or similar governmental agency as may then be in existence and shall be most
nearly equivalent thereto.
Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent
and first monthly installment of estimated Additional Rent (as hereinafter
defined)
3
<PAGE> 10
specified in the Basic Lease Information to be applied toward Base Rent and
Additional Rent for the month commencing on the Rent Commencement Date.
(b) ADDITIONAL RENT. This Lease is intended to be a triple-net Lease with
respect to Landlord; and subject to Paragraph 14(b) below and the other
provisions of this Lease, the Base Rent owing hereunder is (1) to be paid by
Tenant absolutely net of all costs and expenses relating to Landlord's ownership
and operation of the Project and the Building, and (2) not to be reduced, offset
or diminished, directly or indirectly, by any cost, charge or expense payable
hereunder by Tenant or by others in connection with the Premises, the Building
and/or the Project or any part thereof. The provisions of this Paragraph 4(b)
for the payment of Expenses (as hereinafter defined) are intended to pass on to
Tenant all such costs and expenses. Commencing on the Rent Commencement Date, in
addition to the Base Rent, Tenant shall pay to Landlord, in accordance with this
Paragraph 4, all costs and expenses paid or incurred by Landlord in connection
with the ownership, operation, maintenance, management and repair of the
Premises, the Building and/or the Project or any part thereof (collectively, the
"EXPENSES"), including, without limitation, all the following items (the
"ADDITIONAL RENT"):
(1) Taxes and Assessments. All real estate taxes and assessments,
which shall include any form of tax, assessment, fee, license fee, business
license fee, levy, penalty (if a result of Tenant's delinquency), or tax (other
than net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by any authority having the direct or indirect power to tax, or by any
city, county, state or federal government or any improvement or other district
or division thereof, whether such tax is (i) determined by the area of the
Premises, the Building and/or the Project or any part thereof, or the Rent and
other sums payable hereunder by Tenant or by other tenants, including, but not
limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent and/or other sums due under this
Lease; (ii) upon any legal or equitable interest of Landlord in the Premises,
the Building and/or the Project or any part thereof; (iii) upon this transaction
or any document to which Tenant is a party creating or transferring any interest
in the Premises, the Building and/or the Project; (iv) levied or assessed in
lieu of, in substitution for, or in addition to, existing or additional taxes
against the Premises, the Building and/or the Project, whether or not now
customary or within the contemplation of the parties; or (v) surcharged against
the parking area. Tenant and Landlord acknowledge that Proposition 13 was
adopted by the voters of the State of California in the June, 1978 election and
that assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such purposes as fire protection, street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental services
which may formerly have been provided without charge to property owners or
occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to any cause whatsoever are to
be included within the definition of real property taxes for purposes of this
Lease. "TAXES AND
4
<PAGE> 11
ASSESSMENTS" shall also include legal and consultants' fees, costs and
disbursements incurred in connection with proceedings to contest, determine or
reduce taxes, Landlord specifically reserving the right, but not the obligation,
to contest by appropriate legal proceedings the amount or validity of any taxes.
(2) Insurance. All insurance premiums for the Building and/or the
Project or any part thereof, including premiums for "all risk" fire and extended
coverage insurance, commercial general liability insurance, rent loss or
abatement insurance, earthquake insurance, flood or surface water coverage, and
other insurance as Landlord deems necessary in its sole discretion, and any
deductibles paid under policies of any such insurance.
(3) Utilities. The cost of all Utilities (as hereinafter defined)
serving the Premises, the Building and the Project that are not separately
metered to Tenant, any assessments or charges for Utilities or similar purposes
included within any tax bill for the Building or the Project, including without
limitation, entitlement fees, allocation unit fees, and/or any similar fees or
charges and any penalties (if a result of Tenant's delinquency) related thereto,
and any amounts, taxes, charges, surcharges, assessments or impositions levied,
assessed or imposed upon the Premises, the Building or the Project or any part
thereof, or upon Tenant's use and occupancy thereof, as a result of any
rationing of Utility services or restriction on Utility use affecting the
Premises, the Building and/or the Project, as contemplated in Paragraph 5 below
(collectively, "UTILITY EXPENSES").
(4) Common Area Expenses. All costs to operate, maintain, repair,
replace, supervise, insure and administer the Common Areas, including supplies,
materials, labor and equipment used in or related to the operation and
maintenance of the Common Areas, including parking areas (including, without
limitation, all costs of resurfacing and restriping parking areas), signs and
directories on the Building and/or the Project, landscaping (including
maintenance contracts and fees payable to landscaping consultants), amenities,
sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which
the Project or any part thereof is a member or to which the Project or any part
thereof is subject.
(5) Parking Charges. Any parking charges or other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental
authority or insurer in connection with the use or occupancy of the Building or
the Project.
(6) Maintenance and Repair Costs. Except for costs which are the
responsibility of Landlord pursuant to Paragraph 14(b) below, all costs to
maintain, repair, and replace the Premises, the Building and/or the Project or
any part thereof, including without limitation, (i) all costs paid under
maintenance, management and
5
<PAGE> 12
service agreements such as contracts for janitorial, security and refuse
removal, (ii) all costs to maintain, repair and replace the roof coverings of
the Building or the Project or any part thereof, (iii) all costs to maintain,
repair and replace the heating, ventilating, air conditioning, plumbing, sewer,
drainage, electrical, fire protection, life safety and security systems and
other mechanical and electrical systems and equipment serving the Premises, the
Building and/or the Project or any part thereof (collectively, the "SYSTEMS").
Notwithstanding anything to the contrary contained in Paragraph 4(b)(4) above or
this Paragraph 4(b)(6), "Expenses" shall exclude costs incurred by Landlord in
remediating Hazardous Materials (as hereinafter defined) from the Project except
to the extent that the presence of such Hazardous Materials has resulted from
the actions or inactions of Tenant or Tenant's Affiliates (as hereinafter
defined) or Tenant or Tenant's Affiliates have exacerbated the presence of or
contamination caused by such Hazardous Materials. Nothing contained herein shall
be deemed to limit or restrict Tenant's obligations under Paragraph 33 below.
(7) Life Safety Costs. All costs to install, maintain, repair and
replace all life safety systems, including, without limitation, all fire alarm
systems, serving the Premises, the Building and/or the Project or any part
thereof (including all maintenance contracts and fees payable to life safety
consultants) whether such systems are or shall be required by Landlord's
insurance carriers, Laws (as hereinafter defined) or otherwise.
(8) Management and Administration. All costs for management and
administration of the Premises, the Building and/or the Project or any part
thereof, including, without limitation, a property management fee, accounting,
auditing, billing, postage, salaries and benefits for clerical and supervisory
employees, whether located on the Project or off-site, payroll taxes and legal
and accounting costs and fees for licenses and permits related to the ownership
and operation of the Project.
Notwithstanding anything in this Paragraph 4(b) to the contrary, with
respect to all sums payable by Tenant as Additional Rent under this Paragraph
4(b) for the repair or replacement of any item or the construction of any new
item in connection with the physical operation of the Premises, the Building or
the Project (i.e., HVAC, roof membrane or coverings and parking area) which is a
capital item the repair or replacement of which properly would be capitalized
under generally accepted accounting principles, Tenant shall be required to pay
only the prorata share of the cost of the item falling due within the Term
(including any Renewal Term) based upon the amortization of the same over the
useful life of such item, as reasonably determined by Landlord.
6
<PAGE> 13
(c) PAYMENT OF ADDITIONAL RENT.
(1) On or before the Rent Commencement Date, Landlord shall submit to
Tenant an estimate of monthly Additional Rent for the period between the Rent
Commencement Date and the following December 31 and Tenant shall pay such
estimated Additional Rent on a monthly basis, in advance, on the first day of
each month. Tenant shall continue to make said monthly payments until notified
by Landlord of a change therein. By April 1 of each calendar year, Landlord
shall endeavor to provide to Tenant a statement showing the actual Additional
Rent due to Landlord for the prior calendar year, to be prorated during the
first year from the Rent Commencement Date. If the total of the monthly payments
of Additional Rent that Tenant has made for the prior calendar year is less than
the actual Additional Rent chargeable to Tenant for such prior calendar year,
then Tenant shall pay the difference in a lump sum within ten (10) days after
receipt of such statement from Landlord. Any overpayment by Tenant of Additional
Rent for the prior calendar year shall be credited towards the Additional Rent
next due.
(2) Landlord's then-current annual operating and capital budgets for
the Building and the Project or the pertinent part thereof shall be used for
purposes of calculating Tenant's monthly payment of estimated Additional Rent
for the current year, subject to adjustment as provided above. Landlord shall
make the final determination of Additional Rent for the year in which this Lease
terminates as soon as possible after termination of such year. Even though the
Term has expired and Tenant has vacated the Premises, Tenant shall remain liable
for payment of any amount due to Landlord in excess of the estimated Additional
Rent previously paid by Tenant, and, conversely, Landlord shall promptly return
to Tenant any overpayment. Failure of Landlord to submit statements as called
for herein shall not be deemed a waiver of Tenant's obligation to pay Additional
Rent as herein provided.
(d) GENERAL PAYMENT TERMS. The Base Rent, Additional Rent and all other
sums payable by Tenant to Landlord hereunder, including, without limitation, any
late charges assessed pursuant to Paragraph 6 below and any interest assessed
pursuant to Paragraph 45 below, are referred to as the "RENT". All Rent shall be
paid without deduction, offset or abatement (except as specifically provided
herein) in lawful money of the United States of America. Checks are to be made
payable to Aetna Life Insurance Company and shall be mailed to: Aetna Life
Insurance Company, Allegis Business Center, Department #44820, San Francisco,
California 94144-4820 or to such other person or place as Landlord may, from
time to time, designate to Tenant in writing. The Rent for any fractional part
of a calendar month at the commencement or termination of the Lease term shall
be a prorated amount of the Rent for a full calendar month based upon a thirty
(30) day month.
7
<PAGE> 14
5. UTILITY EXPENSES
(a) Tenant shall pay the cost of all water, sewer use, sewer discharge
fees and permit costs and sewer connection fees, gas, heat, electricity, refuse
pick-up, janitorial service, telephone and all materials and services or other
utilities (collectively, "UTILITIES") billed or metered separately to the
Premises and/or Tenant, together with all taxes, assessments, charges and
penalties added to or included within such cost. Tenant acknowledges that the
Premises, the Building and/or the Project may become subject to the rationing of
Utility services or restrictions on Utility use as required by a public utility
company, governmental agency or other similar entity having jurisdiction
thereof. Tenant acknowledges and agrees that its tenancy and occupancy hereunder
shall be subject to such rationing or restrictions as may be imposed upon
Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant
shall in no event be excused or relieved from any covenant or obligation to be
kept or performed by Tenant by reason of any such rationing or restrictions.
Tenant agrees to comply with energy conservation programs implemented by
Landlord by reason of rationing, restrictions or Laws.
(b) Landlord shall not be liable for any loss, injury or damage to
property caused by or resulting from any variation, interruption, or failure of
Utilities due to any cause whatsoever, or from failure to make any repairs or
perform any maintenance. No temporary interruption or failure of such services
incident to the making of repairs, alterations, improvements, or due to
accident, strike, or conditions or other events shall be deemed an eviction of
Tenant or relieve Tenant from any of its obligations hereunder. In no event
shall Landlord be liable to Tenant for any damage to the Premises or for any
loss, damage or injury to any property therein or thereon occasioned by
bursting, rupture, leakage or overflow of any plumbing or other pipes
(including, without limitation, water, steam, and/or refrigerant lines),
sprinklers, tanks, drains, drinking fountains or washstands, or other similar
cause in, above, upon or about the Premises, the Building, or the Project. The
foregoing notwithstanding, Landlord shall not be relieved of liability from its
own gross negligence or willful misconduct. For purposes of this Lease, "gross
negligence" shall refer to an action taken by Landlord with reckless disregard
for the consequences thereof.
6. LATE CHARGE
Notwithstanding any other provision of this Lease, Tenant hereby
acknowledges that late payment to Landlord of Rent, or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord's
designated agent within five (5) days after their due date, then Tenant shall
pay to Landlord a late charge equal to ten percent (10%) of such overdue amount,
plus any costs and attorneys' fees incurred by Landlord by reason of Tenant's
failure to pay Rent
8
<PAGE> 15
and/or other charges when due hereunder. Landlord and Tenant hereby agree that
such late charges represent a fair and reasonable estimate of the cost that
Landlord will incur by reason of Tenant's late payment and shall not be
construed as a penalty. Landlord's acceptance of such late charges shall not
constitute a waiver of Tenant's default with respect to such overdue amount or
estop Landlord from exercising any of the other rights and remedies granted
under this Lease.
Initials: Landlord _______ Tenant _______
7. LETTER OF CREDIT
(a) Upon execution of this Lease, Tenant shall, at Tenant's sole cost and
expense, cause the LC Issuer (as hereinafter defined) to increase the face
amount of the Existing Letter of Credit (as hereinafter defined) from One
Hundred Thousand Dollars ($100,000) to Two Hundred Fifty Thousand Dollars
($250,000) (the "LC FACE AMOUNT") and Landlord shall retain the Existing Letter
of Credit, as so amended (the "LETTER OF CREDIT"), as security for Tenant's
performance of all of Tenant's covenants and obligations under this Lease, which
security shall be in addition to the Security Deposit provided pursuant to
Paragraph 8 below; provided, however, that neither the Letter of Credit nor any
Letter of Credit Proceeds (as defined below) shall be deemed an advance rent
deposit or an advance payment of any other kind, or a measure of Landlord's
damages upon Tenant's Default. Subject to Paragraph 7(b) below, the Letter of
Credit shall be maintained in effect from the date hereof through the date that
is sixty (60) days after the Expiration Date (the "LC TERMINATION DATE"). On the
LC Termination Date, Landlord shall return to Tenant the Letter of Credit and
any Letter of Credit Proceeds then held by Landlord (other than those Letter of
Credit Proceeds Landlord is entitled to retain under the terms of this Paragraph
7(a)); provided, however, that in no event shall any such return be construed as
an admission by Landlord that Tenant has performed all of its obligations
hereunder. Landlord shall not be required to segregate the Letter of Credit
Proceeds from its other funds and no interest shall accrue or be payable to
Tenant with respect thereto. Landlord may (but shall not be required to) draw
upon the Letter of Credit and use the proceeds therefrom (the "LETTER OF CREDIT
PROCEEDS") or any portion thereof to cure any Default under this Lease and to
compensate Landlord for any damage Landlord incurs as a result of such Default,
and for any other purpose for which Landlord is entitled to use, apply or retain
the Security Deposit or any portion thereof pursuant to Paragraph 8 below, it
being understood that any use of the Letter of Credit Proceeds shall not
constitute a bar or defense to any of Landlord's remedies set forth in Paragraph
26 below. In such event and upon written notice from Landlord to Tenant
specifying the amount of the Letter of Credit Proceeds so utilized by Landlord
and the particular purpose for which such amount was applied, Tenant shall
immediately deliver to Landlord an amendment to the Letter of Credit or a
replacement Letter of Credit in an amount equal to the full LC Face Amount.
Tenant's failure to deliver such
9
<PAGE> 16
replacement Letter of Credit to Landlord within ten (10) days of Landlord's
notice shall constitute a Default hereunder. As used herein, "EXISTING LETTER OF
CREDIT" shall mean the stand-by letter of credit furnished by Tenant to Landlord
pursuant to the Lease Agreement by and between Landlord and Tenant, dated as of
July 28, 1997, relating to certain premises commonly known as 617 Palomar
Avenue, Sunnyvale, California.
(b) Upon the second (2nd) anniversary of the Commencement Date, Landlord
shall review Tenant's financial statements and other information requested by
Landlord regarding the prospects for Tenant's continued business operations
throughout the remainder of the Term (collectively, "TENANT'S FINANCIALS"). In
the event Tenant's Financials are acceptable to Landlord in its sole and
absolute discretion, then Landlord shall return the Letter of Credit to Tenant
and Tenant shall have the right to cancel the Letter of Credit.
(c) The Letter of Credit shall be an unconditional, stand-by irrevocable
letter of credit issued by either the Menlo Park office of Imperial Bank (the
"LC ISSUER") or the San Francisco office of another major national bank insured
by the Federal Deposit Insurance Corporation and otherwise satisfactory to
Landlord (the "BANK"), naming Landlord as beneficiary, in the amount of the LC
Face Amount, and otherwise acceptable to Landlord in form and substance. The
Letter of Credit shall be for a one-year term and shall provide: (i) that
Landlord may make partial and multiple draws thereunder, up to the face amount
thereof, (ii) that Landlord may draw upon the Letter of Credit up to the full
amount thereof and the Bank will pay to Landlord the amount of such draw upon
receipt by the Bank of a sight draft signed by Landlord and accompanied by a
written certification from Landlord to the Bank stating either that: (A) a
Default has occurred and is continuing under this Lease and any applicable grace
period has expired, or (B) Landlord has not received notice from the Bank at
least thirty (30) days prior to the then current expiry date of the Letter of
Credit that the Letter of Credit will be renewed by the Bank for at least one
(1) year beyond the relevant annual expiration date or, in the case of the last
year of the Term, sixty (60) days after the Expiration Date, together with a
replacement Letter of Credit or a modification to the existing Letter of Credit
effectuating such renewal, and Tenant has not otherwise furnished Landlord with
a replacement Letter of Credit as hereinafter provided; and (iii) that, in the
event of Landlord's assignment or other transfer of its interest in this Lease,
the Letter of Credit shall be freely transferable by Landlord, without recourse
and without the payment of any fee or consideration, to the assignee or
transferee of such interest and the Bank shall confirm the same to Landlord and
such assignee or transferee. In the event that the Bank shall fail to (y) notify
Landlord that the Letter of Credit will be renewed for at least one (1) year
beyond the then applicable expiration date, and (z) deliver to Landlord a
replacement Letter of Credit or a modification to the existing Letter of Credit
effectuating such renewal, and Tenant shall not have otherwise delivered to
Landlord, at least thirty (30) days prior to the relevant annual expiration
date, a replacement Letter of Credit in the amount
10
<PAGE> 17
required hereunder and otherwise meeting the requirements set forth above, then
Landlord shall be entitled to draw on the Letter of Credit as provided above,
and shall hold the proceeds of such draw as Letter of Credit Proceeds pursuant
to Paragraph 7(a) above.
8. SECURITY DEPOSIT
Concurrently with Tenant's execution of the Lease, in addition to the
Letter of Credit provided pursuant to Paragraph 7 above, Tenant shall deposit
with Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy any
Default by Tenant under this Lease, (b) subject to Paragraph 22 below, to repair
damage to the Premises caused by Tenant, (c) to clean the Premises upon
termination of this Lease, (d) to reimburse Landlord for the payment of any
amount which Landlord may reasonably spend or be required to spend by reason of
Tenant's Default, and (e) to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's Default. Within thirty (30) days
following the expiration of the Term, the Security Deposit or any balance
thereof shall be returned to Tenant or, at the option of Landlord, to the last
assignee of Tenant's interest in this Lease. Landlord shall not be required to
keep the Security Deposit separate from its general funds and Tenant shall not
be entitled to any interest on such deposit. If Landlord so uses or applies all
or any portion of said deposit, within five (5) days after written demand
therefor Tenant shall deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to the full extent of the above amount, and
Tenant's failure to do so shall be a default under this Lease. In the event
Landlord transfers its interest in this Lease, Landlord shall transfer the then
remaining amount of the Security Deposit to Landlord's successor in interest,
and thereafter Landlord shall have no further liability to Tenant with respect
to such Security Deposit. Nothing contained herein shall be deemed or construed
to limit Tenant's obligations under Paragraph 17 below.
9. POSSESSION
(a) TENANT'S RIGHT OF POSSESSION. Landlord shall deliver possession of the
Premises to Tenant upon the Commencement Date.
(b) EARLY OCCUPANCY. Notwithstanding the provisions of Paragraph 9(a)
above, in the event the Tenant Improvements have been substantially completed
prior to April 1, 1998, then Tenant shall be permitted to enter upon the
Premises at times convenient to Landlord during the period commencing on the
date of substantial completion (but in no event earlier than March 16, 1998) and
April 1, 1998 for the sole purpose of fixturizing the Premises for Tenant's
business operations; provided, however, that prior to any such entry, Tenant
shall provide
11
<PAGE> 18
Landlord with proof of Tenant's insurance as set forth in Paragraph 16 of this
Lease. Such entry upon the Premises shall be subject to all of the provisions of
this Lease, except that Tenant shall not be required to pay Base Rent or
Additional Rent as long as Tenant is not operating its business in the Premises
during such early possession period. All materials, work, installations,
equipment and decorations of any nature brought upon or installed by Tenant in
the Premises prior to the Commencement Date shall be at Tenant's sole risk.
(c) DELAY IN DELIVERING POSSESSION. If for any reason whatsoever, Landlord
cannot deliver possession of the Premises to Tenant on or before the Estimated
Commencement Date, this Lease shall not be void or voidable, nor shall Landlord,
or Landlord's agents, advisors, employees, partners, shareholders, directors,
invitees or independent contractors (collectively, "LANDLORD'S AGENTS"), be
liable to Tenant for any loss or damage resulting therefrom. Tenant shall not be
liable for Rent until Landlord delivers possession of the Premises to Tenant.
The Expiration Date shall be extended by the same number of days that Tenant's
possession of the Premises was delayed beyond the Estimated Commencement Date.
10. USE OF PREMISES
(a) PERMITTED USE. The use of the Premises by Tenant and Tenant's agents,
advisors, employees, partners, shareholders, directors, invitees and independent
contractors (collectively, "TENANT'S AGENTS") shall be solely for the Permitted
Use specified in the Basic Lease Information and for no other use. Tenant shall
not permit any objectionable or unpleasant odor, smoke, dust, gas, noise or
vibration to emanate from or near the Premises. The Premises shall not be used
to create any nuisance or trespass, for any illegal purpose, for any purpose not
permitted by Laws, for any purpose that would invalidate the insurance or
increase the premiums for insurance on the Premises, the Building or the Project
or for any purpose or in any manner that would interfere with other tenants' use
or occupancy of the Project. Tenant agrees to pay to Landlord, as Additional
Rent, any increases in premiums on policies resulting from Tenant's Permitted
Use or any other use or action by Tenant or Tenant's Agents which increases
Landlord's premiums or requires additional coverage by Landlord to insure the
Premises. Tenant agrees not to overload the floor(s) of the Building.
(b) COMPLIANCE WITH GOVERNMENTAL REGULATIONS AND PRIVATE RESTRICTIONS.
Tenant and Tenant's Agents shall, at Tenant's expense, faithfully observe and
comply with (1) all municipal, state and federal laws, statutes, codes, rules,
regulations, ordinances, requirements, and orders (collectively, "LAWS"), now in
force or which may hereafter be in force pertaining to the Premises or Tenant's
use of the Premises, the Building or the Project, whether substantial in cost or
otherwise, provided, however, that except as provided in Paragraph 10(c) below,
Tenant shall not be required to make or, except as provided in Paragraph 4
above, pay for, structural changes to the Premises or the Building (including,
without
12
<PAGE> 19
limitation, installation of fire sprinkler systems, seismic reinforcement and
related alterations, and removal of asbestos) not related to Tenant's specific
use of the Premises unless the requirement for such changes is imposed as a
result of any improvements or additions made or proposed to be made at Tenant's
request; (2) all recorded covenants, conditions and restrictions affecting the
Project ("PRIVATE RESTRICTIONS") now in force or which may hereafter be in
force; and (3) any and all rules and regulations set forth in EXHIBIT D and any
other rules and regulations now or hereafter promulgated by Landlord related to
parking or the operation of the Premises, the Building and/or the Project
(collectively, the "RULES AND REGULATIONS"). The judgment of any court of
competent jurisdiction, or the admission of Tenant in any action or proceeding
against Tenant, whether Landlord be a party thereto or not, that Tenant has
violated any such Laws or Private Restrictions, shall be conclusive of that fact
as between Landlord and Tenant.
(c) COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Landlord and Tenant
hereby agree and acknowledge that the Premises, the Building and/or the Project
may be subject to, among other Laws, the requirements of the Americans with
Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including,
but not limited to Title III thereof, and all regulations and guidelines related
thereto, together with any and all laws, rules, regulations, ordinances, codes
and statutes now or hereafter enacted by local or state agencies having
jurisdiction thereof, including all requirements of Title 24 of the State of
California, as the same may be in effect on the date of this Lease and may be
hereafter modified, amended or supplemented (collectively, the "ADA"). Any
Tenant Improvements to be constructed hereunder shall be in compliance with the
requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Tenant
Improvements. As between Landlord and Tenant, Tenant shall be solely responsible
for conducting its own independent investigation of this matter and for ensuring
that the design of all Tenant Improvements strictly complies with all
requirements of the ADA. Subject to reimbursement pursuant to Paragraph 4 above,
if under the ADA any barrier removal work or other work is required to the
Building, the Common Areas or the Project or in connection with access to the
Premises, restrooms or any improvements to the Premises or Project completed by
Landlord in May 1997, then such work shall be the responsibility of Landlord;
provided, if such work is required under the ADA as a result of Tenant's use of
the Premises or any work or Alteration (as hereinafter defined) made to the
Premises by or on behalf of Tenant, then such work shall be performed by
Landlord at the sole cost and expense of Tenant. Except as otherwise expressly
provided in this provision, Tenant shall be responsible at its sole cost and
expense for fully and faithfully complying with all applicable requirements of
the ADA related to the Premises and/or Tenant's use thereof during the Term,
including without limitation, not discriminating against any disabled persons in
the operation of Tenant's business in or about the Premises, and offering or
otherwise providing auxiliary aids and services as, and when,
13
<PAGE> 20
required by the ADA. Within ten (10) days after receipt, Tenant shall advise
Landlord in writing, and provide Landlord with copies of (as applicable), any
notices alleging violation of the ADA relating to any portion of the Premises,
the Building or the Project; any claims made or threatened orally or in writing
regarding noncompliance with the ADA and relating to any portion of the
Premises, the Building, or the Project; or any governmental or regulatory
actions or investigations instituted or threatened regarding noncompliance with
the ADA and relating to any portion of the Premises, the Building or the
Project. Tenant shall and hereby agrees to protect, defend (with counsel
acceptable to Landlord) and hold Landlord and Landlord's Agents harmless and
indemnify Landlord and Landlord's Agents from and against all liabilities,
damages, claims, losses, penalties, judgments, charges and expenses (including
attorneys' fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision) arising
from or in any way related to, directly or indirectly, Tenant's or Tenant's
Agents' violation or alleged violation of the ADA related to the Premises and/or
Tenant's use thereof during the Term. Tenant agrees that the obligations of
Tenant herein shall survive the expiration or earlier termination of this Lease
11. ACCEPTANCE OF PREMISES
(a) By entry hereunder, except as specifically provided in Paragraph 11(b)
below, Tenant accepts the Premises as suitable for Tenant's intended use and as
being in good and sanitary operating order, condition and repair, AS IS, and
without representation or warranty by Landlord as to the condition, use or
occupancy which may be made thereof. Any exceptions to the foregoing must be by
written agreement executed by Landlord and Tenant. On the Commencement Date or
within fifteen (15) days thereafter, Landlord and Tenant shall jointly inspect
the Premises and make a list (the "PUNCH LIST") of any defective items or
conditions in the Tenant Improvements existing on the Commencement Date.
Landlord shall cause the Contractor (as defined in EXHIBIT B hereto) to correct
the items described on the Punch List promptly after the Commencement Date.
(b) Notwithstanding the terms of Paragraph 11(a) above, Landlord shall (i)
repair or replace the front door of the Premises prior to the Commencement Date,
and (ii) cause the HVAC, electrical and plumbing systems serving the Premises to
be in good working order and the roof on the Building to be in good condition on
the Commencement Date. Any claims by Tenant under the preceding sentence shall
be set forth on the Punch List. In the event Tenant fails to specify any claims
on the Punch List, then Landlord shall be conclusively deemed to have satisfied
its obligations under this Paragraph 11.
14
<PAGE> 21
12. SURRENDER
Tenant agrees that on the last day of the Term, or on the sooner
termination of this Lease, Tenant shall surrender the Premises to Landlord (a)
in good condition and repair (damage by acts of God, fire, and normal wear and
tear excepted), but with all interior walls painted or cleaned so they appear
painted, any carpets cleaned, all floors cleaned and waxed, all non-working
light bulbs and ballasts replaced and all roll-up doors and plumbing fixtures in
good condition and working order, and (b) otherwise in accordance with Paragraph
33(h). Normal wear and tear shall not include any damage or deterioration to the
floors of the Premises arising from the use of forklifts in, on or about the
Premises (including, without limitation, any marks or stains on any portion of
the floors), and any damage or deterioration that would have been prevented by
proper maintenance by Tenant, or Tenant otherwise performing all of its
obligations under this Lease. On or before the expiration or sooner termination
of this Lease, (i) Tenant shall remove all of Tenant's Property (as hereinafter
defined) and Tenant's signage from the Premises, the Building and the Project
and repair any damage caused by such removal, and (ii) Landlord may, by notice
to Tenant given not later than ninety (90) days prior to the Expiration Date
(except in the event of a termination of this Lease prior to the scheduled
Expiration Date, in which event no advance notice shall be required), require
Tenant at Tenant's expense to remove any or all Alterations and to repair any
damage caused by such removal. Any of Tenant's Property not so removed by Tenant
as required herein shall be deemed abandoned and may be stored, removed, and
disposed of by Landlord at Tenant's expense, and Tenant waives all claims
against Landlord for any damages resulting from Landlord's retention and
disposition of such property; provided, however, that Tenant shall remain liable
to Landlord for all costs incurred in storing and disposing of such abandoned
property of Tenant. All Tenant Improvements and Alterations except those which
Landlord requires Tenant to remove shall remain in the Premises as the property
of Landlord. If the Premises are not surrendered at the end of the Term or
sooner termination of this Lease, and in accordance with the provisions of this
Paragraph 12 and Paragraph 33(h) below, Tenant shall continue to be responsible
for the payment of Rent (as the same may be increased pursuant to Paragraph 36
below) until the Premises are so surrendered in accordance with said Paragraphs,
and Tenant shall indemnify, defend and hold Landlord harmless from and against
any and all loss or liability resulting from delay by Tenant in so surrendering
the Premises including, without limitation, any loss or liability resulting from
any claim against Landlord made by any succeeding tenant or prospective tenant
founded on or resulting from such delay and losses to Landlord due to lost
opportunities to lease any portion of the Premises to any such succeeding tenant
or prospective tenant, together with, in each case, actual attorneys' fees and
costs.
15
<PAGE> 22
13. ALTERATIONS AND ADDITIONS
(a)Tenant shall not make, or permit to be made, any alteration, addition or
improvement (hereinafter referred to individually as an "ALTERATION" and
collectively as the "ALTERATIONS") to the Premises or any part thereof without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld; provided, however, that Landlord shall have the right in its sole and
absolute discretion to consent or to withhold its consent to any Alteration
which affects the structural portions of the Premises, the Building or the
Project or the Systems serving the Premises, the Building and/or the Project or
any portion thereof (such Alterations described in this proviso being herein
referred to as "STRUCTURAL Alterations"). Notwithstanding the foregoing, Tenant
shall have the right to make Alterations (specifically excluding, however,
Structural Alterations) to the Premises with prior notice to but without the
consent of Landlord, provided that such Alterations are constructed and
performed in full compliance with the terms of Paragraphs 13(b) through (f)
below and do not exceed two thousand five hundred dollars ($2,500) in cost on an
individual basis or ten thousand dollars ($10,000) in the aggregate over the
Term of this Lease.
(b) Any Alteration to the Premises shall be at Tenant's sole cost and
expense, in compliance with all applicable Laws and all requirements requested
by Landlord, including, without limitation, the requirements of any insurer
providing coverage for the Premises or the Project or any part thereof, and in
accordance with plans and specifications approved in writing by Landlord, and
shall be constructed and installed by a contractor approved in writing by
Landlord. As a further condition to giving consent, Landlord may require Tenant
to provide Landlord, at Tenant's sole cost and expense, a payment and
performance bond in form acceptable to Landlord, in a principal amount not less
than one and one-half times the estimated costs of such Alterations, to ensure
Landlord against any liability for mechanic's and materialmen's liens and to
ensure completion of work. Before Alterations may begin, valid building permits
or other permits or licenses required must be furnished to Landlord, and, once
the Alterations begin, Tenant will diligently and continuously pursue their
completion. Landlord may monitor construction of the Alterations and Tenant
shall reimburse Landlord for its costs (including, without limitation, the costs
of any construction manager retained by Landlord) in reviewing plans and
documents and in monitoring construction. Tenant shall maintain during the
course of construction, at its sole cost and expense, builders' risk insurance
for the amount of the completed value of the Alterations on an all-risk
non-reporting form covering all improvements under construction, including
building materials, and other insurance in amounts and against such risks as
Landlord shall reasonably require in connection with the Alterations. In
addition to and without limitation on the generality of the foregoing, Tenant
shall ensure that its contractor(s) procure and maintain in full force and
effect during the course of construction a "broad form" commercial general
liability and property damage policy of insurance naming Landlord, Tenant and
Landlord's lenders as additional
16
<PAGE> 23
insureds. The minimum limit of coverage of the aforesaid policy shall be in the
amount of not less than Three Million Dollars ($3,000,000.00) for injury or
death of one person in any one accident or occurrence and in the amount of not
less than Three Million Dollars ($3,000,000.00) for injury or death of more than
one person in any one accident or occurrence, and shall contain a severability
of interest clause or a cross liability endorsement. Such insurance shall
further insure Landlord and Tenant against liability for property damage of at
least One Million Dollars ($1,000,000.00).
(c) All Alterations, including, but not limited to, heating, lighting,
electrical, air conditioning, fixed partitioning, drapery, wall covering and
paneling, built-in cabinet work and carpeting installations made by Tenant,
together with all property that has become an integral part of the Premises or
the Building, shall at once be and become the property of Landlord, except to
the extent such items consist of trade fixtures or Tenant's Property. If
requested by Landlord, Tenant will pay, prior to the commencement of
construction, an amount determined by Landlord necessary to cover the costs of
demolishing such Alterations and/or the cost of returning the Premises and the
Building to its condition prior to such Alterations.
(d) No private telephone systems and/or other related computer or
telecommunications equipment or lines may be installed without Landlord's prior
written consent except to the extent the same (i) may be installed without the
making of Alterations to the Premises or the Building, or (ii) are installed as
part of the Tenant Improvements and are shown on the Final Plans and
Specifications (as defined in EXHIBIT B attached hereto) and approved by
Landlord in accordance with the procedures set forth in EXHIBIT B hereto. If
Landlord's consent is required under this Paragraph 25(d), such consent shall
not be unreasonably withheld; provided, however, that Landlord shall have the
right in its sole and absolute discretion to consent or to withhold its consent
to any installation or Alteration which affects the structural portions of the
Premises, the Building or the Project or the Systems serving the Premises, the
Building and/or the Project or any portion thereof. If Landlord gives such
consent, all equipment must be installed within the Premises and, at the request
of Landlord made at any time prior to the expiration of the Term, removed upon
the expiration or sooner termination of this Lease and the Premises restored to
the same condition as before such installation.
(e) Notwithstanding anything herein to the contrary, before installing any
equipment or lights which generate an undue amount of heat in the Premises, or
if Tenant plans to use any high-power usage equipment in the Premises, Tenant
shall obtain the written permission of Landlord. Landlord may refuse to grant
such permission unless Tenant agrees to pay the costs to Landlord for
installation of supplementary air conditioning capacity or electrical systems
necessitated by such equipment.
17
<PAGE> 24
(f) Tenant agrees not to proceed to make any Alterations, notwithstanding
consent from Landlord to do so to the extent required under this Paragraph 13,
until Tenant notifies Landlord in writing of the date Tenant desires to commence
construction or installation of such Alterations and Landlord has approved such
date in writing, in order that Landlord may post appropriate notices to avoid
any liability to contractors or material suppliers for payment for Tenant's
improvements. Tenant will at all times permit such notices to be posted and to
remain posted until the completion of work.
14. MAINTENANCE AND REPAIRS OF PREMISES
(a) MAINTENANCE BY TENANT. Subject to the provisions of Paragraphs 22 and
23 below, throughout the Term, Tenant shall, at its sole expense, (1) keep and
maintain in good order and condition the Premises, and repair and replace every
part thereof, including glass, windows, window frames, window casements,
skylights, interior and exterior doors, door frames and door closers; interior
lighting (including, without limitation, light bulbs and ballasts), the plumbing
and electrical systems exclusively serving the Premises, all communications
systems serving the Premises, Tenant's signage, interior demising walls and
partitions, equipment, interior painting and interior walls and floors, and the
roll-up doors, ramps and dock equipment, including, without limitation, dock
bumpers, dock plates, dock seals, dock levelers and dock lights located in or on
the Premises (excepting only those portions of the Building or the Project to be
maintained by Landlord, as provided in Paragraph 14(b) below), (2) furnish all
expendables, including light bulbs, paper goods and soaps, used in the Premises,
and (3) keep and maintain in good order and condition, repair and replace all of
Tenant's security systems in or about or serving the Premises. Tenant shall not
do nor shall Tenant allow Tenant's Agents to do anything to cause any damage,
deterioration or unsightliness to the Premises, the Building or the Project. .
Nothing contained herein shall be deemed or construed to limit Tenant's
obligations under Paragraph 17 below.
(b) MAINTENANCE BY LANDLORD. Subject to the provisions of Paragraphs 14(a),
22 and 23, and further subject to Tenant's obligation under Paragraph 4 to
reimburse Landlord, in the form of Additional Rent, for the cost and expense of
the following items, Landlord agrees to repair and maintain the following items:
the roof coverings (provided that Tenant installs no additional air conditioning
or other equipment on the roof that damages the roof coverings, in which event
Tenant shall pay all costs resulting from the presence of such additional
equipment); the Systems serving the Premises and the Building, excluding the
plumbing and electrical systems exclusively serving the Premises; and the
Parking Areas, pavement, landscaping, sprinkler systems, sidewalks, driveways,
curbs, and lighting systems in the Common Areas. Subject to the provisions of
Paragraphs 14(a), 22 and 23, Landlord, at its own cost and expense, agrees to
repair
18
<PAGE> 25
and maintain the following items: the structural portions of the roof
(specifically excluding the roof coverings), the foundation, the footings, the
floor slab, and the load bearing walls and exterior walls of the Building
(excluding any glass and any routine maintenance, including, without limitation,
any painting, sealing, patching and waterproofing of such walls).
Notwithstanding anything in this Paragraph 14 to the contrary and subject to the
provisions of Paragraph 22 below, Landlord shall have the right to either repair
or to require Tenant to repair any damage to any portion of the Premises, the
Building and/or the Project caused by or created due to any act, omission,
negligence or willful misconduct of Tenant or Tenant's Agents and to restore the
Premises, the Building and/or the Project, as applicable, to the condition
existing prior to the occurrence of such damage; provided, however, that in the
event Landlord elects to perform such repair and restoration work, Tenant shall
reimburse Landlord upon demand for all costs and expenses incurred by Landlord
in connection therewith. Landlord's obligation hereunder to repair and maintain
is subject to the condition precedent that Landlord shall have received written
notice of the need for such repairs and maintenance and a reasonable time to
perform such repair and maintenance. Tenant shall promptly report in writing to
Landlord any defective condition which Landlord is required to repair, and,
except to the extent that Landlord otherwise has actual knowledge of such
defective condition, failure to so report such defects shall make Tenant
responsible to Landlord for the costs and expenses of repairing any Preventable
Damage occurring after the date Tenant obtains actual knowledge of such
defective condition and any liability incurred by Landlord by reason of Tenant's
failure to notify Landlord of such defective condition in a timely manner as
provided herein. As used herein, "PREVENTABLE DAMAGE" means any damage or
deterioration which could have been prevented had Landlord received timely
notice of the defective condition. Nothing contained herein shall be deemed or
construed to limit Tenant's obligations under Paragraph 17 below.
(c) TENANT'S WAIVER OF RIGHTS. Tenant hereby expressly waives all rights to
make repairs at the expense of Landlord or to terminate this Lease, as provided
for in California Civil Code Sections 1941 and 1942, and 1932(1), respectively,
and any similar or successor statute or law in effect or any amendment thereof
during the Term.
15. LANDLORD'S INSURANCE
(a) Landlord shall purchase and keep in force fire, extended coverage and
"all risk" insurance covering the Building and the Project in an amount equal to
the full replacement cost thereof, as determined by Landlord from time to time,
specifically excluding, however, land value, footings and foundations. Tenant
shall, at its sole cost and expense, comply with any and all reasonable
requirements pertaining to the Premises, the Building and the Project of any
insurer necessary for the maintenance of reasonable fire and commercial general
liability insurance, covering
19
<PAGE> 26
the Building and the Project. Landlord, at Tenant's cost, may maintain "Loss of
Rents" insurance, insuring that the Rent will be paid in a timely manner to
Landlord for a period of at least twelve (12) months if the Premises, the
Building or the Project or any portion thereof are destroyed or rendered
unusable or inaccessible by any cause insured against under this Lease.
16. TENANT'S INSURANCE
(a) COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant shall, at Tenant's
expense, secure and keep in force a "broad form" commercial general liability
insurance and property damage policy covering the Premises, insuring Tenant, and
naming Landlord and its lenders as additional insureds, against liability
arising out of the ownership, use, occupancy or maintenance of the Premises. The
minimum limit of coverage of such policy shall be in the amount of not less than
One Million Dollars ($1,000,000.00) for injury or death of one person in any one
accident or occurrence and in the amount of not less than One Million Dollars
($1,000,000.00) for injury or death of more than one person in any one accident
or occurrence, shall include an extended liability endorsement providing
contractual liability coverage (which shall include coverage for Tenant's
indemnification obligations in this Lease), and shall contain a severability of
interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least One
Million Dollars ($1,000,000.00). Landlord may from time to time require
reasonable increases in any such limits if Landlord believes that additional
coverage is necessary or desirable. The limit of any insurance shall not limit
the liability of Tenant hereunder. No policy maintained by Tenant under this
Paragraph 16(a) shall contain a deductible greater than five thousand dollars
($5,000.00). No policy shall be cancelable or subject to reduction of coverage
without thirty (30) days prior written notice to Landlord, and loss payable
clauses shall be subject to Landlord's approval. Such policies of insurance
shall be issued as primary policies and not contributing with or in excess of
coverage that Landlord may carry, by an insurance company authorized to do
business in the State of California for the issuance of such type of insurance
coverage and rated A:XIII or better in Best's Key Rating Guide.
(b) PERSONAL PROPERTY INSURANCE. Tenant shall maintain in full force and
effect on all of its personal property, furniture, furnishings, trade or
business fixtures and equipment (collectively, "TENANT'S PROPERTY") on the
Premises, a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of the full replacement cost
thereof. No such policy shall contain a deductible greater than five thousand
dollars ($5,000.00). During the term of this Lease the proceeds from any such
policy or policies of insurance shall be used for the repair or replacement of
the fixtures and equipment so insured. Landlord shall have no interest in the
insurance upon Tenant's equipment and fixtures and will sign all documents
reasonably necessary in connection with the
20
<PAGE> 27
settlement of any claim or loss by Tenant. Landlord will not carry insurance on
Tenant's possessions.
(c) WORKER'S COMPENSATION INSURANCE; EMPLOYER'S LIABILITY INSURANCE. Tenant
shall, at Tenant's expense, maintain in full force and effect worker's
compensation insurance with not less than the minimum limits required by law,
and employer's liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).
(d) EVIDENCE OF COVERAGE. Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least thirty (30)
days prior to expiration of each policy, furnish Landlord with certificates of
renewal or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancellable or otherwise subject to modification except
after thirty (30) days prior written notice to Landlord and the other parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days notice has been given to Landlord).
17. INDEMNIFICATION
(a) OF LANDLORD. Tenant shall indemnify and hold harmless Landlord and
Landlord's Agents against and from any and all claims, liabilities, judgments,
costs, demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from (1) the use of the Premises, the
Building or the Project by Tenant or Tenant's Agents, or from any activity done,
permitted or suffered by Tenant or Tenant's Agents in or about the Premises, the
Building or the Project, and (2) any act, neglect, fault, willful misconduct or
omission of Tenant or Tenant's Agents in connection with this Lease, or from any
breach or default in the terms of this Lease by Tenant or Tenant's Agents, and
(3) any action or proceeding brought on account of any matter in items (1) or
(2). If any action or proceeding is brought against Landlord by reason of any
such claim, upon notice from Landlord, Tenant shall defend the same at Tenant's
expense by counsel reasonably satisfactory to Landlord. As a material part of
the consideration to Landlord, Tenant hereby releases Landlord and Landlord's
Agents from responsibility for, waives its entire claim of recovery for and
assumes all risk of (i) damage to property or injury to persons in or about the
Premises, the Building or the Project from any cause whatsoever (except that
which is caused by the gross negligence or willful misconduct of Landlord or
Landlord's Agents or by the failure of Landlord to observe any of the terms and
conditions of this Lease, if such failure has persisted for an unreasonable
period of time after written notice of such failure), or (ii) loss resulting
from business interruption or loss of income at the
21
<PAGE> 28
Premises. The obligations of Tenant under this Paragraph 17 shall survive any
termination of this Lease.
(b) NO IMPAIRMENT OF INSURANCE. The foregoing indemnity shall not relieve
any insurance carrier of its obligations under any policies required to be
carried by either party pursuant to this Lease, to the extent that such policies
cover the peril or occurrence that results in the claim that is subject to the
foregoing indemnity.
18. SUBROGATION
Landlord and Tenant hereby mutually waive any claim against the other and
its Agents for any loss or damage to any of their property located on or about
the Premises, the Building or the Project that is caused by or results from
perils covered by property insurance carried by the respective parties, to the
extent of the proceeds of such insurance actually received with respect to such
loss or damage, whether or not due to the negligence of the other party or its
Agents. Because the foregoing waivers will preclude the assignment of any claim
by way of subrogation to an insurance company or any other person, each party
now agrees to immediately give to its insurer written notice of the terms of
these mutual waivers and shall have their insurance policies endorsed to prevent
the invalidation of the insurance coverage because of these waivers. Nothing in
this Paragraph 18 shall relieve a party of liability to the other for failure to
carry insurance required by this Lease.
19. SIGNS
Tenant shall not place or permit to be placed in, upon, or about the
Premises, the Building or the Project any exterior lights, decorations,
balloons, flags, pennants, banners, advertisements or notices, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior the Premises
without obtaining Landlord's prior written consent or without complying with
Landlord's signage criteria specified on EXHIBIT E hereto, as the same may be
modified by Landlord from time to time, and with all applicable Laws, and will
not conduct, or permit to be conducted, any sale by auction on the Premises or
otherwise on the Project. Tenant shall remove any sign, advertisement or notice
placed on the Premises, the Building or the Project by Tenant upon the
expiration of the Term or sooner termination of this Lease, and Tenant shall
repair any damage or injury to the Premises, the Building or the Project caused
thereby, all at Tenant's expense. If any signs are not removed, or necessary
repairs not made, Landlord shall have the right to remove the signs and repair
any damage or injury to the Premises, the Building or the Project at Tenant's
sole cost and expense.
22
<PAGE> 29
20. FREE FROM LIENS
Tenant shall keep the Premises, the Building and the Project free from any
liens arising out of any work performed, material furnished or obligations
incurred by or for Tenant. In the event that Tenant shall not, within ten (10)
days following the imposition of any such lien, cause the lien to be released of
record by payment or posting of a proper bond, Landlord shall have in addition
to all other remedies provided herein and by law the right but not the
obligation to cause same to be released by such means as it shall deem proper,
including payment of the claim giving rise to such lien. All such sums paid by
Landlord and all expenses incurred by it in connection therewith (including,
without limitation, attorneys' fees) shall be payable to Landlord by Tenant upon
demand. Landlord shall have the right at all times to post and keep posted on
the Premises any notices permitted or required by law or that Landlord shall
deem proper for the protection of Landlord, the Premises, the Building and the
Project, from mechanics' and materialmen's liens. Tenant shall give to Landlord
at least five (5) business days' prior written notice of commencement of any
repair or construction on the Premises.
21. ENTRY BY LANDLORD
Tenant shall permit Landlord and Landlord's Agents to enter into and upon
the Premises at all reasonable times, upon reasonable notice (except in the case
of an emergency, for which no notice shall be required), and subject to Tenant's
reasonable security arrangements, for the purpose of inspecting the same or
showing the Premises to prospective purchasers, lenders or tenants or to alter,
improve, maintain and repair the Premises or the Building as required or
permitted of Landlord under the terms hereof, or for any other business purpose,
without any rebate of Rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned (except for
actual damages resulting from the gross negligence or willful misconduct of
Landlord); and Tenant shall permit Landlord to post notices of
non-responsibility and ordinary "for sale" or "for lease" signs. No such entry
shall be construed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises. Landlord may
temporarily close entrances, doors, corridors, elevators or other facilities
without liability to Tenant by reason of such closure in the case of an
emergency and when Landlord otherwise reasonably deems such closure necessary.
22. DESTRUCTION AND DAMAGE
(a) If the Premises are damaged by fire or other perils covered by extended
coverage insurance, Landlord shall, at Landlord's option:
(1) In the event of total destruction (which shall mean destruction or
damage in excess of twenty-five percent (25%) of the full insurable value
thereof)
23
<PAGE> 30
of the Premises, elect either to commence promptly to repair and restore the
Premises and prosecute the same diligently to completion, in which event this
Lease shall remain in full force and effect; or not to repair or restore the
Premises, in which event this Lease shall terminate. Landlord shall give Tenant
written notice of its intention within sixty (60) days after the date (the
"CASUALTY DISCOVERY DATE") Landlord obtains actual knowledge of such
destruction. If Landlord elects not to restore the Premises, this Lease shall be
deemed to have terminated as of the date of such total destruction.
(2) In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding twenty-five percent (25%) of
the full insurable value thereof) of the Premises for which Landlord will
receive insurance proceeds sufficient to cover the cost to repair and restore
such partial destruction and, if the damage thereto is such that the Premises
may be substantially repaired or restored to its condition existing immediately
prior to such damage or destruction within one hundred eighty (180) days from
the Casualty Discovery Date, Landlord shall commence and proceed diligently with
the work of repair and restoration, in which event the Lease shall continue in
full force and effect. If such repair and restoration requires longer than one
hundred eighty (180) days or if the insurance proceeds therefor (plus any
amounts Tenant may elect or is obligated to contribute) are not sufficient to
cover the cost of such repair and restoration, Landlord may elect either to so
repair and restore, in which event the Lease shall continue in full force and
effect, or not to repair or restore, in which event the Lease shall terminate.
In either case, Landlord shall give written notice to Tenant of its intention
within sixty (60) days after the Casualty Discovery Date. If Landlord elects not
to restore the Premises, this Lease shall be deemed to have terminated as of the
date of such partial destruction.
(3) Notwithstanding anything to the contrary contained in this
Paragraph, in the event of damage to the Premises occurring during the last
twelve (12) months of the Term, Landlord and Tenant may each elect to terminate
this Lease by written notice of such election given to the other within thirty
(30) days after the Casualty Discovery Date; provided, however, that Tenant
shall have the right to terminate this Lease under this Paragraph 22(a)(3) only
if its use of the Premises is materially disrupted as a result of such damage.
(b) If the Premises are damaged by any peril not covered by extended
coverage insurance, and the cost to repair such damage exceeds any amount Tenant
may agree to contribute, Landlord may elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to
repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty (60)
days after the Casualty Discovery Date. If Landlord elects not to restore the
Premises, this Lease shall be deemed to have terminated as of the date on which
Tenant surrenders possession of the
24
<PAGE> 31
Premises to Landlord, except that if the damage to the Premises materially
impairs Tenant's ability to continue its business operations in the Premises,
then this Lease shall be deemed to have terminated as of the date such damage
occurred.
(c) Notwithstanding anything to the contrary in this Paragraph 22, Landlord
shall have the option to terminate this Lease, exercisable by notice to Tenant
within sixty (60) days after the Casualty Discovery Date, in each of the
following instances:
(1) If more than twenty-five percent (25%) of the full insurable value
of the Building or the Project is damaged or destroyed, regardless of whether or
not the Premises are destroyed.
(2) If the Building or the Project or any portion thereof is damaged
or destroyed and the repair and restoration of such damage requires longer than
one hundred eighty (180) days from the Casualty Discovery Date.
(3) If the Building or the Project or any portion thereof is damaged
or destroyed and the insurance proceeds therefor are not sufficient to cover the
costs of repair and restoration.
(4) If the Building or the Project or any portion thereof is damaged
or destroyed during the last twelve (12) months of the Term.
(d) If the Premises is damaged or destroyed to the extent that the Premises
cannot be fully repaired or restored by Landlord within one hundred eighty (180)
days after the Casualty Discovery Date, Tenant may terminate this Lease
immediately upon notice thereof to Landlord, which notice shall be given, if at
all, not later than fifteen (15) days after Landlord notifies Tenant of
Landlord's estimate of the period of time required to repair such damage or
destruction.
(e) In the event of repair and restoration as herein provided, the monthly
installments of Base Rent shall be abated proportionately in the ratio which
Tenant's use of the Premises is impaired during the period of such repair or
restoration; provided, however, that Tenant shall not be entitled to such
abatement to the extent that such damage or destruction resulted from the
wrongful or grossly negligent acts of Tenant or Tenant's Agents. Except as
expressly provided in the immediately preceding sentence with respect to
abatement of Base Rent, Tenant shall have no claim against Landlord for, and
hereby releases Landlord and Landlord's Agents from responsibility for and
waives its entire claim of recovery for any cost, loss or expense suffered or
incurred by Tenant as a result of any damage to or destruction of the Premises,
the Building or the Project or the repair or restoration thereof, including,
without limitation, any cost, loss or expense resulting from any loss of use of
the whole or any part of the Premises, the
25
<PAGE> 32
Building or the Project and/or any inconvenience or annoyance occasioned by such
damage, repair or restoration.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall repair or restore only the initial Tenant Improvements,
if any, constructed by Landlord in the Premises pursuant to the terms of this
Lease, substantially to their condition existing immediately prior to the
occurrence of the damage or destruction; and Tenant shall promptly repair and
restore, at Tenant's expense, Tenant's Alterations which were not constructed by
Landlord.
(g) Tenant hereby waives the provisions of California Civil Code Section
1932(2) and Section 1933(4) which permit termination of a lease upon destruction
of the leased premises, and the provisions of any similar law now or hereinafter
in effect, and the provisions of this Paragraph 22 shall govern exclusively in
case of such destruction.
23. CONDEMNATION
(a) If twenty-five percent (25%) or more of either the Premises, the
Building or the Project or the parking areas for the Building or the Project is
taken for any public or quasi-public purpose by any lawful governmental power or
authority, by exercise of the right of appropriation, inverse condemnation,
condemnation or eminent domain, or sold to prevent such taking (each such event
being referred to as a "CONDEMNATION"), Landlord may, at its option, terminate
this Lease as of the date title vests in the condemning party. If twenty-five
percent (25%) or more of the Premises is taken and if the Premises remaining
after such Condemnation and any repairs by Landlord would be untenantable for
the conduct of Tenant's business operations, Tenant shall have the right to
terminate this Lease as of the date title vests in the condemning party. If
either party elects to terminate this Lease as provided herein, such election
shall be made by written notice to the other party given within thirty (30) days
after the nature and extent of such Condemnation have been finally determined.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially the same
condition as existed prior to such Condemnation, allowing for the reasonable
effects of such Condemnation, and a proportionate abatement shall be made to the
Base Rent corresponding to the time during which, and to the portion of the
floor area of the Premises (adjusted for any increase thereto resulting from any
reconstruction) of which, Tenant is deprived on account of such Condemnation and
restoration, as reasonably determined by Landlord. Except as expressly provided
in the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any Condemnation or the repair or restoration of the Premises,
26
<PAGE> 33
the Building or the Project or the parking areas for the Building or the Project
following such Condemnation, including, without limitation, any cost, loss or
expense resulting from any loss of use of the whole or any part of the Premises,
the Building, the Project or the parking areas and/or any inconvenience or
annoyance occasioned by such Condemnation, repair or restoration. The provisions
of California Code of Civil Procedure Section 1265.130, which allows either
party to petition the Superior Court to terminate the Lease in the event of a
partial taking of the Premises, the Building or the Project or the parking areas
for the Building or the Project, and any other applicable law now or hereafter
enacted, are hereby waived by Tenant.
(b) Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection with any Condemnation, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease or otherwise;
provided, however, that Tenant shall be entitled to receive any award separately
allocated by the condemning authority to Tenant for Tenant's relocation expenses
or the value of Tenant's Property (specifically excluding fixtures, Alterations
and other components of the Premises which under this Lease or by law are or at
the expiration of the Term will become the property of Landlord), provided that
such award does not reduce any award otherwise allocable or payable to Landlord.
24. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily or by operation of law, (1) mortgage,
pledge, hypothecate or encumber this Lease or any interest herein, (2) assign or
transfer this Lease or any interest herein, sublease the Premises or any part
thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent of
Landlord, which consent shall not be withheld unreasonably provided that (i)
Tenant is not then in Default under this Lease nor is any event then occurring
which with the giving of notice or the passage of time, or both, would
constitute a Default hereunder, and (ii) Tenant has not previously assigned or
transferred this Lease or any interest herein or subleased the Premises or any
part thereof, excluding only a Limited Sublease (as hereinafter defined) entered
into by Tenant in accordance with Paragraph 24(h) below. When Tenant requests
Landlord's consent to such assignment or subletting, it shall notify Landlord in
writing of the name and address of the proposed assignee or subtenant and the
nature and character of the business of the proposed assignee or subtenant and
shall provide current and prior financial statements for the proposed assignee
or subtenant in a form reasonably acceptable to Landlord. Tenant shall also
provide Landlord with a copy of the proposed sublease or assignment agreement,
including all material terms and conditions thereof. Except in the case of a
Limited Sublease (as hereinafter defined) or an assignment or sublease to a
Tenant Affiliate
27
<PAGE> 34
(as hereinafter defined), Landlord shall have the option, to be exercised within
thirty (30) days of receipt of the foregoing, to (1) terminate this Lease as of
the commencement date stated in the proposed sublease or assignment, (2)
sublease or take an assignment, as the case may be, from Tenant of the interest,
or any portion thereof, in this Lease and/or the Premises that Tenant proposes
to assign or sublease, on the same terms and conditions as stated in the
proposed sublet or assignment agreement, (3) consent to the proposed assignment
or sublease, or (4) refuse its consent to the proposed assignment or sublease,
providing that such consent shall not be unreasonably withheld, delayed or
conditioned so long as Tenant is not then in Default under this Lease nor is any
event then occurring which with the giving of notice or the passage of time, or
both, would constitute a Default hereunder. In the event Landlord elects to
terminate this Lease or sublease or take an assignment from Tenant of the
interest, or portion thereof, in the Lease and/or the Premises that Tenant
proposes to assign or sublease as provided in the foregoing clauses (1) and (2),
respectively, then Landlord shall have the additional right to negotiate
directly with Tenant's proposed assignee or subtenant and to enter into a direct
lease or occupancy agreement (collectively, a "DIRECT LEASE") with such party on
such terms as shall be acceptable to Landlord in its sole and absolute
discretion, and Tenant hereby waives any claims against Landlord related
thereto, including, without limitation, any claims for any compensation or
profit related to such Direct Lease, provided that any such Direct Lease shall
contain a release of Tenant of all of its obligations hereunder accruing during
the term of such Direct Lease with respect to the portion of the Premises
demised thereunder.
(b) Notwithstanding anything to the contrary contained in Paragraph 24(a)
above, Tenant shall have the right with the consent of Landlord, which consent
shall not be unreasonably withheld, to assign this Lease or to sublease the
Premises or any part thereof to a Tenant Affiliate. In the event Tenant proposes
to enter into an assignment or sublease with a Tenant Affiliate, then Tenant
shall provide Landlord with the information required to be delivered pursuant to
said Paragraph 24(a). Landlord shall have the option, to be exercised within
thirty (30) days of receipt of the foregoing, to (1) consent to the proposed
assignment or sublease, or (2) refuse its consent to the proposed assignment or
sublease, providing that such consent shall not be unreasonably withheld. For
purposes of this Paragraph 24, a "TENANT AFFILIATE" shall mean an entity that
controls, is controlled by or is under common control with, Tenant; and a party
shall be deemed to "control" another party for purposes of the aforesaid
definition only if the first party owns more than fifty percent (50%) of the
stock or other beneficial interests of the second party.
(c) Without otherwise limiting the criteria upon which Landlord may
withhold its consent under Paragraphs 24(a) and (b) above or Paragraph 24(h)
below, Landlord shall be entitled to consider all reasonable criteria including,
but not limited to, the following: (1) whether or not the proposed subtenant or
assignee is engaged in a business which, and the use of the Premises will be in
an manner
28
<PAGE> 35
which, is in keeping with the then character and nature of all other tenancies
in the Project, (2) whether the use to be made of the Premises by the proposed
subtenant or assignee will conflict with any so-called "exclusive" use then in
favor of any other tenant of the Building or the Project, and whether such use
would be prohibited by any other portion of this Lease, including, but not
limited to, any rules and regulations then in effect, or under applicable Laws,
and whether such use imposes a greater load upon the Premises and the Building
and Project services then imposed by Tenant, (3) the business reputation of the
proposed individuals who will be managing and operating the business operations
of the assignee or subtenant, and the long-term financial and competitive
business prospects of the proposed assignee or subtenant, and (4) the
creditworthiness and financial stability of the proposed assignee or subtenant
in light of the responsibilities involved. In any event, Landlord may withhold
its consent to any assignment or sublease, if (i) the actual use proposed to be
conducted in the Premises or portion thereof conflicts with the provisions of
Paragraph 10(a) or (b) above or with any other lease which restricts the use to
which any space in the Building or the Project may be put, or (ii) the proposed
assignment or sublease requires Alterations to the Premises or portions thereof
other than Alterations approved by Landlord pursuant to Paragraph 13 above.
(d) If Landlord approves an assignment or subletting as herein provided,
Tenant shall pay to Landlord, as Additional Rent, the difference, if any,
between (1) the Base Rent plus Additional Rent allocable to that part of the
Premises affected by such assignment or sublease pursuant to the provisions of
this Lease, and (2) the rent and any additional rent payable by the assignee or
sublessee to Tenant, less reasonable and customary market-based leasing
commissions, if any, incurred by Tenant in connection with such assignment or
sublease. The assignment or sublease agreement, as the case may be, after
approval by Landlord, shall not be amended without Landlord's prior written
consent, and shall contain a provision directing the assignee or subtenant to
pay the rent and other sums due thereunder directly to Landlord upon receiving
written notice from Landlord that Tenant is in default under this Lease with
respect to the payment of Rent. In the event that, notwithstanding the giving of
such notice, Tenant collects any rent or other sums from the assignee or
subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord
and shall immediately forward the same to Landlord. Landlord's collection of
such rent and other sums shall not constitute an acceptance by Landlord of
attornment by such assignee or subtenant. A consent to one assignment,
subletting, occupation or use shall not be deemed to be a consent to any other
or subsequent assignment, subletting, occupation or use, and consent to any
assignment or subletting shall in no way relieve Tenant of any liability under
this Lease. Any assignment or subletting without Landlord's consent shall be
void, and shall, at the option of Landlord, constitute a Default under this
Lease.
(e) Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant's obligations under this Lease shall at all times remain
fully
29
<PAGE> 36
responsible and liable for the payment of the Rent and for compliance with all
of Tenant's other obligations under this Lease (regardless of whether Landlord's
approval has been obtained for any such assignment or subletting).
(f) Tenant shall pay Landlord's reasonable fees (including, without
limitation, the fees of Landlord's counsel), incurred in connection with
Landlord's review and processing of documents regarding any proposed assignment
or sublease, not to exceed the sum of two thousand five hundred dollars
($2,500.00) per transaction.
(g) Notwithstanding anything in this Lease to the contrary, in the event
Landlord consents to an assignment or subletting by Tenant in accordance with
the terms of this Paragraph 24, Tenant's assignee or subtenant shall have no
right to further assign this Lease or any interest therein or thereunder or to
further sublease all or any portion of the Premises. In furtherance of the
foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee
or subtenant claiming under it (and any such assignee or subtenant by accepting
such assignment or sublease shall be deemed to acknowledge and agree) that no
sub-subleases or further assignments of this Lease shall be permitted at any
time.
(h) Notwithstanding anything in this Paragraph 24 to the contrary, Tenant
shall have the right with the consent of Landlord, which consent shall not be
unreasonably withheld, to sublease a portion of the Premises comprising not more
than ten thousand (10,000) rentable square for a term ending not later than
twenty-four (24) months after the Commencement Date (such sublease being herein
referred to as a "LIMITED SUBLEASE"). In the event Tenant proposes to enter into
a Limited Sublease, then Tenant shall provide Landlord with the information
required to be delivered pursuant to Paragraph 24(a) above. Landlord shall have
the option, to be exercised within twenty (20) days of receipt of the foregoing,
to (1) consent to the proposed assignment or sublease, or (2) refuse its consent
to the proposed assignment or sublease, provided that such consent shall not be
unreasonably withheld, delayed or conditioned so long as Tenant is not then in
Default beyond any applicable cure periods. Nothing contained herein shall be
deemed to limit Landlord's right to approve any Tenant Improvements in
accordance with EXHIBIT B hereto or any Alterations in accordance with Paragraph
13 above.
(i) Tenant acknowledges and agrees that the restrictions, conditions and
limitations imposed by this Paragraph 24 on Tenant's ability to assign or
transfer this Lease or any interest herein, to sublet the Premises or any part
thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4,
as amended from time to time, and for all other purposes, reasonable at the time
that the Lease was entered into, and shall be deemed to be reasonable at the
time that Tenant seeks to assign or
30
<PAGE> 37
transfer this Lease or any interest herein, to sublet the Premises or any part
thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof.
25. TENANT'S DEFAULT
The occurrence of any one of the following events shall constitute an event
of default on the part of Tenant ("DEFAULT"):
(a) The abandonment of the Premises by Tenant; the vacation of the Premises
by Tenant for a period of twenty one (21) consecutive days; or any vacation of
the Premises by Tenant which would cause any insurance policy to be invalidated
or otherwise lapse; in each of the foregoing cases irrespective of whether or
not Tenant is then in monetary default under this Lease. Tenant agrees to notice
and service of notice as provided for in this Lease and waives any right to any
other or further notice or service of notice which Tenant may have under any
statute or law now or hereafter in effect;
(b) Failure to pay any installment of Rent or any other monies due and
payable hereunder, said failure continuing for a period of five (5) days after
the same is due;
(c) A general assignment by Tenant or any guarantor or surety of Tenant's
obligations hereunder (collectively, "GUARANTOR") for the benefit of creditors;
(d) The filing of a voluntary petition in bankruptcy by Tenant or any
Guarantor, the filing by Tenant or any Guarantor of a voluntary petition for an
arrangement, the filing by or against Tenant or any Guarantor of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by the creditors of Tenant or any Guarantor, said involuntary petition
remaining undischarged for a period of sixty (60) days;
(e) Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other seizure
remaining undismissed or undischarged for a period of sixty (60) days after the
levy thereof;
(f) Death or disability of Tenant or any Guarantor, if Tenant or such
Guarantor is a natural person, or the failure by Tenant or any Guarantor to
maintain its legal existence, if Tenant or such Guarantor is a corporation,
partnership, limited liability company, trust or other legal entity;
(g) Failure of Tenant to execute and deliver to Landlord any estoppel
certificate, subordination agreement, or lease amendment within the time periods
and in the manner required by Paragraphs 31 or 32 or 43;
31
<PAGE> 38
(h) An assignment or sublease, or attempted assignment or sublease, of this
Lease or the Premises by Tenant contrary to the provision of Paragraph 24,
unless such assignment or sublease is expressly conditioned upon Tenant having
received Landlord's consent thereto;
(i) Failure of Tenant to restore the Letter of Credit or the Security
Deposit to the amount and within the time period provided in Paragraph 7 or
Paragraph 8, respectively, above;
(j) Failure in the performance of any of Tenant's covenants, agreements or
obligations hereunder (except those failures specified as events of Default in
subparagraphs (b), (l) or (m) above or any other subparagraphs of this Paragraph
25, which shall be governed by such other Paragraphs), which failure continues
for thirty (30) days after written notice thereof from Landlord to Tenant,
provided that, if Tenant has exercised reasonable diligence to cure such failure
and such failure cannot be cured within such thirty (30) day period despite
reasonable diligence, Tenant shall not be in default under this subparagraph so
long as Tenant thereafter diligently and continuously prosecutes the cure to
completion and actually completes such cure within ninety (90) days after the
giving of the aforesaid written notice;
(k) Chronic delinquency by Tenant in the payment of Rent, or any other
periodic payments required to be paid by Tenant under this Lease. "CHRONIC
DELINQUENCY" shall mean failure by Tenant to pay Rent, or any other payments
required to be paid by Tenant under this Lease within three (3) days after
written notice thereof for any three (3) months (consecutive or nonconsecutive)
during any period of twelve (12) months. In the event of a Chronic Delinquency,
in addition to Landlord's other remedies for Default provided in this Lease, at
Landlord's option, Landlord shall have the right to require that Rent be paid by
Tenant quarterly, in advance;
(l) Chronic overuse by Tenant or Tenant's Agents of the number of
undesignated parking spaces set forth in the Basic Lease Information. "CHRONIC
OVERUSE" shall mean use by Tenant or Tenant's Agents of a number of parking
spaces greater than the number of parking spaces set forth in the Basic Lease
Information more than three (3) times during the Term after written notice by
Landlord;
(m) Any insurance required to be maintained by Tenant pursuant to this
Lease shall be canceled or terminated or shall expire or be reduced or
materially changed, except as permitted in this Lease; and
(n) Any failure by Tenant to discharge any lien or encumbrance placed on
the Project or any part thereof in violation of this Lease within ten (10) days
after the
32
<PAGE> 39
date such lien or encumbrance is filed or recorded against the Project or any
part thereof.
Tenant agrees that any notice given by Landlord pursuant to Paragraph
25(j), (k) or (l) above shall satisfy the requirements for notice under
California Code of Civil Procedure Section 1161, and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding.
26. LANDLORD'S REMEDIES
(a) TERMINATION. In the event of any Default by Tenant, then in addition to
any other remedies available to Landlord at law or in equity and under this
Lease, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
(1) the worth at the time of award of any unpaid Rent and any other
sums due and payable which have been earned at the time of such termination;
plus
(2) the worth at the time of award of the amount by which the unpaid
Rent and any other sums due and payable which would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the unpaid
Rent and any other sums due and payable for the balance of the term of this
Lease after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course would be likely to result
therefrom, including, without limitation, (A) any costs or expenses incurred by
Landlord (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including such actions undertaken in connection with the reletting or
attempted reletting of the Premises to a new tenant or tenants; (3) for leasing
commissions, advertising costs and other expenses of reletting the Premises; or
(4) in carrying the Premises, including taxes, insurance premiums, utilities and
security precautions; (B) any unearned brokerage commissions paid in connection
with this Lease; and (C) any unamortized portion of the Tenant Improvement
Allowance (such Tenant Improvement Allowance to be amortized over the Term in
the manner reasonably determined by Landlord), plus
33
<PAGE> 40
(5) such reasonable attorneys' fees incurred by Landlord as a result
of a Default, and costs in the event suit is filed by Landlord to enforce such
remedy; and plus
(6) at Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.
As used in subparagraphs (1) and (2) above, the "worth at the time of award" is
computed by allowing interest at an annual rate equal to twelve percent (12%)
per annum or the maximum rate permitted by law, whichever is less. As used in
subparagraph (3) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other pertinent present or future Law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
Default of Tenant hereunder.
(b) CONTINUATION OF LEASE. In the event of any Default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the remedy described in California Civil
Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's
Default and abandonment and recover Rent as it becomes due, provided Tenant has
the right to sublet or assign, subject only to reasonable limitations). In
addition, Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises. For purposes of this Paragraph 26(b), the
following acts by Landlord will not constitute the termination of Tenant's right
to possession of the Premises:
(1) Acts of maintenance or preservation or efforts to relet the
Premises, including, but not limited to, alterations, remodeling, redecorating,
repairs, replacements and/or painting as Landlord shall consider advisable for
the purpose of reletting the Premises or any part thereof; or
(2) The appointment of a receiver upon the initiative of Landlord to
protect Landlord's interest under this Lease or in the Premises.
(c) RE-ENTRY. In the event of any Default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, in compliance with
applicable law, to re-enter the Premises and remove all persons and property
from the Premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant.
(d) RELETTING. In the event of the abandonment of the Premises by Tenant or
in the event that Landlord shall elect to re-enter as provided in Paragraph
26(c) or shall take possession of the Premises pursuant to legal proceeding or
pursuant to
34
<PAGE> 41
any notice provided by law, then if Landlord does not elect to terminate this
Lease as provided in Paragraph 26(a), Landlord may from time to time, without
terminating this Lease, relet the Premises or any part thereof for such term or
terms and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable with the right to make
alterations and repairs to the Premises in Landlord's sole discretion. In the
event that Landlord shall elect to so relet, then rentals received by Landlord
from such reletting shall be applied in the following order: (1) to reasonable
attorneys' fees incurred by Landlord as a result of a Default and costs in the
event suit is filed by Landlord to enforce such remedies; (2) to the payment of
any costs of such reletting; (3) to the payment of the costs of any alterations
and repairs to the Premises; (4) to the payment of Rent due and unpaid
hereunder; and (5) the residue, if any, shall be held by Landlord and applied in
payment of future Rent and other sums payable by Tenant hereunder as the same
may become due and payable hereunder. Should that portion of such rentals
received from such reletting during any month, which is applied to the payment
of Rent hereunder, be less than the Rent payable during the month by Tenant
hereunder, then Tenant shall pay such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon
as ascertained, any costs and expenses incurred by Landlord in such reletting or
in making such alterations and repairs not covered by the rentals received from
such reletting.
(e) TERMINATION. No re-entry or taking of possession of the Premises by
Landlord pursuant to this Paragraph 26 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any Default by Tenant, Landlord may at any time after such reletting
elect to terminate this Lease for any such Default.
(f) CUMULATIVE REMEDIES. The remedies herein provided are not exclusive and
Landlord shall have any and all other remedies provided herein or by law or in
equity.
(g) NO SURRENDER. No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Tenant prior to the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects
in writing that such merger take place, but shall operate as an assignment to
Landlord of any and all existing subleases, or Landlord may, at its option,
elect in writing to treat such surrender as a merger terminating Tenant's estate
under this Lease, and
35
<PAGE> 42
thereupon Landlord may terminate any or all such subleases by notifying the
sublessee of its election so to do within five (5) days after such surrender.
27. LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
(a) Without limiting the rights and remedies of Landlord contained in
Paragraph 26 above, if Tenant shall be in Default in the performance of any of
the terms, provisions, covenants or conditions to be performed or complied with
by Tenant pursuant to this Lease, then Landlord may at Landlord's option,
without any obligation to do so, and without notice to Tenant perform any such
term, provision, covenant, or condition, or make any such payment and Landlord
by reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant or any of
Tenant's Agents.
(b) Without limiting the rights of Landlord under Paragraph 27(a) above,
Landlord shall have the right at Landlord's option, without any obligation to do
so, to perform any of Tenant's covenants or obligations under this Lease without
notice to Tenant in the case of an emergency, as determined by Landlord in its
sole and absolute judgment, or if Landlord otherwise determines in its sole
discretion that such performance is necessary or desirable for the proper
management and operation of the Building or the Project or for the preservation
of the rights and interests or safety of other tenants of the Building or the
Project.
(c) If Landlord performs any of Tenant's obligations hereunder in
accordance with this Paragraph 27, the full amount of the cost and expense
incurred or the payment so made or the amount of the loss so sustained shall
immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to
Landlord upon demand, as Additional Rent, the full amount thereof with interest
thereon from the date of payment by Landlord at the lower of (1) ten percent
(10%) per annum, or (2) the highest rate permitted by applicable law.
28. ATTORNEY'S FEES
(a) If either party hereto fails to perform any of its obligations under
this Lease or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Lease, then the defaulting
party or the party not prevailing in such dispute, as the case may be, shall pay
any and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder, including,
without limitation, court costs and reasonable attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by either
party in enforcing a judgment in its favor under this Lease shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be
36
<PAGE> 43
severable from the other provisions of this Lease and to survive and not be
merged into any such judgment.
(b) Without limiting the generality of Paragraph 28(a) above, if Landlord
utilizes the services of an attorney for the purpose of collecting any Rent due
and unpaid by Tenant or in connection with any other breach of this Lease by
Tenant, Tenant agrees to pay Landlord actual attorneys' fees as determined by
Landlord for such services, regardless of the fact that no legal action may be
commenced or filed by Landlord.
29. TAXES
Tenant shall be liable for and shall pay, prior to delinquency, all taxes
levied against Tenant's Property. If any Alteration installed by Tenant pursuant
to Paragraph 13 or any of Tenant's Property is assessed and taxed with the
Project or Building, Tenant shall pay such taxes to Landlord within ten (10)
days after delivery to Tenant of a statement therefor.
30. EFFECT OF CONVEYANCE
The term "Landlord" as used in this Lease means, from time to time, the
then current owner of the Building or the Project containing the Premises, so
that, in the event of any sale of the Building or the Project, Landlord shall be
and hereby is entirely freed and relieved of all future covenants and
obligations of Landlord hereunder, provided that the purchaser of the Building
or the Project has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder arising from and after the effective date of
such sale or other transfer.
31. TENANT'S ESTOPPEL CERTIFICATE
From time to time, upon written request of Landlord, Tenant shall execute,
acknowledge and deliver to Landlord or its designee, a written certificate
stating (a) the date this Lease was executed, the Commencement Date of the Term
and the date the Term expires; (b) the date Tenant entered into occupancy of the
Premises; (c) the amount of Rent and the date to which such Rent has been paid;
(d) that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended in any way (or, if assigned, modified,
supplemented or amended, specifying the date and terms of any agreement so
affecting this Lease); (e) that this Lease represents the entire agreement
between the parties with respect to Tenant's right to use and occupy the
Premises (or specifying such other agreements, if any); (f) that all obligations
under this Lease to be performed by Landlord as of the date of such certificate
have been satisfied (or specifying those as to which Tenant claims that Landlord
has yet to perform); (g) that all required contributions by Landlord to Tenant
on account of Tenant's improvements have been received (or stating exceptions
thereto); (h) that on such date there exist no defenses or offsets
37
<PAGE> 44
that Tenant has against the enforcement of this Lease by Landlord (or stating
exceptions thereto); (i) that no Rent or other sum payable by Tenant hereunder
has been paid more than one (1) month in advance (or stating exceptions
thereto); (j) that security has been deposited with Landlord, stating the
original amount thereof and any changes thereto; and (k) any other matters
evidencing the status of this Lease that may be reasonably required either by a
lender making a loan to Landlord to be secured by a deed of trust covering the
Building or the Project or by a purchaser of the Building or the Project. Any
such certificate delivered pursuant to this Paragraph 31 may be relied upon by a
prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the Premises.
If Tenant shall fail to provide such certificate within ten (10) days of receipt
by Tenant of a written request by Landlord as herein provided, such failure
shall, at Landlord's election, constitute a Default under this Lease, and Tenant
shall be deemed to have given such certificate as above provided without
modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee.
32. SUBORDINATION
Landlord shall have the right to cause this Lease to be and remain subject
and subordinate to any and all mortgages, deeds of trust and ground leases, if
any ("ENCUMBRANCES") that are now or may hereafter be executed covering the
Premises, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided only, that in the event of termination of any such ground
lease or upon the foreclosure of any such mortgage or deed of trust, so long as
Tenant is not in default, the holder thereof ("HOLDER") shall agree to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute, acknowledge and deliver any and all reasonable documents
required by Landlord or the Holder to effectuate such subordination. If Tenant
fails to do so, such failure shall constitute a Default by Tenant under this
Lease. Notwithstanding anything to the contrary set forth in this Paragraph 32,
Tenant hereby attorns and agrees to attorn to any person or entity purchasing or
otherwise acquiring the Premises at any sale or other proceeding or pursuant to
the exercise of any other rights, powers or remedies under such Encumbrance.
33. ENVIRONMENTAL COVENANTS
(a) Prior to executing this Lease, Tenant has completed, executed and
delivered to Landlord a Hazardous Materials Disclosure Certificate ("INITIAL
DISCLOSURE CERTIFICATE"), a fully completed copy of which is attached hereto as
38
<PAGE> 45
EXHIBIT F and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that the information on the Initial
Disclosure Certificate is true and correct and accurately describes the
Hazardous Materials which will be manufactured, treated, used or stored on or
about the Premises by Tenant or Tenant's Agents. Tenant shall, on each
anniversary of the Commencement Date and at such other times as Tenant desires
to manufacture, treat, use or store on or about the Premises new or additional
Hazardous Materials which were not listed on the Initial Disclosure Certificate,
complete, execute and deliver to Landlord an updated Disclosure Certificate
(each, an "UPDATED DISCLOSURE CERTIFICATE") describing Tenant's then current and
proposed future uses of Hazardous Materials on or about the Premises, which
Updated Disclosure Certificates shall be in the same format as that which is set
forth in EXHIBIT F or in such updated format as Landlord may require from time
to time. Tenant shall deliver an Updated Disclosure Certificate to Landlord not
less than thirty (30) days prior to the date Tenant intends to commence the
manufacture, treatment, use or storage of new or additional Hazardous Materials
on or about the Premises, and Landlord shall have the right to approve or
disapprove such new or additional Hazardous Materials in its sole and absolute
discretion. Tenant shall make no use of Hazardous Materials on or about the
Premises except as described in the Initial Disclosure Certificate or as
otherwise approved by Landlord in writing in accordance with this Paragraph
33(a).
(b) As used in this Lease, the term "HAZARDOUS MATERIALS" shall mean and
include any substance that is or contains (1) any "hazardous substance" as now
or hereafter defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") (42
U.S.C. Section 9601 et seq.) or any regulations promulgated under CERCLA; (2)
any "hazardous waste" as now or hereafter defined in the Resource Conservation
and Recovery Act, as amended ("RCRA") (42 U.S.C. Section 6901 et seq.) or any
regulations promulgated under RCRA; (3) any substance now or hereafter regulated
by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601
et seq.) or any regulations promulgated under TSCA; (4) petroleum, petroleum
by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (5)
asbestos and asbestos-containing material, in any form, whether friable or
non-friable; (6) polychlorinated biphenyls; (7) lead and lead-containing
materials; or (8) any additional substance, material or waste (A) the presence
of which on or about the Premises (i) requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined), (ii) causes
or threatens to cause a nuisance on the Premises or any adjacent area or
property or poses or threatens to pose a hazard to the health or safety of
persons on the Premises or any adjacent area or property, or (iii) which, if it
emanated or migrated from the Premises, could constitute a trespass, or (B)
which is now or is hereafter classified or considered to be hazardous or toxic
under any Environmental Laws.
(c) As used in this Lease, the term "ENVIRONMENTAL LAWS" shall mean and
include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local
39
<PAGE> 46
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or
hereinafter in effect relating to (A) pollution, (B) the protection or
regulation of human health, natural resources or the environment, (C) the
treatment, storage or disposal of Hazardous Materials, or (D) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.
(d) Tenant agrees that during its use and occupancy of the Premises it will
(1) not (A) permit Hazardous Materials to be present on or about the Premises
except in a manner and quantity necessary for the ordinary performance of
Tenant's business (provided that Tenant shall not be responsible under this
Paragraph 33(d)(1)(A) for the on-site migration of Hazardous Materials from
off-site sources not under the control of Tenant or any Affiliate of Tenant,
provided that neither Tenant nor Tenant's Agents exacerbate the presence of or
contamination caused by such Hazardous Materials), or (B) release, discharge or
dispose of any Hazardous Materials on, in, at, under, or emanating from, the
Premises, the Building or the Project; (2) comply with all Environmental Laws
relating to the Premises and the use of Hazardous Materials on or about the
Premises and not engage in or permit others to engage in any activity at the
Premises in violation of any Environmental Laws; and (3) immediately notify
Landlord of (A) any inquiry, test, investigation or enforcement proceeding by
any governmental agency or authority against Tenant, Landlord or the Premises,
Building or Project relating to any Hazardous Materials or under any
Environmental Laws or (B) the occurrence of any event or existence of any
condition that would cause a breach of any of the covenants set forth in this
Paragraph 33. For purposes of this Paragraph 33(d), "AFFILIATE" shall mean a
party which controls, is controlled by or is under common control with, Tenant.
(e) If Tenant's use of Hazardous Materials on or about the Premises results
in a release, discharge or disposal of Hazardous Materials on, in, at, under, or
emanating from, the Premises, the Building or the Project, Tenant agrees to
investigate, clean up, remove or remediate such Hazardous Materials in full
compliance with (1) the requirements of (A) all Environmental Laws and (B) any
governmental agency or authority responsible for the enforcement of any
Environmental Laws; and (2) any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the
Project.
(f) Upon reasonable notice to Tenant, Landlord may inspect the Premises and
surrounding areas for the purpose of determining whether there exists on or
about the Premises any Hazardous Material or other condition or activity that is
in violation of the requirements of this Lease or of any Environmental Laws.
Such inspections may include, but are not limited to, entering the Premises or
adjacent property with drill rigs or other machinery for the purpose of
obtaining laboratory samples. Landlord shall not be limited in the number of
such inspections during the Term of this Lease. In the event (1) such
inspections reveal the presence of any
40
<PAGE> 47
such Hazardous Material or other condition or activity in violation of the
requirements of this Lease or of any Environmental Laws, or (2) Tenant or its
Agents contribute or knowingly consent to the presence of any Hazardous
Materials in, on, under, through or about the Premises, the Building or the
Project or exacerbate the condition of or the conditions caused by any Hazardous
Materials in, on, under, through or about the Premises, the Building or the
Project, Tenant shall reimburse Landlord for the cost of such inspections within
ten (10) days of receipt of a written statement therefor. Tenant will supply to
Landlord such historical and operational information regarding the Premises and
surrounding areas as may be reasonably requested to facilitate any such
inspection and will make available for meetings appropriate personnel having
knowledge of such matters. Tenant agrees to give Landlord at least sixty (60)
days' prior notice of its intention to vacate the Premises so that Landlord will
have an opportunity to perform such an inspection prior to such vacation. The
right granted to Landlord herein to perform inspections shall not create a duty
on Landlord's part to inspect the Premises, or liability on the part of Landlord
for Tenant's use, storage, treatment or disposal of Hazardous Materials, it
being understood that Tenant shall be solely responsible for all liability in
connection therewith.
(g) Landlord shall have the right, but not the obligation, prior or
subsequent to a Default, without in any way limiting Landlord's other rights and
remedies under this Lease, to enter upon the Premises, or to take such other
actions as it deems necessary or advisable, to investigate, clean up, remove or
remediate any Hazardous Materials or contamination by Hazardous Materials
present on, in, at, under, or emanating from, the Premises, the Building or the
Project in violation of Tenant's obligations under this Lease or under any
Environmental Laws. Notwithstanding any other provision of this Lease, Landlord
shall also have the right, at its election, in its own name or as Tenant's
agent, to negotiate, defend, approve and appeal, at Tenant's expense, any action
taken or order issued by any governmental agency or authority with regard to any
such Hazardous Materials or contamination by Hazardous Materials in violation of
Tenant's obligations under this Lease or under any Environmental Laws. All costs
and expenses paid or incurred by Landlord in the exercise of the rights set
forth in this Paragraph 33 shall be payable by Tenant upon demand.
(h) Tenant shall surrender the Premises to Landlord upon the expiration or
earlier termination of this Lease free of debris, waste or Hazardous Materials
placed on, about or near the Premises by Tenant or Tenant's Agents, and, to the
extent of any such debris, waste or Hazardous Materials, in a condition which
complies with all Environmental Laws and any additional requirements of Landlord
that are reasonably necessary to protect the value of the Premises, the Building
or the Project, including, without limitation, the obtaining of any closure
permits or other governmental permits or approvals related to Tenant's use of
Hazardous Materials in or about the Premises. Tenant's obligations and
liabilities pursuant to the provisions of this Paragraph 33 shall survive the
expiration or earlier
41
<PAGE> 48
termination of this Lease. If the condition of all or any portion of the
Premises, the Building, and/or the Project is not in compliance with the
provisions of this Lease with respect to Hazardous Materials, including, without
limitation, all Environmental Laws, at the expiration or earlier termination of
this Lease, then at Landlord's sole option, Landlord may require Tenant to hold
over possession of the Premises until Tenant can surrender the Premises to
Landlord in the condition in which the Premises existed as of the Commencement
Date and prior to the appearance of such Hazardous Materials except for normal
wear and tear, including, without limitation, the conduct or performance of any
closures as required by any Environmental Laws. For purposes hereof, the term
"normal wear and tear" shall not include any deterioration in the condition or
diminution of the value of any portion of the Premises, the Building, and/or the
Project in any manner whatsoever related to directly, or indirectly, Hazardous
Materials. Any such holdover by Tenant will be with Landlord's consent, will not
be terminable by Tenant in any event or circumstance and will otherwise be
subject to the provisions of Paragraph 36 of this Lease.
(i) Tenant agrees to indemnify and hold harmless Landlord from and against
any and all claims, losses (including, without limitation, loss in value of the
Premises, the Building or the Project, liabilities and expenses (including
attorney's fees)) sustained by Landlord attributable to (1) any Hazardous
Materials placed on or about the Premises, the Building or the Project by Tenant
or Tenant's Agents, or (2) Tenant's breach of any provision of this Paragraph
33.
(j) Notwithstanding anything in this Paragraph 33 to the contrary, Tenant
shall not be responsible for the clean up or remediation of, and shall not
required to indemnify Landlord against, any costs or liabilities attributable
to, Hazardous Materials placed on or about the Premises (i) prior to the
Commencement Date by third parties not related to Tenant or Tenant's Agents, or
(ii) by Landlord at any time, except in either case to the extent that Tenant or
Tenant's Agents have contributed to or exacerbated the presence of such
Hazardous Materials.
(k) The provisions of this Paragraph 33 shall survive the expiration or
earlier termination of this Lease.
34. NOTICES
All notices and demands which are required or may be permitted to be given
to either party by the other hereunder shall be in writing and shall be sent by
United States mail, postage prepaid, certified, or by personal delivery or
overnight courier, addressed to the addressee at Tenant's Address or Landlord's
Address as specified in the Basic Lease Information, or to such other place as
either party may from time to time designate in a notice to the other party
given as provided herein. Copies of all notices and demands given to Landlord
shall additionally be sent to Landlord's property manager at the address
specified in the Basic Lease Information or at such
42
<PAGE> 49
other address as Landlord may specify in writing from time to time. Notice shall
be deemed given upon actual receipt (or attempted delivery if delivery is
refused ), if personally delivered, or one (1) business day following deposit
with a reputable overnight courier that provides a receipt, or on the third
(3rd) day following deposit in the United States mail in the manner described
above.
35. WAIVER
The waiver of any breach of any term, covenant or condition of this Lease
shall not be deemed to be a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of Rent by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord in regard to any
Default by Tenant shall impair such a right or remedy or be construed as a
waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease.
36. HOLDING OVER
Any holding over after the expiration of the Term, without the express
written consent of Landlord, shall constitute a Default and, without limiting
Landlord's remedies provided in this Lease, such holding over shall be construed
to be a tenancy at sufferance, at a rental rate of one hundred fifty percent
(150%) of the Base Rent last due in this Lease, plus Additional Rent, and shall
otherwise be on the terms and conditions herein specified, so far as applicable;
provided, however, in no event shall any renewal or expansion option or other
similar right or option contained in this Lease be deemed applicable to any such
tenancy at sufferance. If the Premises are not surrendered at the end of the
Term or sooner termination of this Lease, and in accordance with the provisions
of Paragraphs 12 and 33(h), Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all loss or liability resulting from delay by
Tenant in so surrendering the Premises including, without limitation, any loss
or liability resulting from any claim against Landlord made by any succeeding
tenant or prospective tenant founded on or resulting from such delay and losses
to Landlord due to lost opportunities to lease any portion of the Premises to
any such succeeding tenant or prospective tenant, together with, in each case,
actual attorneys' fees and costs.
37. SUCCESSORS AND ASSIGNS
The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of
43
<PAGE> 50
more than one entity or person, the obligations of Tenant under this Lease shall
be joint and several.
38. TIME
Time is of the essence of this Lease and each and every term, condition and
provision herein.
39. BROKERS
Landlord and Tenant each represents and warrants to the other that neither
it nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker except the Broker(s) specified in the Basic Lease Information
in the negotiating or making of this Lease, and each party agrees to indemnify
and hold harmless the other from any claim or claims, and costs and expenses,
including attorneys' fees, incurred by the indemnified party in conjunction with
any such claim or claims of any other broker or brokers to a commission in
connection with this Lease as a result of the actions of the indemnifying party.
Landlord shall be responsible for a commission payable to Landlord's Broker in
connection with the execution of this Lease pursuant to a separate written
agreement between Landlord and Landlord's Broker, and Landlord's Broker shall be
solely responsible for any commission or fee payable to Tenant's Broker in
connection with this Lease or the subject matter hereof.
40. LIMITATION OF LIABILITY
Tenant agrees that, in the event of any default or breach by Landlord with
respect to any of the terms of the Lease to be observed and performed by
Landlord (1) Tenant shall look solely to the then-current landlord's interest in
the Building for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord;
(2) no other property or assets of Landlord, its partners, shareholders,
officers, directors, employees, investment advisors, or any successor in
interest of any of them (collectively, the "LANDLORD PARTIES") shall be subject
to levy, execution or other enforcement procedure for the satisfaction of
Tenant's remedies; (3) no personal liability shall at any time be asserted or
enforceable against any one or more of the Landlord Parties; and (4) no judgment
will be taken against any one or more of the Landlord Parties. The provisions of
this section shall apply only to the Landlord and the parties herein described,
and shall not be for the benefit of any insurer nor any other third party. This
provision shall survive the termination or expiration of this Lease.
44
<PAGE> 51
41. FINANCIAL STATEMENTS
Within ten (10) days after Landlord's request, Tenant shall deliver to
Landlord the then current financial statements of Tenant (including interim
periods following the end of the last fiscal year for which annual statements
are available), prepared or compiled by a certified public accountant, including
a balance sheet and profit and loss statement for the most recent prior year.
42. RULES AND REGULATIONS
Tenant agrees to comply with such reasonable rules and regulations as
Landlord may adopt from time to time for the orderly and proper operation of the
Building and the Project. Such rules may include but shall not be limited to the
following: (a) restriction of employee parking to a limited, designated area or
areas; and (b) regulation of the removal, storage and disposal of Tenant's
refuse and other rubbish at the sole cost and expense of Tenant. The then
current rules and regulations shall be binding upon Tenant upon delivery of a
copy of them to Tenant. Landlord shall not be responsible to Tenant for the
failure of any other person to observe and abide by any of said rules and
regulations. Landlord's current rules and regulations are attached to this Lease
as EXHIBIT D.
43. MORTGAGEE PROTECTION
(a) MODIFICATIONS FOR LENDER. If, in connection with obtaining financing
for the Project or any portion thereof, Landlord's lender shall request
reasonable modifications to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent to such
modifications, provided such modifications do not materially adversely affect
Tenant's rights or increase Tenant's obligations under this Lease.
(b) RIGHTS TO CURE. Tenant agrees to give to any trust deed or mortgage
holder ("HOLDER"), by registered mail, at the same time as it is given to
Landlord, a copy of any notice of default given to Landlord, provided that prior
to such notice Tenant has been notified, in writing, (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Holder shall have an
additional twenty (20) days after expiration of such period, or after receipt of
such notice from Tenant (if such notice to the Holder is required by this
Paragraph 43(b)), whichever shall last occur within which to cure such default
or if such default cannot be cured within that time, then such additional time
as may be necessary if within such twenty (20) days, any Holder has commenced
and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated.
45
<PAGE> 52
44. ENTIRE AGREEMENT
This Lease, including the Exhibits and any Addenda attached hereto, which
are hereby incorporated herein by this reference, contains the entire agreement
of the parties hereto, and no representations, inducements, promises or
agreements, oral or otherwise, between the parties, not embodied herein or
therein, shall be of any force and effect.
45. INTEREST
Any installment of Rent and any other sum due from Tenant under this Lease
which is not received by Landlord within ten (10) days from when the same is due
shall bear interest from the date such payment was originally due under this
Lease until paid at an annual rate equal to the maximum rate of interest
permitted by law. Payment of such interest shall not excuse or cure any Default
by Tenant. In addition, Tenant shall pay all costs and attorneys' fees incurred
by Landlord in collection of such amounts.
46. CONSTRUCTION
This Lease shall be construed and interpreted in accordance with the laws
of the State of California. The parties acknowledge and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Lease, including
the Exhibits and any Addenda attached hereto. All captions in this Lease are for
reference only and shall not be used in the interpretation of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural, the masculine shall include the feminine, and vice versa. If any
provision of this Lease shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect.
47. REPRESENTATIONS AND WARRANTIES OF TENANT
Tenant hereby makes the following representations and warranties, each of
which is material and being relied upon by Landlord, is true in all respects as
of the date of this Lease, and shall survive the expiration or termination of
the Lease.
(a) If Tenant is an entity, Tenant is duly organized, validly existing and
in good standing under the laws of the state of its organization and the persons
executing this Lease on behalf of Tenant have the full right and authority to
execute this Lease on behalf of Tenant and to bind Tenant without the consent or
approval of any other person or entity. Tenant has full power, capacity,
authority and legal right to execute and deliver this Lease and to perform all
of its obligations
46
<PAGE> 53
hereunder. This Lease is a legal, valid and binding obligation of Tenant,
enforceable in accordance with its terms.
(b) Tenant has not (1) made a general assignment for the benefit of
creditors, (2) filed any voluntary petition in bankruptcy or suffered the filing
of an involuntary petition by any creditors, (3) suffered the appointment of a
receiver to take possession of all or substantially all of its assets, (4)
suffered the attachment or other judicial seizure of all or substantially all of
its assets, (5) admitted in writing its inability to pay its debts as they come
due, or (6) made an offer of settlement, extension or composition to its
creditors generally.
48. SECURITY
(a) Tenant acknowledges and agrees that, while Landlord may engage security
personnel to patrol the Building or the Project, Landlord is not providing any
security services with respect to the Premises, the Building or the Project and
that Landlord shall not be liable to Tenant for, and Tenant waives any claim
against Landlord with respect to, any loss by theft or any other damage suffered
or incurred by Tenant in connection with any unauthorized entry into the
Premises or any other breach of security with respect to the Premises, the
Building or the Project.
(b) Tenant hereby agrees to the exercise by Landlord and Landlord's Agents,
within their sole discretion, of such security measures as, but not limited to,
the evacuation of the Premises, the Building or the Project for cause, suspected
cause or for drill purposes, the denial of any access to the Premises, the
Building or the Project and other similarly related actions that it deems
necessary to prevent any threat of property damage or bodily injury. The
exercise of such security measures by Landlord and Landlord's Agents, and the
resulting interruption of service and cessation of Tenant's business, if any,
shall not be deemed an eviction or disturbance of Tenant's use and possession of
the Premises, or any part thereof, or render Landlord or Landlord's Agents
liable to Tenant for any resulting damages or relieve Tenant from Tenant's
obligations under this Lease.
49. JURY TRIAL WAIVER
Tenant hereby waives any right to trial by jury with respect to any action
or proceeding (i) brought by Landlord, Tenant or any other party, relating to
(A) this Lease and/or any understandings or prior dealings between the parties
hereto, or (B) the Premises, the Building or the Project or any part thereof, or
(ii) to which Landlord is a party. Tenant hereby agrees that this Lease
constitutes a written consent to waiver of trial by jury pursuant to the
provisions of California Code of Civil Procedure Section 631, and Tenant does
hereby constitute and appoint Landlord its true and lawful attorney-in-fact,
which appointment is coupled with an interest, and Tenant does hereby authorize
and empower Landlord, in the name,
47
<PAGE> 54
place and stead of Tenant, to file this Lease with the clerk or judge of any
court of competent jurisdiction as a statutory written consent to waiver of
trial by jury.
50. OPTION TO RENEW
Tenant shall have one (1) option (the "RENEWAL OPTION") to extend the Term
for a period of five (5) years beyond the Expiration Date (the "RENEWAL TERM").
The Renewal Option shall be effective only if Tenant is not in Default under
this Lease beyond the expiration of any applicable cure period either at the
time of exercise of the Renewal Option or the time of commencement of the
Renewal Term. The Renewal Option must be exercised, if at all, by written notice
(the "ELECTION NOTICE") from Tenant to Landlord given not more than twelve (12)
months nor less than six (6)) months prior to the expiration of the initial
Term. Except as hereinafter provided in this Paragraph 50, any such notice given
by Tenant to Landlord shall be irrevocable. If Tenant fails to exercise the
Renewal Option in a timely manner as provided for above, the Renewal Option
shall be void. The Renewal Term shall be upon the same terms and conditions as
the initial Term, except that the annual Base Rent during the Renewal Term shall
be equal to an amount specified by Landlord in a written notice (the "RENEWAL
RATE NOTICE") to Tenant given prior to the expiration of the initial Term.
Tenant shall have ten (10) days after receipt of the Renewal Rate Notice (the
"RESPONSE PERIOD") to advise Landlord whether or not Tenant agrees to pay the
Base Rent specified in the Renewal Rate Notice. If Tenant agrees to pay such
Base Rent, then Landlord and Tenant shall promptly enter into an amendment to
this Lease providing for the lease of the Premises by Tenant during the Renewal
Term upon the terms stated in the Renewal Rate Notice. If Tenant does not agree
to pay the Base Rent specified in the Renewal Rate Notice, Tenant shall have the
right to rescind its Election Notice in writing within the Response Period and
neither party shall have any further rights or obligations under this Paragraph
50. If Tenant fails to provide Landlord with written notice of rescission prior
to the expiration of the Response Period, then Tenant shall be deemed to have
agreed to pay the Base Rent specified in the Renewal Rate Notice.
48
<PAGE> 55
Landlord and Tenant have executed and delivered this Lease as of the Lease
Date specified in the Basic Lease Information.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY, CLASSIFIEDS2000, INC.,
a Connecticut corporation a California corporation
By: Allegis Realty Investors LLC
Its Investment Advisor and Agent By: /s/ SANI EL-FISHAWY
-----------------------------
Print Name: SANI EL-FISHAWY
---------------------
Its: CEO
----------------------------
By: /s/ CYNTHIA STEVENIN
-------------------------------
Cynthia Stevenin
Vice President By: _____________________________
Print Name: _____________________
Its: ____________________________
49
<PAGE> 56
EXHIBIT A
DIAGRAM OF THE PREMISES
<PAGE> 57
EXHIBIT B
TENANT IMPROVEMENTS
This exhibit, entitled "TENANT IMPROVEMENTS", is and shall constitute
EXHIBIT B to the Lease Agreement, dated as of the Lease Date, by and between
Landlord and Tenant for the Premises. The terms and conditions of this EXHIBIT B
are hereby incorporated into and are made a part of the Lease. Capitalized terms
used, but not otherwise defined, in this EXHIBIT B have the meanings ascribed to
such terms in the Lease.
1. TENANT IMPROVEMENTS
Subject to the conditions set forth below, Landlord agrees to construct
certain Tenant Improvements in the Premises pursuant to the terms of this
EXHIBIT B.
2. DEFINITION
"TENANT IMPROVEMENTS" as used in the Lease and this EXHIBIT B shall include
only those improvements within the interior portions of the Premises which are
depicted on the Final Plans and Specifications (hereafter defined in Paragraph
3) or described hereinbelow. "TENANT IMPROVEMENTS" shall specifically not
include any Alterations installed or constructed by Tenant, and any of Tenant's
Property.
The Tenant Improvements may include:
(a) Partitioning, doors, floor coverings, finishes, ceilings, wall
coverings and painting, millwork and similar items.
(b) Electrical wiring, lighting fixtures, outlets and switches, and other
electrical work.
(c) Duct work, terminal boxes, diffusers and accessories required for the
completion of the heating, ventilation and air conditioning systems serving the
Premises, including the cost of meter and key control for after-hour air
conditioning.
(d) Any additional Tenant requirements including, but not limited to odor
control, special heating, ventilation and air conditioning, noise or vibration
control or other special systems.
(e) All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Building and serving the Premises.
B-1
<PAGE> 58
(f) All plumbing, fixtures, pipes, and accessories to be installed within
the Building and serving the Premises.
3. PLANS AND SPECIFICATIONS
Landlord shall retain the architect specified in the Basic Lease
Information ("ARCHITECT") for the preparation of preliminary and final working
architectural and engineering plans and specifications for the Tenant
Improvements ("PLANS AND SPECIFICATIONS"). Tenant shall cooperate with the
Architect and shall furnish within ten (10) days after request therefor, all
information required by the Architect for completion of the Plans and
Specifications, and shall provide (in writing, if requested by Landlord), not
later than three (3) business days after request therefor, any approval or
disapproval of the Plans and Specifications which Tenant is permitted to give
under this EXHIBIT B. The Plans and Specifications shall be subject to
Landlord's approval, which approval shall not be unreasonably withheld. The
Plans and Specifications approved by Landlord shall be referred to herein as the
"FINAL PLANS AND SPECIFICATIONS." Landlord shall not be deemed to have acted
unreasonably if it withholds its approval of any plans, specifications, drawings
or other details or of any Change Request (hereafter defined in Paragraph 7
below) because, in Landlord's reasonable opinion, the work as described in any
such item, or any Change Request, as the case may be: (a) is likely to adversely
affect Building systems, the structure of the Building or the safety of the
Building and/or its occupants; (b) might impair Landlord's ability to furnish
services to Tenant; (c) would increase the cost of operating the Building or the
Project (unless Tenant agrees in writing to pay the full amount of any such
increase); (d) would violate any Laws; (e) contains or uses Hazardous Materials;
(f) would adversely affect the appearance of the Building or the Project or the
marketability of the Premises to subsequent tenants; (g) is prohibited by any
ground lease affecting the Building and/or the Project, any Private Restrictions
or any mortgage, trust deed or other instrument encumbering the Building and/or
the Project; (h) is likely to be substantially delayed because of unavailability
or shortage of labor or materials necessary to perform such work or the
difficulties or unusual nature of such work; (i) is not, at a minimum in
accordance with Landlord's building standards, or (j) would increase the Tenant
Improvements Cost (defined in Paragraph 6 below) by more than ten percent (10%)
from the cost originally estimated and anticipated by the parties. The foregoing
reasons, however, shall not be the only reasons for which Landlord may withhold
its approval, whether or not such other reasons are similar or dissimilar to the
foregoing. Neither the approval by Landlord of the Final Plans and
Specifications or any other plans, specifications, drawings or other items
associated with the Tenant Improvements nor Landlord's performance, supervision
or monitoring of the Tenant Improvements shall constitute any warranty or
covenant by Landlord to Tenant of the adequacy of the design for Tenant's
intended use of the Premises. As between Landlord and Tenant, Tenant agrees to,
and does hereby, assume full and complete responsibility to ensure that the
Tenant Improvements and the Final Plans and Specifications are adequate to
B-2
<PAGE> 59
fully meet the needs and requirements of Tenant's intended operations of its
business within the Premises and Tenant's use of the Premises. Landlord and
Tenant shall indicate their approval of the Final Plans and Specifications by
initialing them and attaching them to the Lease as EXHIBIT B-1. Upon completion
of the Final Plans and Specifications and approval thereof by Landlord and
Tenant, Landlord will obtain one or more bids for the work shown on the Final
Plans and Specifications and furnish a cost breakdown to Tenant. In the event
the estimated Tenant Improvements Cost, based on such bid(s) and the reasonably
anticipated costs of other items constituting the Tenant Improvements Cost,
exceeds the Tenant Improvements Allowance (hereafter defined in Paragraph 5),
plus any amounts which Tenant desires to pay as an Excess Tenant Improvements
Cost (hereafter defined in Paragraph 7) ("TENANT'S T.I. BUDGET"), at Tenant's
request, the Final Plans and Specifications may be revised, at Tenant's cost and
expense. Any such revisions shall be subject to Landlord's approval, and the
amended Final Plans and Specifications, as approved by Landlord and Tenant,
shall thereafter be deemed to be the Final Plans and Specifications for the
Tenant Improvements. The amended Final Plans and Specifications shall be
approved by Tenant (in writing, if requested by Landlord) not later than three
(3) business days after Landlord's request therefor. Landlord shall thereafter
submit such amended Final Plans and Specifications to its contractor (the
"CONTRACTOR") for re-bidding, and shall furnish a cost breakdown to Tenant. If
the estimated Tenant Improvements Cost, as determined by the bids based on the
amended Final Plans and Specifications and the reasonably anticipated costs of
other items constituting the Tenant Improvements Cost, result in an Excess
Tenant Improvements Cost, then Tenant shall pay such Excess Tenant Improvements
Cost as and when required by Paragraph 8. Tenant's failure to approve or
disapprove any matters which Tenant shall be entitled to approve or disapprove
pursuant to this Paragraph 3 shall be conclusively deemed to be approval of same
by Tenant.
4. LANDLORD TO CONSTRUCT IMPROVEMENTS
When the Final Plans and Specifications (as amended, if required by
Paragraph 3 above) have been approved by Landlord and Tenant, Landlord shall
submit such Final Plans and Specifications to all governmental authorities
having rights of approval over the Tenant Improvement work and shall apply for
all governmental approvals and building permits. Subject to satisfaction of all
conditions precedent and subsequent to its obligations under this EXHIBIT B, and
further subject to the provisions of Paragraph 7, Landlord shall thereafter
direct the Contractor to commence and proceed to complete construction of the
Tenant Improvements in accordance with the Final Plans and Specifications. The
Contractor shall be engaged by Landlord pursuant to a guaranteed maximum price
contract.
B-3
<PAGE> 60
5. TENANT IMPROVEMENTS ALLOWANCE
(a) Landlord shall provide an allowance for the planning and construction
of the Tenant Improvements in the amount specified in the Basic Lease
Information ("TENANT IMPROVEMENTS ALLOWANCE"). The Tenant Improvements Allowance
shall be the maximum contribution by Landlord for the Tenant Improvements Cost.
Should the actual cost of planning and constructing those Tenant Improvements
depicted on the Final Plans and Specifications be less than the Tenant
Improvements Allowance, the Tenant Improvements Allowance shall be reduced to an
amount equal to said actual cost.
(b) In the event the actual cost of constructing the Tenant Improvements
depicted on the Final Plans and Specifications is less than the Tenant
Improvements Allowance, then Landlord and Tenant shall set forth the amount of
the unused Tenant Improvements Allowance (the "REMAINING ALLOWANCE") on the
Commencement Date Memorandum. Landlord shall thereafter disburse the Remaining
Allowance to Tenant to reimburse Tenant for costs actually incurred in making
Alterations to the Premises pursuant to Paragraph 13 above as necessary to
re-demise the Premises following the expiration of the Limited Sublease. Tenant
shall provide Landlord with invoices, receipts and other documentation
reasonably requested by Landlord to substantiate such costs.
6. TENANT IMPROVEMENTS COST
The Tenant Improvements Cost ("TENANT IMPROVEMENTS COST") shall include all
costs and expenses associated with the design, preparation, approval and
construction of the Tenant Improvements, including, but not limited, to the
following:
(a) All costs of preliminary and final architectural and engineering plans
and specifications for the Tenant Improvements, and engineering costs associated
with completion of the State of California energy utilization calculations under
Title 24 legislation;
(b) All costs of obtaining building permits and other necessary
authorizations and approvals from local governmental authorities;
(c) All costs of interior design and finish schedule plans and
specifications including as-built drawings;
(d) All direct and indirect costs of procuring, constructing and installing
the Tenant Improvements in the Premises, including, but not limited to, the
construction fee for overhead and profit and the cost of all on-site supervisory
and administrative staff, office, equipment and temporary services rendered by
Landlord, Landlord's consultants and property manager and the Contractor in
B-4
<PAGE> 61
connection with construction of the Tenant Improvements and all labor (including
overtime) and materials constituting the Tenant Improvements;
(e) All fees payable to the Architect, the Contractor, subcontractors and
Landlord's engineering firm if they are required by Tenant and/or any
governmental authorities to redesign any portion of the Tenant Improvements
following Tenant's approval of the Final Plans and Specifications;
(f) All construction and project management fees payable by Landlord to
Landlord's property management company or any other individual or entity;
provided, however, that the construction management fee payable to Landlord's
property management company shall not exceed an amount equal to four percent
(4%) of the Tenant Improvements Cost; and
(g) Utility connection fees.
In no event shall the Tenant Improvements Cost include any costs of
procuring, constructing or installing in the Premises any of Tenant's Property.
7. EXCESS TENANT IMPROVEMENTS COST
If the Tenant Improvements Cost is more than the Tenant Improvements
Allowance, then the difference between the Tenant Improvements Cost and the
Tenant Improvements Allowance ("EXCESS TENANT IMPROVEMENTS COST") shall be paid
by Tenant to Landlord in cash, within ten (10) days of delivery of statements
from Landlord to Tenant therefor. If construction of the Tenant Improvements
will result in an Excess Tenant Improvements Cost, Landlord shall not be
obligated to commence or continue construction of the Tenant Improvements if
payment of the Excess Tenant Improvements Costs by Tenant is not received within
ten (10) days after delivery by Landlord to Tenant of a statement therefor;
provided, however, that Landlord may, at its option, commence or continue
construction of the Tenant Improvements, in which event Tenant shall pay the
Excess Tenant Improvements Cost within ten (10) days after delivery by Landlord
to Tenant of the statement therefor. If Landlord so elects to commence
construction of the Tenant Improvements or has already commenced construction of
the Tenant Improvements when there occurs an Excess Tenant Improvements Cost,
then Landlord shall be entitled to suspend or terminate construction of the
Tenant Improvements if payment by Tenant to Landlord of the Excess Tenant
Improvement Costs has not been received within ten (10) days after delivery by
Landlord to Tenant of a statement therefor.
8. CHANGE REQUEST
When the Final Plans and Specifications have been approved by Landlord,
there shall be no changes without Landlord's prior written consent, except for
B-5
<PAGE> 62
(a) necessary on-site installation variations or minor changes necessary to
comply with building codes and other governmental regulations; (b) one or more
revisions, if requested by Tenant, to adjust the estimated Tenant Improvements
Cost to Tenant's T.I. Budget therefor, as permitted by Paragraph 3 above; and
(c) changes approved in writing by both parties. Any costs related to such
governmentally required or requested and approved changes shall be added to the
Tenant Improvements Cost and, to the extent such cost results in Excess Tenant
Improvements Cost, shall be paid for by Tenant as and with any Excess Tenant
Improvements Cost as set forth in Paragraph 8. The billing for such additional
costs to Tenant shall be accompanied by evidence of the amounts billed as is
customarily used in the business. Costs related to changes shall include,
without limitation, any architectural or design fees, construction management
fees and the Contractor's price for effecting the change.
9. TERMINATION
(a) Notwithstanding anything to the contrary contained in the Lease, in the
event the City of Sunnyvale (the "CITY") fails to issue a building permit for
the construction of the Tenant Improvements within sixty (60) days after the
submission to the City of the Final Plans and Specifications, together with such
additional documents as the City shall require in connection therewith (the
"PERMIT PERIOD"), and provided that the delay by the City is not caused by any
action or inaction on the part of Tenant, Tenant shall have the right to
terminate the Lease by written notice given to Landlord, if at all, not later
than ten (10) days after the end of the Permit Period. If Tenant fails to
deliver a notice of termination to Landlord in a timely manner as provided
herein, then Tenant's right to terminate the Lease under this Paragraph 9(a)
shall lapse and shall thereafter be null and void.
(b) If the Lease is terminated prior to completion of the Tenant
Improvements for any reason due to the Default of Tenant under the Lease, in
addition to any other damages available to Landlord, Tenant shall pay to
Landlord, within five (5) days of receipt of a statement therefor, all costs
incurred by Landlord through the date of termination in connection with the
Tenant Improvements. Landlord shall have the right to terminate the Lease, upon
written notice to Tenant, if Landlord is unable to obtain a building permit for
the Tenant Improvements within one hundred twenty (120) days from the date the
Lease is mutually executed.
10. INTEREST
Any payments required to be made by Tenant hereunder which are not paid
when due shall bear interest at the maximum rate permitted by law from the due
date therefor until paid.
B-6
<PAGE> 63
11. DISCLAIMER
Landlord shall have no liability to Tenant in the event construction of the
Tenant Improvements is delayed or prevented due to any cause beyond Landlord's
reasonable control. If Tenant is entitled or permitted to enter the Premises
prior to completion of the Tenant Improvements, Landlord shall not be liable to
Tenant or Tenant's Agents for any loss or damage to property, or injury to
person, arising from or related to such entry. Tenant shall take all reasonable
precautions to protect against such loss, damage or injury during construction
of the Tenant Improvements, and shall not interfere with the conduct of the
Tenant Improvement work. Tenant shall cooperate with all reasonable directives
of Landlord and the Contractor in order to minimize any disruption or delay in
completion of the Tenant Improvements work.
12. CONSTRUCTION WARRANTIES
Landlord shall obtain from the Contractor warranties (collectively,
"Construction Warranties") for all components of the Tenant Improvements for
which warranties are customarily provided in the construction industry. To the
extent Tenant is required to maintain and repair the Premises or any portion
thereof pursuant to the Lease and such maintenance and repair is covered by any
Construction Warranty, Landlord shall enforce such Construction Warranty or
shall assign such Construction Warranty to Tenant and permit Tenant to enforce
the same.
13. LEASE PROVISIONS; CONFLICT
The terms and provisions of the Lease, insofar as they are applicable, in
whole or in part, to this EXHIBIT B, are hereby incorporated herein by
reference. In the event of any conflict between the terms of the Lease and this
EXHIBIT B, the terms of this EXHIBIT B shall prevail. Any amounts payable by
Tenant to Landlord hereunder shall be deemed to be Additional Rent under the
Lease and, upon any default in the payment of same, Landlord shall have all
rights and remedies available to it as provided for in the Lease.
B-7
<PAGE> 64
EXHIBIT B-1
FINAL PLANS AND SPECIFICATIONS FOR
TENANT IMPROVEMENTS
Reference is hereby made to that certain Lease Agreement dated February 20,
1998 by and between AETNA LIFE INSURANCE COMPANY, a Connecticut corporation, as
landlord ("LANDLORD"), and CLASSIFIEDS2000, INC., a California corporation, as
tenant ("TENANT") ("LEASE Agreement").
The Final Plans and Specifications (as defined in EXHIBIT B to the Lease
Agreement) consists of the following described drawings, specifications and
other documents:
Title of Drawing, Specification or
Other Document Date
The Final Plans and Specifications have been initialed by both Landlord and
Tenant and are on file with Landlord.
Initials: Landlord _______ Tenant _______
<PAGE> 65
EXHIBIT C
COMMENCEMENT AND EXPIRATION DATE MEMORANDUM
LANDLORD: AETNA LIFE INSURANCE COMPANY
TENANT: CLASSIFIEDS2000, INC.
LEASE DATE: February 20, 1998
PREMISES: Located at 955 Benecia Avenue, Sunnyvale, California
Tenant hereby accepts the Premises as being in the condition required under
the Lease, with all Tenant Improvements completed (except for minor punchlist
items which Landlord agrees to complete).
Landlord has expended _________________________ Dollars ($____________) of
the Tenant Improvements Allowance pursuant to EXHIBIT B of the Lease in
connection with the planning, design and construction of the Tenant
Improvements. The balance of the Tenant Improvements Allowance,
_________________________ Dollars ($____________), is available for application
by Tenant toward the cost of Alterations in accordance with Paragraph 5(b) of
said EXHIBIT B.
The Commencement Date of the Lease is hereby established as , 1998 and the
Expiration Date is , 2003.
TENANT: CLASSIFIEDS2000, INC.
a California corporation
By: _____________________________________
Print Name: _____________________________
Its: ____________________________________
C-1
<PAGE> 66
Approved and Agreed:
LANDLORD:
AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Allegis Realty Investors LLC
Its Investment Advisor and Agent
By: __________________________________
Cynthia Stevenin
Vice President
C-2
<PAGE> 67
EXHIBIT D
RULES AND REGULATIONS
This exhibit, entitled "Rules and Regulations," is and shall constitute
Exhibit D to the Lease Agreement, dated as of the Lease Date, by and between
landlord and Tenant for the Premises. The terms and conditions of this Exhibit D
are hereby incorporated into and are made a part of the Lease. Capitalized terms
used, but not otherwise defined, in this Exhibit D have the meanings ascribed to
such terms in the Lease.
1. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the consent of Landlord.
2. All window coverings installed by Tenant and visible from the outside
of the building require the prior written approval of Landlord.
3. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on or around
the Premises, except to the extent that Tenant is permitted to use the same
under the terms of Paragraph 33 of the Lease.
4. Tenant shall not alter any lock or install any new locks or bolts on
any door at the Premises without the prior consent of Landlord.
5. Tenant shall not make any duplicate keys without the prior consent of
Landlord.
6. Tenant shall park motor vehicles in parking areas designated by
Landlord except for loading and unloading. During those periods of loading and
unloading, Tenant shall not unreasonably interfere with traffic flow around the
Building or the Project and loading and unloading areas of other tenants. Tenant
shall not park motor vehicles in designated parking areas after the conclusion
of normal daily business activity.
7. Tenant shall not disturb, solicit or canvas any tenant or other
occupant of the Building or Project and shall cooperate to prevent same.
8. No person shall go on the roof without Landlord's permission.
9. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Landlord or other tenants,
shall be placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or in noise-dampening housing or other devices sufficient to
eliminate noise or vibration.
D-1
<PAGE> 68
10. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and shall not be
left in parking or receiving areas overnight.
11. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks under the
dolly wheels to prevent damage to the asphalt paving surfaces. No parking or
storing of such trailers will be permitted in the auto parking areas of the
Project or on streets adjacent thereto.
12. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
13. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable receptacles
stored behind screened enclosures at locations approved by Landlord.
14. Tenant shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No displays
or sales of merchandise shall be allowed in the parking lots or other common
areas.
15. Tenant shall not permit any animals, including but not limited to, any
household pets, to be brought or kept in or about the Premises, the Building,
the Project or any of the common areas.
INITIALS:
TENANT:______________
LANDLORD:____________
D-2
<PAGE> 69
EXHIBIT E
SIGN CRITERIA
<PAGE> 70
EXHIBIT F
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord to evaluate your proposed uses of the premises (the "PREMISES")
and to determine whether to enter into a lease agreement with you as tenant. If
a lease agreement is signed by you and the Landlord (the "LEASE AGREEMENT"), on
an annual basis in accordance with the provisions of Paragraph 33 of the Lease
Agreement, you are to provide an update to the information initially provided by
you in this certificate. Any questions regarding this certificate should be
directed to, and when completed, the certificate should be delivered to:
Landlord: Aetna Life Insurance Company
c/o Allegis Realty Investors LLC
455 Market Street, Suite 1540
San Francisco, California 94105
Attention: Cynthia Stevenin
Phone: (415) 538-4800
Name of (Prospective) Tenant: Classifieds2000, Inc.
Mailing Address: __________________________________________________________
___________________________________________________________________________
Contact Person, Title and Telephone Number(s): ____________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): ______________________________________________________
___________________________________________________________________________
Address of (Prospective) Premises: ________________________________________
Length of (Prospective) initial Term: _____________________________________
___________________________________________________________________________
F-1
<PAGE> 71
1. GENERAL INFORMATION:
Describe the proposed operations to take place in, on, or about the
Premises, including, without limitation, principal products processed,
manufactured or assembled, and services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed changes to
on-going operations.
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials (as hereinafter defined) be used,
generated, treated, stored or disposed of in, on or about the
Premises? Existing tenants should describe any Hazardous Materials
which continue to be used, generated, treated, stored or disposed of
in, on or about the Premises.
Wastes Yes 0 No 0
Chemical Products Yes 0 No 0
Other Yes 0 No 0
If Yes is marked, please explain: ____________________________________
______________________________________________________________________
______________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, treated, stored or disposed of in, on
or about the Premises, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials to be present
on or about the Premises at any given time; estimated annual
throughput; the proposed location(s) and method of storage (excluding
nominal amounts of ordinary household cleaners and janitorial supplies
which are not regulated by any Environmental Laws, as hereinafter
defined); and the proposed location(s) and method(s) of treatment or
disposal for each Hazardous Material, including, the estimated
frequency, and the proposed contractors or subcontractors. Existing
tenants should attach a list setting forth the information requested
above and such list should include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
F-2
<PAGE> 72
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage or treatment of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps proposed in,
on or about the Premises? Existing tenants should describe any such
actual or proposed activities.
Yes 0 No 0
If yes, please explain: ______________________________________________
______________________________________________________________________
______________________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing tenants should describe any additional identification
numbers issued since the previous certificate.
Yes 0 No 0
4.2 Has your company filed a biennial or quarterly reports as a hazardous
waste generator? Existing tenants should describe any new reports
filed.
Yes 0 No 0
If yes, attach a copy of the most recent report filed.
F-3
<PAGE> 73
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
_____ storm drain? _____ sewer?
_____ surface water? _____ no wastewater or other
wastes discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
5.2 Will any such wastewater or waste be treated before discharge?
Yes 0 No 0
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used in
your company's operations in, on or about the Premises that will
discharge into the air; and will such air emissions be monitored?
Existing tenants should indicate whether or not there are any such air
filtration systems or stacks in use in, on or about the Premises which
discharge into the air and whether such air emissions are being
monitored.
Yes 0 No 0
If yes, please describe: _____________________________________________
______________________________________________________________________
______________________________________________________________________
6.2 Do you propose to operate any of the following types of equipment, or
any other equipment requiring an air emissions permit? Existing
tenants should specify any such equipment being operated in, on or
about the Premises.
_____ Spray booth(s) _____ Incinerator(s)
_____ Dip tank(s) _____ Other (Please describe)
_____ Drying oven(s) _____ No Equipment Requiring Air Permits
If yes, please describe: _____________________________________________
______________________________________________________________________
______________________________________________________________________
F-4
<PAGE> 74
6.3 Please describe (and submit copies of with this Hazardous Materials
Disclosure Certificate) any reports you have filed in the past
[thirty-six] months with any governmental or quasi-governmental
agencies or authorities related to air discharges or clean air
requirements and any such reports which have been issued during such
period by any such agencies or authorities with respect to you or your
business operations.
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("MANAGEMENT PLAN") or Hazardous
Materials Business Plan and Inventory ("BUSINESS PLAN") pursuant to
Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes 0 No 0
If yes, attach a copy of the Management Plan or Business Plan.
Existing tenants should attach a copy of any required updates to the
Management Plan or Business Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the Premises
listed or regulated under Proposition 65? Existing tenants should
indicate whether or not there are any new Hazardous Materials being so
used which are listed or regulated under Proposition 65.
Yes 0 No 0
If yes, please describe: _____________________________________________
______________________________________________________________________
______________________________________________________________________
F-5
<PAGE> 75
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company received
requests for information, notice or demand letters, or any other
inquiries regarding its operations? Existing tenants should indicate
whether or not any such actions, orders or decrees have been, or are
in the process of being, undertaken or if any such requests have been
received.
Yes 0 No 0
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders or
decrees and also describe any requests, notices or demands, and attach
a copy of all such documents. Existing tenants should describe and
attach a copy of any new actions, orders, decrees, requests, notices
or demands not already delivered to Landlord pursuant to the
provisions of Paragraph 33 of the Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety
concerns?
Yes 0 No 0
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and other documents
related thereto as requested by Landlord. Existing tenants should
describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not already
delivered to Landlord pursuant to the provisions of Paragraph 33 of
the Lease Agreement.
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises and the current status of any
such problems or complaints.
Yes 0 No 0
F-6
<PAGE> 76
If yes, please describe. Existing tenants should describe any such
problems or complaints not already disclosed to Landlord under the
provisions of the signed Lease Agreement and the current status of any
such problems or complaints.
9. PERMITS AND LICENSES
9.1 Attach copies of all permits and licenses issued to your company with
respect to its proposed operations in, on or about the Premises,
including, without limitation, any Hazardous Materials permits,
wastewater discharge permits, air emissions permits, and use permits
or approvals. Existing tenants should attach copies of any new permits
and licenses as well as any renewals of permits or licenses previously
issued.
As used herein, "HAZARDOUS MATERIALS" shall mean and include any substance
that is or contains (a) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA") (42 U.S.C. Section 9601 et seq.) or
any regulations promulgated under CERCLA; (b) any "hazardous waste" as now or
hereafter defined in the Resource Conservation and Recovery Act, as amended
("RCRA") (42 U.S.C. Section 6901 et seq.) or any regulations promulgated under
RCRA; (c) any substance now or hereafter regulated by the Toxic Substances
Control Act, as amended ("TSCA") (15 U.S.C. Section 2601 et seq.) or any
regulations promulgated under TSCA; (d) petroleum, petroleum by-products,
gasoline, diesel fuel, or other petroleum hydrocarbons; (e) asbestos and
asbestos-containing material, in any form, whether friable or non-friable; (f)
polychlorinated biphenyls; (g) lead and lead-containing materials; or (h) any
additional substance, material or waste (A) the presence of which on or about
the Premises (i) requires reporting, investigation or remediation under any
Environmental Laws (as hereinafter defined), (ii) causes or threatens to cause a
nuisance on the Premises or any adjacent property or poses or threatens to pose
a hazard to the health or safety of persons on the Premises or any adjacent
property, or (iii) which, if it emanated or migrated from the Premises, could
constitute a trespass, or (B) which is now or is hereafter classified or
considered to be hazardous or toxic under any Environmental Laws; and
"ENVIRONMENTAL LAWS" shall mean and include (a) CERCLA, RCRA and TSCA; and (b)
any other federal, state or local laws, ordinances, statutes, codes, rules,
regulations, orders or decrees now or hereinafter in effect relating to (i)
pollution, (ii) the protection or regulation of human health, natural resources
or the environment, (iii) the treatment, storage or disposal of Hazardous
Materials, or (iv) the emission, discharge, release or threatened release of
Hazardous Materials into the environment.
The undersigned hereby acknowledges and agrees that this Hazardous
Materials Disclosure Certificate is being delivered to Landlord in connection
with the evaluation of a Lease Agreement and, if such Lease Agreement is
executed, will
F-7
<PAGE> 77
be attached thereto as an exhibit. The undersigned further acknowledges and
agrees that if such Lease Agreement is executed, this Hazardous Materials
Disclosure Certificate will be updated from time to time in accordance with
Paragraph 33 of the Lease Agreement. The undersigned further acknowledges and
agrees that the Landlord and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement. I [print name] ____________________, acting with full
authority to bind the (proposed) Tenant and on behalf of the (proposed) Tenant,
certify, represent and warrant that the information contained in this
certificate is true and correct.
(PROSPECTIVE) TENANT:
CLASSIFIEDS2000, INC.,
a California corporation
By: /s/ SANI EL-FISHAWY
------------------------------------
Title: PRESIDENT
------------------------------------
Date: 2/9/98
------------------------------------
INITIALS:
TENANT: /s/ SE
--------------
/s/ CS
LANDLORD: --------------
F-8
<PAGE> 1
EXHIBIT 10.21
CONSENT TO SUBLETTING
THIS AGREEMENT (this "Agreement") is made as of the 7th day of December,
1998, by and between AETNA LIFE INSURANCE COMPANY, a Connecticut corporation
("Landlord"), CLASSIFIEDS2000, INC., a California corporation ("Tenant"), and
GENERAL MAGIC, INC., a Delaware corporation ("Subtenant"), with reference to the
following facts:
A. Landlord and Tenant have previously entered into that certain Lease
Agreement dated February 20, 1998 (the "Master Lease"), relating to certain
premises more particularly described in the Master Lease ("Premises").
B. Tenant and Subtenant have entered into a Sublease dated as of December
4, 1998 ("Sublease"). By the terms of the Sublease, Tenant will sublease to
Subtenant and Subtenant will sublease from Tenant a portion of the Premises, as
more particularly described in the Sublease ("Sublease Premises").
C. Tenant is wholly-owned by Excite, Inc., a Delaware corporation
("Guarantor"). Concurrently herewith, Guarantor has executed a Guaranty of Lease
with respect to the Master Lease for the purpose of inducing Landlord to consent
to the Sublease.
D. Tenant has requested that Landlord consent to Tenant subletting the
Sublease Premises to Subtenant pursuant to the Sublease. Landlord has agreed to
consent to the subletting on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing, and in consideration of
the mutual agreements and covenants hereinafter set forth, Landlord, Tenant and
Subtenant agree as follows:
1. DEFINITIONS. Unless otherwise defined in this Agreement, all defined
terms used in this Agreement shall have the same meaning and definition given
them in the Master Lease.
2. MASTER LEASE.
2.1 The Sublease is and shall be at all times subject to all of the
terms and conditions of the Master Lease and, notwithstanding anything to the
contrary contained in the Sublease, Subtenant agrees to perform all of the
covenants of Tenant contained in the Master Lease insofar as the same relate to
the Sublease Premises. Notwithstanding the foregoing, (a) Subtenant shall be
required to pay Base Rent under the Sublease only in the amounts set forth in
the Sublease, (b) Tenant shall be responsible for the delivery of the Security
Deposit and the Letter of Credit to Landlord and Subtenant shall have no
responsibility therefor, and (c) Exhibit B and Exhibit B-1 shall not apply to
the Sublease.
2.2 Subtenant acknowledges and agrees that the Sublease shall at all
times be subordinate to the Master Lease and the term of the Sublease shall
automatically terminate upon the termination of the Master Lease for any reason
whatsoever, including,
1
<PAGE> 2
without limitation, the termination of the Master Lease prior to the expiration
of the term thereof pursuant to a written agreement by and between Landlord and
Tenant; provided, however, that in the event Subtenant elects to cure a default
by Tenant under the Master Lease in accordance with any cure rights granted to
Tenant therein, Landlord shall accept such cure by Subtenant. Notwithstanding
any provision to the contrary in the Sublease or in any other agreement,
Subtenant acknowledges that it shall have no right and there shall not be vested
in Subtenant any right to exercise rights of first refusal, options, or other
similar preferential rights, if any, given to Tenant under the Master Lease.
3. CONSENT OF LANDLORD. Landlord hereby consents to the subletting of the
Sublease Premises to Subtenant pursuant to the terms of the Sublease, provided,
however, that Landlord specifically does not consent to any provision of the
Sublease which purports to amend provisions of the Master Lease. Landlord's
consent shall not release Tenant of any of its obligations under the Master
Lease or release or alter the liability of Tenant to pay rent and all other sums
due under the Master Lease and to perform and comply with all other obligations
of Tenant under the Master Lease. As between Landlord and Tenant, the Sublease
shall not alter, amend or otherwise modify any provisions of the Master Lease.
Landlord shall have no obligations to any party in connection with the Sublease
Premises other than those obligations set forth in the Master Lease.
4. ASSIGNMENT OF RENT.
4.1 Subject to the terms of Section 4.2, Tenant hereby absolutely and
irrevocably assigns and transfers to Landlord Tenant's rights under the Sublease
to all rentals and other sums due Tenant under the Sublease.
4.2 Landlord agrees that until a default shall occur in the
performance of Tenant's obligations under the Master Lease, Tenant shall have a
license to receive, collect and enjoy the rentals and other sums due Tenant
under the Sublease. However, said license shall automatically terminate without
notice to Tenant upon the occurrence of a default by Tenant in the performance
of its obligations under the Master Lease and Landlord may thereafter, at its
option, receive and collect, directly from Subtenant, all rentals and other sums
due or to be due Tenant under the Sublease. Landlord shall not, by reason of the
assignment of all rentals and other sums due Tenant under the Sublease nor by
reason of the collection of said rentals or other sums from the Subtenant, (a)
be bound by or become a party to the Sublease, (b) be deemed to have accepted
the attornment of Subtenant, or (c) be deemed liable to Subtenant for any
failure of Tenant to perform and comply with Tenant's obligations under the
Sublease. Tenant hereby irrevocably authorizes and directs Subtenant, upon
receipt of any written notice from Landlord stating that a default exists in the
performance of Tenant's obligations under the Master Lease, to pay directly to
Landlord the rents and other income due and to become due under the Sublease.
Tenant agrees that Subtenant shall have the right to rely solely upon such
notice from Landlord notwithstanding any conflicting demand by Tenant or any
other party. Tenant hereby agrees to indemnify, defend and hold Subtenant
harmless from any
2
<PAGE> 3
and all claims, losses, liabilities, judgments, costs, demands, causes of action
and expenses (including, without limitation, attorneys' fees and consultants'
fees) (collectively, "Claims") which Subtenant may incur in relying on any
written notice from Landlord and/or paying rent and other sums due under the
Sublease directly to Landlord in accordance with this Section 4.2.
5. INDEMNIFICATION; INSURANCE.
5.1 Tenant shall indemnify and hold harmless Landlord and its Agents,
against and from any and all Claims arising from or related to the following:
(a) Subtenant's use of the Sublease Premises or any activity done, permitted or
suffered by Subtenant in, on or about the Sublease Premises, the Building, or
the Project; (b) any act or omission by Subtenant or its Agents in connection
with or related to the Sublease, the Sublease Premises, the Building, or the
Project; (c) any Hazardous Material used, stored, released, disposed, generated,
or transported by Subtenant or its Agents in, on, or about the Sublease
Premises, the Building or the Project, including without limitation, any Claims
arising from or related to any Hazardous Material investigations, monitorings,
cleanup or other remedial action; and (d) any action or proceeding brought on
account of any matter referred to in items (a), (b), and/or (c). If any action
or proceeding is brought against Landlord by reason of any such Claims, upon
notice from Landlord, Tenant shall defend the same at Tenant's expense with
counsel reasonably satisfactory to Landlord. The obligations of Tenant under
this Section 5.1 shall survive any termination of the Sublease or the Master
Lease.
5.2 Notwithstanding any provision to the contrary in the Sublease,
Subtenant shall, at Subtenant's expense, with respect to the Sublease Premises,
secure and keep in force during the term of the Sublease such insurance as
required of Tenant under the Master Lease. Without limiting the generality of
the immediately preceding sentence, the policy or policies of such insurance
shall name Landlord and its lenders, if any, as additional insureds. A
certificate evidencing such insurance shall be delivered to Landlord promptly
after the date hereof.
5.3 Landlord and Subtenant hereby mutually waive any claim against the
other during the Term for any injury to a person or loss or damage to any of
their property located on or about the Premises, the Building or the Property
that is caused by perils covered by insurance carried by the respective parties
or required to be carried by the Master Lease or this Agreement, as applicable,
to the extent of the proceeds of such insurance actually received (or which
would have been received but for the failure of the party required to maintain
the applicable insurance to maintain such insurance as required under the Master
Lease) with respect to such injury, loss or damage, whether or not due to the
negligence of the other party of its agents. Because the foregoing waivers will
preclude the assignment of any claim by way of subrogation to an insurance
company or any other person, each party now agrees to immediately give to its
insurer written notice of the terms of these mutual waivers and shall have their
insurance policies endorsed to prevent the invalidation of the insurance
coverage because of these waivers. Nothing in
3
<PAGE> 4
this Paragraph 5.3 shall relieve a party of liability to the other for failure
to carry insurance required by the Master Lease or by this Agreement.
6. MISCELLANEOUS PROVISIONS.
6.1 Tenant shall pay to Landlord, upon Landlord's demand, Landlord's
reasonable fees incurred in connection with Landlord's review and processing of
documents relating to the subletting of the Sublease Premises to Subtenant.
6.2 Tenant and Subtenant each represents and warrants to Landlord that
neither it nor its officers or agents nor anyone acting on its behalf has dealt
with any real estate broker in connection with the Sublease other than CPS and
Cornish & Carey Commercial. Tenant and Subtenant each agrees to indemnify and
hold harmless Landlord from any claim or claims, and costs and expenses,
including attorneys' fees, incurred by Landlord in conjunction with any such
claim or claims.
6.3 Tenant and Subtenant agree not to amend, modify, supplement, or
otherwise change in any respect the Sublease except with the prior written
consent of Landlord, which consent shall not be unreasonably withheld.
6.4 This Agreement, together with the provisions of the Master Lease
relating to subletting or assigning, contains the entire agreement between the
parties hereto regarding the matters which are the subject of this Agreement. In
the event of a permitted assignment under the Master Lease by Landlord or Tenant
of its interest in the Master Lease, then, the assignee of either Landlord or
Tenant, as appropriate, shall automatically be deemed to be the assignee of
Landlord or Tenant under this Agreement, and such assignee shall automatically
assume the obligations of Landlord or Tenant under this Agreement. No other
assignments of this Agreement or further assignments or subleases under the
Master Lease shall be permitted, except with the written consent of all parties
hereto. The terms, covenants and conditions of this Agreement shall apply to and
bind the heirs, successors, the executors and administrators and permitted
assigns of all the parties hereto. The parties acknowledge and agree that no
rule or construction, to the effect that any ambiguities are to be resolved
against the drafting party, shall be employed in the interpretation of this
Agreement. If any provision of this Agreement is determined to be illegal or
unenforceable, such determination shall not affect any other provisions of this
Agreement, and all such other provisions shall remain in full force and effect.
6.5 Notwithstanding anything to the contrary contained in Paragraph
6.3 above, Subtenant shall have the right to enter into a Limited Sub-Sublease
with DataRover Mobile Systems, Inc., a California corporation ("Sub-Subtenant"),
subject, however, to the terms of the Consent to Sub-Subletting to be hereafter
entered into by and among Landlord, Subtenant and Sub-Subtenant, in the form of
Exhibit A hereto. For purposes of this Paragraph 6.4, a "LIMITED SUB-SUBLEASE"
shall mean a sub-sublease of not more than one-half (1/2) of the Sublease
Premises.
4
<PAGE> 5
6.6 Subject to Paragraph 12 of the Master Lease, Landlord hereby
preliminarily approves Tenant's construction of the Alterations depicted on
Exhibit B hereto subject to Tenant's full compliance with the terms of the
Master Lease, including, but not limited to, the requirements and conditions set
forth in Paragraph 13 thereof. Such requirements include, but are not limited
to, the delivery to Landlord for its approval of detailed plans and
specifications for such Alterations.
6.7 If any party hereto fails to perform any of its obligations under
this Agreement or if any dispute arises between the parties hereto concerning
the meaning or interpretation of any provision of this Agreement, then the
defaulting party or the party not prevailing in such dispute, as the case may
be, shall pay any and all costs and expenses incurred by the other party or
parties on account of such default and/or in enforcing or establishing its
rights hereunder, including, without limitation, court costs and reasonable
attorneys' fees and disbursements. Any such attorneys' fees and other expenses
incurred by any party in enforcing a judgment in its favor under this Agreement
shall be recoverable separately from and in addition to any other amount
included in such judgment, and such attorneys' fees obligation is intended to be
severable from the other provisions of this Agreement and to survive and not be
merged into any such judgment.
IN WITNESS WHEREOF, Landlord, Tenant and Subtenant have executed this
Agreement as of the day and year first hereinabove written.
LANDLORD: AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Allegis Realty Investors LLC
Its Investment Advisor and Agent
By: /s/ CYNTHIA STEVENIN
---------------------------------
Cynthia Stevenin
Vice President
5
<PAGE> 6
TENANT: CLASSIFIEDS2000 INC.,
a California corporation
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
Print Name: SIGNATURE ILLEGIBLE
--------------------------------
Its: General Counsel, Corporate Secretary
----------------------------------------
By:
----------------------------------------
Print Name:
--------------------------------
Its:
----------------------------------------
SUBTENANT: GENERAL MAGIC, INC.
a Delaware corporation
By: /s/ JAMES P. MC CORMICK
----------------------------------------
Print Name: James P. McCormick
--------------------------------
Its: Senior Vice President, Finance
---------------------------------------
By: /s/ MARY E. DOYLE
----------------------------------------
Print Name: Mary E. Doyle
--------------------------------
Its: Senior Vice President, Business Affairs
---------------------------------------
6
<PAGE> 7
EXHIBIT A
CONSENT TO SUB-SUBLETTING
1
<PAGE> 8
EXHIBIT B
ALTERATIONS
1
<PAGE> 1
EXHIBIT 10.22
SUBLEASE
This Sublease is made and entered into as of December 4, 1998, by and
between Classifieds2000, Inc. ("Sublandlord"), and General Magic, Inc.
("Subtenant"), under the Master Lease dated February 20, 1998, between Aetna
Life Insurance Company, as "Lessor", and Sublandlord as "Lessee." A copy of the
Master Lease is attached hereto as Attachment I and incorporated herein by this
reference. All capitalized terms not otherwise defined in this Sublease shall
have the meanings set forth in the Master Lease.
1. Provisions Constituting Sublease.
1.1 Master Lease. This Sublease is subject to all of the terms and
conditions of the Master Lease. Subtenant hereby assumes and agrees to perform
all of the obligations of "Lessee" under the Master Lease to the extent said
obligations apply to the Subleased Premises and Subtenant's use of the Common
Areas, except as specifically set forth herein. Subtenant shall not commit or
permit to be committed on the Subleased Premises or on any other portion of the
Project any act or omission which violates any term or condition of the Master
Lease. Except to the extent waived or consented to in writing by the other party
or parties hereto who are affected thereby, neither of the parties hereto will,
by renegotiation of the Master Lease, assignment, subletting, default or any
other voluntary action, avoid or seek to avoid the observance or performance of
the terms to be observed or performed hereunder by such party, but will at all
times in good faith assist in carrying out all the terms of this Sublease and in
taking all such action as may be necessary or appropriate to protect the rights
of the other party or parties who are affected thereby against impairment.
Nothing contained in this Section 1.1 or elsewhere in this Sublease shall
prevent or prohibit Sublandlord (a) from exercising its right to terminate the
Master Lease pursuant to the terms thereof, or (b) from assigning its interest
in this Sublease.
1.2 Incorporation of Terms. All of the terms and conditions contained
in the Master Lease are incorporated herein, except as specifically provided
below, and the terms and conditions specifically set forth in this Sublease,
shall constitute the complete terms and conditions of this Sublease.
Notwithstanding the foregoing, (a) Subtenant shall be required to pay Base Rent
under this Sublease only in the amounts set forth in the Sublease, (b)
Sublandlord shall be responsible for the delivery of its Security Deposit and
the Letter of Credit to Landlord and Subtenant shall have no responsibility
therefor, and (c) Exhibits B and B-1 of the Master Lease shall not apply to this
Sublease.
2. Subleased Premises and Rent.
2.1 Subleased Premises. Sublandlord hereby leases to Subtenant and
hereby Subtenant leases from Sublandlord the Subleased Premises upon all of the
terms, covenants and conditions contained in this Sublease. The Subleased
Premises consist of the entire Premises described in Exhibit A of the Master
Lease, which Premises consist of approximately 20,000 square feet and are
located at 955 Benicia Avenue, Sunnyvale, California.
2.2 Base Rent. Without deductions, offset, prior notice or demand,
Subtenant shall pay to Sublandlord Base Rent for the Subleased premises
according to the following schedule:
<TABLE>
<CAPTION>
MONTHS RENT PER MONTH
- ------ --------------
<S> <C>
1-12 $36,000.00
13-24 $37,000.00
25-36 $38,000.00
37-48 $39,000.00
49-53 $40,000.00
</TABLE>
2.3 Additional Rent. This Sublease is intended to be a triple-net
lease. In addition to the Base Rent specified above, Subtenant shall pay to
Sublandlord all costs and expenses which are Sublandlord's obligations under the
Master Lease in connection with the operation, maintenance and management of the
Subleased Premises and accruing during the Sublease Term, including without
<PAGE> 2
limitation, real estate taxes, insurance, common area maintenance, roof
preventive maintenance, HVAC maintenance and management fees (collectively,
"Additional Rent"). Subtenant shall pay Additional Rent according to the
estimate of monthly Additional Rent submitted by Lessor to Sublandlord, and
Subtenant shall have Sublandlord's rights and obligations under the Master Lease
arising from any difference between the estimated Additional Rent paid to Lessor
and the actual Additional Rent due to Lessor each year.
2.4 General Payment Terms. The Base Rent and Additional Rent are
referred to herein as the "Rent." Rent shall be payable by Subtenant to
Sublandlord in consecutive monthly installments on or before the first day of
each calendar month during the Sublease Term (as defined in Section 4.1). If the
Sublease commencement date or termination date occurs on a date other than the
first day or the last day, respectively, of a calendar month, then the Rent for
such partial month shall be prorated and the prorated Rent shall be payable on
the Sublease commencement date or on the first day of the calendar month in
which the Sublease termination date occurs, respectively.
2.5 Security Deposit. Subtenant shall pay to Sublandlord as a
non-interest bearing Security Deposit the sum of One Hundred Seventeen Thousand
Dollars ($117,000.00). In the event Subtenant has performed all of the terms and
conditions of this Sublease during the term hereof, Sublandlord shall return to
Subtenant, within ten days after Subtenant has vacated the Subleased Premises,
the Security Deposit less any sums due and owing to Sublandlord.
3. Use.
Subtenant shall use the Subleased Premises only for general software
development purposes, office and other legally related uses, unless Sublandlord
and Master Landlord consent in writing to other uses prior to the commencement
thereof.
4. Sublease Term.
4.1 Sublease Term. The term of this Sublease (the "Sublease Term")
shall be for the period commencing December 4, 1998 and continuing through March
31, 2003. In no event shall the Sublease Term extend beyond the Term of the
Master Lease.
4.2 Inability to Deliver Possession. In the event Sublandlord is unable
to deliver possession of the Subleased Premises at the commencement of the
Sublease Term, Sublandlord shall not be liable for any damage caused thereby,
nor shall this Sublease be void or voidable but Subtenant shall not be liable
for Rent until such time as Sublandlord offers to deliver possession of the
Subleased Premises to Subtenant, but the Sublease Term shall not be extended by
such delay. If Subtenant, with Sublandlord's consent, takes possession prior to
commencement of the Sublease Term, Subtenant shall do so subject to all the
covenants and conditions hereof and shall pay Rent for the period ending with
the commencement of the Term at the same rental as that prescribed for the first
month of the Term prorated at the rate of 1/30th thereof per day. In the event
Sublandlord has been unable to deliver possession of the Subleased Premises
within 30 days from the commencement date, Subtenant, at Subtenant's option, may
terminate this Sublease.
5. Building Condition.
Subtenant accepts the Subleased Premises "as is", except that
Sublandlord shall cause the HVAC, electrical, plumbing and lighting serving the
Subleased Premises to be in good working order on the date this Sublease
commences.
6. Notices.
All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be given in the manner
provided in the Master Lease, at the addresses shown on the signature page
hereof. Sublandlord shall notify Subtenant of any Event of Default under the
Master Lease, or of any other event of which Sublandlord has actual knowledge
which will impair Subtenant's ability to conduct its normal business at the
Subleased Premises, as soon as reasonably
<PAGE> 3
practicable following Sublandlord's receipt of notice from the Landlord of an
Event of Default or actual knowledge of such impairment. If Sublandlord elects
to terminate the Master Lease, Sublandlord shall so notify Subtenant by giving
at lease 90 days notice prior to the effective date of such termination.
7. Broker Fee.
Upon execution of the Sublease, Sublandlord shall pay Cornish & Carey
Commercial, a licensed real estate broker ("Broker"), fees set forth in a
separate agreement between Sublandlord and Broker.
8. Compliance With Americans With Disabilities Act.
Subtenant shall be responsible for the installation and cost of any and
all improvements, alterations or other work required on or to the Subleased
Premises or to any other portion of the Project which are required or reasonably
necessary because of: (a) Subtenant's particular use of the Subleased Premises
or any portion thereof; (b) the particular use by a subtenant by reason of
assignment or sublease; or (c) both, including any improvements, alterations or
other work required under the Americans With Disabilities Act of 1990. Prior to
any construction of improvements or alterations to the Subleased Premises,
Subtenant shall obtain Sublandlord's and Lessor's approval of the improvement or
alteration plans and its general contractor. Compliance with the provisions of
this Section 8 shall be a condition of Sublandlord granting its consent to any
assignment or Sublease of all or a portion of this Sublease and the Subleased
Premises described in this Sublease.
9. Compliance With Nondiscrimination Regulations.
It is understood that it is illegal for Sublandlord to refuse to
display or sublease the Subleased Premises, or to assign, surrender or sell the
Master Lease, to any person because of race, color, religion, national origin,
sex, sexual orientation, marital status or disability.
10. Toxic Contamination Disclosure.
Sublandlord and Subtenant each acknowledge that they have been advised
that numerous federal, state, and/or local laws, ordinances and regulations
("Laws") affect the existence and removal, storage, disposal, leakage of and
contamination by materials designated as hazardous or toxic ("Toxics"). Many
materials, some utilized in everyday business activities and property
maintenance, are designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by
landowners, future landowners or former landowner without regard to whether the
party required to pay for "clean up" caused the contamination, owned the
property at the time the contamination occurred or even knew about the
contamination. Some items, such as asbestos or PCBs, which were legal when
installed, now are classified as Toxics, and are subject to removal
requirements. Civil lawsuits for damages resulting from Toxics may be filed by
third parties in certain circumstances.
Sublandlord and Subtenant each acknowledge that Broker has no specific
expertise with respect to environmental assessment or physical condition of the
Subleased Premises, including, but not limited to, matters relating to: (a)
problems which may be posed by the presence or disposal of hazardous or toxic
substances on or from the Subleased Premises, (b) problems which may be posed by
the Subleased Premises being within the Special Studies Zone as designated under
the Alquist-Priolo Special Studies Zone Act (Earthquake Zones), Section
2621-2630, inclusive of California Public Resources Code, and (c) problems which
may be posed by the Subleased Premises being within a HUD Flood Zone as set
forth in the U.S. Department of Housing and Urban Development "Special Flood
Zone Area Maps," as applicable.
Sublandlord and Subtenant each acknowledge that Broker has not made an
independent investigation or determination of the physical or environmental
condition of the Subleased Premises, including, but not limited to, the
existence or nonexistence of any underground tanks, sumps, piping, toxic or
hazardous substances on the Subleased Premises. Subtenant agrees that it will
rely solely upon its own
<PAGE> 4
investigation and/or the investigation of professionals retained by it or
Sublandlord, and neither Sublandlord nor Subtenant shall rely upon Broker to
determine the physical and environmental condition of the Subleased Premises or
to determine whether, to what extent or in what manner, such condition must be
disclosed to potential sublessees, assignees, purchasers or other interested
parties.
11. Rent Abatement and Damages to Personal Property
In the event Sublandlord, pursuant to the terms of the Master Lease, is
entitled to and receives rent abatement, then to the extent such rent abatement
affects the subleased premises, Subtenant shall be entitled to rent abatement in
an amount that the net rentable area of the Subleased Premises bears to the
total net rentable area of the Master Lease, and only to the extent any such
abatement applies to the Sublease Term. In addition, any amounts paid or
credited to Sublandlord under the terms of the Master Lease for damage to
personal property shall be credited to Subtenant, subject to the same
limitations set forth above.
12. Signage.
Subtenant may install a sign on the monument sign subject to prior
approval by the Lessor and the City of Sunnyvale.
13. Assignment of Rent.
Sublandlord and Subtenant agree that until a default shall occur in the
performance of Sublandlord's obligations under the Master Lease, Sublandlord
shall have a license to receive, collect and enjoy the rentals and other sums
due Sublandlord under the Sublease. However, said license shall automatically
terminate without notice to Sublandlord upon the occurrence of a default by
Sublandlord in the performance of its obligations under the Master Lease and
Lessor may thereafter, at its option, receive and collect, directly from
Subtenant, all rentals and other sums due or to be due Sublandlord under the
Sublease. Lessor shall not, by reason of the assignment of all rentals and other
sums due Sublandlord under the Sublease nor by reason of the collection of said
rentals or other sums from the Subtenant, (a) be bound by or become a party to
the Sublease, (b) be deemed to have accepted the attornment of Subtenant, or (c)
be deemed liable to Subtenant for any failure of Sublandlord to perform and
comply with Sublandlord's obligations under the Sublease. Sublandlord hereby
irrevocably authorizes and directs Subtenant, upon receipt of any written notice
from Lessor stating that a default exists in the performance of Sublandlord's
obligations under the Master Lease, to pay directly to Lessor the rents and
other income due and to become due under the Sublease. Sublandlord agrees that
Subtenant shall have the right to rely solely upon such notice from Lessor
notwithstanding any conflicting demand by Sublandlord or any other party.
Sublandlord hereby agrees to indemnify, defend and hold Subtenant harmless from
any and all claims, losses, liabilities, judgements, costs, demands, causes of
action and expenses (including, without limitation, attorneys' fees and
consultants' fees) (collectively, "Claims") which Subtenant may incur in relying
on any written notice form Lessor and/or paying rent and other sums due under
the Sublease directly to Landlord in accordance with this Section 13.
Alterations
Sublandlord and Subtenant hereby consent to the proposed alterations described
in Exhibit A attached hereto and incorporated herein by this reference.
Sublandlord: CLASSIFIEDS2000, INC.
By: /s/ [SIGNATURE ILLEGIBLE] Date: December 8, 1998
------------------------------------- -----------------
Its: General Counsel, Corporate Secretary
------------------------------------
Subtenant: GENERAL MAGIC, INC.
<PAGE> 5
By: /s/ JAMES P. McCORMICK Date: December 8, 1998
------------------------------- ----------------
Its: Senior Vice President, Finance
------------------------------
NOTICE TO SUBLANDLORD AND SUBTENANT: CORNISH & CAREY COMMERCIAL IS NOT
AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUBLEASE OR
ANY DISCUSSIONS BETWEEN CORNISH & CAREY AND SUBLANDLORD AND SUBTENANT SHALL BE
DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY CORNISH & CAREY COMMERCIAL,
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES ARE ENCOURAGED TO
CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR ATTORNEYS REGARDING
THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.
MASTER LANDLORD CONSENT
The undersigned, Lessor under the Master Lease attached as Attachment I, hereby
consents to the subletting of the Subleased Premises described herein on the
terms and conditions contained in this Sublease. This Consent shall apply only
to this Sublease and shall not be deemed to be a consent to any other Sublease.
Landlord: AETNA LIFE INSURANCE COMPANY
By: _____________________ Date: ____________________
Its: ____________________
ATTORNMENT AGREEMENT
Subtenant shall attorn to Lessor and perform all of Subtenant's obligations
under the Sublease directly to Lessor as if Lessor were the Sublandlord under
the Sublease. If Subtenant is not, at the time of the notice, in default, Lessor
shall continue to recognize the estate of Subtenant created under the Sublease.
If Subtenant is not in default, the Sublease shall continue with the same force
and effect as if Lessor and Subtenant had entered into a lease on the same
provisions as those contained in the Sublease, including, without limitation,
Subtenant's right to extend the term of the Lease.
Subtenant: GENERAL MAGIC, INC.
By: /s/ JAMES P. McCORMICK Date: December 8, 1998
------------------------------- ----------------
Its: Senior Vice President, Finance
------------------------------
<PAGE> 1
EXHIBIT 10.23
SUB-SUBLEASE
THIS SUB-SUBLEASE (this "Sub-Sublease") is entered into this 8th of
February, 1999 (the "Effective Date"), by and between General Magic, Inc., a
Delaware corporation ("Sub-Sublessor"), and DataRover Mobile Systems, Inc., a
California corporation ("Sub-Sublessee").
RECITALS:
A. This Sub-Sublease is made under the terms of that certain lease
dated February 20, 1998, by and between Aetna Life Insurance Company, as
landlord ("Master Lessor"), and Classifieds2000, Inc., as tenant
("Classifieds2000") (the "Master Lease"). The Master Lease pertains to
approximately twenty thousand (20,000) square feet of space located at 955
Benecia Avenue, Sunnyvale, California (the "Premises"). A copy of the Master
Lease is attached hereto as Exhibit A and, subject to the terms hereof, is
incorporated herein by reference.
B. Classifieds2000, as sublandlord, and Sub-Sublessor, as subtenant,
entered into that certain Sublease (the "Sublease") dated December 4, 1998
pursuant to which Sub-Sublessor has subleased the Premises. The Sublease is
attached hereto as Exhibit B and, subject to the terms hereof, is incorporated
herein by reference.
C. Sub-Sublessee desires to sublease a portion of the Premises
consisting of approximately ten thousand (10,000) square feet and shown as the
cross-hatched area on the floor plan attached hereto as Exhibit C (the
"Sub-Sublease Premises"), on the terms and conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Sub-Sublease. Sub-Sublessor hereby subleases to Sub-Sublessee, and
Sub-Sublessee hereby subleases from Sub-Sublessor, the Sub-Sublease Premises on
the terms and conditions hereinafter set forth. Sub-Sublessor warrants to
Sub-Sublessee that to the Sub-Sublessor's knowledge, (a) the Master Lease and
the Sublease have not been amended or modified, (b) Sub-Sublessor is not in
default or breach of either the Sublease or the Master Lease, and (c)
Sub-Sublessor has no knowledge of a claim by either Master Lessor or Classifieds
2000 of a breach or default.
2. Term. The term of this Sub-Sublease (the "Term") shall commence on
the later of (a) February 8, 1999, or (b) the date that the consents to this
Sub-Sublease have been obtained from the Master Lessor and Classifieds2000 (the
"Commencement Date"). Subject to Paragraphs 13 and 14 hereof, the Term shall
expire at midnight on February 7, 2001 (the "Expiration Date"). Notwithstanding
the foregoing, if for any reason Sub-Sublessor cannot deliver possession of the
Sub-Sublease Premises to Sub-Sublessee on the Commencement Date, Sub-Sublessor
shall not be subject to any liability on account of said failure to deliver, nor
shall such failure affect the validity of the Sub-Sublease or the obligations of
the Sub-Sublessee hereunder, but in such event, Sub-Sublessee shall not be
obligated to pay rent for the Sub-Sublease Premises until possession thereof is
tendered to Sub-Sublessee and the Term would
1
<PAGE> 2
expire on the second anniversary of the delivery of possession of the
Sub-Sublease Premises to Sub-Sublessee. Sub-Sublessee shall have no option to
extend the Term.
3. Rent.
(a) Base Monthly Rent. Sub-Sublessee shall pay to Sub-Sublessor
as base monthly rent for the Sub-Sublease Premises ("Monthly Rent") the
following amounts: (i) from the Commencement Date until the first anniversary of
the Commencement Date, the amount of Ten Thousand Dollars ($10,000), and (ii)
from the first anniversary of the Commencement Date until the end of the Term,
one-half (1/2) of the full amount of Base Rent payable by Sub-Sublessor under
the Sublease. Monthly Rent shall be payable, in advance on the first day of each
month, without deduction, offset or abatement to Sub-Sublessor at the address
set forth in Paragraph 11 below or at such other address as may be designated in
writing. Monthly Rent for any partial month during the Term shall be prorated
based on a thirty (30) day month.
(b) Additional Rent. During the first year of the Term,
Sub-Sublessee shall only be responsible for paying Sub-Sublessor the Monthly
Rent described above plus its costs and expenses for telephone service and data
transmission charges which shall be separately contracted for by Sub-Sublessee.
Commencing on the first anniversary of the Commencement Date and continuing
throughout the Term, in addition to the Monthly Rent described above,
Sub-Sublessee shall pay to Sub-Sublessor one-half (1/2) of all amounts payable
by Sub-Sublessor under the Sublease in connection with the operation,
maintenance and management of the Premises, including, without limitation, all
sums payable by Sub-Sublessor under Section 2.3 of the Sublease. Additionally,
from and after the first anniversary of the Commencement Date, Sub-Sublessee
shall be fully responsible for all of the costs and expenses incurred in
connection with all utilities and services furnished to the Sub-Sublease
Premises.
4. [Intentionally Omitted.]
5. Incorporation of Lease Terms.
(a) Subordination; Sub-Sublessee Obligations. This
Sub-Sublease is subject and subordinate to all of the terms and conditions of
the Master Lease and the Sublease. Except for those provisions of the Master
Lease and Sublease excluded by Paragraph 5(b) below, Sub-Sublessee hereby
expressly assumes the obligations of Sub-Sublessor as "Tenant" under the Master
Lease and as "Subtenant" under the Sublease, to the extent such obligations
arise from and after the Commencement Date and are applicable to the
Sub-Sublease Premises. If Sub-Sublessee fails to pay any sum of money to
Sub-Sublessor, or fails, within any applicable cure period, to perform any other
obligation hereunder, then Sub-Sublessor may, but shall not be required to, make
such payment or perform such act. All such sums paid and all costs and expenses
of performing any such act shall be deemed additional rent payable by
Sub-Sublessee to Sub-Sublessor upon demand, together with interest thereon at
the rate described in Section 45 of the Master Lease.
(b) Incorporation. Except as otherwise provided in this
Sub-Sublease, all of the terms and conditions applicable to the Sub-Sublease
Premises contained in the Master Lease
2
<PAGE> 3
are incorporated herein as terms of this Sub-Sublease (with each reference
therein to "Landlord" and "Tenant" to be deemed to refer to "Sub-Sublessor" and
"Sub-Sublessee" respectively) except for those provisions specifically excluded
or modified under the Sublease, all of which are specifically excluded from this
Sub-Sublease. All of the terms and conditions applicable to the Sub-Sublease
Premises contained in the Sublease, including those terms of the Master Lease
which are specifically incorporated into the Sublease, are incorporated herein
as terms of this Sub-Sublease (with each reference therein to "Sublandlord" and
"Subtenant" to be deemed to refer to "Sub-Sublessor" and "Sub-Sublessee"
respectively) except that Sections 2.5, 4.1, 7 and 14 of the Sublease are hereby
excluded from this Sub-Sublease.
(c) Sub-Sublessor's Obligations. Notwithstanding the
foregoing, it is understood and agreed that Sub-Sublessor shall not be obligated
to perform any of the obligations of Master Lessor under the Master Lease with
respect to the provisions of the Master Lease incorporated into the Sublease,
and that Sub-Sublessor shall not be obligated to perform any of the obligations
of Classifieds2000 under the Sublease with respect to the provisions of the
Sublease incorporated into this Sub-Sublease.
(d) (i) Sub-Sublessee hereby agrees to indemnify and hold
harmless Sub-Sublessor from and against any and all claims, liabilities, losses,
damages and expenses (including reasonable attorneys' fees) incurred by
Sub-Sublessor arising out of, from or in connection with (x) the use or
occupancy of the Sub-Sublease Premises by Sub-Sublessee, or (y) any breach or
default by Sub-Sublessee under this Sub-Sublease, except for claims arising from
Sub-Sublessor's negligence or willful acts.
(ii) Sub-Sublessor hereby agrees to indemnify and hold
harmless Sub-Sublessee from and against any and all claims, liabilities, losses,
damages and expenses (including reasonable attorneys' fees) incurred by
Sub-Sublessee arising out of, from or in connection with (x) the use or
occupancy of the Premises (other than the Sub-Sublease Premises) by
Sub-Sublessor, or (y) any breach or default by Sub-Sublessor under this
Sub-Sublease, except for claims arising from Sub-Sublessee's negligence or
willful acts.
6. Use. The Sub-Sublease Premises shall be used and occupied solely for
the purposes set forth in Section 3 of the Sublease.
7. Condition of the Sub-Sublease Premises. Notwithstanding any
provision to the contrary in the Master Lease and the Sublease, by execution of
this Sub-Sublease, Sub-Sublessee accepts the Sub-Sublease Premises as being in
good and sanitary order, condition, and repair, and accepts the Sub-Sublease
Premises "as is" in their present condition without any representation or
warranty by Sub-Sublessor as to the condition of the Sub-Sublease Premises or as
to the use or occupancy which may be made thereof. Sub-Sublessee shall have no
restoration obligations pursuant to the terms of the Master Lease with respect
to any alterations made by Sub-Sublessor or Classifieds2000 to the Sub-Sublease
Premises prior to the Commencement Date; provided, however, Sub-Sublessee shall
be responsible for all restoration obligations pursuant to the terms of the
Master Lease with respect to alterations made by Sub-Sublessee to the
Sub-Sublease Premises from and after the Commencement Date. Each party shall
indemnify the other against all damages, costs and expenses which the other
party may incur by reason of a breach or failure
3
<PAGE> 4
on the other party's part to comply with the foregoing sentence, including
reasonable attorneys' fees and court costs.
8. Insurance.
(a) Sub-Sublessee's Insurance. Sub-Sublessee agrees to carry the
insurance coverage described in Section 16 of the Master Lease during the term
of this Sub-Sublease. Sub-Sublessee shall name Sub-Sublessor, Classifieds2000
and Master Lessor as additional insureds under the required insurance policies.
Prior to its occupancy of the Sub-Sublease Premises, Sub-Sublessee shall deliver
certificates of insurance evidencing the above to Sub-Sublessor,
Classifieds2000, and Master Lessor.
(b) Waiver of Subrogation. The waivers of rights of recovery and
subrogation set forth in Paragraph 18 of the Master Lease shall be deemed a four
party agreement binding among and inuring to the benefit of Sub-Sublessor,
Sub-Sublessee, Master Lessor and Classifieds2000.
9. Assignment and Subletting. Notwithstanding any provision in the
Sublease to the contrary, and subject to Section 24 of the Master Lease:
(a) Sub-Sublessor's Consent. Sub-Sublessee shall not transfer,
assign or convey this Sub-Sublease, or any interest therein, voluntarily or
involuntarily, and shall not sublet the Sublease Premises or any part thereof,
or any right or privilege appurtenant thereto, without the prior written consent
of Sub-Sublessor, which consent shall not be unreasonably withheld. Any
attempted or purported transfer of this Sub-Sublease, or the Sub-Sublessee's
interest in this Sub-Sublease or in and to the Sub-Sublease Premises without
Sub-Sublessor's prior written consent shall be void and confer no rights upon
any third person and at Sub-Sublessor's election shall constitute a default by
Sub-Sublessee under this Sub-Sublease. Consent by Sub-Sublessor to any such
assignment or subletting shall not be deemed a consent to any subsequent
assignment or subletting. Notwithstanding the foregoing, in no event shall
Sub-Sublessee assign, sublet, convey or otherwise transfer more than fifty
percent (50%) of the Sub-Sublease Premises and Sub-Sublessor shall be entitled
to withhold its consent to any request for an assignment, subletting or other
transfer of more than fifty percent (50%) of the Sub-Sublease Premises.
(b) Requirements. Each assignment, sublease or other act which
requires the consent of Sub-Sublessor pursuant to Paragraph 9(a) above, and to
which Sub-Sublessor has consented shall be by an instrument in writing in form
reasonably satisfactory to Sub-Sublessor, and shall be executed by all parties
to the transaction. Each assignee shall agree in writing for the benefit of
Sub-Sublessor to assume, to be bound by and to perform the terms, conditions and
covenants of this Sub-Sublease to be performed by Sub-Sublessee. One executed
copy of such written instrument shall be delivered to Sub-Sublessor.
(c) No Release of Sub-Sublessee. Regardless of Sub-Sublessor's
consent, no subletting or assignment shall release Sub-Sublessee of
Sub-Sublessee's obligation or alter the primary liability of Sub-Sublessee to
pay the rent and to perform all other obligations to be
4
<PAGE> 5
performed by Sub-Sublessee hereunder. The acceptance of rent by Sub-Sublessor
from any other person shall not be deemed to be a waiver by Sub-Sublessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Sub-Sublessee or any successor of Sub-Sublessee, in the
performance of any of the terms hereof, Sub-Sublessor may proceed directly
against Sub-Sublessee without the necessity of exhausting remedies against said
assignee.
(d) Attorney's Fees. In the event Sub-Sublessee shall assign or
sublet the Sub-Sublease Premises or request the consent of Sub-Sublessor to any
assignment or subletting or if Sub-Sublessee shall request the consent of
Sub-Sublessor for any act Sub-Sublessee proposes to do then Sub-Sublessee shall
pay Sub-Sublessor's reasonable attorneys' fees incurred in connection therewith.
10. Consent. Notwithstanding any provision to the contrary in the
Master Lease, whenever the consent of Master Lessor is required under the Master
Lease, Sub-Sublessee shall obtain the consent of each of Sub-Sublessor,
Classifieds2000 and Master Lessor, in that order.
11. Notices. All notices given under this Sub-Sublease shall be deemed
delivered on actual receipt or refusal of delivery, and to reflect the following
addresses of the parties to which all communications, notices and demands of any
kind which either party may be required or desires to give to or serve upon the
other party shall be sent:
If to Sub-Sublessor:
General Magic, Inc.
420 North Mary Avenue
Sunnyvale, CA 94086
Attn: General Counsel
Facsimile (408) 774-4023
If to Sub-Sublessee:
DataRover Mobile Systems, Inc.
955 Benecia Avenue
Sunnyvale, CA 94086
Attn: Controller
Facsimile (408) 530-2950
12. Brokers. Each party represents to the other that no brokerage
commission or finder's fee has been incurred in connection with this
transaction, and each party shall indemnify the other against any such
commission or fee which may be alleged to have been incurred by it in connection
with this Sub-Sublease.
13. Default. In addition to all other rights and remedies of
Sub-Sublessor hereunder, should Sub-Sublessee be in default under any of the
covenants or obligations of the Master Lease, the Sublease, or this
Sub-Sublease, including payment of Monthly Rent and other
5
<PAGE> 6
payments, then Sub-Sublessor shall have the rights of Master Lessor set forth in
the Master Lease in the event of such default.
14. Termination of Master Lease or Sublease. In the event the Master
Lease or Sublease is terminated for any reason, then, on the date of such
termination, this Sub-Sublease shall automatically terminate and be of no
further force or effect. If the termination of the Master Lease or the Sublease
(and resulting termination of the Sublease and/or this Sub-Sublease) occurs
through no fault of Sub-Sublessor, Sub-Sublessor shall have no liability to
Sub-Sublessee for the resultant termination of this Sub-Sublease.
15. Entire Agreement. This Sub-Sublease contains all of the terms,
covenants and conditions agreed to by Sub-Sublessor and Sub-Sublessee and may
not be modified orally or in any manner other than by an agreement in writing
signed by all the parties to this Sub-Sublease or their respective successors in
interest.
16. Exhibits. All exhibits attached hereto are incorporated in this
Sub-Sublease, except as expressly excluded herein.
17. Counterparts. This Sub-Sublease may be executed in any number of
counterparts, each of which shall be deemed an original, and when taken together
they shall constitute one and the same Sublease.
18. Conditions Precedent to Effectiveness. This Sub-Sublease shall not
become effective until Master Lessor and Classifieds2000 have consented to this
Sub-Sublease. Sub-Sublessor agrees to promptly seek such consent from Master
Lessor and Classifieds 2000. If the foregoing has not occurred within sixty (60)
days of the parties execution of this Sub-Sublease, then this Sub-Sublease shall
be deemed void and the parties shall have no further rights or obligations
hereunder.
19. Sub-Sublessor Payments. Sub-Sublessor shall, in accordance with the
Real Estate License Agreement between the parties, dated November 4, 1998, pay
the following to the extent not previously paid: (a) all of Sub-Sublessee's
reasonable moving expenses from 420 North Mary Avenue, Sunnyvale, California to
the Sub-Sublease Premises, (b) the costs of furnishing the Sub-Sublease Premises
in a manner consistent with the Licensed Area (as defined in the Real Estate
License Agreement) and (iii) the cost of wiring the Sub-Sublease Premises for
telephone service and data transmission.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Sub-Sublease
on the date first above written.
SUB-SUBLESSOR:
General Magic, Inc., a Delaware corporation
By: /s/ James P. McCormick
------------------------------------
Its: COO & CFO
------------------------------------
SUB-SUBLESSEE:
DataRover Mobile Systems, Inc., a
California corporation
By: /s/ Eric Popejoy
------------------------------------
Its: Secretary & Treasurer
------------------------------------
7
<PAGE> 8
EXHIBIT A
Master Lease
<PAGE> 9
EXHIBIT B
Sublease
<PAGE> 10
EXHIBIT C
Sub-Sublease Premises
<PAGE> 1
EXHIBIT 10.24
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
and 230.406.
[PORTAL LOGO] AGREEMENT NUMBER:_____________
LICENSE AGREEMENT
This Agreement is made as of April 30, 1998, ("Effective Date") between
Portal Information Network, Inc., a California corporation with an office at
20863 Stevens Creek Boulevard, Suite 200, Cupertino, California 95014
("Portal") and the "Licensee" listed below.
- --------------------------------------------------------------------------------
LICENSEE: GENERAL MAGIC, INC. CONTACT: ROBYN CERUTTI
- --------------------------------------------------------------------------------
ADDRESS: 420 NORTH MARY AVENUE PHONE: (408) 774-4269
- --------------------------------------------------------------------------------
SUNNYVALE, CA 94086 FAX: (408) 774-4022
- --------------------------------------------------------------------------------
E-MAIL: [email protected]
- --------------------------------------------------------------------------------
PORTAL SOFTWARE AND FEE INFORMATION
USE OF APPLICATION: BILLING AND CUSTOMER MANAGEMENT FOR LICENSEE'S
VOICE-ACCESSIBLE INTEGRATED NETWORK SERVICE WHICH PROVIDES ACCESS TO EMAIL,
VOICEMAIL, FAX, LICENSEE'S CONTACT MANAGEMENT SYSTEM, PAGER SERVICE AND OTHER
INFORMATION SERVICES.
MAXIMUM NUMBER OF SUBSCRIBERS(1): [**]
LOCATION WHERE PORTAL SOFTWARE INSTALLED: 420 NORTH MARY AVENUE, SUNNYVALE, CA
94086(2)
TERRITORY OF INSTALLATION: UNITED STATES
HARDWARD PLATFORM: WINDOWS NT
BILLING INFORMATION
- --------------------------------------------------------------------------------
GENERAL P.O. # CONSULTING SERVICES P.O. # MAINTENANCE P.O. #
- --------------------------------------------------------------------------------
CUSTOMER BILLING CONTACT:
- -------------------------------------------------------------------------------
TELEPHONE NO. FAX: E-MAIL:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LICENSE & MAINTENANCE SUPPORT FEES
- ------------------------------------------------------------------------------------------------
PORTAL TOTAL LICENSE FEE PAYMENT DATE/ ANNUAL GOLD LEVEL PAYMENT DATE
SOFTWARE SOFTWARE MAINTENANCE AND
COMPONENT DELIVERY DATE UPDATE SUPPORT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[X] INFRANET [**] EFFECTIVE DATE [**] EFFECTIVE DATE
(FOUNDATION)
- ------------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) "Subscriber" means an individual customer record in the Portal Software
Database. The total number of Subscribers is exactly equal to the number of
Customer Records in the Portal Software Database. Customer Records are referred
to as Account Objects in the Portal Software. If the Portal software is used to
track corporate or group accounts, each individual user within the corporate or
group account(s) will be counted as a Subscriber.
(2) Licensee shall be permitted to use the Portal Software throughout its
internal business operations for the purpose of developing and providing its
voice-accessible integrated network service, regardless of where those
operations are or in the future may be located, as long as such operations are
operated by or on behalf of Licensee.
(3) A copy of Portal's Gold Level Product Support, Guidelines and Definitions
are attached hereto as Attachment A and is incorporated herein by this
reference as though fully set forth.
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 1
[**] 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
ADDITIONAL SUBSCRIBER LICENSES
For up to 3 (three) years from the Effective Date Licensee ("Option Period")
shall be entitled to license Additional Subscribers at the rates set forth in
the following table. After expiration of the Option Period, Licensee will
license Additional Subscribers at Portal's then current rates. Such Additional
Subscribers may only be licensed in the incremental blocks specified and not
one at a time. Applicable Annual Maintenance Support Fees must be licensed and
paid before such Additional Subscribers are called into use. Annual Maintenance
Support fees will be prorated over the remainder of the annual support term
during which they are added.
<TABLE>
<CAPTION>
SUBSCRIBER SUBSCRIBERS IN PRICE PER PRICE PER BLOCK ANNUAL MAINTENANCE
NUMBERS BLOCK SUBSCRIBER SUPPORT FEE PER
BLOCK
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[**] [**] [**] [**] [**]
[**] [**] [**] [**] [**]
[**] [**] [**] [**] [**]
[**] [**] [**] [**] [**]
- -------------------------------------------------------------------------------------
</TABLE>
PROFESSIONAL SERVICES
<TABLE>
<CAPTION>
SERVICE RATE/PRICE(4) SERVICE DATE PAYMENT DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FastTrak Implementation(5) [**] To Be Determined 30 days from Invoice date
by the parties
Basic Developer Training [**]/Student As Needed 30 days from Invoice date
Advanced Developer Training [**]/Student As Needed 30 days from Invoice date
Infranet Technical Consultant [**]/hour As Needed 30 days from Invoice date
Professional Services Manager [**]/hour As Needed 30 days from Invoice date
- ----------------------------------------------------------------------------------------------------
</TABLE>
This Agreement includes the following terms and conditions and all
Exhibits, and contains, among other things, warranty disclaimers, liability
limitations and use limitations. For additional products, attach an executed
Additions Schedule in Portal's standard form. Any different or additional terms
of any related purchase order, confirmation, or similar form shall have no force
or effect unless signed by the parties after the date hereof and the parties
explicitly agree in writing that such terms and conditions override one or more
specified term(s) of this Agreement.
LICENSEE: PORTAL:
BY: /s/ KEVIN J. SURACE BY: [Illegible Signature]
-------------------------------- --------------------------------
NAME AND TITLE: Kevin J. Surace NAME AND TITLE: V.P. CFO
Vice President
-------------------- --------------------
DATE: April 30, 1998 DATE: April 30, 1998
------------------------------ -------------------------------
TERMS AND CONDITIONS
1. Grant of License and Restrictions. Subject to all the terms of this Agreement
and payment of all fees, Portal grants Licensee a nonsublicensable,
nonexclusive, right to use a product designated above or on an Additions
Schedule in the nonsource code form provided by Portal ("Portal Software") and
its associated documentation ("Documentation") only on a database located at the
site designated above ("Portal Software Database") or on such Additions
Schedule, as applicable ("Site") and only for the Application specified above.
Licensee shall be permitted to install the Portal Software at additional Sites
("Additional Sites") provided that (i) Licensee provides Portal with the address
and location each such Additional Site in writing at least thirty days before
any Portal Software is downloaded or installed
- -------------------------
(4) Rates subject to increase with time.
(5) A copy of the FastTrak Implementation Statement of Work for this project is
attached hereto as Attachment B and is incorporated herein by this reference
as though fully set forth. Any additions, modifications or refinements to the
Attachment B will be memorialized in a writing signed by both parties and will
be attached to this Agreement and incorporated herein by reference.
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 2
[**] 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> 3
there, (ii) all Additional Sites will be located in the United States, and
(iii) the Portal Software licensed hereunder, regardless of where is it
installed, shall only be used for the Application specified above. Licensee may
possess only the number of copies of any Portal Software necessary for the type
of use specified above or on the applicable Additions Schedule and may use any
such copy on only one single Portal Software Database and only in accordance
with the online user documentation for the Portal Software. Licensee is
responsible for ensuring that all use of the Portal Software will be consistent
with the terms hereof. Portal retains ownership of all Portal Software and
copies. Upon receipt of final payment for the FastTrak Implementations services
rendered by Portal under this Agreement, Portal hereby assigns all right, title
and interest, including intellectual property rights, to Licensee to the work
products required to be delivered hereunder, which assignment shall be
effective upon Portal's receipt of final payment. Notwithstanding the
foregoing, nothing in this Agreement shall be construed so as to preclude
Portal from developing, using or marketing programs or other materials that may
be competitive with that prepared for Licensee hereunder, irrespective of
whether such programs are similar or related to the programs developed under
this Agreement. Licensee will maintain the copyright notice and any other
notices that appear on the Portal Software on any copies and any media. Except
to the minimum extent necessary to comply with EC Directive, if applicable, or
other applicable legislation, Licensee will not (and will not allow its
employees or contractors or authorize any third party to) (i) reverse engineer
or attempt to discover any source code or underlying ideas or algorithms of any
Portal Software (except to the minimum extent that applicable law prohibits
reverse engineering restrictions), (ii) provide, lease, lend, use for
timesharing or service bureau purposes or otherwise use or allow others to use
the Portal Software for the benefit of any third party, or (iii) use any
Portal Software, or allow the transfer, transmission, export, or re-export of
any Portal Software or portion thereof in violation of any export control laws
or regulations administered by the U.S. Commerce Department, OFAC, or any other
government agency. All the limitations and restrictions on the Portal Software
in this Agreement also apply to Documentation.
2. Support and Maintenance. While the license for the Portal Software remains
effective and the applicable Annual Maintenance Fee has been paid, Portal will
provide the support and maintenance services for that Portal Software described
in Portal's then standard support terms and conditions ("Support Services"),
subject to Section 3. A copy of Portal's Gold Level Product Support Guidelines,
Policies and Definitions is attached hereto as Attachment A and incorporated by
this reference as though fully set forth herein.
3. Fees and Payment. Upon execution of this Agreement and each applicable
Additions Schedule, Licensee shall pay Portal the License Fee set forth
thereon. Licensee shall also promptly pay the applicable Annual Maintenance
Fees as and when specified above or in the applicable Additions Schedules;
provided that Portal may elect on sixty (60) days notice (i) effective on any
Annual Maintenance Fee payment date with respect to any particular Portal
Software, to change the Annual Maintenance Fee and support services terms for
that Portal Software to its then standard fees and terms however, Portal agrees
that it will not increase the Annual Maintenance Fee by more than 5% over the
amounts specified in this Agreement and/or (ii) effective on the third or any
later Annual Maintenance Fee payment date with respect to any particular Portal
Software, not to provide Support Services to Licensee for that Portal Software,
in which cases Licensee may elect to forego further Support Services and Annual
Maintenance Fees for such Portal Software. All payments shall be made inside
the U.S., in U.S. dollars. In addition to any remedies Portal may have
hereunder or at law, any payments more than thirty (30) days overdue will bear
a late payment fee of .75% per month, or, if lower, the maximum rate allowed by
law. In addition, Licensee will pay all freight, taxes, duties, withholdings
and the like, promptly upon invoice. Delays in payment will result in a
day-for-day delay of Portal Software delivery and implementation deadlines.
4. Termination.
4.1 Notice and Cure Period. If either party breaches this Agreement, the other
(non-breaching) party shall be entitled to give the breaching party written
notice describing the breach in reasonable detail. If the breach is not cured
within thirty (30) days following receipt of such notice, or if the breaching
party has not made substantial efforts toward curing such breach if such breach
is not curable within thirty (30) days, the non-breaching party shall be
entitled, in addition to any other rights and remedies it may have, to
terminate this Agreement immediately by providing written notice to the other
party. If Licensee breaches its obligations to pay or otherwise elects not to
continue paying the Support Services Fees due hereunder, Portal agrees that its
sole remedy in such case will be termination of the Support Services (including
update and upgrade services) and such a breach in and of itself will not result
in termination of Licensee's license rights hereunder. If Licensee elects to
recommence
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 3
<PAGE> 4
such Support Services, Licensee will be required to pay the Support Services
Fees for the period during which such Support Services were suspended or
cancelled. Nothing in this Section 4.1 or in this Agreement shall be construed
so as to preclude either party from seeking injunctive or other equitable
relief from a court of competent jurisdiction.
4.2 Effect of Termination. Upon termination of this Agreement by Portal as
provided in Section 4.1 above (except for a breach by Licensee of its
obligation to pay for Support Services or if Licensee elects to terminate such
Support Services), Licensee shall immediately cease all use of the Portal
Software and Documentation and shall return or destroy all copies of the Portal
Software and Documentation or any portion thereof and so certify to Portal.
Licensee shall also immediately pay to Portal all fees then due to Portal.
Nothing in this Section 4.2 shall be construed to terminate any licenses
granted to Licensee hereunder in the event that Licensee terminates this
Agreement under Section 4.1.
Termination is not an exclusive remedy and all other remedies will be available
whether or not termination occurs.
4.3 Surviving Provisions. The following Sections shall survive termination of
this Agreement: 1, 3 (to the extent any fees are due and payable as of the date
of termination or expiration), 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15.
5. Indemnification. Portal shall defend and hold Licensee harmless from
liability to third parties resulting from infringement by the Portal Software
of any United States patent issued sixty (60) days or more before delivery of
such Portal Software or any copyright or misappropriation of any trade
secret, provided Portal is promptly notified of the claim and/or proceedings
giving rise to such liability and given reasonable assistance and the
opportunity to assume sole control over defense and settlement. Portal will not
be responsible for any settlement it does not approve in writing. The foregoing
obligations do not apply with respect to any Portal Software or portions or
components thereof (i) not supplied by Portal, (ii) made in whole or in part in
accordance to Licensee specifications and/or instructions, (iii) that are
modified by Licensee after delivery by Portal, (iv) that are combined with
other products, processes or materials not authorized by Portal where the
alleged infringement would not have arisen but for such combination, (v) where
Licensee continues to use an allegedly infringing version of the Portal
Software after being notified thereof or after being informed of and provided
with modifications that would have avoided the alleged infringement, or (vi) to
the extent that Licensee's use of such Portal Software is not strictly in
accordance with this Agreement. Licensee will indemnify Portal from all
liability to third parties related to any claim of infringement or
misappropriation excluded from Portal's indemnity obligation set forth in
subsections (ii), (iii), (iv), (v) and/or (vi) above.
6. Limited Warranty and Disclaimer. Portal warrants for a period of ninety
(90) days from Licensee's first receipt of the Portal Software that such Portal
Software will substantially conform to Portal's then current user
Documentation for such Portal Software as implemented in Licensee's network.
This warranty covers only problems reported to Portal during the warranty
period and does not entitle Licensee to any refund, in whole or in part, for
Support and/or Implementation Services provided by Portal. ANY LIABILITY OF
PORTAL WITH RESPECT TO A PRODUCT OR THE PERFORMANCE THEREOF UNDER ANY WARRANTY,
NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY WILL BE LIMITED EXCLUSIVELY TO
PRODUCT REPLACEMENT OR, IF REPLACEMENT IS INADEQUATE AS A REMEDY AT LICENSEE'S
OPTION TO REFUND OF THE LICENSE FEE. EXCEPT FOR THE FOREGOING AND THE PORTAL'S
EXPRESS WARRANTY OBLIGATIONS SET FORTH IN SECTION 10 AND 12 BELOW, ALL PRODUCTS
ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND INCLUDING WITHOUT LIMITATION
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT. FURTHER, PORTAL DOES NOT WARRANT RESULTS OF USE OR THAT THE
PRODUCTS ARE BUG FREE OR THAT THEIR USE WILL BE UNINTERRUPTED.
7. Inspections and Audit Rights. Portal will be entitled to inspect the
installation and configuration of the Portal Software from time to time on
reasonable notice but no more often than once in any six (6) month period.
Licensee agrees to keep and maintain accurate records pertaining to its
obligations hereunder, including without limitation the number of Subscribers
for which the Portal Software is being used. Licensee agrees to keep and
maintain such records for a minimum period of three years from the end of each
calendar year of their accrual. Upon Portal's written request and upon fourteen
(14) days notice, Licensee agrees to make such records available to Portal (or
its duly appointed representative) for examination at a mutually agreed upon
time and place. Portal agrees that such audits will be conducted no more often
than once in any six month period and in a manner which does not unreasonably
disrupt or interfere with Licensee's business practices. If an audit reveals
that Licensee has underpaid any amounts owing hereunder or is otherwise
out of compliance with the terms and conditions hereunder, Licensee will
immediately pay any amounts owing or take such measures as are required to bring
itself into compliance with this Agreement. Portal will bear the expense of
conducting the audits, however, if an audit reveals that Licensee has exceeded
the authorized number of Subscribers hereunder by more than ten percent (5%)
Licensee shall bear the cost of the audit. All records
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 4
<PAGE> 5
disclosed to Portal pursuant to this Section 7 and any information discovered
by Portal as a result of such audits will be deemed Proprietary Information
under Section 13.
8. Limitation of Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR
OTHERWISE, AND EXCEPT FOR BODILY INJURY AND FOR BREACH PORTAL'S EXPRESS WARRANTY
OBLIGATIONS SET FORTH IN SECTIONS 10 AND 12 BELOW, PORTAL SHALL NOT BE LIABLE OR
OBLIGATED WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT OR UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (I)
FOR ANY AMOUNTS IN EXCESS OF THE AGGREGATE OF THE FEES PAID TO IT HEREUNDER OR
(II) FOR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, SERVICES OR
RIGHTS, (III) FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES; OR (IV) FOR
INTERRUPTION OF USE OR LOSS OR CORRUPTION OF DATA.
For any breach of the terms of this Agreement or of the warranties contained
herein, Licensee's exclusive remedy, and Portal's entire liability, shall be:
(a) For Software Programs: the correction of material program errors, or if
Portal is unable to make the Portal Software work as warranted, Portal will
refund the license fee paid for the non-operational Portal Software.
(b) For Services: The reperformance of the services, or if Portal is unable to
perform the services as warranted, Portal will refund the fees paid for the
unsatisfactory services.
9. Transfer and Assignment. Neither this Agreement nor the licenses granted
hereunder may be assigned or transferred by Licensee without the prior written
consent of Portal; any attempt to do so shall be void. The sale of all or
substantially all of the assets or the transfer of the majority of the voting
stock or equal interest in Licensee, in one or more related transactions, shall
be deemed an assignment, however, such an assignment shall be permitted
provided (i) there is no change in the Application set forth above and (ii) the
entity which acquires Licensee's rights hereunder agrees in writing to be bound
by all of the obligations and liabilities of Licensee hereunder.
10. Year 2000 Warranty:
10.1 Portal represents and warrants that the Products are designed to be used
during, and after the calendar 2000 AD, and that the Products will operate
during each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century;
10.2 Without limiting the generality of the foregoing, Portal further warrants
that:
(a) That the Products will not abnormally end or provide invalid or incorrect
results as a result of the date data, specifically including date data which
represents or references different centuries or more than one century;
(b) That the Products have been designed to ensure year 2000 compatibility,
including, but not limited to, date data century formulas and date values, and
date data interface values that reflect the century;
(c) That the Products include "year 2000 capabilities". For the purposes of
this Agreement, "year 2000 capabilities" means the Products:
(i) will manage and manipulate data involving dates, including single century
formulas and multi-century formulas, and will not cause an abnormally ending
scenario within the application or generate incorrect values or invalid results
involving such dates; and
(ii) provides that all date-related user interface functionalities and data
fields include the indication of century; and
(iii) provides that all date-related data interface functionalities include the
indication of century.
11. Source Code Escrow.
11.1 Fees. Upon execution of this agreement, Licensee may order Source Code
Escrow Services ("Escrow Services") from Portal for an annual fee of [**]
per year (the first such payment will be payable within fifteen (15) days of the
Effective Date hereof). Escrow Services shall be renewed each year for one
additional year for the renewal fee in the amount of [**] unless terminated
by Licensee by written notice at least forty-five (45) days prior to end of the
term. The Source Code escrow provisions in this Section 11 shall apply if and
only if Licensee has ordered the Service upon execution of this agreement and
has paid the full fees for this service.
11.2 Release Conditions. In the event (i) Portals seeks protection under any
non-Chapter 7 bankruptcy, receivership, trust deed, creditor's arrangement 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.
<PAGE> 6
comparable proceeding or if any such proceeding is instituted against it and not
dismissed within one hundred and twenty (120) days and Licensee demonstrates
that Portal to is unable to meet its obligations set forth herein; (ii) Portal
ceases its business operations without a successor capable of supporting the
software or seeks protection under Chapter 7 bankruptcy and such proceeding is
not dismissed within one hundred days (120) days; or (iii) if Portal ceases to
offer Support Services for the then current and immediately previous release
version of the Portal Software, Licensee shall be entitled to receive a copy of
the Source Code of the Portal Software from the Escrow Holder subject to the
restrictions set forth in Section 11.3 below.
11.3 Grant of License and Rights. Licensee is hereby granted a currently
effective non-exclusive non-sublicensable license to use the Source Code to and
only to support and maintain its licensed number of End Users of the Portal
Software and Licensee covenants that it will not exercise such license to any
extent except if and for so long as the condition for release occurs and
continues. Licensee shall not disclose any Source Code to any third party
except for its employees who have a "need to know" and are similarly bound in
writing. In support of the forgoing, Portal shall deposit the Source Code of
the Portal Software into an escrow account pursuant to the terms of an escrow
agreement provided as Attachment D.
11.4 Bankruptcy. Portal and Licensee acknowledge that this Agreement and all
rights and licenses granted to Licensee under or pursuant to this Agreement are,
and will otherwise be deemed to be, licenses of rights to "intellectual
property" as defined under Section 101 of Title 11, United States Code (the
"Bankruptcy Code"). The parties agree that Licensee, as a licensee of such
rights under this Agreement will retain and may fully exercise all of its rights
and elections under the Bankruptcy Code. Portal acknowledges that if Portal as a
debtor in possession, or a trustee in bankruptcy in a case under the Bankruptcy
Code, rejects the licenses granted to Licensee in this Agreement, Licensee may
elect to retain its rights under such licenses as provided in Section 365(n) of
the Bankruptcy Code. After the commencement of a case under the Bankruptcy Code
by or against Portal and unless and until the licenses granted herein are
terminated, upon written request of Licensee to Portal or the trustee in
bankruptcy, Portal or the trustee in bankruptcy will not interfere with the
rights of Licensee as provided under this Agreement.
12. Virus Control. Portal hereby warrants that to the best of its knowledge
there is no virus in any portion of the Portal Software and that it has used
commercially reasonable efforts to ensure that the Portal Software is free of
computer viruses and has undergone virus checking procedures consistent with
industry standards. The term "virus" as used hereunder means any computer code
designed to disable, disrupt or damage Licensee's use of the Portal Software or
Licensee's computer or network, or (b) damage or destroy any data or files
residing on Licensee's computer system without Licensee's consent.
13. Mutual Confidentiality. Both Portal and Licensee agree to be bound by the
terms of the Nondisclosure Agreement attached hereto as Attachment C and
incorporated herein by this reference as though fully set forth. Neither party
will disclose, without prior written consent of the other party, the terms of
this Agreement or matters relating thereto except to its attorneys,
accountants, employees, and/or contractors on a need to know basis or to
potential acquirers or investors who have signed a confidentiality agreement
consistent with the terms hereof, unless required by law.
14. Force Majeur. Either party shall be excused from any delay or failure in
performance hereunder, except the payment of monies by Licensee to Portal,
caused by reason of any occurrence or contingency beyond its reasonable
control, including but not limited to, acts of God, earthquake, labor disputes
and strikes, riots, war, novelty of product manufacture or other unanticipated
product development problems, and governmental requirements. The obligations
and rights of the party so excused shall be extended on a day-to-day basis for
the period of time equal to that of the underlying cause of the delay.
15. Miscellaneous. Any notice, report, approval or consent required or
permitted hereunder shall be in writing. No failure or delay in exercising any
right hereunder will operate as a waiver thereof, nor will any partial exercise
of any right or power hereunder preclude further exercise. If any provision of
this Agreement shall be adjudged by any court of competent jurisdiction to be
unenforceable or invalid, that provision shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable. This Agreement shall be deemed to have been
made in, and shall be construed pursuant to the laws of the State of California
and the United States without regard to conflicts of laws provisions
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 6
<PAGE> 7
thereof, and without regard to the United Nations Convention on the
International Sale of Goods. Any legal action or proceeding relating to this
Agreement shall be instituted in a state or federal court in Santa Clara
County, California. Portal and Licensee agree to submit to the jurisdiction of,
and agree that venue is proper in, these courts in any such action or
proceeding. Any waivers or amendments shall be effective only if made in
writing. This Agreement is the complete and exclusive statement of the mutual
understanding of the parties and supersedes and cancels all previous written
and oral agreements and communications relating to the subject matter of this
Agreement. The prevailing party in any action to enforce this Agreement will be
entitled to recover its attorney's fees and costs in connection with such
action. Licensee represents that it is not a government agency and it is not
acquiring the license pursuant to a government contract or with government
funds.
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 7
<PAGE> 8
ATTACHMENT A
PRODUCT SUPPORT GUIDELINES, POLICIES AND DEFINITIONS
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 8
<PAGE> 9
[PORTAL LOGO]
INFRANET(TM)
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
PORTAL SOFTWARE, INC.
20863 Stevens Creek Boulevard
Suite 200
Cupertino, CA 95014
U.S.A.
<PAGE> 10
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
PRODUCT SUPPORT.............................................................. 1
GUIDELINES, POLICIES AND DEFINITIONS......................................... 1
SUPPORT OVERVIEW............................................................. 3
Portal Error Tracking System(PETS)......................................... 3
Web-Based Support.......................................................... 3
PORTAL ERROR TRACKING SYSTEM(PETS)........................................... 4
PETS Ticket Severity Definitions........................................... 4
PETS Ticket Response Time.................................................. 6
Phase Definitions.......................................................... 6
Changing Severity Level of a PETS Ticket................................... 7
Status Definitions in PETS................................................. 7
Typical Progression Through Status......................................... 8
Changing the Status of a PETS Ticket....................................... 9
Activity Log in PETS Tickets............................................... 9
PETS Review Cycles......................................................... 9
PETS Severity 1 Tickets.................................................... 9
PETS Severity 2 Tickets.................................................... 9
PETS Severity 3, 4, 5 and 10 Tickets....................................... 10
PORTAL WEB-BASED SUPPORT..................................................... 10
Case Submission............................................................ 10
Technical Support Contacts................................................. 11
SUPPORT AND ESCALATION PROCESS............................................... 11
For Severity 1 & 2......................................................... 11
For General Support Issues and Errors of Any Severity...................... 12
SOFTWARE ERRORS.............................................................. 12
First Customer Ship Releases and Update Releases........................... 12
Product Support Period..................................................... 13
DIRECTIONS FOR PETS.......................................................... 14
________________________________________________________________________________
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page-2-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 11
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
SUPPORT OVERVIEW
As Portal grows we are committed to continuing to develop our world-class
technical support service organization to provide the best support services to
our customer. The following are procedures that we would like to implement to
ensure that you, as a customer, receive the proper and prompt assistance when
needed.
There are currently two methods of addressing issues raised for support. They
are:
PORTAL ERROR TRACKING SYSTEM (PETS)
Production related errors are defects/bugs of Infranet that occurred during the
execution of a production system and should be reported as such in Portal's
Error Tracking System (PETS).
Please submit an error report for the problem using PETS -- www.pin.com (there
are separate instructions for how to logon to PETS and use it). Our response
time for the defect will be based on the severity levels and individual
customer's support contract. If the defect is not resolved in a satisfactory
manner, please escalate the situation per the escalation process.
WEB-BASED SUPPORT
For all those technical, development, non-production related questions, please
start by submitting the question/issue via our Web-Based Support:
www.portal.com/WebSupport/login.htm
Each customer contact is provided with a login ID and unique password. To
obtain your login and password, register by completing our online registration
form:
www.portal.com/professional services/plreg.htm
_______________________________________________________________________________
PORTAL CONFIDENTIAL AND PROPRIETARY Page -3-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 12
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
PORTAL ERROR TRACKING SYSTEM (PETS)
PETS Ticket Severity Definitions:
SEVERITY 1 - PRODUCTION ISSUE - Major product defect causing complete loss of
service.
Resolution: work until complete
(Portal found bugs - major product defect that would likely cause full loss of
service to a customer's production system)
Examples:
- System failure prevents end-users from accessing network service.
- Failover not successful in routing around problems.
- Repeated data loss or data corruption occurs to object data.
- Repeated software failures that result in total interruption of
service.
SEVERITY 2 - PRODUCTION ISSUE/EMERGENCY DEVELOPMENT ISSUE - Serious product
defect causing major but intermittent loss of production service or preventing
imminent deployment of system under development. No workaround is available,
but operation can continue in a restricted fashion. Resolution: Work until
complete.
(Portal found bugs - serious product defect that would likely cause major but
intermittent loss of service at a customer site.)
Examples:
- System failure prevents end-users from signing up for service, but
allows end users to access network services.
- System failure prevents billing collections from occurring, but
allows end-users to access network service.
SEVERITY 3 - Significant product defect causing loss of service of one or more
functions. Workaround is not available, or functionality loss is critical to
system operation.
Resolution: Patch or next release, if imminent.
Examples:
- System failure prevents admin users from performing specific
account updates, but all other functions are working. However,
the missing function is critical to determining customer's sales
commissions.
- System failure prevents end-users from accessing web pages for
account information, but allows end-users to access network service.
However, for many users, the web is the only access available to
them.
- --------------------------------------------------------------------------------
PORTAL CONFIDENTIAL AND PROPRIETARY Page -4-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 13
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
SEVERITY 4 - Product defect causing loss of service of one or more functions.
Workaround is available, or functionality loss is not critical to system
operation. Resolution: Next or future release.
Examples:
- System failure prevents admin users from performing specific
account updates, but all other system functions are working.
- System failure prevents end-users from accessing web pages for
account information, but allows end-users to access network service.
SEVERITY 5 - Minor product defect causing little or no end-user visible loss of
service. This category includes cosmetic errors or defects where the impact to
a customer's operation is minor. Resolution: Candidate for future release.
Examples:
- Documentation errors requiring correction or clarification.
- Most error message problems.
- System failure that occurs rarely and where failover successfully
routes around the failure.
SEVERITY 10 - Enhancement request to Infranet for new feature or modification
to existing feature rendering the feature more effective, complete or easier to
use. Resolution: Candidate for future release.
Examples:
- Additional summary reports by cycle, accounts, etc.
- Additional screens in the web interface.
- -------------------------------------------------------------------------------
PORTAL CONFIDENTIAL AND PROPRIETARY Page -5-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 14
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
PETS Tickets Response Time
<TABLE>
<CAPTION>
TARGET
FOR
CALL INITIAL
BACK ANALYSIS
SEVERITY LEVEL TIME IS RESOLUTION
-------------- ---- -------- ----------
<S> <C> <C> <C>
1 Complete loss in production 30 minutes 4 hours work until complete
2 Serious defect causing major but 4 hours 8 hours work until complete
intermittent loss in production or
preventing deployment.
3 Significant defect causing minor 2 business 5 business Patch or next release
loss in production with no days days
workaround
4 Minor defect causing minor loss Via PETS Via PETS Next or future release
with workaround updates updates
5 Minor defect causing no loss Via PETS Via PETS Candidate for future
updates updates release
10 Request for Enhancement Via PETS Via PETS Candidate for future
updates updates release
</TABLE>
Phase Definitions:
- ------------------
- CALL BACK TIME - Initial callback from Portal by a qualified
technical support representative.
- TARGET FOR INITIAL ANALYSIS - Targeted response time for first
detailed analysis of problem, including any possible workaround
and plan for complete resolution.
- RESOLUTION - Estimate of when fix or workaround is available to
customer to eliminate symptoms of problem.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -6-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 15
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
Changing Severity Level of a PETS Ticket:
When a PETS ticket is initially submitted, the submitter makes their
best estimate of the appropriate severity level of the ticket and files
it as such. As Portal and the submitter work on the reported issue, it
may become clear that the severity level should be changed. If the
submitter wishes to change the severity level, they should send an
email to [email protected] listing the PETS id number, what
severity level to change from and to, and why the change is being
requested.
If in reviewing the PETS ticket, Portal's analysis is that a change in
severity levels is consistent with the definitions above, Portal will
change the severity level and notify the submitter.
Status Definitions in PETS:
SUBMITTED - Ticket has been logged into PETS for tracking
PENDING - Not enough information has been logged in the ticket; more
information is needed from the submitter for Portal to further analyze
the problem. Information to include when submitting a PETS ticket
includes: how to reproduce the error, any non-reproducible symptoms
and any error messages. Customers should update the PETS ticket with
the additional information and inform support by sending an email to
[email protected]. Technical support will change the status of
the ticket so that it is continued to be worked on.
QUALIFIED - Infranet Technical Support has reviewed the ticket and
qualified it as warranting Engineering evaluation. If the issue can be
resolved without Engineering evaluation, the Technical Support
personnel will drive resolution rather than qualifying it to pass to
Engineering for evaluation.
ASSIGNED - Engineering resources have been assigned to resolve the error.
EVALUATED - Engineering has evaluated the ticket and considers the ticket
to contain enough information to proceed.
INTEGRATED - The error is fixed and tested. The fix is incorporated into a
release of Infranet.
DELIVERED - The fix is delivered to the customer as either a patch or a
future release. Delivered is the final status for any PETS ticket that
requires code changes.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -7-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 16
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
CLOSED - No action needed because the reported issue is a duplicate of an
existing ticket, it turns out not to be an error or it cannot be
reproduced. Closed is the final status for any PETS ticket that does not
require code changes.
Typical Progression Through Status
The order in which the status indicators are listed in the prior pages is
close to the typical progression through to resolution of a PETS ticket.
All tickets are automatically tagged with a status of Submitted when they
are filed. Infranet Technical Support personnel are the first ones at
Portal to review a PETS ticket. They will do one of three things. 1) They
may see that more information is needed, note what information is needed
in the activity log of the PETS ticket and change the status to Pending
until more information is submitted to [email protected]. 2) They
may determine that this PETS ticket warrants review by Portal Engineering
and mark the status as Qualified. Or 3) they answer the question
themselves if the answer does not require any code changes, and then mark
the status as Closed.
Once a PETS ticket is marked as qualified, then Portal Engineering reviews
it, assigns it to an appropriate engineer and marks the status as
Assigned. When an engineer reviews the PETS ticket, they may do one of
three things: 1) Evaluate it, determine they have enough information to
reach a resolution and mark the status as Evaluated. 2) Evaluate it,
determine that more information is necessary, list what information is
necessary in the activity log of the PETS ticket and mark the status as
Pending. 3) Evaluate the ticket, determine that it should be closed for
some reason, indicate the reason (such as duplicate of another PETS
ticket, not reproducible or not an error) and change the status to Closed.
After a Portal engineer has evaluated a PETS ticket and determined that
enough information is available, the engineer will work on a fix for the
error. Once a fix has been implemented, tested and integrated into an
Infranet build, then the engineer will change the status to Integrated.
After the build in which the fix has been integrated is delivered (posted
to the Portal web site) as a Release or an Update, then the PETS ticket
status is changed to Delivered and the activity log is updated with the
name of the Release or Update. Delivered is the final status for any PETS
ticket that requires code change. Closed is the final status for PETS
tickets that do not require code changes.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -8-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 17
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
Changing the Status of a PETS Ticket
As the ticket progresses through to resolution, Portal will update the
status of the PETS ticket. If the submitter wishes to update the status of
a ticket, for example when they've provided requested additional
information in response to a status of Pending, the submitter should send
an email to [email protected] requesting the status change.
Activity Log in PETS Tickets
Portal will add to the activity log of a PETS ticket as it progresses
through to resolution. Any information that is pertinent will be added to
the log. In particular when a ticket's status is changed to Pending,
details of what information is needed is described in the activity log.
PETS Review Cycles
Portal does a full review of outstanding PETS tickets at least once during
the course of each Infranet release. Since Infranet releases are scheduled
3 times a year, all the outstanding PETS ticket will be reviewed at least
three times a year.
COMMUNICATION
PETS Severity 1 Tickets
For Severity 1 tickets Portal provides updates to submitter as pertinent
information is available. These updates are provided via phone, fax or
email as the situation warrants. The definition of Severity 1 as complete
loss of service in production will be strictly adhered to and any tickets
that do not fall within this definition either initially or after a work
around has been provided will be reassigned to a lower severity level.
PETS Severity 2 Tickets
For Severity 2 tickets Portal provides updates to submitter as pertinent
information is available. These updates are provided via phone, fax or
email as the situation warrants. The definition of Severity 2 as major
loss of service in production or preventing deployment will be strictly
adhered to and any tickets that do not fall within this definition either
initially or after a work around has been provided will be reassigned to a
lower severity level.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -9-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 18
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
PETS Severity 3, 4, 5 and 10 Tickets
Portal communicates updates on these tickets via PETS as pertinent
information is available. The PETS system permits users to search for
recently updated tickets and it will also send out an automatic email when
a ticket is changed.
WEB-BASED SUPPORT
Technical support is available to all Portal customers with a current customer
support contract. Portal's Web-Based support provides fast and easy access to
all your technical support cases. It allows you to add a new case, or update
and monitor the status of an existing case. Each case is associated with a case
number for reference and tracking purposes.
Case Submission:
When you submit a question or issue to us, please make sure you do the
following so we can best serve you:
1. Give us a DETAILED DESCRIPTION OF YOUR PROBLEM.
2. Give us a DETAILED DESCRIPTION OF WHAT YOU HAVE DONE to try to solve the
problem on your own. Have you read the documentation? Have you looked in
the error log?
3. Email any configuration or log files to [email protected]. Please include
your case number and company name in the subject header of the email. For
example, "Portal case #1234: dm_oracle pinlog files"
NOTE: Be aware that when you CC people in your email to us with aliases, we
may not get the full email address of the CC'ed person. If that is the case,
we will be unable to send a reply to them. You will need to forward our reply
to them yourself.
All questions submitted are researched and answered in a timely manner. Portal
will log all questions/issues in the order they are received and will work on
them IN THAT ORDER. Once the question has been understood and analyzed, an
estimate of how long it would take to resolve it will be provided back to the
customer IF an answer or a solution is not available in a reasonable amount of
time.
________________________________________________________________________________
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -10-
Not to be disclosed without prior written
Version 2.0 permission 4/1/98
<PAGE> 19
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
Technical Support Contacts
To ensure that we provide uniform support to each of our customers, each
customer account is required to designate two senior level contacts to function
as the technical support liaison to Portal. Please send an email to
[email protected] stating the name, phone number and email address of your
contacts. Your designated contacts will be added to our call tracking database
and will be the only individuals allowed to submit issues into technical
support. To change your contact information, please send an email request to
[email protected]. Additional contacts can be negotiated into the Support
Maintenance Contract at additional cost.
SUPPORT AND ESCALATION PROCESS
To ensure our customers are getting the appropriate level of attention and
service, the following are procedures to use when dealing with any Infranet
product defects.
For Severity 1 or 2 Errors:
For PRODUCTION defects entered into PETS as SEVERITY 1 or 2, please call
our 24-Hour answering service AFTER you have entered the error into PETS so
we can respond to your submittal in a timely manner.
SEVERITY 1 & 2: (408) 752-7430
Customers on 7 by 24 hours support, should call at any time, others should
call during our normal business hours between 8:00am - 5pm PST.
An agent with the answering service will receive your call and collect the
following information from you: your name, phone number, company which you
represent, severity, and a brief message. The answering service will
escalate your call to the appropriate Portal individual. Our internal
escalation guidelines are as follows:
FOR SEVERITY 1:
1. Page primary on-call support engineer.
2. If primary on-call person does not respond in 10 minutes, page
secondary on-call support engineer.
3. If the secondary on-call person does not respond in 10 minutes
page and call the Technical Support Manager.
4. If the manager does not respond in 10 minutes, page and call the
regional Director and the VP of Portal's Professional Services
Group.
________________________________________________________________________________
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -11-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 20
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
FOR SEVERITY 2:
1. Page the primary on-call support engineer.
2. If the primary on-call person does not respond in 1 hour, page
the secondary on-call support engineer.
3. If the secondary on-call person does not respond in 1 hour, page
and call the Technical Support Manager.
4. If the Manager does not respond in 1 hour, page the regional
Director.
5. If the Director does not respond in 1 hour, page the VP of
Portal's Professional Services Group.
For General Support Issues and Errors of Any Severity:
If you feel that an error or defect of any severity submitted via PETS is
not being resolved appropriately, please call the Technical Support phone
number at:
Technical Support: (408) 343-4410 (voicemail)
and leave a voicemail with your name, phone number, company which you
represent and brief problem description. A Technical Support engineer will
be paged automatically to assist you. If the Technical Support engineer is
unable to address your needs, please feel free to contact the Technical
Support Manager at:
Technical Support Manager (West): (408) 697-5037 (pager)
Technical Support Manager (East): (888) 550-0405 (pager)
If the problem is not progressing at a speed with which you are satisfied,
you may ask the Technical Support Manager to escalate the issue. S/He will
work with you to set up a conference call with the VP of Portal's
Professional Services Group.
SOFTWARE ERRORS
First Customer Ship Releases and Update Releases
Portal will work on tickets of severity 1, 2 and 3 until they are
resolved. Fixes for these tickets are targeted to be included in an Update
Release of the currently shipping Infranet release as well as in the
following release.
Portal schedules one Update Release four weeks after the First Customer
Ship (FCS) of an Infranet Release. An Update Release is a full Infranet
release with additional fixes integrated. After the scheduled Update
Release that Portal posts to the web 4 weeks after FCS, any other Update
Releases are posted on an as-needed basis. For example, Portal posted
Infranet 5.1 Update 5. Update Releases
________________________________________________________________________________
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -12-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 21
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
contain the cumulative set of fixes available for a given release. Update
Releases should be downloaded and installed in full to ensure that you
have the most recent, supported version of Infranet.
Tickets of severity 4 are targeted for fixing in the next release,
severity 5 for fixing in a future release and tickets of severity 10 are
candidates for a future release.
PRODUCT SUPPORT PERIOD
Infranet releases are supported for a period of 6 months after the
subsequent release of Infranet ships. For example, Infranet 5.1 will be
supported for 6 months after the release of Infranet 5.2 or for a total of
10 months after shipping 5.1 (since 5.2 ships 4 months after 5.1, 5.1 is
supported for that 4 months plus an additional 6 months for a total of 10
months.) Portal highly encourages customers to upgrade to the latest
release of Infranet in order to benefit from the latest features and
fixes. Yet, we understand that it does take time to migrate to the latest
release, so we have allocated a period of a total of ten months to support
a release: four months until the next release ships (Infranet releases
ship three times a year, every four months) plus six months after the next
release ships.
________________________________________________________________________________
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -13-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 22
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
DIRECTIONS TO USING PETS2
GETTING STARTED
You can get to PETS2, login via the www.pin.com web site. Log into this site
using your current user name and password. Once on, click on PETS2. The system
will ask you for another login and password. This is not the same user
login/password that was used in PETS. Support will let you know your new login.
The password is the same as before. When you type in your login and password,
make sure you use capitals when specified. PETS2 is now case sensitive.
- --------------------------------------------------------------------------------
Select one of the schemas in the list below.
Click on Query OR Submit (or use the buttons which follow the list) to open the
selected schema for Query OR Submit.
PETS2 PETS: User Comments
Click on QUERY OR SUBMIT to start working with the selected schema.
- --------------------------------------------------------------------------------
You will see the above when you first login. The PETS2 schema is used for
tickets. The PETS: User Comments schema is used for User Comments.
SEARCHING AND MODIFYING A TICKET
To search or modify a ticket, choose the PETS2 schema and click on QUERY. You
may search on any one of the fields you see. You may select from the pulldown
menu for any or all of these fields. If a field is left blank, that field is
considered a wildcard. If you leave all the fields blank, all wildcards, you'll
get all your tickets in PETS2.
After you've made your search criteria selection, hit RUN QUERY and a list of
all tickets matching your set of criteria will appear. You can either view or
modify those tickets.
SUBMITTING A TICKET
To submit a ticket, choose the PETS2 schema and click on the SUBMIT button at
the top of the page to get a blank ticket. Currently, the only way to get back
to the PETS2 page is to use a bookmark or to hit "back" in your browser. We are
looking into changing that.
There are several fields that are required in submitting a ticket. They are the
following:
* Severity * Release * Product * OS * Problem Summary
- --------------------------------------------------------------------------------
[PORTAL LOGO] Page -14-
CONFIDENTIAL AND PROPRIETARY
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 23
PRODUCT SUPPORT
GUIDELINES, POLICIES AND DEFINITIONS
* Problem Detail * Last Name * Caller ID * Hdwr *DB
If you don't fill in all the fields, you'll get an error message and your ticket
won't be submitted.
After you've filled everything out, click on SUBMIT at the top or bottom of the
screen. The next screen will tell you if the submission was successful. To get
back to the any of the previous screens, just hit "back" on your browser.
SUBMITTING SUGGESTIONS FOR IMPROVING OR FIXING PETS2
There are two ways to do suggest improvements for PETS2. You can either file a
ticket against PETS2 by following the instructions above and choosing PETS as a
product or you can submit a comment.
To submit a suggestion for improving or changing PETS2 itself, choose the
"PETS:User Comments" schema in the first screen after logging in and click on
SUBMIT. Fill in the Description field and the optional Comments field and click
on SUBMIT.
SEARCHING FOR A USER COMMENT
You can search for a user's comment by filling in any one of the fields. Most
likely, you will only fill in the "Company Name" field. PETS2 is case sensitive
so be sure to fill in the "Company Name" exactly as it appears when you
submitted it. Hit QUERY when you have entered in the field. PETS2 will give you
a list of comments matching your criteria. You can only view the comment even
though it says you can modify it. If you try to modify, it will give you an
error. We will change that for future releases.
THE QUERY BAR
The query bar is used for complex queries. We don't suggest you use it.
Portal is a registered trademark in the United States, and Portal
Software, the Portal logo, the Real Time - No Limits tagline and
Infranet are trademarks of Portal Software, Inc. Copyright 1998
Portal Software, Inc.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -15-
Not to be disclosed without prior written
permission
Version 2.0 4/1/98
<PAGE> 24
ATTACHMENT B
FASTTRAK IMPLEMENTATION
STATEMENT OF WORK
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 9
<PAGE> 25
[PORTAL LOGO]
[INFRANET LOGO]
GENERAL MAGIC
IMPLEMENTATION STATEMENT OF WORK
APRIL 24th, 1998
- --------------------------------------------------------------------------------
PORTAL SOFTWARE, INC.
20863 Stevens Creek Blvd.
Suite 200
Cupertino, CA 95014
408-343-4400
<PAGE> 26
General Magic Statement of Work
- --------------------------------------------------------------------------------
STATEMENT OF WORK
Portal Professional Services Group (PPSG) is pleased to provide assistance to
General Magic for Phase I implementation of Infranet. The following statement
of work defines the scope, deliverables and associated costs for Phase I
implementation of the General Magic system.
PROJECT OVERVIEW
This implementation of Infranet will support customer management and
billing for General Magic services. The system is intended to provide real time
customer management and billing to General Magic's customers.
[**]
We propose that the implementation of the new system at General Magic be
carried out in two phases. Phase I consists of a FastTrak implementation
executed by PPSG. Phase II is the data conversion effort required to migrate
the customer base [**] on General Magic. PPSG will assist in the Phase II of the
implementation on a T&M basis if General Magic requests. At this time, due to
lack of details for this task, PPSG recommends that General Magic provide
resources to own and drive the data conversion portion (Phase II of
implementation); either via internal resources or other independent contractors.
PPSG is happy to recommend Infranet-trained contractors who can assist in this
manner.
SCOPE
The scope of this Agreement is as follows:
* Installation of Infranet; this would include:
- Infranet Foundation
- Infranet Insite
- Infranet Admin Tool
* An Implementation Workshop to determine the actual customization
requirements, scope the implementation, schedule activities and
allocated resources for the effort
* Development of pricing plans including implementation of a pricing
model (to be defined by the Implementation Workshop)
* Development and customization of agreed upon interfaces identified
from the Implementation Workshop.
* Set up of G/L ids
PORTAL CONFIDENTIAL AND PROPRIETARY Page -2-
Not to be disclosed without prior written
permission
[**] 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> 27
GENERAL MAGIC STATEMENT OF WORK
- --------------------------------------------------------------------------------
* Infranet knowledge transfer to General Magic staff;
DELIVERABLES
1. Installation and default configuration of Infranet Foundation, Admin. Tool
and Insite on a single CM/DM server and a single Oracle server. Both servers
to operate on NT environment.
2. Development and implementation of General Magic services and pricing plans.
3. Implementation workbook, project plan and tasks list.
4. Development and implementation of identified interfaces from the
Implementation workshop.
5. G/L ids creation.
6. Knowledge transfer to General Magic personnel.
SCHEDULE
The planned start date for Phase I is based on the completion of
contract. Phase I will start upon a mutually agreed upon date by both parties.
On this date the project team assigned to the project will begin working. The
timeframe for this implementation can vary, depending on the scope of work, but
it is typically eight weeks long. Currently we are planning for a start date of
[**].
If General Magic like, for Phase II of the implementation, PPSG is happy
to provide up to 20 days worth of consulting services to assist the General
Magic resources dedicated to this task.
STAFFING
PPSG will staff the General Magic project with a project manager (PM) and
technical consultants for the Phase I of the implementation. The PM position is
part-time while the consultants will provide full coverage for the duration of
the project.
PPSG will staff Phase II of the implementation with a part-time PM and one
technical consultant for the duration with a budget set for up to 20 days.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -3-
Not to be disclosed without prior written permission
[**] 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> 28
GENERAL MAGIC STATEMENT OF WORK
- --------------------------------------------------------------------------------
COSTS
PHASE I OF IMPLEMENTATION:
- --------------------------
<TABLE>
<CAPTION>
TASK RATE TOTAL
---- ---- -----
<S> <C> <C>
FastTrak $[**] $[**]
TOTAL $[**]
</TABLE>
ALL TRAVEL, LODGING AND EXPENSE WILL BE INVOICED TO GENERAL MAGIC.
PHASE II OF IMPLEMENTATION:
- ---------------------------
<TABLE>
<CAPTION>
TEAM MEMBERS HOURLY RATE DAYS TOTAL
------------ ----------- ---- -----
<S> <C> <C> <C>
Each Title
- ---- -----
1 Project Manager $[**] TBD
1 Technical Consultant $[**] TBD
TOTAL
</TABLE>
ALL TRAVEL, LODGING AND EXPENSE WILL BE INVOICED TO GENERAL MAGIC.
- --------------------------------------------------------------------------------
[PORTAL LOGO] CONFIDENTIAL AND PROPRIETARY Page -4-
Not to be disclosed without prior written permission
[**] 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> 29
ATTACHMENT C
MUTUAL CONFIDENTIALITY AGREEMENT
In connection with a License Agreement for Portal Software between Portal
Software, Inc. ("Portal") and Licensee, each party ("Disclosing Party") has
disclosed or may disclose to the other ("Receiving Party") confidential business
information, technical information, regulatory files, and/or documentation
related thereto (the "Proprietary Information").
In consideration of the License, Portal and Licensee agree as follows:
SECTION 1.0 PROPERTY
All information identified as Proprietary Information above will be and will
remain the sole property of the Disclosing Party and all proprietary rights in
connection with the Proprietary Information will be and will remain the sole
property of the Disclosing Party.
SECTION 2.0 SOURCE CODE
Any Source Code or internal specification documents for the Portal Software are
hereby designated as Proprietary Information of Portal and if disclosed to
Licensee, shall be subject to the non-disclosure and non-use provisions of this
Attachment B regardless of whether or not they are labeled as Proprietary
Information.
SECTION 3.0 ALLOWABLE USE
Receiving Party will use Disclosing Party's Proprietary Information solely as
allowed under the Licensing Agreement with the Disclosing Party.
SECTION 4.0 NONDISCLOSURE
Receiving Party will hold in confidence and not use (except as permitted by the
License Agreement) or disclose, without the other's consent, any Proprietary
Information of the Disclosing Party. The foregoing restrictions shall not apply
to information which Receiving Party can document in writing (a) is or becomes
in the public domain through no fault of its own, (b) was properly known to it,
without restriction, prior to disclosure by Disclosing Party, (c) was properly
disclosed to it, without restriction, by another person with the legal authority
to do so, (d) is independently developed by Licensee without use or reference to
the Portal Software and without breaching this Agreement, or (e) is the subject
of a written permission to disclose such information signed by the disclosing
party. Notwithstanding any of the provisions of this Agreement, disclosure of
Proprietary Information shall not be precluded if such disclosure is required by
valid legal process or otherwise ordered by a court or tribunal of competent
jurisdiction and provided the Receiving Party provides the Disclosing Party of
such legal proceeding or order with as much notice as reasonably possible under
the circumstances to enable the Disclosing Party with an opportunity to
meaningfully object to such disclosure.
SECTION 5.0 REVERSE ENGINEERING
Receiving Party will not reverse engineer, reverse compile or attempt to derive
the composition or underlying information, structure or ideas of the Disclosing
Party's Proprietary Information.
SECTION 6.0 NO GRANT OF LICENSE
Nothing contained herein shall be construed as granting or conferring any right
by license or otherwise, expressly or impliedly, to the Receiving Party, for any
business strategy, marketing plan, invention, discovery, protocol design,
development or improvement on any of the foregoing, embodied in the Proprietary
Information disclosed to it hereunder, except as explicitly set forth under the
License Agreement.
SECTION 7.0 TERMINATION
If the License Agreement between the parties terminates, Receiving Party will
promptly return all of the Disclosing Party's Proprietary Information and all
copies and extracts.
SECTION 8.0 NOTIFICATION
Receiving Party will promptly notify the Disclosing Party of any unauthorized
release of Proprietary Information.
SOFTWARE LICENSE AGREEMENT 04/30/98 PAGE 10
<PAGE> 30
AMENDMENT TO THE ATTACHMENT B OF THE LICENSE AGREEMENT
THIS AMENDMENT ("Amendment") IS TO THE ATTACHMENT B OF THE LICENSE AGREEMENT
dated April 30, 1998 between Portal Software, Inc. and General Magic, Inc. By
mutual agreement of the parties and in exchange for good and valuable
consideration, Attachment B to the License Agreement is hereby amended as
contemplated by Note 5 of page 2 of the License Agreement to include the
additional Statement of Work attached hereto.
AUTHORIZED SIGNATURES
In order to bind the parties to this Amendment, their duly authorized
representatives have signed their names below on the dates indicated.
GENERAL MAGIC, INC. PORTAL SOFTWARE, INC.
By: /s/ JAMES P. MCCORMICK By: /s/ STEVE SOMMER
---------------------------- -----------------------
(signature) (signature)
Name: JAMES P. MCCORMICK Name: STEVE SOMMER
-------------------------- ---------------------
(print or type) (print or type)
Title: Chief Financial Officer Title: VP PPSG
------------------------- --------------------
Date: October 14, 1998 Date: October 15, 1998
-------------------------- ---------------------
<PAGE> 31
PORTAL
Real Time No Limits
Infranet(R)
Portal Professional Services Group
General Magic
Statement of Work
Portal Software, Inc.
20863 Stevens Creek Boulevard
Suite 200
Cupertino, CA 95014 USA
(408) 343-4400
<PAGE> 32
GENERAL MAGIC
STATEMENT OF WORK
PROJECT OVERVIEW
Portal Professional Services Group (PPSG) is pleased to provide additional
assistance to General Magic in regards to the Infranet product. The following
Statement of Work defines the scope and associated costs.
SCOPE
The consultant will focus and provide assistance on the following tasks and
areas during this period of services. These tasks will be done based on time
permitting:
- - Subscriber Conversion
- [**]
- - [**]
- Create a [**] Report and a [**] Report
- Create a script [**]
- - Phase 1 Integration Testing and Deployment
- Assist with testing the integrated Infranet-Portico system and
support the deployment to production.
- - [**]
- [**]
- [**]
[**]
- Configure number [**]
- Set [**] a number of [**]
- Set [**]
- Notify Portico when an account [**]
- Monitor [**] and notify Finance [**]
- Send [**] when [**] occurs.
[**] 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> 33
GENERAL MAGIC
STATEMENT OF WORK
- - [**]
- Configure [**]
- Send [**] to Finance when a [**]
- Send [**] to [**] when a [**]
- [**]
- Notify Portico [**]
SCHEDULE
PPSG will provide up to 17 weeks of technical consulting starting [**]. The
Consultant will be working on the tasks and areas outlined in the Scope section,
as time permits.
STAFFING
Portal Professional Services Group will staff the General Magic project with a
full time consultant. Consultants will work a standard 8-hour working day. Hours
billed above the 8 hours per day must be pre-approved by General Magic and will
be charged as overtime using the then current hourly rate.
CONSULTING RATES
The following rates will be used for the Portal Staffing effort under this
agreement. The customer will be invoiced monthly on a time and materials basis.
<TABLE>
<CAPTION>
ROLE RATE WEEKS TOTAL ESTIMATE
---- ---- ----- --------------
<S> <C> <C> <C>
Technical Consultant [**] per hr Up to [**] $ [**] USD
</TABLE>
The above quote does not include expenses.
[**] 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> 34
GENERAL MAGIC
STATEMENT OF WORK
Expenses
Expenses will be the responsibility of the customer. All incurred expenses will
be billed back to the customer for the actual amount paid by the consultant.
Expenses include travel cost, lodging, transportation, meal and living expenses.
Acceptance and Sign-Off
Each design deliverable described in this statement of work will require a
sign-off from the customer. Upon completion of a document it will be distributed
to the appropriate persons at the customer site. The customer will review and
submit one of the following back to Portal:
- - The accepted document with comments to be incorporated
- - The accepted document as it was submitted
- - The document with comments to be incorporated and resubmitted for approval
The customer has 5 days to review each document and submit comments and
acceptance back to Portal. If the document has not been received back from the
customer within 5 days, the documents will be deemed accepted by the customer.
Portal Software, Inc. General Magic, Inc.
Name
[SIGNATURE ILLEGIBLE] /s/ JAMES P. MCCORMICK
- -------------------------------- ------------------------
Title
Director, Professional Services Chief Financial Officer
- -------------------------------- ------------------------
Date
October 15, 1998 October 14, 1998
- -------------------------------- ------------------------
<PAGE> 35
2nd AMENDMENT TO LICENSE AGREEMENT
This AMENDMENT ("Amendment") is to the License Agreement ("Agreement") between
Portal Software, Inc., and General Magic, Inc., (collectively, "the Parties")
entered into on or about April 30, 1998. By mutual agreement of the Parties and
in exchange for good and valuable consideration, the Agreement is hereby amended
to include the following new Sections:
16. Licensee shall be permitted to develop, use and modify the application
programming interfaces, macros, user interfaces and policy facilities
source code and supporting scripts provided by Portal under this
Agreement in its sole discretion. For the purposes of this Agreement,
such development shall be deemed an authorized modification of the
Portal Software. Portal shall have no proprietary interest in any such
original works created by Licensee using the aforementioned application
programming interfaces, macros, user interfaces and policy facilities
source code and supporting scripts.
17. For the purposes of this Agreement, the term "Restricted Release" shall
mean any version (subsequent to version 5.5.2) of the Portal Software
(which includes any and all required scripts for upgrading from earlier
versions of the Portal Software and any patches to the Portal Software)
which is not released for general availability or which is otherwise
designated as a Restricted Release. If Licensee is selected for
participation and elects to participate in a Restricted Release
program, Licensee agrees (i) Portal shall have no obligation to correct
errors in or deliver updates to the Restricted Release, (ii) Portal
shall have no obligation to otherwise support a Restricted Release once
a production version or a later Restricted Release of the Portal
Software is delivered to Licensee or has been made generally available
to Portal's customers or if Licensee has declined to pay the applicable
support services and license fees to obtain such version, (iii)
Licensee agrees to use reasonable commercial efforts, if requested by
Portal, to provide informal feedback regarding any errors discovered in
the Restricted Release so that Portal may recreate and address such
errors, (iv) Licensee understands and agrees that Restricted Releases
are experimental and may contain problems and errors and are provided
to Licensee on an "AS-IS" basis with no warranties of any kind, express
or implied, (v) neither party will be responsible or liable for any
losses, claims or damages of whatever nature, arising out of or in
connection with the performance or nonperformance of a Restricted
Release, and (vi) Licensee will not use the Restricted Release in
production applications without the prior written approval of Portal.
AUTHORIZED SIGNATURES
In order to bind the parties to this Amendment, their duly authorized
representatives have signed their names below on the dates indicated.
GENERAL MAGIC, INC. PORTAL SOFTWARE, INC.
By: /s/ ROY D. ALBERT By: /s/ JACK ACOSTA
----------------------------- --------------------------------
(signature) (signature)
Name: Roy D. Albert Name: Jack Acosta
--------------------------- ------------------------------
(print or type) (print or type)
Title: V.P. of Engineering Title: CFO
-------------------------- -----------------------------
Date: 4/12/99 Date: 4/12/99
--------------------------- ------------------------------
<PAGE> 1
EXHIBIT 10.25
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406.
AGREEMENT NO. 9705NU0060.02-SL
MAGIC NETWORK
PROTOTYPE DEVELOPMENT AGREEMENT
This agreement ("Agreement") is between Nuance Communications, a
California corporation with its principal place of business at 333 Ravenswood
Ave., Building 110, Menlo Park, CA 94025 ("Nuance") and General Magic, Inc., a
Delaware corporation with its principal place of business at 420 North Mary
Ave., Sunnyvale, California ("General Magic"). The effective date of this
Agreement shall be March 3, 1997 ("Effective Date").
Nuance and General Magic have agreed on business terms for the various
stages of the development and implementation of the Magic Network service
employing Nuance speech recognition as the speech interface. There are four
agreed phases: i. Development support and initial trial; ii. [**] user pilot;
iii. [**] user Magic Network deployment; iv. Post-deployment operations
beginning January 1, 1999 with an initial end date of December 31, 2001.
1. PHASE ONE: DEVELOPMENT SUPPORT AND INITIAL TRIAL
1.1. Development.
1.1.1 Scope of Development. Nuance will design and implement
the voice interface for the Magic Network prototype application which consists
of a C-based application which defines the application callflow ("Voice
Interface"). Nuance will also design and implement the recognition grammars
which operate in conjunction with the Voice Interface to define the allowable
speech input ("Recognition Grammars") for the Magic Network prototype
application. Other functions required for the Magic Network prototype
application, including information storage and retrieval and fax drivers, will
be made available by General Magic via an http server interface. General Magic
will provide a linkable C library, built on top of the current http server
interface, which contains C wrapper functions that can be used as an interface
to the server. The C wrapper function inputs and outputs will be native data
structures used by the Magic Network application, meaning that creation and
parsing of the http strings will be done within this library.
1.1.2 Development Schedule and Testing. Nuance projects a
total of six weeks required for development and initial testing of the prototype
Voice Interface and Recognition Grammars. Five weeks will be targeted as the
development period with an additional week for testing and iteration of the
prototype Voice Interface and Recognition Grammars by selected Nuance and
General Magic employees. The prototype Voice Interface and Recognition Grammars
are targeted for delivery on May 16, 1997.
1
[**] 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
1.1.3 Development Costs. Nuance will commit appropriate
management and development resources for design and implementation of the
prototype Voice Interface and Recognition Grammars. The aggregate charge for
contracting of development resources will be $[**] per week. General Magic will
issue an initial purchase order for six (6) weeks of development resources. A
minimum of six (6) weeks of funding, or $[**], is required and payable upon
execution of this Agreement subject to prior receipt of an invoice from Nuance
for $[**] unless such amount has been previously paid prior to execution of this
Agreement. Should development continue beyond six (6) weeks, General Magic will
issue purchase orders in one (1) week increments (although multiple weeks may be
listed in a single purchase order) and Nuance will invoice General Magic weekly
upon completion of each week's development work. Subject to receipt of Nuance's
invoices, General Magic will pay Nuance's development work invoices within
thirty (30) days of the end of each weekly development period described in a
General Magic purchase order. General Magic may terminate development by written
notice any time, subject to payment for all development resources time spent to
date.
1.2. Initial Trial. A total of 200 users will be targeted for the
initial Magic Network prototype trial of the prototype Voice Interface and
Recognition Grammars. The Voice Interface will include a logon sequence, with
users providing some means of identification (i.e. name, account number) and a
PIN for security (voice and touch-tone supported for digit entry). Once logged
in, users can retrieve voice mail and e-mail messages as well as calendar and
contact information (PIM). The prototype Voice Interface application will
include retrieval functions only, users will not be able to send voice messages
or enter contact or calendar information. Functions for messaging include List
(Scan), Play, and Delete. Functions for PIM include List Contacts, Read
Information and Fax Information. Text-to-speech will be used to read e-mail
messages. The text-to-speech for e-mail messages will be pre-processed and
available to Nuance as audio files for use within the prototype Voice Interface
and Recognition Grammars. Subsequently, as an alternative, General Magic may, in
its discretion, provide a real-time text-to-speech capability as a resource.
1.3. Purchase of Server Licenses. General Magic will purchase [**]
run-time server software licenses for the Nuance voice recognition engine [**]
to support the initial 200-user Magic Network prototype trial and subsequent
[**] user service trial currently scheduled for August, 1997. The total software
license fee for the [**] server licenses shall be $[**]. $[**] is payable on
execution of this Agreement with the remaining $[**] due on or before July 1,
1997. The Nuance voice recognition engine server software (referred to as the
"Program" in the Software License Agreement) is licensed to General Magic under
the terms of the software license as specified in Exhibit A ("Software License
and Support Agreement") and such license is applicable to the Magic Network
service system which will ultimately be used for deployment; the terms of such
software license agreement shall not change the license fees or payment terms
set forth herein. All orders for server software licenses hereunder are
non-cancelable, and sums, once paid, are non-refundable.
2
[**] 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> 3
2. PHASE TWO: [**]-USER PILOT
Following the initial 200-user trial, General Magic will develop a Phase
Two pilot for the Magic Network service incorporating the Voice Interface and
Recognition Grammars configured for a total of [**] users. General Magic will
have use of the [**] server licenses purchased under the terms of Section 1.3
("Purchase of Server Licenses") to support the Phase Two [**]-user trial. In
addition, Nuance will grant General Magic up to [**] additional server licenses
for use in support of the Phase Two pilot on an as-needed, no-charge, temporary
basis. Such [**] additional server licenses will be "loaned" at no charge as
described herein through December 31, 1997.
3. PHASE THREE: 100,000- USER MAGIC NETWORK DEPLOYMENT
When General Magic makes a commitment, in its sole discretion, to deploy
the Magic Network service, a Phase Three purchase order will be issued by
General Magic to Nuance for the total number of Nuance voice recognition engine
server software licenses required to support [**] users. This Phase Three
purchase order, if any, for the applicable number of licenses as determined by
General Magic, will be delivered to Nuance on or before December 31, 1997. Upon
delivery of such Phase Three purchase order by General Magic to Nuance, such
purchase order is non-cancelable and the license fees due thereunder are
non-refundable. The total number of licenses is currently estimated at [**] but
is subject to change by General Magic depending on trial results. At a minimum,
General Magic will pay 25% of the total license fees due under the Phase Three
purchase order on or before March 31, 1998 and will pay the remaining 75% of the
license fees due under the Phase Three purchase order on or before June 30,
1998. The discount applied to server licenses ordered for the [**]-user system
shall be [**]% off the then-current Nuance list price as of the date the Phase
Three purchase order is placed.
4. PHASE FOUR: POST-DEPLOYMENT OPERATIONS
4.1. Purchase of Server Licenses. During the term of this Agreement,
General Magic shall receive a [**]% discount off the then-current Nuance list
price for any server licenses purchased for the Magic Network service in order
to serve a subscriber base of more than [**] users. Payment terms for any Nuance
voice recognition engine server software licenses ordered by General Magic other
than under the Phase Three purchase order shall be Net 30 days from the date of
the invoice.
4.2. Revenue Participation. Nuance will also share in the revenue
generated from the Magic Network service. Nuance shall receive a royalty of
$[**] the Magic Network service. The royalty will be in effect and apply to
the Magic Network service subscriber base beginning on January 1, 1999 and will
continue up through and including December 31, 2001. Such royalty will be due
thirty (30) days after the last day of each month and will be based on [**] to
the Magic Network service as tallied on the last day of each month.
3
[**] 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> 4
4.3. Audit. Nuance may, at Nuance's expense and not more than once
annually, audit General Magic's books and records relevant to the royalties due
under Section 4.2 ("Revenue Participation"). Any such audit shall be conducted
by an independent accounting firm selected by Nuance and shall be conducted
during General Magic's regular business hours and shall not unreasonably
interfere with General Magic's business activities. If such an audit reveals
that General Magic has underpaid royalties to Nuance, General Magic shall be
invoiced for the underpaid royalties.
4.4. Technical Support. Nuance will make technical support for the
voice recognition engine software, the Voice Interface and the Recognition
Grammars available to General Magic under the support terms in Exhibit A
("Software License and Support Agreement") and the Technical Support Policy in
Attachment A-2. General Magic agrees to purchase such technical support during
the initial term of this Agreement on an annual basis for the voice recognition
engine software and on an as needed, time and materials basis (billed at
Nuance's then current standard rate) for the Voice Interface and Recognition
Grammars. The annual technical support fee for the voice recognition engine
software will be payable annually in advance on the Effective Date and
thereafter on the Support Period Anniversary (as defined below). The technical
support fee will be calculated as [**] percent ([**]%) of the server license fee
actually invoiced to General Magic (net price) for each copy of the voice
recognition engine server software for which General Magic has purchased a
license and which is in use in the Magic Network on the Effective Date of this
Agreement and thereafter on each Support Period Anniversary (as defined below).
Nuance will prepare and issue an appropriate invoice for each successive
one-year period ("Support Period"), starting as of the Effective Date and on
each anniversary of the Effective Date ("Support Period Anniversary")
thereafter. As each new copy of the voice recognition engine server software is
licensed from Nuance and put into use in the Magic Network, Nuance will issue an
invoice for the technical support fee applicable to each such copy of the voice
recognition engine server software, pro rated to include only the months
remaining in the then-current Support Period.
5. SOFTWARE LICENSES AND PROPRIETARY RIGHTS
5.1. Software Licenses. The server software for the Nuance voice
recognition engine will be licensed to General Magic under the terms of the
software license in Exhibit A ("Software License and Support Agreement").
5.2. Acceptance of the Voice Interface and Recognition Grammars.
Nuance will deliver the Voice Interface and Recognition Grammars as developed by
Nuance hereunder in accordance with the mutually agreed upon schedule. Within
thirty (30) days of delivery of the Voice Interface and Recognition Grammars,
General Magic will review and accept or reject (with a written statement of
errors) the Voice Interface and Recognition Grammars based on the written
requirements mutually agreed upon by Nuance and General Magic in Exhibit B
("Acceptance Requirements"). The parties will mutually agree upon and add
acceptance testing procedures to Exhibit B ("Acceptance Requirements") by
amendment, within a reasonable period of time after the Effective Date but at
least prior to the beginning of the thirty (30) day acceptance period. General
Magic's deployment of the Voice Interface and Recognition Grammars in the
initial 200-user trial shall be deemed acceptance of the Voice Interface and
Recognition Grammars by General Magic.
5.3. Assignment of the Voice Interface. Nuance hereby assigns all
right, title and interest in the Voice Interface developed by Nuance hereunder
including all patent, copyright, trade secret and trademark rights to General
Magic.
[**] 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.
4
<PAGE> 5
Nuance agrees to perform all acts deemed necessary or desirable by General
Magic to permit and assist General Magic, at General Magic's expense, in
perfecting and enforcing its rights in the Voice Interface throughout the world.
Such acts may include, but are not limited to, execution of documents and
assistance or cooperation in the registration and enforcement, including
litigation, of applicable intellectual property rights or other legal
proceedings.
5.4. Ownership. General Magic shall retain all right, title and
interest in the Voice Interface, including patent, copyright, trade secret, and
trademark rights. Nuance does not acquire any rights, express or implied, in the
Voice Interface. Nuance shall retain all right, title and interest in the
Recognition Grammars, including patent, copyright, trade secret and trademark
rights. Except as licensed hereunder, General Magic does not acquire any rights,
express or implied, in the Recognition Grammars.
5.5. License to the Recognition Grammars. Nuance hereby grants to
General Magic a worldwide, nonexclusive, perpetual, irrevocable, royalty-free
license to reproduce, modify, distribute, display and perform the Recognition
Grammars in conjunction with the Magic Network service.
5.6. Warranty of Title. Nuance represents and warrants (i) that the
Voice Interface and Recognition Grammars are original works of authorship and
were created solely by Nuance, (ii) that the Voice Interface and Recognition
Grammars and the intellectual property rights associated with such applications
are free and clear of all encumbrances, including, without limitation, security
interests, licenses, liens, charges or other restrictions, and (iii) that use,
reproduction, distribution, or modification of the Voice Interface and
Recognition Grammars does not and will not violate the rights of any third party
including, but not limited to, trade secrets, copyrights and, to the best of
Nuance's knowledge, patents.
5.7. Source Code. Upon acceptance of the Voice Interface and
Recognition Grammars by General Magic, Nuance will deliver a complete copy of
the source code for the Voice Interface and Recognition Grammars, including all
programmer's comments and any proprietary tools, in object code, necessary to
compile the Voice Interface and Recognition Grammars source code as well as any
related information necessary to support the source code.
5.8. Similar Software. General Magic acknowledges that Nuance may be
requested to develop software with functions that are similar to the Voice
Interface and/or the Recognition Grammars and agrees that nothing in this
Agreement is intended to prohibit Nuance from independently developing such
similar software so long as Nuance does not copy the Voice Interface code and
does not incorporate any of General Magic's Confidential Information.
5
<PAGE> 6
5.9 Support Software. In order to support the functionality required
by the Magic Network Service, Nuance may develop additional software ("Support
Software") which works in conjunction with the voice recognition engine software
(examples include automatic pronunciation generation, text-to-speech integration
and call statistics). Such Support Software will be licensed to General Magic as
part of the voice recognition engine software according to the terms in Exhibit
A. Nuance shall retain all right, title and interest in the Support Software,
including patent, copyright, trade secret and trademark rights. Except as
licensed hereunder, General Magic does not acquire any rights, express or
implied, in the Support Software.
5.10. Cellular Recognition Performance. Recognition Accuracy over
cellular channels is important to consumer acceptance of the Magic Network
Service. In one study of recognition performance on 8-digit strings, the word
error rate over landline channels was [**]%, AMPS-[**]%, CDMA-[**]%, and
TDMA-[**]% (stationary handset for all cases). Nuance will apply its best
efforts to achieve equal or better accuracy in its product releases to General
Magic in addition to providing a product which performs well over GSM channels
(no tests performed to date).
6. WARRANTIES AND DISCLAIMERS
6.1. Warranty. Nuance warrants that for a period of ninety (90) days
from the Effective Date, the Voice Interface and Recognition Grammars as
delivered to and accepted by General Magic and without modification by General
Magic will perform the functions required by the acceptance requirements set
forth in Exhibit B ("Acceptance Requirements"). The foregoing warranty will not
be applicable to versions of the Voice Interface or Recognition Grammars which
have been modified by General Magic. Nuance does not warrant that the Voice
Interface and Recognition Grammars will operate in the combinations which
General Magic may select for use, that the operation of the Voice Interface and
Recognition Grammars will be uninterrupted or error-free, or that all the Voice
Interface and Recognition Grammars errors will be corrected.
6.2. Services. Nuance warrants that its technical support services
will be performed consistent with generally accepted industry standards. This
warranty shall be valid for ninety (90) days from performance of service.
6.3. Limitations. The warranties above are exclusive and in lieu of
all other warranties, whether express or implied, including the implied
warranties of merchantability and fitness for a particular purpose.
6.4. Exclusive Remedies. For any breach of the warranties contained
above, General Magic's exclusive remedy, and Nuance's entire liability, shall
be:
(a) For the Voice Interface. The correction of Voice
Interface and/or Recognition Grammars errors which are reproducible in the
unmodified versions of the Voice Interface and/or Recognition Grammars that
cause the Voice Interface and/or Recognition Grammars not to perform the
functions required by the Acceptance Requirements, or if Nuance is unable to
make the Voice Interface and/or Recognition Grammars perform as warranted,
General Magic shall be entitled to terminate the use of the Voice Interface
and/or Recognition Grammars in its sole discretion and recover the fees paid for
the Voice Interface and/or Recognition Grammars.
(b) For Services. The re-performance of the technical
support services, or if Nuance is unable to perform the services as warranted,
General Magic shall be entitled to recover the fees paid to Nuance for the
deficient services.
7. LIMITATION OF LIABILITY
In no event shall either party be liable to the other for any special,
indirect, incidental, or consequential damages, or damages for loss of profits,
savings, revenue, use, damaged files or data, or business interruption, incurred
by either party or any third party, which may arise in connection with this
Agreement or the use and support of the Voice Interface and/or Recognition
Grammars regardless of whether such claims are based or remedies are sought in
contract or tort, even if the other party has been advised of the possibility of
such damages. Under no circumstances shall Nuance's liability exceed [**].
8. INDEMNITY
[**] 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> 7
Nuance will defend and indemnify General Magic against a claim that the
unmodified Voice Interface and/or Recognition Grammars furnished and used within
the scope of this Agreement infringe a copyright, patent, or trademark, provided
that: (a) General Magic notifies Nuance of such claim in writing within thirty
(30) days of the claim; (b) at Nuance's expense, Nuance has sole control of the
defense and all related settlement negotiations, and (c) General Magic provides
Nuance with a reasonable assistance, information, and authority necessary to
perform Nuance's obligations under this Section 8 ("Indemnity"). Nuance shall
have no liability for any claim of infringement based on use of a superseded or
altered release of the Voice Interface and/or Recognition Grammars or the use of
the Voice Interface and/or Recognition Grammars in combination with other
hardware or software if the infringement would have been avoided by the use of a
current, unaltered release of the Voice Interface and/or Recognition Grammars
that Nuance provides to General Magic, or in combination with different hardware
or software, or to the extent such use is possible, use without any combination.
In the event the Voice Interface and/or Recognition Grammars are held or are
believed by Nuance to infringe, Nuance shall have the option, at its expense, to
(a) modify the Voice Interface and/or Recognition Grammars to be noninfringing;
(b) procure for General Magic a license to continue using the Voice Interface
and/or Recognition Grammars; or if it is not commercially reasonable for Nuance
to perform (a) or (b), (c) General Magic may, in its sole discretion, terminate
the use of the Voice Interface and/or Recognition Grammars and receive a refund
of the fees paid for the Voice Interface and/or Recognition Grammars. This
Section states Nuance's entire liability and General Magic's exclusive remedy
for infringement.
9. TAXES
Fees hereunder do not include local, state, or federal sales, use,
property, value-added, or other taxes based on the licenses and services
provided under this Agreement or General Magic's use thereof. General Magic
agrees to pay all such taxes as may be imposed upon Nuance or General Magic.
General Magic shall be invoiced for such taxes if Nuance is required to pay them
on General Magic's behalf. This provision shall not apply to taxes based on
Nuance's income.
10. CONFIDENTIAL INFORMATION
10.1. Obligations. By virtue of this Agreement, the parties may have
access to information that is confidential to one another ("Confidential
Information"). Confidential Information shall include the disclosing party's
business strategies, technical information related to the Magic Network service
in the case of General Magic, source code for all software delivered by Nuance
hereunder, customer information, the terms of this Agreement and pricing under
this Agreement, and in addition, all information clearly identified as
confidential if disclosed in writing (or visually) or in the case of verbal
disclosure, identified as such at the time of disclosure. The obligations of
confidentiality described herein shall be applicable during the term of this
Agreement and for a period of ten years after the termination of this Agreement.
The parties agree that, unless required by law, they will not make each other's
Confidential Information available in any form to any third party or use each
other's Confidential Information for any purpose other than the implementation
of this Agreement. Notwithstanding the foregoing, General Magic may disclose
certain Confidential Information to third parties as
7
<PAGE> 8
necessary to display the Magic Network so long as such disclosure is under an
obligation of confidentiality and so long as General Magic obtains Nuance's
prior written consent, which consent will not be unreasonably withheld. Each
party agrees to take all reasonable steps using at a minimum the same degree of
care as is used for its own Confidential Information to ensure that Confidential
Information is not disclosed or distributed by its employees or agents in
violation of the terms of this Agreement.
10.2. Exception. A party's Confidential Information shall not include
information that: (a) is or becomes a part of the public domain through no act
or omission of the other party; (b) was in the other party's lawful possession
prior to the disclosure and had not been obtained by the other party either
directly or indirectly from the disclosing party; (c) is lawfully disclosed to
the other party by a third party without restrictions on disclosure; or (d) is
independently developed by the other party.
11. TERM
The initial term of this Agreement shall commence on the Effective Date
and shall terminate on December 31, 2001. Thereafter, the Agreement will
automatically renew for successive one (1) year renewal terms unless either
party sends a notice of termination at least thirty (30) days prior to the last
day of the initial term or any renewal period.
12. ASSIGNMENT
Except in the case of a merger, acquisition or sale of all or
substantially all of the assets of a party, neither party may assign this
Agreement without the other party's prior written consent. Any attempt to do so
without that consent will be void. This Agreement will bind and inure to the
benefit of the parties and their respective successors and permitted assigns.
13. TERMINATION
Either party may terminate this Agreement for a material breach by the
other party upon thirty (30) days written notice and opportunity to cure during
the notice period. General Magic may terminate this Agreement at any time for
its convenience, subject to the obligation to pay for all development work,
license fees and royalties that have accrued and/or are due and owing as of the
date of termination.
14. EXPORT
General Magic agrees to comply fully with all relevant export laws and
regulations of the United States ("Export Laws") to assure that neither the
Voice Interface and/or Recognition Grammars nor any direct product thereof are
(a) exported, directly or indirectly, in violation of Export Laws; or (b)
intended to be used for any purposes prohibited by the Export laws, including,
without limitation, nuclear, chemical, or biological weapons proliferation.
15. NOTICE
8
<PAGE> 9
All notices under this Agreement, including notices of address change,
shall be in writing and shall be deemed to have been given when sent by
registered mail, return receipt requested, to the first address listed above.
16. LEGAL EXPENSES
In the event legal action is taken by either party to enforce this
Agreement, all costs and expenses, including reasonable attorney's fees incurred
by the prevailing party, shall be paid by the other party.
17. SEVERABILITY
If any provision of this Agreement is held by a court of competent
jurisdiction to be illegal, unenforceable, or in conflict with any law of a
federal, state, or local government, the validity of the remaining portions or
provisions shall remain in full force and effect.
18. GOVERNING LAW
This Agreement shall be construed and enforced according to the laws of
the State of California.
19. RELATIONSHIP OF THE PARTIES
The relationship of the parties is that of independent contractors. No
one party is the agent of the other and neither party is authorized to act on
behalf of the other party.
20. WAIVER
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or breach.
Except for actions of non-payment or breach of either party's proprietary
rights, no action, regardless of form, arising out of this Agreement may be
brought by either party more than one year after the cause of action has
accrued.
21. ENTIRE AGREEMENT
This Agreement contains all the agreements, representations, and
understandings of the parties hereto and supersedes any previous understandings,
commitments, or agreements, oral or written, with respect to the subject matter
of this Agreement. It is expressly agreed that all terms of any General Magic
purchase order or other ordering document shall be superseded by the terms of
this Agreement. This Agreement may not be modified or amended except in a
writing signed by a duly authorized representative of each party; no other act
shall be deemed to amend or modify this Agreement.
IN WITNESS WHEREOF, the authorized representatives of the parties have
executed this Agreement below.
9
<PAGE> 10
Nuance Communications General Magic
By: /s/ BRUCE DOUGHERTY By: /s/ KEVIN J. SURACE
-------------------------------- -------------------------------------
(signature) (signature)
Bruce Dougherty Kevin J. Surace
-------------------------------- -------------------------------------
(name) (name)
Vice President VP & GM
-------------------------------- -------------------------------------
(title) (title)
Date: May 14, 1997 Date: May 14, 1997
------------------------------ -----------------------------------
10
<PAGE> 11
EXHIBIT A
SOFTWARE LICENSE AND SUPPORT AGREEMENT
This agreement ("Agreement") is Exhibit A to the Magic Network Prototype
Development Agreement ("Development Agreement") and is between Nuance
Communications, a California corporation with its principal place of business at
333 Ravenswood Ave., Building 110, Menlo Park, California 94025 ("Nuance") and
General Magic, Inc. a Delaware corporation with its principal place of business
at 420 North Mary Ave., Sunnyvale California ("Customer"). The terms of this
Agreement shall apply to each Program license granted and to all services
provided by Nuance under this Agreement. When completed and executed by both
parties, an Order Form shall evidence the Program licenses granted and the
services that are to be provided.
I. DEFINITIONS
1.1 "PROGRAM(S)" shall mean the software programs delivered by Nuance to
Customer consisting of computer programs owned or distributed by Nuance
in object code form, data files, Documentation, and Updates.
1.2 "DOCUMENTATION" shall mean all program guides and user documentation for
use of the software provided with the Programs.
1.3 "SUPPORTED PROGRAM LICENSE(S)" shall mean any Program licenses for which
Customer has purchased Technical Support for the relevant time period.
"TECHNICAL SUPPORT" shall mean Program support provided under Nuance's
technical support policy attached hereto as Attachment A-2 ("Technical
Support Policy").
1.4 "UPDATE(S)" shall mean any bug fixes, patches, modifications, new
releases and enhancements to the Programs as may be generally made
available for Supported Program Licenses at no additional charge, other
than media and handling charges. Updates shall not include any releases,
options, or future products which Nuance licenses separately.
1.5 "LOCATION(S)" shall mean the initial Customer location(s) specified on
the applicable Order Form and any location, whether owned or leased by
Customer or a third party under agreement with Customer where Customer
may locate the Programs in the future, so long as Customer will provide
Nuance with a written identification of all such locations upon Nuance's
request from time to time.
1.6 "RECOGNITION SYSTEM(S)" shall mean the computer/operating system/IVR
combination(s) designated on the applicable Order Form. Unless otherwise
specified on the Order Form, each Program copy made from the Master Copy
may be installed on only one (1) computer at a time.
1.7 "ORDER FORM" shall mean the document in the form attached hereto as
Attachment A-1 ("Order Form") by which Customer orders Program licenses
and services from Nuance, and which is agreed to by the parties. The
Order Form shall reference the Effective Date of this Agreement.
1.8 "COMMENCEMENT DATE" shall mean the date on which the Programs are
shipped by Nuance to Customer, or, if no delivery is necessary, the
Effective Date of the relevant Order Form.
1.9 "MASTER COPY" shall mean the original copy of the Program delivered to
Customer as a reproducible master copy.
1.10 "LICENSE KEY" shall mean a CPU-specific password key provided by Nuance
to Customer to activate the Program copy made from the Master Copy for
which Customer has paid the applicable license fee to Nuance.
II. LICENSED PROGRAM LICENSE
2.1 RIGHTS GRANTED
A. In consideration for the payment of royalties as set forth in
Section 4.2 ("Revenue Participation") of the Development
Agreement and the Program license fees paid hereunder, Nuance
grants to Customer and Customer accepts a non-exclusive,
non-transferable license to use the Programs and any Updates
Customer obtains under this Agreement, as follows:
i. to use the Programs solely for Customer's own internal
business operations and Customer's Magic Network (which
is publicly available) on the Recognition Systems or on
a
11
<PAGE> 12
backup system at the Location(s). The Magic Network will
be used by customers and subscribers in accordance with
General Magic's then-current commercial terms applicable
to the Magic Network service. Customer shall not have
the right to manufacture, sell, or otherwise
commercially exploit, except in support of Customer's
own internal business operations and Customer's Magic
Network (which is publicly available), any product,
system, or service based in whole or in part on the
Programs. Nuance acknowledges that Customer may use
third parties to operate certain Locations and/or
Recognition Systems, however, Customer will not resell
or sublicense the Programs;
ii. to use the Documentation provided with the Programs in
support of Customer's authorized use of the Programs;
iii. to copy the Master Copy to make copies of the Program
subject to payment of license fees and to copy the
Programs for archival or backup purposes; no other
copies shall be made without Nuance's prior written
consent. Customer may use an archival copy of each copy
of the Programs on a single backup Recognition System if
the production Recognition System for which each copy of
the Program was acquired is rendered inoperable. Nuance
agrees to promptly provide the necessary License Key to
enable use of the archival copy in such case. Under no
circumstances shall Customer use the Programs on the
production Recognition System and the backup Recognition
System simultaneously. Customer agrees not to alter,
change, or remove from the Programs any identifications,
including copyright and trademark notices, and further
agrees to place such markings on any copies of the
Programs. All archival and backup copies of the Programs
are subject to the terms of this Agreement.
Customer shall not copy or use the Programs (including the
Documentation) except as otherwise specified in this Agreement.
B. Nuance shall retain all right, title and interest in the
Programs, including copyright, trade secret, and trademark
rights. Except as otherwise expressly stated in this Agreement,
Customer does not acquire any rights, express or implied, in the
Programs.
C. Customer shall not cause or permit the reverse engineering,
decompilation, disassembly or other translation of the Programs.
D. Upon Nuance's prior written consent and subject to obtaining the
necessary License Key for operation on the new Recognition
System, Customer may transfer the license previously paid for by
Customer to another Recognition System within the Magic Network,
further subject to payment of any upgrade fee to cover the
difference in license fees between the prior and the new
Recognition System. Such transfer shall be subject to Nuance's
transfer fees and policies in effect at the time at the
transfer, provided, Nuance will not charge a transfer fee for
installation of an archival copy as described in Section II,
2-1(A)(iii).
E. Customer shall have the right to allow its third party agents,
suppliers, and customers to use the Programs for Customer's
internal business purposes and Customer's Magic Network,
provided Customer's use and such third party agent, supplier and
customer use is in accordance with the terms of this Agreement.
2.2 ACCEPTANCE. Customer shall be deemed to have accepted the Programs on
the Commencement Date. If Customer is granted a right to copy the
Programs, all copies shall be deemed accepted upon acceptance of the
Master Copy.
2.3 ASSIGNMENT. Except in the case of a merger, acquisition or sale of all
or substantially all of the assets of a party, neither party may assign
this Agreement without the other party's prior written consent. Any
attempt to do so without that consent will be void. This Agreement will
bind and inure to the benefit of the parties and their respective
successors and permitted assignees.
2.4 VERIFICATION. On Nuance's written request, not more frequently than
annually, Customer shall provide to Nuance a signed certification (a)
verifying the Programs are being used in accordance with the terms of
this Agreement,
12
<PAGE> 13
including any use limitations; and (b) listing the locations and type(s)
of the Recognition System(s) on which the Programs are run.
Nuance may, at Nuance's expense and not more than once annually, audit
Customer's use of the Programs subject to obligations of
confidentiality. Any such audit shall be conducted during business hours
and shall not unreasonably interfere with Customer's business activities
and shall be limited to records necessary to determine whether all
license fees due have been paid. If such an audit reveals that Customer
has underpaid fees to Nuance, Customer shall be invoiced for the
underpaid fees based upon Nuance's commercial price list in effect at
the time of the audit.
III. TECHNICAL SUPPORT SERVICES
Technical Support services ordered by Customer will be provided under Nuance's
Technical Support policy, as applicable, in effect on the date Technical Support
is ordered. The Technical Support Policy in effect as of the Effective Date of
this Agreement is attached hereto as Attachment A-2 ("Technical Support
Policy"). Technical Support shall be charged for at the fees stated in the
Development Agreement. Additional telephone support services, on-site support,
assistance in developing the best uses of the Programs, and other improvements
may be obtained from Nuance under a separate agreement and for additional fees.
For any on-site services requested by Customer, Customer shall reimburse Nuance
for actual, reasonable travel and out-of-pocket expenses incurred.
IV. TERM AND TERMINATION
4.1 TERM. If not otherwise specified on the Order Form as to a specific
Program license, each Program license granted hereunder and this
Agreement shall remain in effect in perpetuity, unless otherwise
terminated as set forth below.
4.2 TERMINATION BY CUSTOMER. Customer may terminate any Program license or
this Agreement at any time upon written notice to Nuance.
4.3 TERMINATION BY NUANCE. Nuance may terminate this Agreement upon written
notice if Customer materially breaches this Agreement and fails to
correct such breach within thirty (30) days of written notice specifying
the breach. Nuance may terminate the license to any Program copy if
Customer is in breach of its payment obligation as to the applicable
license fee and fails to cure as described above.
4.4 EFFECT OF TERMINATION. Termination of this Agreement or any Program
license by either party shall not limit either party from pursuing any
other remedies available to it, including injunctive relief, nor shall
such termination release Customer from any obligation to pay all fees
that have accrued or that Customer has agreed to pay under any Order
Form under this Agreement up to the date of termination. The parties'
rights and obligations under Sections 2.1.B, 2.1.C, 2.3, and Articles
IV, V, VI, VII, and VIII shall survive termination of this Agreement.
4.5 AFTER TERMINATION. If a license granted under this Agreement expires or
otherwise terminates, Customer shall (a) cease using the applicable
Programs, and (b) certify to Nuance within thirty (30) days of
expiration or termination that Customer has destroyed or returned to
Nuance the Programs and all copies thereof remaining in Customer's
possession. This requirement applies to copies in all forms, partial and
complete, in all types of media and computer memory, and whether or not
modified or merged into other materials.
V. WARRANTIES AND LIMITATION OF LIABILITY
5.1 WARRANTIES AND DISCLAIMERS
A. Program License. Nuance warrants that for a period of ninety
(90) days from the Commencement Date each unmodified Program
will perform the functions described in the Documentation.
Nuance does not warrant that the Programs will meet Customer's
requirements, that the Programs will operate in the combinations
which Customer may select for use, that the operation of a
Program will be uninterrupted or error-free, or that all Program
errors will be corrected.
13
<PAGE> 14
B. Media. Nuance warrants the tapes, diskettes, or other media to
be free of defects in materials and workmanship under normal use
for ninety (90) days from the Commencement Date.
C. Services. Nuance warrants that its Technical Support services
will be performed consistent with generally accepted industry
standards. This warranty shall be valid for ninety (90) days
from performance of service.
D. LIMITATIONS. THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. PRE-PRODUCTION RELEASES OF PROGRAMS ARE
DISTRIBUTED "AS-IS" WITHOUT WARRANTY.
5.2 EXCLUSIVE REMEDIES. For any breach of the warranties contained in
Section 5.1 above, Customer's exclusive remedy, and Nuance's entire
liability, shall be:
A. For Programs. The correction of Program errors that cause breach
of the warranty, or if Nuance is unable to make the Program work
as warranted, Customer shall be entitled to terminate the
Program license and recover the fees paid for the Program
license or Update, as applicable.
B. For Media. The replacement of defective media returned to Nuance
within ninety (90) days of the Commencement Date.
C. For Services. The performance of the Technical Support services,
or if Nuance is unable to perform the services as warranted,
Customer shall be entitled to recover the fees paid to Nuance
for the deficient services.
5.3 LIMITATION OF LIABILITY. In no event shall either party be liable to the
other for any special, indirect, incidental, or consequential damages,
or damages for loss of profits, savings, revenue, use, damaged files or
data, or business interruption, incurred by either party or any third
party, which may arise in connection with this Agreement or the use and
support of the Programs, regardless of whether such claims are based or
remedies are sought in contract or tort, even if the other party has
been advised of the possibility of such damages. Under no circumstances
shall Nuance's liability exceed the [**].
VI. INFRINGEMENT INDEMNITY
Nuance will defend and indemnify Customer against a claim that Programs
furnished and used within the scope of this Agreement infringe a copyright,
patent, or trademark, provided that: (a) Customer notifies Nuance of such claim
in writing within thirty (30) days of the claim; (b) at Nuance's expense, Nuance
has sole control of the defense and all related settlement negotiations; and (c)
Customer provides Nuance with the reasonable assistance at Nuance's expense,
information, and authority necessary to perform Nuance's obligations under this
Article. Nuance shall have no liability for any claim of infringement based on
use of a superseded or altered release of the Programs or the use of the
Programs in combination with other hardware or software if the infringement
would have been avoided by the use of a current, unaltered release of the
Programs that Nuance provides to Customer, or in combination with different
hardware or software, or to the extent such use is possible, use without any
combination.
In the event the Programs are held or are believed by Nuance to infringe, Nuance
shall have the option, at its expense, to (a) modify the Programs to be
noninfringing; (b) procure for Customer a license to continue using the
Programs; or, if it is not commercially reasonable for Nuance to perform (a) or
(b), (c) terminate the license for the infringing Programs and refund the
license fees paid for those Programs. This Article VI states Nuance's entire
liability and Customer's exclusive remedy for infringement.
VII. PAYMENT OF FEES
All fees hereunder shall be due and payable net thirty (30) days of the date of
invoice. All Technical Support fees shall be payable annually in advance, and in
accordance with the terms of Section 4.4 ("Technical Support") of the Agreement.
Any amounts payable by Customer hereunder which remain unpaid after the due date
shall be subject to late penalty fees equal to 1.5% per month from the due date
until such amount is paid. Customer agrees to pay applicable media and shipping
charges. Customer shall issue to Nuance a purchase order or other document
acceptable to Nuance on or before the effective date of the applicable Order
Form.
Fees hereunder do not include local, state, or federal sales, use, property,
value-added, or other taxes based
14
<PAGE> 15
on the licenses and services provided under this Agreement or Customer's use
thereof. Customer agrees to pay all such taxes as may be imposed upon Nuance or
Customer. Customer shall be invoiced for such taxes if Nuance is required to pay
them on Customer's behalf. This provision shall not apply to taxes based on
Nuance's income.
VIII. OTHER
8.1 CONFIDENTIAL INFORMATION. By virtue of this Agreement, the parties may
have access to information that is confidential to one another
("Confidential Information"). Confidential Information shall be limited
to the Programs, the terms and pricing under this Agreement, and all
information clearly identified as confidential.
A party's Confidential Information shall not include information that:
(a) is or becomes a part of the public domain through no act or omission
of the other party; (b) was in the other party's lawful possession prior
to the disclosure and had not been obtained by the other party either
directly or indirectly from the disclosing party; (c) is lawfully
disclosed to the other party by a third party without restriction on
disclosure; or (d) is independently developed by the other party.
Customer shall not disclose the results of any benchmark tests of the
Programs to any third party without Nuance's prior written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of two
years after the termination of this Agreement. The parties agree that,
unless required by law, they will not make each other's Confidential
Information available in any form to any third party, including
customers or customer prospects, or use each other's Confidential
Information for any purpose other than the implementation of this
Agreement. Each party agrees to take all reasonable steps to ensure that
Confidential Information is not disclosed or distributed by its
employees or agents in violation of the terms of this Agreement. Nothing
in this Agreement shall be construed as permitting Customer the right to
use the Nuance name in conjunction with any product or service offered
by Customer.
Subject to Customer's obligations with respect to confidentiality,
privacy and other limitations imposed on such disclosures by applicable
law, Customer agrees to provide Nuance with full access to all audio
input to the Programs resulting from Customer's end user calls (the
"In-Service Data") solely for Nuance's purposes of training, refining,
supplementing, or testing its speech recognition software, models, and
algorithms. Such In-Service Data shall be protected as Customer's
Confidential Information.
8.2 EXPORT. Customer agrees to comply fully with all relevant export laws
and regulations of the United States ("Export Laws") to assure that
neither the Programs nor any direct product thereof are (a) exported,
directly or indirectly, in violation of Export Laws; or (b) intended to
be used for any purposes prohibited by the Export Laws, including,
without limitation, nuclear, chemical, or biological weapons
proliferation.
8.3 NOTICE. All notices under this Agreement, including notices of address
change, shall be in writing and shall be deemed to have been given when
sent by registered mail, return receipt requested, to the first address
listed in the relevant Order Form (if to Customer) or to the Nuance
address on the Order Form (if to Nuance).
8.4 LEGAL EXPENSES. In the event legal action is taken by either party to
enforce this Agreement or any Order Form, all costs and expenses,
including reasonable attorney's fees incurred by the prevailing party,
shall be paid by the other party.
8.5 SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be illegal, unenforceable, or in conflict with
any law of a federal, state, or local government, the validity of the
remaining portions or provisions shall remain in full force and effect.
8.6 GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of California.
8.7 RELATIONSHIP OF THE PARTIES. The relationship of the parties is that of
independent contractors. No one party is the agent of the other and
neither party is authorized to act on behalf of the other party.
8.8 WAIVER. The waiver by either party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent
default or breach. Except for actions for nonpayment or breach of
Nuance's proprietary rights in the Programs, no action, regardless of
form, arising out of this Agreement may be
15
<PAGE> 16
brought by either party more than one year after the cause of action has
accrued.
8.9 ENTIRE AGREEMENT. This Agreement contains all the agreements,
representations, and understandings of the parties hereto and supersedes
any previous understandings, commitments, or agreements, oral or
written, with respect to the subject matter of this Agreement. It is
expressly agreed that all terms of any Customer purchase order or other
ordering document shall be superseded by the terms of this Agreement.
This Agreement may not be modified or amended except in a writing signed
by a duly authorized representative of each party; no other act, usage,
or custom shall be deemed to amend or modify this Agreement.
The Effective Date of this Agreement shall be
-----------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
NUANCE COMMUNICATIONS CUSTOMER
Authorized Signature: Authorized Signature:
---------------- -------------------
Printed Name: Printed Name:
------------------------ ---------------------------
Title: Title:
------------------------------- ----------------------------------
16
<PAGE> 17
ATTACHMENT A-1
ORDER FORM
This Order is placed by General Magic, a Delaware corporation ("Customer") under
the Software License and Support Agreement dated March 3, 1997 ("Agreement").
The Agreement is incorporated by reference as though set forth in full herein.
DATE ORDER PLACED:
<TABLE>
<CAPTION>
SOFTWARE
- --------
- -------------------------------------------------------------------------------------------------
NET SALE
ITEM PRODUCT DESCRIPTION QTY PRICE EACH PRICE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SERVICES
- --------
- -------------------------------------------------------------------------------------------------
NET SALE
ITEM PRODUCT DESCRIPTION QTY PRICE EACH PRICE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
</TABLE>
LOCATION FOR SOFTWARE INSTALLATION
- ----------------------------------
General Magic, Inc.
420 North Mary Ave.
Sunnyvale, CA 94086
The Effective Date of this Order shall be __________________
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement.
NUANCE COMMUNICATIONS CUSTOMER
Authorized Signature: Authorized Signature:
------------------ -----------------
Printed Name: Printed Name:
-------------------------- -------------------------
Title: Title:
--------------------------------- --------------------------------
18
<PAGE> 19
ATTACHMENT A-2
TECHNICAL SUPPORT POLICY
TECHNICAL SUPPORT SHALL INCLUDE:
1. Updates as defined in the Software License and Support Agreement.
2. Basic Support provided from 8:00 a.m. to 5:00 p.m. PST, Monday to
Friday, with exception of Nuance holidays. Response will be given within
4 hours of a Basic Support request. Basic support includes telephone
and/or on-line support for:
o Assistance in Program Installation
o Assistance related to questions on the operational use of Program
o Assistance in identifying and resolving problems related to use of
Program
Emergency support will be provided for any Program errors which render a
production system inoperable or impair its performance significantly. Response
will be given within 2 hours of an Emergency Support request. Nuance will work
continuously and apply its best efforts to provide a fix or workaround to remedy
the Emergency situation.
Premium Technical Support is available extending hours of coverage to 24 hours a
day, seven days a week, with the same response times guaranteed for Basic
Support and Emergency Support.
3. License Transfer Support. Customer may transfer Programs from one
Recognition System to another subject to a transfer fee. If a Program
copy is transferred due to hardware failure or reallocated to another
server of equivalent performance in the same operating environment, no
transfer fee shall be levied. If a Program copy is transferred for any
other reason, the maximum transfer fee shall be [**]% of the original
Program copy license fee and shall not exceed that charged by Nuance to
other customers for the same transfer. In either case, if the Program
copy is transferred to a different model CPU, additional license fees
will be levied according to the difference in license fees, if any,
between the prior and new CPU. The license fees used to calculate any
additional license fees due shall be license fees for model of CPUs in
effect at the time of transfer.
[**] 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.
19
<PAGE> 20
EXHIBIT B
Acceptance Requirements
20
<PAGE> 21
AGREEMENT NO. 9705NU0060.02-SL
ATTACHMENT A-1
ORDER FORM
This Order is placed by General Magic, a Delaware corporation ("Customer") under
the Software License and Support Agreement dated March 3, 1997 ("Agreement").
The Agreement is incorporated by reference as though set forth in full herein.
SOFTWARE
<TABLE>
<CAPTION>
ITEM PRODUCT DESCRIPTION QTY PRICE EACH NET SALE PRICE
- ---- ------- ----------- --- ---------- --------------
<S> <C> <C> <C> <C> <C>
1 V6.0 Runtime Nuance base engine runtime [**] $[**] $[**]
Server server license for use with
License Intel [**] MHz CPU or
equivalent. One license
required per CPU.
CA SALES TAX - 8.25% [**]
Total Software License Fees $[**]
</TABLE>
SERVICES
<TABLE>
<CAPTION>
ITEM PRODUCT DESCRIPTION QTY PRICE EACH NET SALE PRICE
- ---- ------- ----------- --- ---------- --------------
<S> <C> <C> <C> <C> <C>
1 Technical 1 year of technical support [**] $[**] $[**]
Support - including bug fixes, patches,
Runtime modifications, and
Software enhancements to Nuance V6.0
Runtime Server Software.
Support provided 8:00 AM to
5:00 PM, Monday to Friday,
except Nuance holidays.
Support for all copies of
runtime server software in
use must be purchased for
Nuance to provide this
service.
Total Annual Support Fees $[**]
</TABLE>
LOCATION FOR SOFTWARE INSTALLATION
General Magic, Inc.
420 North Mary Avenue
Sunnyvale, CA 94086
[**] 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> 22
The Effective Date of this Order shall be May 14, 1997.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
<TABLE>
<CAPTION>
Nuance Communications Customer
<S> <C>
Authorized Signature: /s/ BRUCE DOUGHERTY Authorized Signature: /s/ KEVIN J. SURACE
---------------------------- ----------------------------
Printed Name: Bruce Dougherty Printed Name: Kevin J. Surace
------------------------------------ ------------------------------------
Title: Vice President Title: V.P.
------------------------------------------- -------------------------------------------
</TABLE>
<PAGE> 23
Amendment No. 1 to the "Magic Network Prototype Agreement" (Agreement No.
9705NU0060.02-SL)
This Amendment No. 1 ("Amendment") is between Nuance Communications, a
California corporation with its principal place of business at 1380 Willow Road,
Menlo Park, California, 94025 ("Nuance") and General Magic, Inc., a Delaware
corporation with its principal place of business at 420 North Mary Avenue,
Sunnyvale, California ("General Magic"). The effective date of this Amendment
shall be July 1, 1998.
Nuance and General Magic have entered into an Agreement (the Magic Network
Prototype Development Agreement) specifying the terms and conditions applicable
to the development and implementation of the "Magic Network." This amendment
hereby supersedes and replaces Phase Three (as described in Section 3) and Phase
4 (as described in sections 4.1 through 4.3) and modifies that Agreement as
follows:
1. Definitions: The following terms shall have the following meanings for
the purposes of this Amendment and the Agreement:
1.1 "Recognition Unit" (RU) shall mean the processing power necessary to
perform speech recognition as calculated by The Nuance Dimensioner
Tool. Specifically, it is the recognition power required to understand
a continuous stream of [**] in real time with a [**] error rate, as
represented by a [**] Nuance-supplied benchmark test set.
1.2 "Speech Channel" shall mean a single port that has been enabled for
speech recognition.
1.3 "Capacity" shall mean any combination of Recognition Units and Speech
Channels, as specifically licensed pursuant to the terms of the
Agreement.
1.4 "The Nuance Dimensioner Tool" shall mean the then-current version of
the GUI tool used to estimate the number of RUs needed for a particular
application. Nuance will make The Nuance Dimensioner Tool available to
GMI.
1.5 "The Nuance Dimensioner Tool Benchmark Version" shall mean a copy of
The Nuance Dimensioner Tool to be provided upon execution of this
Amendment No. 1, which will be used by GMI to validate that required
changes to Capacity are the result of changes to the input to The
Nuance Dimensioner Tool and not the result of changes to the algorithms
that produce the output of The Nuance Dimensioner Tool. The Nuance
Dimensioner Tool Benchmark Version will be used in conjunction with The
Nuance Dimensioner Tool Test Set.
1.6 "The Nuance Dimensioner Tool Test Set" shall mean an agreed set of GMI
inputs, as detailed in Attachment B-1, which will be used by GMI to
validate that given the same inputs, future versions of The Nuance
Dimensioner Tool will not calculate an increase in the RUs required.
2. RU Provisioning: Initial provisioning (July 1, 1998) is reflected in
Attachment A-1 ("Order Form"), and A-2 ("The Nuance Dimensioner Tool
Initial Order Assumptions"), and is based upon the call flow, busy hour
transactions, call length, speech recognition latency and grammars
specified by GMI. The pruning parameter will be assumed to be [**] for
the initial provisioning. As usage of GMI's services increases,
additional Capacity will be required. The quantity of incremental
Capacity to be invoiced to GMI will be determined in the second month
of each calendar quarter, commencing Q4 1998. The Nuance Dimensioner
Tool will be utilized to determine the Capacity required by the GMI
services. Nuance will benchmark the then current GMI grammars with
in-service speech data provided by GMI and extract call traffic
statistics to use as inputs to The Nuance Dimensioner Tool for this
determination. Nuance will invoice GMI for any additional Capacity
required for the quarter based on such determination by means of an
Order Form (substantially in the form attached hereto as Attachment
A-1), in accordance with the pricing set forth on Attachment A-1
hereto.
The Dimensioner will be run with parameters reflecting GMI's actual settings for
the following:
[**] 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> 24
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
The output of The Nuance Dimensioner Tool will specify the Capacity to be
licensed to GMI based upon the then current call flow, busy hour transactions,
call length, speech recognition latency and grammars specified by GMI (grade of
service benchmark shall be [**]% blocking; recognition latency of [**]%
seconds or less). Subsequently, if while performing operations in conformance
with the above criteria, GMI requires additional RU licenses in order to attain
the latency specified by GMI as input to The Nuance Dimensioner Tool, Nuance
will provide such additional RU licenses at no charge until the Nuance software
performs in accordance with the RU requirements specified by The Nuance
Dimensioner Tool.
3. [**] pricing: License pricing is Application-specific and licensed
solely for use in the Magic Network personal assistant application which
provides call management, electronic message retrieval and access to individual
contact or calendar information as core functions as well as access to various
other services. If transaction processing services (i.e., airline reservations,
bill payment or money transfers, stock or mutual funds trading) become part of
the Magic Network personal assistant application, license fees for the
incremental Capacity utilized to provide such services will be negotiated.
4. US Equities Stock Grammar: The Nuance US Equities Grammar will be
licensed for deployment in all RecServers based on the number of RUs required to
meet usage requirements for speech recognition of company names. License fees
will be paid on a per RU basis, and are in addition to any other applicable
license fees for recognition Capacity. Transcription of utterances will be
performed from time to time (not more than once per calendar quarter) to
determine the number of utterances in the busy hour that contain a company name.
This information will then be used as input to The Nuance Dimensioner Tool to
calculate the quantity of RUs used for recognition of company names within the
US Equities Grammar with a specified latency. Adjustments to license fees per RU
for succeeding quarters will be based upon this quarterly audit of usage. In
addition, the RU quantities determined above will be used to calculate the
monthly fee for the Stock Grammar Update service. The minimum monthly fee for
the Stock Grammar Update service is $[**] per month.
5. Software License Keys: Nuance will provide GMI with software license
keys to initially enable [**] Recognition Server/Client Machine pairs with [**]
RUs and [**] Speech Channels when ordered by GMI for use in the Magic Network
personal assistant application. Nuance will provide all needed software license
keys to enable future GMI orders.
[**] 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> 25
NUANCE COMMUNICATIONS GENERAL MAGIC
/s/ BRUCE DOUGHERTY /s/ KEVIN J. SURACE
- ------------------------------ ------------------------------
Signature Signature
Bruce Dougherty Kevin J. Surace
- ------------------------------ ------------------------------
Print Name Print Name
Vice-President, Sales V.P. and General Manager, PNSD
- ------------------------------ ------------------------------
Title Title
July 31, 1998 July 31, 1998
- ------------------------------ ------------------------------
Date Date
<PAGE> 26
Agreement No. 9705NU0060.02-SL __________
Reference P.O. No. ________________________
ATTACHMENT A-1
ORDER FORM
This Order is placed by General Magic, a Delaware corporation ("Customer") under
Amendment No. 1 to the "Magic Network Prototype Agreement." The Agreement is
incorporated by reference as though set forth in full herein. The effective date
of this Order shall be July 1, 1998.
Software
<TABLE>
<CAPTION>
ITEM PRODUCT DESCRIPTION QTY PRICE EACH NET PRICE
- --------- --------------- ------------------------------------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1 R.U. Software Nuance Recognition Unit Software [**] $ [**] $ [**]
License License - to be deployed initially
on [**] Recognition Servers.
Calculations per assumptions
contained in Attachment A-2.
2 Speech Nuance Speech Channel Software [**] $ [**] $ [**]
Channel License - to be deployed initially
License on [**] Client machines.
Calculations per assumptions
contained in Attachment A-2.
3 Stock Grammar Nuance Stock Grammar Recognition [**] $ [**] $ [**]
R.U. License Unit Software License - U.S.
Equities
4 Credit Credit for Recognition Units [**] $ [**] $ [**]
already purchased under prior
server-based pricing model - [**]
R.U.
-----------
Total Software License Fees $ [**]
===========
</TABLE>
Services
<TABLE>
<CAPTION>
ITEM PRODUCT DESCRIPTION QTY PRICE EACH NET PRICE
- --------- --------------- ------------------------------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1 Software Annual Software Maintenance for 1 $ [**] $ [**]
Maintenance Tech Support - [**] of Net License
Fee $[**]
2 Stock Grammar Annual Software Maintenance for 1 $ [**]
Update U.S. Equities Stock Grammar - based
on pro-rated RU usage - [**]
or $[**] per month min.
----------
Total Annual Support Fees $ [**]
==========
</TABLE>
<TABLE>
<CAPTION>
Location for Software Installation Contact Information
- ---------------------------------- -------------------
<S> <C>
General Magic, Inc. Technical Contact Person: Jim Underwood
420 North Mary Avenue Title: Technical Director
Sunnyvale, CA 94086 E-mail: [email protected]
</TABLE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
Nuance Communications Customer
Authorized Signature: Authorized Signate:
/s/ BRUCE DOUGHERTY /s/ KEVIN J. SURACE
- ------------------- ---------------------
[**] 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> 27
\
Printed Name: BRUCE DOUGHERTY Printed Name: KEVIN J. SURACE
--------------- ---------------
Title: Vice-President, Sales Title: V.P. and General Manager, PNSD
---------------------- ------------------------------
<PAGE> 28
Attachment A-2
Nuance Dimensioner Tool Initial Order Assumptions
Actual Grammar Benchmark Results (from supplied audio data):
<TABLE>
<CAPTION>
AVG. #UTT/CALL LUS PER UTT AVG. SEC/UTT
- ------------------------------ -------------- ------------ --------------
<S> <C> <C> <C>
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
Total [**]
</TABLE>
Other:
Busy hour call attempts [**]
Carried calls
Pruning
Call hold time
Grade of Service
Latency, [**] less than
Provisioning Results:
Speech Channels [**]
RUs required
[**] 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> 29
Attachment B-1
The Nuance Dimensioner Tool Test Set
Grammar Parameters:
<TABLE>
<CAPTION>
AVG. # UTT/CALL LUS PER UTT AVG. SEC/UTT
- ---------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
[**] [**] [**] [**]
Total [**]
</TABLE>
Other Dimensioner Inputs:
Busy hour call attempts [**]
Call hold time
Grade of Service
Latency, [**]% less than
Ports
Provisioning Results: [**]
Speech Channels
Rus required
[**] 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
EXHIBIT 10.26
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
and 230.406.
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT ("Agreement") is made and
entered into effective as of the 12th day of May, 1997 (the "Effective Date"),
by GENERAL MAGIC, INC., a Delaware corporation having a place of business at 420
North Mary Avenue, Sunnyvale, California 94086 ("Magic"), and STARFISH SOFTWARE,
INC., a California corporation having a place of business at 1700 Green Hills
Road, Scotts Valley, California 96066 ("Starfish").
RECITALS
A. WHEREAS, Magic is engaged in the business of designing, developing
and distributing network service technology with personal calendar and contact
management features ("Magic Network Service").
B. WHEREAS, Starfish has developed server-based personal information
management software known as Intera.
C. WHEREAS, Magic desires to engage Starfish to develop a customized
version of Starfish's server-based personal information management software and
to obtain a license from Starfish for such software and Starfish is willing to
perform such development and license such software to Magic upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENT
1. DEFINITIONS.
1.1 "CONFIDENTIAL INFORMATION" as used in this Agreement shall mean any
confidential or proprietary information disclosed by one party to the other
pursuant to this Agreement, whether in oral, written, graphic or electronic
form, including source code, software tools, designs, schematics, plans or any
other information relating to any research project, work in process, future
development, scientific, engineering, manufacturing, marketing or business plan
or financial or personnel matter concerning either party, its present or future
products, sales, suppliers, customers, employees, investors or business.
1.2 "DELIVERABLE" means each of the Alpha, Customer Pilot, Performance
Tuning, Customer First Beta, Customer Second Beta, Customer Third Beta and
Customer Gamma versions of the Product as further described in the
Specifications set forth in Exhibit A (Specifications") attached hereto.
1.3 "DELIVERABLES SCHEDULE" means the schedule for performance under
this Agreement set forth in Exhibit B ("Deliverables Schedule") attached hereto.
1.4 "EXCLUSIVE FIELD OF USE" means [**] features and a [**]. The
Exclusive Field of Use does not include client or synchronization software.
[**] 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.
1.
<PAGE> 2
1.5 "LICENSED TECHNOLOGY" means all patents, copyrights, trade secrets,
mask works, inventions and other intellectual property or proprietary rights
associated with the Software and the Product.
1.6 "PRODUCT" means the software and accompanying end user
documentation developed by Starfish pursuant to this Agreement as further
described in the Specifications set forth in Exhibit A ("Specifications")
attached hereto.
1.7 "SOFTWARE" means Starfish's server-based personal information
management software known as Intera, a copy of which has been delivered to
Magic.
1.8 "SPECIFICATIONS" means the written specifications for the Product
set forth in Exhibit A ("Specifications") attached hereto, including any and all
modifications, amendments or changes thereto made pursuant to this Agreement.
1.9 "TRADEMARKS" means those of Starfish's trademarks and service marks
identified on Exhibit E ("Trademarks").
2. DEVELOPMENT SERVICES.
2.1 SCOPE OF DEVELOPMENT. Starfish agrees to develop the Product in
accordance with the Specifications and pursuant to the Deliverables Schedule.
2.2 COSTS OF DEVELOPING THE PRODUCT. Except as set forth in Section 5.1
("NRE Fees"), Starfish shall bear the costs of developing the Product.
2.3 PROJECT MANAGEMENT. Magic and Starfish will each appoint a project
manager to serve as the primary contact between the parties. Starfish agrees to
appoint a project manager who has substantial expertise in the Software. Either
party may replace its project manager at any time by providing written notice of
such replacement to the other party, provided that the Starfish project manager
shall have the expertise set forth above. The Starfish project manager shall
assume responsibility for ensuring that the Product is developed in accordance
with the Specifications and the Deliverables Schedule.
3. DELIVERY AND ACCEPTANCE.
3.1 DELIVERABLES. Starfish shall deliver each of the Deliverables to
Magic in accordance with the Deliverables Schedule. All Deliverables shall be
delivered in machine-readable object code form and shall be provided to Magic in
electronic form, master diskettes or CD-ROM.
3.2 MAGIC ACCEPTANCE TESTING. Magic will, within thirty (30) days from
delivery of each Deliverable, test the Deliverable to verify whether such
Deliverable conforms to the applicable Specifications. If the Deliverable fails
to conform to the applicable Specifications, Magic shall notify Starfish in
writing, and Starfish shall have an additional thirty (30) calendar days (the
"Correction Period") in which to correct or modify such Deliverable to conform
in all material respects to the applicable Specifications and to resubmit such
Deliverable to Magic for testing. If such Deliverable fails to conform in all
material respects to the applicable Specifications at the end of the Correction
Period, or if Starfish fails to deliver the Deliverable in accordance with the
Deliverables Schedule, then at Magic's option, (a) the Agreement shall remain in
effect and (i) the Correction Period or the time for delivery of the Deliverable
may be extended as may be agreed by the parties, or (ii) Magic may correct or
complete the Deliverable and deduct an amount equal to Magic's fully-burdened
costs (including without limitation direct internal labor and fringe benefits
and any sums, including royalties paid to third parties) from any further
payments due to Starfish hereunder, or (b) Magic may terminate this Agreement,
including all licenses granted herein.
2.
<PAGE> 3
4. INTELLECTUAL PROPERTY RIGHTS.
4.1 STARFISH'S OWNERSHIP. Starfish shall retain all right, title and
interest in the Software and the Product, including without limitation all
patent, copyright, trade secret, trademark, and other proprietary and
intellectual property rights therein.
4.2 MAGIC'S OWNERSHIP. Magic shall retain all right, title and interest
in and to the Magic Network Service, including without limitation all patent,
copyright, trade secret, trademark, and other proprietary and intellectual
property rights therein.
4.3 LICENSE GRANT.
(a) Starfish hereby grants to Magic under the Licensed Technology
a non-exclusive (except as set forth in Section 4.3(b) below), worldwide,
perpetual, irrevocable, transferable, royalty-bearing license (with rights to
sublicense through multiple tiers of sublicensees) to use, manufacture,
reproduce, market, distribute, publicly perform and publicly display the Product
in connection with the Magic Network Service by means now known or hereafter
developed.
(b) Starfish agrees that Magic shall have the exclusive right
(even as to Starfish) to exercise all rights under the license set forth in
Section 4.3(a) above in the Exclusive Field of Use commencing on the Effective
Date of the Agreement and continuing until January 1, 1999.
(c) Magic agrees to distribute the Product only as incorporated
on or bundled with the Magic Network Service and not on a standalone basis.
4.4 TRADEMARK LICENSE. Starfish hereby grants Magic a non-exclusive,
worldwide, perpetual license to use the Trademarks in connection with the
advertising, marketing, and distribution of the Magic Network Service. Starfish
is familiar with and approves the quality of Magic's products and technologies.
The quality of Magic's products or technology which utilize the Trademarks shall
be substantially of the same quality as Magic's products and technologies. Magic
will adhere to reasonable guidelines for the use of the Trademarks to be
communicated in writing by Starfish to Magic from time to time.
5. NRE FEES, LICENSE FEES, AND TAXES.
5.1 NRE FEES. From May 12, 1997, through and including March 12, 1998,
Magic will pay Starfish a non-recurring engineering fee of [**] in consideration
for Starfish's development and other services hereunder ("NRE Fee"); provided,
however, that continued payment of the NRE Fee is conditioned on Starfish
dedicating the efforts of at least one project manager who has substantial
expertise in the Software, three software engineers, two quality assurance
engineers and one documentation writer to the performance of the development and
other services required under this Agreement, including without limitation PIM
and device synchronization and performance optimization. The first payment of
the NRE Fee shall be made by wire transfer on or before [**]; thereafter,
payment of the fee shall be made on the [**].
5.2 ROYALTIES. Magic will pay a royalty to Starfish in accordance with
the royalty schedule set forth in Exhibit C ("Royalty Fees"). Royalties due
pursuant to this Section shall be calculated on a calendar quarter basis.
Payment of royalties with respect to each calendar quarter shall be due within
forty five (45) days after the end of each quarter, beginning with the quarter
in which the first commercial introduction of a Magic product incorporating the
Product occurs. All royalties due hereunder shall be paid in United States
dollars.
[**] 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> 4
5.2.1 ROYALTY REPORTS AND AUDITS. On or before the due date of
each royalty payment (and regardless of whether any amounts are then payable),
Magic shall provide Starfish with a written report specifying by country the
number of subscribers to the Magic Network Service and the number of server
installations during the prior quarter. On at least fifteen (15) days written
notice to Magic, and no more frequently than once every twelve (12) months,
Starfish shall be entitled to retain an independent accounting firm reasonably
acceptable to Magic to audit the books and records of Magic pertaining to the
payment of royalties to Starfish hereunder, for the sole purpose of confirming
the accuracy of the above-mentioned reports. Any such audit shall be performed
during normal business hours, subject to the execution by the independent
accounting firm of Magic's standard confidentiality agreement. In the event of
any underpayment or overpayment of royalties, the applicable party shall
promptly remit to the other party all amounts due. The cost of the audit shall
be borne by Starfish unless a material discrepancy is discovered, in which case
the cost of the audit shall be borne by Magic. For the purposes of this Section,
a discrepancy shall be deemed material if it involves an underpayment to
Starfish of more than five percent (5 %) of the royalties due for the period
subject to audit.
5.3 MOST FAVORED STATUS. In the event Starfish enters into an agreement
with another licensee to license the Software or the Product for marketing and
distribution to enterprise customers, and such agreement contains more favorable
Economic Terms (as defined below) than those set forth in this Agreement,
Starfish shall inform Magic of the Economic Terms offered to such licensee and
Magic will have thirty (30) days after receipt of such notice to substitute such
Economic Terms for those set forth in this Agreement. For the purposes of this
Section, "Economic Terms" shall mean terms and conditions with respect to
license fees, royalty rates, advances on royalties, marketing expenditure
commitments, maintenance and support obligations. If Magic elects to substitute
the Economic Terms of any such agreement, the substituted Economic Terms shall
be effective on the effective date of the agreement with the other licensee.
5.4 EXPENSES. Except for the payment by Magic as set forth in Sections
5.1 ("NRE Fees") and 5.2 ("Royalties"), all out-of-pocket expenses incurred by
Starfish in the performance of its obligations hereunder shall be paid by
Starfish.
5.5 TAXES. Starfish agrees to pay, and to indemnify and hold Magic
harmless from, any sales, use, excise, import or export, stamp, value added or
similar tax or duty not based on Magic's net income, as well as the collection
or withholding thereof, including penalties and interest, and all government
permit or license fees and all customs or similar fees, levied upon the delivery
of the Product and any other Deliverables made by Starfish to Magic pursuant to
this Agreement.
6. SOURCE CODE ESCROW.
6.1 SOURCE CODE. Source Code (as defined below) shall be written in a
commercially available software programming language and shall be documented in
the English language sufficiently to permit a reasonably competent programmer in
such programming language to understand and modify the Source Code.
6.2 ESCROW. Magic and Starfish agree that, promptly following the
execution of this Agreement, Magic and Starfish will enter into an Escrow
Agreement substantially in the form set forth in Exhibit D ("Escrow Agreement")
and incorporated herein by reference, which provides for Starfish's deposit of
the human-readable source code form ("Source Code") of the Software and each
Deliverable, with Brambles NSD, Inc. ("Escrow Agent") and release of such Source
Code to Magic as provided below and more specifically described in the Escrow
Agreement. At the beginning of and prior to performing any development work
hereunder, Starfish shall deliver to the Escrow Agent a copy of the Source Code
for the Software. Delivery of Source Code for the Software to the Escrow Agent
under this Section shall also
4.
<PAGE> 5
include copies of the computer programs or utilities necessary to create,
compile and run the Source Code for the Software when rendered into object code
form (or, if such programs or utilities are generally commercially available
from third party vendors, a listing of such programs and utilities) and other
instructions if reasonably necessary to explain the use of the tools if they are
custom programs developed by Starfish or its contractors. Such materials shall
be in English. Concurrently with the delivery of each Deliverable, Starfish
shall deliver to the Escrow Agent a copy of the Source Code for the relevant
Deliverable. To the extent that the tools needed to work with the Source Code
for each Deliverable are changed from the version first deposited in escrow, the
current deposit in escrow shall include the updated tools (or a listing thereof,
if generally commercially available from a third party vendor) and instructions
relating thereto. At the end of the development project, Starfish will deliver
to the Escrow Agent a copy of the final Source Code and tools (as described
above) for the Product. The escrow fees shall be borne by Magic. Magic shall
have a right to obtain a copy of Source Code, tools and instructions deposited
in escrow only in the following situations (each an "Escrow Release Event"):
(a) EXERCISE OF COMPLETION RIGHTS. In the event that Magic is
entitled to exercise completion rights as specified in Section 3.2 above and
Magic chooses to exercise such completion rights, Magic will be entitled to
receive a copy of the Source Code in the form developed to date, solely for use
by Magic or a third party contractor of Magic to complete the Product. Magic
will still be obligated to pay Starfish royalties due under this Agreement for
the licensing and distribution of the Product, but the amount of such royalties
shall be reduced as set forth in Section 3.2(a)(ii).
(b) INSOLVENCY. Starfish becomes insolvent, files for any form of
bankruptcy, makes any assignment for the benefit of creditors, dissolves,
liquidates, or ceases to conduct business;
(c) MAINTENANCE/SUPPORT OBLIGATIONS BREACH. Starfish breaches its
maintenance and support obligations under this Agreement; or
(d) WARRANTY OBLIGATIONS BREACH. Starfish has breached its
warranty obligations as set forth in Section 7 ("Warranty").
6.3 EFFECT OF RELEASE FROM ESCROW. In the event Magic obtains Source
Code pursuant to Section 6.2, Starfish hereby grants to Magic a nonexclusive
(except as described below), perpetual, irrevocable, worldwide license under the
Licensed Technology to (i) reproduce, modify and prepare derivative works of the
Source Code, and (ii) use, manufacture, reproduce, market, distribute, publicly
perform and publicly display the Product in object code format in connection
with the Magic Network Service by means now known or hereafter developed. In
addition, Magic will automatically have the exclusive right to use, manufacture,
reproduce, modify, prepare derivatives works of, market, distribute, publicly
perform and publicly display the Product in the Exclusive Field of Use until
January 1, 1999. Magic agrees that it will not exercise its rights pursuant to
this Section unless one of the events specified in Section 6.2 has occurred.
7. WARRANTY. Starfish warrants that for a period of twelve (12) months after the
first commercial introduction of a Magic product incorporating the Product (the
"Warranty Period"), the Product will perform in all material respects in
accordance with the Specifications. During the Warranty Period, Starfish shall
correct any failure of the Product to perform in accordance with the
Specifications as soon as reasonably possible, but in no event more than
forty-five (45) calendar days, after notice from Magic of any failure to perform
in accordance with the Specifications. Furthermore, during the Warranty Period,
without additional charge, Starfish will (i) assist in integration of the
Product, revisions and corrections with the Magic Network Service; (ii) assist
Magic with the identification and resolution of problems with the Product,
revisions and corrections; and (iii) develop, to the extent necessary, temporary
fixes and work arounds for emergency difficulties. Starfish will supply Magic
with object code for all revisions and corrections required for the Product to
conform to the Specifications. Starfish shall deposit in escrow for release in
accordance with
5.
<PAGE> 6
Section 6 the Source Code and related documentation (including descriptions of
the Source Code and build procedures for the object code) for all revisions and
corrections to the Product required for the Product to conform to the
Specifications. In addition to the foregoing, at Magic's request, Starfish will
make qualified technical personnel available for a minimum of 200 hours at
reasonable times for training and consultation with representatives of Magic
with respect to revisions and corrections to the Product.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, AND EXCEPT AS SET FORTH IN THIS SECTION,
STARFISH DISCLAIMS ALL CONDITIONS, WARRANTIES, REPRESENTATIONS, LIABILITIES AND
OBLIGATIONS WHETHER EXPRESS OR IMPLIED ARISING FROM NEGLIGENCE OR IMPOSED BY
STATUTE OR OTHERWISE, IN RESPECT OF THE SUPPLY AND OPERATION OF THE PRODUCT OR
ANY RELATED SERVICES BY STARFISH, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
8. MAINTENANCE AND SUPPORT. Commencing upon commercial introduction of the Magic
Network Service and for the term of this Agreement, Starfish agrees to provide
Magic revisions and corrections of the Product as needed during the term hereof
to correct any minor errors or to fix bugs that do not materially affect the
functionality of the Product.
9. INDEMNITY.
9.1 TITLE. For a period of five years following commercial introduction
of a Magic product incorporating the Product, Starfish represents and warrants
that the Product, including the Software, is or will be original creations of
Starfish and that it does not and will not infringe or misappropriate trade
secret or United States copyright, trademark and, to Starfish's knowledge,
patent rights of any third party; that Starfish has not previously or otherwise
granted any rights to any third party which conflict with the rights herein
granted by Starfish; and that Starfish has the full power and ability to enter
into this Agreement, to carry out its obligations set forth herein and to grant
the rights granted to Magic herein.
9.2 TITLE INDEMNITY. Starfish shall defend and indemnify Magic, its
officers, directors, employees, agents and subcontractors for, and hold them
harmless against, any loss, expense, damage or liability, including, without
limitation, any reasonable attorneys' and expert witness fees, arising from any
claim, suit, action or proceeding alleging any breach of the warranties set
forth in Section 9.1 ("Title") above, provided that Magic gives Starfish prompt
written notice, and reasonable cooperation, at Starfish's expense, in the
defense of any such claim. Starfish shall have exclusive authority to defend and
settle all such claims, provided, however, that Starfish must obtain Magic's
prior written consent to any settlement affecting the business of Magic, or
requiring any payment from or performance of any obligation by Magic. Magic
shall be entitled to participate in the defense of any claim at its expense. If
the Product, or the operation thereof, becomes, or in Starfish's opinion is
likely to become the subject of such a claim, then Starfish may, at its sole
option and expense (i) obtain a license for Magic to make, use and sell the
Product in accordance with the terms hereof, or (ii) replace or modify the
Product so that it becomes noninfringing but equivalent in all material
respects; provided, however, that in the event the Product is held to infringe,
Starfish shall use its best efforts to obtain at its sole expense a license for
Magic to make, use and sell the Product in accordance with the terms hereof.
Notwithstanding the foregoing, Starfish shall have no indemnification obligation
for any claim caused by operation or use of the Product in combination with
software or hardware not supplied by Starfish, if such claim would have been
avoided by operation or use of the Product in combination with different
hardware or software or, to the extent possible, use on a stand-alone basis.
6.
<PAGE> 7
10. LIMITATION OF LIABILITY. Neither party shall be liable to the other party
for any collateral, incidental, special or consequential damages of any kind,
including lost profits, loss of data, loss of use and the like, arising out of
or relating to this Agreement, whether in contract, tort or otherwise. In no
event shall either party's aggregate cumulative liability to the other exceed
the [**]. The foregoing limitation shall not apply to Starfish's indemnity
obligation set forth in Section 9.2 ("Title Indemnity"). This Section shall
survive any termination or expiration of this Agreement.
11. CONFIDENTIALITY.
11.1 Each party agrees that it will not make use of, disseminate, or in
any way disclose the other party's Confidential Information to any person, firm
or business, except as authorized by this Agreement and to the extent necessary
for performance of this Agreement. Each party agrees that it will disclose
Confidential Information only to those of its employees who need to know such
information in connection with their work under and pursuant to this Agreement,
and who have previously agreed to be bound by the terms and conditions of this
Agreement. Each party agrees that it will treat all Confidential Information of
the other party with the same degree of care it accords its own confidential
information; each party represents that it exercises reasonable care to protect
its own confidential information.
11.2 The receiving party's obligations with respect to any portion of
Confidential Information shall terminate when the receiving party can document
that the Confidential Information (i) was in the public domain at the time it
was communicated to the receiving party by the disclosing party; (ii) entered
the public domain subsequent to the time it was communicated to the receiving
party by the disclosing party through no fault of the receiving party; (iii) was
in the receiving party's possession free of any obligation of confidence at the
time it was communicated to the receiving party by the disclosing party; (iv)
was rightfully in the receiving party's possession free of any obligation of
confidence at or subsequent to the time it was communicated to the receiving
party by the disclosing party; (v) was developed by employees or agents of the
receiving party independently of and without reference to any information
communicated to the receiving party by the disclosing party; or (vi) was
disclosed in response to a valid order by a court or other governmental body, or
as otherwise required by law.
11.3 This Section 11 ("Confidentiality") shall survive any termination
of this Agreement.
12. INVESTMENT. On or before May 23, 1997, or such other date as may be agreed
by the parties, Starfish and Magic will close a transaction whereby Starfish
will issue to Magic preferred stock equivalent to [**] percent ([**]%) of the
outstanding common stock equivalents of Starfish. In consideration therefor,
Magic shall pay Starfish the sum of [**], [**] of which will be paid by wire
transfer to Starfish on or before May 13, 1997. In the event that,
notwithstanding the parties' obligation to negotiate in good faith, such an
agreement is not closed on or before May 23, 1997, or such other date as may be
agreed by the parties, Starfish may terminate this Agreement and the licenses
granted hereunder upon written notice to Magic. In such circumstances, Starfish
shall refund all monies paid pursuant to this Section, but may retain the
initial payment of [**] made by Magic under Section 5.1 ("NRE Fees").
13. TERM AND TERMINATION.
13.1 TERM. The term of this Agreement will commence on the Effective
Date and will continue, unless terminated in accordance with the provisions
hereof.
13.2 TERMINATION FOR CAUSE. Either party may terminate this Agreement
if the other breaches a material term or condition of this Agreement and fails
to cure such breach following fifteen (15) days written
[**] 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.
7.
<PAGE> 8
notice, provided however that notwithstanding anything to the contrary in this
Section Magic may immediately exercise its right to terminate this Agreement
pursuant to Section 3.2.
13.3 RIGHTS UPON TERMINATION. Upon termination of this Agreement, and
to the extent consistent with the rights and obligations set forth in the
surviving sections of this Agreement listed below, each party will deliver all
Confidential Information of the other party in its possession to the other
party, or will destroy all such Confidential Information, and an authorized
officer of each party shall immediately certify that all such materials have
been returned or destroyed. In the event of such termination by Magic, all the
rights and obligations pursuant to Sections 4 ("Intellectual Property Rights"),
4.3 ("License Grant"), 4.4 ("Trademark License"), 5.2 ("Royalties"), 6 ("Source
Code Escrow"), 7 ("Warranty"), 9 ("Indemnity"), 10 ("Limitation of Liability"),
11 ("Confidentiality") and 14 ("General Provisions") shall remain in effect. In
the event of such termination by Starfish, all the rights and obligations
pursuant to Sections 4 ("Intellectual Property Rights"), 4.3 ("License Grant"),
4.4 ("Trademark License"), 5.2 ("Royalties"), 10 ("Limitation of Liability"), 11
("Confidentiality") and 14 ("General Provisions") shall remain in effect.
14. GENERAL PROVISIONS.
14.1 CONFIDENTIALITY OF AGREEMENT. Either party may disclose their
relationship with the other party, but may not disclose the terms of this
Agreement, except pursuant to a mutually agreeable press release or as otherwise
approved by the other party hereto in writing.
14.2 NO AGENCY. Starfish will in all matters relating to this Agreement
act as an independent contractor. Starfish will have no authority and will not
represent that it has any authority to assume or create any obligation, express
or implied, on behalf of Magic, or to represent Magic as agent, employee or in
any other capacity. Neither execution nor performance of this Agreement shall be
construed to have established any agency, joint venture or partnership.
14.3 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the United States of America and of the State of California
excluding the application of their respective conflict of laws rules, and the
parties agree that the law of no other jurisdiction shall govern or be used to
construe or interpret this Agreement. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods is specifically
excluded from application to this Agreement. Any suit hereunder will be brought
solely in the federal or state courts in the Northern District of California and
Starfish hereby submits to the personal jurisdiction thereof.
14.4 BANKRUPTCY. Starfish and Magic acknowledge that this Agreement and
all rights and licenses granted under or pursuant to this Agreement by Starfish
to Magic are, and shall otherwise be deemed to be, licenses of rights to
"intellectual property" as defined under Section 101 of Title 11 of the United
States Code. Title 11 of the United States Code is hereinafter referred to as
the "Bankruptcy Code". The parties agree that Magic, as a licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code. The parties further agree that,
in the event of the commencement of a bankruptcy proceeding by or against
Starfish under the Bankruptcy Code, Magic shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property, and same, if not already in its possession, shall be promptly
delivered to Magic (i) upon any such commencement of a bankruptcy proceeding
following written request therefor by Magic, unless Starfish elects to continue
to perform all of its obligations under this Agreement, or (ii) if not delivered
under (i) above, upon the rejection of this Agreement by or on behalf of
Starfish. Magic shall have the sublicensable right to such intellectual property
as set forth in Section 4.3 ("License Grant"). The parties also agree that the
escrow arrangement set forth in Section 6 ("Source Code Escrow") is an
"agreement supplementary to"
8.
<PAGE> 9
the license grant set forth in Section 4.3 ("License Grant") as provided in
Section 365(n) of the Bankruptcy Code. Starfish acknowledges that if Starfish as
a debtor in possession, or a trustee in bankruptcy in a case under the
Bankruptcy Code, rejects the licenses granted in this Agreement, Magic may elect
to retain its rights under the license and escrow granted herein as provided in
Section 365(n) of the Bankruptcy Code. After the commencement of a case under
the Bankruptcy Code by or against Starfish, and unless and until the license
granted herein is terminated, upon written request of Magic to Starfish or the
trustee in bankruptcy, Starfish or the trustee in bankruptcy shall not interfere
with the rights of Magic as provided in this Agreement, including the right to
obtain any materials in escrow from the Escrow Agent.
14.5 COMPLIANCE WITH LAW. Each party shall provide, pay for, and keep
in good standing all licenses pertaining to its activities and shall comply in
all material respects with federal, state, local and foreign laws and
regulations pertaining to its obligations pursuant to this Agreement.
14.6 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission or by certified or
registered mail, return receipt requested, and shall be deemed given upon
personal delivery, five days after deposit in the mail, or upon acknowledgment
of receipt of electronic transmission. Notices shall be sent to the signatory of
this Agreement, with a copy to the General Counsel for that party, at the
address set forth at the beginning of this Agreement or such other address as
either party may hereafter specify in writing to the other.
14.7 INJUNCTIVE RELIEF. It is understood and agreed that,
notwithstanding any other provision of this Agreement, breach by either party of
the provisions of this Agreement regarding the protection of Confidential
Information will cause irreparable damage to the other party for which recovery
of money damages would be inadequate, and that the other party shall therefore
be entitled to seek timely injunctive relief to protect such party's rights
under this Agreement in addition to any and all remedies available at law.
14.8 TIME OF THE ESSENCE. The parties acknowledges that time is of the
essence in the performance of the obligations under this Agreement.
14.9 WAIVER. The failure of either party to require performance by the
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
14.10 SEVERABILITY. In the event that any provision of this Agreement
is found by a court or other body of competent jurisdiction to be unenforceable
or invalid under any applicable law such unenforceability or invalidity shall
not render this Agreement unenforceable or invalid as a whole, and, in such
event, such unenforceable or invalid provision shall be changed and interpreted
so as to best accomplish the objectives of such provision within the limits of
applicable law.
14.11 WARRANTY. Each party warrants that it has full power to enter
into and perform this Agreement, and the person signing this Agreement on a
party's behalf has been duly authorized and empowered to enter in this
Agreement.
14.12 EXHIBITS. The parties hereby agree that they shall negotiate in
good faith to agree upon and attach Exhibits A ("Specifications") and D ("Escrow
Agreement") hereto on or before May 23, 1997, or such other date as may be
agreed by the parties. In the event that, notwithstanding the parties'
obligation to negotiate in good faith, the parties fail to agree upon and attach
Exhibits A ("Specifications") and D ("Escrow Agreement"), Starfish shall refund
all monies paid pursuant to this Agreement, but may retain the initial payment
of [**] made by Magic under Section 5.1 ("NRE Fees"), and this Agreement,
including all licenses granted hereunder, shall terminate.
9.
[**] 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> 10
14.13 HEADINGS. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such section, or in any way affect this
Agreement.
14.14 ASSIGNMENT. Starfish shall not assign its rights or obligations
arising under this Agreement without the prior written consent of Magic except
in the event of a merger, acquisition, or sale of all or substantially all of
its assets or of the Software. Any assignment in violation of this Section shall
be void. Subject to the above restriction on assignment, this Agreement shall
inure to the benefit of and bind the successors and assigns of the parties.
14.15 ENTIRE AGREEMENT. This Agreement and the Exhibits attached hereto
constitute the entire agreement between the parties with respect to the subject
matter hereof. This Agreement supersedes, and the terms of this Agreement
govern, any prior or collateral agreements with respect to the subject matter
hereof with the exception of any prior confidentiality agreements between the
parties. This Agreement may only be changed by mutual, written agreement of
authorized representatives of the parties.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their respective authorized representatives. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same original.
Magic: Starfish:
GENERAL MAGIC, INC. STARFISH SOFTWARE, INC.
/s/ Steven Markman /s/ John Hansen
- ----------------------------- -------------------------------
Authorized Signature Authorized Signature
Steven Markman John Hansen
- ----------------------------- -------------------------------
Printed Name Printed Name
Chairman, CEO & President VP, Business Development
- ----------------------------- -------------------------------
Title Title
May 13, 1997 May 13, 1997
- ----------------------------- -------------------------------
Date Date
10.
<PAGE> 11
EXHIBIT A
SPECIFICATIONS
TO BE PROVIDED BY THE PARTIES PURSUANT TO
SECTION 14.12 OF THE AGREEMENT.
1.
<PAGE> 12
EXHIBIT B
DELIVERABLES SCHEDULE
PRELIMINARY SCHEDULE FOR DELIVERY OF [**] SERVER SOFTWARE [**] AND [**]
CLIENTS:
Alpha [**]
Customer Pilot [**]
Performance Timing [**]
Customer first Beta [**]
Customer second Beta [**]
Customer third Beta [**]
Customer Gamma [**]
PRELIMINARY SCHEDULE FOR SYNCHRONIZATION EFFORT: PARTIES TO DISCUSS
SYNCHRONIZATION EFFORT.
Synchronize with leading devices
PalmPilot [**]
Windows CE [**]
Synchronize with leading Windows PIMs
Sidekick [**]
Schedule+ [**]
Outlook [**]
Act! [**]
Organizer [**]
[**] 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> 13
EXHIBIT C
ROYALTY FEES
SCHEDULE OF LICENSE FEES FOR NETWORK SUBSCRIBERS
Magic will pay Starfish license fees based on the following schedule:
[**] for so long as Magic continues to employ Starfish software in its
network service and receive support from Starfish.
PRELIMINARY SCHEDULE OF LICENSE FEES FOR ENTERPRISE SALES
Magic will pay Starfish license fees based on the following schedule:
[**]
[**] 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> 14
EXHIBIT D
SOURCE CODE ESCROW AGREEMENT
THIS SOURCE CODE ESCROW AGREEMENT ("Escrow Agreement") is between
GENERAL MAGIC, Inc., a Delaware corporation with its principal place of business
at 420 North Mary Avenue, Sunnyvale, California 94086 ("General Magic"); and
STARFISH SOFTWARE, INC., a California corporation with its principal place of
business at 1700 Green Hills Road, Scotts Valley, CA 96066 ("Starfish"); and
Brambles NSD, Inc. a Delaware corporation having a place of business at 2109
Bering Drive, San Jose, California 95131 ("Escrow Agent").
RECITALS
A. General Magic and Starfish have entered into a Development and
License Agreement (the "License Agreement") dated as of May 12, 1997, pursuant
to which Starfish will develop for and license to General Magic a customized
version of its personal information management software.
B. The License Agreement requires Starfish and General Magic to
enter into an escrow agreement that provides for Starfish's deposit of the
human-readable source code and related materials (collectively, the "Escrow
Materials") for the Software (as defined in the License Agreement) and each
Deliverable (also as defined in the License Agreement) (collectively, the
"Licensed Software") with Escrow Agent. The License Agreement provides that, in
the circumstances specified in this Escrow Agreement, General Magic may obtain
the Escrow Materials from the Escrow Agent.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. ESCROW MATERIALS. "Escrow Materials" means two (2) copies of the
Source Code (as defined in the License Agreement) for the Licensed Software and
all existing annotated source code listings, flow charts, decision tables,
schematics, drawings, specifications, documentation, design details,
instructions and other related documents that pertain to the Licensed Software
and all technology necessary to understand the design, structure and
implementation of the Licensed Software or to create, compile and run the Source
Code for the Licensed Software when rendered into object code form (including
but not limited to batch files and copies of any programs or utilities that are
not commercially available or a listing of programs or utilities that are
commercially available) such that a third party programmer reasonably skilled in
the language used in such materials could maintain and support the Licensed
Software without further assistance or references to other materials. The Escrow
Materials will also include the source code materials described above for any
bug fixes, updates, maintenance releases or other releases of the Licensed
Software delivered to General Magic under the License Agreement. All Escrow
Materials shall be in English.
2. DEPOSITS. Upon execution of this Escrow Agreement, Starfish
shall deliver to the Escrow Agent the Escrow Materials
1.
<PAGE> 15
for the Software (the "Initial Deposit"). In addition, concurrently with the
delivery of each Deliverable to General Magic under the License Agreement,
Starfish will deliver to the Escrow Agent the Escrow Materials relating to such
Deliverable (a "Subsequent Deposit"). At the end of the development project,
Starfish will deliver to the Escrow Agent the Escrow Materials for the Product.
Once deposited with the Escrow Agent, no Escrow Materials will be disclosed,
divulged, destroyed, used or released except as provided in each of Paragraph 4
("Storage of Materials; Inspection"), Paragraph 6 ("Term") and Paragraph 8
("Delivery of Escrow Materials to General Magic").
3. RECEIPT BY ESCROW AGENT. Starfish will furnish to the Escrow
Agent a packing list in triplicate describing the Initial Deposit and each
Subsequent Deposit. The Escrow Agent will issue a receipt for all Escrow
Materials received and forward copies of such receipts and packing lists to both
General Magic and Starfish.
4. STORAGE OF MATERIALS; INSPECTION. The Escrow Agent will
establish under its control a receptacle for the purpose of storing the Escrow
Materials in safekeeping in an appropriate physical facility and will allow the
inspection of the Escrow Materials by General Magic to confirm that each Deposit
is complete. Any such inspection may include compiling the source code included
in the Escrow Materials into the Object Code of the Licensed Software. Any
inspection by General Magic will be done in the presence of an authorized
representative of the Escrow Agent. General Magic will notify Starfish in
writing at least ten (10) days before any requested inspection and Starfish will
have the right to attend the inspection. Authorized representatives of the
Escrow Agent will have access to the Escrow Materials to the extent necessary
for the Escrow Agent to perform its obligations under this Escrow Agreement.
5. RECORDS. The Escrow Agent will keep complete written records of
the activities undertaken and the materials prepared and delivered to the Escrow
Agent pursuant to this Escrow Agreement. Starfish and General Magic each will be
entitled at reasonable times during normal business hours, and upon reasonable
notice to the Escrow Agent, to inspect the records of the Escrow Agent with
respect to the Escrow Materials.
6. TERM. This Escrow Agreement will be effective upon execution by
all three parties and will terminate only (a) if and when all of the Escrow
Materials are delivered to General Magic pursuant to Paragraph 8 ("Delivery of
Escrow Materials to General Magic"); (b) upon or at any time after termination
of the License Agreement by Starfish; or (c) if and when General Magic notifies
Starfish and the Escrow Agent that General Magic desires to terminate this
Escrow Agreement. Upon termination of this Escrow Agreement pursuant to clause
(b) or (c) above, the Escrow Agent will return all copies of the Escrow
Materials to Starfish.
7. RELEASE EVENTS. The following events ("Release Events") will
give General Magic the right to receive a single copy of the Escrow Materials
from the Escrow Agent pursuant to Paragraph 8 ("Delivery of Escrow Materials to
General Magic") solely for the purpose of performing the obligations of
Starfish under the License Agreement:
2.
<PAGE> 16
(a) EXERCISE OF COMPLETION RIGHTS. In the event that General
Magic is entitled to exercise completion rights as specified in Section 3.2 of
the License Agreement and General Magic chooses to exercise such completion
rights;
(b) INSOLVENCY. Starfish becomes insolvent, files for any
form of bankruptcy, makes any assignment for the benefit of creditors,
dissolves, liquidates, or ceases to conduct business;
(c) MAINTENANCE/SUPPORT OBLIGATIONS BREACH. Starfish
breaches its maintenance and support obligations under the License Agreement; or
(d) WARRANTY OBLIGATIONS BREACH. Starfish breaches its
warranty obligations as set forth in Section 7 of the License Agreement.
8. DELIVERY OF ESCROW MATERIALS TO GENERAL MAGIC. The Escrow Agent
agrees, and is hereby specifically authorized, to provide the Escrow Materials
to General Magic on the fifth day following written notice from General Magic (a
"Release Notice") certifying that one or more of the Release Events has
occurred, provided that the Escrow Agent has not received a notarized affidavit
executed by an executive officer of Starfish certifying that no Release Event
has occurred (a "Notice of Objection"). A Release Notice must identify which
Release Event or Release Events have occurred. General Magic shall provide
Starfish a copy of any Release Notice delivered to the Escrow Agent pursuant
hereto. Starfish shall provide General Magic a copy of any Notice of Objection
delivered to the Escrow Agent pursuant hereto. If the Escrow Agent receives a
Timely Notice of Objection, the Escrow Agent shall not release the Escrow
Materials, but shall continue to hold them pursuant to this Escrow Agreement
until otherwise jointly directed by General Magic and Starfish, or until
resolution of the dispute pursuant to Paragraph 13 ("Arbitration") of this
Escrow Agreement.
9. BANKRUPTCY. Starfish and General Magic acknowledge that this
Escrow Agreement is an "agreement supplementary to" the License Agreement as
provided in Section 365(n) of Title 11, United States Code (the "Bankruptcy
Code"). Starfish acknowledges that if Starfish, as a debtor in possession or a
trustee in bankruptcy in a case under the Bankruptcy Code, rejects the License
Agreement or this Escrow Agreement, General Magic may elect to retain its rights
under the License Agreement and this Escrow Agreement as provided in Section
365(n) of the Bankruptcy Code. Neither Starfish nor such bankruptcy trustee will
interfere with the rights of General Magic as provided in the License Agreement
and this Escrow Agreement, including the right to obtain the Escrow Materials.
3.
<PAGE> 17
10. LICENSE GRANT. In the event General Magic obtains the Escrow
Materials hereunder, Starfish hereby grants to General Magic a nonexclusive
(except as described below), perpetual, irrevocable, worldwide license under the
Licensed Technology to (i) reproduce, modify and prepare derivative works of the
Source Code for the Licensed Software, and (ii) reproduce, manufacture, market,
distribute, publicly perform and publicly display the Products in object code
format in connection with General Magic's products or technology. In addition,
General Magic will automatically have the exclusive right to reproduce,
manufacture, modify, prepare derivatives works of, distribute, publicly perform
and publicly display the Product in the Exclusive Field of Use until January 1,
1999. General Magic agrees that it will not exercise its rights pursuant to this
Paragraph 10 ("License Grant") unless one or more of the Release Events has
occurred.
11. DELIVERY SITE. Delivery of the Escrow Materials to General
Magic, or return of the Escrow Materials to Starfish, will be at the offices of
the Escrow Agent at 2109 Bering Drive, San Jose, California, unless special
delivery instructions concerning delivery elsewhere are furnished to the Escrow
Agent by the party authorized hereunder to receive the Escrow Materials.
12. OBLIGATIONS OF ESCROW AGENT. The Escrow Agent will be
responsible for the acceptance, storage, and delivery of the Escrow Materials in
accordance with the terms of this Escrow Agreement and for the exercise of due
diligence in accordance with the high level of care accorded fiduciary
obligations. Except as provided in Paragraph 4 ("Storage of Materials;
Inspection"), the Escrow Agent will have no obligation or responsibility (a) to
verify that the Escrow Materials deposited with the Escrow Agent by Starfish do,
in fact, consist of those items that Starfish is obligated to deliver under this
Escrow Agreement or (b) to verify the existence, relevance, completeness,
currency or accuracy of the Escrow Materials. The Escrow Agent will be entitled
to act in good faith reliance upon any written instruction, instrument, or
signature believed in good faith to be genuine and to assume in good faith that
any person purporting to give any writing, notice, advice, or written
instruction in connection with, or relating to, this Escrow Agreement has been
duly authorized to do so.
If the Escrow Agent is, for any reason, uncertain of its obligation to
deliver the Escrow Materials to General Magic pursuant to Paragraph 8 ("Delivery
of Escrow Materials to General Magic"), it will initiate an arbitration pursuant
to Paragraph 13 ("Arbitration") to resolve the uncertainty. Except as expressly
provided in this Escrow Agreement, the Escrow Agent agrees that it will not
divulge or disclose or otherwise make available to any third party, or make any
use whatsoever, of the Escrow Materials, or any information deposited with it by
Starfish in connection with this Escrow Agreement, without the express prior
written consent of Starfish.
13. ARBITRATION. If, subsequent to delivery of a Release Notice to
the Escrow Agent pursuant to Paragraph 8 ("Delivery of Escrow Materials to
General Magic"), any dispute arises concerning the delivery of the Escrow
Materials to General Magic by the Escrow Agent, such dispute will be settled by
binding arbitration before a single arbitrator selected in accordance with the
rules of the American Arbitration Association, to take place in Santa Clara
County,
4.
<PAGE> 18
California, within ten (10) days following a request for arbitration from any
party hereto, in accordance with the then-prevailing rules of the American
Arbitration Association. The sole question shall be whether a Release Event
existed at the time a Release Notice was transmitted by General Magic to the
Escrow Agent. If the arbitrator determines that a Release Event has not
occurred, the arbitrator shall direct the Escrow Agent to continue to hold the
Escrow Materials in accordance with this Escrow Agreement. The arbitrator shall
not have the power to enter any other award or finding, except that the
arbitrator shall award the costs of arbitration and attorneys' fees to the
prevailing party as provided in Paragraph 17 ("Attorneys' Fees") hereof. The
arbitrator shall render an award within fifteen (15) days after the end of the
hearing, and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction.
14. INDEMNITY. Starfish and General Magic jointly and severally
agree to defend and indemnify the Escrow Agent and to hold the Escrow Agent
harmless from and against any and all claims, actions and suits, whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages, costs, charges, penalties, counsel fees, and any other expense of any
other nature, including, without limitation, settlement costs incurred by the
Escrow Agent on account of any good faith act or omission of the Escrow Agent,
in respect of, or with regard to, this Escrow Agreement except as to the
obligations of the Escrow Agent specified in Paragraphs 4 ("Storage of
Materials; Inspection") and 12 ("Obligations of Escrow Agent").
15. COMPENSATION. The Escrow Agent will be compensated as set forth
on Schedule 1 ("Fee Schedule") attached hereto. The fees set forth in Schedule 1
("Fee Schedule") are for Escrow Agent's ordinary services as escrow holder. If
the Escrow Agent is required to perform any additional or extraordinary services
as a result of being escrow holder, including intervention in any litigation or
proceeding, the Escrow Agent will receive, upon prior written approval of the
parties responsible for payment of Escrow Agent's fees and expenses, reasonable
compensation for such services and will be reimbursed for such costs incurred,
including reasonable attorneys' fees. All costs and expenses for establishing
and maintaining the escrow, including but not limited to the Escrow Agent's fees
and expenses, will be borne by General Magic.
16. DISCHARGE OF ESCROW AGENT. The Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice in writing
of such resignation to Starfish and General Magic specifying a date when such
resignation will take effect, which date must be at least sixty (60) days after
the date of receipt of such notice. Prior to the effective date of such
resignation, with the prior written consent of General Magic, which will not be
unreasonably withheld, Starfish will arrange for the services of a new escrow
agent, and Starfish and General Magic agree to execute and deliver another
escrow agreement with the new escrow agent having substantially the same terms
as this Escrow Agreement. When Starfish notifies the Escrow Agent of the name
and address of the new escrow agent, the Escrow Agent will forward the Escrow
Materials to the new escrow agent.
17. ATTORNEYS' FEES. In the event of any dispute between the
parties, the prevailing party in such dispute shall be entitled to recover from
the losing party all fees, costs and expenses of enforcing any right under or
with respect to this Escrow Agreement, including without limitation, reasonable
fees and expenses of attorneys and accountants, and the costs of arbitration.
18. MODIFICATION. These escrow instructions are irrevocable except
as they may be revoked or modified by written consent of General Magic, Starfish
and the Escrow Agent, jointly.
19. GOVERNING LAW. This Escrow Agreement will be governed by the
laws of the State of California as such laws apply to agreements entered into
and to be performed entirely within California by California residents.
20. NOTICE. All notices required by this Escrow Agreement will be
sufficiently given:
5.
<PAGE> 19
(a) upon delivery, if given in person with a signed receipt;
(b) if given by facsimile transmission, upon acknowledgment of
receipt of electronic transmission; or
(c) if given by registered or certified mail (postage prepaid,
return receipt requested), two (2) days after deposit in the mail. All such
notices will be addressed as follows:
If to General Magic: General Magic
420 North Mary Avenue
Sunnyvale, California 94086
Fax: (408) 774-4022
Attention: General Counsel
If to Starfish: Starfish Software, Inc.
1700 Green Hills Road
Scotts Valley, CA 96066
Fax: 408-461-5900
Attention: General Counsel
If to Escrow Agent: Brambles NSD, Inc.
2109 Bering Drive
San Jose, California 95131
Fax: 408-441-6826
Attention: Escrow Officer
or to such other person or address as the parties may from time to time
designate in a writing delivered pursuant to this Paragraph 20 ("Notice").
21. SEVERABILITY. If any provision of this Escrow Agreement is
unenforceable or invalid under any applicable law, such unenforceability or
invalidity will not render this Agreement unenforceable or invalid as a whole,
and the unenforceable or invalid provision will be changed and interpreted so
as to best accomplish the objectives of such provision within the limits of
applicable law.
22. WAIVER. The failure of any party to require performance by
another party of any provision will not affect the full right to require such
performance at any time thereafter, nor will the waiver by any party of a breach
of any provision of this Escrow Agreement by any other party be taken or held to
be a waiver of the provision itself.
23. DEFINITIONS. All capitalized terms not expressly defined in this
Agreement that are expressly defined in the License Agreement have the meanings
stated in the License Agreement.
24. COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
6.
<PAGE> 20
25. SURVIVAL. The following provisions will survive any termination
of this Agreement or partial termination of this Agreement with respect to a
portion of the Escrow Materials delivered pursuant to Paragraph 8 ("Delivery of
Escrow Materials to General Magic"): Paragraphs 10 ("License Grant"), 13
("Arbitration"), 14 ("Indemnity"), 17 ("Attorneys' Fees"), 19 ("Governing Law"),
20 ("Notice"), 21 ("Severability"), 22 ("Waiver"), 24 ("Counterparts") and 26
("Entire Agreement").
26. ENTIRE AGREEMENT. This Escrow Agreement, together with any
schedule hereto, and the License Agreement, constitute the entire agreement
between the parties with respect to the subject matter hereof. This Escrow
Agreement supersedes oral, written or other communications concerning the
subject matter of this Escrow Agreement. The terms of this Escrow Agreement may
not be altered, amended, or modified except in a writing signed by a duly
authorized representative of each party, except that General Magic and Starfish
may agree in writing to modify the Release Events or the Escrow Materials
required to be placed and held in escrow hereunder, and the Escrow Agent's
consent to any such amendment will not be required provided that a copy of any
such amendment is furnished to the Escrow Agent.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed as of the date written below.
STARFISH SOFTWARE, INC. GENERAL MAGIC, INC.
By: /s/ [Signature illegible] By: /s/ Mary E. Doyle
------------------------------ -------------------------------------
Title: V.P,. Business Development Title: General Counsel
--------------------------- ----------------------------------
Date: 27 May 1997 Date: May 27, 1997
---------------------------- -----------------------------------
BRAMBLES NSD, INC.
By: /s/ [Signature illegible]
------------------------------
Title: President
---------------------------
Date: 6/2/97
----------------------------
7.
<PAGE> 21
SCHEDULE 1
EXHIBIT C
FEE SCHEDULE
ESCROW AGENT: BRAMBLES NSD, INC.
2109 BERING DRIVE
SAN JOSE, CA 95131-2014
RE: ESCROW AGREEMENT # _________________, DATED _______________________________
1. INITIAL ACCEPTANCE FEE (ONE TIME ONLY) $1,125.00
2. CUSTOM ESCROW AGREEMENTS
PRICED BY PROPOSAL
3. ANNUAL STORAGE FEE
STANDARD STORAGE UNIT 10" X 10" X 24"
(LARGER UNITS AVAILABLE) $ 425.00
(TOTAL START-UP AND FIRST YEAR'S FEES = $1,550.00)
4. ACCOUNT ADMINISTRATION/MAINTENANCE
CLERICAL (ONE HOUR MINIMUM PER YEAR) $ 30.00/HR.
OFFICER LEVEL (AS REQUIRED) $ 70.00/HR.
TERMINATION FEE (MINIMUM) $ 150.00
SHIPPING ADDITIONAL
5. REGISTRATION OF ADDITIONAL LICENSES TO
MULTIPLE LICENSEE ESCROW
FIRST LICENSEE NO CHARGE
ADDITIONAL LICENSEES - INITIAL REGISTRATION $ 110.00 EA.
ANNUAL FEE PER LICENSEE THEREAFTER $ 25.00 EA.
6. OUTSIDE COSTS
COST PLUS 10%, AS INCURRED
PRICES SUBJECT TO CHANGE WITHOUT NOTICE.
Effective 12/15/92
8.
<PAGE> 22
EXHIBIT E
TRADEMARKS
STARFISH
INTERA
TRUSYNC
5.
<PAGE> 1
Exhibit 10.27
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R, SECTIONS 200.80(B)(4), 200.83
AND 230.406.
SOFTWARE SUPPORT AND MAINTENANCE AGREEMENT
This Software Support and Maintenance Agreement ("Agreement") is
entered as of January 1, 1999 (the "Effective Date") between General Magic,
Inc., a Delaware corporation with offices at 420 North Mary Avenue, Sunnyvale,
California 94086 ("Magic") and Starfish Software, Inc., a California corporation
with offices at 1700 Green Hills Road, Scotts Valley, California 96066
("Starfish").
RECITALS
A. WHEREAS, Magic and Starfish entered a Development and License
Agreement effective as of May 12, 1997 ("License Agreement"), whereby Starfish
agreed to develop for Magic a customized version of its server-based personal
information management software and to grant Magic a license thereto, on the
terms and conditions set forth in the License Agreement.
B. WHEREAS, pursuant to the License Agreement, Starfish also agreed to
develop and license to Magic synchronization software to enable the server-based
personal information management software to synchronize with certain personal
digital assistant devices and Windows personal information management software
listed on Exhibit B to the License Agreement.
C. WHEREAS, Magic desires to receive a formal commitment from Starfish
that Starfish will provide certain ongoing support and maintenance for the
software developed and licensed under the License Agreement, and Starfish is
willing to provide such commitment on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENT
1. DEFINITIONS.
1.1 "Dedicated Starfish Days" means ten (10) person days (i.e., a full
eight hour work day for one person) per month during which Starfish will commit
its engineers to work on (a) Releases that correct Existing Problems (as defined
in Section 2.1 ("Correction of Existing Problems")) set forth on Exhibit A, (b)
Problem Resolutions for new Problems according to the urgency level and schedule
set forth in Section 3.2 ("Problem Resolution"), and (c) assisting Magic with
integrating any Releases made available to Magic or questions related to the
operational use of the Products and Releases.
1.2 "Problem" means any actual or suspected failure of a Product or a
Release to conform with its specifications or user documentation or to perform
in a consistent and correct manner.
1.3. "Problem Resolution" means a workaround procedure, supplemental
code (i.e., a patch), or a new Release that eliminates the Problem. Workaround
procedures and supplemental code are considered temporary Problem Resolutions
and a new Release that eliminates the Problem is considered a permanent Problem
Resolution.
1.4 "Products" means the software programs developed for and/or
licensed by Magic under the License Agreement, now known specifically as
TrueSynch Server and TrueSynch Plus along with all related documentation,
including release notes, in the versions commercially deployed by Magic as of
the execution of this Agreement.
1.5 "Release" means a patch or new release of a Product, whether
containing Problem Resolutions and minor enhancements, or significant functional
enhancements and feature additions, in object code form, along with all related
documentation, including release notes, with the following modifications for
Magic: (i) branding with Magic's logo and product name or the logo and product
name
<PAGE> 2
of a partner of Magic, and removal of other branding, in the manner agreed by
the parties, (ii) configuration of TrueSynch Plus components for use with
Magic's products and services, (iii) configuration of the graphical user
interface used in Magic's products and services for use with the Products, and
(iv) such other modifications as may be mutually agreed by the parties.
2. MAINTENANCE AND SUPPORT.
2.1 Exhibit A. Exhibit A hereto contains a list of Problems existing as
of the execution of this Agreement ("Existing Problems") with a schedule for
correction of such Problems. Starfish shall use reasonable efforts to make
available to Magic for download via ftp Releases that correct Existing Problems
according to the schedule set forth in Exhibit A, or when available to
Starfish's most favored customers, whichever is earlier. Starfish agrees to use
reasonable commercial efforts to provide no fewer than one Release per month
until all Existing Problems are corrected. All Releases furnished to Magic will
be reviewed by Starfish quality assurance personnel prior to delivery to Magic
and will be subject to the terms of the License Agreement applicable to the
Products.
2.2 Minimum Commitment of Monthly Maintenance and Support Time.
Starfish will commit to provide to Magic the Dedicated Starfish Days to correct
the Problems as provided on Exhibit A and in Section 3.1 ("Problems Introduced
by Future Releases").
2.3 Additional Work Beyond the Minimum Commitment. If, despite
Starfish's reasonable commercial efforts, additional work will be required in
any given month in excess of the Dedicated Starfish Days (including any days
carried over as set forth in the previous sentence) to provide a Release
according to the schedule set forth in Exhibit A or a Problem Resolution,
Starfish shall inform Magic in writing and shall provide documentary support
describing the reasons additional work is necessary and its estimate of the
additional work required. Magic shall have the right to pre-approve such
additional work or any part thereof, and any such approval must be given by
Magic in writing (including email).
2.4 Supported Versions of the Product. The maintenance and support
provided by Starfish hereunder will extend to the most current version of the
Product integrated into Magic's products or service, and one prior version,
unless otherwise agreed by the parties in writing. Starfish acknowledges that
deployment of certain Releases may require engineering work on the part of
Magic, or may significantly impact Magic's network; therefore, Magic will not be
required to commercially deploy any Release. In such cases, Magic and Starfish
will work together to introduce such Release at a time mutually agreed upon in
writing, and until such time, Starfish shall continue to provide support for the
version of the Product integrated into Magic's service.
2.5 Custom Development. This Section 2 ("MAINTENANCE AND SUPPORT")
shall not obligate Starfish to perform custom development prior to delivery to
Magic, except as set forth in the definition of Release in this Agreement. Any
custom development shall be the subject of a separate agreement to be negotiated
by the Parties.
2.6 Releases That Do Not Contain Problem Resolutions. In addition to
its obligation to set forth elsewhere in this Agreement to provide Releases to
Magic, if Starfish makes a Release generally available to its most favored
customers, whether or not such Release contains Problem Resolutions, Starfish
shall also make such a Release available to Magic on the same terms and
conditions as Starfish offers to its most favored customers provided that doing
so would not conflict with Starfish's legal obligations to any such other
customer.
2.7 Notices. Notices under this Section 2 ("MAINTENANCE AND SUPPORT")
may be given by email.
3. PROBLEM RESOLUTION.
3.1 Problems Introduced by Future Releases. If a Release introduces a
new Problem, such problems shall be resolved as set forth in Section 3.2
("Problem Resolution").
<PAGE> 3
3.2 Problem Resolution. Magic may report to Starfish any known or
suspected Problems, and Starfish will use reasonable commercial efforts to
provide a "temporary fix", consisting of sufficient programming and operating
instructions to implement a temporary Problem Resolution, as well as a permanent
Problem Resolution, in each case within a reasonable time period based upon the
urgency of the Problem as reported by Magic. Magic may report problems to
Starfish by telephone during phone support hours (8:00 a.m. to 5:00 p.m. PST
Monday-Friday), or by email at any time. Starfish will also make available one
of its technical support or R&D personnel via pager seven days a week, 24 hours
a day.
Starfish will supply web, file, transfer, and support for electronic transfers
of Releases, patches, and access to problem status, which will be regularly
monitored and updated. At the time of reporting, Magic will assign a level of
urgency to the Problems, defined as follows:
a. "Critical (Urgency Level 1)," which means that Magic is
completely unable to use the Release, or it causes the system
on which it is installed to crash, hang, or cease to function
in a reliable manner.
b. "Significant (Urgency Level 2)," which means that Magic's use
of the Release is substantially impaired.
c. "Moderate (Urgency Level 3)," includes Problems with the
software for which there may be a workaround, and which do not
currently threaten use of the Release.
d. "Low (Urgency Level 4)," includes typographical errors in
documentation, inappropriate error messages, and other
miscellaneous problems that have minimal impact on use of the
Release.
The following table shows the resolution times applicable to each Problem by
level of urgency.
<TABLE>
<CAPTION>
URGENCY LEVEL TEMPORARY PROBLEM RESOLUTION PERMANENT PROBLEM RESOLUTION
------------- ---------------------------- ----------------------------
<S> <C> <C>
1 48 hours 5 days
2 7 days 30 days
3 30 days Next Release
4 Not applicable Next Release
</TABLE>
If the timeframes for Problem Resolutions for Problems listed on Exhibit A
hereto differ from those in the table above, the timeframes in Exhibit A apply.
3.3 Source Code Escrow. If Starfish is consistently unable to the
material detriment of Magic to provide a temporary Problem Resolution or a
permanent Problem Resolution for a Problem of any urgency level introduced by a
Release, the parties agree that such inability will be deemed a breach of
Starfish's maintenance and support obligations under this Agreement and the
License Agreement, and shall trigger the release of the Escrow Materials set
forth in Section 7 ("Release Events") of the Escrow Agreement among Starfish,
Magic and Brambles NSD, Inc. dated May 27, 1997 ("Source Code Escrow Agreement")
under provision 7(c) thereof.
4. MAINTENANCE AND SUPPORT FEES.
4.1 Fees. During the initial term of this Agreement, for the
maintenance and support services described herein, Magic will pay to Starfish a
minimum rate of [**] for the Dedicated Starfish Days of which [**] will be due
and payable [**] with the remaining [**] due and payable on the [**]. For
maintenance and support that has been approved in writing by Magic beyond the
Dedicated Starfish Days as described in Section 2.3 ("Additional Work Beyond the
Minimum Commitment"), Magic will pay to Starfish [**]
[**] 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> 4
except to the extent that such maintenance and support is otherwise required
under the terms of this Agreement.
4.2 Payment. Magic shall pay Starfish [**], in consideration of work
performed by Starfish prior to the execution date as well as the first payment
for the month of April 1999.
4.3 Attribution. Magic will at Starfish's request give attribution to
the TrueSync brand on pages in Magic's HTML interface to the Starfish Server by
(a) placing a footer with the phrase "Featuring TrueSync Synchronization" at the
bottom of each such page, hyperlinked to a page (such as the current Portico
Setup/Download page) which will provide instructions to Portico users concerning
the download and use of the Component Install service, and (b) maintaining the
TrueSync logo and hyperlinks on such Setup/Download page substantially as
currently present on such page.
5. TERM AND TERMINATION.
5.1 Term. The term of this Agreement shall be one year from the
Effective Date, provided that this Agreement shall automatically renew for one
year unless either Magic or Starfish notifies the other of its intention not to
renew at least 60 days prior to December 31, 1999, or unless this Agreement is
terminated pursuant to Section 5.2.
5.2 Termination. Either party may terminate this Agreement if the other
breaches a material term or condition of this Agreement and fails to cure such
breach following fifteen (15) days written notice.
6. CONFIDENTIALITY.
The terms of Section 11 ("Confidentiality") of the License Agreement
shall apply to the transactions contemplated under this Agreement, and are
hereby incorporated into this Agreement by reference.
7. WARRANTIES
7.1 Year 2000 Compliance Warranty. Starfish warrants that the Products
on Magic's system as of the execution of this Agreement are Year 2000 Compliant,
except as set forth in Exhibit B hereto, which discloses all errors or issues
that will or may prevent the Products from being Year 2000 Compliant. Starfish
agrees that it will either correct such errors or issues within thirty (30) days
of the execution of this Agreement, or provide, within thirty (30) days of the
execution of this Agreement, a plan and schedule for correcting such errors or
issues. Starfish further warrants that any Releases made available to Magic
under this Agreement will not introduce any new Year 2000 Compliance errors or
issues. "Year 2000 Compliance" means that the Products and Releases
(collectively, the "Software") shall (i) function without interruption caused by
the date on which the Software is used, (ii) correctly process, provide, store,
display, and receive date data within and between the 20th and 21st centuries,
provided that all products used with the Software properly exchange date data
with the Software, and (iii) accept and respond to year input in a manner that
resolves any ambiguities as to century in a defined and predetermined and
correct manner. This Year 2000 Warranty shall begin at the Effective Date and
shall continue until December 31, 2000. If Starfish becomes aware that the
Software will not or does not process data containing any date subsequent to the
year 1999 correctly, Starfish shall immediately notify Magic of that fact. The
foregoing does not provide any warranty that the Software will remedy any
failure of Year 2000 Compliance in or caused by any other product or service
that may be used wit the Software.
7.2 Disclaimer. TO THE MAXIMUM EXTENT PERMITTED BY LAW, AND EXCEPT AS
SET FORTH IN THIS SECTION, STARFISH DISCLAIMS ALL CONDITIONS, WARRANTIES,
REPRESENTATIONS, LIABILITIES AND OBLIGATIONS WHETHER EXPRESS OR IMPLIED ARISING
FROM NEGLIGENCE OR IMPOSED BY STATUE OR OTHERWISE IN RESPECT OF THE SUPPLY AND
OPERATION OF THE PRODUCTS AND RELEASES OR ANY RELATED SERVICES
[**] 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> 5
BY STARFISH, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
8. INDEMNITY.
The terms of Section 9 ("Indemnity") of the License Agreement shall apply to the
transactions contemplated under this Agreement, and are hereby incorporated into
this Agreement by reference.
9. MISCELLANEOUS
9.1 General Provisions. The terms of Section 14.1 ("Confidentiality of
Agreement"), 14.2 ("No Agency"), 14.3 ("Governing Law"), 14.4 ("Bankruptcy"),
14.5 ("Compliance with Law"), 14.6 ("Notices"), 14.7 ("Injunctive Relief"), 14.8
("Time Is of the Essence"), 14.9 ("Waiver"), 14.10 ("Severability"), 14.11
("Warranty"), and 14.13 ("Headings") of the License Agreement shall apply to the
transactions contemplated under this Agreement, and are hereby incorporated into
this Agreement by reference.
9.2 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, except that (i) Magic may
assign or transfer this Agreement in the event of a merger, acquisition or sale
of all or substantially all assets, and (ii) Starfish may assign or transfer
this Agreement in the event of a merger, acquisition or sale of all or
substantially all assets upon notification to Magic and a written representation
that Starfish's obligations under this Agreement will be performed with the same
degree of expertise by the assignee or transferee. Subject to the foregoing,
this Agreement will bind and inure to the benefit of the parties, their
respective successors and permitted assigns.
9.2 Survival. The following Sections shall survive any termination or
expiration of this Agreement: Section 6 ("CONFIDENTIALITY"), Section 7
("WARRANTIES"), Section 8 ("INDEMNITY"), and Section 9 ("MISCELLANEOUS").
9.3 Entire Agreement. This Agreement and the Exhibits attached hereto
constitute the entire agreement between the parties with respect to the subject
matter hereof. This Agreement supersedes, and the terms of this Agreement
govern, any prior or collateral agreements with respect to the subject matter
hereof with the exception of any prior confidentiality agreements between the
parties, the License Agreement, and the Source Code Escrow Agreement, provided
that Section 8 of the License Agreement is hereby terminated. This Agreement may
only be changed by mutual written agreement of authorized representatives of the
parties.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their respective authorized representatives. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same original.
GENERAL MAGIC, INC. STARFISH SOFTWARE, INC.
By: /s/ STEVEN MARKMAN By: /s/ JOHN HANSEN
------------------------------ --------------------------------
Print Name: STEVEN MARKMAN By: JOHN HANSEN
---------------------- --------------------------------
Title: CHAIRMAN PRESIDENT & CEO Title: VP BUS. DEVELOPMENT
--------------------------- -----------------------------
Date: APRIL 23, 1999 Date: APRIL 23, 1999
---------------------------- ------------------------------
<PAGE> 6
EXHIBIT A
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**] 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
EXHIBIT 10.28
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.80(b)(4), 200.83
and 230.406.
[ORACLE LOGO]
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Software License and Services Agreement ("Agreement") is between Oracle
Corporation ("Oracle") and the Customer identified below. The terms of this
Agreement shall apply to each Program license granted and to all services
provided by Oracle under this Agreement, which will be identified on one or
more Order Forms.
1. DEFINITIONS
1.1. "PROGRAM" means the software in object code form distributed by Oracle
for which Customer is granted a license pursuant to this Agreement, and the
media, Documentation and Updates therefor.
1.2. "DOCUMENTATION" means the user guides and manuals for installation and
use of the Program software. Documentation is provided in CD-ROM or bound form,
whichever is generally available.
1.3. "UPDATE" means a subsequent release of the Program which Oracle generally
makes available for Program licenses at no additional license fee other than
media and handling charges, provided Customer has ordered Technical Support for
such licenses for the relevant time period. Update shall not include any
release, option or future product which Oracle licenses separately.
1.4. "ORDER FORM" means the document in hard copy or electronic form by which
Customer orders Program licenses and services, and which is agreed to by the
parties. The Order Form shall reference the Effective Date of this Agreement.
1.5. "DESIGNATED SYSTEM" means the computer hardware and operating system
designated on the relevant Order Form.
1.6. "TECHNICAL SUPPORT" means Program support provided under Oracle's
policies in effect on the date Technical Support is ordered.
1.7. "COMMENCEMENT DATE" means the date on which the Programs are delivered by
Oracle to Customer, or if no delivery is necessary, the Effective Date set
forth on the relevant Order Form.
II. PROGRAM LICENSE
2.1. RIGHTS GRANTED
A. Oracle grants to Customer a nonexclusive license to use the
Programs specified on an Order Form under this Agreement, as
follows:
i. to use the Programs solely for Customer's operations on the
Designated System or on a backup system if the Designated
System is inoperative, consistent with the use limitations
specified or referenced in this Agreement, an Order Form, or
the Documentation. Customer may not relicense, rent or lease
the Programs or use the Programs for third-party training,
commercial time-sharing or service bureau use;
ii. to use the Documentation provided with the Programs in
support of Customer's authorized use of the Programs;
iii. to copy the Programs for archival or backup purposes, and to
make a sufficient number of copies for the use specified in
the Order Form. All titles, trademarks, and copyright and
restricted rights notices shall be reproduced in such copies;
iv. to modify the Programs and combine them with other software
products; and
v. to allow third parties to use the Programs for Customer's
operations so long as Customer ensures that use of the
Programs is in accordance with the terms of this Agreement.
Customer shall not copy or use the Programs (including the
Documentation) except as specified in this Agreement or an Order
Form. Customer shall have no right to use any other software
program that may be delivered with ordered Programs.
B. Customer agrees not to cause or permit the reverse engineering,
disassembly or decompilation of the Programs, except to the extent
required to obtain interoperability with other independently
created software or as specified by law.
C. Oracle shall retain all title, copyright and other proprietary
rights in the Programs. Customer does not acquire any rights,
express or implied, in the Programs, other than those specified in
this Agreement.
2.2. TRANSFER AND ASSIGNMENT
A. Customer may transfer a Program license within its organization
upon notice to Oracle; transfers are subject to the terms and fees
specified in Oracle's transfer policy in effect at the time of the
transfer.
<PAGE> 2
B. Customer may not assign this Agreement or transfer a Program
License to a legal entity separate from Customer without the prior
written consent of Oracle. Oracle shall not unreasonably withhold
or delay such consent.
2.3. VERIFICATION
At Oracle's written request, not more frequently than annually, Customer
shall furnish Oracle with a signed certification verifying that the
Programs are being used pursuant to the provisions of this Agreement and
applicable Order Forms.
Oracle may audit Customer's use of the Programs. Any such audit shall be
conducted during regular business hours at Customer's facilities and
shall not unreasonably interfere with Customer's business activities. If
an audit reveals that Customer has underpaid fees to Oracle, Customer
shall be invoiced for such underpaid fees. Audits shall be conducted no
more than once annually.
III. TECHNICAL SERVICES
3.1. TECHNICAL SUPPORT SERVICES
Technical Support services ordered by Customer will be provided under
Oracle's Technical Support policies in effect on the date Technical
Support is ordered.
3.2. CONSULTING AND TRAINING SERVICES
Oracle will provide consulting and training services agreed to by the
parties under the terms of this Agreement. All consulting services shall
be billed on a time and materials basis unless the parties expressly
agree otherwise in writing.
3.3. INCIDENTAL EXPENSES
For any on-site services requested by Customer, Customer shall reimburse
Oracle for actual, reasonable travel and out-of-pocket expenses incurred.
IV. TERM AND TERMINATION
4.1. TERM
If not otherwise specified on the Order Form, this Agreement and each
Program license granted under this Agreement shall continue perpetually
unless terminated under this Article IV.
4.2. TERMINATION BY CUSTOMER
Customer may terminate any Program license at any time; however,
termination shall not relieve Customer's obligations specified in Section
4.4.
4.3. TERMINATION BY ORACLE
Oracle may terminate this Agreement or any license upon written notice if
Customer materially breaches this Agreement and fails to correct the
breach within 30 days following written notice specifying the breach.
4.4. EFFECT OF TERMINATION
Termination of this Agreement or any license shall not limit either party
from pursuing other remedies available to it, including injunctive
relief, nor shall such termination relieve Customer's obligation to pay
all fees that have accrued or are otherwise owed by Customer under any
Order Form. The parties' rights and obligations under Sections 2.1.B,
2.1.C, and 2.2.B, and Articles IV, V, VI and VII shall survive
termination of this Agreement. Upon termination, Customer shall cease
using, and shall return or destroy, all copies of the applicable Programs.
V. INDEMNITY, WARRANTIES, REMEDIES
5.1. INFRINGEMENT INDEMNITY
Oracle will defend and indemnify Customer against a claim that the Programs
infringe a copyright or patent or other intellectual property right,
provided that: (a) Customer notifies Oracle in writing within 30 days of
the claim; (b) Oracle has sole control of the defense and all related
settlement negotiations; and (c) Customer provides Oracle with the
assistance, information and authority necessary to perform Oracle's
obligations under this Section. Oracle will reimburse Customer's reasonable
out-of-pocket expenses incurred in providing such assistance. Oracle shall
have no liability for any claim of infringement based on use of a
superseded or altered release of Programs if the infringement would have
been avoided by the use of a current unaltered release of the Programs
which Oracle provides to Customer.
If the Programs are held or are believed by Oracle to infringe, Oracle
shall have the option, at its expense, to (a) modify the Programs to be
noninfringing; or (b) obtain for Customer a license to continue using the
Programs. If it is not commercially reasonable to perform either of the
above options, then Oracle may terminate the license for the infringing
Programs and refund the license fees paid for those Programs. This Section
5.1 states Oracle's entire liability and Customer's exclusive remedy for
infringement.
5.2. WARRANTIES AND DISCLAIMERS
A. Program Warranty
Oracle warrants for a period of one year from the Commencement Date
that each unmodified Program license will perform the functions
described in the Documentation.
B. Media Warranty
Oracle warrants the tapes, diskettes or other media to be free of
defects in materials and workmanship under normal use for 90 days
from the Commencement Date.
C. Services Warranty
Oracle warrants that its Technical Support, training and consulting
services will be performed consistent with generally accepted
<PAGE> 3
industry standards. This warranty shall be valid for 90 days from
performance of service.
D. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
ORACLE DOES NOT WARRANT THAT THE PROGRAMS WILL OPERATE IN
COMBINATIONS OTHER THAN AS SPECIFIED IN THE DOCUMENTATION OR THAT
THE OPERATION OF THE PROGRAMS WILL BE UNINTERRUPTED OR
ERROR-FREE. PRE-PRODUCTION RELEASES OF PROGRAMS AND
COMPUTER-BASED TRAINING PRODUCTS ARE DISTRIBUTED "AS IS."
5.3. EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5.2, Customer's
exclusive remedy, and Oracle's entire liability, shall be:
A. For Programs
The correction of Program errors that cause breach of the
warranty, or if Oracle is unable to make the Program operate as
warranted, Customer shall be entitled to terminate the Program
license and recover the fees paid to Oracle for the Program
license.
B. For Media
The replacement of defective media returned within 90 days of the
Commencement Date.
C. For Services
The reperformance of the services, or if Oracle is unable to
perform the services as warranted, Customer shall be entitled to
recover the fees paid to Oracle for the unsatisfactory services.
VI. PAYMENT PROVISIONS
6.1. INVOICING AND PAYMENT
All fees shall be due and payable 30 days from the invoice date. Any
amounts payable by Customer hereunder which remain unpaid after the
due date shall be subject to a late charge equal to 1.5% per month
from the due date until such amount is paid. Customer agrees to pay
applicable media and shipping charges. Customer shall issue a purchase
order, or alternative document acceptable to Oracle, on or before the
Effective Date of the applicable Order Form.
6.2. TAXES
The fees listed in this Agreement do not include taxes, if Oracle is
required to pay sales, use, property, value-added or other taxes
based on the licenses or services granted in this Agreement or on
Customer's use of Programs or services, then such taxes shall be
billed to and paid by Customer. This Section shall not apply to taxes
based on Oracle's income.
VII. GENERAL TERMS
7.1. NONDISCLOSURE
By virtue of this Agreement, the parties may have access to
information that is confidential to one another ("Confidential
Information"). Confidential information shall be limited to the
Programs, the terms and pricing under this Agreement, and all
information clearly identified as confidential.
A party's Confidential Information shall not include information
that: (a) is or becomes a part of the public domain through no act or
omission of the other party; (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party;
(c) is lawfully disclosed to the other party by a third party without
restriction on disclosure; or (d) is independently developed by the
other party. Customer shall not disclose the results of any benchmark
tests of the Programs to any third party without Oracle's prior
written approval.
The parties agree to hold each other's Confidential Information in
confidence during the term of this Agreement and for a period of two
years after termination of this Agreement. The parties agree, unless
required by law, not to make each other's Confidential Information
available in any form to any third party for any purpose other than
the implementation of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not
disclosed or distributed by its employees or agents in violation of
the terms of this Agreement.
7.2. GOVERNING LAW
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the laws of the State of California.
7.3. JURISDICTION
Any legal action or proceeding relating to this Agreement shall be
instituted in a state or federal court in San Francisco or San Mateo
County, California. Oracle and Customer agree to submit to the
jurisdiction of, and agree that venue is proper in, these courts in
any such legal action or proceeding.
7.4. NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given
when mailed by first class mail to the first address listed in the
relevant Order Form (if to Customer) or to the Oracle address on the
Order Form (if to Oracle).
To expedite order processing, Customer agrees that Oracle may treat
documents faxed by Customer to Oracle as original documents;
nevertheless,
<PAGE> 4
either party may require the other to exchange original signed
documents.
7.5. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS,
REVENUE, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY,
WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ORACLE'S LIABILITY
FOR DAMAGES HEREUNDER SHALL IN NO EVENT [**] AND IF SUCH DAMAGES
RESULT FROM CUSTOMER'S USE OF THE PROGRAM OR SERVICES, SUCH LIABILITY
SHALL BE LIMITED TO FEES PAID FOR THE RELEVANT PROGRAM OR SERVICES
GIVING RISE TO THE LIABILITY.
The provisions of this Agreement allocate the risks between Oracle
and Customer. Oracle's pricing reflects this allocation of risk and
the limitation of liability specified herein.
7.6. SEVERABILITY
If any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain
in full force.
7.7. WAIVER
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for nonpayment or breach of Oracle's
proprietary rights in the Programs, no action, regardless of form,
arising out of this Agreement may be brought by either party more
than two years after the cause of action has accrued.
7.8. EXPORT ADMINISTRATION
Customer agrees to comply fully with all relevant export laws and
regulations of the United States ("Export Laws") to assure that
neither the Programs nor any direct product thereof are (1) exported,
directly or indirectly, in violation of Export Laws; or (2) are
intended to be used for any purposes prohibited by the Export Laws,
including, without limitation, nuclear, chemical, or biological
weapons proliferation.
7.9. ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties
and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of
this Agreement. This Agreement may not be modified or amended except
in a writing signed by a duly authorized representative of each
party; no other act, document, usage or custom shall be deemed to
amend or modify this Agreement.
It is expressly agreed that the terms of this Agreement and any Order
Form shall supersede the terms in any Customer purchase order or
other ordering document. This Agreement shall also supersede all
terms of any unsigned or "shrinkwrap" license included in any
package, media, or electronic version of Oracle-furnished software
and any such software shall be licensed under the terms of this
Agreement, provided that the use limitations contained in an unsigned
ordering document shall be effective for the specified licenses.
The Effective Date of this Agreement shall be October 6, 1997.
<TABLE>
<S> <C>
EXECUTED BY CUSTOMER: General Magic. EXECUTED BY ORACLE CORPORATION:
Authorized Signature /s/ KEVIN SURACE Authorized Signature /s/ JOHN ROGERS
----------------- ------------------------
Name: KEVIN SURACE Name: JOHN ROGERS
--------------------------------- ----------------------------------------
Title: VP/General Manager Title: MANAGER, SALES SUPPORT
-------------------------------- ---------------------------------------
Address: 420 N. Mary Avenue Address: 500 Oracle Parkway, Redwood City, CA
Sunnyvale, CA 94086
------------------------------
</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.
[ORACLE LOGO]
Oracle Corporation
500 Oracle Parkway
Redwood City, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation
13006-103196
<PAGE> 5
[ORACLE LOGO] QUOTE Quote#: 169722
Page: 1 of 2
Effective Date: 13-AUG-97
Customer: GENERAL MAGIC CORPORATION
Location: 420 NORTH MARY AVENUE
SUNNYVALE, CA 94086
Contact: STEVEN BALDIN
Phone: 408-774-4242 Fax: 408-774-4030
End User: GENERAL MAGIC CORPORATION
420 NORTH MARY AVENUE
SUNNYVALE, CA 94086
Contact: STEVEN BALDIN
================================================================================
ORACLE CONTRACT INFORMATION
[O] Agreement *** SLSA Attached *** Effective Date:
DESIGNATED SYSTEM
Make/Model: MS / WINDOWS NT-PC COMPATIBLE Media Type: CD
Operating System: WINDOWS NT CSI Number:
Qty License Quantity &
Shipped Level Programs License Type
- --------------------------------------------------------------------------------
1 Full Use Oracle Interoffice Message [**]
Cartridge (CTRL HOLD)
1 App. Spec. Deploy. Oracle Enterprise Manager [**]
Performance Pack
1 App. Spec. Deploy. Oracle Server-Enterprise Edition [**]
1 App. Spec. Deploy. Parallel Server Option [**]
Initial 1 Year Silver Annual Technical Support
Total License Fee Due: [**]
Total Technical Support Fee Due: [**]
Total Additional Fees Due:
==============
Total Fees Due: [**] US
For purposes of this Order Form, Customer Application is defined as General
Magic's voice accessible network service.
MISCELLANEOUS
Oracle shall deliver to the Customer Location, for use in the United States, the
number of copies specified above of the software media and Documentation (CD-ROM
or bound, whichever is generally available) ("Master Copy") for each Program
currently available in production release as of the Effective Date for use on
the Designated Systems. Customer shall have the right to make up to 1 copy of
the Program(s), including Documentation, for each license of the Program(s) and
Customer shall be responsible for installation of the software. All fees due
under this Order Form shall be due and payable net 30 days from date of invoice,
and shall be noncancelable and the sums paid nonrefundable. Customer agrees to
pay applicable sales/use tax, media and shipping charges. The following shipping
terms shall apply: FOB Destination, Prepaid and Add. These terms shall also
apply to any options exercised by Customer. If Customer loses or damages the
media containing a Program licensed hereunder, upon Customer's written notice
Oracle will provide a replacement copy thereof, under Oracle's then-current
Technical Support policies, for a media and shipping charge.
TECHNICAL SUPPORT
Annual Technical Support services ordered by Customer will be provided under
Oracle's Technical Support policies and pricing in effect on the date Technical
Support is ordered and shall be effective upon shipment (or upon Order Form
Effective Date for products not requiring shipment); first year Technical
Support is quoted above, if ordered. Fees for Technical Support are due and
payable annually in advance.
[**] 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> 6
[ORACLE LOGO] QUOTE Quote #: 169722
Page: 2 of 2
Effective Date: 13-AUG-97
Customer GENERAL MAGIC CORPORATION
Thank you for your interest in Oracle. If you have any questions please
contact Steven Sovik, your Oracle Sales Representative, at (415) 506-7000.
Customer and Oracle agree that the terms and pricing of this Quote shall
not be disclosed without prior written consent of the other party.
This Quote is valid through September 19, 1997 and shall become binding
upon execution by Customer and acceptance by Oracle.
This Quote includes the Price List Definitions attachment.
<PAGE> 7
Page 1 of 3
ATTACHMENT
to
QUOTE #169722
between
GENERAL MAGIC CORPORATION
and
ORACLE CORPORATION
Notwithstanding anything to the contrary on the Quote specified above, the
following changes are made to this Order Form as of its Effective Date.
1. Delete the fourth sentence of the MISCELLANEOUS section and replace with
the following:
"Customer agrees to pay applicable sales/use tax and media charges."
2. CUSTOMER
For purposes of this Order Form, Customer shall be defined as Customer and
Customer's majority owned subsidiaries located in the U.S. as of the
Effective Date. Before accessing the Programs, each subsidiary must agree
in writing to be bound by the terms of the Agreement and this Order Form.
3. TECHNICAL SUPPORT CAP
For up to 3 years from the end of the Technical Support period specified
under this Order Form, Customer may acquire Silver Technical Support
services for all the Programs licensed in the U.S. under this Order Form
(except for licenses that are modified or are added to this Order Form
after the Effective Date), for an annual fee not to increase each year by
more than [**] of the Technical Support fee paid by Customer for similar
Technical Support services in the preceding year (excluding any Support
fee reduction issued for terminated licenses), provided Customer
continuously maintains Technical Support services during such period.
Thereafter, Customer may obtain annual Technical Support services from
Oracle under Oracle's Technical Support fees and policies in effect when
such services are ordered.
4. ADDITIONAL LICENSE INCREMENTS
For 1 year from the Effective Date, provided Customer has continuously
maintained Technical Support, Customer may increase the quantity of each
applicable License Type accessing the Programs on the Order Form
("Additional License Increment") by paying Oracle the additional license
fee as specified below:
<TABLE>
<CAPTION>
License Fee per
License each Additional
Program License Type License Level Increment License Increment
- ------- ------------ ------------- --------- -----------------
<S> <C> <C> <C> <C>
Oracle Server-Enterprise Edition Processor App. Spec. Deploy. 1 $[**]
Parallel Server Option Processor App. Spec. Deploy. 1 $[**]
Oracle Enterprise Manager Processor App. Spec. Deploy. 1 $[**]
Performance Pack
Oracle Interoffice Processor Full Use 1 $[**]
Message Cartridge
</TABLE>
Each order placed for an Additional License Increment must be at least
[**] in net license fees; applicable sales tax will be added to the
fee. All applicable fees shall be due and payable on the date that
Customer notifies Oracle in writing of its exercise of this option; Oracle
has no shipment
[**] 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> 8
Page 2 of 3
obligation. Upon election, this payment obligation is noncancellable, and
the sum paid is nonrefundable. At the time of election, Customer may
obtain Technical Support services from Oracle for Additional License
Increment at Oracle's applicable Technical Support fees and policies in
effect when such services are ordered.
5. ORDERING OPTION
Customer may exercise options under this Order Form by providing
Oracle with a Purchase Order which references: (i) the addition of such
license to the Order Form; (ii) the Effective Date of the Order Form;
(iii) the Program(s), License Level(s), Quantity, License Type(s); and
(iv) the Designated System(s) types or CSI number.
6. ADDITIONAL PROGRAMS
It is the current intention of the parties to negotiate license fees for
the addition of future Programs to this Order Form if and when such
Programs are available in production release for installation on the
Designated Systems types and such Programs are listed on Oracle's U.S.
Price List, provided Customer is current at such time on its Technical
Support payments. Such future Programs are not currently available.
Customer has not relied on potential availability in entering into the
payment obligations in this Order Form. Oracle is under no obligation to
change current availability.
7. USE OF ORACLE PROGRAMS BY THIRD PARTIES
A. Subscriber Use
Customer shall have the non-exclusive, non-transferable right to allow
subscribers to Customer's Personal Assistant Service which are based
primarily in the United States ("Subscribers") to access and use the
Oracle Programs acquired under this Order Form installed on Customer's
Designated Systems for each such Subscriber's internal data processing use
subject to the terms of this Section and the Agreement. If a Subscriber
travels outside the United States, the Subscriber may access a Program(s),
installed on Designated System(s) types in the U.S., subject to U.S.
export laws and this Order Form.
Subscriber's access to such Programs shall be available only in
conjunction with the use of the Customer's Personal Assistant Service
application program, and the Subscribers shall not use the Programs
outside the scope of such application program. Each Subscriber under this
Order Form shall have the right to access the Oracle Programs, either
remotely through a modem or directly at the location of the applicable
processor on which Customer has installed the applicable Programs. In no
event shall Customer have the right to sublicense or distribute any
Programs, except as set forth herein.
B. Agreement
Customer shall ensure that the Subscribers' use of the Programs is in
accordance with the terms of the Agreement. Customer agrees to defend and
indemnify Oracle and hold Oracle harmless from all claims, losses,
liabilities, and settlement costs resulting from any claims brought
against or incurred by Oracle arising from any use of the Programs by
Subscribers.
C. Technical Support
Customer is responsible for providing all technical support, training and
consultation to its Subscribers. Any questions from Customer's Subscribers
will be referred by Oracle to Customer.
D. Usage
Customer shall not grant Subscribers access to more Processors of the
Programs than the maximum number of Processors of such Programs licensed
under this Order Form.
<PAGE> 9
Page 3 of 3
8. HOT BACK-UP
With respect to each of the Program licenses ordered under the Order Form,
Customer shall have the right to install and use such Programs on a backup
computer of the same make and model as the Designated System type for the
purpose of temporary disaster recovery and testing. Customer shall have
the right to maintain a "hot" or "live" copy of the Programs on such
backup computer at all times for immediate production use only in the case
of a primary computer malfunction that renders the Programs inoperable on
the applicable Designated System type. At no time shall Customer have the
right to use the Programs on the Designated System type and the backup
computer simultaneously.
9. PAYMENT
The Customer's payment obligations to Oracle under this Order Form as of
the Effective Date shall be satisfied by Millennia Vision Corporation
("Payor") as authorized pursuant to a distribution agreement executed
between Payor and Oracle ("Payor Agreement"). Oracle shall receive
payments directly from Payor under the terms of the Payor Agreement. This
payment obligation is noncancellable and the sum paid is nonrefundable.
The financial obligations of Customer to Payor shall be specified in a
separate agreement. Licenses that are modified or added to this Order Form
after the Effective Date shall be at terms and fees as determined when
such licenses are acquired. Applicable sales tax shall be charged to Payor
based on the point of delivery of the Master Copy and paid under the terms
of the Payor Agreement. Payor is responsible for payment of any use or
other tax arising from use of the Programs in any other location.
- --------------------------------------------------------------------------------
Customer, Oracle and Payor agree that the terms in this Order Form shall not be
disclosed without prior written consent of the other party. This quote is valid
through October 3, 1997 and shall become binding upon execution by Customer and
Payor and acceptance by Oracle.
GENERAL MAGIC CORPORATION MILLENNIA VISION CORPORATION
Signature: /s/ KEVIN SURACE Signature: /s/ AUSTIN ERLICH
------------------------------ -------------------------
Name: Kevin Surace Name: Austin Erlich
----------------------------------- ------------------------------
Title: Vice President & General Manager Title: President
Products - Network Solutions -----------------------------
---------------------------------
ORACLE CORPORATION
Signature: /s/ JOHN ROGERS
------------------------------
Name: John Rogers
-----------------------------------
Title: MANAGER, SALES SUPPORT
----------------------------------
Effective Date: October 6, 1997
-------------------------
- --------------------------------------------------------------------------------
<PAGE> 10
[ORACLE LOGO]
JULY 1, 1997 PRICE LIST DEFINITIONS
"Concurrent Devices": the maximum number of input devices accessing the Programs
at any given point in time. If multiplexing software or hardware (e.g., a TP
Monitor, webserver product) is used, this number must be measured at the
multiplexing front-end.
"Named User" or "Developer": is defined as an individual who is authorized by
Customer to use the Oracle Programs, regardless of whether the individual is
actively using Programs at any given time.
"Mailbox" is defined as a point from which to send or receive electronic mail.
It is created when a user account or application is created in Oracle Office.
"Computer": licensed for use on a single specified computer.
"Processor": shall be defined as the actual number of processors installed in
the licensed Computer and running the Oracle Programs, regardless of the number
of processors which the Computer is capable of running.
"Client": a computer which (1) is used by only one person at a time, and (2)
executes Oracle software in local memory or stores the software on a local
storage device.
"Full Use Programs" are unaltered versions of the Programs with all functions
intact.
"Deployment Programs" may be used only to execute existing applications or
reports. They may not be used to build or modify reports or applications.
Deployment Programs are to be generated by Customer from Full Use Programs.
"Application Specific Deployment Program(s)" are limited to use solely for the
purpose of running the Customer Application designated on the Order Form, and
may not be used to create or alter tables or reports except as necessary for
operating the Customer Application. Customer Application shall be defined in
the attached Order Form if applicable. Application Specific Deployment Programs
are to be generated by Customer from Full Use Programs.
- --Program: Full Use licenses of Programs marked with the symbol "[tilde]" also
include an unlimited number of Deployment licenses for the Programs as
specified in the Documentation.
"Web Specific Program(s)" shall mean Program licenses which may only be accessed
by Clients via Internet networking protocols. Notwithstanding any use
restrictions in the Agreement or Oracle Program License Terms, Customer's
applications may only allow third party web access to a licensed Web Specific
Program for viewing, querying, or adding data only, so long as such use is in
accordance with the other terms of the Agreement.
For Oracle Human Resources, Oracle Payroll and Oracle Time Management the
number of "Employees" is the number of active Customer employee records.
For Oracle Personal Time and Expense, the number of "Employees" is the total
number of people authorized to enter time and expense records.
For Oracle Sales Compensation, the number of "Employees" is the total number of
Customer's employees or agents whose compensation, in whatever form, is
calculated or monitored using Oracle Sales Compensation.
For Oracle Training Administration, the number of "Employees" is the total
number of students receiving training courses supplied by the Customer.
"Foundation Services": This is limited support, and any license for which it is
purchased is not a Supported Program License.
A "Training Unit" entitles Customer to acquire one day of instruction for one
Customer employee at an Oracle Education Center in the U.S., exclusive of
expenses. Eight Training Units may be used to acquire one day of instruction
for up to 15 Customer employees, at a Customer site in the U.S., exclusive of
expenses. Training Units are valid for one year from the Effective Date of the
Order Form on which they are ordered.
"Organizational Change Management Services" are services for assisting
Customer's in managing change in their organizations. Customer's discounts for
consulting or training do not apply to such Organization Change Management
Services.
A "Suite" consists of all of the functional software components described in
the Documentation.
<PAGE> 1
EXHIBIT 10.29
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.80(b)(4), 200.83
and 230.406.
[GTE LOGO]
Master Agreement for
Internetworking Services
Rev. February 19, 1998
- --------------------------------------------------------------------------------
THIS MASTER AGREEMENT BETWEEN GTE INTERNETWORKING INCORPORATED ("WE") AND THE
CUSTOMER IDENTIFIED BELOW ("YOU") INCLUDES THE ATTACHED SERVICE SCHEDULES AND
SERVICE QUOTATIONS (COLLECTIVELY "SCHEDULES") TOGETHER WITH ANY ADDITIONAL
SCHEDULES MUTUALLY AGREED IN WRITING IN THE FUTURE.
1. SERVICES. We will provide you the Internetworking services ("Services")
specified in the Schedule(s). Our commencement of providing any of the Services
shall constitute our acceptance of this Master Agreement.
2. PRICES. Prices are stated in the Schedules and are guaranteed for the Term
stated in the Schedules. If any of the Services are on a month-to-month basis,
we will give you at least 30 days notice of a price change. In addition, you
are responsible for applicable taxes, tariffs, telecommunications surcharges or
other governmental charges due on account of the Services.
3. PAYMENT. Unless otherwise stated in a Schedule, we will invoice you
monthly. You agree to pay within 30 days from receipt of invoice. For overdue
invoices, you will pay interest of 1.5% for each month or part of a month (or
the maximum allowed by law, whichever is less).
4. OUR RESPONSIBILITY. We are responsible for providing the Services by
qualified personnel in a professional manner. WE DISCLAIM ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
5. YOUR RESPONSIBILITY. You are responsible for the manner in which you use
the Services, including the maintenance and security of your data, computer
network and other facilities; your choice of equipment, software and online
content, and all other matters related to how you use the Services. Unless
expressly permitted by a Schedule or separate reseller agreement with us, you
shall not resell Services, or access to Services, directly or indirectly to
third parties.
6. INDEMNIFICATION. We will indemnify you for damages, costs and attorneys
fees you incur from any claim that our design of the Services infringes any
U.S. patent, copyright, trademark, trade secret or other intellectual property
right. You will indemnify us for damages, costs and attorneys fees we incur
from any claim arising from your manner of using of the Services, your
combination of the Services with other products or services not provided by us,
or your modification of the Services. The indemnifying party shall conduct the
defense and shall have control of the litigation; the other party shall give
prompt notice of claims and shall cooperate in defending against the claim. THE
PARTIES DISCLAIM THE IMPLIED WARRANTY OF NON-INFRINGEMENT, RELYING INSTEAD ON
THE TERMS OF THIS SECTION.
7. IP ADDRESSES. Upon expiration, cancellation or termination of the
Agreement or applicable Schedule, you shall relinquish any IP addresses or
address blocks assigned to you by us.
8. ACKNOWLEDGMENT. You agree that we may include your name in listings of our
customers.
9. COMPLIANCE WITH LAWS. You shall not use or permit your end users to use
the Services in ways that violate laws or our acceptable use policy which is
published on our web site at http://www.bbn.com/aup/, infringe the rights of
others, or interfere with users of our network or other networks. For example,
you shall not distribute chain letters or unsolicited bulk electronic mail
("spamming"); propagate computer worms or viruses; use a false identity;
attempt to gain unauthorized entry to any site or network; distribute child
pornography, obscenity or defamatory material over the Internet; or infringe
copyrights, trademarks or other intellectual property rights. You further agree
to comply with U.S. export laws concerning the transmission of technical data
and other regulated materials via the Services.
10. TERMINATION. Either party may terminate or cancel this Agreement if the
other fails to cure a material breach of the Agreement within 30 days after
receiving written notice of the breach. We reserve the right, but assume no
obligation, to suspend performance immediately if you are more than 30 days
overdue in payments or if, in our reasonable judgment, you have violated
Section 9.
11. LIMITATION OF LIABILITY. EXCEPT FOR (A) INDEMNIFICATIONS PURSUANT TO
SECTION 6, (B) BREACH OF ANY CONFIDENTIALITY OBLIGATIONS STATED IN A SERVICE
SCHEDULE, AND (C) BREACHES BY YOU OF LICENSE TERMS APPLICABLE TO GTE-PROVIDED
SOFTWARE, NEITHER PARTY (NOR ITS SUPPLIERS OR CUSTOMERS) SHALL BE LIABLE TO THE
OTHER PARTY FOR PUNITIVE, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES
INCLUDING WITHOUT LIMITATION, LOST PROFITS OR LOSS OR DAMAGE TO DATA ARISING OUT
OF THE USE OR INABILITY TO USE SERVICES, EVEN IF THE PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
12. LIMITATION OF DAMAGES. OUR AGGREGATE LIABILITY TO YOU RELATING TO OR
ARISING OUT OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL NOT
EXCEED (a) THE TOTAL AMOUNTS PAID BY YOU TO US FOR THE SERVICE IN QUESTION,
DURING THE ONE-YEAR PERIOD IMMEDIATELY PRECEDING THE EVENT WHICH GAVE RISE TO
YOUR CLAIMS OR (b) $100,000, WHICHEVER IS LESS.
13. MISCELLANEOUS. The terms and conditions of this Agreement supersede all
previous agreements, proposals or representations related to the Services.
Except for assignments to GTE affiliates, neither party may assign this
Agreement without the prior written consent of the other party. This Agreement
shall be governed by the substantive laws of the Commonwealth of Massachusetts.
Any changes to this Agreement, or any additional or different terms in your
purchase orders, acknowledgments or other documents, will not be effective
unless expressly agreed to in writing by us.
- --------------------------------------------------------------------------------
PLEASE SIGN BELOW TO INDICATE YOUR UNDERSTANDING AND ACCEPTANCE
OF THE TERMS OF THIS AGREEMENT
COMPANY (TYPE OR PRINT FULL CUSTOMER NAME): GENERAL MAGIC, INC.
SIGNATURE: /s/ GARY L. RUCKER DATE: Sept. 4, 1998
PRINT NAME: Gary L. Rucker TITLE: Manager of Information Services
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 of 1
<PAGE> 2
SERVICE SCHEDULE
[GTE LOGO] INTERNET ADVANTAGE(SM)
DOWNSTREAM SERVICE PROVIDER (DSP/ISP)
REV. JUNE 1998
THIS SERVICE SCHEDULE IS PART OF AND IS GOVERNED BY THE MASTER AGREEMENT FOR
INTERNETWORKING SERVICES ("MASTER AGREEMENT"). THE TERMS AND CONDITIONS OF THE
MASTER AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE.
1. COVERED SERVICES. We will provide you with the version of Internet
Advantage(SM) Connection Service ("IA Service") indicated in the Service
Quotation ("Quotation"). The Service Period and fees for the IA Service are
described in the Quotation. Our commencement of providing IA Service to you as
described in the Quotation shall constitute our acceptance of this Service
Schedule.
2. SERVICE DESCRIPTION. IA Service provides you with dedicated access to the
Internet. Further details of the IA Service are set forth in the Service
Description for the version of the IA Service you have selected, as indicated
on the attached Quotation. Service Descriptions are available from your GTE
sales representative.
3. SERVICE LEVEL GUARANTEE AND LIMITED REMEDY. We are committed to providing
you with reliable, high quality Services, and we offer certain assurances about
the quality of Services ("Service Level Guarantee"). A description of the
current Service Level Guarantee is available on our Web site at
http://www.bbn.com/products/access/guarantee.htm or from your GTE
Internetworking sales representative. We reserve the right to change, amend, or
revise the Service Level Guarantee at any time. In the event of any change in
the Service Level Guarantee, your warranties and/or remedies may change. The
warranties and/or remedies described in the then-current Service Level
Guarantee for the applicable Service are your sole remedies under the
Agreement. THIS SERVICE LEVEL GUARANTEE IS THE SOLE AND EXCLUSIVE REMEDY FOR
FAILURE OR DEFECT OF IA SERVICE.
4. RESELLING AUTHORITY & PERMITTED USE. Subject to the terms and conditions set
forth herein, we authorize you to: (a) use the IA Service for your internal
business purposes; (b) provide access to the IA Service to your customers; (c)
allow your customers, through a binding written agreement, to use the IA
Service for internal personal or business use; and (d) allow such customers to
resell the IA Services to third-parties, through a binding written agreement to
third parties [(c) and (d) collectively referred to as "End Users"]. Written
agreements as specified above shall incorporate terms substantially similar to
those stated in Section 16 "MANDATORY FLOW DOWN TERMS" of this Service
Schedule. You are authorized to provide access to the IA Services to your
employees and End Users, all of whom must be located within the United States
of America.
5. RENEWAL. We encourage you to contact us by sending an inquiry via email to:
[email protected] prior to the expiration of the then-current Service Period
to renew the IA Service for an additional term of one year or greater. If the
Service Period expires before it has been renewed in writing, then we may
continue to provide you with the IA Service on a month-to-month basis, at 105%
of our then-current undiscounted list prices, until the Service Period has been
renewed in writing.
6. SERVICE CANCELLATION. You may cancel the IA Service at any time by providing
60 days prior written notice via email to: [email protected]. If you cancel
during a Service Period, you agree to pay us (a) all IA Service fees accrued as
of the cancellation date and (b) an early cancellation fee in an amount equal
to 50% of IA Service fees due for the canceled portion of the Service Period.
You are responsible in all events for any telephone company circuit
cancellation charges incurred by us as a result of your cancellation. If you
elect IA Service with flexible pricing, the cancellation fees shall be
calculated based upon the applicable price for the lowest IA Service usage band.
7. SOFTWARE WE PROVIDE. In the event we provide any software to you in
connection with IA Service, we grant you a personal, non-exclusive,
non-transferable license for the duration of the Service Period, to use such
software in object code form only, on hardware provided by us, for the sole
purpose of enabling you to use the IA Service on your premises. You acknowledge
that the software is copyrighted, that title to such software remains with us
and our suppliers, if any, and that the content and design of such software are
valuable trade secrets. You are authorized to make one copy of the Software for
backup purposes only. You agree not to (a) disclose or make available to third
parties any portion of such software without our advance written permission;
(b) further copy or duplicate such software; (c) reverse engineer, decompile or
disassemble such software; (d) make derivative works from such software; or (e)
modify such software. YOU ACKNOWLEDGE THAT OUR THIRD PARTY SOFTWARE SUPPLIERS
DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT.
7, IP ADDRESSES. Upon expiration, cancellation or termination of the Agreement
or applicable Schedule, you shall relinquish any IP addresses or address blocks
assigned to you or End-Users by us.
9. DOMAIN NAME FEES. All fees associated with domain name registration and
periodic maintenance of domain names are your responsibility and will be billed
directly to you by InterNIC. Such fees are not included in the prices for the
IA Service.
10. RETURN OF EQUIPMENT AND SOFTWARE. Upon termination or expiration of the
Service Period (unless extended by the parties), you agree to return to us all
hardware and software (other than hardware and software which you have
purchased from us) which we have provided to you in connection with the IA
Service. In the event such hardware and software is not returned to us within
30 days following such termination or expiration, we will charge you the
undepreciated list price of the unreturned hardware and software, in addition
to all applicable late return fees.
11. CONTENT RESPONSIBILITY. You understand that we are not responsible for the
content of the transmissions that may pass through the Internet and/or the IA
Services. You agree that you will NOT use the IA Services in ways that violate
laws, infringe the rights of others, or interfere with the users, services, or
equipment of other networks. For example, you shall not distribute unsolicited
advertising, chain letters, or commercial electronic mail ("spamming");
propagate computer worms or viruses; attempt to gain unauthorized entry to
other computers, data or networks; distribute child pornography, obscenity, or
defamatory material over the Internet; or infringe copyrights, trademarks, or
other intellectual property rights. You also agree that you will not use or
allow use of the IA Services in a manner that is inconsistent with the
then-current GTE Internetworking "Acceptable-Use Policy" available at
http://www.bbn.com/aup. You acknowledge that any breach of the foregoing
obligation, by yourself or End Users, may result in suspension or termination
of the IA Services.
12. COMPLIANCE WITH APPLICABLE LAWS. You agree that you shall use the IA
Service in full compliance with (i) all applicable export laws (including
without limitation any U.S. export laws) and (ii) all applicable local laws and
regulations (including without limitation any laws governing the import of the
IA Service. We reserve the right to suspend or terminate the IA Service (or any
portion thereof) without notice in the event that your use of the IA Service,
in our reasonable judgment violates any applicable export law, regulation, or
ordinance.
GTE Internetworking Incorporated
Page 1 of 2
<PAGE> 3
SERVICE SCHEDULE
[GTE LOGO] INTERNET ADVANTAGE(SM)
DOWNSTREAM SERVICE PROVIDER (DSP/ISP)
REV. JUNE 1998
13. EXPORT COMPLIANCE: The transfer of technology across national boundaries,
including electronic transmission thereof, is regulated by the U.S. Government.
You agree not to export or re-export (including by way of electronic
transmission) any technology transmitted through Internet Advantage Connection
Service without first obtaining any required export license or governmental
approval. You further agree not to export, re-export or release any software
(including source code), technology, or foreign-produced direct product of U.S.
origin software or technology, directly or indirectly, to a country or a
national of a country that is (i) listed in the EAR as County Groups D:1 or E:2
or (ii) embargoed by the United States, if such software, technology or direct
product is controlled for export to such country for national security reasons.
If the foreign-produced direct product of such technology is a complete plant
or major component of a plant and the direct product of such plant is
controlled to such country for national security reasons or under the ITAR, you
will not export the direct product of the plant to an such country.
The countries that are embargoed, or included in Groups D:1 and E:2 may change
from time to time. As of December 30, 1997, Country Group D:1 consists of
Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, China, Estonia,
Georgia, Kasakhstan, Krygystan Laos, Latvia, Lithuania, Moldova, Mongolia,
Romania, Russia, Tajikstan, Turkmenstan, Ukraine, Uzbekistan, and Vietnam.
Country Group E:2 consists of Cuba, North Korea, and Libya, and the embargoed
countries are Cuba, Iran, Iraq, North Korea, and Sudan.
14. SURVIVAL: This provision 13 "Survival" and the following provisions shall
survive the termination of the Agreement. Provision 12 "EXPORT COMPLIANCE" of
this Service Schedule, and any Provision in the applicable Master Agreement
which references "INDEMNIFICATION", "LIMITATION OF LIABILITY", "LIMITATION OF
DAMAGES", and "WARRANTY DISCLAIMERS."
15. RESPONSIBILITY FOR END USERS. You agree to be responsible for all billing
and collection from End Users and that you will pay us on a timely basis,
regardless of whether you collect payment from End Users. You agree to be
responsible for all communications to and business relations with End Users.
You shall be responsible for providing all technical and business support
related to IA Services access for End Users, including but not limited to
responding to inquiries and questions, hot-line support, problem resolution,
providing system configuration, installation and support, as applicable and
other such services and shall maintain an organization which is highly trained
and qualified to provide such support. You are responsible for authenticating
and authorizing access by your End Users to IA Services.
16. MANDATORY FLOW-DOWN TERMS. You agree to include terms substantially
similar to the following minimum terms in legally binding agreements with End
Users. For the purpose of this section, "Network Services Supplier" shall mean
us, "Company" shall mean you, "you" and "End User" shall mean the End User and
"IA Services" shall mean Internet Advantage(SM) Connection Service.
Content Responsibility. End User understands that neither Company nor its
Network Services Supplier is responsible for the content of the
transmissions which may pass through the Internet and/or the IA Services.
End User agrees that it will NOT use the IA Services in ways that violate
laws, infringe the rights of others, or interfere with the users, services,
or equipment of the network. For example, End User shall not distribute
unsolicited advertising, chain letters, or commercial electronic mail
("spamming"); propagate computer worms or viruses; attempt to gain
unauthorized entry to other computers, data or networks; distribute child
pornography, obscenity, or defamatory material over the Internet; or
infringe copyrights, trademarks, or other intellectual property rights.
Warranty and Liability Limitations. THE NETWORK SERVICES SUPPLIER AND
COMPANY DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING WARRANTIES
OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. NEITHER COMPANY
NOR ITS NETWORK SERVICES SUPPLIER WILL BE LIABLE FOR UNAUTHORIZED ACCESS TO
COMPANY'S OR END USER'S TRANSMISSION FACILITIES OR PREMISE EQUIPMENT OR FOR
UNAUTHORIZED ACCESS TO OR ALTERATION, THEFT OR DESTRUCTION OF END USER'S
DATA FILES, PROGRAMS, PROCEDURES OR INFORMATION THROUGH ACCIDENT,
FRAUDULENT MEANS OR DEVICES, OR ANY OTHER METHOD, REGARDLESS OF WHETHER
SUCH DAMAGE OCCURS AS A RESULT OF COMPANY'S OR ITS NETWORK SERVICE
SUPPLIER'S NEGLIGENCE.
Disclaimer of Consequential Damages. IN NO EVENT WILL COMPANY OR ITS
NETWORK SERVICES SUPPLIERS BE LIABLE FOR ANY DAMAGES, INCLUDING BUT NOT
LIMITED TO LOSS OF DATA, LOSS OR REVENUE OR PROFITS, OR FOR ANY OTHER
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR
IN CONNECTION WITH THE USE OF OR INABILITY TO USE SERVICES OR PRODUCTS
PROVIDED HEREUNDER.
Export Compliance: End User further agree to comply with U.S. Export laws
concerning the transmission of technical data and other regulated materials
via the IA Services.
IP Addresses: Upon expiration, cancellation or termination of the
Agreement, End-User shall relinquish any IP addresses or address blocks
assigned to End-User by Company or its Network Services Supplier.
AGREED & ACCEPTED:
Company: General Magic, Inc.
-----------------------------
Signature: /s/ GARY L. RUCKER
---------------------------
Name: Gary L. Rucker
--------------------------------
Title: Manager of Information Services
-------------------------------
Date: Sept. 4, 1998
--------------------------------
GTE Internetworking Incorporated Page 2 of 2
<PAGE> 4
[GTE LOGO]
AMENDMENT NO. 1
TO THE
SERVICE SCHEDULE FOR INTERNET ADVANTAGE DOWNSTREAM SERVICE PROVIDERS
BETWEEN
GTE INTERNETWORKING INCORPORATED ("GTE") AND GENERAL MAGIC INC. ("CUSTOMER")
THIS AMENDMENT #1 to Service Schedule for Internet Advantage Downstream Service
Providers September 4, 1998 (the "DSP Service Schedule") entered into between
GTE Internetworking, Incorporated ("GTE", "us" or "ours") and General Magic
Inc. ("Customer", "you" or "your").
RECITALS:
You have signed the Master Agreement and such applicable GTE quotations and/or
additional service schedules describing the Internet services to be provided to
you by us.
A. The parties desire to amend the DSP Service Schedule such that the
following paragraphs read as set forth herein.
3. RESELLING AUTHORITY & PERMITTED USE. Subject to the terms and conditions
set forth herein, we authorize you to: (a) use the IA Service for your internal
business purposes; (b) provide access to the IA service to your customers; (c)
allow your customers, through a binding agreement, to use the IA services in
conjunction with the General Magic Portico(TM) Network for internal personal or
business use; and (d) allow such customers to resell the IA services to
third-parties, through a binding written agreement, to third parties [(c) and
(d) collectively referred to as "End Users"]. Written agreements as specified
above shall incorporate terms substantially similar to those stated in Section
16 "MANDATORY FLOW DOWN TERMS" of this Service Schedule. You are authorized to
provide access to the IA Services to your employees, customers and End Users,
in conjunction with the General Magic Portico(TM) Network, which must be
located within the United States of America. You may add additional countries
upon receiving written permission from GTE or through a separate written
agreement, such permission shall not be unreasonably withheld, based upon GTE's
business and legal concerns.
16. MANDATORY FLOW-DOWN TERMS. You agree to include terms substantially
similar to the following minimum terms in legally binding agreements with End
Users. For the purpose of this section, "Network Services Supplier" shall mean
us, "Company" shall mean you, "you" and "End User" shall mean the End User and
"IA Services" shall mean Internet Advantage(SM) Connection Service.
Content Responsibility. End User understands that neither Company nor its
Network Services Supplier is responsible for the content of the
transmissions which may pass through the Internet and/or the IA Services.
End User agrees that it will NOT use the IA Services in ways that violate
laws, infringe the rights of others, or interfere with the users, services,
or equipment of the network. For example, End User shall not distribute
unsolicited advertising, chain letters, or commercial electronic mail
("spamming"); propagate computer worms or viruses; attempt to gain
unauthorized entry to other computers, data or networks; distribute child
pornography, obscenity, or defamatory material over the Internet; or
infringe copyrights, trademarks, or other intellectual property rights.
Warrant and Liability Limitations. THE NETWORK SERVICES SUPPLIER AND
COMPANY DISCLAIM ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING WARRANTIES
OF
Page 1 of 2
<PAGE> 5
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. NEITHER COMPANY NOR
ITS NETWORK SERVICES SUPPLIER WILL BE LIABLE FOR UNAUTHORIZED ACCESS TO
COMPANY'S OR END USER'S TRANSMISSION FACILITIES OR PREMISE EQUIPMENT OR FOR
UNAUTHORIZED ACCESS TO OR ALTERATION, THEFT OR DESTRUCTION OF END USER'S
DATA FILES, PROGRAMS, PROCEDURES OR INFORMATION THROUGH ACCIDENT,
FRAUDULENT MEANS OR DEVICES, OR ANY OTHER METHOD, REGARDLESS OF WHETHER
SUCH DAMAGE OCCURS AS A RESULT OF COMPANY'S OR ITS NETWORK SERVICE
SUPPLIER'S NEGLIGENCE.
Disclaimer of Consequential Damages. IN NO EVENT WILL COMPANY OR ITS
NETWORK SERVICES SUPPLIERS BE LIABLE FOR ANY DAMAGES, INCLUDING BUT NOT
LIMITED TO LOSS OF DATA, LOSS OF REVENUE OR PROFITS, OR FOR ANY OTHER
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR
IN CONNECTION WITH THE USE OF OR INABILITY TO USE SERVICES OR PRODUCTS
PROVIDED HEREUNDER.
Export Compliance: End User further agree to comply with U.S. Export laws
concerning the transmission of technical data and other regulated materials
via the IA Services.
C. Captions contained in this Amendment are for reference purposes only and
do not constitute part of the Agreement.
D. Capitalized terms used and not defined herein shall have the meanings
ascribed thereto in applicable Master Agreement or Service Schedule.
E. Except as amended hereby (and by other Amendments, if applicable), all
other terms and conditions of the Master Agreement and Service Schedule shall
remain in full force and effect.
These terms and conditions have been read, are understood, and are hereby
accepted.
GTE INTERNETWORKING INCORPORATED GENERAL MAGIC, INC.
By: /s/ Frank Maniscalco By: /s/ GARY L. RUCKER
------------------------------ ----------------------------------
Name: Frank Maniscalco Name: Gary L. Rucker
---------------------------- --------------------------------
Title: Contract Representative Title: Manager of Information Systems
--------------------------- -------------------------------
Date: Sept. 8, 1998 Date: Sept. 4, 1998
---------------------------- --------------------------------
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
<PAGE> 6
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: JUN 30, 1998
General Magic QUOTE VALID TO: JUL 31, 1998
420 North Mary Avenue QUOTE NUMBER: 59761.9999.1
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 5.1, FIXED MULTI-T1
BRONZE
USA
Service Period (please check one as applicable):
[ ] Month to Month [X] 1 Year [ ] 2 Years [ ] 3 Years
The Service Period shall commence upon the provisioning by BBN Corporation, a
subsidiary of GTE Internetworking Incorporated ("we", "our", or "us"), to you
of the services listed on this Service Quotation.
<TABLE>
<CAPTION>
RECURRING FEES (1 YEAR CONTRACT) LIST PRICE DISCOUNT MONTHLY ANNUAL
- -------------------------------- ---------- -------- ------- ------
<S> <C> <C> <C> <C>
Bronze 2xT1 Service Fee $ [**] [**]% $ [**] $ [**]
Leased Circuit Monthly Recurring $ [**] $ [**]
--------- ----------
$ [**] $ [**]
</TABLE>
This renewal quotation entitles your organization to receive certain discounts
as set forth above. In order to renew at this rate, please complete your renewal
package by signing and returning your Service Quotation, your signed contracts,
and your purchase order PRIOR TO the expiration of this quote. Your effective
renewal date is the expiration date of this quotation.
In the event that your renewal quotation expires prior to submitting your
complete renewal package, you will be invoiced at today's non-discounted
renewal rates for a period of 60 days. Upon completion of this 60 day waiting
period, you may request another renewal quote with associated discounts as set
forth above. Interim invoices during this 60 day period must be paid in full
prior to renewing your service(s). You may be subject to cancellation for
non-payment of services at any time after the expiration of this renewal quote.
Internet Advantage v5.1 Connection Service is a comprehensive, fully-managed
offering for customers who view the Internet as a strategic resource and
require a high level of reliability, quality, and performance to use the
Internet as a vehicle for collaboration and commerce.
Internet Advantage Bronze Connection Service is monitored and maintained by GTE
Internetworking 24 hours a day, 365 days a year by experienced operators,
technicians, and analysts, and includes the following at no additional charge:
- - Domain Name Service (DNS): Primary and secondary DNS are provided for up to
10 domains and 100 kilobytes of associated zone data file storage. We will also
register up to 10 domain names for you with InterNIC. Fees for initial
registration and on-going maintenance fees for each domain name will be billed
to you directly by InterNIC.
- - Stats Advantage Usage Reporting: Provides on-demand, web-based graphical and
tabular management summaries of traffic statistics from your Internet
connection to support your monitoring and capacity planning needs. In order to
be able to view or receive Stats Advantage reports, Internet Advantage Bronze
Connection Service customers must provide GTE Internetworking with a community
string permitting read-only SNMP access to the CPE router.
- - Network News Feed: Access to a virtually unlimited number of Internet news
groups, bulletin boards, and discussion forums.
[**] 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> 7
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: JUN 30, 1998
General Magic QUOTE VALID TO: JUL 31, 1998
420 North Mary Avenue QUOTE NUMBER: 59761.9999.1
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 5.1, FIXED MULTI-T1
USA
- - Web-Based Training: Self-service, web-based training on Internet technology,
configuration and installation information, and guidelines for installing and
operating Internet applications.
For an additional charge, Customer Premises Equipment (CPE) and associated
maintenance are available under Internet Advantage Bronze Connection Service.
New customer orders for Internet Advantage Connection service must be placed
for at least an initial one-year term. Service discounts may be available for
multi-year commitments. Activation, advanced features, and hardware-related
fees are not discountable.
Telco-related fees contained within this quotation may be estimates and are not
discountable. In all cases, we will bill customers for actual incurred telco
charges and taxes, including any applicable cross-connect and facility entrance
fees. Standard telco extended demarcations will be billed at $[**]; non-standard
telco extended demarcations will be quoted on an individual case basis.
An invoice for all one-time fees will be issued following the completion of
service activation. Recurring fees will be invoiced on a monthly basis in
arrears.
With fixed price Multi T1 service, you lock in a constant monthly fee
regardless of how much bandwidth you use.
All invoices are payable net 30 days. Applicable taxes will be additional.
This Service Quotation is applicable only for version 5.1 of Internet Advantage
Connection Service. This Service Quotation does not entitle you to any future
versions or releases of such service that we may make available during the
Service Period unless separately agreed to in writing by the parties.
Service Start Date: 8/1/98 Service End Date: 7/31/99
---------- ---------
If you accept the above service period, please initial here [Initialed]
-----------
If you accept the above service period, please initial here [Initialed]
-----------
If your organization requires the use of purchase orders,
please initial here. [Initialed]
-----------
[**] 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> 8
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: JUN 30, 1998
General Magic QUOTE VALID TO: JUL 31, 1998
420 North Mary Avenue QUOTE NUMBER: 59761.9999.1
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 5.1, FIXED MULTI-T1
USA
Additional Terms:
(a) The Service Quotation and all Services that may be provided pursuant to
this Service Quotation are subject to the terms and conditions of (a) the
Master Agreement for Internetworking Services or the Master Agreement for
Internet Services or Internet Services and Products Master Agreement
previously signed by you (or, if you have not signed such a Master
Agreement, the terms and conditions of the current Master Agreement for
Internetworking Services), and (b) the Service Schedule for the applicable
Services you are purchasing as indicated in this Service Quotation.
(b) Final acceptance of this Service Quotation by us is subject to credit
check approval, and confirmation of a valid Master Agreement and Service
Schedule signed by Customer.
(c) Any terms and conditions (including but not limited to those contained in
a purchase order issued by Customer) which are different from or in
addition to the terms and conditions contained in this Service Quotation,
the applicable Master Agreement, and/or the applicable Service Schedule(s)
signed by Customer, shall not be binding on us unless expressly accepted
in writing, herein or otherwise, by our authorized representative, and we
hereby object to and reject all terms and conditions not so accepted.
- --------------------------------------------------------------------------------
Customer (Type or Print Full Name): General Magic, Inc.
-------------------------------------------
Signature: /s/ GARY L. RUCKER Date: Sept. 4, 1998
------------------------- -----------------------------------
Print Name: Gary L. Rucker Title: Manager of Information Services
------------------------ ----------------------------------
- --------------------------------------------------------------------------------
PURCHASE ORDERS SHOULD BE MADE OUT TO:
GTE Internetworking
Attention: Jason DeLoss
22 Moulton Street MS 3/a
Cambridge, MA 02138
Should you have questions about this quotation, please contact Jason DeLoss at
617-873-5651, Fax: 617-873-3599, E-mail: [email protected]
<PAGE> 9
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: OCT 1, 1998
General Magic QUOTE VALID TO: NOV 1, 1998
420 North Mary Avenue QUOTE NUMBER: 79270.9999.2
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 6.0, FLEX T1 BRONZE
USA
Service Period (please check one as applicable):
[ ] Month to Month [X] 1 Year [ ] 2 Years [ ] 3 Years
The Service Period shall commence upon the provisioning by BBN Corporation, a
subsidiary of GTE Internetworking Incorporated ("we", "our", or "us"), to you
of the services listed on this Service Quotation.
<TABLE>
<CAPTION>
RECURRING FEES (1 YEAR CONTRACT) LIST PRICE DISCOUNT MONTHLY ANNUAL
- -------------------------------- ---------- -------- ------- ------
<S> <C> <C> <C> <C>
Bronze Flex T1 Service Fee -
Usage at 128kb $ [**] [**]% $ [**] $ [**]
--------- ----------
$ [**] $ [**]
</TABLE>
This renewal quotation entitles your organization to receive certain discounts
as set forth above. In order to renew at this rate, please complete your renewal
package by signing and returning your Service Quotation, your signed contracts,
and your purchase order PRIOR TO the expiration of this quote. Your effective
renewal date is the expiration date of this quotation.
In the event that your renewal quotation expires prior to submitting your
complete renewal package, you will be invoiced at today's non-discounted
renewal rates for a period of 60 days. Upon completion of this 60 day waiting
period, you may request another renewal quote with associated discounts as set
forth above. Interim invoices during this 60 day period must be paid in full
prior to renewing your service(s). You may be subject to cancellation for
non-payment of services at any time after the expiration of this renewal quote.
Internet Advantage v6.0 Connection Service is a comprehensive, fully-managed
offering for customers who view the Internet as a strategic resource and
require a high level of reliability, quality, and performance to use the
Internet as a vehicle for collaboration and commerce.
Internet Advantage Bronze Connection Service is monitored and maintained by GTE
Internetworking 24 hours a day, 365 days a year by experienced operators,
technicians, and analysts, and includes the following at no additional charge:
- - Domain Name Service (DNS): Primary and secondary DNS are provided for up to
10 domains and 100 kilobytes of associated zone data file storage. We will also
register up to 10 domain names for you with InterNIC. Fees for initial
registration and on-going maintenance fees for each domain name will be billed
to you directly by InterNIC.
- - Stats Advantage Usage Reporting: Provides on-demand, web-based graphical and
tabular management summaries of traffic statistics from your Internet
connection to support your monitoring and capacity planning needs. In order to
be able to view or receive Stats Advantage reports, Internet Advantage Bronze
Connection Service customers must provide GTE Internetworking with a community
string permitting read-only SNMP access to the CPE router.
- - Network News Feed: Access to a virtually unlimited number of Internet news
groups, bulletin boards, and discussion forums.
- - Web-Based Training: Self-service, web-based training on Internet technology,
configuration and installation information,
[**] 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> 10
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: OCT 1, 1998
General Magic QUOTE VALID TO: NOV 1, 1998
420 North Mary Avenue QUOTE NUMBER: 79270.9999.2
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 6.0, FLEX T1 BRONZE
USA
and guidelines for installing and operating Internet applications.
For additional charges, the following optional features and services are
available under Internet Advantage Bronze Connection Service:
- - Customer Premises Equipment (CPE) and associated maintenance.
- - News Access Service allows customers to access Usenet news groups directly
from GTE Internetworking's central news server.
- - Domain Name E-mail Access Service provides basic functionality without the
expense of installing and maintaining an e-mail server. The service provides up
to twenty domain name e-mail boxes for each Internet Advantage connection.
New customer orders for Internet Advantage Connection service must be placed
for at least an initial one-year term. Service discounts may be available for
multi-year commitments. Activation, advanced features, and hardware-related
fees are not discountable.
Telco-related fees contained within this quotation may be estimates and are not
discountable. In all cases, we will bill customers for actual incurred telco
charges and taxes, including any applicable cross-connect and facility entrance
fees. Standard telco extended demarcations will be billed at $150; non-standard
telco extended demarcations will be quoted on an individual case basis.
An invoice for all one-time fees will be issued following the completion of
service activation. Recurring fees will be invoiced on a monthly basis in
arrears.
Flexible T1 Bronze customers whose service activation date occurs after the
first of the month will receive a prorated bill for that first partial month
based on the rate of the 128 kbps usage band, regardless of actual usage.
Normal 95th percentile usage-based monthly billing will commence with the first
full month following service activation according to the following pricing
schedule less any applicable recurring discounts as noted above:
<TABLE>
<CAPTION>
Usage Monthly Fee
<S> <C>
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**] [**]
</TABLE>
Internet Advantage Bronze Connection Service customers purchasing usage-based,
flexible-priced service must provide GTE Internetworking with a community
string permitting read-only SNMP access to the CPE router.
All invoices are payable net 30 days. Applicable taxes will be additional.
This Service Quotation is applicable only for version 6.0 of Internet Advantage
Connection Service. This Service Quotation
[**] 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> 11
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: OCT 1, 1998
General Magic QUOTE VALID TO: NOV 1, 1998
420 North Mary Avenue QUOTE NUMBER: 79270.9999.2
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 6.0, FLEX T1 BRONZE
USA
does not entitle you to any future versions or releases of such service that we
may make available during the Service Period unless separately agreed to in
writing by the parties.
Service Start Date: 11/1/98 Service End Date: 10/31/99
---------- ---------
If you accept the above service period, please initial here [Initialed]
-----------
If your organization requires the use of purchase orders,
please initial here. [Initialed]
-----------
<PAGE> 12
[GTE INTERNETWORKING INCORPORATED LOGO]
SERVICE QUOTATION FOR GENERAL MAGIC
- --------------------------------------------------------------------------------
TO: Tom Schreiber QUOTE DATE: OCT 1, 1998
General Magic QUOTE VALID TO: Nov 1, 1998
420 North Mary Avenue QUOTE NUMBER: 79270.9999.2
Sunnyvale, CA 94086 SERVICE LEVEL: RENEWAL, IA 6.0, FLEX T1 Bronze
USA
Additional Terms:
(a) The Service Quotation and all Services that may be provided pursuant to
this Service Quotation are subject to the terms and conditions of (a) the
Master Agreement for Internetworking Services or the Master Agreement for
Internet Services or Internet Services and Products Master Agreement
previously signed by you (or, if you have not signed such a Master
Agreement, the terms and conditions of the current Master Agreement for
Internetworking Services), and (b) the Service Schedule for the applicable
Services you are purchasing as indicated in this Service Quotation.
(b) Final acceptance of this Service Quotation by us is subject to credit
check approval, and confirmation of a valid Master Agreement and Service
Schedule signed by Customer.
(c) Any terms and conditions (including but not limited to those contained in
a purchase order issued by Customer) which are different from or in
addition to the terms and conditions contained in this Service Quotation,
the applicable Master Agreement, and/or the applicable Service Schedule(s)
signed by Customer, shall not be binding on us unless expressly accepted
in writing, herein or otherwise, by our authorized representative, and we
hereby object to and reject all terms and conditions not so accepted.
- --------------------------------------------------------------------------------
Customer (Type or Print Full Name): General Magic, Inc.
-------------------------------------------
Signature: /s/ GARY LEE RUCKER Date: 11/6/98
------------------------- -----------------------------------
Print Name: Gary Lee Rucker Title: Manager of Information Sys.
------------------------ ----------------------------------
- --------------------------------------------------------------------------------
PURCHASE ORDERS SHOULD BE MADE OUT TO:
GTE Internetworking
Attention: Jason DeLoss
77 A St.
Mail Stop 16
Needham, MA 02494
Should you have questions about this quotation, please contact Jason DeLoss at
617-873-5651, Fax: 617-873-3599, E-mail: [email protected]
<PAGE> 1
EXHIBIT 10.30
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 and 230.406.
[ISOCOR LOGO]
FLAGSHIP LICENSE AGREEMENT
FOR
GENERAL MAGIC, INC.
This AGREEMENT is made on March 31, 1998 ("the Effective Date") by and between
ISOCOR, a California corporation with offices at 3420 Ocean Park Blvd., Suite
2010, Santa Monica, California USA 90405-3306 ("ISOCOR"), and General Magic,
Inc., a Delaware corporation with offices at 420 North Mary Ave., Sunnyvale, CA
94086 ("GENERAL MAGIC").
1. DEFINITIONS
1.1. "BINARY FORM" means the executable version of a Master Binary
program.
1.2. "END USER" shall mean persons or entities who subscribe to the
GENERAL MAGIC Service and who Use the Licensed Programs through the
General Magic Service.
1.3. "LICENSED PROGRAMS" shall be each program in software or firmware
form specified in Attachment A to this Agreement. The term
"Licensed Program" shall specifically include documentation and
related materials pertinent to such program and any updated program
or portion of a program hereinafter furnished to GENERAL MAGIC by
ISOCOR for use in connection with or replacement of a Licensed
Program.
1.4. "MASTER BINARY" shall mean the binary Licensed Programs designated
in Attachment A hereto as a Master Binary Program.
1.5. "SECURITY SOFTWARE" shall be that ISOCOR Licensed Programs
incorporating US export controlled cryptography systems. Such
Licensed Programs shall be marked for the territory in which it may
be used and sold (International, US only, or International/Non-US
only).
1.6. "USE" shall mean (i) the copying or duplicating of any portion of
a Licensed Program from storage units or media into equipment for
processing or (ii) the utilization of any form of a Licensed
Program by GENERAL MAGIC or General Magic Service's End Users.
1.7. "GENERAL MAGIC SERVICE" and GENERAL MAGIC'S voice accessible
integrated network service.
2. LICENSE GRANT
2.1. GRANT. ISOCOR grants to GENERAL MAGIC a perpetual, irrevocable
[except as provided in Section 11 ("Termination") for nonpayment of
license fees] worldwide, royalty-free (notwithstanding the required
license fees specified in Attachment A hereto) right and license to
copy and Use the Binary Form of the Licensed Programs on equipment
owned or controlled, in whole or in part, by GENERAL MAGIC for
providing the General Magic Service. This right and license is
limited to [**].
2.2. OTHER RESTRICTIONS. GENERAL MAGIC may not license, sublicense,
sell, rent or lease the Licensed Programs but may Use the Licensed
Programs to provide the General Magic Service to End Users. GENERAL
MAGIC agrees that it and its employees, consultants, directors,
officers, or others under GENERAL MAGIC'S control will not reverse
engineer, decompile or disassemble the Licensed Programs.
3. DELIVERABLES
3.1. MASTER BINARY PROGRAMS. ISOCOR will deliver to GENERAL MAGIC, in
accordance with the delivery schedules as specified Attachment A,
one copy of each of the Master Binary Licensed Programs listed in
Attachment A. Such programs will be in machine readable form.
3.2. DOCUMENTATION. With each Master Binary Licensed Program, ISOCOR
will provide to GENERAL MAGIC sufficient documentation for a
substantive technical understanding of the Licensed Program. Such
documentation will be in printed form.
4. PAYMENT TERMS
4.1. TERMS. As payment for the license grants and deliverables of this
Agreement, GENERAL MAGIC agrees to pay to ISOCOR the amounts
specified in Attachment A.
[**] 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
4.2. RIGHT TO AUDIT. GENERAL MAGIC agrees to keep complete and accurate
records of the number of End Users of the Licensed Programs
hereunder. Upon ISOCOR's written request, GENERAL MAGIC will make
such records available to ISOCOR or its duly appointed
representative for examination at a mutually agreed time and place
to confirm that General Magic has not exceeded the [**] End Users
limit set forth in Section 2.1 ("License Grant"). Such examinations
will be conducted at ISOCOR's expense, no more than once in any
period of six (6) consecutive months, and if done at GENERAL MAGIC's
facilities, in a manner that does not unreasonably interfere with
GENERAL MAGIC's normal business operations. All records provided to
ISOCOR under this Section 4.2 will be considered GENERAL MAGIC's
Confidential Information subject to Section 8.3 ("Confidentiality").
4.3. LICENSED PROGRAMS SUPPORT AND UPDATE SERVICE FEES. Payment terms are
set forth in Section 6.3 for amounts due under this Agreement for
Licensed Programs Support and Update Services as defined in Section
6 of this Agreement.
4.4. PAST DUE AMOUNTS. In addition to its other rights hereunder,
including the right to terminate, ISOCOR may charge, and GENERAL
MAGIC agrees to pay, a service charge of one and one-half percent
(1-1/2%) per month, but not to exceed the maximum rate permitted by
applicable law, from the due date of the invoice until the date
paid for any invoice not paid in accordance with the terms of this
Agreement.
5. WARRANTY
5.1. PERIOD OF WARRANTY. For a period of ninety (90) days following
GENERAL MAGIC's receipt of the Licensed Programs, GENERAL MAGIC
shall be entitled to receive ISOCOR's maintenance service (the
Software Support and Update Service, as defined in Attachment B of
this Agreement) therefor, without charge.
5.2. SCOPE OF WARRANTY. ISOCOR warrants for the warranty period that the
Licensed Programs will perform substantially in accordance with the
accompanying documentation ("Documentation"). ISOCOR's sole
obligation hereunder shall be to (i) offer on a free of charge
basis during the warranty period the Licensed Programs Support and
Update Service as defined in Attachment B of this Agreement, and
(ii) to replace any defective media during the warranty period.
5.3. LIMITATION. ISOCOR MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH REGARD TO ANY PRODUCT,
SERVICE OR RELATED MATERIALS PROVIDED UNDER THIS AGREEMENT.
5.4. YEAR 2000 COMPLIANCE. ISOCOR warrants that each version of the
software referenced in Attachment A hereto as ISOCOR Global Server
(SKU QA496) and the ISOCOR N-Plex Global Director Server (SKU
QA492) is and will be Year 2000 Compliant. In addition, ISOCOR
warrants that on or before June 1, 1998, ISOCOR will issue and
deliver to GENERAL MAGIC an update of the ISOCOR Global Directory
Server (SKU QA467) that will be Year 2000 Compliant and that each
subsequent version of the ISOCOR Global Directory Server, including
updates, upgrades and any other releases, will also be Year 2000
Compliant. This warranty does not apply to the extent that use or
performance of the Licensed Programs is adversely affected by
hardware, third party programs, or modifications made to the
Licensed Programs not authorized in writing by ISOCOR. ISOCOR's
sole liability at ISOCOR's option shall be: (1) repair the Licensed
Programs to be Year 2000 Compliant; (2) substitute Year 2000
Compliant programs with substantially the same functionality as the
Licensed Programs, or (3) return any paid license fees to GENERAL
MAGIC upon return of the Licensed Programs. For purposes of this
Agreement, Year 2000 Compliant means that the use and performance
of the software will not be adversely affected in any way by any
change in date including the change from December 31, 1999 to
January 1, 2000.
5.5. TIME BOMBS AND VIRUSES. ISOCOR warrants that no portion of the
Licensed Programs, or any Releases thereof, will contain at the
time of delivery to GENERAL MAGIC any "back door", "time bomb",
"Trojan horse", "worm", "drop dead device", "virus", or other
computer software code or routines or hardware components designed
to disable, damage, impair, electronically repossess or erase end
user's copy of the software or other software or data. For failure
to comply with this warranty, ISOCOR shall immediately replace all
copies of the affected Licensed Programs in the Possession of
GENERAL MAGIC. All costs incurred with replacement including, but
not limited to, cost of media, shipping and deliveries shall be
borne by ISOCOR.
6. LICENSED PROGRAMS SUPPORT AND UPDATE SERVICES
6.1. INITIAL PERIOD OF SERVICE. Upon the date of the expiration of the
limited warranty ("SSUS date"), as provided in Section 5 of this
Agreement, ISOCOR will continue the ISOCOR Software Support and
Update Service ("SSUS") to GENERAL MAGIC on an annual fee basis. If
GENERAL MAGIC wishes to cancel
[**] 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> 3
the SSUS, written notice of this intent must be received by ISOCOR
within thirty (30) days prior to the expiration of the warranty
period.
6.2. RENEWAL. The SSUS coverage in continuous. GENERAL MAGIC shall
receive notification of the SSUS coverage thirty (30) days prior
to the beginning of each successive year. If no written notice of
cancellation is received within thirty (30) days of the
commencement of the successive period, ISOCOR shall invoice the
amounts as specified in Section 6.3. In the event that GENERAL
MAGIC wishes to reinstate coverage at a later date after a previous
cancellation, service may be renewed at ISOCOR's then standard
rates for such service, plus an adjustment fee for the period of
lapse.
6.3. FEES FOR SERVICE. ISOCOR will invoice GENERAL MAGIC the lesser of:
the annual amount specified in Attachment A, or ISOCOR's then
standard rates for the annual Licensed Programs Support and Update
Service.
6.4. DEFINITION OF SERVICES. SSUS provided by ISOCOR to GENERAL MAGIC is
defined in Attachment B to this Agreement.
6.5. ISOCOR'S SUPPORT TO GENERAL MAGIC EXCLUSIVELY. ISOCOR shall have no
obligation to provide any consultation or maintenance support to
GENERAL MAGIC's End Users with respect to all or any part of the
Licensed Programs or other subject matter of this Agreement and
ISOCOR shall supply SSUS directly to GENERAL MAGIC.
6.6 AGREEMENT APPLIES TO UPDATES. This Agreement shall extend to
Attachment B Updates upon delivery from ISOCOR to GENERAL MAGIC.
6.7. LIMITATIONS. If ISOCOR is requested pursuant to Sections 5 or 6 of
this Agreement, to correct an error and such error is found to be
caused solely by GENERAL MAGIC's negligence, reconfiguration of the
software by GENERAL MAGIC following installation, operator error or
misuse, or any other cause not inherent in the Master Binary
Licensed Programs, ISOCOR reserves the right to invoice GENERAL
MAGIC, and upon receipt of a proper invoice GENERAL MAGIC agrees to
pay for such support services on a time and materials basis at
ISOCOR's then prevailing standard rate.
7. RIGHTS OF ISOCOR
7.1. RIGHTS RETAINED BY ISOCOR. Nothing in this Agreement shall prohibit
ISOCOR in any manner from using, developing, marketing, licensing,
or otherwise disposing of ISOCOR's Licensed Programs or concepts
embodied therein anywhere in the world; nor shall anything herein
be construed to grant to GENERAL MAGIC any rights in or to any
other present of future products of ISOCOR whether or not similar
to Licensed Programs except rights to Use under this the terms of
this Agreement any updates or upgrades provided under SSUS.
7.2. PROPRIETARY RIGHTS. ISOCOR represents to GENERAL MAGIC that all
portions of the Licensed Programs and documentation to be supplied
by ISOCOR hereunder are owned by ISOCOR and/or others and are
proprietary in nature. GENERAL MAGIC (i) shall respect such claim
of proprietary right, (ii) shall protect such information at least
to the extent that it protects its own proprietary information,
(iii) shall not use such information except for the purposes for
which it is being made available as set forth in this Agreement and
(iv) shall not reproduce, print, disclose, or otherwise make said
information available to any third party, in whole or in part, in
whatever form, subject to the same exceptions as those set forth in
Section 8.3 ("Non-Disclosure").
7.3. PRESERVATION OF NOTICES. ISOCOR and/or others shall retain title to
and ownership of copyrights to the Licensed Programs and related
materials that are provided by ISOCOR to GENERAL MAGIC. Appropriate
copyright notices shall be placed by ISOCOR or ISOCOR's suppliers
on the materials supplied by ISOCOR and shall be embedded in the
Master Binary Licensed Programs, and such notices shall be retained
on full or partial copies made by GENERAL MAGIC. GENERAL MAGIC
agrees to reproduce and include any notices, including any
proprietary notices, copyright notices, and restricted rights
legends, appearing thereon in any copies GENERAL MAGIC makes
pursuant to this Agreement.
8. CONFIDENTIALITY.
8.1. CONFIDENTIALITY. GENERAL MAGIC shall not reproduce, duplicate, copy
or otherwise disclose, distribute or disseminate said Licensed
Program(s) and related documentation provided under this Agreement
in any media, other than as provided for herein for the purposes of
this Agreement.
3
<PAGE> 4
8.2. SAFEGUARD OF INFORMATION. GENERAL MAGIC shall take all reasonable
steps to safeguard the Master Binary Licensed Programs so as to
ensure that no unauthorized copies of said Licensed Programs are
made in whole or in part. GENERAL MAGIC expressly acknowledges
that the ISOCOR supplied Licensed Programs are confidential and
proprietary to ISOCOR and GENERAL MAGIC agrees to receive the
information and maintain it as confidential information, using at
a minimum the same degree of care as is used for GENERAL MAGIC's
own trade secrets.
8.3. NON-DISCLOSURE. During the term of the Agreement and for five (5)
years thereafter, each party to this Agreement (i) shall treat as
confidential and proprietary all confidential information
disclosed by the disclosing party; and (ii) shall not disclose
such confidential information to any employee or subcontractor
not having executed a confidentiality agreement with the
receiving party protecting such information, having terms no less
stringent than those in this Section 8; and (iii) shall not
disclose such information to any employee or contractor not
having a specific need to know such information for the purpose
of this Agreement; and (iv) shall ensure that such employee or
subcontractor shall use such information only in connection with
his or her proper performance of this Agreement. The obligations
of the parties hereunder shall not apply to any materials or
information which a party can demonstrate, through documented
evidence (i) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally
known or available; (ii) is known by the receiving party at the
time of receiving such information as evidenced by its records;
(iii) is hereafter furnished to the receiving party by a third
party as a matter of right and without restriction on disclosure;
(iv) is independently developed by the receiving party without
any breach of this Agreement; or (v) is the subject of a written
permission to disclose provided by the disclosing party.
Notwithstanding any other provision of this Agreement, disclosure
of Confidential Information shall not be precluded if such
disclosure: (a) is in response to a valid order of a court or
other governmental body of the United States or any political
subdivision thereof; provided, however, that the responding party
shall first have given notice to the other party hereto so that
such other party may attempt to prevent such disclosure and if
disclosed, the responding party shall have made a reasonable
effort to obtain a protective order requiring that the
Confidential Information so disclosed be used only for the
purpose for which the order was issued and be treated as
confidential and under seal; (b) is otherwise required by law; or
(c) is otherwise necessary to establish rights or obligations
under this Agreement, but only to the extent that any such
disclosure is reasonably necessary. For purposes of this
Agreement, Confidential Information shall mean all materials or
information disclosed hereunder by one party to the other party
in confidence and shall include the source code of any programs
owned by either party or its suppliers with which the other party
may come into contact in the course of performance of the
Agreement.
8.4. PRICE CONFIDENTIALITY. GENERAL MAGIC is also hereby advised that
ISOCOR considers all its agreements and the terms therein,
including pricing and service arrangements, as confidential, and
the parties agree that this Agreement will be treated accordingly
as set out in this Section 8. Notwithstanding the foregoing, each
party may disclose the terms of this Agreement to (i) it's
attorneys and accountants, and (ii) third parties under a duty of
confidentiality in connection with a contemplated merger or sale
or investment in such party's business.
9. INDEMNIFICATION AGAINST INFRINGEMENT
9.1. INFRINGEMENT. ISOCOR represents that it has the sufficient right,
title and interest in the Licensed Programs to enter into this
Agreement. ISOCOR agrees, at its own expense, to indemnify and
defend GENERAL MAGIC and hold GENERAL MAGIC harmless against any
suit, claim, or proceeding brought against GENERAL MAGIC alleging
that any use of the Licensed Programs as delivered by ISOCOR,
infringes any US patent, Berne Convention copyright or US
trademark or any trade secrets of any third parties, provided
that GENERAL MAGIC (i) promptly notifies ISOCOR in writing of any
such suit, claim or proceeding, (ii) allows ISOCOR at its
expense, to direct the defense of such suit, claim, or
proceeding, (iii) gives ISOCOR full information and assistance
necessary to defend such suit, claim, or proceeding and (iv) does
not enter into any settlement of any such suit, claim or
proceeding without ISOCOR written consent.
9.1.1. Exception: ISOCOR shall not provide indemnification for
GENERAL MAGIC under Section 9.1 or otherwise in regard
to actions brought arising from any use, sale or
transportation of Security Software in violation of its
labeling.
9.2. REMEDIES. Following written notice of a suit, claim or
proceeding or a threat of suit, claim or proceeding requiring
indemnification under Section 9.1 above, ISOCOR shall have the
right, but no obligation, at its sole option, to (i) procure for
GENERAL MAGIC the right or license to use the Licensed Programs
as
4
<PAGE> 5
furnished hereunder, or, (ii) replace or modify the Licensed
Programs to make the same non-infringing, or (iii) return to
GENERAL MAGIC fees applicable to the infringing Licensed Program
and to accept return of same Licensed Programs and related
documentation without further liability of ISOCOR. If ISOCOR
elects to replace or modify the Licensed Programs, such
replacement shall have substantially the same features and
functionality as the Licensed Programs in Attachment A.
9.3. LIMITATION. ISOCOR shall have no liability for any claim that
ISOCOR lacks right, title and interest to the Licensed Programs
or any claim of copyright or patent infringement, based on (i)
GENERAL MAGIC's modification or combination of the Licensed
Programs with any 3rd party software other than Windows NT
v.4.0, if such claim would have been avoided had the Licensed
Programs not been modified, combined or integrated with the 3rd
party software other than Windows NT v.4.0. and (ii) any use,
sale or transportation of Security Software in violation of its
labeling.
9.3.1. GENERAL MAGIC agrees, at its own expense, to defend
ISOCOR and hold it harmless against any suit, claim or
proceeding arising under this Section 9.3 provided that
ISOCOR (i) promptly notifies GENERAL MAGIC in writing
of any such suit, claim or proceeding known to it, (ii)
allows GENERAL MAGIC, at its expense, to direct the
defense of such suit, claim, or proceeding, (iii) gives
GENERAL MAGIC full information and assistance necessary
to defend such suit, claim or proceeding and (iv) does
not enter into any settlement of any such suit, claim
or proceeding without GENERAL MAGIC's consent.
10. LIMITATIONS OF LIABILITY
10.1. LIMITATION OF LIABILITY. Except for liability arising from
Sections 9 (Indemnification Against Infringement) and 8
(Confidentiality), each party's liability to the other party
under any provision of this Agreement, or any transaction
contemplated by this Agreement shall be limited to [**].
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING
OUT OF ITS PERFORMANCE OR FAILURE TO PERFORM PURSUANT TO THIS
AGREEMENT OR OTHERWISE. Each party releases the other party from
all obligation, liability, claims or demands in excess of the
limitations provided in this Section 10.1.
11. TERMINATION
11.1. TERMINATION FOR DEFAULT. Material Breach of this Agreement shall
be specifically defined as GENERAL MAGIC's nonpayment of license
fees or either party's breach of confidentiality. Upon material
breach of any obligations under this Agreement, the party
committing the breach shall be deemed in default. The other
party may terminate this Agreement, upon thirty (30) days
written notice to the party in default. Such termination shall
become effective unless the defaulting party shall cure all
aspects of the default and so notify the terminating party of
the cure in writing within the thirty (30) day period. If ISOCOR
terminates this Agreement as provided above due to non-payment
of license fees all licenses granted herein will terminate as of
the date of termination of this Agreement.
11.2. GENERAL MAGIC's OBLIGATION UPON TERMINATION OF LICENSES. Should
this Agreement be terminated due to GENERAL MAGIC's non-payment
of license fees, GENERAL MAGIC shall, on the effective date of
termination, immediately discontinue the Use of each Licensed
Program and any and all portions thereof. Within five (5) days
after the effective date of termination, GENERAL MAGIC shall
deliver to ISOCOR or to ISOCOR's authorized representative, each
Licensed Program copy and all related materials F.O.B. ISOCOR's
designated shipping point or destroy the Licensed Program and
deliver certification thereof to ISOCOR within five (5) days
after the effective date of termination.
11.3. UNPAID AMOUNTS. Immediately upon termination, any earned but
unpaid amounts due ISOCOR shall become immediately due and
payable by GENERAL MAGIC to ISOCOR, including, but not limited
to, any unpaid license fees.
11.4. SURVIVAL OF OBLIGATION. Any termination of this Agreement shall
not relieve either party of any obligation under Section 2
("License Grant", except for termination based on nonpayment or
late payments), Section 4 ("Payment Terms" to the extent amounts
are owed prior to the effective date of termination), Section 5
("Warranty"), Section 7 ("Rights of ISOCOR"), Section 8
("Confidentiality"), Section 9 ("Indemnification Against
Infringement"), Section 10 ("Limitations of Liability"), Section
12 ("Assignment"), Section 13 ("Notices"), Section 14 ("General
Provision") and Section 15 ("Compliance and Severability").
[**] 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
<PAGE> 6
12. ASSIGNMENT
12.1. ASSIGNMENT. This Agreement may not be assigned by either party
without the express written consent of the other party, except that
either party may assign or transfer this Agreement, in whole or in
part, to any of its affiliates or to any successors to
substantially all that part of such parties business to which this
Agreement relates. Subject to the foregoing, any assignee hereunder
shall be subject to all of the terms, conditions and provisions of
this Agreement.
12.2. BINDING EFFECT. Subject to the limitations hereinabove expressed,
this Agreement will inure to the benefit of and be binding upon the
parties, their successors, administrators, personal representatives,
guardians, heirs and assigns.
12.3. EXPORT CONTROLS. In exercising its rights under this Agreement,
GENERAL MAGIC agrees to comply strictly and fully with all export
controls imposed on the Licensed Programs by any country or
organization of nations within whose jurisdiction GENERAL MAGIC
operates or does business, and expressly those of the United
States. Examples of organizations of nations that may have export
controls pursuant to treaty or international agreement are: The
North Atlantic Treaty Organization, The European Economic
Community, The Andean Common Market, and the Association of
Southeast Asian Nations.
12.3.1. GENERAL MAGIC expressly agrees to comply in full with any
current existing applicable restrictions under the above
jurisdictions on export to the following countries:
Armenia, Angola, Azerbaijan, Burma, Belarus, China, Cuba,
Cypress, Georgia, Guatemala, Haiti, Iran, Iraq, Kazakhstan,
North Korea (Democratic People's Republic of Korea),
Kyrgyzstan, Liberia, Moldova, Mongolia, Nigeria, Peru,
Rwanda, Russia, Somalia, South Africa, Sudan, Syria,
Tajikistan, Turmenistan, Ukraine, Uzbekistan, Vietnam,
Yemen, Former Yugoslavia, and Zaire.
12.4. ENCRYPTION. With respect to exportation or re-exportation of the
Products from the United States, and expressly in regard to
Security Products, GENERAL MAGIC agrees not to export or permit
exportation outside of the United States without first (i)
obtaining any required written permission to do so from the United
States Office of Export Administration and other appropriate
governmental agencies of the United States, or (ii) complying fully
and strictly with all requirements of any general license exempting
the exportation from the requirement for that permission. These
restrictions may also apply to re-exportation from the United
States of imported Licensed Programs.
13. NOTICES. Any notice required under this Agreement shall be given in
writing and shall be deemed effective upon delivery of the party to whom
addressed by (i) express courier, upon written verification of actual
receipt, (ii) facsimile, upon confirmation of receipt generated by the
sending device, or (iii) five days after sending, via certified mail,
return receipt requested. All notices shall be sent to the following
addresses (or such addresses as the parties may designate in writing):
13.1. If to General Magic: General Magic, Inc., 420 North Mary Avenue,
Sunnyvale, CA 94086, Attention: General Counsel
13.2. If to ISOCOR: ISOCOR, 3420 Ocean Park Blvd., Santa Monica, CA
90405, Attn: Contracts Administration.
14. GENERAL PROVISIONS
14.1. AGREEMENT PREVAILS. In the event that any provision of any purchase
order or receipt issued by GENERAL MAGIC is inconsistent with the
provisions of this agreement, then the terms of this Agreement will
prevail.
14.2. TAXES. Payments shown in Attachment A are exclusive of all sales,
use, withholding and other taxes. Any tax ISOCOR may be required to
collect or pay upon the sale or delivery of the products, other
than taxes related to the income of ISOCOR, shall be paid by
GENERAL MAGIC, or in lieu thereof, GENERAL MAGIC shall provide a
tax exemption certificate acceptable to the taxing authorities. On
sales outside the United States, all required import/export duties,
licenses and fees shall be payable by GENERAL MAGIC in addition to
the stated payments to ISOCOR.
14.3. DELIVERY. Delivery will be made as defined in Attachment A, and
will be F.O.B. ISOCOR's shipping location. In the absence of
specific written instruction from GENERAL MAGIC, ISOCOR will select
the carrier but shall not thereby assume any liability in
connection with shipment, nor shall the carrier be construed to the
agent of ISOCOR.
14.4. FORCE MAJEURE. Neither party shall be responsible for delays or
failures in performance resulting from acts beyond the control of
such party. Such acts shall include but not be limited to acts of
God, labor conflicts, acts of war or civil disruption, governmental
regulations imposed after the fact, public utility failures,
6
<PAGE> 7
industry wide shortages of labor or material, or natural disasters.
15. COMPLIANCE AND SEVERABILITY
15.1. PERFORMANCE. ISOCOR and GENERAL MAGIC each agree that it will
perform its obligations under this Agreement in accordance with all
applicable laws, rules and regulations now or hereafter in effect.
15.2. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable the unenforceability of such provision shall not
affect the other provisions of this Agreement and all provisions
not affected by such invalidity or unenforceability shall remain in
full force and effect.
15.3. ATTORNEY'S FEES. If either party employs attorneys to enforce any
rights arising out of or relating to this Agreement, the prevailing
party in such disputes shall be entitled, in addition to its other
rights hereunder, to recover reasonable attorney's fees and related
expenses, including the fees and expenses of any appeal.
15.4. GOVERNING LAW. Should a dispute arise out of this Agreement, the
parties shall first employ every reasonable means of good faith
negotiations to resolve such a dispute. Thereafter, any dispute
relating to this Agreement shall be settled by binding arbitration
in English in Los Angeles, California under the rules of the
American Arbitration Association before a single arbitrator
experienced in the software industry. Judgment upon the
arbitrator's award may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, claims for temporary or
preliminary preservation or relief (such as a temporary restraining
order or a preliminary injunction) relating to breaches of
proprietary rights arising out of this Agreement may be submitted
to a court having jurisdiction thereof instead of arbitration. The
parties hereto agree to exclusive jurisdiction and venue of the
state and Federal courts located in Los Angeles County, California.
15.5. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
arrangements and understandings between the parties and constitutes
the entire agreement between the parties relating to the subject
matter hereof. No addition to or modification of any provision of
this Agreement shall be binding unless made by a written instrument
signed by a duly authorized representative of each party. The
headings and clauses of this Agreement appear for ease of reference
only and shall not affect the interpretation or effect of this
Agreement.
15.6. WAIVER. No waiver by either party of strict compliance with any of
the terms and conditions of this Agreement shall constitute a
waiver of any subsequent failure of the other party to comply
strictly with each and every term and condition hereof.
15.7. LEGAL RELATIONSHIP. Nothing in this Agreement shall create, or be
deemed to create, a formal legal partnership or the relationship of
principal and agent or employer and employee between the parties.
GENERAL MAGIC is not and shall not hold itself out as ISOCOR's
agent for sale of the Licensed Programs or as being entitled to
bind ISOCOR in any way. Neither party shall use any corporate name
deceptively similar to the other party's name (or incorporate the
intellectual property, trademarks or name in its corporate name)
or trademarks, tending to give the impression that any relationship
exists between the parties without the other parties written
consent.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representative. All copies of
this Agreement, signed by both parties, shall be deemed originals.
FOR GENERAL MAGIC: FOR ISOCOR:
Signature /s/ MARY E. DOYLE Signature /s/ [SIGNATURE ILLEGIBLE]
-------------------------- --------------------------
Name Mary E. Doyle Name [SIGNATURE ILLEGIBLE]
------------------------------ -------------------------------
Title V.P. Business Affairs Title
------------------------------ ------------------------------
Date March 31, 1998 (as of) Date
------------------------------ ------------------------------
7
<PAGE> 8
ATTACHMENT A
LICENSE, TRAINING, SUPPORT FEES AND LICENSED PROGRAMS DEFINITION
1. LICENSED PROGRAMS DESCRIPTION. "Licensed Programs" shall mean one copy of
the master binary form of the products and corresponding Stock Keeping
Units ("SKUs") listed in Table A-1 below.
TABLE A-1: LICENSED PROGRAMS DEFINITION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ISOCOR PLATFORM LICENSED PROGRAMS
SKU DESCRIPTION
- ------------------------------------------------------------------------------------
<S> <C> <C>
QA467 Windows NT v4 ISOCOR Global Directory Server for N-Plex Global
[**]
- ------------------------------------------------------------------------------------
QA496 Windows NT v4 ISOCOR Global Server -- no mailboxes, ISP license
(US/Canada only)
- ------------------------------------------------------------------------------------
QA492 Windows NT v4 N-Plex Global Server -- additional mailbox components
[**]
- ------------------------------------------------------------------------------------
</TABLE>
2. LICENSE FEES
GENERAL MAGIC shall pay on or before April 9, 1998, [**] to ISOCOR as the
one time license fee for Use of Licensed Programs.
3. DELIVERY. Delivery of all Licensed Products shall be made on or before
April 5, 1998.
4. INSTALLATION, DEPLOYMENT AND TESTING SERVICES. At GENERAL MAGIC's option,
ISOCOR shall provide on-site installation, deployment, and testing
services at a cost of Seventeen Hundred Fifty ($1,750) US Dollars per day
per person (plus reasonable actual travel, lodging, and subsistence
costs). All services and expenses will be invoiced monthly as charges
accrue and all invoices are due and payable within thirty (30) days from
GENERAL MAGIC's receipt of any ISOCOR invoice. The installation,
deployment, and testing services shall be defined in a mutually agreed
upon written work order describing the scope of work, schedule and an
estimated number of working days for completion and will be effective on
the issuance of a Purchase Order. At GENERAL MAGIC'S request, ISOCOR
shall provide technical assistance on the installation and deployment of
the Year 2000 compliant Global Directory Server (SKU QA467) product at no
cost to GENERAL MAGIC.
5. SOFTWARE SUPPORT AND UPDATE SERVICE. Upon the date of the expiration of
the limited warranty, ISOCOR shall provide GENERAL MAGIC the annual
Software Support and Update Service described in Attachment B at an annual
cost of [**] U.S. Dollars per year. Payment for the first year of service
will be due and payable one calendar year from the date of expiration of
the limited warranty. Thereafter, all payments for SSUS shall be due and
payable prior to commencement of the next annual service.
6. TRAINING COSTS. Should GENERAL MAGIC require training in addition to the
training in Section 3.2 of Attachment B (which is provided free of
charge), ISOCOR shall provide training at a rate of the lesser of (a) [**]
US Dollars per day per trainee or (b) the rate for such services being
offered to ISOCOR's then current customers in Santa Monica, California
(GENERAL MAGIC shall be responsible for all travel, lodging and
subsistence expenses relating to its trainees). All training fees and
expenses will be invoiced monthly as charges accrue and payable within
thirty (30) days from GENERAL MAGIC's receipt of any ISOCOR invoice. The
training will proceed on a mutually agreeable schedule and contain
mutually agreeable subject matter.
7. GENERAL MAGIC FLAGSHIP CUSTOMER RELATIONSHIP
As outlined above, the corporate pricing for the Licensed Programs and
SSUS includes the following additional services:
< PARTNER'S MEETING PARTICIPATION
ISOCOR holds an annual Partners Meeting which your organization
may attend. This of ISOCOR Flagship
[**] 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> 9
customers and key ISOCOR Engineers and development staff creates
a forum in which ISOCOR can formally receive input from our
customers, which results in understanding the requirements of
our customers. These meetings can result in new products,
product feature enhancements, support enhancements improving the
overall relationship with our key customers.
< ISOCOR MANAGEMENT INVOLVEMENT
Quarterly meetings will be conducted with ISOCOR Management (VP
Level or above) as well as Regional Management. These meetings
will provide the forum for addressing business issues, sharing
strategic plans where appropriate, and partnership planning and
attendance is optional for CUSTOMER
< PRIORITY ACCESS TO PROFESSIONAL SERVICES
Customer receives priority access for pre, post, and project
planning services via the designated customer service account
manager. This provides the customer with on demand access to
valuable resources.
< PARTICIPATION IN ISOCOR CASE STUDY AND CUSTOMER PROFILE
MARKETING ACTIVITIES.
Customer will be featured in ISOCOR corporate success stories and
profiled as a enterprise user of messaging. All such activities
will require the prior written approval and content verification
of the customer success stories by CUSTOMER.
9
<PAGE> 10
ATTACHMENT B:
ISOCOR STANDARD SOFTWARE SUPPORT AND UPDATE SERVICE
WITH
MISSION CRITICAL 24 X 7 SUPPORT
1. STANDARD SUPPORT AND UPDATE SERVICE ("SSUS") For as long as GENERAL MAGIC
subscribes to and pays for SSUS, ISOCOR shall maintain a Technical
Support Hotline staffed by personnel with knowledge of the Products.
GENERAL MAGIC shall have access to this service during ISOCOR's normal
office hours which currently run from 6:00 a.m. through 6:00 p.m. Pacific
Standard Time ("Normal Business Hours"). For mission critical support,
GENERAL MAGIC shall have access to ISOCOR's hotline 24 hours per day with
phone numbers provided by ISOCOR. ISOCOR shall apply commercially
reasonable efforts to (i) answer technical questions arising in the
course of using the Products; (ii) correct any program errors which fall
into one of the three categories specified below and are reproducible by
ISOCOR; and, (iii) provide work-around solutions to problems in
accordance with applicable specifications and product manuals, provided,
however, that such program errors have not been introduced through
modifications made by GENERAL MAGIC.
2. CATEGORIES OF PROBLEMS AND RESPONSES: Three classes of program errors are
provided for, and shall be responded to DURING NORMAL HOURS by ISOCOR
under this Agreement as follows:
2.1. MISSION CRITICAL -- The Product fails to function according to its
published specifications and GENERAL MAGIC is unable to proceed
without a fix to the problem or a work-around solution provided by
ISOCOR (no functionality, e.g., system down problems).
2.1.1. MISSION CRITICAL category problems shall be directly
reported to ISOCOR Technical Support by telephone at numbers
provided by ISOCOR. All such problems will be assigned
immediately upon receipt to a Technical Support Specialist.
ISOCOR will initially respond to GENERAL MAGIC within two
hours of receipt of the MISSION CRITICAL program error by
ISOCOR. This response will inform GENERAL MAGIC of the
identity of ISOCOR personnel assigned and of the plan to
correct the problem. ISOCOR will in addition provide twice
daily status updates until the problem has been fixed. The
Technical Support Engineer assigned to the problem will use
all commercially reasonable endeavors to reduce the MISSION
CRITICAL program error to a MILD/MODERATE program error. If
this is not accomplished within four hours from notification
of the error by GENERAL MAGIC, then an ISOCOR Development
Engineer will be assigned to the problem. The Technical
Support Engineer and Development Engineer will work directly
with GENERAL MAGIC to reduce the MISSION CRITICAL program
error to a SEVERE program error.
2.2. SEVERE -- The Product contains major functional problems against its
published specifications which GENERAL MAGIC is able to work around
but to the extent that the Product can only be used to a limited
degree (partial or limited functionality).
10
<PAGE> 11
2.2.1. SEVERE category problems shall be directly reported to
ISOCOR Technical Support by telephone or e-mail. All such
problems will be assigned within two hours from receipt to a
Technical Support Specialist.
ISOCOR will initially respond to GENERAL MAGIC within two
hours of receipt of the SEVERE program error by ISOCOR. This
response will inform GENERAL MAGIC of the identity of ISOCOR
personnel assigned and of the plan to correct the problem.
ISOCOR will in addition provide daily status updates until
the problem has been fixed. The Technical Support Engineer
assigned to the problem will within four hours of receipt of
reported program error from GENERAL MAGIC, use all
commercially reasonable endeavours to resolve the problem. If
this is not accomplished within six hours from notification
of the error, then an ISOCOR Development Engineer will be
assigned to the problem. The Technical Support Engineer and
Development Engineer will work directly with GENERAL MAGIC
until they are successful in correcting the identified
problem. ISOCOR may elect to provide a fully supported
temporary modification or workaround to the program in the
short term, with a permanent modification included in the
next scheduled maintenance release of the Product.
2.3 MILD/MODERATE - Product or documentation contains incorrect logic,
incorrect descriptions, or functional problems which GENERAL MAGIC
is able to work around or where a temporary correction has been
implemented (full functional but needs improvement).
2.3.1. Mild/Moderate category problems shall be directly reported
to ISOCOR Technical Support by telephone or e-mail. ISOCOR's
response to the Mild/Moderate category shall be to provide
commercially reasonable efforts to schedule the personnel
and effort required to solve the problem commensurate with
the severity of the problem. The correction of such errors
shall be performed within the limits of ISOCOR's resources
consistent with the obligations of ISOCOR to it other
customers. ISOCOR may elect to include the modification in
the next scheduled maintenance release of the Product. ISOCOR
will initially respond to GENERAL MAGIC within 24 hours of
receipt by ISOCOR of the MILD/MODERATE program error.
3. OBLIGATIONS OF GENERAL MAGIC UNDER STANDARD SSUS
3.1. GENERAL MAGIC'S DESIGNATED STAFF. GENERAL MAGIC agrees to
establish its own central supportstaff, through which it will
channel all communication and information/update exchange with
ISOCOR regarding this service. ISOCOR shall provide service under
this Agreement solely to GENERAL MAGIC through the central
supportstaff, and shall not be responsible to support GENERAL
MAGIC's individual sites or those of its affiliates or customers.
GENERAL MAGIC shall designate 3 representatives as designated staff
(it is GENERAL MAGIC's duty to keep the 3 names current) with
access to SSUS.
3.2. STAFF TRAINING. GENERAL MAGIC shall maintain an adequate number of
personnel trained in the technical support aspects of the Products.
It is required that two of GENERAL MAGIC's personnel complete
ISOCOR's Technical Support 4 day Training Program at Santa Monica,
California, within 120 (one hundred and twenty) days of the signing
of this Agreement. The ISOCOR Technical Support 4 day Training
11
<PAGE> 12
Program will be offered yearly (as long as GENERAL MAGIC is on
SSUS") to 3 of GENERAL MAGIC's designees on a mutually agreeable
schedule at no charge to GENERAL MAGIC (except GENERAL MAGIC is
responsible for travel, lodging and sustenance expenses of their
designees).
3.2.1. PAYMENT FOR SSUS. After expiration of the Limited
Warranty Period or after purchasing the Products "as
is", GENERAL MAGIC must purchase from ISOCOR the
annual SSUS according to the Agreement or SSUS
contract.
4. TECHNICAL BULLETINS AND UPDATES
ISOCOR will provide GENERAL MAGIC applicable Product Technical Bulletins
and Application Notes as they become available, and will advise GENERAL
MAGIC of new Major and Minor software updates to Products as soon as they
are formally released to the marketplace. For six (6) months from the
release date of a new Major or Minor software update, GENERAL MAGIC is
entitled to order that update at no additional charge, (i) so long as the
Product being updated is under current SSUS Subscription, or (ii) is still
covered by its initial Limited Warranty.
4.1. MINOR SOFTWARE UPDATES are those containing minor improvements
and error corrections to an existing Product and are represented
by an increment to the product version number to the right of
the decimal point, e.g. V1.1 to V1.21, etc.
4.2. MAJOR SOFTWARE UPDATES may contain substantial functionality
improvements, or new functionality, in addition to minor
improvements and error corrections, and are represented by an
increment to the product version number to the left of the
decimal point, e.g. V2.0, V3.0, etc. Major updates also include
any new Product offered to ISOCOR's customers which improves the
functionality of the Licensed Programs or supersedes any Licensed
Products.
4.3. NEW PRODUCTS NOT INCLUDED. SSUS does not cover free upgrades or
exchanges of Products for different products which may implement
different language, alternate platform versions, alternate
operating systems, or a new standards base.
4.4. SUPPORT FOR PRIOR VERSIONS. ISOCOR will support a previous
version (major and minor) release for six (6) months following
release of a new version of a Product.
4.5. FORM OF TECHNICAL INFORMATION. ISOCOR reserves the sole right to
provide any information under this Agreement in one of three
forms. The three forms are: (i) Field Service Bulletins -
Written advisory form, or (ii) Software Modifications - Revised
Product containing modifications, or (iii) New Software Modules
- Revised Product modules for inclusion within the Product.
5. MISSION CRITICAL 24 X 7 SUPPORT
For as long and GENERAL MAGIC subscribes to and pays for SSUS, GENERAL
MAGIC shall have access to ISOCOR's Out of Hours Hotline 24 hours per day,
7 days per week. During these hours ISOCOR shall use all commercially
reasonable efforts to respond to Mission Critical program errors, in
accordance with Paragraph 2.1.1. Foreign and domestic telephone numbers for
this Hotline support shall be provided by ISOCOR to GENERAL MAGIC.
6. ADDITIONAL OBLIGATIONS OF GENERAL MAGIC.
6.,1. ISOCOR SITE VISIT. It may be required for ISOCOR support
personnel to visit
12
<PAGE> 13
GENERAL MAGIC's site in order to understand GENERAL MAGIC's
configuration.
6.2. BACKUP REQUIREMENTS. If the Extended Hour Software Support and
Update Service is selected GENERAL MAGIC shall make daily
backups of the system under support. Before calling the Out of
Hours Hotline, GENERAL MAGIC must use reasonable endeavors to
return the user's system to a working state: that is, the state
the system was in before the problem occurred.
6.3. RECORD KEEPING AND PREPARATION. Before making an Out of Hours
Hotline call, GENERAL MAGIC should have the following useful
information available:
6.3.1. Detailed System configuration files
6.3.2. Detailed log files
6.3.3. Detailed trace files, if available
6.3.4. Configuration and login details to allow the ISOCOR
Technical Support Engineer to have remote access to
the client site over TCP/IP, Async, APS.
6.3.5. GENERAL MAGIC must keep a detailed Change Log of any
system configuration changes and on request shall make
these log files available to ISOCOR Support staff.
7. ADDITIONAL OBLIGATIONS OF ISOCOR
o SUPERIOR TECHNICAL SUPPORT
This includes: maintenance support, upgrade support, application of
technology consulting, training, technology review, technology
planning, and architecture design.
o DEDICATED SENIOR ACCOUNT MANAGER.
A technical support individual assigned to your organization, familiar
with your staff, architecture, environment, and product deployment.
o SPECIAL SUPPORT ACCESS PRIVILEGES
Private dedicated support line to technical support services.
13
<PAGE> 14
[ISOCOR LETTERHEAD]
1 October, 1998
Mr. Jim Underwood
General Magic
420 North Mary Avenue
Sunnyvale, CA 94086
Dear Mr. Underwood:
This letter ("Letter") sets forth the terms of our agreement regarding the use
of selected source code and amends the License Agreement between General Magic,
Inc. ("General Magic") and ISOCOR dated March 31, 1998 ("Agreement") as follows:
1. FOR THE PURPOSE OF THIS LETTER, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANING:
1.1 DERIVATIVE WORK means all copyrights, patents, trade secrets, or
other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship
developed or created by General Magic using the Software (as
defined herein.
1.2 DOCUMENTATION means an e-mail that ISOCOR will provide to an
individual nominated by General Magic that explains how to
configure the extension DLL to allow an external program to be
called when a new mail account is created, modified or deleted.
1.3 SOFTWARE means a [**] from N-PLEX Global Server (QA492) which will
contain the required entry points in the DLL and the header file
documenting prototypes. There will be no functionality in the
skeleton and General Magic will be responsible for developing any
and all functionality related to General Magic's needs. It will also
include Documentation as defined herein. The Software will be in the
C programming language and will compile using Microsoft Visual C++
5.1 or later.
[**] 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> 15
2 LICENSE TO USE SOFTWARE - The following is added to Section 2 ("License
Grant") of the Agreement: ISOCOR grants to General Magic a perpetual,
irrevocable, worldwide, non-exclusive right to use the Software to prepare
Derivative Works, and to use a reasonable number of copies in Binary Form
the Derivative Works with the Software in conjunction with the Licensed
Programs. ISOCOR shall own all Derivative Works. ISOCOR grants to General
Magic a perpetual, irrevocable, worldwide, non-exclusive, royalty-free
right to sublicense the Derivative Works to third parties, provided that
any such sublicenses are exclusively for use of the Derivative Works with
the N-Plex Global Server software.
3 CONFIDENTIALITY. The Software and this Letter shall be Confidential
Information as defined in Section 8 ("Confidentiality") of the Agreement.
General Magic agrees not to reproduce, duplicate or copy, or disclose,
distribute or disseminate the Software, except as provided herein and in
the Agreement.
4 DISCLAIMER OF WARRANTIES. "The following provisions apply only to the
Software that is the subject of this Letter, and in no way modify or amend
Section 5 ("Warranty") of the Agreement with respect to the Licensed
Programs: The SOFTWARE is provided "AS IS", with NO WARRANTY OF ANY KIND.
The entire risk of quality and performance of the SOFTWARE, with or
without Derivative Works, is with General Magic. ISOCOR does not warrant
that the SOFTWARE will perform error free or that reported errors will be
corrected.
4.1 WARRANTIES TO DERIVATIVE WORK. General Magic's Derivative Works are
provided "AS IS", with NO WARRANTY OF ANY KIND. The entire risk of
quality and performance of the Derivative Works is with user of the
Derivative Works. General Magic does not warrant that the
Derivative Works will perform error free or that reported errors
will be corrected. GENERAL MAGIC AND/OR ITS SUPPLIERS DISCLAIM ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE DERIVATIVE WORKS.
4.2 NO OTHER WARRANTIES. ISOCOR, AND/OR ITS SUPPLIERS, DISCLAIM ALL
OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE SOFTWARE.
4.3 NO ISOCOR LIABILITY FOR CONSEQUENTIAL DAMAGES. THE FOLLOWING
PROVISION APPLIES ONLY TO THE SOFTWARE THAT IS THE SUBJECT OF THIS
LETTER AND IN NO WAY MODIFIES OR AMENDS SECTION 10 ("LIMITATIONS OF
LIABILITY") OF THE AGREEMENT WITH RESPECT TO THE LICENSED PROGRAMS:
"IN NO EVENT SHALL ISOCOR AND/OR ITS SUPPLIERS BE LIABLE FOR ANY
DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS
OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS
INFORMATION, OTHER PECUNIARY LOSS OR
<PAGE> 16
INCIDENTAL OR CONSEQUENTIAL DAMAGES) ARISING OUT OF THE USE OF OR
INABILITY TO USE THE SOFTWARE, EVEN IF ISOCOR HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
4.4 NO GENERAL MAGIC LIABILITY FOR CONSEQUENTIAL DAMAGES. IN NO EVENT
SHALL GENERAL MAGIC AND/OR ITS SUPPLIERS BE LIABLE FOR ANY DAMAGES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS
INFORMATION, OTHER PECUNIARY LOSS OR INCIDENTAL OR CONSEQUENTIAL
DAMAGES) ARISING OUT OF THE USE OF THE DERIVATIVE WORK OR INABILITY
TO USE THE SOFTWARE, EVEN IF GENERAL MAGIC HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
5 DELIVERY. ISOCOR will e-mail the Software to one individual designated by
General Magic within thirty calendar days after execution of this Letter
by both parties.
6 EFFECT ON AGREEMENT. Any Derivative Works shall constitute third party
programs for purposes of Section 5.4 of the Agreement and third party
software for purposes of Section 9.3 of the Agreement. Except as provided
in this Letter, all provisions applying to the Licensed Programs under the
Agreement, including without limitation Section 9 ("Indemnification
Against Infringement") shall also apply to the Software.
7 NON-RECURRING ENGINEERING TIME ("NRE"). ISOCOR shall provide to General
Magic during normal business hours up to a total of eight hours of
telephone or e-mail support to assist with the development of the
Derivative Work. The scope of the NRE shall be limited to the architecture
of the extension mechanism and its interaction with the N-Plex product.
All information communicated to General Magic shall remain the property of
ISOCOR and shall be considered confidential under the Agreement.
8 SUPPORT. ISOCOR shall not provide SSUS for the Derivative Work or for the
Software with or without the Derivative Work. ISOCOR shall not provide any
updates, upgrades, new versions, revisions, or future enhancements of the
Software to General Magic.
9 EFFECTIVENESS OF AGREEMENT. Except as expressly provided herein, nothing
in this Letter shall be deemed to waive or modify any of the provisions of
the Agreement, or addendum thereto. In the event of any conflict between
the Agreement, the attachments, this Letter, or any other Amendment or
addendum thereof, the document of later time shall prevail.
10 COUNTERPARTS AND FACSIMILE DELIVERY. This Letter may be executed in two or
more identical counterparts, each of which shall be deemed to be an
original and all of which taken together shall be deemed to constitute the
Letter when a duly authorized representative of each party has signed a
counterpart. The parties may
<PAGE> 17
sign and deliver this Letter by facsimile transmission. Each party agrees
that the delivery of the Letter by facsimile shall have the same force and
effect as delivery of original signatures and that each party may use such
facsimile signatures as evidence of the execution and delivery of the
Letter by all parties to the same extent that an original could be used.
11 POSSIBLE CONSEQUENCES. General Magic acknowledges that the Software runs
in the same process as mission critical functions of the Licensed
Programs. Further, General Magic acknowledges that the Software DLL has
the ability to [**]. Therefore, General Magic agrees that ISOCOR is not
responsible for any malfunctions or performance degradation of the
Licensed Programs relating to the use of the Software with the Derivative
Works.
If you accept the terms of this letter, please sign below and ISOCOR will
execute this letter. If you have any questions, please do not hesitate to call
me.
Sincerely,
Dermot Connell,
Associate Vice President
The parties signed below accept the terms and conditions set forth above.
GENERAL MAGIC, INC. ISOCOR
Signature /s/ JAMES M. UNDERWOOD Signature [Signature Illegible]
------------------------- -------------------------
Name/Title Director of Technology Name/Title [Name Illegible]
------------------------- ------------------------
Date 10/1/98 Date: 10/26/98
----------------------------- ----------------------------
[**] 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
EXHIBIT 10.31
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.80(b)(4), 200.83
and 230.406.
PAYMENTECH MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
In consideration of the mutual promises herein made and the mutual benefits to
be derived from this AGREEMENT, the undersigned merchant (hereinafter referred
to as the MERCHANT, "you" or "your") and PAYMENTECH MERCHANT SERVICES, INC., a
Nevada corporation, having its principal office at 1601 Elm Street, Dallas,
Texas 75201 (hereinafter referred to as PAYMENTECH, "we", "our" or "us") agree
to the following terms and conditions:
1. THE RELATIONSHIP: We facilitate the funds transfer between the various CARD
ORGANIZATIONs and you for CARD SALEs you make to your CARDHOLDER customers.
In a manner similar to the way personal checks are cleared, your CARD SALEs
and CREDITs are cleared according to the various CARD ORGANIZATIONs' rules
and regulations and federal, state and local law. It is the purpose of this
AGREEMENT to establish the legal relationship and contractual duties
required of the parties in order to comply with such rules, regulations and
laws. You will present all your SALES RECORDs to us for processing, except
as otherwise provided in writing, and we will process them in accordance
with the terms of this AGREEMENT.
2. SALES RECORD: Each CARD SALE must be evidenced by a single SALES RECORD
completed with the SALE DATE, the amount and a brief description of goods
and services sold or of the customer deposit tendered, in sufficient detail
to identify the transaction.
3. PRESENTMENT: You must present SALES RECORDs to us within three business
days of the SALE DATE for a CARD SALE or within three business days of the
date you receive the CARDHOLDER's returned merchandise, cancellation of
service, or a price adjustment request for a credit. Such SALES RECORDs
must be presented in an acceptable format and in compliance with the rules
of the CARD ORGANIZATIONs.
4. AUTHORIZATIONS: We will make an electronic authorization request for every
BANK CARD transaction and for those T&E CARD transactions which exceed the
floor limit set for you by the relevant T&E CARD company, but only if you
have not otherwise provided an authorization. We reserve the right to
refuse to process any SALES RECORD presented by you if we are unable to
obtain an authorization, if we reasonably determine that the SALES RECORD
is or will become uncollectible from the CARDHOLDER to which the CARD SALE
would otherwise be charged, or if we determine that the SALES RECORD was
prepared in violation of any provision of this AGREEMENT. The fact that
you or that we obtained an authorization will not be deemed to be our
representation that a particular CARD transaction is in fact a valid or
undisputed transaction entered into by the actual CARDHOLDER or an
authorized user of the CARD.
5. CREDIT FOR SALES RECORDS:
(a) For BANK CARD transactions, except as provided in Section 4, we will
initiate transfer of the NET PROCEEDS to your BANK ACCOUNT(S) not later
than three business days following our receipt of your SALES RECORDs. You
agree that the transfer of NET PROCEEDS to your BANK ACCOUNT(S)
constitutes provisional credit for your SALES RECORDs so long as any
CARDHOLDER has a dispute or challenge with respect to the SALES RECORD for
any reason.
(b) To the extent the NET PROCEEDS for any day are negative, we may pursue one
or more of the following options: (1) recoup all amounts due to us from
any funds otherwise due to you, including but not limited to the proceeds
from your next transmission of SALES RECORDs; (2) debit your BANK
ACCOUNT(S) for the amount of the negative balance; (3) delay presentation
of your CREDITs until you make a payment to use of a sufficient amount to
cover the negative balance; (4) collect the negative balance from any of
your accounts at your bank or at any other financial institution without
notice to you and (5) request (either orally or in writing) payment for
such amounts, and you agree to resolve any negative balance within one
business day of our advice to you of a negative balance.
(c) For T&E CARD transactions, we will forward the SALES RECORDs, including
the required authorization code, to the appropriate T&E CARD company. Your
receipt of the proceeds due you will be governed by whatever agreement you
have with that T&E CARD company, and we do not bear any responsibility for
their performance.
6. ACCOUNTING: Within three business days following the close of a business
day on which activity is submitted to us, we will supply a detailed
statement describing the elements of your NET PROCEEDS and your T&E CARD
transactions for that business day. We will not be responsible for any
error that you do not bring to our attention within thirty days from date
of such statement.
7. CARD ORGANIZATION RULES AND REGULATIONS AND FEDERAL, STATE AND LOCAL LAW:
By signing this AGREEMENT you agree to comply with all rules and
regulations of the CARD ORGANIZATIONs. You also agree to comply with all
provisions of federal, state and local law affecting CARD transactions.
Any failure by you to comply with a
1
<PAGE> 2
CARD ORGANIZATIONs' rules and regulations or federal, state or local law
applicable to any aspect of any CARD transaction is a breach of this
AGREEMENT that allows us to terminate this AGREEMENT immediately and
without prior notice to you.
8. YOUR WARRANTIES: You warrant and represent the following and reaffirm such
warranties and representations each time you present a SALES RECORD:
(a) Each SALES RECORD complies with the conditions and requirements of this
AGREEMENT.
(b) Each SALES RECORD is genuine and arises out of a bona fide CARD SALE of
merchandise or services by you and does not involve the use of a CARD for
any other purpose or the refinancing of existing obligations of the
CARDHOLDER.
(c) You have title to the SALES RECORD, and you have the authority to present
the SALES RECORD to us.
(d) To the best of your knowledge, no SALES RECORD is subject to any dispute,
set-off or counterclaim.
(e) The SALES RECORD has not and will not be presented for payment anywhere
else.
(f) Each SALES RECORD represents a valid obligation for the amounts set forth
therein.
(g) All statements on each SALES RECORD are true, and you have no knowledge of
facts that would impair the validity or collectibility of the amount of
the SALES RECORD.
(h) You have performed all of your principal obligations with respect to each
SALES RECORD including shipment of the order or fulfillment of the service
to the CARDHOLDER.
(i) You have reasonable procedures in place to ensure that each CARD SALE is
made to a purchaser who actually is the CARDHOLDER and to whom, upon
receiving an authorization from us, you actually sell the goods or
services and deliver them according to the CARDHOLDER's instructions.
(j) To the best of your knowledge, the goods described in each SALES RECORD
are your sole property and you are free to sell them.
(k) The CARD SALE does not violate your charter or by-laws or any applicable
federal, state or local laws or regulations.
(l) You have made no representations or agreements for the issuance of CREDIT
except as it states in your RETURN POLICY, which has been previously
submitted to us in writing.
9. LIABILITY FOR BREACH OF WARRANTIES: If any of your representations or
warranties in your APPLICATION, this AGREEMENT or in any paper or
documents submitted to us at any time is untrue at the time it is made,
this AGREEMENT may be terminated by us, in our sole discretion, immediately
upon notice to you.
10. ACCEPTANCE POLICIES: The CARD ORGANIZATIONs require strict adherence to
the following card acceptance policies:
(a) You do not increase the price or impose any other fee upon any customer
who uses a BANKCARD for payment of any transaction.
(b) You make no CARD SALEs when only a part of the consideration due is paid
through use of a BANKCARD except pursuant to a policy previously submitted
in writing to us.
(c) You prepare one and only one SALES RECORD per CARD SALE.
(d) You do not require a minimum transaction amount below which you refuse to
honor otherwise valid BANK CARDs.
(e) You do not sell, purchase, provide, or exchange BANK CARD account number
information in any form whatsoever other than to us or pursuant to an
official governmental request.
11. NOTICE TO PUBLIC: Wherever you accept CARDs, you will inform the public of
the CARDs that you honor.
12. RETURN POLICY:
(a) You are required to maintain a fair policy with regard to the exchange,
return and adjustment of CARD SALEs. Your policy must be applied equally
to all CARDHOLDERs and must be posted in your establishment or otherwise
disclosed to customers.
(b) You are required to submit your RETURN POLICY to us in writing prior to
the effective date of this AGREEMENT, and any subsequent change in your
RETURN POLICY must be submitted in writing to us not less than thirty days
prior to such change. We reserve the right to refuse to process any CARD
SALE made subject to a revised RETURN POLICY not acceptable to us.
13. REFUNDS AND CARDHOLDER PAYMENTS: If you allow a price adjustment, return of
merchandise or cancellation of services in connection with a CARD SALE, you
will prepare and deliver to us a CREDIT in accordance with this AGREEMENT.
The amount of the CREDIT cannot exceed the amount shown as the total on the
original SALES RECORD except by the exact amount required to reimburse the
CARDHOLDER for postage that the CARDHOLDER paid to return merchandise in
accordance with a policy that you apply consistently to all of your
customers. You are not allowed to accept
2
<PAGE> 3
cash or any other payment or consideration from a customer in return for
preparing a CREDIT to be deposited to the customer's CARD account nor to
give cash refunds to a CARDHOLDER in connection with a CARD SALE, unless
required by law.
14. PAYMENTECH PROCESSING PROCEDURES, FORMS AND FORMATS: You agree to comply
with our processing procedures, forms requirements and data processing
formats for timely and secure processing of SALES RECORDs under this
AGREEMENT.
15. RETRIEVAL REQUESTS: We will send you any RETRIEVAL REQUEST that we cannot
satisfy with the information we have on file concerning a CARD SALE. If you
notify us in writing by certified mail, return receipt requested, of the
resolution of your investigation of such a RETRIEVAL REQUEST within seven
business days after we send it to you, we will take the appropriate steps to
reduce the probability of the CARD ISSUER issuing an unjustified CHARGEBACK.
You acknowledge that your failure to comply with a RETRIEVAL REQUEST in
accordance with CARD ORGANIZATIONs' rules may result in an irreversible
CHARGEBACK of the subject CARD SALE.
16. CHARGEBACKS:
(a) You have full liability for all CHARGEBACKs. You may receive a CHARGEBACK
from a CARDHOLDER or CARD ISSUER for numerous reasons under the CARD
ORGANIZATION rules. The following are some of the most common reasons for
CHARGEBACKs:
(1) The return or non-delivery of goods or services.
(2) An authorization was required and not obtained.
(3) The CARD SALE date is after the CARD's expiration date.
(4) The SALES RECORD is produced incorrectly or fraudulently.
(5) We did not receive your response to a RETRIEVAL REQUEST within seven
business days.
(6) CARDHOLDER disputes the CARD SALE or signature on the SALES RECORD or
claims that the sale price is subject to a set-off, defense or
counterclaim.
(7) The CARDHOLDER refuses to make payment for a CARD SALE because in the
CARDHOLDER's good faith opinion, a claim or complaint has not been
resolved, or has been resolved by you but in an unsatisfactory manner
(Regulation Z).
(8) The CARD was not actually presented and the CARDHOLDER denies making
the purchase. The fact that you or that we obtained an authorization
does not mean that a particular CARD transaction is in fact a valid or
undisputed transaction entered into by the actual CARDHOLDER or an
authorized user of the CARD.
(9) A CREDIT is due to the CARDHOLDER and you have failed to submit a
CREDIT.
(b) We will recreate or retrieve all sales information needed to respond to
CHARGEBACKs with respect to SALES RECORDs. You are not allowed to re-submit
for processing any CARD SALE that has been previously charged back to you.
(c) If we determine that you are receiving an excessive amount of CHARGEBACKs,
we may review your internal procedures relating to acceptance of CARDs and
we may take one or more of the following actions: (1) notify you of new
procedures you should adopt; and (2) notify you of a new rate we will charge
you to process your CHARGEBACKs or (3) terminate the AGREEMENT, immediately.
For purposes of this AGREEMENT, an excessive number of CHARGEBACKs means one
CHARGEBACK per 100 SALES RECORDs or the total dollar amount of CHARGEBACKs
is greater than or equal to one percent of the total dollar amount of SALES
RECORDs for the last thirty days.
17. RECORDS RETENTION:
(a) In order to respond to RETRIEVAL REQUESTs and CHARGEBACKs, you are required
to (1) keep the order information from which the SALES RECORDs are derived
for at least six months from the date of the respective transaction; (2)
retain copies of all such data for three years from the date of the
respective transaction; and (3) furnish the same to us upon request. We will
keep the SALES RECORD information itself for you for the required time
period.
(b) You are not allowed to charge any fee for the creation or storage of copies
required under this AGREEMENT. We may require you to deliver original order
information to us rather than storing it.
18. CLAIMS OF CARDHOLDER CUSTOMERS: To the extent that we have paid or may be
called upon to pay a CHARGEBACK or CREDIT for or on the account of a
CARDHOLDER and reimbursement is not made by you as provided in this
AGREEMENT, then for the purpose of our obtaining reimbursement of such sums
paid or anticipated to be paid, we have all of the rights and remedies of
such CARDHOLDERs under applicable federal, state or local law and you
authorize us to assert any and all such claims in our own name for and on
behalf of any such CARDHOLDER customer individually or all such CARDHOLDER
customers as a class.
3
<PAGE> 4
19. [INTENTIONALLY DELETED]
20. RESERVE ACCOUNT: In the event of the occurrence or threat of a material,
adverse change in [**] or of another event as the result of which [**] or
that you may be liable to [**] we have the right to (a) immediately place
payments due you in the RESERVE ACCOUNT and/or stop processing SALES
RECORDs for you until such time as [**] and (b) demand from you an amount
to be placed in a RESERVE ACCOUNT that our experience dictates to assure
payment of such liability. Your failure to pay such amount allows us to
terminate this AGREEMENT immediately.
21. INFORMATION ABOUT MERCHANT'S BUSINESS: You agree to furnish us within five
days your most recently prepared financial statements and credit
information as we may from time to time request. With prior notice and
during your normal business hours our duly authorized representatives may
visit your business premises and may examine your books and records that
pertain to your SALES RECORDs and CARD SALEs. You agree to provide us at
least thirty days' prior written notice of your intent to change the basic
nature of your business or your product line or services, your trade name
or style, or the manner in which you accept CARDs. If we, in our sole
discretion, determine such a change is material to our relationship with
you, we reserve the right to refuse to process SALES RECORDs made pursuant
to the change and we may terminate this AGREEMENT. You will also give us
prompt notice of any potential material adverse change to your business.
You agree to provide us with prompt written notice if you or any of your
parent/principals, subsidiary or affiliated entities are the subject of
any voluntary or involuntary bankruptcy or insolvency petition or
proceeding.
22. LIMITED LIABILITY: We will, at our own expense, correct any data in which
(and to the extent that) errors have been caused by us, or by malfunctions
of our software or machines. However, subject to Section 6, the expense of
correcting such data will be our only responsibility in connection with
such errors or in connection with any other performance or nonperformance
by us under this AGREEMENT. Under no circumstances will our financial
responsibility for our failure of performance under this AGREEMENT [**]. IN
NO EVENT WILL WE, OUR EMPLOYEES OR AFFILIATES, BE LIABLE FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR CLAIMS BY MERCHANT OR ANY THIRD
PARTY RELATIVE TO THE TRANSACTIONS HEREUNDER.
23. CONFIDENTIALITY:
(a) In performing the services described in this AGREEMENT, we may have access
to and receive certain information about you which you designate to be
proprietary including, but not limited to financial and sales information,
customer lists. Such information will be used solely in connection with
our obligations under this AGREEMENT, we will receive such information in
confidence and not disclose such information to any third party except to
the extent that such information is already public or as required by legal
process. We shall, however, be permitted to publish the fact that you are
using our processing services. We will use our reasonable efforts to
ensure compliance with the terms of this Section 23 by our employees and
will restrict the number of our employees with access to this information.
Furthermore, all employees of PAYMENTECH and its affiliates are required
to sign a confidentiality statement as a condition of employment.
(b) In receiving the services described in this AGREEMENT, you may receive
access to and disclosure of certain confidential information about us
which we consider to be proprietary, including but not limited to our
LICENSED PROGRAMS (defined in Section 24) and our Pricing Schedule. You
agree that such information will be used solely in connection with your
obligations pursuant to this AGREEMENT, and that you will receive such
information in confidence and will not disclose such information to any
third party except to the extent that such information is already public
or as required by legal process. You agree this AGREEMENT, schedules
(including pricing) and addenda are designated as confidential. You will
use your best efforts to ensure compliance with the terms of this Section
23 by your employees and will restrict the number of your employees with
access to this information.
(c) In addition, you will exercise reasonable care to prevent disclosure of
CARDHOLDER information, including, but not limited to, storing all media
containing CARD numbers in an area limited to selected personnel. Prior to
discarding material
[**] 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.
4
<PAGE> 5
containing CARDHOLDER information, you will destroy it in a manner rendering
the data unreadable. If at any time you determine that CARDHOLDER
information has been compromised, you must notify us immediately.
24. LICENSED PROGRAMS:
(a) LICENSED PROGRAMS are our proprietary computer programs that we provide for
your use pursuant to the requirements of this AGREEMENT, including without
limitation, for the purpose of transmitting SALES RECORDs to us and
receiving report from us. All programs that we provide to you now and in the
future are proprietary to us and licensed to you on a non-exclusive basis
governed by, and only for the term of, this AGREEMENT. You acknowledge that
the license granted herein is limited to your own use exclusively and that
you do not have the right to sub-license any of the LICENSED PROGRAMS in
either their original or modified form. The original and any copies of
LICENSED PROGRAMS made by you in whole or in part, are our property. You may
modify any LICENSED PROGRAM in machine readable form for your own use and
merge it into other program material to form an updated work, provided that,
upon termination of this AGREEMENT, the LICENSED PROGRAM must be completely
removed from the updated work and treated as if permission to modify had
never been granted.
(b) We represent and warrant that your use of the LICENSED PROGRAMS and any
documentation provided by us pursuant to this AGREEMENT, as contemplated
herein, will not violate any copyright, patent, trade secret, or trademarks
of any person. We will defend (or settle) at our own expense any and all
claims that the above items infringe a trademark, copyright, trade secret,
or patent, if you give us prompt notice of any such claim or lawsuit against
you relating to the LICENSED PROGRAMS or documentation. If your use of the
LICENSED PROGRAMS is prevented by any legal process, we will procure for you
the right to continue to use the LICENSED PROGRAMS, or modify the LICENSED
PROGRAMS so that they are no longer infringing, or replace the LICENSED
PROGRAMS with non-infringing software of equal or superior functional
capability.
(c) EXCEPT AS PROVIDED IN THIS SECTION, PAYMENTECH GRANTS NO WARRANTIES, EITHER
EXPRESS OR IMPLIED, ON ANY LICENSED PROGRAM OR ANY SERVICE PROVIDED UNDER
THIS AGREEMENT, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL PAYMENTECH BE LIABLE FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES EVEN IF PAYMENTECH HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
25. INDEMNITY:
(a) We agree to indemnify you from any liability, loss or expense arising out of
any claim or complaint by CARDHOLDER related to any failure by us to
properly safeguard the CARDHOLDER's information. This indemnification does
not apply to any claim or compliant relating to merchandise or services sold
by you or your failure to resolve a payment dispute. We agree to indemnify
you from any loss due to our mismanagement of funds transferred to you. The
indemnification provided for in this Section 25(a) is subject to Section 22.
(b) You agree to indemnify us from any liability, loss or expense arising out of
any claim, complaint, offset or CHARGEBACK made by a CARDHOLDER with respect
to any SALES RECORD for merchandise or services which are the subject of any
CARD SALE made by you. Also, you agree to indemnify us for any loss caused
by your violation of a CARD ORGANIZATION's rules or regulations or federal,
state or local laws or by your willful misconduct or negligence.
26. EVENTS OF DEFAULT: Upon the occurrence of any one or more of the following
events of default, we may terminate this AGREEMENT without notice or demand,
in addition to exercising our rights and remedies upon default, as set forth
in Section 27. The occurrence of any such event of default also constitutes
a default under all other agreements between us.
(a) Failure to pay when due any amount owing by you to us;
(b) Failure to promptly, punctually, and faithfully perform or discharge any of
your obligations to us;
(c) We determine that any representation or warranty now or hereafter made by
you to us, whether herein or in any other document, instrument, agreement or
paper was not true or accurate when given;
(d) The occurrence of any event of default under any agreement between you and
us even though we may not have exercised our rights upon default under the
other agreement, instrument, or paper;
(e) The application for or appointment of a receiver, trustee, or other person
(pursuant to court action or otherwise) over all or any part of your
property; the assignment of all or part of your assets for the benefit of
your creditors, or the occurrence of any voluntary or involuntary
liquidation; or the entry of an order for relief or similar order with
respect to you in any proceeding pursuant to any statute dealing with
bankruptcy;
(f) The entry of any material judgment against you, which judgment is not
satisfied or appealed from within fifteen days of such judgment's entry;
(g) The service of any process upon us seeking to attach or garnish any of your
funds in our possession;
(h) Your termination of existence, dissolution, winding up, or liquidation;
5
<PAGE> 6
(i) The occurrence of any event of circumstance with respect to you and/or the
SALES RECORDs such that we deem ourselves insecure;
(j) Your business failure; or a material, adverse change in your financial
condition; or
(k) The occurrence of any of the foregoing events of default with respect to any
guarantor to us of this AGREEMENT, as if such guarantor were "you".
27. RIGHTS AND REMEDIES UPON DEFAULT: Upon the occurrence of any event of
default, and at any time thereafter, we have all of the rights and remedies
as provided in this AGREEMENT in addition to which we may sell or otherwise
dispose of the SALES RECORDs and other collateral and apply the proceeds
thereof for application towards (but not necessarily in complete
satisfaction of) the obligations due to us or for which we may be liable to
third parties, including without limitation CARDHOLDER customers. The
proceeds will be applied toward your obligations to us in such order and
manner as we determine in our sole discretion, any statute, certain or
vague, to the contrary notwithstanding. You remain liable to us for any
deficiency remaining following such application.
28. FEES:
(a) You agree to pay us for our services as set forth in Schedule A in
accordance with this AGREEMENT. You acknowledge that your pricing is based
on your representation as to your volume of CARD transactions, method of
processing, type of business, and interchange qualification criteria as
represented in your APPLICATION and Schedule A. To the extent your actual
volumes, method, type and criteria differ from this information, we may
modify the pricing set forth on Schedule A or terminate this AGREEMENT with
thirty days' prior written notice.
(b) In addition to the above, from time to time, we may change our fees, charges
and discounts resulting from increases in CARD FEES or the charges of any
third party vendor by giving you notice of the change.
(1) Any price change that is caused by changes in the CARD FEEs will be
applicable to you as of the effective date established by the CARD
ORGANIZATION. Your presentation of any SALES RECORD to us after the
effective date will constitute your acceptance of the new prices.
(2) As to any price change not caused by CARD ORGANIZATION increases, we
will provide you with at least thirty days' notice of the effective
date of this price change. Your presentation of any SALES RECORD to us
after the effective date will constitute your acceptance of the new
prices. Should you choose not to accept the new prices you agree to
notify us, within fifteen days of our price change notice, of your
intent to terminate this AGREEMENT. Such termination shall be effective
thirty days from the date of your written notice to us.
(c) If you terminate this AGREEMENT prior to the expiration of the original or
any renewal term for a reason other than price change or material breach,
you agree that the future harm to us would be difficult to calculate.
Accordingly, in the event of your early termination of this AGREEMENT for
any reason other than an increase in your PROCESSING FEES as provided in
Section 28(b)(2), in order to compensate us for our loss and not as a
penalty, you agree to pay to us as liquidated damages an amount calculated
by multiplying the average monthly PROCESSING FEES from the prior six months
by the number of months remaining in the contract term. Such amount will be
funded, to the extent possible, according to the same methods for collecting
amounts due under Section 5 hereof.
(d) We process all SALES RECORDs in a manner so that each transaction will have
the potential to qualify under the rules of the CARD ORGANIZATIONs for the
reduced CARD FEEs charged by the CARD ORGANIZATIONs. These reduced rates are
known as qualifying rates. For those SALES RECORDs that cannot qualify, the
standard interchange rate will apply, which includes a non-qualification
surcharge for those transactions. If we determine that an excessive amount
of SALES RECORDs do not qualify, we may review your internal procedures
relating to acceptance of CARDs, and we may notify you of new procedures you
should adopt. For purposes of this AGREEMENT, an excessive number of SALES
RECORDs which do not qualify for QUALIFYING RATES is 2 per 100 SALES
RECORDs.
29. TERM; TERMINATION:
(a) This AGREEMENT takes effect when signed by PAYMENTECH and has an initial
term expiring one year from the effective date. At our option, this
AGREEMENT automatically becomes null and void if you fail to [**] from the
effective date. Unless otherwise terminated by either party as provided in
this Agreement, the AGREEMENT will automatically extend for successive one
year terms. Either party may give notice of non-renewal of this AGREEMENT in
writing no less than [**] prior to any expiration date. Also, we may
terminate if a [**]. Termination does not affect either party's respective
rights and obligations under this AGREEMENT as to SALES RECORDs submitted
before termination, nor does it affect either party's rights and obligations
under Sections 5, 15, 16, 17, 18, 19, 20, 22, 23, 24, 25, 27, 28, 29, and
30, all of which continue without limit as to time.
(b) Upon termination by either party for any reason, you will be required to
[**].
[**] 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> 7
Such [**] will be funded, to the extent possible, with [**] otherwise
payable to you under [**]. To the extent such [**] are insufficient, you
will fund the [**] directly according to the same methods for [**] of this
AGREEMENT. You will have no right to return of the funds in the [**] until
[**] In addition, and notwithstanding the lack of outstanding obligations
by you at the termination of this AGREEMENT, we are authorized to retain
[**] after termination of this Agreement or for such longer period of time
as we reasonably determine to be necessary.
30. GENERAL:
(a) APPLICATION AND CREDIT CHECK. All statements made on your APPLICATION for
this AGREEMENT are true as of the date of your execution of this
AGREEMENT. You have no reason to suspect any fact or circumstance not
specified therein which, if known to us, might prevent us from executing
this AGREEMENT. Your signature on this AGREEMENT authorizes us to perform
any credit check deemed necessary of MERCHANT, its principals and
Guarantors.
(b) SECTION HEADINGS: The section headings of this AGREEMENT are for
convenience only and do not define, limit or describe the scope or intent
of this AGREEMENT.
(c) ASSIGNMENT: You cannot assign or transfer your rights or delegate your
responsibilities under this AGREEMENT without our prior written consent.
(d) SUCCESSORS AND ASSIGNS: This AGREEMENT binds you and us and our respective
heirs, representatives, successors and assigns.
(e) SEVERABILITY: Should any provision of this AGREEMENT be determined to be
invalid or unenforceable under any law, rule or regulation, such
determination shall not affect the validity or enforceability of any other
provision of this AGREEMENT.
(f) WAIVERS: No term or condition of this AGREEMENT may be waived unless a
written waiver is signed by both parties.
(g) ENTIRE AGREEMENT: This AGREEMENT including any schedules or addenda
constitutes the entire AGREEMENT between both parties.
(h) NOTICES: Except as otherwise provided in this AGREEMENT, all notices must
be given in writing and either hand delivered, faxed, or mailed first
class, postage prepaid (and deemed to be delivered when mailed) to the
addresses set forth below or to such other address as either party may
from time to time specify to the other party in writing. If said notice is
to PAYMENTECH, in addition to the address below, a copy of the notice
shall also be sent to Paymentech Merchant Services, Inc., Attn: General
Counsel, 1601 Elm Street, Suite 4700, Dallas, Texas 75201.
(i) GOVERNING LAW: This AGREEMENT will be governed by and construed in
accordance with the laws of the State of Texas. Any action, proceeding,
litigation or arbitration relating to or arising from this AGREEMENT must
be brought in Dallas County, Dallas, Texas.
(j) ATTORNEYS' FEES: In any action to enforce your obligations under this
AGREEMENT, you will be liable for all of our costs, expenses and
reasonable attorney's fees.
(k) FORCE MAJEURE: We will not be liable for delays in processing or other
nonperformance caused by such events as fires, telecommunications or
utility or power failures, equipment failures, labor strife, riots, war,
nonperformance of our vendors or suppliers, acts of God, or other causes
over which we have no reasonable control.
31. DEFINITIONS:
(a) AGREEMENT refers to this Credit Card Processing Services Agreement,
Application and all schedules, related addenda and amendments, notices and
revisions as well as the APPLICATION.
(b) APPLICATION is your statement of the characteristics of your account that
you have submitted to us to induce us to enter into this AGREEMENT with
you and that has induced us to process your CARD transactions under the
terms and conditions of this AGREEMENT.
(c) BANK ACCOUNT(s) is/are your account(s) in your bank to which we will
transfer your NET PROCEEDS.
(d) BANK CARD is either a MasterCard, VISA or JCB CARD or such other CARD as
we may hereafter designate.
(e) CARD is both the plastic card or other evidence of the account issued by a
CARD ISSUER to the CARDHOLDER and the account number designated on the
CARD, either of which you accept from your customers as payment for their
purchases from you.
(f) CARD FEE is the interchange fee and assessments charged by a CARD
ORGANIZATION. This fee will increase or decrease as a result of changes in
the fees or assessments set by the various CARD ORGANIZATIONs.
(g) CARDHOLDER is the person to whom the CARD is issued and who is entitled to
use the CARD.
(h) CARD ISSUER is the bank that issues BANK CARDs or the T&E CARD company
that issues T&E CARDs.
(i) CARD ORGANIZATION is a BANK CARD interchange system, such as the systems
operated by MasterCard International, Inc. and Visa, Inc.
[**] 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.
7
<PAGE> 8
(j) CARD SALE is a sale made by you paid for by a CARD as of the SALE DATE.
Each order you receive is a single CARD SALE unless the goods or services
ordered cannot be delivered or completed at one time, in which case each
partial deposit, delivery or completion is a later CARD SALE.
(k) CHARGEBACK is a charge against a SALES RECORD you previously presented.
(l) CREDITs are submitted by you to us to offset specific SALES RECORDs
previously presented by you.
(m) MERCHANT is the party to this AGREEMENT contracting with PAYMENTECH whose
correct legal name, legal identity, legal and business address or
addresses and all trade names are set forth in the APPLICATION.
(n) NET PROCEEDS is the net positive or negative amount of your CARD
transaction consisting of (1) the amount of the SALES RECORDS minus the
CARD FEE (2) Less the amount of CREDITs minus the CARD FEE (3) Less the
CHARGEBACK amounts (4) Less the PROCESSING FEES (5) Less amounts to be
credited to the RESERVE ACCOUNT. These items are not necessarily applied
in this order.
(o) PROCESSING FEES are the fees we charge you for our services as specified
in Schedule "A", as may be amended from time to time.
(p) RESERVE ACCOUNT is an account that we may establish on our records for our
accounting requirements and benefit pledged by you to secure payment to
us of any and all amounts which may be due from you to us and for the
benefit of your CARDHOLDER customers. Any and all funds credited to the
RESERVE will be subject to disbursement only by us. You have no interest
in the RESERVE ACCOUNT until your receipt thereof. The RESERVE ACCOUNT
secures our PROCESSING FEES and any other sums as may be due to us, under
this AGREEMENT and all other agreements between us, including CHARGEBACKs
and CREDITs and the claims of CARDHOLDERs arising from CARD SALEs, and you
hereby grant to us a security interest in all funds in our possession at
any time.
(q) RETRIEVAL REQUEST is a request for information on behalf of a CARDHOLDER
or CARD ISSUER relating to a claim or complaint concerning a CARD SALE you
have made.
(r) RETURN POLICY is that policy established by you for the issuance of
CREDITs to refund specific SALES RECORDs.
(s) SALE DATE is the effective date of the CARD SALE at which time you have
performed all principal obligations to the CARDHOLDER in connection with
a transaction, including shipment or delivery of goods or services.
(t) SALES RECORD is a transaction representing a CARD SALE or CREDIT that you
submit to us for authorization and processing.
(u) T&E CARD is a Travel and Entertainment CARD issued by American Express,
Novus/Discover, Carte Blanche, Diner's Club, or such other T&E CARD as we
may designate in the future.
YOUR SIGNATURE ON TWO COPIES OF THIS AGREEMENT THAT YOU RETURN TO US INDICATES
YOUR UNDERSTANDING AND ACCEPTANCE OF ITS TERM AND CONDITIONS. WE WILL THEN
INDICATE OUR ACCEPTANCE OF THE AGREEMENT BY RETURNING ONE FULLY EXECUTED COPY TO
YOU, AND TWO SIGNED COPIES OF SCHEDULE A OR OTHER ADDENDA THAT ARE INCORPORATED
HEREIN.
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
GENERAL MAGIC, INC. PAYMENTECH MERCHANT SERVICES, INC.
- -------------------------------------
MERCHANT LEGAL NAME (Print or Type)
420 North Mary Avenue 4 Northeastern Boulevard
- ------------------------------------- Salem, NH 03079-1952
Street Address (Print or Type)
Sunnyvale, CA 94086
- -------------------------------------
City, State Zip (Print or Type)
/s/ JAMES P. McCORMICK /s/ KATHLEEN M. KELLER
- ------------------------------------- ----------------------------------
By (authorized signature) By (authorized signature)
James P. McCormick Kathleen M. Keller, Group Manager
- -------------------------------------
By, Name, Title (Print or Type)
August 18, 1998 9/1/98
- ------------------------------------- ----------------------------------
Date Date
To Be Completed By Paymentech Merchant Services, Inc.
Your Merchant Agreement Contract Number is: 824466-3683
-----------
Your Merchant Processing Identification Number
Will Be Provided At Time of Processing Set Up
REVISION 01/98 V.8
8
<PAGE> 9
PAYMENTECH MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
SCHEDULE A
MERCHANT NAME: GENERAL MAGIC, INC.
MERCHANT AGREEMENT CONTRACT NUMBER: 824466
The average value of MERCHANT's CREDIT CARD transactions will be $50.00.
MERCHANT will process approximately 19,000 CREDIT CARD transactions annually.
PROCESSING FEES
<TABLE>
<S> <C>
Per CREDIT CARD SALES DRAFT and CREDIT $[**]
Per T&E Card SALES DRAFT and CREDIT $[**]
Per MCI, VISA or T&E CPU (Central Processing Unit) Authorization $[**]
Per Voice Authorization $[**]
Per Voice AVS (Address Verification Service) Authorization $[**]
Per Audio Response Unit Authorization $[**]
Monthly Maintenance $[**]
Monthly Paper Reporting Fee $[**]
Per MCI and VISA CHARGEBACK Processed/Represented $[**]
Collection, Pre-Arbitration & Compliance $[**]
ACH (Automated Clearing House) Funds Transfer $[**]
Network Administration Fee $[**]
Postage, Supplies, Equipment & Other Services Charged as used
Supplemental Products Quoted as Requested
Other Communication Services (Frame Relay Telco Cost) Quoted as Requested
</TABLE>
If on any business day, MERCHANT's NET PROCEEDS are negative, any such
amounts shall be collected from MERCHANT's designated bank account via ACH.
SET UP FEES:
<TABLE>
<S> <C>
Computer to Computer Direct Access (CPU) Set up $[**]
</TABLE>
NEGATIVE BALANCE
MERCHANT shall be charged a fee against NET PROCEEDS after the number of
Negative Balances for a calendar month has exceeded two (2) based on the
following schedule.
<TABLE>
<CAPTION>
Negative Balance Amount Fee Per Occurrence
----------------------- ------------------
<S> <C>
$[**] $[**]
$[**] $[**]
$[**] $[**]
$[**] $[**]
$[**] $[**]
$[**] $[**]
$[**] $[**]
</TABLE>
If a Negative Balance results when any fees are assessed, section 7 shall apply.
- -------------------------------------------------------------------------------
Dated Printed June 22, 1998
[**] 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> 10
PAYMENTECH MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
SCHEDULE A (CONTINUED)
MERCHANT NAME: GENERAL MAGIC, INC. AGREEMENT NUMBER 824466
[**]
We shall [**] BANK CARD SALES DRAFTs, a [**], as indicated below, that
shall be [**] to a [**]. We shall [**] a [**] to the [**] and provide to
MERCHANT a periodic accounting which, relates by month: i) the amount of
BANK CARD SALES DRAFTs, submitted, ii) the [**], iii) the amounts of [**]
to and [**] submitted and iv) the resulting [**] balance. On a monthly
basis, and no later than fifteen (15) days following the sixth full
calendar month [**], we shall [**] MERCHANT any [**] in the [**] that
exists for the sixth month prior to a current reporting period, subject to
all other terms and conditions herein.
If any periodic accounting shows that a [**] associated with any given
month, becomes or is projected to [**], we shall [**] by [**] MERCHANT
and/or [**] the amounts necessary to [**]. Upon notice from us, MERCHANT
shall [**] within one (1) business day by wire transfer. We may increase
the [**] as it appears to be necessary [**].
<TABLE>
<S> <C>
[**] [**]%
ACTIVITY PARAMETERS
Maximum Average Ticket of $[**]
</TABLE>
<TABLE>
<CAPTION>
DAILY WEEKLY
----- ------
<S> <C> <C>
Total BANK CARD SALES DRAFTs $[**] $[**]
Total BANK CARD CREDITs $[**] $[**]
</TABLE>
In any case wherein MERCHANT exceeds the above parameters, PAYMENTECH
shall make every reasonable attempt to contact the MERCHANT and advise
MERCHANT of such occurrence, and PAYMENTECH may exercise its rights under
paragraph 21. Failure to contact MERCHANT or exercise any rights of
PAYMENTECH, in no way waives any rights or remedies of PAYMENTECH under
this AGREEMENT at any time.
YOUR SIGNATURE ON TWO COPIES OF THIS ADDENDUM THAT YOU RETURN TO US INDICATES
YOUR UNDERSTANDING AND ACCEPTANCE OF ITS TERMS AND INCORPORATION BY REFERENCE
IN THE PAYMENTECH MERCHANT SERVICES, INC. CREDIT CARD PROCESSING SERVICES
AGREEMENT.
<TABLE>
<S> <C>
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
General Magic, Inc. PAYMENTECH MERCHANT SERVICES, INC.
- --------------------------------------- -----------------------------------------------
MERCHANT LEGAL NAME (Print or Type)
420 N. Mary Avenue, Sunnyvale, CA 94086 4 Northeastern Boulevard, Salem, NH 03079-1952
- --------------------------------------- -----------------------------------------------
Address (Print or Type)
/s/ JAMES P. McCORMICK /s/ KATHLEEN M. KELLER
- --------------------------------------- -----------------------------------------------
By (authorized signature) By (authorized signature)
James P. McCormick, CFO Kathleen M. Keller, Group Manager
- --------------------------------------- -----------------------------------------------
By, Name, Title (Print or Type) By, Title (Print or Type)
August 18, 1998 9/1/98
- --------------------------------------- -----------------------------------------------
Date Date
</TABLE>
- --------------------------------------------------------------------------------
Date Printed June 22, 1998
[**] 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> 11
PAYMENTECH MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT SCHEDULE A -- CONTINUED
MERCHANT NAME: GENERAL MAGIC, INC. AGREEMENT NUMBER: 824466
CARD FEES
FOR DIRECT MARKETING DEPOSITS:
MASTERCARD PASS THROUGH FEES FOR DIRECT MARKETING DEPOSITS
<TABLE>
<CAPTION>
CLASSIFICATION EFFECTIVE 3/27/98
<S> <C>
Merit I [**]
Standard [**]
US Corporate Data Rate II [**]
US Corporate Data Rate I [**]
US Corporate Standard [**]
US Corporate Large Ticket [**]
International Corporate Purchasing Large Ticket [**]
International Corporate Purchasing Data Rate II [**]
International Corporate Purchasing [**]
International Corporate [**]
International (Standard) [**]
MasterCard Dues & Assessments [**]
</TABLE>
VISA PASS THROUGH FEES FOR DIRECT MARKETING DEPOSITS
<TABLE>
<CAPTION>
CLASSIFICATION EFFECTIVE 3/27/98
<S> <C>
CPS Card Not Present [**]
EIRF [**]
Key-Entered Emerging Markets [**]
VISA Commercial Card (Electronic/Key Entered) [**]
VISA Commercial Card (Standard) [**]
Standard [**]
Visa Dues & Assessments [**]
</TABLE>
FOR DETAIL DEPOSITS:
MASTERCARD PASS THROUGH FEES FOR RETAIL DEPOSITS
<TABLE>
<CAPTION>
CLASSIFICATION EFFECTIVE 3/27/98
<S> <C>
Merit III [**]
Key-Entered [**]
Merit I [**]
Standard [**]
US Corporate Face-to-Face [**]
US Corporate Data Rate II [**]
US Corporate Data Rate I [**]
US Corporate Standard [**]
US Corporate Large Ticket [**]
US Corporate T&E [**]
International Corporate Purchasing Large Ticket [**]
International Corporate Purchasing Data Rate II [**]
International Corporate Purchasing [**]
International Corporate [**]
International (Electronic) [**]
International (Standard) [**]
World Card T&E [**]
MasterCard Dues & Assessments [**]
</TABLE>
VISA PASS THROUGH FEES FOR RETAIL DEPOSITS
<TABLE>
<CAPTION>
CLASSIFICATION EFFECTIVE 3/27/98
<S> <C>
CPS Retail Credit Card [**]
CPS Retail Check Card [**]
CPS Retail 2 (Key-Entered) [**]
Key-Entered Emerging Markets [**]
EIRF [**]
VISA Commercial Card (Electronic/Key Entered) [**]
VISA Commercial Card (Standard) [**]
Standard [**]
Visa Dues & Assessments [**]
</TABLE>
JCB CARD FEEs [**]%
- --------------------------------------------------------------------------------
Dated Printed June 22, 1998
[**] 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
EXHIBIT 10.32
RETENTION AGREEMENT
This Retention Agreement (the "Agreement") is made and entered into as
of February 19, 1999 (the "Effective Date"), by and between General Magic, Inc.,
a Delaware corporation (the "Company"), and James P. McCormick (the
"Executive").
1. TERM OF RETENTION PERIOD. This Agreement shall become effective
as of the Effective Date and shall continue until the earlier of the date the
Company terminates the Executive without cause (as defined in Section 5 below)
or the date occurring six (6) months after the Effective Date (the "Term Date").
For the purposes of this Agreement, Executive may elect to treat his removal
from the position of Chief Operating Officer for other than cause as a
termination without cause. During the term of this Agreement, the Executive
agrees that he will not seek or accept employment with an employer other than
the Company. The Company and the Executive may extend the term of this Agreement
upon such terms as they mutually agree.
2. POSITION AND DUTIES. During the term of this Agreement, the
Executive shall continue to be employed by the Company in his current position
at his current salary rate; provided, however, that upon the Effective Date, the
Executive shall be appointed as the Chief Operating Officer of the Company. Such
appointment will be announced on a date determined by the Company and that is
acceptable to the Executive. During the term of this Agreement, the Executive
agrees to devote his full business time, energy and skill to his duties at the
Company. These duties will include the duties described in Exhibit 1 attached
hereto and any other duties consistent with his position which may reasonably be
assigned to Executive from time to time.
3. ACCELERATION OF VESTING OF STOCK OPTIONS. The Company granted
the Executive two (2) stock options on June 12, 1997 (Option Numbers 001300 and
001301) (the "Options"). As of the date hereof, approximately 99,144 shares
subject to Option Number 001300 are unvested and approximately 21,690 shares
subject to Option Number 001301 are unvested. The vesting of the shares subject
to such Options shall be accelerated as follows:
(a) If, after the Effective Date and prior to March 10,
1999, the Company executes a letter of intent or similar agreement providing for
a financing transaction in which the Company is to receive gross proceeds of at
least $15,000,000 on terms acceptable to the Board of Directors of the Company,
then a total of 60,000 of the unvested shares subject to Option Number 001300
shall become vested as of the date of such execution by the Company, regardless
of whether the anticipated financing is consummated.
(b) On the Term Date, an additional 60,834 unvested shares
subject to the Options (or, if lesser, the aggregate number of unvested shares
subject to the Options) shall become vested.
(c) The Executive acknowledges that to the extent that
either Option was an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, the acceleration of vesting described above
may cause the exercise of such Option to be treated as the exercise of a
nonstatutory stock option to the extent required by Section 422. The Executive
is encouraged to consult with his own tax advisor regarding the tax treatment of
his Options.
<PAGE> 2
4. BONUS. On the Term Date, the Company shall pay the Executive a
bonus in an amount such that the net payment retained by the Executive, after
withholding of any applicable federal and state income taxes (at 39.60% and
5.62% respectively) and any applicable employment taxes, shall be equal to
$200,000.
5. CONDITION TO RECEIPT OF BONUS AND ACCELERATION OF VESTING.
Executive shall be entitled to the acceleration of vesting of the Options
pursuant to Section 3(b) and receipt of the bonus described in Section 4 unless,
prior to the Term Date, the Executive voluntarily terminates his employment with
the Company or the Company terminates Executive's employment for cause. For
purposes of this Agreement, "cause" shall mean any of the following: (a)
Executive's theft of any Company property or intentional falsification of any
employment or Company records, (b) Executive's improper disclosure of the
Company's confidential, business or proprietary information, (c) Executive's
consistent failure, as determined by the Board of Directors, to perform the
duties of his position, provided that the Executive is first given a written
warning detailing the failure of performance and does not correct such failure
within fifteen (15) days of his receipt of the warning, (d) Executive's
acceptance during the term of this Agreement of employment with an employer
other than the Company or any successor thereto, or (e) Executive's conviction
(including any plea of guilty or nolo contendere) for a felony or other crime
involving moral turpitude which impairs the Executive's ability to perform his
duties for the Company.
6. DEATH OR DISABILITY. In the event of the death or disability of
the Executive during the term of this Agreement, Executive or his estate, as
applicable, shall be entitled to the acceleration of the vesting of the Options
pursuant to Section 3(b) and receipt of the bonus described in Section 4 on a
pro-rated basis from the Effective Date through the date of such death or the
commencement of a disability. For purposes of this Agreement, "disability" shall
mean the Executive's inability, as determined by a qualified physician
acceptable to the Company, to perform the essential duties of his position for a
period of sixty (60) consecutive days by reason of a physical or mental illness,
injury or disease.
7. CHANGE OF CONTROL. Executive shall be entitled to the
acceleration of vesting of the Options pursuant to Section 3(b) and receipt of
the bonus described in Section 4, effective ten (10) days prior to a change of
control. For purposes of this Agreement, "change of control" shall mean the
occurrence of any of the following events: (a) the direct or indirect sale or
exchange by the stockholders of the Company of all or substantially all of the
stock of the Company where the stockholders of the Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such sale or
exchange; (b) a merger in which the stockholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such merger; or (c)
the sale, exchange, or transfer (including, without limitation, pursuant to a
liquidation or dissolution) of all or substantially all of the Company's assets
(other than a sale, exchange, or transfer to one (1) or more corporations where
the stockholders of the Company before such sale, exchange, or transfer retain,
directly or indirectly, at least a majority
2
<PAGE> 3
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
8. CONFIDENTIALITY. The Executive acknowledges and agrees that the
fact, terms and conditions of this Agreement, as well as the discussions that
led to this Agreement (collectively referred to as "the Retention Information"),
are confidential, and that the Executive shall not disclose the Retention
Information or any part thereof, to any person or entity, except to his spouse,
his attorney, and his accountant, provided that such person agrees to be bound
by the terms of this confidentiality provision.
9. MISCELLANEOUS PROVISIONS.
(a) APPLICABLE LAW. The Executive and the Company agree that
this Agreement shall be interpreted in accordance with and governed by the laws
of the State of California.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
(c) NOTICES. 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 U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him 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.
(d) SEVERABILITY. In the event that any provision of this
Agreement shall be found unenforceable by a mediator, an arbitrator or a court
of competent jurisdiction, the parties hereto shall determine a reasonable
modification to such provision to the extent necessary to allow enforceability
of the provision. If a modification of the provision is not satisfactory in the
judgment of such mediator, arbitrator or court, the unenforceable provision
shall be deemed deleted, and the validity and enforceability of the remaining
provisions shall not be affected thereby.
(e) MEDIATION AND ARBITRATION. In the event of any dispute
or claim relating to or arising out of this Agreement, the Executive and the
Company agree to mediate such dispute or claim with a mediator acceptable to
both parties. In the event that the parties do not resolve such dispute or claim
pursuant to mediation within sixty (60) days, the parties hereby agree that all
such disputes and claims shall be fully, finally and exclusively resolved by
binding arbitration conducted by the American Arbitration Association ("AAA") in
Santa Clara County, California in accordance with AAA's National Employment
Dispute Resolution rules as those rules are currently in effect, and not as
those rules may be modified in the future. The Executive and the Company hereby
knowingly and willingly waive their respective rights to have any such disputes
or claims tried to a judge or jury. Notwithstanding the foregoing, this
arbitration
3
<PAGE> 4
provision shall not apply to any disputes or claims relating to or arising out
of the actual or alleged misuse or misappropriation of the Company's property,
including, but not limited to, its trade secrets or proprietary information.
(f) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(g) INTEGRATED AGREEMENT. This Agreement, the agreements
between the Company and the Executive evidencing the Options, and the
Proprietary Rights and Information Agreement between the Company and the
Executive constitute the entire understanding and agreement of the Executive and
the Company with respect to the subject matter contained herein and therein and
supersede any prior agreements, understandings, restrictions, representations,
or warranties among the Executive and the Company with respect to such subject
matter other than those as set forth or provided for herein or therein.
(h) MODIFICATION. This Agreement may only be modified or
amended by a written agreement signed by the Executive and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Effective Date.
GENERAL MAGIC, INC.
By: /s/ Steven Markman
-------------------------------------
Title: Chairman, CEO and President
----------------------------------
EXECUTIVE:
/s/ James P. McCormick
----------------------------------------
James P. McCormick
2/19/99
4
<PAGE> 5
EXHIBIT 1
MANAGEMENT BUSINESS OBJECTIVES
1. Manage the Company's finance and accounting functions in accordance with
the Executive's current responsibilities and duties as Chief Financial
Officer.
2. Manage Network Operations and Customer Support to yield a World Class
Operations Center capable of supporting all products and services of the
Company.
(a) Ensure execution of the 1Q99 Operations Plan (milestones as per
plan).
(b) Ensure creation of each quarterly operations plan and its
execution.
3. Ensure the creation and/or modification of the Company's billing systems
to support all of the Company's products and services.
(a) Drive the modification of pricing structure to ease the billing
system's processing issues.
(b) As the primary customer for the Billing System, drive the
requirements into the Billing Program Team and ensure
understanding of those requirements.
4. Create a world class MIS department.
(a) Integrate the operations center MIS need with the needs of the
Company as a whole and develop a plan to properly support both.
(b) Organize the MIS functions to maximize efficiency of personnel,
upgrade personnel as needed to get best service, and ensure
support of the World Class Network Operations Center.
5. Improve communications.
(a) Consciously and consistently communicate support of the Company
and its management team through departmental meetings and
one-on-one conversations.
(b) Drive development of IR presentations and the training of key
management and other personnel in delivering the financial
message.
6. Raise the cash the Company needs for 1999.
<PAGE> 6
(a) Negotiate an LOI for $15 million prior to March 10, 1999 on
terms acceptable to the Company's Board of Directors, in its
sole discretion.
(b) Negotiate an LOI for up to an additional $15 million prior to
July 1, 1999, as needed, on terms acceptable to the Company's
Board of Directors, in its sole discretion.
(c) Assist Kevin Surace and Steve Markman in discussions and
negotiations for raising at least another $20 million from
strategic partners.
7. Drive Security Policy for the Company.
(a) Chair the Security Policy Committee.
(b) Form a VP-level security organization reporting to the COO
(1Q99).
(c) Implement recommendations of the IBM Security Audit as approved
by the Security Policy Committee.
<PAGE> 1
EXHIBIT 10.33
RETENTION AGREEMENT
This Retention Agreement (the "Agreement") is made and entered into as
of February 5, 1999 (the "Effective Date"), by and between General Magic, Inc.,
a Delaware corporation (the "Company"), and Kevin J. Surace (the "Executive").
1. TERM OF RETENTION PERIOD. This Agreement shall become effective
as of the Effective Date and shall continue until the earlier of the date the
Company terminates the Executive without cause (as defined in Section 5 below)
or the date occurring six (6) months after the Effective Date (the "Term Date").
For purposes of this Agreement, Executive may elect to treat his removal from
the position of Executive Vice President for other than cause as a termination
without cause. During the term of this Agreement, the Executive agrees that he
will not seek or accept employment with an employer other than the Company. The
Company and the Executive may extend the term of this Agreement upon such terms
as they mutually agree.
2. POSITION AND DUTIES. During the term of this Agreement, the
Executive shall continue to be employed by the Company in his current position
at his current salary rate. During the term of this Agreement, the Executive
agrees to devote his full business time, energy and skill to his duties at the
Company. These duties will include the duties described in Exhibit 1 attached
hereto and any other duties consistent with his position which may reasonably be
assigned to Executive from time to time.
3. ACCELERATION OF VESTING OF STOCK OPTIONS. The Company granted
the Executive a total of four (4) stock options on December 12, 1996 and April
17, 1997 (Option Numbers 001285, 001286, 001391 and 001392) (the "Options"). As
of the date hereof, approximately 62,968 shares subject to Option Number 001285
are unvested, approximately 5,781 shares subject to Option Number 001286 are
unvested, approximately 9,772 shares subjection to Option Number 001391 are
unvested, and approximately 29,603 shares subject to Option Number 001301 are
unvested. The vesting of the shares subject to such Options shall be accelerated
as follows:
(a) If, after the Effective Date, the Company concludes an
agreement with an Internet portal company to provide the Portico service, or a
subset of that service, to users of its web site on terms acceptable to the
Board of Directors of the Company, then a total of 60,000 of the unvested shares
subject to Option Numbers 001285, 001286, 001391 and 001392 shall become vested
as of the date of the execution of such an agreement by the Company.
(b) On the Term Date, an additional 48,124 unvested shares
subject to the Options (or, if lesser, the aggregate number of unvested shares
subject to the Options) shall become vested.
(c) The Executive acknowledges that to the extent that
either Option was an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, the acceleration of vesting described above
may cause the exercise of such Option to be treated as the exercise of a
nonstatutory stock option to the extent required by Section 422. The Executive
is encouraged to consult with his own tax advisor regarding the tax treatment of
his Options.
<PAGE> 2
4. BONUS. On the Term Date, the Company shall pay the Executive a
bonus in an amount such that the net payment retained by the Executive, after
withholding of any applicable federal and state income taxes (at 39.60% and
5.62% respectively) and any applicable employment taxes, shall be equal to
$200,000.
5. CONDITION TO RECEIPT OF BONUS AND ACCELERATION OF VESTING.
Executive shall be entitled to the acceleration of vesting of the Options
pursuant to Section 3(b) and receipt of the bonus described in Section 4 unless,
prior to the Term Date, the Executive voluntarily terminates his employment with
the Company or the Company terminates Executive's employment for cause. For
purposes of this Agreement, "cause" shall mean any of the following: (a)
Executive's theft of any Company property or intentional falsification of any
employment or Company records, (b) Executive's improper disclosure of the
Company's confidential, business or proprietary information, (c) Executive's
consistent failure, as determined by the Board of Directors, to perform the
duties of his position, provided that the Executive is first given a written
warning detailing the failure of performance and does not correct such failure
within fifteen (15) days of his receipt of the warning, (d) Executive's
acceptance during the term of this Agreement of employment with an employer
other than the Company or any successor thereto, or (e) Executive's conviction
(including any plea of guilty or nolo contendere) for a felony or other crime
involving moral turpitude which impairs the Executive's ability to perform his
duties for the Company.
6. DEATH OR DISABILITY. In the event of the death or disability of
the Executive during the term of this Agreement, Executive or his estate, as
applicable, shall be entitled to the acceleration of the vesting of the Options
pursuant to Section 3(b) and receipt of the bonus described in Section 4 on a
pro-rated basis from the Effective Date through the date of such death or the
commencement of a disability. For purposes of this Agreement, "disability" shall
mean the Executive's inability, as determined by a qualified physician
acceptable to the Company, to perform the essential duties of his position for a
period of sixty (60) consecutive days by reason of a physical or mental illness,
injury or disease.
7. CHANGE OF CONTROL. Executive shall be entitled to the
acceleration of vesting of the Options pursuant to Section 3(b) and receipt of
the bonus described in Section 4, effective ten (10) days prior to a change of
control. For purposes of this Agreement, "change of control" shall mean the
occurrence of any of the following events: (a) the direct or indirect sale or
exchange by the stockholders of the Company of all or substantially all of the
stock of the Company where the stockholders of the Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such sale or
exchange; (b) a merger in which the stockholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such merger; or (c)
the sale, exchange, or transfer (including, without limitation, pursuant to a
liquidation or dissolution) of all or substantially all of the Company's assets
(other than a sale, exchange, or transfer to one (1) or more corporations where
the stockholders of the Company before such sale, exchange, or transfer retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the corporation(s) to which the assets were transferred).
2
<PAGE> 3
8. CONFIDENTIALITY. The Executive acknowledges and agrees that the
fact, terms and conditions of this Agreement, as well as the discussions that
led to this Agreement (collectively referred to as "the Retention Information"),
are confidential, and that the Executive shall not disclose the Retention
Information or any part thereof, to any person or entity, except to his spouse,
his attorney, and his accountant, provided that such person agrees to be bound
by the terms of this confidentiality provision.
9. MISCELLANEOUS PROVISIONS.
(a) APPLICABLE LAW. The Executive and the Company agree that
this Agreement shall be interpreted in accordance with and governed by the laws
of the State of California.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
(c) NOTICES. 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 U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him 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.
(d) SEVERABILITY. In the event that any provision of this
Agreement shall be found unenforceable by a mediator, an arbitrator or a court
of competent jurisdiction, the parties hereto shall determine a reasonable
modification to such provision to the extent necessary to allow enforceability
of the provision. If a modification of the provision is not satisfactory in the
judgment of such mediator, arbitrator or court, the unenforceable provision
shall be deemed deleted, and the validity and enforceability of the remaining
provisions shall not be affected thereby.
(e) MEDIATION AND ARBITRATION. In the event of any dispute
or claim relating to or arising out of this Agreement, the Executive and the
Company agree to mediate such dispute or claim with a mediator acceptable to
both parties. In the event that the parties do not resolve such dispute or claim
pursuant to mediation within sixty (60) days, the parties hereby agree that all
such disputes and claims shall be fully, finally and exclusively resolved by
binding arbitration conducted by the American Arbitration Association ("AAA") in
Santa Clara County, California in accordance with AAA's National Employment
Dispute Resolution rules as those rules are currently in effect, and not as
those rules may be modified in the future. The Executive and the Company hereby
knowingly and willingly waive their respective rights to have any such disputes
or claims tried to a judge or jury. Notwithstanding the foregoing, this
arbitration provision shall not apply to any disputes or claims relating to or
arising out of the actual or alleged misuse or misappropriation of the Company's
property, including, but not limited to, its trade secrets or proprietary
information.
3
<PAGE> 4
(f) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(g) INTEGRATED AGREEMENT. This Agreement, the agreements
between the Company and the Executive evidencing the Options, and the
Proprietary Rights and Information Agreement between the Company and the
Executive constitute the entire understanding and agreement of the Executive and
the Company with respect to the subject matter contained herein and therein and
supersede any prior agreements, understandings, restrictions, representations,
or warranties among the Executive and the Company with respect to such subject
matter other than those as set forth or provided for herein or therein.
(h) MODIFICATION. This Agreement may only be modified or
amended by a written agreement signed by the Executive and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Effective Date.
GENERAL MAGIC, INC.
By: /s/ Steven Markman
-------------------------------------
Title: Chairman, CEO and President
---------------------------------
EXECUTIVE:
/s/ Kevin J. Surace
----------------------------------------
Kevin J. Surace
4
<PAGE> 5
EXHIBIT 1
MANAGEMENT BUSINESS OBJECTIVES
1. Manage the Company's Business Development, Sales and Advanced
Development functions in accordance with the Executive's current
responsibilities and duties as Executive Vice President.
2. Assist the CEO in raising at least $20 million from strategic partners.
3. Improve communications:
a. Consciously and consistently communicate support of the Company
and its management team through departmental meetings and
one-on-one conversations.
b. Ensure visibility of all deals and sales forecasts at Executive
Staff meetings.
c. Communicate with existing program teams about issues affecting
their products and decisions needed in support of sales to
partners.
4. Broaden relationships between partners and the Company:
a. Introduce key executives to existing partners to ensure smooth
transition from presales to post sales support.
b. Grow Business Development staff with high-powered sales
executives to increase deal flow.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 36,982
<SECURITIES> 4,019
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,058
<PP&E> 18,233
<DEPRECIATION> 9,959
<TOTAL-ASSETS> 55,656
<CURRENT-LIABILITIES> 15,364
<BONDS> 3,820
40,331
0
<COMMON> 35
<OTHER-SE> (5,894)
<TOTAL-LIABILITY-AND-EQUITY> 55,656
<SALES> 0
<TOTAL-REVENUES> 155
<CGS> 0
<TOTAL-COSTS> 1,912
<OTHER-EXPENSES> 10,445
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> (13,695)
<INCOME-TAX> 22
<INCOME-CONTINUING> (13,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,717)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
