-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WxWDIvQKaB2Ny5wND7+JPkFllgULLqlZK4HvwpUNo/ddEMIoV2qEZOv8Y/nEl3KC cA5SojXebd8hnBbXXPZkjA== 0000929624-00-000345.txt : 20000314 0000929624-00-000345.hdr.sgml : 20000314 ACCESSION NUMBER: 0000929624-00-000345 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 20000313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMARTAGE CORP CENTRAL INDEX KEY: 0001097924 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-32250 FILM NUMBER: 567062 BUSINESS ADDRESS: STREET 1: 3450 CALIFORNIA ST CITY: SAN FRANCISCO STATE: CA ZIP: 94118 MAIL ADDRESS: STREET 1: 3450 CALIFORNIA ST CITY: SAN FRANCISCO STATE: CA ZIP: 94118 S-1 1 FORM S-1 As filed with the Securities and Exchange Commission on March 13, 2000 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------ FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 ------------ SMARTAGE.COM CORP. (Exact name of registrant as specified in its charter) Delaware 7389 88-038-6603 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification No.) incorporation or Code Number) organization) 3450 California Street San Francisco, CA 94118 (415) 674-3787 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------ WILLIAM LOHSE Chief Executive Officer SMARTAGE.COM CORP. 3450 California Street San Francisco, CA 94118 (415) 674-3787 (Name, address, including zip code, and telephone number, including area code, of agent for service of process) ------------ Copies to: Jorge del Calvo, Esq. Brian V. Caid, Esq. Gavin B. Grover, Esq. Allison Leopold Tilley, Esq. Morrison & Foerster LLP Matthew Burns, Esq. Davina K. Kaile, Esq. 5200 Republic Plaza Donald C. Hunt, Esq. Pillsbury Madison & Sutro LLP 370 Seventeenth Morrison & Foerster LLP 2550 Hanover Street Denver, CO 80202-5638 425 Market Street Palo Alto, CA 94304 San Francisco, CA 94105
------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. ------------ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement numbers of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ------------ CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Proposed Maximum Class of Securities Aggregate Amount of To Be Registered Offering Price(1)(2) Registration Fee - ---------------------------------------------------------------------- Common Stock, $0.0001 par value............ $90,000,000 $23,760 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (2) Includes the value of shares that the underwriters have the option to purchase to cover overallotments, if any. ------------ The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +We will amend and complete the information in this prospectus. Although we + +are permitted by US federal securities laws to offer these securities using + +this prospectus, we may not sell them or accept your offer to buy them until + +the documentation filed with the Securities and Exchange Commission relating + +to these securities has been declared effective by the Securities and + +Exchange Commission. This prospectus is not an offer to sell these securities + +or our solicitation of your offer to buy these securities in any jurisdiction + +where that would not be permitted or legal. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION -- March 13, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRELIMINARY PROSPECTUS , 2000 [LOGO] SMARTAGE.COM CORP. Shares of Common Stock - -------------------------------------------------------------------------------- SmartAge.com Corp.: . We are a leading provider of business-to-small business e-commerce and online promotional services and products. . SmartAge.com Corp. 3450 California Street San Francisco, CA 94118 (415) 674-3787 Proposed Symbol & Market: . SMTG/Nasdaq National Market The Offering: . We are offering shares of our common stock. . The underwriters have an option to purchase an additional shares from SmartAge.com Corp. to cover over-allotments. . This is our initial public offering. We anticipate that the initial public offering price will be between $ and $ per share. . We plan to use the proceeds from this offering for working capital and other general corporate purposes. . Closing: , 2000
- -------------------------------------------------------------------------------- Per Share Total - -------------------------------------------------------------------------------- Public offering price: $ $ Underwriting fees: Proceeds to SmartAge.com Corp.:
- -------------------------------------------------------------------------------- This investment involves risks. See "Risk Factors" beginning on Page 4. - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Nor have they made, nor will they make, any determination as to whether anyone should buy these securities. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- Joint Book-Running Managers Donaldson, Lufkin & Jenrette Merrill Lynch & Co. U.S. Bancorp Piper Jaffray DLJdirect, Inc. Inside Front Cover SmartAge.com Business-to small business e-commerce and on-line promotional services and promotional services and products Create: Easy-to-use online services to help small businesses quickly build an online presence Promote: online services designed to enable small businesses to promote their business in order to attract customers in a cost-effective manner. SmartAge Corner Office integrates the information needed by our small business members to manage their online business SmartAge Knowledge Center provides members and visitors a place to communicate online with experts and other members and learn what they need to know to succeed as a small business on the Web. [Screen shot of SmartAge.com advertising page] SmartAge MarketPlace provides a central location that brings together our small business members and third-party providers of e-commerce services to buy and sell goods and services. Enhance: online services that enable small businesses to add new functionality to their Web site while optimizing their performance Sell: a suite of e-commerce services to allow small businesses to cost- effectively establish an online e-commerce presence [Left side of Gatefold] SmartAge.com business-to-business e-commerce and online promotional services and products Step 1: Create Your Web site Step 2: Enhance your Web site SmartAge site SmartAge SiteWatch SmartAge Domain Registration Service SmartAge ProStats SmartAge Enhance Services GIF Wizard Step 3: Promote Your Business Step 4: Sell Online SmartAge Media Buyer SmartAge Store SmartAge Banner Studio SmartAge Advanced Store Builder SmartAge Banner Creator SmartAge Affiliate Network SmartAge Submit SmartAge SiteRank SmartAge Business Success Packs Step 5: SmartAge MarketPlace SmartAge Auctions SmartAge Unique Requests SmartAge Internet Barter SmartAge Group Demands
Promote your business e-commerce/sell online Enhance your Web site e-commerce/procure goods and services Create your Web Site Manage your online business SmartAge Corner Office SmartAge Knowledge Center SmartAge Corner Office Monitor Results Modify Settings Explore Available Services Adjust Member/Account Information SmartAge Knowledge Center Articles and How-to Self-help tools Expert advice Weekly Newsletters Industry-specific news forums - -------------------------------------------------------------------------------- [Right side of Gatefold] Selected Customers and Strategic Relationships Logos of customers and strategic relationships appear here. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate as of the date of this document. SmartClicks is our registered trademark. SmartAge.com, SmartAge and Corner Office are our trademarks. This prospectus also contains brand names, logos, service marks and trademarks of others. TABLE OF CONTENTS
Page Prospectus Summary................ 1 Risk Factors...................... 4 Forward-Looking Statements........ 17 Use of Proceeds................... 18 Dividend Policy................... 18 Capitalization.................... 19 Dilution.......................... 20 Selected Financial Data........... 21 Management's Discussion and Analysis of Financial Condition and Results of Operations........ 22
Page Business......................... 27 Management....................... 39 Certain Transactions............. 46 Principal Stockholders........... 48 Description of Capital Stock..... 49 Shares Eligible for Future Sale.. 53 Underwriting..................... 55 Legal Matters.................... 58 Experts.......................... 58 Where You Can Find More Information..................... 58 Index to Financial Statements.... F-1
i PROSPECTUS SUMMARY You should read the following summary together with the more detailed information in this prospectus, including risk factors, regarding our company and the common stock being sold in this offering. SmartAge.com SmartAge.com is a leading provider of business-to-small business e-commerce and online promotional services and products. Our Web site provides comprehensive solutions that enable our members to easily create and promote their Web sites, attract customers and buy and sell services and products online. By providing services and products that are important to small businesses, we have attracted more than one million members to our small business community. This community serves as a cost-effective e-commerce and advertising channel through which both small and large businesses can target and reach the highly fragmented small business market. According to IDC, the number of small businesses, including home offices, is estimated to grow to 38.5 million by 2002. IDC expects that aggregate small business e-commerce revenues will increase from $3.4 billion in 1998 to approximately $72.8 billion in 2003. Forrester Research projects that online advertising expenditures worldwide will increase ten-fold from $3.3 billion in 1999 to $33.1 billion in 2004. We provide the following benefits to small businesses, e-commerce providers and advertisers: Benefits to Small Businesses Effective Marketing and Promotional Services: Small businesses can attract customers by using online advertising services, including SmartClicks and SmartAge MediaBuyer. Easy to Use, Customizable Web Site Creation and Enhancement Tools: With SmartAge.com, small businesses can use online Web site creation tools to develop and enhance their Web sites. Efficient Monitoring, Analysis and Enhancement of Online Performance: Our SmartAge Corner Office allows small businesses to analyze key data, such as traffic and click-through activity, from a single source. Efficient MarketPlace for Buying and Selling Goods and Services: The SmartAge MarketPlace enables our small business members, and businesses targeting our members, to buy and sell services and products online. Benefits to E-Commerce Providers and Advertisers Valuable E-Commerce and Marketing Channel: Our growing community of over one million members provides e-commerce providers and advertisers with a cost- effective channel to reach the small business market. Targeted Marketing Opportunity: Our members provide us with information that allows us to enable e-commerce providers and advertisers to effectively target and reach specific market segments. Our objective is to be the leading online marketplace for business-to-small business commerce. Key elements of our strategy are to expand membership and distribution channels, increase our member loyalty and activity, increase the number of e-commerce transactions through our Web site, extend our brand leadership, continue to develop innovative technologies and expand our international presence. We were incorporated in Delaware in January 1998 under the name Netweb, Inc. We changed our name to Netweb Corporation in April 1998, to SmartAge Corp. in October 1998 and to SmartAge.com Corp. in February 2000. Our principal executive offices are located at 3450 California Street, San Francisco, California 94118, and our telephone number at that address is (415) 674-3787. Our Web site is located at www.smartage.com. The information on our Web site is not part of this prospectus. 1 The Offering Common stock offered by SmartAge.com................... shares Common stock to be outstanding after this offering............ shares Use of proceeds................... Working capital and other general corporate purposes Proposed Nasdaq National Market symbol......................... SMTG
Unless otherwise noted, all information in this prospectus assumes: . the conversion of all of outstanding shares of preferred stock into common stock upon completion of this offering; . the filing of our amended and restated certificate of incorporation; and . the underwriters will not exercise their over-allotment option. ------------ The number of shares of common stock to be outstanding after this offering assumes no exercise of the underwriters' over-allotment option and excludes: . 4,254,452 shares issuable upon exercise of options outstanding at December 31, 1999 at a weighted average exercise price of $0.53 per share; . 6,275,549 shares issuable upon exercise of warrants outstanding as of December 31, 1999 at a weighted average exercise price of $2.07 per share; . 403,735 additional shares available for future issuance under our stock plan as of December 31, 1999; and . 605,620 shares issuable upon exercise of warrants granted after December 31, 1999 in connection with the closing of our Series C preferred stock financing and 551,243 additional shares issuable due to the amendment and restatement of some of the warrants outstanding as of December 31, 1999 at a weighted average exercise price of $3.396 per share. 2 Summary Financial Data (In thousands, except per share data) The pro forma as adjusted balance sheet data below reflects the application of the net proceeds from the sale of the shares of common stock offered by SmartAge.com at an assumed initial public offering price of $ per share, after deducting the underwriting discounts and commissions and our estimated offering expenses. Please see note 1 of the notes to the financial statements for an explanation of the determination of the number of shares used in computing per share data.
January 20, 1998 (inception) to Year Ended December 31, December 31, 1998 1999 Statement of Operations Data: Total revenues.................................... $ 278 $ 2,598 Cost of revenues.................................. 57 1,540 Gross profit ..................................... 221 1,058 Total operating expenses.......................... 2,921 15,139 Loss from operations.............................. (2,700) (14,081) Net loss.......................................... $(2,692) $(13,767) Net loss applicable to common stockholders........ $(2,692) $(14,184) Net loss applicable to common stockholders per share: Basic and diluted............................... $ (0.18) $ (0.90) Weighted average shares......................... 14,940 15,751 Pro forma net loss applicable to common stockholders per share: Basic and diluted............................... $ (0.57) Weighted average shares......................... 24,793 December 31, 1999 --------------------------- Pro Forma Actual as Adjusted Balance Sheet Data: Cash and cash equivalents......................... $19,892 $ Working capital................................... 17,109 Total assets...................................... 26,231 Note payable...................................... 736 Redeemable convertible preferred stock............ 7,428 Stockholders' equity.............................. 13,222
3 RISK FACTORS Any investment in our shares of common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before deciding to invest in shares of our common stock. Risks Relating to Our Business Our limited operating history makes evaluation of our business difficult. We were incorporated in January 1998 and initially introduced our services and products in February 1998. We have entered into the majority of our contracts and strategic relationships in the last 12 months. You should consider our prospects in light of our limited operating history and the risks, uncertainties, expenses and difficulties encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets such as the market for business-to-business e-commerce services and products. We expect continuing losses and may not achieve profitability, which may cause the market price of our stock to decline. We incurred net losses of approximately $16.5 million for the period from January 20, 1998 (inception) through December 31, 1999. We expect to continue to incur substantial net losses for the foreseeable future. If we continue to incur net losses, we may not be able to increase our number of employees, increase our investment in capital equipment or increase our sales, marketing and technology and development programs in accordance with our present plans. We do not know when or if we will become profitable. If we do not become profitable within the timeframe expected by securities analysts or investors, the market price of our common stock will likely decline. If we do achieve profitability, we may not sustain or increase profitability in the future and may not be able to continue to operate. If we do not meet quarterly financial expectations, our stock price could decline. Since our inception in January 1998, our operating activities have consisted primarily of building and providing e-commerce and online promotional services for small businesses and establishing relationships with third-party distribution providers. Because of our limited operating history and other factors, our quarterly revenues and operating results are difficult to predict. In addition, due to the emerging nature of the market for e-commerce and online promotional services and products, and other factors, our quarterly revenues and operating results may fluctuate from quarter to quarter. It is likely that our operating results in some quarters will be below the expectations of securities analysts or investors. In this event, the market price of our common stock is likely to decline. A number of factors may cause fluctuations in our operating results, including, but not limited to, the following: . the growth rate of the market for e-commerce and online promotional services and products; . timing of recognition of revenues associated with our services agreements; . our ability to attract and retain members and maintain member satisfaction; . increases in member acquisition costs; . our ability to upgrade, develop and maintain our systems and infrastructure; . the amount and timing of operating costs and capital expenditures relating to the expansion of our business and infrastructure; . delays in developing and introducing new e-commerce and online promotional services and products for small businesses; . technical difficulties or system outages; . our ability to attract and retain qualified personnel with Internet industry expertise, particularly technical personnel; 4 . the announcement, introduction and market acceptance of new or enhanced services and products by our competitors; . changes in accounting standards, including standards relating to revenue recognition and stock-based compensation; . the price and mix of services and products we offer; . changes in our pricing policies and those of our competitors; . failure to increase our international sales; and . governmental regulation surrounding the Internet, such as taxation on Internet-based transactions. Due to the foregoing and other factors, we believe that period-to-period comparisons of our operating results are not a good indication of our future performance. Our business model may not be successful and may not sustain revenue growth. Our model for conducting business and generating revenues may not be successful. Our business model depends upon our ability to generate revenue streams from multiple sources, including e-commerce and online promotional services. The demand for our services and products is largely undetermined at this time. If we fail to increase traffic to our Web site and the number of customers that purchase our services and products, our business will not grow as we expect. To generate revenues, we must drive traffic to our Web site and convert visitors into customers who will use our services and products. We do not know if our business model will succeed or be sustainable as our business grows. Furthermore, we will need to develop new offerings as customer preferences change and new competitors emerge. Additionally, we currently provide many of our services and products without charge, and may not be able to generate sufficient revenues to pay for these services and products. Consequently, our business model may not be successful and may not sustain revenue growth. Our success will depend on sales of media services and the adoption of the SmartAge MarketPlace. To date, we have derived a significant portion of our revenues from the sale of banner advertisements, sponsorships and product listings to companies seeking to reach our small business members and their customers. We will not be able to maintain or increase our media services revenues in the future if our advertising customers move their advertising to competing Internet sites or to other media channels. We introduced our SmartAge MarketPlace in December 1999 and we expect that e-commerce revenues from the SmartAge MarketPlace will represent an increasing percentage of our overall revenues. If businesses do not adopt the SmartAge MarketPlace as a means to buy and sell services and products, our business will suffer and we may not be able to increase our revenues to meet the expectations of securities analysts and investors. We rely on a small number of customers for substantial portions of our revenues. In 1999, 10 customers accounted for approximately 50% of our total revenues. AdAuction accounted for approximately 13% of our total revenues in 1999, and GoTo.com accounted for approximately 11% of our total revenues in 1999. Because a few customers are likely to continue to account for a significant portion of our revenues, our revenues could decline due to the loss or delay of a single customer purchase or the failure of an existing customer to maintain its relationship with us. We may not obtain additional customers. The failure to obtain additional customers, the loss or delay of customer orders and the failure of existing customers to maintain their relationships will harm our business and operating results. 5 The development of our brand is essential to our future success and requires significant expenditures. We believe that development of our brand is critical to our future success. The importance of brand recognition will increase as more companies engage in commerce over the Internet. Because the online commerce aspects of our business model have limited legal, technological and financial barriers to entry, if we are unable to establish a trusted brand name, our business will suffer. We currently intend to invest significant capital resources to develop our brand, including spending significant amounts of money on advertising and promotions. In addition, if our competitors significantly increase their marketing spending, we may be forced to increase our marketing spending in order to compete effectively. Our efforts to promote our brand may not be successful or we may not have adequate financial resources to continue to promote our brand. We must compete successfully in the market for e-commerce and online promotional services and products. The market for e-commerce and online promotional services and products is new and rapidly evolving. Barriers to entry in this market are low, and established or new entities may enter this market at any time. We face competitive pressures from numerous actual and potential competitors, including Microsoft Corporation and Yahoo!, many of which may have: . longer operating histories; . greater brand recognition; . larger audiences; . larger technical, production and editorial staffs; . a more established Internet presence; and . significantly greater financial, technical and marketing resources than us. Although we do not compete against any one entity with respect to all aspects of our business, we do face competition from banner exchange and advertising networks, small business portals, Web site creation and content providers, e-commerce service providers and online providers of services and products for small businesses and application service providers. For instance, we compete with banner exchange networks that provide small businesses with free banner advertisements on their Web site in exchange for placing advertisements on other sites. We also compete with advertising networks, which provide targeted advertising technology and online outsourcing to Web sites, and small business portals, which provide Web site hosting services and products. We also compete with Web site creation and content providers of Web tools and e-commerce services to small businesses. We also face competition from other Internet companies focused on the small business market such as Onvia.com Inc. and DigitalWork.com Inc. In addition to the competition for members, we face competition in entering into advertising and sponsorship relationships. This competition may decrease the amount of revenues we receive from our media services. Also, our agreements with advertisers or sponsors do not have exclusivity provisions that would preclude them from entering into similar agreements with our competitors. Our future success depends on the broad adoption and acceptance of our services and products. Our services and products are designed to enable small businesses to develop and enhance their Web sites and to buy and sell services and products online. Our future success depends on the continued growth of the Internet as a medium for transacting commerce and on our ability to achieve broad market acceptance and adoption of our services and products. To accomplish this, we must, among other things, offer competitive services and products that meet industry standards and address the needs of small businesses and develop relationships with high-traffic Web sites and third-party providers of e-commerce services. If we fail to achieve any of these objectives, our business and operating results will suffer. 6 Our operating expenses may increase as we build our business and if our revenues do not correspondingly increase our operating results and financial condition may be harmed. We have spent heavily on technology and infrastructure development. We expect to dedicate significant financial and other resources on developing our Web site, developing and introducing new services and products and expanding our sales and marketing organization and operating infrastructure. We expect that our operating expenses will continue to increase in absolute dollars and may increase as a percentage of revenues. If our revenues do not correspondingly increase, our business and operating results could suffer. We base our expense levels in part on our expectations regarding future revenue levels. If our revenues for a particular quarter are lower than we expect, we may be unable to proportionately reduce our operating expenses for that quarter. We face risks associated with advertising and sponsorship arrangements. We enter into advertising and sponsorship arrangements with third parties to provide services on our Web site that involve a rate structure. These arrangements expose us to potentially significant financial risks, including the risk that we fail to deliver required minimum levels of user impressions and that third-party sponsors do not renew the agreements at the end of their terms. Some of these arrangements also require us to integrate advertisers' or sponsors' content with our services, which requires the dedication of resources and significant programming and design efforts to accomplish. We may be unable to attract additional advertisers or sponsors or we may be unable to renew existing advertising arrangements when they expire. In addition, we from time to time have granted exclusivity provisions to some of our sponsors and may in the future grant additional exclusivity provisions. If our system security is breached, our business and reputation could suffer. A fundamental requirement for online communications and transactions is the secure transmission of confidential information over public networks. Third parties may attempt to breach our security or that of our customers. We may be liable to our customers for any breach in our security and any breach could harm our business and our reputation. Our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. We may be required to spend significant capital and other resources to license encryption technology and additional technologies to protect against security breaches or to alleviate problems caused by any breach. Problems with accessing our Web site will harm our business. Our success depends in part on our ability to provide uninterrupted access to our e-commerce and online promotional services and products through our Web site. Any system failure or coordinated effort by third parties to overload our systems that causes an interruption in the service of our Web site or a decrease in its responsiveness could result in reduced user traffic and reduced revenues. Further, prolonged or ongoing performance problems on our Web site could damage our reputation and result in the permanent loss of customers to our competitors' Web sites. We have occasionally experienced system interruptions that have made our Web site unavailable, slowed its response time or prevented us from efficiently providing services to our members. We believe these interruptions may continue to occur from time to time. Our business and reputation will suffer if we experience frequent problems that result in the inability to access our Web site. We may face liability associated with our management of sensitive member information. We manage sensitive member information, and we may be subject to claims associated with invasion of privacy or inappropriate disclosure, use or loss of this information. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could harm our reputation and our business and operating results. 7 The integration of our services and products with other vendors' services and products could cause us to incur significant costs, divert attention from our development efforts and cause customer relations problems. Our customers may use our services and products together with services and products from other companies. For example, we offer Web site design tools from third parties as part of our e-commerce service offerings. As a result, a problem may not be discovered until our products or services are integrated for use. In addition, when a problem occurs, it may be difficult to identify the source of the problem. Even when these problems are not caused by our products or services, they may cause us to incur significant warranty costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems. If we fail to successfully extend and establish strategic relationships to help us expand market acceptance of our services and products, our business will suffer. To successfully extend our existing and establish new relationships, we must establish new relationships with original equipment manufacturers, or OEMs, as well as continue to advertise and create marketing alliances to promote the use of our e-commerce solutions and online promotional services and products. If we fail to maintain, establish or successfully implement these relationships, our e-commerce and online promotional services and products will suffer and our business and operating results will be harmed. Our failure to expand and maintain third-party distribution channels may impede our revenue growth. To increase our revenues, we must increase the number of our marketing and distribution providers, including OEMs and resellers for our services and products. For example, we rely on OEMs and third-party service providers for co-branded marketing and member acquisition. Our existing or future marketing and distribution providers may choose to devote greater resources to marketing and supporting the services and products of competitors, which could harm us. In addition, our OEMs may not continue to co-market our services and products. If we do not maintain and build these distribution relationships, our business and financial condition may suffer. We may need to license third-party technologies and may be unable to do so. We intend to continue to license technologies from third parties, including our Web server technology. Licensed technologies are integrated into our services and products and are used to perform key functions. To the extent we need to continue to license third-party technologies, we may be unable to do so on commercially reasonable terms or at all. In addition, we may fail to successfully integrate any licensed technology into our services. Third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, the diversion of resources from the development of our own proprietary technology, our inability to generate revenues from new technology sufficient to offset associated acquisition and maintenance costs. Our inability to obtain any of these licenses could delay service and product development until equivalent technology can be identified, licensed and integrated. This in turn would harm our business and operating results. Failure to successfully develop and introduce new services and products would harm our business. Our future success depends in large part on our ability to develop new or enhanced e-commerce and online promotional services and products in a timely manner and to provide new services and products that achieve rapid and broad market acceptance. We may fail to identify new product and service opportunities successfully or develop and timely bring new services and products to market. We may also experience delays in completing development of enhancements to, and new versions of, our services and products. We may be unable to develop or acquire marketable services and products in a timely manner. In addition, product or service innovations may not achieve the market penetration or price stability necessary for profitability. 8 As the Internet continues to evolve, we plan to leverage our technology by developing complementary services and products as additional sources of revenues. Accordingly, we may change our business model to take advantage of new business opportunities, including business areas in which we do not have extensive experience. If we fail to develop these or other businesses successfully, our business would be harmed. We may engage in future acquisitions or investments that could dilute our existing stockholders, cause us to incur significant expenses or harm our business. We may review acquisition or investment prospects that may include acquiring complementary businesses, technologies, content or products. Integrating any newly acquired businesses, technologies or products, may be expensive and time- consuming. To finance any acquisitions, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may dilute our stockholders. We may be unable to complete any acquisitions or investments on commercially reasonable terms, if at all. Even if completed, we may be unable to operate any acquired businesses profitably or otherwise implement our growth strategy successfully. If we are unable to integrate any newly acquired entities or technologies effectively, our operating results could suffer. Future acquisitions by us could also result in large and immediate write-offs, incurrence of debt and contingent liabilities or amortization of expenses related to goodwill and other intangibles, any of which could harm our operating results. If we fail to expand our sales and marketing organization, we may be unable to expand our brand recognition and our business. If we do not successfully expand our sales and marketing organization, we may not expand our business fast enough to meet the expectations of securities analysts and investors and our stock price could decline. With our relatively brief operating history and our plans for expansion, we have considerable need to recruit, train and retain qualified sales and marketing staff. Any delays or difficulties we encounter in these staffing efforts could impair our ability to attract new customers and to enhance our relationships with existing customers. This in turn would adversely impact the timing of revenues. Because the majority of our sales and marketing personnel have recently joined us and have limited experience working together, our sales and marketing organization may not be able to compete successfully against bigger and more experienced organizations of our competitors. Our recent growth has placed a strain on our resources and if we fail to manage our future growth, our business could suffer. We are currently experiencing a period of rapid expansion in our personnel, facilities, infrastructure and Web site traffic. For example, substantially all of our employees were hired in 1999, and we expect that our hiring rate will continue at a rapid pace. If we cannot integrate these employees into our business, we will not be able to manage our growth effectively. In addition, several members of our management team, such as our Chief Financial Officer, joined SmartAge.com in the past few months. If our senior managers are unable to work effectively as a team, our business operations could be significantly disrupted. We expect further significant expansion will be required to address any future growth in our consumer base, the breadth of our product and service offerings and other opportunities. We currently plan to relocate our corporate headquarters in San Francisco, California in March 2000, and any disruption of our operations as a result of this relocation could harm our business. Our expansion has placed, and we expect that it will continue to place, a significant strain on our management, operational and financial resources. Our failure to manage growth could disrupt our operations, delay execution of our business plan and consequently harm our business. We must recruit and retain our key employees to expand our business. Our success will depend on the skills, experience and performance of our senior management, engineering, sales, marketing and other key personnel, many of whom have worked together for only a short period of time. 9 The loss of the services of any of our senior management or other key personnel, including our Chief Executive Officer, William Lohse, could harm our business. We do not have long-term employment agreements with many of our key employees, and we do not have life insurance policies on any of our key employees. Our future success will also depend on our ability to attract, train, retain and motivate other highly skilled engineering, technical, managerial, sales and marketing and customer support personnel. Competition for these personnel is intense, especially in the San Francisco Bay Area, and we have had difficulty hiring employees in the timeframe we desire. In particular, we may be unable to hire a sufficient number of qualified engineers and Web designers. Our inability to hire, integrate and retain qualified personnel in sufficient numbers could reduce the quality of our services and products. If we fail to retain and recruit necessary engineering, sales, marketing or other personnel, our business and our ability to develop new services and products and to provide acceptable levels of customer service could suffer. In addition, companies in the Internet industry whose employees accept positions with competitors frequently claim that competitors have engaged in unfair hiring practices. We could incur substantial costs in defending ourselves against any of these claims, regardless of the merits of these claims. Failure to expand and upgrade our Web site infrastructure to meet customer requirements would harm our business. We will need to expand and upgrade our Web site infrastructure to support increases in the volume of traffic on our Web site. Accommodating this potential growth in Web site traffic and customer transactions will require us to continue to develop our technology infrastructure. To maintain the necessary technological platform in the future, we must continue to expand and stabilize the performance of our Web servers, improve our transaction processing system, optimize the performance of our network servers and ensure the stable performance of our entire network. The expansion and operation of our Web infrastructure will require substantial financial, operational and management resources. In addition, as we expand and upgrade our Web infrastructure, we may encounter software or equipment failures. We may be unable to expand and upgrade our Web infrastructure to meet additional demand or adapt to our customers' changing requirements in a timely manner or at all. As a result, interest in and demand for our services could decrease and our business and operating results would be harmed. Unknown software defects could disrupt our services, which could harm our business and reputation. Our e-commerce and online promotional services and products depend on complex software, both internally developed and licensed from third parties. Complex software often contains defects, particularly when first introduced or when new versions are released. Although we conduct testing during the development of our services and products, we have at times been forced to delay commercial release of our services and products until problems were corrected and, in some cases, have provided enhancements to correct errors in our services and products. If we do detect any errors before we introduce a service or product, we might have to stop providing the service or selling the product for an extended period of time while we address the problem. We may not discover defects that affect our new or current services and products or enhancements until after they are deployed. It is possible that, despite testing by us, defects may occur. These defects could result in: . damage to our reputation; . lost sales; . delays in commercial release of our services or products; . product liability claims; . delays in or loss of market acceptance of our services or products; . service and product refunds; and . unexpected expenses and diversion of resources to remedy errors. 10 If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer. We intend to expand into international markets. If our revenues from international operations do not exceed the expense associated with establishing and maintaining our international operations, our business will suffer. We have limited experience in international operations and may not be able to compete effectively in international markets. Some risks we face in conducting business internationally include: . unexpected changes in regulatory requirements; . difficulties and costs of staffing and managing international operations; . differing technology standards; . difficulties in collecting accounts receivable and longer collection periods; . political and economic instability; . fluctuations in currency exchange rates; . imposition of currency exchange controls; . potentially adverse tax consequences; and . reduced protection for intellectual property rights in foreign countries. Unplanned system interruptions and capacity constraints could harm our business and our reputation. Because our data warehousing, Web server and network facilities are all located in California, an earthquake or other natural disaster could affect all of our facilities simultaneously. An unexpected event such as a power or telecommunications failure, fire, flood or earthquake at our data warehousing facility or our Internet service provider's facilities could cause the loss of critical data and prevent us from offering our services and products. Business interruption insurance may not adequately compensate us for losses that may occur. In addition, we rely on third parties to securely store our archived data, house our Web server and network systems and connect us to the Internet. A failure by any of these third parties to provide these services satisfactorily would impair our ability to access archives and operate our Web site. Our Web servers and database servers are maintained at an Exodus Communications data center. Our operations depend on Exodus' ability to protect its and our systems against damage from fire, power loss, water damage, telecommunications failures, vandalism and similar unexpected adverse events. Any disruption in the services provided by Exodus could severely disrupt our operations. Our backup systems may not be sufficient to prevent major interruptions to our operations, and we do not have a formal disaster recovery plan. We also may not have sufficient business interruption insurance to cover losses from major interruptions. Our members and visitors to our Web site depend on their own Internet service providers, online service providers and other Web site operators for access to our Web site. Each of these providers has experienced outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems. We may be unable to protect our intellectual property and proprietary rights, which could harm our business. Our success depends in part upon our ability to protect our intellectual property. We rely on a combination of copyright, trade secret, trademark and contractual protection to establish and protect our proprietary rights, and we enter into confidentiality agreements with those of our employees and consultants involved in product development. Despite our efforts to protect our proprietary rights through confidentiality and license agreements, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Our precautions may not prevent misappropriation or infringement of our intellectual property and do not prevent independent third-party development of competitive products. 11 We might have liability for the third-party services and products that we provide. Because we provide access to third-party services and products on our Web site, we might be sued for negligence, copyright or trademark infringement or other reasons. These types of claims have been brought, sometimes successfully, against providers of online services and products in the past. Others could also sue us for the content that is accessible from our Web site through links to other Web sites. These claims might include, among others, claims that by hosting, directly or indirectly, the Web sites of third parties, we are liable for copyright or trademark infringement or other wrongful actions by these third parties through these Web sites. Our insurance may not adequately protect us against these types of claims and, even if these claims do not result in liability, we could incur significant costs in investigating and defending against these claims. We may face intellectual property infringement claims that could be costly to defend. Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. In addition, other parties may assert infringement claims against us. Although we have not received notice of any alleged infringement, our products may infringe issued patents that may relate to our products. In addition, because the contents of patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed that relate to our services and products. We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming and could divert management's attention away from running our business. This litigation could also require us to develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. Our failure or inability to develop non- infringing technology or license the proprietary rights on a timely basis would harm our business. We are engaged in legal proceedings with Internet Finance Corporation that could seriously harm our business. On June 9, 1999, Internet Finance Corporation filed a demand for arbitration with the American Arbitration Association in San Francisco, California against us for breach of contract, breach of express warranty, negligence, fraud in the inducement, unconscionable contract and intentional misrepresentation. Internet Finance Corporation is seeking compensatory damages of $2.4 million and punitive damages of at least $1.0 million and injunctive relief. On July 21, 1999 we filed an answer and counterclaim against Internet Finance Corporation. An arbitration hearing was completed on February 1, 2000, and both parties have filed post-arbitration briefs. The arbitration ruling is expected in early April. The outcome of this proceeding may not be favorable to us. An adverse determination in this proceeding could subject us to substantial damages and seriously harm our business. If we do not adequately address Year 2000 issues, we may incur significant costs and our business could suffer. Many existing computer programs use only two digits to identify a year. These programs were designed and developed without addressing the impact of the upcoming change in the century. If not corrected, many computer software applications could fail or create erroneous results by, at or beyond 2000. As a result, the networks that incorporate our products and our own internal networks could fail, leading to disruptions in operations and business activities. Although we have not experienced any Year 2000 problems to date, we may face risks associated with residual Year 2000 issues, including those associated with newly installed or utilized computer programs. 12 Risks Relating to Our Industry We may not be able to keep up with rapid technological change. The e-commerce and online promotional services and products markets are characterized by rapid technological change, frequent introductions of new or enhanced hardware and software products, evolving industry standards and changes in customer preferences and requirements. We may not be able to keep up with any of these or other rapid technological changes, and if we do not, our business will be harmed. These changes and the emergence of new industry standards and practices could render our existing Web site and operational infrastructure obsolete. The widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require us to incur substantial expenditures to modify or adapt our operating practices or infrastructure. To be successful, we must enhance our Web site responsiveness, functionality and features, acquire and license leading technologies, enhance our existing service and product offerings and respond to technological advances and emerging industry standards and practices in a timely and cost- effective manner. Our success depends on development of the market for e-commerce and online promotional services and products. The market for e-commerce and online promotional services and products is new and rapidly evolving. As a result, demand and market acceptance for our services and products is highly uncertain. If this new market fails to develop, develops more slowly than expected or becomes saturated with competitors, or if our services and products do not achieve or sustain market acceptance, our business could be harmed. Our success will depend on growth in consumer acceptance of our Web site as a method for delivery of comprehensive e-commerce services over the Internet. Factors that might influence market acceptance of our services and products include the following, over which we have little or no control: . the availability of sufficient capacity on the Internet; . willingness of small businesses to rely on us as an aggregator of e- commerce services; and . the cost of time-based Internet access. Our success depends on the increasing use of the Internet by small businesses. If use of the Internet as a medium for small business communications and commerce does not continue to increase, demand for our services and products will be limited and our financial results will suffer. If the development of infrastructure of the Internet does not keep pace with the growth of Internet usage, our business could suffer. Given the Internet-based nature of our business, without the continued development and maintenance of the Internet infrastructure, our plan to generate revenues by providing e-commerce and online promotional services and products may not succeed. This continued development of the Internet would include maintenance of a reliable network with the necessary speed, data capacity and security, as well as timely development of complementary products, including high speed modems, for providing reliable Internet access and services. Because global commerce and advertising on the Internet are new and evolving, we cannot predict whether the Internet will prove to be a viable commercial marketplace in the long term. The success of our business will rely on the continued improvement of the Internet as a convenient means of consumer interaction and commerce. As the Internet continues to experience increased numbers of users, increased frequency of use and increased bandwidth requirements, the Internet infrastructure may be unable to support the demands placed on it. In addition, increased users or capacity requirements may harm the performance of the Internet. The Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage 13 as well as the level of traffic. The infrastructure and complementary services or products necessary to make the Internet a viable commercial marketplace for the long term may not be developed successfully or in a timely manner. Even if these products or services are developed, the Internet may not become a viable commercial marketplace for the services or products that we offer. Because our members must access services and products through our Web site, our business could suffer if efficient transmission of data over the Internet is interrupted. The recent growth in the use of the Internet has caused frequent interruptions and delays in accessing the Internet and transmitting data over the Internet. Because we provide e-commerce and online promotional services and products, interruptions or delays in Internet transmissions will harm our customers' ability to use our services and products. Therefore, our market depends on improvements being made to the entire Internet infrastructure to alleviate overloading and congestion. Governmental regulation and legal uncertainties could impair the growth of the Internet and decrease demand for our products or increase our cost of doing business. The laws and regulations that govern our business change rapidly. Although our operations are currently based in California, the United States government and the governments of other states and foreign countries have attempted to regulate activities on the Internet and the manufacture of computer software and distribution. Although there are currently few laws and regulations directly applicable to the Internet and the use of the Internet as a commercial medium, a number of laws have been proposed involving the Internet. These proposed laws include laws addressing user privacy, pricing, content, copyrights, distribution, antitrust and characteristics and quality of services and products. Moreover, the applicability to the Internet of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. Evolving areas of law that are relevant to our business include privacy law, proposed encryption laws, content regulation and sales and use tax laws and regulations. Because of this rapidly evolving and uncertain regulatory environment, we cannot predict how these laws and regulations might affect our business. Any new laws and regulations could harm us by subjecting us to liability or forcing us to change how we do business. For example, in 1998, Congress passed the Internet Freedom Act, which imposes a three-year moratorium on state and local taxes on Internet-based transactions. We cannot assure you that this moratorium will be extended. Failure to renew this moratorium would allow various states to impose taxes on e-commerce, which might harm our business. Risks Relating to Our Offering Our stock price may be volatile, and you may not be able to sell your shares at or above the offering price. Prior to this offering, our common stock has not been publicly traded, and an active trading market may not develop or be sustained after this offering. You may not be able to sell your shares at or above the offering price. The price at which our common stock will trade after this offering is likely to be highly volatile and may fluctuate substantially due to factors such as the following: . actual or anticipated fluctuations in our operating results; . changes in or our failure to meet securities analysts' expectations; . announcements of technological innovations; . introduction of new services and products by us or our competitors; . developments with respect to intellectual property rights; . conditions and trends in the Internet and other technology industries; and . general market conditions. 14 Purchasers of our common stock will suffer immediate and substantial dilution. Purchasers of our common stock in this offering will experience immediate dilution of $ in the pro forma net tangible book value per share of common stock, based on an assumed initial public offering price of $ per share. Purchasers will also experience additional dilution upon the exercise of outstanding stock options and warrants. The initial public offering price is expected to be substantially higher than the book value per share of our common stock. Some elements of our market value do not originate from measurable transactions. Therefore, there is not a corresponding rise in book, or historical accounting, value for our rise in market value, if any. Examples of these elements include the perceived value associated with our strategic relationships, perceived growth prospects of our market and our perceived competitive position within that market. After this offering, our directors, executive officers and principal stockholders will continue to have substantial control over matters requiring stockholder approval and may not vote in the same manner as our other stockholders. Prior to this offering, our directors, executive officers and stockholders who currently own over 5% of our common stock collectively own approximately % of our outstanding common stock. After this offering, our directors, executive officers and stockholders who currently own over 5% of our common stock will collectively beneficially own approximately % of our outstanding common stock. These stockholders, if they vote together, will be able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in control of SmartAge.com. Future sales of our common stock may depress our stock price. Sales of a substantial number of shares of common stock in the public market after this offering or after the expiration of lockup and holding periods could cause the market price of our common stock to decline. After this offering, we will have approximately shares of common stock outstanding. All the shares sold in this offering will be freely tradable. The remaining shares of common stock outstanding after this offering are subject to lock-up agreements that prohibit the sale of the shares for 180 days after the date of this prospectus, subject to release during the 180-day period pursuant to the terms of the lockup agreement. However, 25% of the shares of common stock subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions on the later to occur of the end of the 90-day period after the date of this prospectus or the second trading day following the first public release of our quarterly results, provided that the reported sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on such date. An additional 25% of the shares subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions if the reported last sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on the last trading day of the 135-day period after the date of this prospectus. Each person subject to the lock-up agreement described above has agreed to execute any transaction released from restriction in accordance with the terms in this paragraph only through Donaldson, Lufkin & Jenrette Securities Corporation or any of its affiliates acting as broker, unless otherwise agreed in writing by Donaldson, Lufkin & Jenrette Securities Corporation. Any or all of these shares may be released prior to expiration of the 180-day lockup period at the discretion of Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Immediately after the 180-day lockup period, shares that will be outstanding after the offering will become available for sale. The remaining shares of our common stock will become available at various times thereafter upon the expiration of one-year holding periods. 15 We may need additional capital which may not be available and raising additional capital may dilute existing stockholders. We believe that our existing capital resources, including the anticipated proceeds of this offering, will enable us to maintain our current and planned operations for at least the next 12 months. However, we may choose to, or be required to, raise additional funds due to unforeseen circumstances. If our capital requirements vary materially from those currently planned, we may require additional financing sooner than anticipated. This financing may not be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion, take advantage of unanticipated opportunities, develop or enhance services or products or otherwise respond to competitive pressures would be significantly limited. If we do not use the proceeds in a manner that increases our operating results or market value, our business could suffer. We have no current specific plans for the net proceeds from this offering. As a result, our management will have significant flexibility in applying the net proceeds of this offering. The net proceeds could be applied in ways that do not increase our operating results or market share. We intend generally to use the net proceeds from this offering for working capital and general corporate purposes. We have not yet determined the actual expected expenditures and thus cannot estimate the amounts to be used for each specified purpose. The actual amounts and timing of these expenditures will vary significantly depending on a number of factors, including, but not limited to, the amount of cash used in or generated by our operations and the market response to the introduction of any new product and service offerings. Depending on future developments and circumstances, we may use some of the proceeds for uses other than those described above. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. Our certificate of incorporation, bylaws and Delaware corporate law contain provisions that could delay or prevent a change in control even if the change in control would be beneficial to our stockholders. Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change in control of SmartAge.com. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. Some of these provisions: . authorize the issuance of preferred stock that can be created and issued by the board of directors without prior stockholder approval to increase the number of outstanding shares and deter or prevent a takeover attempt; . prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; . establish a classified board of directors requiring that not all members of the board be elected at one time; . prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; . limit the ability of stockholders to call special meetings of stockholders; and . establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. In addition, Section 203 of the Delaware General Corporation Law and the terms of our stock option plans may discourage, delay or prevent a change in control of SmartAge.com. 16 We may become involved in securities class action litigation, which could divert management's attention and harm our business. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stocks of technology companies, particularly Internet companies. These broad market fluctuations may cause the market price of our common stock to decline. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management's attention and resources, which could harm our business and operating results. We do not anticipate paying dividends in the foreseeable future. We have never paid cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future. FORWARD-LOOKING STATEMENTS Some of the statements contained in this prospectus contain forward-looking information. These statements are found in the sections entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus. They include statements concerning: . our business strategy; . liquidity and capital expenditures; . our use of the proceeds of the offering; . future sources and nature of revenues; . future expenses and investments; . future profitability; . expansion of our services and products; . sales trends; . trends in Internet activity generally; . Year 2000 issues; . trends in government regulation; and . payment of dividends. You can identify these statements by forward-looking words such as "expect," "anticipate," "believe," "goal," "plan," "intend," "estimate," "predict," "potential," "continue," "may," "will" and "should" or similar words. You should be aware that these statements are subject to known and unknown risks, uncertainties and other factors, including those discussed in the section entitled "Risk Factors," that could cause the actual results to differ materially from those suggested by the forward-looking statements. 17 USE OF PROCEEDS We estimate that our net proceeds from the sale of the shares of common stock we are selling, after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us, will be approximately $ million based on an initial public offering price of $ per share. If the underwriters exercise in full their over-allotment option to purchase an additional shares of common stock, the aggregate net proceeds will be approximately $ million. The principal purposes of this offering are: . to obtain additional capital; . to create a public market for our common stock; . to increase our visibility and credibility; and . to facilitate future access to the public equity markets. We intend to use the net proceeds of this offering for working capital and other general corporate purposes. We have not yet determined the expected expenditures and thus cannot estimate the amounts to be used for each specified purpose. The actual amounts and timing of these expenditures will vary significantly depending on a number of factors, including, but not limited to, the amount of cash used in or generated by our operations and the market response to the introduction of any new product and service offerings. In addition, we may use a portion of the net proceeds of this offering to acquire or invest in businesses, products, services or technologies complementary to our current business, through mergers, acquisitions, joint ventures or otherwise. However, we have no specific agreements or commitments and are not currently engaged in any negotiations with respect to such transactions. Accordingly, our management will retain broad discretion as to the allocation of the net proceeds of this offering. We intend to invest the net proceeds of this offering in short-term, interest-bearing investment grade securities until they are used. DIVIDEND POLICY We have never declared or paid dividends on our capital stock and do not anticipate paying any dividends in the foreseeable future. We currently intend to retain our earnings, if any, for the development of our business. 18 CAPITALIZATION The following table sets forth our capitalization as of December 31, 1999: . on an actual basis; . on a pro forma basis after giving effect to: -- the issuance of 110,993 shares of our Series C convertible preferred stock in February 2000; -- the exercise of outstanding warrants to purchase an aggregate of 3,878,781 shares of our Series C convertible preferred stock in March 2000; and -- the conversion of all outstanding shares of preferred stock into common stock and changes to our authorized capital stock upon completion of this offering. . on the same pro forma basis as adjusted to give effect to the sale of shares of common stock by us at an assumed initial public offering price of $ per share and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. This information should be read together with the financial statements and related notes included elsewhere in this prospectus.
December 31, 1999 ------------------------------ Pro Pro Forma Actual Forma As Adjusted (In thousands except share data) Notes payable ................................. $ 736 $ 736 $ -------- ------- ---- Redeemable convertible Series B preferred stock: $0.0001 par value; 9,164 shares authorized, 6,503 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted...................................... 7,428 -- -------- ------- ---- Stockholders' equity: Convertible Series A preferred stock: $0.0001 par value; 3,840 shares authorized, 2,657 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted......................... -- -- -- Convertible Series C preferred stock: $0.0001 par value; 14,000 shares authorized, 7,573 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted......................... 1 -- -- Common stock: $0.0001 par value; 61,500 shares authorized, 16,882 shares issued and outstanding, actual; 37,605 shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted............ 2 4 Additional paid-in capital..................... 36,384 57,360 Deferred stock-based compensation.............. (6,705) (6,705) Accumulated deficit ........................... (16,460) (16,460) -------- ------- ---- Total stockholders' equity................... 13,222 34,200 -------- ------- ---- Total capitalization......................... $ 21,386 $34,936 $ ======== ======= ====
19 DILUTION The pro forma net tangible book value of our common stock on December 31, 1999 was $ million, or approximately $ per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities divided by the number of shares of common stock outstanding on a pro forma basis at that date, assuming the conversion of all outstanding shares of preferred stock into common stock. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the pro forma net tangible book value per share of our common stock immediately after completion of this offering. After giving effect to the issuance of 110,993 shares of Series C preferred stock in February 2000 and our sale of shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share and after deducting the estimated underwriting discounts and offering expenses payable by us, our pro forma net tangible book value would have been $ million, or approximately $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to the existing stockholders and an immediate dilution in pro forma net tangible book value of $ per share to new investors. Assumed initial public offering price per share.................. $ Pro forma net tangible book value per share as of December 31, 1999.......................................................... $ Increase per share attributable to new investors............... ---- Adjusted pro forma net tangible book value per share after the offering...................................................... ---- Dilution in pro forma net tangible book value per share to new investors..................................................... $ ====
The following table sets forth as of December 31, 1999, on the pro forma basis described above, the differences between the number of shares of common stock purchased from us, the total price and the average price per share paid by existing stockholders and by the new investors before deducting estimated underwriting discounts and offering expenses payable by us, assuming an initial public offering price of $ per share.
Shares Total Average Purchased Consideration Price -------------- -------------- Per Number Percent Amount Percent Share Exiting stockholders.................. % $ % $ New investors......................... --- --- ---- --- Total............................... % $ % $ === === ==== === ====
The foregoing table assumes no exercise of the underwriters' over-allotment option and excludes: . 4,254,452 shares issuable upon exercise of options outstanding at December 31, 1999; . up to 6,275,549 shares issuable upon exercise of warrants outstanding as of December 31, 1999; . 403,735 additional shares available for future issuance under our stock plans as of December 31, 1999; and . 605,620 shares issuable upon exercise of warrants granted after December 31, 1999 in connection with the closing of our Series C preferred stock financing and 551,243 additional shares issuable due to the amendment and restatement of some of the warrants outstanding as of December 31, 1999. To the extent the underwriters' over-allotment option is exercised or any of these warrants or options are exercised, there will be further dilution to new investors. 20 SELECTED FINANCIAL DATA The following selected statement of operations data for the period from inception through December 31, 1998 and the year ended December 31, 1999 and the selected balance sheet data as of December 31, 1998 and 1999 are derived from our audited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any future period. The data have been derived from financial statements that have been prepared in accordance with generally accepted accounting principles and should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus. See note 1 of the notes to our financial statements for an explanation of the determination of the number of shares used in computing basic and diluted net loss per share.
Period from January 20, 1998 (inception) to Year Ended December 31, 1998 December 31, 1999 (In thousands, except per share data) Statement of Operations Data: Revenues: Media..................................... $ 239 $ 2,237 E-commerce................................ 39 361 ------- -------- Total revenues........................... 278 2,598 Cost of revenues........................... 57 1,540 ------- -------- Gross profit............................... 221 1,058 Operating expenses: Sales and marketing....................... 667 6,544 Technology and development................ 736 3,372 General and administrative................ 1,210 3,706 Stock-based compensation.................. 308 1,517 ------- -------- Total operating expenses................. 2,921 15,139 ------- -------- Loss from operations....................... (2,700) (14,081) Interest income, net....................... 8 314 ------- -------- Net loss................................. $(2,692) $(13,767) Accretion on redeemable convertible preferred stock........................... -- 417 ------- -------- Net loss applicable to common stockholders............................ $(2,692) $(14,184) ======= ======== Basic and diluted net loss per share....... $ (0.18) $ (0.90) ======= ======== Weighted-average shares used in computing basic and diluted net loss per share................................. 14,940 15,751 Pro forma basic and diluted net loss per share (unaudited)......................... $ (0.57) ======== Weighted-average shares used in computing pro forma basic and diluted net loss per share (unaudited)......................... 24,793 As of December 31, ----------------------------------- 1998 1999 (In thousands) Balance Sheet Data: Cash and cash equivalents.................. $ 620 $ 19,892 Working capital............................ 415 17,109 Total assets............................... 1,219 26,231 Note payable............................... 736 736 Redeemable convertible preferred stock..... -- 7,428 Total stockholders' equity................. 79 13,222
21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with the financial statements and the related notes included elsewhere in this prospectus. Overview We are a leading provider of business-to-small business e-commerce and online promotional services and products. Our solutions and services have attracted more than one million members and are specifically designed to enable them to quickly and easily create and promote their Web sites, attract customers and buy and sell services and products online. Through the SmartAge Knowledge Center and electronic newsletters, we provide small businesses with expert advice and information designed to help them evolve their businesses and compete more effectively. Our SmartAge MarketPlace allows our members to efficiently buy and sell goods and services with each other as well as with large businesses targeting the small business market segment. Our company was incorporated on January 20, 1998. On February 5, 1998, we purchased Thomsen Enscore Computer Solutions, Inc., which created our proprietary banner advertising exchange technology called SmartClicks. Since inception, our operating activities have consisted primarily of developing services and products, establishing relationships with third-party distribution providers and providing marketing opportunities for businesses targeting our small business members. Our small business membership has grown from over 107,000 small businesses at December 31, 1998, to over one million small businesses by December 31, 1999. We made significant investments in technology and development to enhance our current, and develop new, services and products. We have also made significant investments in marketing and sales to enhance our brand recognition and extend our customer reach. We began recognizing revenues in the first quarter of 1998. Revenues in 1998 were generated primarily from the sale of advertising and sponsorships to businesses targeting our small business members. Revenues in 1999 were generated from advertising and sponsorships as well as e-commerce solutions and online promotional services sold to our small business members. Advertising revenues are generated by delivering impressions on our Web site, on our members' Web sites and on third-party networks at an agreed upon rate per thousand impressions. An impression is the viewing of advertising or other promotional material on a Web site. Sponsorship revenues are generated by selling both advertising in our electronic newsletters and location-specific advertisements for a specified period of time such as banners, links, buttons and other images on our Web site. We contract directly with advertisers and sponsors and bear full credit risk. E-commerce revenues are generated from sales of online promotional and media buying services to our members and, to a lesser extent, the sale of Web site creation services and products. We recently introduced SmartAge MarketPlace and we intend to introduce additional e-commerce services and products in the future. We expect that, over time, revenues from current and new e-commerce services and products will comprise an increasing percentage of our overall revenues. Revenues from the sale of advertising are recognized in the period the services are delivered. Revenues from the sale of sponsorships are recognized either in the period services are delivered or ratably over the term of the agreement. Advertising and sponsorships are typically sold under purchase order agreements, which are usually short-term in nature and subject to cancellation. E-commerce revenues are recognized in the period our services are delivered or transactions occur. Any payments received in advance are recorded as deferred revenue until recognized. E-commerce revenues are recognized net of any amounts owed to third-party providers. While we enable our small business members to engage in barter transactions for which we receive a cash fee, we do not engage in barter transactions ourselves. Cost of revenues consist primarily of expenses related to co-location services, Internet telecommunications charges, depreciation expense for operating equipment and amounts paid to third-party advertising inventory providers. Our operating expenses include expenses associated with sales and marketing, technology and development and general and administrative activities. Sales and marketing expenses consist primarily of salaries and commissions for personnel, travel, advertising, direct marketing and public relations. Technology and development expenses consist 22 primarily of salaries for personnel. In addition, costs related to the development of new services and products and enhancements to existing services and products are charged to technology and development as incurred. General and administrative expenses consists primarily of salaries for personnel, facility costs and professional services and fees. We have sustained losses on a quarterly and annual basis since inception. As of December 31, 1999, we had an accumulated deficit of $16.5 million. These losses resulted from significant costs incurred in developing our Web site and technology and building our small business membership. We expect to significantly increase our operating expenses, particularly in technology and development and sales and marketing. As a result of these factors, we expect to incur significant losses on a quarterly and annual basis for the foreseeable future. Recent Events On February 16, 2000, we issued and sold 110,993 shares of our Series C preferred stock for aggregate proceeds of $377,000. On March 3, 2000 we issued 3,878,781 shares of our Series C preferred stock upon the exercise of warrants for aggregate proceeds of $13.2 million. Results of Operations References to our 1998 results of operations reflect the period from our inception on January 20, 1998 to December 31, 1998. In light of the rapidly evolving nature of our business and our limited operating history, we believe that period-to-period comparisons of our financial results between 1998 and 1999 are not indicative of our future growth or financial performance. Period from January 20, 1998 (inception) through December 31, 1998 and the Year Ended December 31, 1999 Revenues. Revenues increased 834% to $2.6 million in 1999 from $278,000 in 1998. This increase was primarily due to an increase in media revenues, which increased to $2.2 million in 1999 from $239,000 in 1998, and e-commerce revenues, which increased to $361,000 in 1999 from $39,000 in 1998. Cost of Revenues. Cost of revenues increased to $1.5 million, or 59% of revenues, in 1999, from $57,000, or 20% of revenues, in 1998. This increase was primarily due to growth in advertising and sponsorship revenues and associated amounts paid to third-party advertising inventory providers, increased expenses for co-location services, Internet telecommunication charges and increased depreciation expenses. We expect that cost of revenues will increase in absolute dollar amounts and decrease as a percentage of revenues as e-commerce revenues become a larger portion of our overall revenues. Sales and Marketing. Sales and marketing expenses increased to $6.5 million in 1999 from $667,000 in 1998. This increase was primarily due to the hiring of additional personnel and an increase in advertising and direct marketing activities. We also incurred significant expenses in connection with expanding our marketing and other strategic relationships. We expect to continue to substantially increase our advertising and direct marketing efforts and hire additional sales and marketing personnel. As a result, we expect sales and marketing expenses to increase in absolute dollar amounts. Technology and Development. Technology and development expenses increased to $3.4 million in 1999 from $736,000 in 1998. This increase was primarily due to increases in personnel and professional services. We expect to continue to make substantial investments in the enhancement and development of our technologies and services and anticipate that technology and development expense will increase in absolute dollar amounts. General and Administrative. General and administrative expenses increased to $3.7 million in 1999 from $1.2 million in 1998. This increase was primarily due to hiring additional personnel, leasing additional facilities and incurring increased professional services and fees. We expect general and administrative expenses to increase substantially in absolute dollar amounts as we incur additional costs related to the addition of personnel and infrastructure to support the anticipated growth of our business and our operations as a public company. 23 Stock-Based Compensation. Stock-based compensation consists of non-cash deferred stock-based compensation expense, warrants issued in connection with strategic marketing agreements and other equity expenses. In connection with the grant of stock options to employees, we have recorded deferred stock-based compensation related to stock options granted below fair market value through December 31, 1999 of approximately $2.5 million. This amount represents the difference between the exercise price of these stock option grants and the deemed fair market value of the common stock at the time of grant. We expect to record additional deferred stock-based compensation in connection with options granted during the first quarter of 2000. We have recorded aggregate deferred stock-based compensation expense of $549,000 for options granted in 1999. The remaining $1.9 million of unearned stock-based compensation resulting from employee option grants is amortized on an accelerated basis over the vesting period of the options in accordance with FASB interpretation No. 28. We anticipate that the total charges we will recognize in future periods from amortization of deferred stock-based compensation expenses as of December 31, 1999, are $1.0 million in 2000, $546,000 in 2001, $277,000 in 2002 and $85,000 in 2003. We recognized stock-based compensation expense of $1.0 million in 1999 and $309,000 in 1998 for warrants issued in connection with strategic marketing agreements. Interest and Other Income (Expense), Net. Net interest and other income increased to $314,000 in 1999 from $8,000 in 1998. This increase was primarily due to an increase in cash and cash equivalent balances earning interest income. Quarterly Results of Operations The following table sets forth unaudited quarterly statement of operations data for the four quarters ended December 31, 1999. This information has been derived from our unaudited financial statements, which, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the quarters presented. This information should be read together with the audited financial statements and related notes included elsewhere in this prospectus. The operating results for any quarter are not necessarily indicative of the operating results for any future period.
Three Months Ended -------------------------------------- Mar. 31, June 30, Sept. 30, Dec. 31, 1999 1999 1999 1999 (In thousands) Revenues: Media................................ $ 212 $ 273 $ 672 $ 1,080 E-commerce........................... 32 49 106 174 ------- ------- ------- ------- Total revenues...................... 244 322 778 1,254 Cost of revenues..................... 54 211 585 690 ------- ------- ------- ------- Gross profit......................... 190 111 193 564 Operating Expenses: Sales and marketing.................. 522 905 1,583 3,534 Technology and development........... 380 557 930 1,505 General and administrative........... 518 624 924 1,640 Stock-based compensation............. 408 193 382 534 ------- ------- ------- ------- Total operating expenses............ 1,828 2,279 3,819 7,213 ------- ------- ------- ------- Loss from operations................... (1,638) (2,168) (3,626) (6,649) Interest income (expense), net......... (4) 45 15 258 ------- ------- ------- ------- Net loss............................... $(1,642) $(2,123) $(3,611) $(6,391) ======= ======= ======= ======= Accretion on redeemable convertible preferred stock....................... -- 136 139 142 ------- ------- ------- ------- Net loss applicable to common stockholders.......................... $(1,642) $(2,259) $(3,750) $(6,533) ======= ======= ======= =======
24 Revenues. Revenues increased sequentially on a quarterly basis from $244,000 for the quarter ended March 31, 1999 to $1.3 million for the quarter ended December 31, 1999. Both media and e-commerce revenues in the third and fourth quarter of 1999 increased significantly as we expanded our sales personnel and marketing resources, particularly in advertising and promotion. Cost of Revenues. Cost of revenues increased each quarter primarily due to increases in co-location charges, expenses associated with third-party advertising inventory providers and increases in depreciation expense. Sales and Marketing. Sales and marketing expenses increased in the quarters ended June 30, 1999, September 30, 1999 and December 31, 1999 due to hiring additional personnel and increased marketing programs related to expanding membership, increased distribution channels, and increasing member loyalty and activity. In particular, spending on advertising increased to $1.7 million in the quarter ended December 31, 1999 or 49% of total sales and marketing spending in the quarter. Technology and Development. Technology and development expenses increased in quarters ended September 30, 1999 and December 31, 1999 due to the hiring of personnel and professional services. General and Administrative. General and administrative expenses increased in the quarter ended December 31, 1999 due to hiring of personnel, leasing additional facilities and increased professional services and fees. Stock-Based Compensation. Stock-based compensation in the quarters ended March 31, 1999 and June 30, 1999 was primarily attributable to the stock-based compensation expense for warrants issued in connection with strategic marketing agreements. Stock-based compensation in quarters ended September 30, 1999 and December 31, 1999 was primarily due to stock-based compensation expense for stock options granted in 1999. Liquidity and Capital Resources Since our inception in January 1998, we have financed our operations primarily through private placements of our preferred stock and a promissory note that was converted into 235,701 shares of common stock on February 16, 2000. As of December 31, 1999, we had $19.9 million in cash and cash equivalents. Net cash provided by financing activities was $32.8 million in 1999 and $3.2 million in 1998. In both cases, the cash was attributable to net proceeds from the issuance of preferred stock and redeemable convertible preferred stock. Net cash used in operating activities was $9.2 million in 1999 and $2.1 million in 1998. Cash used in operating activities was primarily the result of operating losses and increases in prepaid expenses and accounts receivable and were offset by increases in accounts payable and accrued liabilities. Net cash used in investing activities was $4.3 million in 1999 and $0.5 million in 1998. Cash used in investing activities was primarily related to the purchase of equipment of $2.4 million and restricted cash deposits of $1.9 million. As of December 31, 1999, our principal commitments consisted of obligations outstanding under operating leases. Although we have no material commitments for capital expenditures, we anticipate a substantial increase in our capital expenditures and lease commitments consistent with our anticipated growth in operations, infrastructure and personnel. Our actual capital requirements will depend on numerous factors, including market acceptance of our services, the resources we allocate to our technology and development, sales, marketing and customer support services and other factors. We believe that the net proceeds from the sale of common stock in this offering, together with our current cash balances, will be sufficient to meet our working capital and capital expenditure requirements for at least 25 the next 12 months. In addition, although there are no present understandings, commitments or agreements with respect to any acquisition of other businesses, services, products and technologies, we may from time to time evaluate potential acquisitions of other businesses, services, products and technologies and may in the future require additional equity or debt financings to consummate any potential acquisitions. We may also need to raise additional funds in order to fund more rapid expansion, including significant increases in personnel and office facilities, to develop new or enhance existing services or products or respond to competitive pressures. In addition, in order to meet our long term liquidity needs, we may need to raise additional funds, establish a credit facility or seek other financing arrangements. Additional funding may not be available on favorable terms, if at all. Qualitative and Quantitative Disclosures About Market Risk Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Due to the short-term nature of our investments, we believe that we are not subject to any material market risk exposure. Year 2000 Issues The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations causing disruptions of operations for any company using such computer programs or hardware, including, among other things, a temporary inability to process transactions, send invoices or engage in normal business activities. As a result, the networks that incorporate our products and our own internal networks could fail, leading to disruptions in operations and business activities. Although we have not experienced any Year 2000 problems to date, we may face risks associated with residual Year 2000 issues, including those associated with newly installed or utilized computer programs. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative Financial Instruments and for Hedging Activities," which provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. SFAS 133, as amended by SFAS No. 137, is effective for all fiscal quarters for fiscal years beginning after June 15, 2000 and is not anticipated to have a significant impact on our operating results or financial condition when adopted. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101. The SAB summarized certain of the SEC Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 101, and any resulting change in accounting principle that a registrant would have to report, is effective no later than the Company's fiscal quarter ending October 31, 2000. The Company does not expect the application of SAB No. 101 to have a material effect its financial position or results of operations, nor does the Company expect to report a change in accounting principle resulting from its application. 26 BUSINESS Overview We are a leading provider of business-to-small business e-commerce solutions and online promotional services and products. We have attracted more than one million members to our small business community by providing services and products that are important to small businesses. By aggregating the highly fragmented small business market, we have created a cost-effective e-commerce and advertising channel through which both small and large businesses can target small businesses. Our small business solutions and services are specifically designed to enable our members to quickly and easily create and promote their Web sites, attract customers and buy and sell services and products online. Through our SmartAge Knowledge Center and electronic newsletters, we provide small businesses with expert advice and information designed to help them grow their businesses and compete more effectively. In addition, our proprietary SmartAge Corner Office solution provides our members with a single source from which they can monitor the success of their online promotional and marketing programs. The SmartAge MarketPlace is an online destination providing multiple channels through which our members, and large businesses targeting our members, can efficiently buy and sell goods and services. The SmartAge MarketPlace extends our members' customer reach and provides them with both traditional and alternative means, such as auction and barter, of transacting commerce. Industry Background The Growth of Online Advertising and Business-to-Business E-Commerce Businesses are increasingly using the Internet for advertising because it offers global customer reach and cost efficiencies that are unavailable in traditional media. For example, the Internet enables businesses to target advertisements to desired audiences such as small businesses and capture valuable data related to the effectiveness of their advertisements. These unique characteristics combined with the growth in the number of businesses using the Internet has led to a significant increase in online advertising. Forrester Research projects that online advertising expenditures worldwide will increase ten-fold from $3.3 billion in 1999 to $33.1 billion in 2004. The adoption of the Internet as a platform for commerce has fundamentally changed the way businesses interact with other businesses. The Gartner Group expects the volume of nonfinancial goods and services sold through business-to- business e-commerce to grow from $145 billion in 1999 to $7.3 trillion worldwide in 2004. To capitalize on the unique opportunities presented by the Internet, businesses of all sizes are seeking to take advantage of the Internet to attract new customers, increase revenues, reduce costs and conduct commerce more efficiently. Online Opportunities for Small Businesses According to IDC, the number of small businesses, including home offices, is estimated to grow to 38.5 million by 2002. In addition, IDC expects that aggregate small business e-commerce revenues will increase from $3.4 billion in 1998 to approximately $72.8 billion in 2003. Small businesses have a significant economic impact on the United States economy. According to the Small Business Administration, small businesses in the United States: . employ 53% of the private workforce; . contribute 47% of all sales; and . represent 50% of the private gross domestic product. 27 The Internet provides small businesses with the ability to reach new customers, retain and better serve existing customers, access new distribution channels and information, enhance operational efficiencies and generate new commerce opportunities. Small businesses can further benefit from timely customer feedback as well as shared experiences and expert advice from others in their online communities. Challenges Facing Small Businesses on the Internet Small businesses are increasingly accepting the Internet as critical to the success of their businesses, and are looking to use the Internet to: . attract, retain and serve customers; . advertise and promote their services and products; and . buy and sell goods and services easily and efficiently. However, most small businesses face significant challenges in trying to take full advantage of the unique commerce and cost savings opportunities presented by the Internet. Specifically, most small businesses do not currently have the: . technical expertise to establish an online presence; . time and resources to manage, maintain and enhance their Web sites; . tools to drive customer traffic to their Web sites; . knowledge to identify, evaluate and select appropriate third-party providers; or . information to analyze the effectiveness of their online investments. Challenges of Marketing to Small Businesses Many large businesses have dedicated organizations and product lines that address the needs of their small business customers. Historically, these businesses have used traditional media channels, such as television, radio and print, to advertise to small businesses. These channels have proven to be expensive and inefficient because of the fragmented nature of the small business market, the inability to specifically target the appropriate small business audience and the difficulty tracking the return on their marketing investment. Market Opportunity There exists an opportunity for a company to create a large and loyal online community of small businesses by providing them with the services and products they need to compete effectively. This community of small businesses would be a cost-effective channel for e-commerce providers and advertisers to access the otherwise highly fragmented small business market. The SmartAge.com Business-to-Small Business Solution SmartAge.com has created an online community of over one million small business members by providing them with a comprehensive solution that enables them to quickly and easily create and promote their Web sites, attract customers and buy and sell services and products online, promote and sell services and products and increase operational efficiencies. Our community provides small and large businesses with a cost-effective channel to reach the small business market. 28 Benefits to Small Businesses Our solution provides our small business community members with the following key benefits: Effective Marketing and Promotional Services. Small businesses can attract customers by marketing and promoting their Web sites using our online advertising services, including SmartClicks and SmartAge MediaBuyer. These services enable our members to access marketing and promotional channels previously unavailable to small businesses. In addition, these services assist our members in effectively targeting their desired audience. Easy to Use, Customizable Web Site Creation and Enhancement Tools. With SmartAge.com, small businesses can use online Web site creation tools to quickly and easily develop or enhance their Web sites. We offer access to Web site templates for a large number of specific industries. We also offer access to advanced Web site development tools that can be used by small businesses to customize the functionality and content of their Web sites. Efficient Monitoring, Analysis and Enhancement of Online Performance. Small businesses use our SmartAge Corner Office to analyze key data, such as traffic and click-through activity, regarding their marketing campaigns. With this information, businesses can quickly and easily implement changes to enhance the performance of their marketing campaigns. SmartAge Corner Office allows small businesses to access this information from a single source, enabling them to save time and quantify the return on their marketing investment. Efficient MarketPlace for Buying and Selling Goods and Services. The SmartAge MarketPlace is an online destination providing multiple channels through which our members, and large businesses targeting our members, can efficiently buy and sell goods and services. The SmartAge MarketPlace extends our members' reach and provides them with both traditional and alternative means, such as auction and barter, of transacting commerce. Our members can also aggregate their purchasing power to get better prices on core business services such as long distance telephone service, Web hosting, credit card processing and payroll. Benefits to E-Commerce Providers and Advertisers Our solution also provides e-commerce providers and advertisers with the following key benefits: Valuable E-Commerce and Marketing Channel. Our growing community of over one million members provides e-commerce providers and advertisers with a cost- effective marketing and e-commerce channel not available through traditional media. We enable businesses to reach our small business members and the SmartAge Affiliate Network through online promotions, advertising and sponsorship of content found on our Web site and in our electronic newsletters. We also enable businesses to access our small business members through our SmartAge MarketPlace. Targeted Marketing Opportunity. Our members provide us with their business profiles, including information relating to their industry, location, employees and level of e-commerce experience. This information allows us to assist e- commerce providers and advertisers by enabling them to target specific market segments within our community. In addition, we develop content based on our community members' interests, which leads to sponsorship opportunities for businesses seeking to reach our members interested in this content. The SmartAge.com Business-to-Small Business Strategy Our objective is to be the leading online marketplace for business-to-small business commerce. The following are our key strategies: Expand Membership and Distribution Channels We currently have more than one million registered members. We intend to substantially increase our membership by increasing our marketing efforts and by providing services and products which help small 29 businesses address the core challenges they face online. We intend to attract small businesses through multiple marketing channels, including targeted online advertising, direct marketing and industry-related periodicals. As our membership continues to increase, we believe we will be able to expand our current distribution alliances and attract new alliances to provide our members greater customer reach and improved purchasing power. We also intend to facilitate word-of-mouth marketing through our Tell-a-Friend referral program. Increase Member Loyalty and Activity We believe that improving our members' ability to succeed online will increase member loyalty and activity and enable us to grow our e-commerce and media services revenues. We intend to increase our members' ability to succeed by continuing to provide them with innovative e-commerce marketing and promotion services. We will also plan to increase member loyalty and activity by facilitating the exchange of knowledge and experience within our small business community through information services, such as discussion boards and community chat. Increase E-Commerce Transactions We intend to continue to expand our SmartAge MarketPlace to deliver additional buying, selling and exchange opportunities for our members and the businesses targeting our members. We also intend to provide additional aggregated purchasing opportunities for our small business members. We believe that by continuing to increase the number of sales and procurement channels in our SmartAge MarketPlace, we can attract more businesses and increase the volume of e-commerce transactions. We also believe that by providing small and large businesses with a single destination for all of their sales and procurement needs, our SmartAge MarketPlace can become the premier e-commerce channel to reach small businesses. Extend Brand Leadership We have established a leading brand for online business-to-small business commerce. We intend to continue to extend our brand recognition through a variety of marketing and promotional programs. We also plan to invest in public relations campaigns and traditional advertising campaigns, such as print and radio, as well as online advertising and direct marketing. In addition, we intend to strengthen the SmartAge.com brand by distributing our services and products under the SmartAge.com name and, in some instances, to co-brand our services and products with recognized Internet and business leaders. We believe these initiatives will enhance our reputation as a reliable, quality provider of essential solutions for small businesses. Continue to Develop Innovative Technologies We intend to continue to enhance and develop proprietary technologies to provide valuable e-commerce solutions and online promotional services and products to our small business members. We also intend to enhance and develop technologies to increase the scalability and reliability of our services and products. In addition, we plan to expand our existing, and establish new, relationships with third-party technology providers. Expand International Presence We intend to become the world's leading online marketplace for business-to- small business commerce by extending our international presence, increasing our international marketing activities and establishing and developing international strategic relationships and joint ventures. As of February 29, 2000, we had over 175,000 international registered members. In addition, we recently announced our intention to establish our first joint venture with SOFTBANK Commerce Corp. in Japan during the first quarter of 2000. 30 SmartAge.com Services and Products The following table summarizes our e-commerce and online promotional services and products:
Category Services and Products Create and Enhance a Web site .SmartAge Site .SmartAge Domain Registration Service .SmartAge SiteWatch .SmartAge ProStats .SmartAge Enhance Services .GIF Wizard - ------------------------------------------------------------------------------------ Promote Your Business .SmartClicks .SmartAge Media Buyer .SmartAge Banner Studio and SmartAge Banner Creator .SmartAge Submit .SmartAge SiteRank .SmartAge Business Success Packs - ------------------------------------------------------------------------------------ Sell Online .SmartAge Store .SmartAge Advanced StoreBuilder .SmartAge Affiliate Network - ------------------------------------------------------------------------------------ SmartAge MarketPlace .SmartAge Auctions .SmartAge Unique Requests .SmartAge Internet Barter .SmartAge Group Demands - ------------------------------------------------------------------------------------ SmartAge Corner Office .Monitor Results .Modify Settings .Explore Available Services .Adjust Member/Account Information - ------------------------------------------------------------------------------------ SmartAge Knowledge Center .Articles and How-To .Self-Help Tools .Expert Advice .SmartAge Forums .Weekly newsletters .Industry-specific news - ------------------------------------------------------------------------------------
In addition, we provide media services to large businesses targeting the small business market. Media services include advertising and sponsorship placements on our Web site, in our newsletters and on the Web sites of our small business members. Create and Enhance a Web site SmartAge.com offers a suite of easy-to-use online services to help small and growing businesses quickly build an online presence. To encourage repeat visits, we also provide services to help small businesses enhance their Web sites by adding new functionality and optimizing performance. In addition, our members can access customized online statistical reports regarding the efficiency and performance of our services. 31 These services include: . SmartAge Site: to build a Web site using industry-specific templates with integrated SmartClicks technology. . SmartAge Domain Registration Service: to register domain names or check if a domain name is available. . SmartAge SiteWatch: to monitor a member's server response time and alert the member if the member's Web site is down. . SmartAge ProStats: to track traffic statistics, such as customer activity, on a member's Web site. . SmartAge Enhance Services: to add fresh content such as news, weather and stock quotes, search functions and free e-mail services to a member's Web site. . GIF Wizard: to compress banner ads and Web pages to increase the speed and efficiency of displaying banner advertisements and Web pages. Promote Your Business SmartAge.com offers online services designed to enable small businesses to promote their business in order to attract customers in a cost-effective manner. These services include: . SmartClicks: a sophisticated banner exchange advertising service that includes SmartTargeting, a proprietary, automated system. SmartTargeting analyzes the response rate for a particular advertisement and then targets more advertising toward those audiences. . SmartAge Media Buyer: a service that enables our members to buy advertising on popular Web sites or networks, such as Excite, Shockwave.com, the SmartAge member network or Talk City, in quantities that are attractive to small businesses. SmartAge Media Buyer also provides the same advanced delivery options leading advertisers use, such as search engine keywords, category and demographic targeting as well as SmartTargeting in the SmartAge member network. . SmartAge Banner Studio and SmartAge Banner Creator: services that enable our members to easily create high-quality advertising banners online or through downloadable software. . SmartAge Submit: a service that enables small businesses to submit their URL to leading search engines. . SmartAge SiteRank: a service that enables small businesses to track their URL ranking. . SmartAge Business Success Packs: a one-stop-shop advertising service sold on a subscription basis that combines our advertising services, SmartAge SiteWatch and SmartAge Submit. Sell Online Our suite of e-commerce services allows small businesses to cost-effectively establish an online e-commerce presence. These services include: . SmartAge Store: to build a Web store using industry-specific templates with integrated SmartClicks technology. . SmartAge Advanced StoreBuilder: to create a Web store with online credit card processing, add e-commerce functionality to an existing Web site and apply for the ability to accept credit card payments online for an Internet merchant account. 32 . SmartAge Affiliate Network: to join the affiliate programs of leading Web merchants, such as Priceline.com and Stamps.com, and earn commissions and advertising credits. SmartAge MarketPlace SmartAge MarketPlace is a central location on our Web site that brings together our small business members and third-party providers of e-commerce services. Our SmartAge MarketPlace allows small businesses to increase visibility and attract new customers by offering and procuring goods and services through multiple channels. In addition, non-members can also access the SmartAge MarketPlace and become a registered member to buy and sell goods and services. SmartAge MarketPlace includes: . SmartAge Auctions: an auction service that allows our small business members to buy and sell services and products. . SmartAge Unique Requests: an anonymous e-mail shopping service that allows buyers to request specific information on a wide range of goods and services and provides sellers with an additional channel for selling their goods and services. . SmartAge Internet Barter: a service that enables businesses to barter goods and services and allows members to engage in transactions beyond traditional one-to-one barter. . SmartAge Group Demands: a service that helps businesses aggregate their purchasing power to obtain better prices on core business services such as long distance telephone service, Web hosting, credit card processing and payroll. SmartAge Group Demands enables businesses to purchase these core services in volume through alliances with other companies that want the same products and by collectively building demand through the pooling of merchants. SmartAge Corner Office SmartAge Corner Office integrates the information needed by our small business members to manage their online presence. This information includes traffic, click-through activity, customer account information and Web site performance. In a password-protected environment, the SmartAge Corner Office allows small businesses to access this information from a single source, enabling them to save time and quantify the return on their marketing investment. With this information, businesses can quickly and easily implement changes to enhance the performance of their marketing campaigns. Member information is continuously updated and can be frequently accessed to provide the key information necessary for our members to efficiently manage their online businesses. SmartAge Knowledge Center: Learn How to Evolve Your Business SmartAge Knowledge Center provides members and visitors a place to communicate with experts and other members and learn what they need to know to launch their Web site and succeed as a small business on the Internet. Major resources in this area include: . Articles and How-To; . Self-Help tools; . Expert Advice; . SmartAge Forums; . Weekly newsletters; and . Industry-specific news. 33 Media Services We provide media services to large businesses targeting the small business market. Media services include advertising and sponsorship placements on our Web site, in our newsletters and on the Web sites of our small business members. Our sponsorship offerings are designed to provide targeted exposure opportunities to name brand marketers. Customers Our customers include large businesses seeking to advertise to our small business members as well as our members who purchase e-commerce and advertising services from us. The table below represents our top customers as measured by revenues in 1999: AdAuction eFax Hewlett Packard Affinia Eyescream/Icom Mastercard Amazon.com GoTo.com Tradal Beyond.com
In addition, we have agreements with third party service providers, such as auction.com, beFree, Business Web, Excite@Home, NetObjects, Respond.com, Shockwave and Talk City, that sell their services and products to our members through the SmartAge.com Web site and from which we derive e-commerce revenues. Strategic Relationships We have established, and plan to continue to establish, strategic relationships to enable us to increase our member base, distribute our services and products and expand our product and service offerings. Specifically, we have strategic relationships that enable us to do the following: . Acquire members--establish relationships with high traffic Web sites, such as Fast Company, Go.com, Infotonic, Looksmart, Lycos/Tripod/Angelfire, theglobe.com and Trellix, to expand our membership base; . Distribute our e-commerce services and products--establish relationships with companies, such as DoubleClick and Excite@Home, to distribute our e- commerce services and products under the Smartage.com brand name or in a co-branded manner; . Expand service and product offerings--establish relationships with third- party providers, such as auction.com, Demandline, NetNation, Netobjects, Netopia, Prospero, Searchbutton.com and iVendor, to acquire services and products for resale to our members. We have also entered into value-added reseller relationships with companies, such as AT&T and Bank of America. Under these agreements, we will deliver our services and products to the small business customers of these companies on a co-branded basis. Sales, Marketing and Customer Service We sell our SmartAge.com services and products through a number of channels including direct sales, online sales, telesales and customer service. Our direct sales force focuses on larger companies seeking to reach our small business member base. Our online sales include sales of our services to our small business members through our Web site and partner programs. Our inside telesales team works directly with small businesses referred to us through our partner relationships, such as Excite@Home. We maintain direct sales, telesales and customer service offices in Boston, Charlotte, Chicago, New York and San Francisco. Our marketing programs are designed to increase our brand recognition as the leading online marketplace for business-to-small business commerce and encourage the use of our e-commerce services by small businesses. Through ongoing interaction with our customers and members, we continue to develop the services 34 and products we offer to address major problems that most small businesses encounter. Through our member advisory board, focus groups and customer service interactions, we are able to respond quickly to the changing market needs of our members and customers. We also engage in marketing and communications activities which support our sales efforts and promote the SmartAge.com brand to our members through direct marketing programs, print advertising, online advertising, radio, public relations activities and our Web site. As of February 29, 2000, we had over 30 marketing relationships with third-party service providers. We believe customer service is critical to maintaining membership loyalty. Our customer services include: . Online statistical reporting--Enabling members to access customized online statistical reports that detail the efficiency and performance of services; and . Advertising quality control--Reviewing banners and Web sites that link to banners before they are displayed on our members' Web sites. We have also established a Customer Service Quality Assurance program to ensure that customer-service personnel are trained to respond to member inquiries in a clear, accurate and professional manner. We also actively solicit member feedback on existing and potential services. As of February 25, 2000, we had 96 employees in sales, marketing and customer service. Technology and Development We devote a substantial portion of our resources developing new e-commerce services and products, enhancing our current services and products, strengthening our technological expertise and continuing to develop our Web site. Our technology and development expenses were approximately $736,000 in 1998 and $3.4 million in 1999. We intend to continue to devote significant resources to technology and development for the foreseeable future. Technology For our e-commerce services, we developed a flexible, scalable framework that enables rapid integration of additional services, whether they are purchased, acquired through third-party providers or developed in-house. We have also constructed a data warehouse that enables member inquiries using SmartAge Corner Office. We developed a high performance, scalable ad server, SmartClicks, and a sophisticated set of software algorithms, SmartTargeting, which deliver high banner click-through rates. In general, our systems are designed for redundancy, scalability and reliability. Our technology portfolio is divided into four major categories: Systems Development Our software that runs our SmartClicks, and ProStats services was developed using fast, reliable code similar to operating systems, Web servers or database management codes. We recently extended the functionality of the SmartClicks technology through modifications that support additional services and products other than advertisements. We believe this platform will continue to provide a strong base for our e-commerce services and products. Application Development We design member applications to be easy-to-use, fast, scalable and reliable. For example, the underlying technology of the SmartAge Corner Office and the software for our services such as SmartAge SiteWatch, SmartAge Submit, SmartAge ProStats and SmartAge Media Buyer have graphical user interfaces which allow our members to interact easily with our applications. 35 Data Warehousing Development The data warehouse is focused on the representation, reduction, storage and analysis of all operational data generated by both the systems and applications described above. Data Warehousing [DIAGRAM OF DATA WAREHOUSING SYSTEM APPEARS HERE] Our data warehousing is accomplished by populating a database system with transactional data, including the production databases, Web logs, registration forms and member survey information. These statistics are made available to our members through the SmartAge Corner Office utilizing ProStats. Operation Center Our systems, which include Internet servers, database servers, load- balancing hardware, switches and routers, are housed at Exodus Communications' Santa Clara, California facility. Exodus Communications is an independent provider of Internet hosting services. Exodus provides continuous physical security, redundant power supply with generator backup, cooling systems and connectivity to the Internet. Our systems are designed to be scalable, to support heavy user traffic and to provide a secure e-commerce environment. We maintain multiple Internet servers and use third-party load-balancing hardware. Additional Internet servers can be added to our system to handle increased transaction volume. Our systems are designed to be redundant so that no single point of failure will disrupt our system. The systems are comprised of computers running the Linux operating system for our systems' software and Oracle databases running on Sun Microsystems hardware for our application and data warehousing portfolio. We have developed monitoring systems to provide continuous notification and coverage of our technology platform. Competition We believe that several competitors may enter into the market for e-commerce and online promotional services and products in the near future. Although we currently do not compete against any one entity with respect to all aspects of our business, we face competition with respect to some individual service and product offerings. Our actual and potential competitors include banner exchange networks, advertising networks, small 36 business portals and application service providers. We also compete with Web site creation and content providers of Web tools and e-commerce services to small businesses and other Internet companies focused on the small business market. Many of our current and potential competitors have longer operating histories, greater brand recognition and market presence and greater financial, marketing and other resources than we do. As a result, these competitors may be able to respond more quickly to technological developments or changes in customer requirements. Increased competition could reduce our market share. We believe the competitive factors in our market include: . brand recognition; . customer loyalty; . access to relevant and leading-edge services, information and technology; . scalability and reliability; . Web site performance; and . quality of customer service. We believe that we compete favorably with respect to each of these factors. However, due to the rapidly evolving nature of the small business e-commerce solutions and online promotional services and products market, we may not be able to compete successfully against current or future competitors, which in turn would harm our business and operating results. Intellectual Property The status of United States patent protection in the Internet industry is not well defined and will evolve as the U.S. Patent and Trademark Office grants additional patents. We currently have one patent application pending in the United States, and we may seek additional patents in the future. We do not know if our patent application or any future patent application will result in a patent being issued with the scope of the claims we seek, if at all, or whether any patents we have or may receive will be challenged or invalidated. It is difficult to monitor unauthorized use of technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and our competitors may independently develop technology similar to ours. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects of our technology that we believe constitute innovations providing significant competitive advantages. The pending and any future applications may or may not result in the issuance of valid patents. Our success depends in part upon our ability to protect our intellectual property. We rely on a combination of copyright, trade secret, trademark and contractual protection to establish and protect our proprietary rights, and we enter into confidentiality agreements with those of our employees and consultants involved in service and product development. We routinely require our employees, customers, and potential business partners to enter into confidentiality and nondisclosure agreements before we will disclose any sensitive aspects of our services or products, technologies or business plans. In addition, we require employees to agree to surrender to SmartAge.com any proprietary information, inventions or other intellectual property they generate or come to possess while employed by us. Despite our efforts to protect our proprietary rights through confidentiality and licensing agreements, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. These precautions may not prevent misappropriation or infringement of our intellectual property. Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. In addition, other parties may assert infringement claims against us. Although we have not received notice of any alleged infringement, our services and products may infringe issued patents that may relate to our services and 37 products. In addition, because patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to our services and products. We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming and could divert management's attention away from running our business. This litigation could also require us to develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. Our failure or inability to develop non-infringing technologies or license the proprietary rights on a timely basis would harm our business. Employees As of February 25, 2000, we had 165 full-time employees. None of our employees are covered by collective bargaining agreements. We believe our relations with our employees are good. Legal Proceedings On June 9, 1999, Internet Finance Corporation filed a demand for arbitration with the American Arbitration Association in San Francisco, California against us for breach of contract, breach of express warranty, negligence, fraud in the inducement, unconscionable contract and intentional misrepresentation. Internet Finance Corporation is seeking compensatory damages of $2.4 million and punitive damages of at least $1.0 million and injunctive relief. On July 21, 1999 we filed an answer and counterclaim against Internet Finance Corporation. An arbitration hearing was completed on February 1, 2000, and both parties have filed post-arbitration briefs. The arbitration ruling is expected in early April. We may be subject to other legal proceedings and claims in the ordinary course of business. We are not aware of any legal proceedings or claims that we believe could have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Facilities Our corporate headquarters are located in San Francisco, California. We have entered into a lease for approximately 42,348 square feet that expires in February 2004. This location will become our new corporate headquarters in San Francisco. We have also leased a 9,550 square foot facility in Charlotte, North Carolina under a lease expiring in February 2005. We expect to occupy both of these facilities in March 2000. The leases for the facilities we currently occupy in both San Francisco and Charlotte, North Carolina expire in March 2000 with the exception of one lease that expires in May 2000. We will have no remaining obligations under these leases once they expire. We believe our facilities will be adequate through at least September 2000, at which time we may need to lease additional space. 38 MANAGEMENT Directors and Executive Officers Our directors, executive officers and key employees and their ages as of December 31, 1999 are as follows:
Name Age Position William Lohse.............. 48 President, Chief Executive Officer and Director John T. Thomsen............ 34 President of SmartClicks and Director Allen M. Barr.............. 46 Chief Financial Officer Brian T. McGee............. 39 Vice President of Finance & Secretary Carter J. Hostelley........ 37 Vice President of International James C. Freeman........... 41 Chief Technology Officer and Vice President of Engineering Johnathan P. Robinson...... 46 Vice President of Sales Christopher S. Dean........ 35 Vice President of Corporate Development Douglas E. Roseborough..... 41 Vice President of Marketing William L. Burnham(1)(2)... 28 Director John C. Colligan(1)(2)..... 45 Director
- --------------------- (1) Member of compensation committee. (2) Member of audit committee. William Lohse has served as the President, Chief Executive Officer and as a director of SmartAge.com since founding the Company in January 1998. Prior to joining SmartAge.com, from October 1992 to December 1997, Mr. Lohse served as the founding president of ZD Expos, a technology conference and trade-show organization, which later became SOFTBANK Forums. From October 1985 to January 1990, Mr. Lohse served as the publisher of PC Magazine, the founding publisher of PC Computing, a personal computing publication, and president of Ziff Davis Publishing. Mr. Lohse holds a B.A. in Philosophy with honors and distinction from California State University, Sonoma. John T. Thomsen has served as the President of our SmartClicks banner exchange advertising network and as a director of SmartAge.com since February 1998. Prior to joining SmartAge.com, Mr. Thomsen was the president of Thomas Enscore Computer Solutions, Inc., from March 1997 until its acquisition by SmartAge.com in February 1998. From August 1991 to March 1997, Mr. Thomsen served as the lead software engineer at Progressive Software, a software company. Mr. Thomsen holds a B.S. in Computer Science from the University of North Carolina at Charlotte. Allen M. Barr has served as Chief Financial Officer of SmartAge.com since February 2000. Prior to joining Smartage.com, Mr. Barr served as the vice president of finance of New Era of Networks, Inc., an e-business integration software company, from September 1998 to February 2000, where he was responsible for domestic mergers and acquisitions and subsequently the financial management of the ERP/Commercial unit. Mr. Barr served as chief financial officer, vice president of finance of Century Analysis, Inc., an enterprise integration company, from August 1996 to September 1998, when Century Analysis, Inc. was acquired by New Era of Networks, Inc. From April 1994 to August 1996, Mr. Barr served as chief financial officer, vice president finance of Sanctuary Woods Multimedia Corp., a software company. Prior to that time, Mr. Barr served in operating management and corporate roles for 14 years at Time Warner Inc. Mr. Barr holds an M.B.A. with a concentration in finance from Harvard University and a B.S. in Communication Studies from Northwestern University. Brian T. McGee has served as Vice President of Finance of SmartAge.com since August 1999. Prior to joining SmartAge.com, Mr. McGee served as the chief financial officer and vice president of finance for Academic Systems Corporation, a provider of interactive mathematics and English software for the college 39 market, from November 1998 to September 1999. From August 1997 to October 1998, Mr. McGee served as controller for Elo TouchSystems, a wholly owned subsidiary of Raychem Corporation which was recently acquired by Tyco International. From June 1993 to July 1997, Mr. McGee held several controller positions in a number of Raychem Corporation's business units. Mr. McGee holds a B.S. in Business- Finance from the California Polytechnic State University, San Luis Obispo and a Certificate in Management Accounting. Carter J. Hostelley has served as the Vice President of International of SmartAge.com since September 1999. From October 1998 to September 1999, Mr. Hostelley served as our Vice President of Finance and before that as our Director of Finance from April 1998 to October 1998. Prior to joining SmartAge.com, Mr. Hostelley served as the director of finance and development for the Internet division of Ziff-Davis Events, a SOFTBANK company, from April 1996 to April 1998. From July 1994 to March 1996, Mr. Hostelley served as vice president of Demographic Marketing, Inc., a start-up gift catalog. Mr. Hostelley holds an M.B.A. from Cornell University, an MBA from Catholic University of Leuven, Belgium and a B.B.A. in Finance from the University of Hawaii. James C. Freeman has served as the Chief Technology and Vice President of Engineering of SmartAge.com since April 1999. Prior to joining SmartAge.com, Mr. Freeman served as director of engineering for IBM from August 1998 to April 1999. From January 1998 to August 1998, Mr. Freeman served as president at PaxInternet, an application service provider for the medical industry. From January 1997 to January 1998, Mr. Freeman served as vice president of customer services at Verity Inc., a software company. From August 1996 to January 1997, Mr. Freeman served as senior vice president of engineering at Worlds, Inc, an Internet software and services company. From January 1995 to August 1996, Mr. Freeman served as director of marketing at Fujitsu Ltd., a computer company. Mr. Freeman holds an M.S. in Computer Engineering from Syracuse University and a B.S. in Economics and Computer Science from Indiana University of Pennsylvania. Johnathan P. Robinson has served as Vice President of Sales of SmartAge.com since May 1998. Prior to joining SmartAge.com, Mr. Robinson served as vice president of sales and sponsorship development of NetChannel, a provider of Internet services over television, from March 1997 to April 1998. From May 1995 to January 1997, Mr. Robinson served as a founding partner of RealTime Partners, an Internet-based advertising representative firm that subsequently merged with Petry Interactive, which merged with 24/7 Media in January 1996. From January 1994 to May 1995, Mr. Robinson served as director of marketing for US West Inc.'s marketing resources group and then as director of national sales for Interactive Video Enterprises, an interactive merchandising and marketing company and a subsidiary of US West Inc., now known as MediaOne Group, Inc. Mr. Robinson holds a B.S. in Radio-TV-Film from Northwestern University. Christopher S. Dean has served as Vice President of Corporate Development of SmartAge.com since October 1999 and as Vice President of Business Development, of SmartAge.com from October 1998 to October 1999. Prior to joining SmartAge.com, Mr. Dean served as a principal at Internet & New Media Consulting, an Internet and enterprise software, marketing and business development consulting firm and as the chief executive officer of Advanced Compensation Solutions, an Internet-based customized compensation analysis service, from April 1997 to October 1998. From August 1995 to March 1997, Mr. Dean held several positions at Worlds, Inc., an Internet software and services company, and most recently served as vice president of marketing. From August 1993 to August 1995, Mr. Dean served as a senior consultant at Regis McKenna, a high technology management consulting firm. Mr. Dean holds an M.B.A. from the Kellogg Graduate School of Management at Northwestern University and a B.A. in Economics from Vassar College. Douglas E. Roseborough has served as Vice President of Marketing of SmartAge.com since June 1999. Prior to joining SmartAge.com, Mr. Roseborough served as vice president of worldwide marketing of BackWeb Technologies, a software company, from April 1998 to May 1999. From October 1987 to March 1998, Mr. Roseborough held several sales, marketing and operations positions at Oracle Corporation, a software company, and most recently served as vice president of Americas marketing and operations. Mr. Roseborough holds an Honors Bachelor of Commerce degree in Marketing and Finance from the University of Windsor and a B.A. in Science and Economics from the University of Toronto. 40 William L. Burnham has served as a director of SmartAge since October 1999. Since August 1999, Mr. Burnham has been managing director of SOFTBANK Capital Partners L.P. From July 1998 to August 1999, Mr. Burnham was a vice president and senior research analyst of Credit Suisse First Boston Corporation. From May 1998 to July 1998, Mr. Burnham served as a vice president at Deutsche Morgan Grenfell, and from April 1997 to May 1998, he served as a vice president at US Bancorp Piper Jaffray. From August 1993 to March 1997, Mr. Burnham served as a senior associate at Booz Allen & Hamilton, a management consulting company. Mr. Burnham is a director of AllAdvantage.com Inc., Dovebid Inc. and Law.com Inc. Mr. Burnham holds an A.B. in political science from Washington University. John C. Colligan has served as a director of SmartAge.com since March 1999. Since March 1998, Mr. Colligan has served as a partner at Accel Partners, a venture capital firm. From November 1996 until August 1998, Mr. Colligan served as chairman of Macromedia, Inc., a multimedia and Web publishing software company. From January 1993 to November 1996, Mr. Colligan served as chief executive officer of Macromedia and from April 1992 to January 1993 he was president and chief executive officer of Macromedia. Mr. Colligan also serves as a director of CNET Networks, Inc. Mr. Colligan holds an M.B.A. from the Stanford Graduate School of Business and a B.S. in International Economics from Georgetown University. There are no family relationships among any of our directors or executive officers. Board Committees Our board of directors has a compensation committee and an audit committee. Our compensation committee is responsible for, among other things, determining salaries, incentives and other forms of compensation for directors and executive officers of SmartAge.com and administering various incentive compensation and benefit plans. Messrs. Burnham and Colligan are the current members of the compensation committee. Our audit committee reviews our annual audit and meets with our independent auditors to review our internal controls and financial management practices. Messrs. Burnham and Colligan are the current members of the audit committee. Director Compensation Except for the grant of stock options, we do not currently compensate our directors for their services as directors. Directors who are employees of SmartAge.com are eligible to participate in our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase Plan. In addition, we granted John C. Colligan, a director of SmartAge.com, an option to purchase 290,206 shares of our common stock. This option was immediately exercised and the shares issued upon exercise of the option are subject to SmartAge.com's right of repurchase. We also reimburse each member of our board of directors for out-of-pocket expenses incurred in connection with attending board meetings. Executive Compensation William Lohse, our President and Chief Executive Officer, received a salary of $150,000 and did not receive a bonus in 1999. No other executive officer received a total annual salary and bonus exceeding $100,000 for services rendered in all capacities to SmartAge.com during 1999. Mr. Lohse has never been granted options to purchase shares of our capital stock. Compensation Committee Interlocks and Insider Participation The members of our compensation committee are currently William L. Burnham and John C. Colligan. No interlocking relationship exists, or has existed in the past, between the board of directors or compensation committee and the board of directors or compensation committee of any other company. 41 1998 Equity Incentive Plan The board of directors in May 1998 adopted our 1998 Equity Incentive Plan which will be amended and restated effective upon completion of this offering. Our 1998 Equity Incentive Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code to employees and the grant of nonstatutory stock options and stock purchase rights to employees, non-employee directors and consultants. A total of 5,250,000 shares of common stock have been reserved for issuance under our 1998 Equity Incentive Plan as of December 31, 1999. In October 1999, we increased the number of shares of common stock reserved for issuance under our 1998 Equity Incentive Plan by an aggregate of 1,250,000 shares. In February 2000, we increased the number of shares of common stock reserved for issuance under our 1998 Equity Incentive Plan by an aggregate of 2,000,000 shares. Our compensation committee and our non-insider option committee administer our 1998 Equity Incentive Plan. Our compensation committee consists of at least two directors who are "non-employee directors," as defined in Rule 16b-3. The board of directors may amend our 1998 Equity Incentive Plan as desired without further action by SmartAge.com's stockholders except as required by applicable law. Our 1998 Equity Incentive Plan will continue in effect until terminated by the board or for a term of 10 years from its amendment and restatement date, whichever is earlier. The consideration for each award under our 1998 Equity Incentive Plan will be established by the compensation committee, but in no event will the option price for incentive stock options be less than 100% of the fair market value of the stock on the date of grant. Awards will have such terms and be exercisable in such manner and at such times as the compensation committee may determine. However, each incentive stock option must expire within a period of not more than 10 years from the date of grant. Generally, options granted under the 1998 Equity Incentive Plan vest over four years, and are nontransferable other than by will or the laws of descent and distribution. In the event of specified changes in control of SmartAge.com, the acquiring or successor corporation may assume or substitute for options outstanding under the 1998 Equity Incentive Plan, or these options will terminate. Some options granted to our executive officers and other employees provide for partial acceleration upon a change in control of SmartAge.com. As of December 31, 1999: . 591,813 shares of common stock have been issued upon the exercise of options; and . 403,735 shares were available for future awards. 2000 Stock Incentive Plan The 2000 Stock Incentive Plan was adopted by our board of directors in March 2000 and will be submitted for approval by our stockholders prior to the completion of this offering. The 2000 Stock Incentive Plan will be administered by our compensation committee. The 2000 Stock Incentive Plan provides for the direct award or sale of shares of common stock and for the grant of options to purchase shares of common stock. The 2000 Stock Incentive Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code and the grant of nonstatutory stock options and stock purchase rights to employees, non-employee directors, advisors and consultants. 1,000,000 shares of common stock have been authorized for issuance under the 2000 Stock Incentive Plan. However, in no event may one participant in the 2000 Stock Incentive Plan receive option grants or direct stock issuances for more than 1,000,000 shares in the aggregate in any one fiscal year. The number of shares reserved for issuance under the 2000 Stock Incentive Plan will be increased on the first day of each of our fiscal years from 2000 through 2009 by the lesser of: . shares . 5% of our outstanding common stock on the last day of the immediately preceding fiscal year: or 42 . the number of shares determined by the board of directors. The 2000 Stock Incentive Plan will have the following program features: . Qualified employees will be eligible for the grant of incentive stock options to purchase shares of common stock; . Qualified non-employee directors will be eligible to receive automatic option grants to purchase shares of common stock at an exercise price equal to 100% of the fair market value of those shares on the date of grant; . The compensation committee will determine the exercise price of options or the purchase price of stock purchase rights, but in no event will the option price for incentive stock options be less than 100% of the fair market value of the stock on the date of grant; and . The exercise price or purchase price may, at the discretion of the compensation committee, be paid in, among other things, cash, cash equivalents, full-recourse promissory notes, past services or future services. The 2000 Stock Incentive Plan will include change in control provisions that may result in the accelerated vesting of outstanding option grants and stock issuances. The committee may grant options or stock purchase rights in which all or some of the shares shall become vested in the event of a change in control of the company. The board of directors will be able to amend or modify the 2000 Stock Incentive Plan at any time, subject to any required stockholder approval. 2000 Employee Stock Purchase Plan The 2000 Employee Stock Purchase Plan was adopted by our board of directors in March 2000 and will be submitted for approval by our stockholders prior to the completion of this offering. A total of 1,500,000 shares of common stock have been reserved for issuance under our employee stock purchase plan. The number of shares reserved for issuance under the 2000 Employee Stock Purchase Plan will be increased on the first day of each of our fiscal years from 2000 through 2009 by the lesser of: . shares; . 1% of our outstanding common stock on the last day of the immediately preceding fiscal year; or . the number of shares determined by the board of directors. Our 2000 Employee Stock Purchase Plan, which is intended to qualify under Section 423 of the Internal Revenue Code, is administered by the board of directors or by a committee appointed by the board. Employees (including officers and employee directors of SmartAge.com but excluding 5% or greater stockholders) are eligible to participate if they are customarily employed for more than 20 hours per week and for at least five months in any calendar year. Our 2000 Employee Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed 15% of an employee's compensation. The 2000 Employee Stock Purchase Plan will be implemented by a series of overlapping offering periods of 24 month duration, with new offering periods, other than the first offering period, commencing on January 1 and July 1 of each year. The board of directors will establish participation periods for our 2000 Employee Stock Purchase Plan, none of which will exceed six months. During each participation period, payroll deductions will accumulate without interest. On the purchase dates set by the board of directors for each participation period, accumulated payroll deductions will be used to purchase common stock. The initial offering period is expected to commence on the date of this offering and end on December 31, 2001. The initial purchase period is expected to begin on the date of this offering and end on December 31, 2000. 43 Eligible employees may purchase shares at a purchase price equal to 85% of the fair market value per share of common stock on either the first day of the participation period or on the purchase date, whichever is less. Employees may withdraw their accumulated payroll deductions at any time. Participation in our 2000 Employee Stock Purchase Plan ends automatically on termination of employment with SmartAge.com. Immediately prior to the effective time of a corporate reorganization, the participation period then in progress shall terminate and stock will be purchased with the accumulated payroll deductions, unless the 2000 Employee Stock Purchase Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation. 401(k) Plan We adopted a tax-qualified employee savings and retirement plan for which SmartAge.com's employees will generally be eligible. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation and have the amount of such reduction contributed to the 401(k) Plan. To date, SmartAge.com has made no matching contributions. The 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so that contributions to the 401(k) Plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) Plan, and so that contributions by SmartAge.com, if any, will be deductible by SmartAge.com when made. Employment Agreements and Change in Control Arrangements We entered into an employment agreement dated March 9, 2000, with William Lohse, our President and Chief Executive Officer. Under this agreement, Mr. Lohse is entitled to receive a monthly payment of at least $12,500 which will increase to $16,666 upon the effective date of the registration statement relating to this offering. The agreement further provides that Mr. Lohse is eligible for payments based on achievement of performance goals subject to approval by the board of directors. Mr. Lohse is also entitled to reimbursement of reasonable business expenses, and reimbursement of expenses exceeding $25,000 must be pre-approved in writing by the board of directors. If Mr. Lohse is discharged without cause or if he terminates this agreement for good cause, he is entitled to a lump sum severance benefit equal to his base salary of 12 months and an additional payment equal to 12 months of his average performance payment. If Mr. Lohse's employment agreement is terminated for good cause, Mr. Lohse will receive the payment of the severance benefit if the termination of this agreement occurs during the year following a change in control. Brian T. McGee holds options to purchase 200,000 shares of common stock that vest over a period of time, which vesting is accelerated 25% upon a change of control of SmartAge.com. Limitation of Liability and Indemnification Matters Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of their fiduciary duties as directors, except liability for: . any breach of the director's duty of loyalty to the corporation or its stockholders; . acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; . unlawful payments of dividends or unlawful stock repurchases or redemption; or . any transaction from which the director derived an improper personal benefit. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. 44 Our certificate of incorporation and bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification. We are entering into agreements to indemnify our directors and executive officers, in addition to indemnification provided for in our certificate of incorporation and bylaws. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. The limited liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty and may reduce the likelihood of derivative litigation against our directors and officers, even though a derivative litigation, if successful, might otherwise benefit us and our stockholders. A stockholder's investment in us may be adversely affected to the extent we pay the costs of settlement or damage awards against our directors or officers under these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. 45 CERTAIN TRANSACTIONS Since our inception, there has not been any transaction or series of transactions to which we were or are a party in which the amount involved exceeded or exceeds $60,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than the transactions described below. Transactions with Management and Others Between July 1998 and December 1999, we issued and sold 16,732,717 shares of our preferred stock for an aggregate consideration of $35,361,374. Between July 1998 and October 1998, we sold 2,657,051 shares of Series A preferred stock at a price of $0.9375 per share. Between March 1999 and July 1999, we issued and sold 6,502,863 shares of Series B preferred stock at a price of $1.10 per share. Between October 1999 and December 1999, we issued and sold 7,572,803 shares of Series C preferred stock at a price of $3.396 per share. Upon completion of this offering, each share of Series A, Series B and Series C preferred stock will convert into one share of common stock. The following table summarizes purchases, valued in excess of $60,000, of shares of our capital stock by our directors, executive officers and our 5% stockholders:
Common Series A Series B Series C Stock Preferred Stock Preferred Stock Preferred Stock Directors and Executive Officers: William Lohse(1)........ 13,000,000 10,666 3,679 -- John T. Thomsen(2)...... 3,000,000 -- -- -- William L. Burnham(3)... -- -- -- 5,554,268 John C. Colligan(4)..... 290,206 -- 5,000,000 1,325,526 5% Stockholders: Entities affiliated with Accel Partners(4)...... 290,206 -- 5,000,000 1,325,526 Entities affiliated with SOFTBANK Capital Partners(3)............ -- -- -- 5,554,268
- --------------------- (1) Represents 13,000,000 shares of common stock held by Mr. Lohse, 7,172 shares of common stock held by the Emilie T. Lose Survivor's Trust, dated 7/7/94 and 7,173 shares of common stock held by the William George Lohse Bypass Trust dated 7/7/94. The two trusts are for the benefit of Mr. Lohse and other members of his family. (2) Represents 1,500,000 shares of common stock held by Mr. Thomsen, and 1,500,000 shares of common stock held by Erica Thomsen, Mr. Thomsen's wife. (3) Represents 5,474,842 shares of common stock held by SOFTBANK Capital Partners LP and 79,426 shares of common stock held by SOFTBANK Capital Advisors Fund LP. (4) Represents 5,148,978 shares of common stock held by Accel VI LP and 657,855 shares of common stock held by Accel Internet Fund II LP and 436,461 shares of common stock held by Accel Investors 98 LP and 82,232 shares of common stock held by Accel Keiretsu VI LP and 290,206 shares of common stock held by Mr. Colligan a partner of Accel Partners. These affiliates purchased the securities described above at the same price and on the same terms and conditions as the unaffiliated investors in the private financings. On February 16, 2000, we issued 235,701 shares of common stock at a price of $3.396 per share to William Lohse, our President and Chief Executive Officer. Mr. Lohse paid for those shares by converting the outstanding principal and interest owed by us to Mr. Lohse on an unsecured $735,511 note. Prior to conversion, the note accrued interest at a rate of 5.8% per annum. Entities affiliated with Accel Partners became affiliates of SmartAge.com in connection with the Series B preferred stock financing. Entities affiliated with SOFTBANK Capital Partners became affiliates of SmartAge.com in connection with the Series C preferred stock financing. 46 Business Relationships In August 1999, we entered into an agreement with Victoria Korb for services relating to the build-out of our new headquarters facility in San Francisco, California. Under the agreement, we will pay Ms. Korb $100,000. Victoria Korb is the wife of William Lohse, our President and Chief Executive Officer. We believe that the services provided by Victoria Korb are provided on terms no less favorable to SmartAge.com than would have been obtained from unaffiliated third parties. Indebtedness of Management It is our current policy that all transactions between us and our officers, directors, 5% stockholders and their affiliates will be entered into only if these transactions are approved by a majority of the disinterested directors, are on terms no less favorable to us than could be obtained from unaffiliated parties and are reasonably expected to benefit us. For information concerning indemnification of directors and officers, see "Management--Limitation of Liability and Indemnification Matters." 47 PRINCIPAL STOCKHOLDERS The following table sets forth information regarding beneficial ownership of our common stock as of December 31, 1999, by: . each person or entity known to us to own beneficially more than 5% of the outstanding shares of our common stock; . each of the named executive officers; . each of our directors; and . all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of December 31, 1999 are deemed outstanding. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated, and subject to applicable community property laws, the stockholders named in the table have sole voting and investment power with respect to the shares beneficially owned by them. Unless otherwise indicated, the address for the following stockholders is c/o SmartAge.com Corp., 3450 California Street, San Francisco, California 94118. The following table assumes no exercise of the underwriters' over-allotment option. Applicable percentage ownership is based on 33,614,736 shares of common stock outstanding as of December 31, 1999 and shares outstanding immediately after completion of this offering.
Percentage of Shares Beneficially Owned ------------------------ Number of Shares Prior to After Name Beneficially Owned Offering Offering 5% Stockholders: Accel Partners(1)............. 6,615,732 19.7% % SOFTBANK Capital Partners(2).. 8,276,186 22.8% % Directors and Executive Officers: William Lohse(3).............. 13,014,345 38.7% % John T. Thomsen(4)............ 3,000,000 8.9% % William L. Burnham(2)......... 8,276,186 22.8% % John C. Colligan(1)........... 6,615,732 19.7% % All directors and executive officers as a group (6 persons)(5).................. 31,106,263 85.1% %
- --------------------- (1) Principal address is 428 University Avenue, Palo Alto, California 94301. Represents 5,148,978 shares of common stock held by Accel VI L.P. and 657,855 shares of common stock held by Accel Internet Fund II L.P. and 436,461 shares of common stock held by Accel Investors 98 L.P. and 82,232 shares of common stock held by Accel Keiretsu VI L.P. and 290,206 shares of common stock held by Mr. Colligan, all of which are subject to repurchase by SmartAge.com. Other than the shares held in his name, Mr. Colligan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in entities affiliated with Accel Partners. (2) Principal address is 200 West Evelyn Avenue, Suite 200, Mountain View, California 94043. Represents 5,474,842 shares of common stock held by SOFTBANK Capital Partners LP and 79,426 shares of common stock held by SOFTBANK Capital Advisors Fund LP and 2,682,995 shares of common stock issuable upon exercise of warrants held by SOFTBANK Capital Partners, LP and 38,923 shares of common stock issuable upon exercise of warrants held by SOFTBANK Capital Advisors Fund, LP. Mr. Burnham disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in entities affiliated with SOFTBANK Capital Partners. (3) Represents 13,000,000 shares of common stock held by Mr. Lohse and 7,172 shares of common stock held by the Emilie T. Lose Survivor's Trust dated 7/7/94 and 7,173 shares of common stock held by the William George Lohse Bypass Trust dated 7/7/94, the trusts are for the benefit of Mr. Lohse and members of his family. (4) Represents 1,500,000 shares of common stock held by Mr. Thomsen, and 1,500,000 shares of common stock held by Erica Thomsen, Mr. Thomsen's wife. 166,667 shares held by Mr. Thomsen and 166,667 shares held by Mrs. Thomsen are subject to SmartAge.com's right of repurchase. Mr. Thomsen disclaims beneficial ownership of the shares held by Mrs. Thomsen. (5) Includes 290,206 shares subject to SmartAge's right of repurchase, 200,000 shares subject to immediately exercisable options which are subject to SmartAge.com's right of repurchase and 2,721,918 shares of common stock issuable upon exercise of warrants. 48 DESCRIPTION OF CAPITAL STOCK Upon completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of preferred stock, $0.0001 par value. The following description of our capital stock assumes conversion of all outstanding preferred stock into common stock and gives effect to our amended and restated certificate of incorporation, which will be effective upon completion of this offering. Common Stock As of December 31, 1999, there were 33,614,736 shares of common stock outstanding held by approximately 85 stockholders of record. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of common stock are entitled to the following: Dividends. Holders of common stock are entitled to receive dividends out of assets legally available for the payment of dividends at the times and in the amounts as the board of directors from time to time may determine. Voting. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and will not have cumulative voting rights unless we are subject to Section 2115 of the California Corporations Code. Cumulative voting for the election of directors is not authorized by our certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. Preemptive rights, conversion and redemption. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Liquidation, dissolution and winding-up. Upon liquidation, dissolution or winding-up of SmartAge.com, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation of any preferred stock. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be, upon payment therefore, duly and validly issued, fully paid and nonassessable. Preferred Stock The board of directors is authorized, without action by the stockholders, to designate and issue up to 5,000,000 shares of preferred stock in one or more series. The board of directors can fix the rights, preferences and privileges of the shares of each series and any qualifications, limitations or restrictions on these shares. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of common stock until the board of directors determines the specific rights of the holders of such preferred stock. However, the effects might include, among other things: . restricting dividends on the common stock; . diluting the voting power of the common stock; . impairing the liquidation rights of the common stock; or . delaying or preventing a change in control of us without further action by the stockholders. 49 The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of SmartAge.com. Upon completion of this offering, no shares of preferred stock will be outstanding, and we have no current plans to issue any shares of preferred stock. Warrants In July 1998, we issued a warrant to Lycos, Inc., which was amended in March 1999, to purchase an aggregate of 1,092,159 shares of our Series A preferred stock at an exercise price of $0.9375 per share. This warrant expires in July 2002. In April 1999, we issued warrants to Excite, Inc. to purchase an aggregate of 2,461,472 shares of our Series B preferred stock at an exercise price of $1.10 per share. These warrants expire in April 2003. Registration Rights Upon completion of this offering, the holders of 32,732,717 shares of common stock held by certain founders or issuable upon conversion of the Series A, B and C preferred stock and upon the exercise of warrants have the right to cause us to register these shares under the Securities Act as follows: . Demand Registration Rights. At the earlier of March 26, 2003, or six months after this offering, the holders of 30% of the common stock issued upon conversion of Series B preferred stock may request that we register their shares, provided that the shares to be included in such registration have an anticipated aggregate public offering price of at least $15,000,000. At the earlier of March 26, 2003, or six months after this offering, the holders of 30% of the common stock issued upon conversion of Series C preferred stock or may request that we register their shares, provided that the shares to be included in such registration have an anticipated aggregate public offering price of at least $20,000,000. We are obligated to effect two registrations upon the request of the holders of Series B preferred stock and two registrations upon the request of the holders of Series C preferred stock. . Piggyback Registration Rights. The holders of registrable securities may request to have their shares registered any time we file a registration statement to register any of our securities for our own account or for the account of others subject to complete cutback for our initial public offering and subject to a specified cutback for any offering other than our initial public offering. . S-3 Registration Rights. The holders of registrable securities have the right to request registrations on Form S-3 if we are eligible to use Form S-3 and have not already effected two such S-3 registrations within the past 12 months and if the aggregate proceeds are at least $2,500,000. Upon exercise a holder of warrants to purchase an additional 1,092,159 shares of common stock will have the S-3 registration rights described above commencing 45 days after we have qualified to use Form S-3. Registration of shares of common stock pursuant to the exercise of demand registration rights, piggyback registration rights or S-3 registration rights under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration. See "Shares Eligible for Future Sale" and "Certain Transactions." We will pay all registration expenses in connection with any registration and will pay other underwriting discounts and commissions in connection with the exercise of demand registration rights. The registration rights terminate five years following completion of this offering, or, with respect to each holder of registrable securities holding less than five percent (5%) of our outstanding shares, when the holder can sell all of the holder's shares in any 90-day period under Rule 144 under the Securities Act. 50 Section 2115 of the California General Corporation Law We are currently subject to Section 2115 of the California General Corporation Law. Section 2115 provides that, regardless of a company's legal domicile, some provisions of California corporate law will apply to that company if more than 50% of its outstanding voting securities are held of record by persons having addresses in California and the majority of the company's operations occur in California. While we are subject to Section 2115, stockholders may cumulate votes in electing directors. This means that each stockholder may vote the number of votes equal to the number of candidates multiplied by the number of votes to which the stockholder's shares are normally entitled in favor of one candidate. This potentially allows minority stockholders to elect some members of the board of directors. When we are no longer subject to Section 2115, cumulative voting will not be allowed and a holder of 50% or more of our voting stock will be able to control the election of all directors. Additionally, Section 2115: . enables removal of directors with or without cause with majority stockholder approval; . places limitations on the distribution of dividends; . extends additional rights to dissenting stockholders in any reorganization, including a merger, sale of assets or exchange of shares; and . provides for information rights and required filings in the event we effect a sale of assets or complete a merger. We anticipate that our common stock will be qualified for trading as a national market security on the Nasdaq National Market and that we will have at least 800 stockholders of record by the record date for our 2000 annual meeting of stockholders. If these two conditions occur, then we will no longer be subject to Section 2115. Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions Delaware Anti-Takeover Statute We are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless: . prior to this date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; . upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or . on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. In general, Section 203 defines an interested stockholder as any entity or person who, together with affiliates and associates owns, or within three years, beneficially owned 15% or more of the outstanding voting stock of the corporation. Section 203 defines business combination to include: . any merger or consolidation involving the corporation and the interested stockholder; 51 . any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; . subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; . any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and . the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. Certificate of Incorporation and Bylaws Preferred Stock. Under our certificate of incorporation, the board of directors has the power to authorize the issuance of up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without further vote or action by the stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, may: . delay, defer or prevent a change in control of SmartAge.com; . discourage bids for the common stock at a premium over the market price of our common stock; . adversely affect the voting and other rights of the holders of our common stock; and . discourage acquisition proposals or tender offers for our shares and, as a consequence, inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts. Election and Removal of Directors. Under our certificate of incorporation, our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. This classified system may discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it makes it more difficult for stockholders to replace a majority of the directors. Advance Notice Provisions. Our bylaws establish advance notice procedures for stockholder proposals and nominations of candidates for election as directors other than nominations made by or at the direction of the board of directors or a committee of the board. Special Meeting Requirements. Our bylaws provide that special meetings of stockholders be called by the chairman of the board, the chief executive officer or the board of directors. Cumulative Voting. Both our certificate of incorporation and our bylaws do not provide for cumulative voting in the election of directors. The provisions described above may only be amended by approval of the holders of at least 66 2/3% of the outstanding common stock and may have the effect of deterring a hostile takeover or delaying a change in control or management of SmartAge.com. Transfer Agent and Registrar The transfer agent and registrar for our common stock is . Nasdaq National Market Listing We have applied to have our common stock quoted on the Nasdaq National Market under the symbol "SMTG." 52 SHARES ELIGIBLE FOR FUTURE SALE Sales of substantial amounts of our common stock in the public market after this offering, or the perception that such sales may occur, could cause the market price of our common stock to decline and adversely affect our ability to raise capital in the future. When this offering is completed, we will have a total of shares of common stock outstanding, assuming no exercise of the underwriters' over- allotment option and no exercise of outstanding options. The shares offered by this prospectus will be freely tradable unless they are purchased by our "affiliates," as defined in Rule 144 under the Securities Act of 1933. The remaining 33,614,736 shares of our common stock are held by our existing stockholders. These shares, as well as any shares sold in this offering that are purchased by one of our affiliates, are "restricted securities," which may be sold in the public market only through registration under the Securities Act of 1933 or under an available exemption from registration, such as provided through Rule 144. The following table shows approximately when the shares of our common stock that are not being sold in this offering, but which will be outstanding when this offering is complete, will be eligible for sale in the public market: Eligibility of Restricted Shares for Sale in the Public Market
Date Number of Shares At the effective date.......................................... days after the effective date................................ From time to time after days after the effective date........
Lock-up Agreements All of our officers, directors and substantially all of our stockholders, holding an aggregate of shares of common stock, have agreed to a 180-day "lock-up" with respect to these shares. This generally means that they cannot sell these shares during the 180 days following the date of this prospectus, subject to release during the 180-day period pursuant to the terms of the lockup agreement. However, 25% of the shares of common stock subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions on the later to occur of the end of the 90-day period after the date of this prospectus or the second trading day following the first public release of our quarterly results, provided that the reported sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on such date. An additional 25% of the shares subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions if the reported last sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on the last trading day of the 135-day period after the date of this prospectus. Each person subject to the lock-up agreement described above has agreed to execute any transaction released from restriction in accordance with the terms in this paragraph only through Donaldson, Lufkin & Jenrette Securities Corporation or any of its affiliates acting as broker, unless otherwise agreed in writing by Donaldson, Lufkin & Jenrette Securities Corporation. After the 180-day lock-up period, these shares may be sold in accordance with Rule 144. Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated may release any or all of the shares subject to lockup agreements at any time prior to the expiration of the lockup period. 53 Rule 144 In general, under Rule 144 as currently in effect, a person or persons whose shares are aggregated, who has beneficially owned restricted securities for at least one year, including the holding period of any holder who is not an affiliate, is entitled to sell within any three month period a number of our shares of common stock that does not exceed the greater of: . 1% of the then outstanding shares of our common stock, which will equal approximately shares upon completion of this offering; or . the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the date on which notice of sale is filed with the Securities and Exchange Commission. Sales under Rule 144 are subject to restrictions relating to manner of sale, notice and the availability of current public information about us. Under Rule 144 and subject to volume limitations, of the restricted shares will be eligible for sale beginning days after the date of the final prospectus, and the remaining restricted shares will become salable at various times thereafter. Rule 144(k) A person who is not deemed an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned shares for at least two years, including the holding period of any prior owner who is not an affiliate, would be entitled to sell shares following this offering under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information or notice requirements of Rule 144. Rule 701 and Options Rule 701, as currently in effect, permits resales of shares in reliance upon Rule 144 but without compliance with some restrictions, including the holding period requirement, of Rule 144. Any employee, officer or director or consultant who purchased his or her shares pursuant to a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait 90 days after the date of this prospectus before selling such shares. However, all shares issued by us pursuant to Rule 701 are subject to lock-up provisions and will only become eligible for sale upon the expiration of 180 days after the date of this prospectus subject to release during the 180-day period pursuant to the terms of the lock-up agreement. Registration Following this offering, we intend to file a registration statement under the Securities Act covering shares of common stock subject to outstanding options or issued or issuable under our 1998 Equity Incentive Plan, 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase Plan. Based on the number of shares subject to outstanding options at December 31, 1999, and currently reserved for issuance under these plans, this registration statement would cover approximately 8,754,452 shares. This registration statement will automatically become effective upon filing. Accordingly, shares registered under this registration statement will, subject to Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the expiration of the 180-day lock-up agreements. In addition, holders of 32,732,717 shares of common stock will be entitled to registration rights. See "Description of Capital Stock-- Registration Rights." 54 UNDERWRITING Subject to the terms and conditions contained in all underwriting agreement dated , 2000, the underwriters named below, who are represented by Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, U.S. Bancorp Piper Jaffray Inc. and DLJdirect Inc., have severally agreed to purchase from us the number of shares of common stock set forth opposite their names below:
Number of Shares Underwriters: Donaldson, Lufkin & Jenrette Securities Corporation................ Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................................. U.S. Bancorp Piper Jaffray Inc..................................... DLJdirect Inc...................................................... ---- Total..................................................... ====
The underwriting agreement provides that the obligations of the underwriters to purchase and accept delivery of the shares of common stock offered by this prospectus are subject to approval by their counsel of legal matters concerning the offering and to conditions that must be satisfied by us. The underwriters are obligated to purchase and accept delivery of all the shares of common stock offered by this prospectus, other than those shares covered by the over- allotment option described below, if any are purchased. The underwriters initially propose to offer the shares of common stock in part directly to the public at the initial public offering price set forth on the cover page of this prospectus and in part to dealers, including the underwriters, at such price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may re-allow, to other dealers a concession not in excess of $ per share. After the initial offering of the common stock to the public, the public offering price and other selling terms may be changed by the representatives of the underwriters at any time without notice. The underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. An electronic prospectus will be available on the Web site maintained by DLJdirect Inc., one of the underwriters and an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation. Other than the prospectus in electronic format, the information on this Web site relating to the offering is not part of this prospectus and has not been approved or endorsed by us or the underwriters, and should not be relied on by prospective investors. We have granted to the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of additional shares of common stock at the initial public offering price less underwriting discounts and commissions. The underwriters may exercise the option solely to cover over-allotments, if any, made in connection with the offering. To the extent that the underwriters exercise the option, each underwriter will become obligated, subject to conditions contained in the underwriting agreement, to purchase its pro rata portion of such additional shares based on the underwriters' percentage underwriting commitment as indicated in the above table. The following table sets forth the compensation payable to the underwriters by us in connection with the offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of our common stock.
No Full Exercise Exercise Per share.................................................. Total......................................................
We will pay the offering expenses, estimated to be $ . 55 We have agreed to indemnify the underwriters against liabilities which may arise in connection with the offering, including liabilities under the Securities Act of 1933, or to contribute to payments that the underwriters may be required to make with respect to these liabilities. We, our executive officers, directors, stockholders and optionholders are subject to lock-up agreements providing that, for a period of 180 days after the date of the prospectus, they will not: . offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or . enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any common stock, regardless of whether any such transaction described above is to be settled by delivery of common stock or other securities, in cash, or otherwise without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated. However, 25% of the shares of common stock subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions on the later to occur of the end of the 90-day period after the date of this prospectus or the second trading day following the first public release of our quarterly results, provided that the reported sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on such date. An additional 25% of the shares subject to the restrictions described above (other than shares owned by our directors, officers or affiliates) will be released from these restrictions if the reported last sale price of the common stock on the Nasdaq National Market is at least twice the initial public offering price for 20 of the 30 trading days ending on the last trading day of the 135-day period after the date of this prospectus. Each person subject to the lock-up agreement described above has agreed to execute any transaction released from restriction in accordance with the terms in this paragraph only through Donaldson, Lufkin & Jenrette Securities Corporation or any of its affiliates acting as broker, unless otherwise agreed in writing by Donaldson, Lufkin & Jenrette Securities Corporation. In addition, during such 180-day period, we have also agreed not to file any registration statement with respect to, and each of our executive officers, directors and stockholders have agreed not to make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Prior to the offering, there has been no established trading market for the common stock. The initial public offering price of the shares of common stock offered by this prospectus will be determined by negotiation among us and the representatives of the underwriters. The factors to be considered in determining the initial public offering price include: . the history of and the prospects for the industry in which we compete; . our past and present operations; . our historical results of operations; . our prospects for future operational results; . the recent market prices of securities of generally comparable companies; and . the general condition of the securities markets at the time of the offering. At our request, the underwriters have reserved up to % of the shares of common stock to be sold in this offering for sale to some of our employees, associates of our employees and directors, and other 56 individuals or companies who have commercial arrangements or personal relationships with us. No shares have been reserved for sale to our directors or officers. Through this directed share program, we intend to ensure that those individuals and companies that have supported us, or who are in a position to support us in the future, have the opportunity to purchase our common stock at the same price that we are offering our shares to the general public. Indications of interest will be sought by means of a written notice, which conforms to Rule 134, accompanied by a copy of this prospectus. Prospective participants will be permitted to participate in this offering at the initial public offering price presented on the cover page of this prospectus. No commitment to purchase shares by any participant in the directed share program will be accepted until after the registration statement of which this prospectus is a part is effective and an initial public offering price has been established. The number of shares of our common stock available for sale to the general public will be reduced by the number of shares sold through the directed share program. Any shares reserved for the directed share program which are not purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. We have applied for quotation of our common stock on the Nasdaq National Market under the symbol "SMTG." Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the shares of common stock included in this offering in any jurisdiction where action for that purpose is required. The shares of common stock included in this offering may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any of these shares of common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of such jurisdiction. We advise persons who receive this prospectus to inform themselves about and observe any restrictions relating to the offering of the common stock and the distribution of this prospectus. This prospectus is not an offer to sell or a solicitation of any offer to buy any shares of common stock included in this offering in any jurisdiction in which such an offer or a solicitation is unlawful. In connection with the offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may over-allot the offering, creating a syndicate short position. The underwriters may bid for and purchase shares of our common stock in the open market to cover syndicate short positions or to stabilize the price of the common stock. In addition, the underwriting syndicate may reclaim selling concessions from syndicate members and selected dealers if they repurchase previously distributed common stock in syndicate covering transactions, in stabilizing transactions or otherwise. These activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. 57 LEGAL MATTERS Selected legal matters with respect to the validity of the common stock offered by this prospectus are being passed upon for SmartAge.com by Pillsbury Madison & Sutro LLP, Palo Alto, California. Certain partners of Pillsbury Madison & Sutro LLP and an investment partnership comprised of partners and former partners of that firm beneficially own an aggregate of 23,814 shares of SmartAge.com common stock. Legal matters in connection with this offering will be passed upon for the underwriters by Morrison & Foerster LLP, San Francisco, California. EXPERTS The financial statements of SmartAge.com Corp. as of December 31, 1998 and 1999 and for the period from January 20, 1998 (inception) to December 31, 1998 and for the year ended December 31, 1999 have been included in the prospectus and elsewhere in the registration statement in reliance on the report of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information with respect to SmartAge.com and the common stock offered by this prospectus, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. You may read and copy any document we file at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC's Web site at http://www.sec.gov. Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, accordingly, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms and the Web site of the SEC referred to above. 58 INDEX TO FINANCIAL STATEMENTS
Page ---- Independent Auditors' Report............................................. F-2 Balance Sheets........................................................... F-3 Statements of Operations................................................. F-4 Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity.................................................................. F-5 Statements of Cash Flows................................................. F-6 Notes to Financial Statements............................................ F-7
F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors SmartAge.com Corp.: We have audited the accompanying balance sheets of SmartAge.com Corp. as of December 31, 1998 and 1999, and the related statements of operations, redeemable convertible preferred stock and stockholders' equity, and cash flows for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SmartAge.com Corp. as of December 31, 1998 and 1999, and the results of its operations and its cash flows for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ KPMG LLP San Francisco, California February 25, 2000, except as to the second paragraph of Note 11 for which the date is March 6, 2000 F-2 SMARTAGE.COM CORP. BALANCE SHEETS
December 31, ------------------------- 1998 1999 Assets Current assets: Cash and cash equivalents......................... $ 620,422 $ 19,891,948 Accounts receivable, net.......................... 179,727 909,205 Prepaid expenses and other assets................. 19,409 1,153,221 ----------- ------------ Total current assets............................. 819,558 21,954,374 Property and equipment, net......................... 313,368 2,301,007 Restricted cash..................................... -- 1,937,565 Other assets, net................................... 86,275 37,867 ----------- ------------ Total assets..................................... $ 1,219,201 26,230,813 =========== ============ Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable.................................. $ 174,563 $ 3,619,253 Accrued liabilities............................... 230,151 1,226,254 ----------- ------------ Total current liabilities........................ 404,714 4,845,507 Notes payable to shareholder........................ 735,511 735,511 ----------- ------------ Total liabilities................................ 1,140,225 5,581,018 ----------- ------------ Commitments and contingencies (Note 6) Series B redeemable convertible preferred stock; $0.0001 par value; 9,164,335 shares authorized; zero and 6,502,863 shares issued and outstanding in 1998 and 1999, respectively; liquidation preference of $0 and $7,153,149 in 1998 and 1999, respectively; redemption amount of $0 and $7,569,787 in 1998 and 1999, respectively.......... -- 7,427,787 Stockholders' equity: Series A convertible preferred stock; $0.0001 par value; 3,840,000 shares authorized; 2,657,051 shares issued and outstanding in 1998 and 1999; liquidation preference of $2,490,985 in 1998 and 1999............................................. 266 266 Series C convertible preferred stock; $0.0001 par value; 14,000,000 shares authorized; zero and 7,572,803 shares issued and outstanding in 1998 and 1999, respectively; liquidation preference of $0 and $25,717,238 in 1998 and 1999, respectively..................................... -- 757 Common stock, $0.0001 par value; 61,500,000 shares authorized; 16,046,569 and 16,882,019 shares issued and outstanding in 1998 and 1999, respectively..................................... 1,605 1,688 Deferred stock-based compensation................... (427,317) (6,705,059) Additional paid-in capital.......................... 3,196,662 36,384,027 Accumulated deficit................................. (2,692,240) (16,459,671) ----------- ------------ Total stockholders' equity....................... 78,976 13,222,008 ----------- ------------ Total liabilities, redeemable convertible preferred stock and stockholders' equity........ $ 1,219,201 $ 26,230,813 =========== ============
See accompanying notes to financial statements. F-3 SMARTAGE.COM CORP. STATEMENTS OF OPERATIONS
January 20, 1998 (inception) to Year ended December 31, December 31, 1998 1999 Revenues: Media........................................... $ 239,370 $ 2,237,105 E-commerce...................................... 38,971 361,366 ----------- ------------ Total revenues................................. 278,341 2,598,471 Cost of revenues.................................. 56,902 1,539,866 ----------- ------------ Gross profit................................... 221,439 1,058,605 Operating expenses: Sales and marketing............................. 667,251 6,544,306 Technology and development...................... 735,789 3,372,155 General and administrative...................... 1,209,906 3,706,681 Stock-based compensation........................ 308,597 1,516,534 ----------- ------------ Total operating expenses....................... 2,921,543 15,139,676 ----------- ------------ Loss from operations........................... (2,700,104) (14,081,071) Interest income, net.............................. 7,864 313,640 ----------- ------------ Net loss....................................... (2,692,240) (13,767,431) Accretion on redeemable convertible preferred stock............................................ -- 416,638 ----------- ------------ Net loss applicable to common stockholders..... $(2,692,240) $(14,184,069) =========== ============ Net loss applicable to common stockholders per share--basic and diluted......................... $ (0.18) $ (0.90) =========== ============ Weighted average shares--basic and diluted........ 14,939,918 15,750,832 =========== ============
See accompanying notes to financial statements. F-4 SMARTAGE.COM CORP. STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Period from January 20, 1998 (inception) to December 31, 1999
Redeemable convertible Convertible preferred stock preferred stock Common stock Additional Deferred ---------------------- ----------------- ----------------- paid-in stock-based Shares Amount Shares Amount Shares Amount capital compensation Issuance of common stock to founder......................... -- $ -- -- $ -- 13,000,000 $1,300 $ -- $ -- Issuance of common stock for acquisition of TECS, Inc........ -- -- -- -- 3,000,000 300 46,500 (41,373) Issuance of Series A convertible preferred stock, net of $35,000 of issuance costs............... -- -- 2,657,051 266 -- -- 2,455,626 -- Issuance of Series A preferred stock warrants.................. -- -- -- -- -- -- 685,260 (685,260) Issuance of common stock for consulting services rendered.... -- -- -- -- 46,569 5 9,276 -- Amortization of stock-based compensation.................... -- -- -- -- -- -- -- 299,316 Net loss........................ -- -- -- -- -- -- -- -- ---------- ----------- ---------- ------ ---------- ------ ----------- ----------- Balance at December 31, 1998.... -- -- 2,657,051 266 16,046,569 1,605 3,196,662 (427,317) Issuance of Series B redeemable convertible preferred stock, net of $142,000 of issuance costs... 6,502,863 7,011,149 -- -- -- -- -- -- Accretion of Series B redeemable convertible preferred stock..... -- 416,638 -- -- -- -- (416,638) -- Issuance of Series C convertible preferred stock, net of $35,000 of issuance costs............... -- -- 7,572,803 757 -- -- 25,678,482 -- Issuance of common stock upon the exercise of options......... -- -- -- -- 523,844 52 16,539 -- Issuance of common stock for consulting services rendered.... -- -- -- -- 311,606 31 114,706 -- Issuance of Series A preferred stock warrants.................. -- -- -- -- -- -- 277,787 (277,787) Issuance of Series B preferred stock warrants.................. -- -- -- -- -- -- 1,621,455 (1,621,455) Issuance of Series C preferred stock warrants.................. -- -- -- -- -- -- 3,407,435 (3,407,435) Deferred stock-based compensation.................... -- -- -- -- -- -- 2,487,599 (2,487,599) Amortization of stock-based compensation.................... -- -- -- -- -- -- -- 1,516,534 Net loss........................ -- -- -- -- -- -- -- -- ---------- ----------- ---------- ------ ---------- ------ ----------- ----------- Balance at December 31, 1999.... 6,502,863 $ 7,427,787 10,229,854 $1,023 16,882,019 $1,688 $36,384,027 $(6,705,059) ========== =========== ========== ====== ========== ====== =========== =========== Total Accumulated stockholders' deficit equity Issuance of common stock to founder......................... $ -- $ 1,300 Issuance of common stock for acquisition of TECS, Inc........ -- 5,427 Issuance of Series A convertible preferred stock, net of $35,000 of issuance costs............... -- 2,455,892 Issuance of Series A preferred stock warrants.................. -- -- Issuance of common stock for consulting services rendered.... -- 9,281 Amortization of stock-based compensation.................... -- 299,316 Net loss........................ (2,692,240) (2,692,240) ------------- -------------- Balance at December 31, 1998.... (2,692,240) 78,976 Issuance of Series B redeemable convertible preferred stock, net of $142,000 of issuance costs... -- -- Accretion of Series B redeemable convertible preferred stock..... -- (416,638) Issuance of Series C convertible preferred stock, net of $35,000 of issuance costs............... -- 25,679,239 Issuance of common stock upon the exercise of options......... -- 16,591 Issuance of common stock for consulting services rendered.... -- 114,737 Issuance of Series A preferred stock warrants.................. -- -- Issuance of Series B preferred stock warrants.................. -- -- Issuance of Series C preferred stock warrants.................. -- -- Deferred stock-based compensation.................... -- -- Amortization of stock-based compensation.................... -- 1,516,534 Net loss........................ (13,767,431) (13,767,431) ------------- -------------- Balance at December 31, 1999.... $(16,459,671) $ 13,222,008 ============= ==============
See accompanying notes to financial statements. F-5 SMARTAGE.COM CORP. STATEMENTS OF CASH FLOWS
January 20, 1998 (inception) to Year ended December 31, December 31, 1998 1999 Cash flows from operating activities: Net loss........................................ $(2,692,240) $(13,767,431) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.................. 95,768 452,939 Non-cash stock compensation expense............ 308,597 1,516,534 Changes in operating assets and liabilities: Accounts receivable.......................... (179,727) (729,478) Prepaid expenses and other assets............ (19,409) (1,133,812) Accounts payable............................. 174,563 3,444,690 Accrued liabilities.......................... 230,151 996,103 ----------- ------------ Net cash used in operating activities...... (2,082,297) (9,220,455) ----------- ------------ Cash flows from investing activities: Purchases of property and equipment, net........ (357,307) (2,357,240) Cash paid in TECS acquisition................... (145,010) -- Restricted cash deposits........................ -- (1,937,565) Other assets.................................... 12,333 -- ----------- ------------ Net cash used in investing activities...... (489,984) (4,294,805) ----------- ------------ Cash flows from financing activities: Proceeds from note payable to founder........... 735,511 -- Proceeds from the sale of redeemable convertible preferred stock, net........................... -- 7,011,149 Proceeds from issuance of preferred stock, net.. 2,455,892 25,679,239 Proceeds from issuance of common stock upon the exercise of options............................ -- 16,591 Proceeds from issuance of common stock.......... 1,300 79,807 ----------- ------------ Cash provided by financing activities...... 3,192,703 32,786,786 ----------- ------------ Net increase in cash and cash equivalents......... 620,422 19,271,526 Cash and cash equivalents at beginning of period.. -- 620,422 ----------- ------------ Cash and cash equivalents at end of period........ $ 620,422 $ 19,891,948 =========== ============ Noncash financing and investing activities: Issuance of common stock in TECS acquisition.... $ 46,500 $ -- =========== ============ Issuance of preferred stock warrants............ $ 685,260 $ 5,306,677 =========== ============ Issuance of common stock for consulting services rendered....................................... $ 9,281 $ 34,930 =========== ============ Deferred stock-based compensation............... $ -- $ 2,487,599 =========== ============ Accretion on redeemable convertible preferred stock.......................................... $ -- $ 416,638 =========== ============
See accompanying notes to financial statements. F-6 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS (1) Organization and Summary of Significant Accounting Policies (a) Organization and Nature of Operations SmartAge.com Corp. was incorporated in Delaware on January 20, 1998. SmartAge.com (the Company) is a provider of business-to-small business e- commerce and online promotional services and products. The Company's Web site provides comprehensive solutions that enable its members to easily create and promote their Web sites, attract customers and sell services and products online. By providing services and products that are important to small businesses, the Company has attracted more than one million members to its small business community. This community serves as a cost-effective e-commerce and advertising channel through which both small and large businesses can target and reach the highly fragmented small business market segment. (b) Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid investments such as money market funds with remaining maturities of less than 90 days. (c) Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation of property and equipment is provided over the estimated useful lives of the respective assets, generally three years, on a straight-line method. (d) Restricted Cash Restricted cash consists of funds held in a money market account which are restricted from use pursuant to certain lease agreements. (e) Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of the asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell. (f) Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets whose realization is not considered probable. (g) Concentration of Credit Risk Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and trade accounts receivable. The Company places its cash and cash equivalents F-7 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) primarily in depository accounts and money market accounts of recognized financial institutions. To reduce credit risk with trade accounts receivable, the Company performs evaluations of the credit worthiness of its customers on an ongoing basis. The Company does not generally require collateral or other security. The Company historically has not experienced any significant credit losses. As of December 31, 1998 and 1999, the allowance for bad debt was $0 and $79,000, respectively. (h) Revenue Recognition Advertising revenues were generated by delivering impressions on the Company's Web site, on the Company's members' Web sites and on third-party networks at an agreed upon rate per thousand impressions. An impression is the viewing of advertising or other promotional material on a Web site. Sponsorship revenues are generated by selling both advertising in the Company's electronic newsletter and location-specific advertisements for a specified period of time such as banners, links, buttons and other images on the Company's Web site. The Company contracts directly with advertisers and sponsors and bears full credit risk. E-commerce revenues are generated from sales to the Company's members of online promotional and media buying services and to a lesser extent, the sale of Web site creation services and products. Revenues from the sale of advertising is recognized in the period the services are delivered. Revenues from the sale of sponsorships are recognized either in the period services are delivered or ratably over the term of the agreement. Advertising and sponsorships are typically sold under purchase order agreements, which are usually short term in nature and subject to cancellation. E-commerce revenue is recognized in the period services are delivered or transactions occur. E-commerce revenue is recognized net of any amounts owed to third-party providers. Any payments received in advance are recorded as deferred revenue until recognized. While the Company's service enables small business members to engage in barter transactions for which the Company receives a cash fee, the Company does not engage in barter transactions. (i) Software Development Costs Costs related to the development of new products and enhancements to existing products are charged to technology and development as incurred. Software development costs are required to be capitalized when a product's technological feasibility has been established by completion of a working model of the product. To date, completion of a working model of the Company's products and general release have substantially coincided. As a result, the Company has not capitalized any software development costs because such costs have not been significant. (j) Accounting for Stock-Based Compensation The Company accounts for its stock-based compensation arrangements with employees using the intrinsic value method pursuant to Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. As such, compensation expense is recorded on the date of grant when the fair value of the underlying common stock exceeds either the exercise price for stock options or the purchase price for the issuance or sales of common stock. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company discloses the pro forma effects of using the fair value method of accounting for stock-based compensation arrangements. Unearned deferred compensation resulting from employee option grants is amortized on an accelerated basis over the vesting period of the options, generally four years in accordance with Financial Accounting Standards Board Interpretation No. 28. (k) Comprehensive Loss The Company has no significant components of other comprehensive loss; accordingly, comprehensive loss is the same as net loss for all periods presented. F-8 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) (l) Advertising Expense The cost of advertising is expensed as incurred. Advertising costs totaled approximately $12,700 and $2,563,000 for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, respectively. (m) Per Share Computations Basic net loss per share is computed by dividing net loss by the weighted- average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common and, when dilutive, potential common equivalent shares outstanding during the period. Common equivalent shares include the effect of redeemable convertible preferred stock, convertible preferred stock, outstanding warrants and stock options. All potential common equivalent shares have been excluded from the computation of diluted net loss per share for all periods presented because the effect would be antidilutive. Diluted net loss per share does not include the effect of the following antidilutive common equivalent shares (in thousands):
Period from January 20, 1998 Year ended to December 31, December 31, 1998 1999 Stock options................................... 1,895 4,254 Shares of common stock subject to repurchase.... 1,000 679 Convertible preferred warrants.................. 1,092 6,276 Redeemable convertible preferred stock (as if converted)..................................... -- 6,503 Convertible preferred stock (as if converted)... 2,657 10,230 ----- ------ 6,644 27,942 ===== ======
The weighted-average exercise prices of stock options were $0.03 and $0.53 as of December 31, 1998 and 1999, respectively. The weighted-average prices of shares of common stock subject to repurchase were $0.0156 and $0.1300 as of December 31, 1998 and 1999, respectively. (n) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (o) Segment Information During fiscal 1999, the Company adopted the provisions of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 established annual and interim reporting standards for a company's operating segments. SFAS No. 131 requires disclosures of selected segment- related financial information about products, major customers and geographic areas. F-9 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) (p) Internal Use Software In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 is effective for financial statements for years beginning after December 15, 1998. SOP 98-1 provides guidance over accounting for computer software developed or obtained for internal use, including the requirement to capitalize specified costs and amortization of these costs. Adoption of this standard did not have a material effect on the Company's financial statements. (q) Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments (including derivative instruments embedded in other contracts) and for hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. To date, the Company has not entered into any derivative financial instruments or hedging activities. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101. The SAB summarized certain of the SEC Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 101, and any resulting change in accounting principle that a registrant would have to report, is effective no later than the Company's fiscal quarter ending October 31, 2000. The Company does not expect the application of SAB No. 101 to have a material effect its financial position or results of operations, nor does the Company expect to report a change in accounting principle resulting from its application. (2) Business Combination On February 5, 1998, the Company purchased Thomsen Enscore Computer Solutions, Inc. (TECS), a privately owned company, which developed the SmartClicks technology. Under terms of the acquisition, the Company issued approximately 3,000,000 shares of its common stock in exchange for all outstanding shares of TECS common stock and paid $100,000 in cash and $45,000 in direct acquisition costs. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations of TECS have been included in the Company's financial statements from February 5, 1998. The aggregate purchase price of approximately $192,000, was allocated to the net tangible assets acquired, goodwill, and deferred compensation. Approximately 1,000,000 shares of common stock issued in connection with the acquisition are returnable to the Company in the event of the termination of the former TECS founders/shareholders. The returnable shares vest over a three- year period (note 5). The goodwill will be amortized over three years. Goodwill amortization of approximately $52,000 was recorded in both the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999. F-10 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) (3) Balance Sheet Components (a) Property and Equipment Property and equipment consisted of the following as of December 31, 1998 and 1999:
1998 1999 Computer equipment and software......................... $309,995 2,634,692 Furniture and fixtures.................................. 47,312 114,785 -------- --------- 357,307 2,749,477 Accumulated depreciation................................ (43,939) (448,470) -------- --------- Property and equipment, net............................. $313,368 2,301,007 ======== =========
(b) Prepaids Expenses and Other Current Assets Prepaids Expenses and other current assets consisted of the following as of December 31, 1998 and 1999:
1998 1999 Employee receivable........................................ $ -- 90,725 Deposits................................................... 10,409 241,933 Reimbursable lease payments................................ -- 326,827 Prepaid expenses........................................... 9,000 493,736 ------- --------- $19,409 1,153,221 ======= =========
(4) Note Payable In June 1998, the Company obtained an unsecured promissory note of approximately $736,000 from the Company's founder. The note bears interest at 5.8% and is due on or before June 30, 2004. The note was amended in January 2000 in order to provide for payment of the loan by conversion of the balance into shares of the Company's common stock at a price of $3.396 per share. (5) Redeemable Convertible Preferred Stock and Stockholders' Equity (a) Redeemable Convertible Preferred Stock Redeemable convertible preferred stock consisted of the following series:
Shares outstanding Liquidation Noncumulative Redemption -------------------- preference dividend price 1998 1999 per share per share per share Series B........... -- 6,502,863 $1.10 0.088 1.98
The holders of the Series B redeemable convertible preferred stock may request redemption of their shares on or after March 26, 2007 by written request from 2/3rds of the then-outstanding Series B stockholders. The redemption price for each share of the Series B preferred stock would be its original issue price plus 10% of the Series B original issue price per annum from the original issue date until the redemption date, less any declared and paid dividends. The difference between the original issue price per share and the redemption price per share is being charged to the statement of operations, using the effective interest method, as accretion on redeemable convertible preferred stock through March 27, 2007. For the year ended December 31, 1999, approximately $417,000 of accretion was recorded by the Company. F-11 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) Each share of Series B preferred stock is convertible into one share of common stock. Upon completion of an initial public offering (IPO), all shares are automatically converted to common stock and the holders of the Series B preferred stock will not be paid the redemption price per share. Holders of Series B preferred stock vote equally with holders of common stock on an as-if converted basis. (b) Convertible Preferred Stock Convertible preferred stock consisted of the following series:
Shares outstanding Liquidation Noncumulative -------------------- preference dividend 1998 1999 per share per share Series A...................... 2,657,051 2,657,051 $0.9375 0.0750 Series C...................... -- 7,572,803 3.3960 0.2717 --------- ---------- 2,657,051 10,229,854 ========= ==========
Holders of Series A and C convertible preferred stock are entitled to noncumulative dividends, if and when declared by the Board of Directors, as shown above. Each share of Series A and C convertible preferred stock is convertible at any time into one share of common stock subject to certain antidilution provisions. Shares of Series A and C convertible preferred stock have a liquidation preference as shown above, plus any declared and unpaid dividends. Convertible preferred stock votes equally with shares of common stock on an as-if-converted basis. No dividends have been declared or paid on the preferred stock or common stock since the Company's inception. (c) Warrants In July 1998 (amended in March 1999), the Company entered into a joint marketing agreement with Lycos Inc. (Lycos) whereby Lycos desired to have the Company establish a banner exchange service for the Lycos homepage builder sites and to generate new members for the Company from the Lycos network. In consideration for new member generation, Lycos received a warrant to purchase 1,092,159 shares of the Company's Series A convertible preferred stock at an exercise price of $0.9375, issuable upon attainment of certain performance milestones. The warrant expires in July 2002. No shares underlying the warrant had been earned and fully vested as of December 31, 1998. As of December 31, 1999, all shares underlying the warrant were earned, vested and were issuable pursuant to Lycos having achieved certain performance milestones in fiscal 1999. Using the Black-Scholes option pricing model, the initial fair value of the warrant on the effective date of the agreement approximated $685,000, which was amortized to stock-based compensation expense using the straight-line method over one year. The shares underlying the unachieved milestones were revalued at each subsequent balance sheet date until each milestone was achieved. Such remeasurement resulted in an increase from the initial fair value, which was recognized over the remaining term. The Company recorded approximately $299,000 and $535,000 of amortization for the period from January 22, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, respectively. The fair value of the warrant was calculated using the following assumptions: dividend yield of 0%, expected volatility of 90%, risk-free interest rate of 5% and the contractual life of 4 years. In April 1999, the Company entered into a joint marketing and services agreement with Excite@Home whereby the Company and Excite@Home will work jointly on a range of integrated content and marketing solutions. In consideration for new member and sales growth generation, Excite@Home received a warrant to purchase 2,461,472 shares of the Company's Series B redeemable convertible preferred stock at an exercise F-12 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) price of $1.10 issuable upon attainment of certain performance milestones. The warrant expires in April 2003. No shares underlying the warrant have been earned as of December 31, 1999. As of December 31, 1999, the Company considers Excite@Home's attainment of the first milestone for new member and sales growth to be probable. Therefore, using the Black-Scholes option pricing model, the fair value of the shares underlying the first milestone was determined to be approximately $1,600,000. This amount is being amortized to stock-based compensation expense over the term of the agreement and approximately $418,000 of amortization was recorded in the year ended December 31, 1999. The fair value of the warrant was calculated using the following Black-Scholes assumptions: dividend yield of 0%, expected volatility of 90%, risk-free interest rate of 5% and the contractual life of 4 years. In October 1999, the Company entered into a joint venture agreement with SoftBank Capital Advisors Fund, LP (SOFTBANK) whereby the parties to the agreement will establish joint ventures, among other countries, Japan, England, and France. Pursuant to such joint venture arrangement, the Company agreed to fund, in the future, the joint venture for a certain amount upon formation; further, in connection with such proposed formation, the Company issued warrant to SOFTBANK to purchase 2,721,918 shares of the Series C convertible preferred stock at an exercise price of $3.396 per share, exercisable upon formation of such joint venture. The warrant expires in December 2000. Using the Black- Scholes option pricing model, the initial fair value of the warrant on the effective date of the agreement approximated $3,410,000. The fair value of the warrant, was calculated using the following assumptions: dividend yield of 0%, expected volatility of 90%, risk-free interest rate of 5% and the contractual life of 1 year. During February 2000, the Company amended the agreement with SoftBank such that the number of shares underlying the warrant increased to 3,265,278, the exercisability criteria of joint venture formation was removed and the shares underlying the warrant became immediately vested. (d) Common Stock As of December 31, 1999, the Company has reserved 16,732,717 shares of common stock for the future conversion of the preferred stock. The Company has issued 16,882,019 shares of common stock to founders, employees, and consultants under restricted stock purchase agreements. Certain restricted stock purchase agreements include provisions whereby the Company has the right to repurchase or demand return of the stock upon the termination of the holders' service with the Company. The repurchase/return right generally lapses over a period of three years. Approximately 1,000,000 shares of common stock issued in connection with the TECS acquisition (Note 2) are returnable to the Company in the event of employee termination. As of December 31, 1998 and 1999, 1,000,000 and 388,887 were subject to return under this agreement. As of December 31, 1999, 290,206 shares of common stock issued to a member of the Company's Board of Directors are subject to repurchase at the original purchase price of $0.275 per share. (e) Stock Option Plan As of December 31, 1999, a total of 5,250,000 shares of common stock were authorized for issuance under the 1998 Equity Incentive Plan (the Plan). Options may be granted at an exercise price not less than 100% of the fair market value, as determined by the Board of Directors, for incentive stock options and 85% of fair market value for nonqualified stock options at the grant date. All options are granted at the discretion of the Company's Board of Directors and have a term not greater than 10 years from the date of grant. Options issued generally vest 25% on the first anniversary date and ratably over the following 36 months. F-13 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) A summary of stock option activity under the Plan is as follows:
Weighted- Number average of options exercise price Options granted................................... 2,495,000 $0.062 Options canceled.................................. (600,000) 0.016 --------- ------ Balance at December 31, 1998...................... 1,895,000 0.08 Options granted at fair value..................... 235,700 0.20 Options granted at less than fair value........... 2,761,864 0.80 Options exercised................................. (523,844) 0.04 Options canceled.................................. (114,268) 0.17 --------- ------ Balance at December 31, 1999...................... 4,254,452 $ 0.53 ========= ======
As of December 31, 1999, there were 403,735 options available for future grant under the Plan. The following table summarizes information about stock options outstanding under the Plan as of December 31, 1999:
Options outstanding Options vested -------------------------------------------------- ---------------------- Weighted- average Weighted- Weighted- Range remaining average average of exercise Number life exercise Number exercise prices of shares (in years) price of shares price $ 0.02 750,833 8.41 $0.02 151,062 $0.02 0.19--0.28 2,645,079 9.26 0.24 141,042 0.19 0.81--1.50 566,050 9.82 1.38 -- -- 2.50 195,990 9.93 2.50 -- -- 3.40 96,500 9.98 3.40 -- -- ----------- --------- ---- ----- ------- ----- $0.02--3.40 4,254,452 9.23 $0.53 292,104 $0.10 =========== ========= ==== ===== ======= =====
The weighted-average fair value of employee stock options granted at fair value during the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999 were $0.02 and $0.04, respectively. The weighted-average fair value of employee stock options granted below fair value during the year ended December 31, 1999 was $1.10. The fair value of employee option grants was estimated on the date of grant using the Black-Scholes option pricing model. The fair value of options granted for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, is estimated on the date of grant using the minimum value method with the following weighted-average assumptions: no volatility, no dividend yield; risk- free interest rate of 5% and expected life of four years. The Company uses the intrinsic value method in accounting for its employee stock-based compensation plan. Accordingly, no compensation cost has been recognized for any of its stock options granted because the exercise price of each option equaled or exceeded the fair value of the underlying common stock as of the grant date for each stock option, except for certain stock options granted in fiscal 1999. For those option grants, the Company recorded deferred stock-based compensation of $2.5 million for the difference at the grant date between the exercise price of each stock option granted and the fair value of the underlying common stock. This amount is being amortized on an accelerated basis over the vesting period, generally four years in accordance with FIN No. 28. The $549,000 of stock-based compensation expense for the year ended December 31, 1999 relates to the following items in the accompanying 1999 statement of operations: $74,000 technology and development; $244,000 sales and marketing; and $231,000 general and administrative. F-14 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) Had compensation cost for the Company's stock-based compensation plans been determined consistent with the fair value approach set forth in SFAS No. 123, the Company's net loss applicable to common stockholders for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, would have been as follows:
1998 1999 Net loss applicable to common stockholders: As reported...................................... $(2,692,240) (14,184,069) =========== =========== Pro forma........................................ $(2,692,240) (14,243,608) =========== =========== Basic and diluted net loss per share: As reported...................................... $ (0.18) (0.90) =========== =========== Pro forma........................................ $ (0.18) (0.90) =========== ===========
(6) Commitments and contingencies (a) Leases The Company leases its facilities under various, noncancelable operating lease agreements that expire on dates through February 2006. Future minimum payments under the leases for these facilities as of December 31, 1999 are as follows: Years ended December 31: 2000............................................................ $1,729,817 2001............................................................ 1,576,818 2002............................................................ 1,868,437 2003............................................................ 1,917,722 2004 and thereafter............................................. 2,500,752 ---------- $9,593,546 ==========
Rent expense for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999 was approximately $137,000 and $364,000, respectively. (b) Contingencies On June 9, 1999, a demand for arbitration was filed with the American Arbitration Association in San Francisco, California against the Company for breach of contract, breach of express warranty, negligence, fraud in the inducement, unconscionable contract and intentional misrepresentation. The party is seeking compensatory damages of $2.4 million and punitive damages of at least $1.0 million and injunctive relief. On July 21, 1999 the Company filed an answer and counterclaim against the party. An arbitration hearing was completed on February 1, 2000, and both parties have filed post-arbitration briefs. The arbitration ruling is expected in early April. From time to time the Company may be subject to other legal proceedings and claims in the ordinary course of business. The Company is not aware of any legal proceedings or claims, including the above matter that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company's business, financial condition or results of operations. F-15 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) (7) Income Taxes The Company had no income tax expense in the period from January 20, 1998 (inception) to December 31, 1998 or the year ended December 31, 1999. The tax effects of temporary differences that give rise to significant portions of deferred tax assets are presented below as of December 31, 1998 and 1999:
1998 1999 Deferred tax assets: Accrued expenses ................................. $ 148,064 873,443 State taxes....................................... 272 -- Book depreciation in excess of federal depreciation..................................... -- 16,418 Net operating loss carryforward................... 821,657 5,582,878 --------- ---------- 969,993 6,472,739 Less valuation allowance.......................... (962,530) (6,472,739) --------- ---------- Net deferred tax asset.......................... $ 7,463 -- ========= ========== Deferred tax liabilities: Federal depreciation in excess of book............ 7,463 -- --------- ---------- Net deferred tax asset.......................... $ -- -- ========= ==========
The net change in the total valuation allowance for the year ended December 31, 1999 was $4,525,118. As of December 31, 1999, the Company has net operating loss carryforwards for federal and California income tax purposes of $14,042,982 and $13,853,419, respectively. The net operating loss and tax credit carryforwards expire in the year 2019 for federal income tax purposes and the year 2006 for California income tax purposes. The Company has a valuation allowance for the full amount of the net deferred tax assets as of December 31, 1998 and 1999 as management does not believe it is more likely than not that the value of the assets is recoverable. Federal and California tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a shift in ownership of the Company which constitutes an "ownership change," as defined in Section 382 of the Internal Revenue Code. The Company has not yet determined whether an ownership change has occurred due to significant stock transactions in each of the report periods disclosed. If an ownership change does occur, the Company's ability to utilize the stated carryforwards could be significantly reduced. (8) Segment Information During fiscal 1999, the Company adopted the provisions of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 requires disclosures of selected segment-related financial information about products, major customers and geographic areas. The Company's chief operating decision maker (CODM) is considered to be the Company's CEO. The CODM evaluates performance, makes operating decisions and allocates resources based on financial data consistent with the presentation in the accompanying financial statements. Therefore, the Company operates in a single segment for purposes of disclosure under SFAS No. 131. F-16 SMARTAGE.COM CORP. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company's revenues have all been earned from customers in the United States. In addition, all operations and long-lived assets are located in the United States. During fiscal 1999, two customers accounted for approximately 13% and 11% respectively of the Company's revenues. (9) Retirement Plan In December 1999, the Company established a tax-qualified employee savings and retirement plan for which the Company's employees will generally be eligible. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation and have the amount of such reduction contributed to the 401(k) Plan. To date, the Company has made no matching contributions. The 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so that contributions to the 401(k) Plan and income earned on plan contributions are not taxable to employees until withdrawn from the 401(k) Plan, and so that contributions by the Company, if any, will be deductible by the Company when made. (10) Related Party In August 1999, the Company entered into an agreement with the wife of the founder for interior design services relating to the build-out of the Company's new headquarters facility. Total costs incurred in fiscal 1999 related to this agreement were approximately $100,000. (11) Subsequent Events In February 2000, the Company issued 110,993 shares of Series C convertible preferred stock for aggregate proceeds of $377,000. The Company issued a warrant to purchase an aggregate of up to 605,620 shares of Series C convertible preferred stock at an exercise price of $3.396 per share. The warrant expires in December 2000. In March 2000, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission that would permit the Company to sell shares of the Company's stock in connection with a proposed initial public offering. The Company issued 3, 878,781 shares of Series C convertible preferred stock upon the exercise of warrants for aggregate proceeds of $13,200,000. The Company adopted an 2000 Omnibus Equity Incentive Plan in which 1,000,000 shares of the Company's common stock will be reserved exclusively for issuance under the plan. In addition, the Company adopted an Employee Stock Purchase Plan in which 1,500,000 shares of common stock were reserved exclusively for issuance under the plan. F-17 Inside Back Cover SmartAge.com Business-to-small business e-commerce www. Smartage.com - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- , 2000 [SMARTAGE.COM LOGO] Shares of Common Stock --------------------- PROSPECTUS --------------------- Donaldson, Lufkin & Jenrette Merrill Lynch & Co. U.S. Bancorp Piper Jaffray DLJdirect Inc. - ------------------------------------------------------------------------------- We have not authorized any dealer, sales person or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or our solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or the affairs of SmartAge.com Corp. have not changed since the date hereof. - ------------------------------------------------------------------------------- Until , 2000 (25 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth the various expenses expected to be incurred by the Registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee, National Association of Securities Dealers, Inc. filing fee and Nasdaq National Market Listing fee.
Payable by Registrant SEC registration fee.............................................. $23,760 National Association of Securities Dealers, Inc. filing fee....... 9,500 Nasdaq National Market Listing Fee................................ 95,000 Accounting fees and expenses...................................... * Legal fees and expenses........................................... * Printing and engraving expenses................................... * Blue Sky fees and expenses........................................ 10,000 Registrar and Transfer Agent's fees............................... * Miscellaneous fees and expenses................................... * Total........................................................... * =======
- --------------------- * To be filed by amendment. Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors, and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article XI of the Registrant's Amended and Restated Certificate of Incorporation to be effective upon completion of the offering (Exhibit 3.3 hereto) and Article XII of the Registrant's Amended and Restated Bylaws to be effective upon completion of the offering (Exhibit 3.4 hereto) provide for indemnification of the Registrant's directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. The Registrant has also entered into agreements with its directors and officers that will require the Registrant, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent not prohibited by law. The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the Underwriters of the Registrant, its directors and officers, and by the Registrant of the Underwriters, for certain liabilities, including liabilities arising under the Act, and affords certain rights of contribution with respect thereto. The Underwriting Agreement (Exhibit 1.1) provides for indemnification by ourselves, our underwriters and our directors and officers of the underwriters, for certain liabilities, including liabilities arising under the Act, and affords certain rights of contribution with respect thereto. II-1 Item 15. Recent Sales of Unregistered Securities 1. From January 1998 to December 31, 1999, the Registrant issued and sold 16,882,019 shares of common stock to employees, directors and consultants at prices ranging from $0.0001 to $3.396 per share. 2. From July 30, 1998 to October 29, 1998, the Registrant issued and sold 2,657,051 shares of Series A preferred stock to a total of 33 investors for an aggregate purchase price of $2,490,985. 3. From March 26, 1999 to July 23, 1999, the Registrant issued and sold 6,502,863 shares of Series B preferred stock to a total of 32 investors for an aggregate purchase price of $7,153,149. 4. From October 1999 to February 2000, the Registrant issued and sold 7,683,796 shares of Series C preferred stock to a total of 44 investors for an aggregate purchase price of $26,094,171. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each of these transactions represented their intention to acquire the securities for investment only and not with view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had adequate access, through their relationship with the Registrant, to information about the Registrant. Item 16. Exhibits and Financial Statement Schedule (a) Exhibits See exhibits listed on the Exhibit Index following the signature page of the Form S-1, which is incorporated herein by reference. (b) Financial Statement Schedule Schedule II--Valuation and Qualifying Accounts (included on pages S-1 and S- 2 of this Registration Statement). Schedules other than those referred to above have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the related notes. Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) The Registrant will provide to the underwriters at the closing(s) specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on the 13th day of March 2000. Smartage.com Corp. /s/ William Lohse By __________________________________ William Lohse President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William Lohse, Allen M. Barr, and Brian T. McGee, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this Registration Statement, and any registration statement relating to the offering covered by this Registration Statement and filed pursuant to Rule 462(b) under the Securities Act of 1933 and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Name Title Date /s/ William Lohse President, Chief Executive March 13, 2000 ______________________________________ Officer and Director William Lohse (Principal Executive Officer) /s/ Allen M. Barr Chief Financial Officer March 13, 2000 ______________________________________ Allen M. Barr /s/ Brian T. McGee Vice President, Finance March 13, 2000 ______________________________________ (Principal Financial Brian T. McGee Officer and Principal Accounting Officer) /s/ John T. Thomsen Director March 13, 2000 ______________________________________ John T. Thomsen /s/William L. Burnham Director March 13, 2000 ______________________________________ William L. Burnham /s/ John C. Colligan Director March 13, 2000 ______________________________________ John C. Colligan
II-4 EXHIBIT INDEX
Exhibit Number Description of Document 1.1* Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation, as amended on January 18, 2000, February 15, 2000 and February 24, 2000. 3.2 Bylaws, as amended on March 16, 1999. 3.3 Amended and Restated Certificate of Incorporation, to be effective upon completion of this offering. 3.4 Amended and Restated Bylaws, to be effective upon completion of this offering. 4.1* Form of Common Stock Certificate. 4.2 Seconded Amended and Restated Investors' Rights Agreement, dated October 5, 1999, by and among the registrant and the parties who are signatories thereto. 4.3+ Warrant to Purchase Shares of Series A Preferred Stock dated July 20, 1998, by and between the registrant and Lycos, Inc., as amended by the Amendment No. 1 to Agreement dated March 13, 1999, by and between the registrant, Lycos, Inc., Tripod, Inc. and Angelfire, Inc. 4.4+ Warrant to Purchase Shares of Series B Preferred Stock dated April 30, 1999, by and among registrant and Excite, Inc. 4.5+ Warrant to Purchase Shares of Series B Preferred Stock dated April 30, 1999, by and among registrant and Excite, Inc. 5.1* Opinion of Pillsbury Madison & Sutro LLP. 10.1 Registrant's 1998 Equity Incentive Plan, as amended. 10.2 Registrant's 2000 Omnibus Equity Incentive Plan. 10.3 Registrant's 2000 Employee Stock Purchase Plan. 10.4 Form of Directors and Officers' Indemnification Agreement. 10.5 Employment Agreement, dated March 9, 2000, by and between the registrant and William Lohse. 10.6 Lease Agreement between the registrant and The Equitable Life Assurance Society of the United States dated August 10, 1999. 10.7 Lease Agreement between the registrant and Western Investment Real Estate Trust dated August 6, 1998. 10.8 Lease Agreement between the registrant and Rotunda Building, LLC dated December 1999. 10.9+ Agreement among the registrant, Lycos, Inc., Tripod, Inc. and Angelfire, Inc. dated July 20, 1998, as amended on March 13, 1999. 10.10+ Marketing and Services Agreement between the registrant and Excite, Inc. dated April 30, 1999, as amended on April 30, 1999. 10.11+ Banner Exchange and Services Agreement between the registrant and theglobe.com, Inc. dated March 30, 1999. 23.1 Consent of KPMG LLP, Independent Accountants. 23.3* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion filed as Exhibit 5.1). 24.1 Power of Attorney. Reference is made to Page II-3. 27.1 Financial Data Schedule for SmartAge.com Corp. (in EDGAR format only).
- --------------------- * To be filed by amendment. +Confidential Treatment Requested. II-5 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE The Board of Directors SmartAge.com Corp.: Under the date of February 25, 2000, except as to the second paragraph of Note 11 for which the date is March 6, 2000, we reported on the balance sheets of SmartAge.com Corp. as of December 31, 1998 and 1999, and the related statements of operations, redeemable convertible preferred stock and stockholders' equity, and cash flows for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, which are included in the registration statement. In connection with our audits of the aforementioned financial statements, we also audited the accompanying financial statement schedule. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express on opinion on this financial statement schedule based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP San Francisco, California February 25, 2000 S-1 SMARTAGE.COM CORP. Schedule II--Valuation and Qualifying Accounts
Balance Addition Balance at Charged at End Beginning to of Description of Period Expense Deduction Period - ----------- --------- -------- --------- ------- (in thousands) Period ended December 31, 1998: Allowance for bad debt................... $ -- $ -- $ -- $ -- ===== ===== ===== ===== Year ended December 31, 1999: Allowance for bad debt................... $ -- $ 97 $ 18 $ 79 ===== ===== ===== =====
S-2 EX-3.1 2 AMENDED & RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ------------------------------------------------- OF -- SMARTAGE CORP. -------------- SmartAge Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on January 20, 1998 under the name of "Netweb Corporation". SECOND: The Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been duly adopted in accordance with --------- the provisions of sections 245 and 242 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation. THIRD: The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby --------- incorporated herein by this reference. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the President this 4/th/ day of October, 1999 SMARTAGE CORP. By /s/ William Lohse --------------------------------- William Lohse, Chief Executive ATTEST: By: /s/ William Lohse ----------------------------- William Lohse, Secretary EXHIBIT A --------- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SMARTAGE CORP. ARTICLE I The name of the Company is SmartAge Corp. ARTICLE II The address of the registered office of the Company in the State of Delaware is at 30 Old Rudnick Lane, in the City of Dover, County of Kent. The name of the Company's registered agent at that address is CorpAmerica, Inc. ARTICLE III The purpose of the Company is to engage in any lawful act or activity for which a Company may be organized under the General Company Law of the State of Delaware. ARTICLE IV The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the Company. The number of directors which constitute the whole Board of Directors of the Company shall be as specified in the Bylaws of the Company. The election of directors need not be by written ballot unless the Bylaws of the Company shall so provide. ARTICLE V This Company is authorized to issue two classes of shares, designated "Common Stock" and "Preferred Stock." The number of shares of Common Stock authorized to be issued is 61,500,000 shares with a par value of one hundredth of a cent ($0.0001) per share. The number of shares of Preferred Stock authorized to be issued is 31,500,000 shares with a par value of one hundredth of a cent ($0.0001) per share. There shall be designated three series of Preferred Stock. The first series shall consist of 3,840,000 shares designated as "Series A Preferred Stock." The second series shall consist of 9,164,335 shares designated as "Series B Preferred Stock." The third series shall consist of 14,000,000 shares designated as "Series C Preferred Stock." The remaining shares of Preferred Stock may be issued from time to time in one or more series. A-1 The Board of Directors is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by amending and restating the provisions of this Amended and Restated Certificate of Incorporation (the "Restated Certificate") or by filing a Certificate of Designation pursuant to -------------------- the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding). The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote, unless a vote of any other holders is required pursuant to a Certificate or Certificates establishing a series of Preferred Stock. Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article V or in Article VI of this Restated Certificate, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting rights, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock. ARTICLE VI The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock and the Common Stock are as follows: 1. Definitions. For purposes of this Article VI, the following ----------- definitions shall apply: 1.1 "Board" shall mean the Board of Directors of the Company. ----- 1.2 "Company" shall mean this Company. ------- 1.3 "Common Stock" shall mean the Common Stock, one-hundredth of a ------------ cent ($0.0001) par value per share, of the Company. 1.4 "Common Stock Dividend" shall mean a stock dividend declared and --------------------- paid on the Common Stock that is payable in shares of Common Stock. 1.5 "Dividend Rate" shall mean $0.075 per share per annum for the ------------- Series A Preferred Stock, $0.088 per share per annum for the Series B Preferred Stock and $0.2717 per share per annum for the Series C Preferred Stock. A-2 1.6 "Original Issue Date" shall mean, with respect to a series of ------------------- Series Preferred Stock, the date on which the first share of that series of Series Preferred Stock is issued by the Company. 1.7 "Original Issue Price" shall mean the Series A Original Issue -------------------- Price or the Series B Original Issue Price or the Series C Original Issue Price, as the case may be (as adjusted for stock splits, reverse stock splits and similar events). 1.8 "Permitted Repurchases" shall mean the repurchase by the Company --------------------- of shares of Common Stock held by employees, officers, directors, consultants, independent contractors, advisors, or other persons performing services for the Company or a Subsidiary that are subject to restricted stock purchase agreements, stock option exercise agreements or related stock purchase agreements under which the Company has the option to repurchase such shares: (a) at cost, upon the occurrence of certain events, such as the termination of employment or services; or (b) at any price pursuant to the Company's exercise of a right of first refusal to repurchase such shares. 1.9 "Series Preferred Stock" shall mean the Series A Preferred Stock, ---------------------- the Series B Preferred Stock and the Series C Preferred Stock, collectively. 1.10 "Series A Original Issue Date" shall mean July 30, 1998. ---------------------------- 1.11 "Series A Original Issue Price" shall mean $0.9375 per share for ----------------------------- the Series A Preferred Stock (as adjusted for stock splits of the Series A Preferred Stock, reverse stock splits of the Series A Preferred Stock and similar events). 1.12 "Series A Preferred Stock" shall mean the Series A Preferred ------------------------ Stock, one-hundredth of a cent ($0.0001) par value per share, of the Company. 1.13 "Series B Original Issue Date" shall mean March 26, 1999. ---------------------------- 1.14 "Series B Original Issue Price" shall mean $1.10 per share for ----------------------------- the Series B Preferred Stock (as adjusted by for stock splits of the Series B Preferred Stock, reverse stock splits of the Series B Preferred Stock and similar events). 1.15 "Series B Preferred Stock" shall mean the Series B Preferred ------------------------ Stock, one- hundredth of a cent ($0.0001) par value per share, of the Company. 1.16 "Series C Original Issue Date" shall mean the date on which the ---------------------------- first share of Series C Preferred Stock is issued by the Company. 1.17 "Series C Original Issue Price" shall mean $3.396 per share for ----------------------------- the Series C Preferred Stock (as adjusted for stock splits of the Series C Preferred Stock, reverse stock splits of the Series C Preferred Stock and similar events). 1.18 "Series C Preferred Stock" shall mean the Series C Preferred ------------------------ Stock, one hundredth of a cent ($.0001) par value per share, of the Company. A-3 1.19 "Subsidiary" shall mean any company of which at least fifty ---------- percent (50%) of the outstanding voting stock is at the time owned directly or indirectly by the Company or by one or more of such subsidiary Companies. 2. Dividend Rights. --------------- 2.1 Dividend Preference. In each calendar year, the holders of the ------------------- then outstanding Series C Preferred Stock shall be entitled to, when, as and if declared by the Board, out of any funds and assets of the Company legally available therefor, cumulative dividends at the annual Dividend Rate for the Series C Preferred Stock, prior and in preference to the payment of any dividends on the Common Stock in such calendar year (other than a Common Stock Dividend). In each calendar year, the holders of the then outstanding Series A Preferred Stock and Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board, out of any funds and assets of the Company legally available therefor, noncumulative dividends at the annual Dividend Rate for each such series of Series Preferred Stock, prior and in preference to the payment of any dividends on the Common Stock in such calendar year (other than a Common Stock Dividend). No dividends (other than a Common Stock Dividend) shall be paid with respect to the Common Stock during any calendar year unless dividends in the total amount of the annual Dividend Rate for the Series A Preferred Stock shall have first been paid or declared and set apart for payment to the holders of the Series A Preferred Stock, dividends in the total amount of the annual Dividend Rate for the Series B Preferred Stock shall have first been paid or declared and set apart for payment to the holders of the Series B Preferred Stock and dividends in the total amount of the annual Dividend Rate for the Series C Preferred Stock shall have first been paid or declared and set apart for payment to the holders of the Series C Preferred Stock, respectively, during that calendar year; provided, however, that this restriction shall not -------- ------- apply to Permitted Repurchases. Payments of any dividends to the holders of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be paid pro rata, on an equal priority, pari passu basis according to their respective Dividend Rates as set forth herein. Dividends on the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall not be mandatory or cumulative (except for Series C Preferred), and no rights or interest shall accrue to the holders of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock by reason of the fact that the Company shall fail to declare or pay dividends on the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock in the amount of the respective annual Dividend Rate for each such series or in any other amount in any calendar year or any fiscal year of the Company, whether or not the earnings of the Company in any calendar year or fiscal year were sufficient to pay such dividends in whole or in part. 2.2 Series B Preferred Stock Participation Rights. If, after --------------------------------------------- dividends in the full preferential amounts specified in this Section 2 for the Series A Preferred Stock and Series B Preferred Stock have been paid or declared and set apart in any calendar year of the Company, the Board shall declare additional dividends out of funds legally available therefor in that calendar year, then such additional dividends shall be declared pro rata on the Common Stock and the Series B Preferred Stock on a pari passu basis according to the number of shares of Common Stock held by such holders, where each holder of shares of Series B Preferred Stock is to be A-4 treated for this purpose as holding the greatest whole number of shares of Common Stock then issuable upon conversion of all shares of Series B Preferred Stock held by such holder. 2.3 Non-Cash Dividends. Whenever a dividend provided for in this ------------------ Section 2 shall be payable in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board. 3. Liquidation Rights. In the event of any liquidation, dissolution or ------------------ winding up of the Company (a "Liquidation Event"), whether voluntary or ----------------- involuntary, the funds and assets of the Company that may be legally distributed to the Company's stockholders (the "Available Funds and Assets") shall be -------------------------- distributed to stockholders in the following manner: 3.1 Liquidation Preferences. (a) Each holder of the shares of Series ----------------------- C Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any distribution (or any setting apart of any payment or distribution) of any Available Funds and Assets on any shares of Series A Preferred Stock, Series B Preferred Stock and Common Stock, an amount per share equal to the sum of the Series C Original Issue Price plus all declared and unpaid dividends with respect to such shares of Series C Preferred Stock held (the "Series C Preference"). Thereafter each ------------------- holder of the shares of Series A Preferred Stock and Series B Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any distribution (or any setting apart of any payment or distribution) of any Available Funds and Assets on any shares of Common Stock, an amount per share equal to the sum of (A) the Series A Original Issue Price plus all declared and unpaid dividends with respect to such shares of Series A Preferred Stock held (the "Series A Preference") and (B) the Series ------------------- B Original Issue Price plus all declared and unpaid dividends with respect to such shares of Series B Preferred Stock held (the "Series B Preference"), ------------------- respectively. (b) If, upon the occurrence of any Liquidation Event, the Available Funds and Assets to be distributed among the holders of Series C Preferred Stock are insufficient to permit the payment to such holders of the full preferential amount, then all of the Available Funds and Assets shall be distributed ratably among the holders of the Series C Preferred Stock prior and in preference to any distribution to the holders of the Series A and the Series B Preferred Stock and Common Stock. (c) If, upon the occurrence of any Liquidation Event, the Available Funds and Assets to be distributed among the holders of Series A Preferred Stock and Series B Preferred Stock are insufficient to permit the payment to such holders of the full preferential amount, then after payment in full of the Series C Preference, all of the Available Funds and Assets shall be distributed ratably among the holders of Series A Preferred Stock and Series B Preferred Stock, provided that the holders of the Series A and Series B Preferred Stock shall receive such distribution on an equal priority, pari passu basis, according to their respective dividend preferences set forth herein 3.2 Participation Rights. After payment or setting apart for payment -------------------- of the Series A Preference, the Series B Preference and the Series C Preference set forth in Section 3.1 A-5 above, all the remaining assets and funds of the Company shall be distributed pro rata, on a pari passu basis, among the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and the Common Stock based upon the number of shares of Common Stock held by each (assuming conversion into Common Stock of all shares of Preferred Stock converted pursuant to the provisions of Section 6 hereof), until such time as each holder of: (a) Series A Stock shall have received, in distributions made under this Section 3, an aggregate amount equal to three times the Series A Original Issue Price (such aggregate dollar amount to include all amounts previously paid to such holder pursuant to subsection 3.1), (b) Series B Stock shall have received, in distributions made under this Section 3, an aggregate amount equal to three times the Series B Original Issue Price (such aggregate dollar amount to include all amounts previously paid to such holder pursuant to subsection 3.1) and (c) Series C Stock shall have received, in distributions made under this Section 3, an aggregate amount equal to two times the Series C Original Issue Price (such aggregate dollar amount to include all amounts previously paid to such holder pursuant to subsection 3.1). After such distribution has been paid to all holders of Series Preferred Stock, then the holders of then outstanding Common Stock shall be entitled to receive all the remaining Available Funds and Assets (if any) pro rata according to the number of outstanding shares of Common Stock then held by each of them. 3.3 Merger or Sale of Assets. (a) a consolidation or merger of the ------------------------ Company with or into any other Company or Companies in which the holders of the Company's outstanding shares immediately before such consolidation or merger do not, immediately after such consolidation or merger, retain stock representing a majority of the voting power of the surviving Company of such consolidation or merger; or (b) a sale of all or substantially all of the assets of the Company (a "Merger or Sale"), shall be deemed a Liquidation Event for the purposes of -------------- this Section 3. 3.4 Non-Cash Consideration. If any assets of the Company distributed ---------------------- to stockholders in connection with any Liquidation Event are other than cash, then the value of such assets shall be their fair market value as determined by the Board, except that any securities to be distributed to stockholders in a ------ ---- Liquidation Event shall be valued as follows: (a) The method of valuation of securities not subject to investment letter or other similar restrictions on free marketability shall be as follows: (i) if the securities are then traded on a national securities exchange or the Nasdaq National Market (or a similar national quotation system), then the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30 day period ending three (3) days prior to the distribution; and (ii) if actively traded over-the-counter, then the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the distribution; and A-6 (iii) if there is no active public market, then the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Company. (b) The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market value determined as above in subparagraphs (a)(i),(ii) or (iii) of this subsection to reflect the approximate fair market value thereof, as determined in good faith by the Board. 4. Redemption. ---------- 4.1 Mandatory Redemption of Series B Preferred Stock. Subject to the ------------------------------------------------ terms and conditions of this subsection, to the extent that any outstanding shares of Series B Preferred Stock have not been converted into Common Stock prior to March 26, 2007, the Company shall, upon receiving at any time after March 26, 2007, a written request for the redemption of Series B Preferred Stock under this Section 4 signed by holders of Series B Preferred Stock representing at least two-thirds (2/3rds) of the then outstanding Series B Preferred Stock (the "Redemption Request"), redeem, on the date sixty (60) days following ------------------ receipt of such written redemption request, from any source of funds legally available therefor, at the redemption price described in this subsection, all of the then outstanding shares of Series B Preferred Stock requested by such holders to be redeemed; provided, however, that the Company, at its sole option -------- ------- and discretion, may redeem greater numbers (including all) of the outstanding shares of Series B Preferred Stock, to the extent permitted by law. The redemption price for each share of Series B Preferred Stock shall be an amount equal to one hundred percent (100%) of the Series B Original Issue Price plus 10% of the Series B Original Issue Price per annum from the Series B Original Issue Date until the Redemption Date, less any declared and paid dividends thereon. If upon any redemption date scheduled under this subsection for the redemption of Series B Preferred Stock, the funds and assets of the Company legally available to redeem such stock shall be insufficient to redeem all shares of Series B Preferred Stock then scheduled to be redeemed, then any such unredeemed shares shall be carried forward and shall be redeemed (together with any other shares of Series B Preferred Stock then scheduled to be redeemed) at the next such scheduled redemption date to the full extent of legally available funds of the Company at such time, and any such unredeemed shares shall continue to be so carried forward until redeemed. Shares of Series B Preferred Stock which are subject to redemption hereunder but which have not been redeemed due to insufficient legally available funds and assets of the Company shall continue to be outstanding and entitled to all dividend, liquidation, conversion and other rights, preferences, privileges and restrictions of the Series B Preferred Stock respectively until such shares have been converted or redeemed. 4.2 Partial Redemption. If the Company is not required to or is ------------------ unable to redeem all shares of the Series B Preferred Stock for which redemption has been duly requested under this section 4, the Company shall effect such redemption pro rata among all requesting holders of then outstanding Series B Preferred Stock, according to the number of shares held by each requesting holder thereof on the applicable Redemption Date. A-7 4.3 Redemption Notice. At least 20 but no more than 40 days prior to ----------------- the date fixed for any redemption of Series B Preferred Stock (the "Redemption ---------- Date"), written notice shall be mailed by the Company, postage prepaid, to each - ---- holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series B Preferred Stock to be redeemed, at the address last shown on the records of the Company for such holder or given by the holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying such holder of the redemption to be effected, specifying the subsection hereof under which such redemption is being effected, the Redemption Date, the applicable redemption price, the place at which payment may be obtained and the date on which such holder's conversion rights (as set forth in Section 6) as to such shares terminate (which date shall in no event be earlier than three (3) days' prior to the Redemption Date) and calling upon such holder to surrender to the Company, in the manner and at the place designated, the certificate or certificates representing the shares to be redeemed (the "Redemption Notice") if such holder elects for its shares of ----------------- Series B Stock to be redeemed. Notwithstanding the foregoing, if the Company only elects to redeem the Series B Stock specified in the Redemption Request then only one Redemption Notice need be given for a redemption effected pursuant to subsection 4.1, provided such Redemption Notice identifies the Redemption Date and provided that each new transferee who acquires shares of Series B Preferred Stock after such shares are first to be redeemed under subsection 4.1 shall be given a similar Redemption Notice before redemption of any such holder's shares of Series B Preferred Stock under subsection 4.1. 4.4 Surrender of Certificates. On or before each designated ------------------------- Redemption Date, each holder of Series B Preferred Stock to be redeemed shall (unless such holder has previously exercised his right to convert such shares of Series B Preferred Stock into Common Stock as provided in Section 6 below), surrender the certificate(s) representing such shares of Series B Preferred Stock to be redeemed to the Company, in the manner and at the place designated in the Redemption Notice, and thereupon the redemption price for such shares shall be payable to the order of the person whose name appears on such certificate(s) as the owner thereof, and each surrendered certificate shall be canceled and retired. If less than all of the shares represented by such certificate are redeemed, then the Company shall promptly issue a new certificate representing the unredeemed shares. 4.5 Effect of Redemption. If the Redemption Notice shall have been -------------------- duly given, and if on the Redemption Date the redemption price is either paid or made available for payment through the deposit arrangements specified in subsection 4.6 below, then notwithstanding that the certificates evidencing any of the shares of Series B Preferred Stock so called for redemption shall not have been surrendered, all dividends with respect to such shares shall cease to accrue after the Redemption Date, such shares shall not thereafter be transferred on the Company's books and the rights of all of the holders of such shares with respect to such shares shall terminate after the Redemption Date, except only the right of the holders to receive the redemption price without interest upon surrender of their certificate(s) therefor. 4.6 Deposit of Redemption Price. On or prior to the Redemption Date, --------------------------- the Company may, at its option, deposit with a bank or trust company having a capital and surplus of A-8 at least $100,000,000, as a trust fund, a sum equal to the aggregate redemption price for all shares of Series B Preferred Stock called for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust company to pay, on or after the Redemption Date, the redemption price to the respective holders upon the surrender of their share certificates. From and after the date of such deposit, the shares so called for redemption shall be redeemed. The deposit shall constitute full payment of the shares to their holders, and from and after the date of the deposit, the shares shall be deemed to be no longer outstanding, all dividends with respect to such shares shall cease to accrue and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the right to receive from the bank or trust company payment of the redemption price of the shares, without interest, upon surrender of their certificates therefor, and the right to convert such shares as provided in Section 6 below (in which case, upon conversion of the shares of Series B Preferred Stock before redemption, such shares shall not be redeemed). Any funds so deposited and unclaimed at the end of six months from the Redemption Date shall be released or repaid to the Company, after which time the holders of shares called for redemption who have not claimed such funds shall be entitled to receive payment of the redemption price only from the Company. 5. Voting Rights. ------------- 5.1 Common Stock. Each holder of shares of Common Stock shall be ------------ entitled to one (1) vote for each share thereof held. 5.2 Preferred Stock. Each holder of shares of Series Preferred Stock --------------- shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which such shares of Series Preferred Stock could be converted pursuant to the provisions of Section 6 below at the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, the date such vote is taken or any written consent of stockholders is solicited. 5.3 General. Subject to the other provisions of this Restated ------- Certificate, each holder of Series Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the Company (as in effect at the time in question) and applicable law, and shall be entitled to vote, together with the holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote, except as may be otherwise provided by applicable law. Except as otherwise expressly provided herein or as required by law, the holders of Series Preferred Stock and the holders of Common Stock shall vote together and not as separate classes. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula shall be rounded to the nearest whole number (with one-half rounded upward to one). 5.4 Board Size. The authorized number of directors of the Company's ---------- Board shall be five (5). A-9 5.5 Board of Directors Election and Removal. --------------------------------------- (a) Election. (i) So long as at least 2,000,000 shares of Series -------- B Preferred Stock is outstanding, the holders of the Series B Preferred Stock, voting as a separate series, shall be entitled to elect one (1) director of the Company; (ii) so long as at least 2,000,000 shares of Series C Preferred Stock is outstanding the holders of Series C Preferred Stock, voting as a separate series, shall be entitled to elect one (1) director of the Company; (iii) the holders of the Common Stock, voting as a separate class, shall be entitled to elect two (2) directors of the Company; and (iv) the Common Stock, voting as a single class, and the holders of the Series B Stock and Series C Stock, voting together as a separate class, shall be entitled to elect one (1) director of the Company. Any other remaining directors shall be elected in accordance with Delaware law. (b) Quorum; Required Vote. --------------------- (i) Quorum. At any meeting held for the purpose of electing ------ directors, the presence in person or by proxy (A) of the holders of a majority of the shares of Series B Preferred Stock or Series C Preferred Stock or Common Stock then outstanding, respectively, shall constitute a quorum of the Series B Preferred Stock or Series C Preferred Stock or Common Stock, as the case may be, for the election of directors to be elected solely by the holders of the Series B Preferred Stock or Series C Preferred Stock or Common Stock, respectively and (B) of holders of (x) Common Stock representing a majority of the voting power of all the then-outstanding shares of Common Stock and (y) Series B Preferred Stock representing a majority of the voting power of all the then-outstanding shares of Series B Preferred Stock shall constitute a quorum for the election of directors to be elected jointly by the holders of the Common Stock and the Series B Preferred Stock. (ii) Required Vote. With respect to the election of any ------------- director or directors by the holders of the outstanding shares of a specified series or class of stock given the right to elect such director or directors pursuant to subsection 5.5(a) above (the "Specified Stock"), that candidate or --------------- those candidates (as applicable) shall be elected in the case of any such vote conducted at a meeting or by written consent without a meeting of the holders of such Specified Stock, who receives the highest number of affirmative votes of the outstanding shares of such Specified Stock, up to the number of directors to be elected by such Specified Stock, except that, if such vote is to fill a vacancy on the Board other than a vacancy created by removal of a director, such vacancy may be filled by election or by the written consent of the holders of a majority of the outstanding shares of such Specified Stock. (c) Vacancy. If there shall be any vacancy in the office of a ------- director elected by the holders of any Specified Stock pursuant to subsection 5.5(a), then a successor to hold office for the unexpired term of such director may be elected by either: (i) the remaining director or directors (if any) in office that were so elected by the holders of such Specified Stock, by the affirmative vote of a majority of such directors (or by the sole remaining director elected by the holders of such Specified Stock if there be but one), or (ii) the required vote of holders of the A-10 shares of such Specified Stock specified in subsection 5.5(b)(ii) above that are entitled to elect such director under subsection 5.5(a). (d) Removal. Any director who shall have been elected to the ------- Board by the holders of any Specified Stock pursuant to subsection 5.5(a) or by any director or directors elected by holders of any Specified Stock as provided in subsection 5.5(c), may be removed during his or her term of office, either with or without cause, by, and only by, the affirmative vote of shares representing a majority of the voting power of all the outstanding shares of such Specified Stock entitled to vote, given either at a meeting of such shareholders duly called for that purpose or pursuant to a written consent of stockholders without a meeting, and any vacancy created by such removal may be filled only in the manner provided in subsection 5.5(c). (e) Procedures. Any meeting of the holders of any Specified ---------- Stock, and any action taken by the holders of any Specified Stock by written consent without a meeting, in order to elect or remove a director under this subsection 5.5, shall be held in accordance with the procedures and provisions of the Company's Bylaws, Delaware General Corporation Law and applicable law regarding stockholder meetings and stockholder actions by written consent, as such are then in effect (including but not limited to procedures and provisions for determining the record date for shares entitled to vote). (f) Termination. Notwithstanding anything in this subsection 5.5 ----------- to the contrary, the provisions of this subsection 5.5 shall cease to be of any further force or effect upon the earlier to occur of: (i) with respect to the rights of the holders of Series B Preferred Stock, the first date on which the total number of outstanding shares of Series B Preferred Stock is less than 2,000,000 shares (such number of shares being subject to proportional adjustment to reflect combination or subdivisions of such Series B Preferred Stock or dividends declared in shares of such stock); (ii) with respect to the rights of the holders of Series C Preferred Stock, the first date on which the total number of outstanding shares of Series C Preferred Stock is less than 2,000,000 shares (such number of shares being subject to proportional adjustment to reflect combination or subdivisions of such Series C Preferred Stock or dividends declared in shares of such stock) or (iii) upon the merger or consolidation of the Company with or into any other company or companies if such consolidation or merger is approved by the stockholders of the Company in compliance with applicable law and the Restated Certificate and Bylaws of the Company and the Company is not the surviving entity or if the Stockholders of the Company immediately prior to such merger or consolidation do not own a majority of the voting securities of the surviving entity; (iv) a sale of all or substantially all of the Company's assets; or (v) an IPO (as defined below in Section 6.2(a) hereof). 6. Conversion Rights. The outstanding shares of Series Preferred Stock ----------------- shall be convertible into Common Stock as follows: 6.1 Optional Conversion. ------------------- (a) At the option of the holder thereof, each share of Series Preferred Stock shall be convertible, at any time or from time to time prior to the close of business on the A-11 business day before any date fixed for redemption of such share, into fully paid and nonassessable shares of Common Stock as provided herein. (b) Each holder of Series Preferred Stock who elects to convert the same into shares of Common Stock shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series Preferred Stock or Common Stock, and shall give written notice to the Company at such office that such holder elects to convert the same and shall state therein the number of shares of Series Preferred Stock being converted. Thereupon the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled upon such conversion. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the certificate or certificates representing the shares of Series Preferred Stock to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. 6.2 Automatic Conversion. -------------------- (a) Conversion Events. ----------------- (i) Series A Preferred Stock. Each share of Series A ------------------------ Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock, as provided herein: (A) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Company in which the aggregate public offering price (before deduction of underwriters' discounts and commissions) equals or exceeds $7,500,000 and the public offering price per share of which equals or exceeds $2.81 per share (such price per share of Common Stock to be appropriately adjusted to reflect Common Stock Events (as defined in subsection 6.5)); or (B) upon the Company's receipt of the written consent of the holders of not less than a majority of the then outstanding shares of Series A Preferred Stock to the conversion of all then outstanding Series A Preferred Stock under this Section 6. (ii) Series B Preferred Stock. Each share of Series B ------------------------ Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock, as provided herein: (A) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Company in which the aggregate public offering price (before deduction of underwriters' discounts and commissions) equals or exceeds $15,000,000 and the public offering price per share of which equals or exceeds $5.50 per share (such price per share of Common Stock to be appropriately adjusted to reflect Common Stock Events (as defined in subsection 6.5)); or (B) upon the Company's receipt of the written consent of the holders of not less than a majority of the then outstanding shares of Series B Preferred Stock to the conversion of all then outstanding Series B Preferred Stock under this Section 6. A-12 (iii) Series C Preferred Stock. Each share of Series C ------------------------ Preferred Stock shall automatically be converted into fully paid and nonassessable shares of Common Stock, as provided herein: (A) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Company in which the aggregate public offering price (before deduction of underwriters' discounts and commissions) equals or exceeds $20,000,000 and the public offering price per share of which equals or exceeds $5.50 per share (such price per share of Common Stock to be appropriately adjusted to reflect Common Stock Events (as defined in subsection 6.5)) (an "IPO"); or (B) upon the Company's receipt of the written consent of the holders of not less than a majority of the then outstanding shares of Series C Preferred Stock to the conversion of all then outstanding Series C Preferred Stock under this Section 6. (b) Conversion Procedures. Upon the occurrence of any event ---------------------- specified in subparagraph 6.2(a)(i), (ii) or (iii) above, the outstanding shares of Series Preferred Stock shall be converted into Common Stock automatically without the need for any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be -------- ------- obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series Preferred Stock are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series Preferred Stock, the holders of Series Preferred Stock shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series Preferred Stock or Common Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred. 6.3 Conversion Price. Each share of Series Preferred Stock shall be ---------------- convertible in accordance with subsection 6.1 or subsection 6.2 above into the number of shares of Common Stock which results from dividing the Original Issue Price for such series of Series Preferred Stock by the conversion price for such series of Series Preferred Stock that is in effect at the time of conversion (the "Conversion Price"). The initial Conversion Price for the Series A ---------------- Preferred Stock shall be the Series A Original Issue Price, the initial Conversion Price for the Series B Preferred Stock shall be the Series B Original Issue Price and the initial Conversion Price for the Series C Preferred Stock shall be the Series C Original Issue Price. The Conversion Price of each series of Series Preferred Stock shall be subject to adjustment from time to time as provided below. A-13 6.4 Adjustment to Conversion Price for Additional Issuances of Common ----------------------------------------------------------------- Stock. - ----- (a) Special Definitions. For purposes of this subsection 6.4, ------------------- the following definitions shall apply: (i) "Options" shall mean rights, options or warrants to ------- subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (ii) "Convertible Securities" shall mean any evidences of ---------------------- indebtedness, shares (other than the Common Stock) or other securities convertible into or exchangeable for Common Stock. (iii) "Additional Shares of Common Stock" shall mean all --------------------------------- shares of Common Stock issued (or, pursuant to Section 6.4(b), deemed to be issued) by the Company, other than: (A) shares of the Company's Common Stock or other securities issued upon conversion of the Series Preferred Stock, or any securities issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding on the Series C Original Issue Date, provided however, to the extent that more than 1,092,159 shares of Series Preferred Stock (as adjusted to reflect stock splits, stock dividends and the like), (the "Base Shares") are issued under those certain warrants to purchase shares of Series B Preferred Stock dated April 30, 1999 issued to Excite, Inc., and that certain warrant to purchase Shares of Series A Preferred Stock dated as of July 20, 1998 issued to Lycos, Inc. and Tripod, Inc., prior to the earlier of (i) expiration of all currently outstanding warrants of the Company, and (ii) the Company's IPO, such Shares of Series B Preferred Stock in excess of the Base Shares, as converted, shall be deemed Additional Shares of Common Stock with respect to the Series C Preferred Stock only; (B) shares or other securities issued pursuant to the acquisition or merger of another company or entity by the Company by consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in which the Company acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other company or entity or fifty percent (50%) or more of the voting power of such other company or entity or fifty percent (50%) or more of the equity ownership of such other entity, or issued pursuant to the acquisition of technologies or products from a third party; (C) shares or other securities of the Company's Common Stock (or related options or warrants) issued to employees, officers, directors, consultants, contractors, vendors, advisors, or other persons performing services for the Company (including, but not by way of limitation, distributors and sales representatives) and including any securities issuable upon exercise or conversion of any of the foregoing securities, pursuant to any stock offering, plan, agreement, or arrangement approved by unanimous written consent of the Board of Directors or the vote of not less than a majority of the members of the A-14 Company's Board of Directors present and voting at a duly held meeting; provided -------- that any issuance of such shares or other securities to William Lohse or any of his affiliates shall require approval by unanimous written consent of the Board of Directors or the vote of not less than a majority of the members of the Company's Board of Directors present and voting at a duly held meeting without counting the vote of William Lohse; (D) shares or other securities issued to banks and other financial institutions or landlords in connection with the extension of credit to the Company (including loans, lines or credit, guarantees or other financing arrangements) or in connection with the lease of equipment, personal property or real property and in each case for other than equity financing purposes; provided that such issuance has been approved by a majority of the -------- Company's Board of Directors; (E) the issuance of shares or other securities in connection with a Common Stock Event (as defined in subsection 6.5 below); (F) the issuance of shares or other securities approved by at least sixty percent (60%) of the outstanding Series Preferred Stock; or (G) issuance of any shares or other securities offered by the Company to the public pursuant to a registration statement filed under the Securities Act in which the aggregate public offering price (before deduction of underwriters' discounts and commissions) equals or exceeds $20,000,000 and the public offering price per share of which equals or exceeds $5.50 per share (such price per share of Common Stock to be appropriately adjusted to reflect Common Stock Events (as defined in subsection 6.5)). (b) Deemed Issue of Additional Shares of Common Stock. In the ------------------------------------------------- event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto assuming the satisfaction of any conditions to exercisability, including, without limitation, the passage of time and without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date; provided that Additional Shares of Common Stock shall not be deemed to -------- have been issued unless the consideration per share (determined pursuant to subsection 6.4(c)(i) hereof) of such Additional Shares of Common Stock would be less than the applicable Conversion Price for the applicable series of Series Preferred Stock in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and; provided further, that in any such -------- case in which Additional Shares of Common Stock are deemed to be issued: A-15 (i) no further adjustment in the Conversion Prices shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Company, or in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Prices computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (iii) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Prices computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if; (A) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and (B) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Company for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (iv) no readjustment pursuant to clause (ii) or (iii) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (A) the Conversion Price on the original adjustment date, or (B) the Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and (v) in the case of any Options which expire by their terms not more than 90 days after the date of issue thereof, no adjustment of the Conversion Price shall be made until the expiration or exercise of all such Options. A-16 (c) Adjustment of Conversion Price Upon Issuance of Additional Shares ----------------------------------------------------------------- of Common Stock. In the event this Company shall issue Additional Shares of - --------------- Common Stock after the Original Issue Date (i) without consideration, (ii) with respect to the Series A Preferred Stock, for consideration per share less than the Conversion Price for the Series A Preferred Stock in effect on the date of and immediately prior to such issue, (iii) with respect to the Series B Preferred Stock, for consideration per share less than the Conversion Price for the Series B Preferred Stock in effect on the date of and immediately prior to such issue, or (iv) with respect to the Series C Preferred Stock, for consideration per share less than the Conversion Price for the Series C Preferred Stock in effect on the date of and immediately prior to such issue, otherwise than in connection with a dividend or distribution as provided in subsection 6.6 or a recapitalization, reclassification or other change as provided in subsection 6.7, then and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock or upon exercise of outstanding stock options and warrants exercisable on the date thereof) plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price for such series of Series Preferred Stock in effect immediately prior to such issue or sale; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and up to 4,000,000 shares of Common Stock reserved, under the Company's 1998 Equity Incentive Plan or subsequent plans, for issuance upon exercise of outstanding stock options and warrants which are or become exercisable on the date thereof) plus the number of such Additional Shares of Common Stock so issued. (d) Determination of Consideration. For purposes of this subsection ------------------------------ 6.4, the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (i) Cash and Property: Such consideration shall: ------------------ (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company excluding amounts paid or payable for accrued interest or accrued dividends; (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board, irrespective of any accounting treatment; and (C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for A-17 consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board. (ii) Options and Convertible Securities. The consideration ---------------------------------- per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to subsection 6.4(b), relating to Options and Convertible Securities, shall be determined by dividing: (x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by -- (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (e) Adjustment of Conversion Price Upon Failure to Sell Stock. --------------------------------------------------------- In the event SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP, or an affiliate thereof (collectively, "SOFTBANK"), has not purchased 2,465,000 shares of the Company's capital stock (the "Softbank Sale") by the earlier of (i) February 2, 2000 and (ii) the IPO (the "Adjustment Date"), then and in such event, the Series C Conversion Price shall be reduced as of the Adjustment Date to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be 100,000,000 divided by the sum of (x) 29,450,120 plus (y) 2,465,000 less the number of shares of the Company's capital stock actually purchased by SOFTBANK in the Softbank Sale, and the denominator of which shall be the Series C Original Issue Price. No reduction to the Series C Conversion Price shall be made in the event the Softbank Sale does not occur due to the actions or failure to act on the part of SOFTBANK. 6.5 Adjustment Upon Common Stock Event. Upon the happening of a ---------------------------------- Common Stock Event (as hereinafter defined), the Conversion Price of the Series A Preferred Stock, the Conversion Price of the Series B Preferred Stock and the Conversion Price of the Series C Preferred Stock shall, simultaneously with the happening of such Common Stock Event, be adjusted by multiplying the Conversion Price of such series of Series Preferred Stock in effect immediately prior to such Common Stock Event by a fraction, (a) the numerator of which shall be the number of shares of Common Stock issued and outstanding immediately prior to such Common Stock Event, and (b) the denominator of which shall be the number of shares of Common Stock issued and outstanding immediately after such Common Stock Event, and the product so obtained shall thereafter be the Conversion Price for such series of Series Preferred Stock. The Conversion Price for a series of Series Preferred Stock shall be readjusted in the A-18 same manner upon the happening of each subsequent Common Stock Event. As used herein, the term "Common Stock Event" shall mean (i) the issue by the Company of ------------------ additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination of the outstanding shares of Common Stock into a smaller number of shares of Common Stock. 6.6 Adjustments for Other Dividends and Distributions. If at any ------------------------------------------------- time or from time to time after the Original Issue Date the Company pays a dividend or makes another distribution to the holders of the Common Stock payable in securities of the Company other than shares of Common Stock, then in each such event provision shall be made so that the holders of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable upon conversion thereof, the amount of securities of the Company which they would have received had their Series Preferred Stock been converted into Common Stock on the date of such event (or such record date, as applicable) and had they thereafter, during the period from the date of such event (or such record date, as applicable) to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 6 with respect to the rights of the holders of the Series Preferred Stock or with respect to such other securities by their terms. 6.7 Adjustment for Reclassification, Exchange and Substitution. If ---------------------------------------------------------- at any time or from time to time after the Original Issue Date the Common Stock issuable upon the conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than by a Common Stock Event or a stock ----- ---- dividend, reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 6), then in any such event each holder of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 6.8 Certificate of Adjustment. In each case of an adjustment or ------------------------- readjustment of the Conversion Price for a series of Series Preferred Stock, the Company, at its expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of the Series Preferred Stock at the holder's address as shown in the Company's books. 6.9 Adjustment Threshold and Recording. No adjustment in a ---------------------------------- Conversion Price need be made if such adjustment would result in a change in a Conversion Price of less A-19 than $0.001. Any adjustment of less than $0.001 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.001 or more in a Conversion Price. All calculations under this Section 6 shall be made to the nearest one-tenth of a cent ($0.001) or to the nearest one hundredth (1/100) of a share, as the case may be. 6.10 Fractional Shares. No fractional shares of Common Stock shall ----------------- be issued upon any conversion of a series of Series Preferred Stock. In lieu of any fractional share to which the holder would otherwise be entitled, the Company shall pay the holder cash equal to the product of such fraction multiplied by the Common Stock's fair market value as determined in good faith by the Board as of the date of conversion. 6.11 Reservation of Stock Issuable Upon Conversion. The Company --------------------------------------------- shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 6.12 Notices. Any notice required by the provisions of this Section ------- 6 to be given to the holders of shares of the Series Preferred Stock shall be deemed given upon the earlier of actual receipt or deposit in the United States mail, by certified or registered mail, return receipt requested, postage prepaid, addressed to each holder of record at the address of such holder appearing on the books of the Company. 6.13 No Impairment. The Company shall not avoid or seek to avoid the ------------- observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series Preferred Stock against impairment. 7. Series A Protective Provisions. So long as at least 500,000 shares of ------------------------------ Series A Preferred Stock remain outstanding, the Company shall not, without the approval, by vote or written consent, of the holders of a majority of the Series A Preferred Stock then outstanding, voting as a separate series: (a) amend its Restated Certificate or its Bylaws in any manner that would materially and adversely alter or change any of the rights, preferences, privileges or restrictions of the Series A Preferred Stock; A-20 (b) reclassify any outstanding shares of securities of the Company into shares having rights, preferences or privileges, as to dividend rights or liquidation preferences, senior to or on a parity with the Series A Preferred Stock; (c) authorize, create or issue shares of any other class of stock having rights, preferences or privileges senior to or on a parity with the Series A Preferred Stock as to dividend rights or liquidation preferences; or (d) declare or pay any dividends (other than dividends payable solely in shares of its own Common Stock) on or declare or make any other distribution (other than Permitted Repurchases), directly or indirectly, on account of any shares of Common Stock now or hereafter outstanding. 8. Series B Protective Provisions. So long as at least 1,600,000 shares ------------------------------ of Series B Preferred Stock remain outstanding, the Company shall not, without the approval, by vote or written consent, of the holders of a majority of the Series B Preferred Stock then outstanding, voting as a separate series: (a) reclassify any outstanding shares of securities of the Company into shares having rights, preferences or privileges senior to the Series B Preferred Stock (provided that the Company may reclassify such shares into shares having rights, preferences or privileges on a parity with or subordinate to the Series B Preferred Stock); (b) authorize, create or issue shares of any other class of stock having rights, preferences or privileges senior to the Series B Preferred Stock (provided that the Company may authorize, create or issue such other class of stock having rights, preferences or privileges on a parity with or subordinate to the Series B Preferred Stock); (c) declare or pay any dividends (other than dividends payable solely in shares of its own Common Stock) on or declare or make any other distribution (other than Permitted Repurchases), directly or indirectly, on account of any shares of Common Stock now or hereafter outstanding; (d) repurchase any Series Preferred Stock or Common Stock, except for repurchases of shares, at the original purchase price thereof, held by a person following their termination of employment as an employee of or consultant to the Company; (e) amend its Restated Certificate to increase the number of authorized shares of Series Preferred Stock; or (f) amend its Restated Certificate or its Bylaws in any manner that would adversely alter or change any of the rights, preferences, privileges or restrictions of the Series B Preferred Stock. 9. Series C Protective Provisions. So long as at least a majority of the ------------------------------ shares of Series C Preferred Stock issued on the Series C Original Issue Date remain outstanding, the A-21 Company shall not, without the affirmative approval by vote or written consent of the holders of at least a majority of the Series C Preferred Stock then outstanding, voting as a separate series: (a) reclassify any outstanding shares of securities of the Company into shares having rights, preferences or privileges senior to the Series C Preferred Stock (provided that the Company may reclassify such shares into shares having rights, preferences or privileges on a parity with or subordinate to the Series C Preferred Stock); (b) authorize, create or issue shares of any other class of stock having rights, preferences or privileges senior to the Series C Preferred Stock (provided that the Company may authorize, create or issue such other class of stock having rights, preferences or privileges on a parity with or subordinate to the Series C Preferred Stock); (c) declare or pay any dividends (other than dividends payable solely in shares of its own Common Stock) on or declare or make any other distribution (other than Permitted Repurchases), directly or indirectly, on account of any shares of Common Stock now or hereafter outstanding; (d) repurchase any Series Preferred Stock or Common Stock, except for repurchases of shares, at the original purchase price thereof, held by a person following their termination of employment as an employee of or consultant to the Company; (e) amend its Restated Certificate to increase the number of authorized shares of Series Preferred Stock; (f) amend its Restated Certificate or its Bylaws in any manner that would adversely alter or change any of the rights, preferences, privileges or restrictions of the Series C Preferred Stock; (g) approve a sale, merger liquidation or change in control transaction valued at a per share price which is less than the Series C Original Issue Price; or (h) enter into any transaction between the Company and William Lohse, John Thomsen or Erica Thomsen, or any officer or director, that is valued in excess of $200,000 and is not at arm's length. ARTICLE VII The Company is to have perpetual existence. ARTICLE VIII Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Company may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Company. A-22 ARTICLE IX 1. The Company shall indemnify each of the Company's directors and officers in each and every situation where, under Section 145 of the General Company Law of the State of Delaware, as amended from time to time ("Section ------- 145"), the Company is permitted or empowered to make such indemnification. The - --- Company may, in the sole discretion of the Board of Directors of the Company, indemnify any other person who may be indemnified pursuant to Section 145 to the extent the Board of Directors deems advisable, as permitted by Section 145. The Company shall promptly make or cause to be made any determination required to be made pursuant to Section 145. 2. To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided, however, that the foregoing shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. (a) Right to Indemnification. Each person who was or is made a ------------------------ party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another Company or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Company Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (c) hereof with respect to proceedings to enforce rights to indemnification, the Company shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the Company. (b) Right to Advancement of Reasonable Expenses. The right to ------------------------------------------- indemnification conferred in paragraph (a) of this Section shall include the right to be paid by the A-23 Company the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an "advancement of reasonable expenses"); provided, however, that, -------- ------- if the Delaware General Company Law requires, an advancement of reasonable expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Company of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. (c) Right of Indemnitee to Bring Suit. The rights to indemnification --------------------------------- and to the advancement of reasonable expenses conferred in paragraphs (a) and (b) of this Section shall be contract rights. If a claim under paragraph (a) or (b) of this Section is not paid in full by the Company within sixty (60) days after a written claim has been received by the Company, except in the case of a claim for an advancement of reasonable expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Company to recover an advancement of reasonable expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of reasonable expenses) it shall be a defense that, and (ii) in any suit by the Company to recover an advancement of reasonable expenses pursuant to the terms of an undertaking the Company shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Company Law. Neither the failure of the Company (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Company Law, nor an actual determination by the Company (including its board of directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of reasonable expenses hereunder, or by the Company to recover an advancement of reasonable expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of reasonable expenses, under this Section or otherwise shall be on the Company. (d) Non-Exclusivity of Rights. The rights to indemnification and to ------------------------- the advancement of reasonable expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Company's A-24 certificate of incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. (e) Insurance. The Company may maintain insurance, at its expense, to --------- protect itself and any director, officer, employee or agent of the Company or another Company, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Delaware General Company Law. (f) Indemnification of Employees and Agents of the Company. The ------------------------------------------------------ Company may, to the extent authorized from time to time by the Board, grant rights to indemnification, and to the advancement of reasonable expenses to any employee or agent of the Company to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors and officers of the Company. (g) Amendment of General Delaware Company Law. If the Delaware Company ----------------------------------------- Law hereafter is amended to further eliminate or limit of the liability of directors, then the liability of a director of the Company, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Company Law. For purposes of this Article IX, "fiduciary duty as a director" shall include any fiduciary duty arising out of serving at the Company's request as a director of another Company, partnership, joint venture or other enterprise, and "personal liability to the Company or its stockholders" shall include any liability to such other Company, partnership, joint venture, trust or other enterprise, and any liability to the Company in its capacity as a security holder, joint venturer, partner, beneficiary, creditor or investor of or in any such other Company, partnership, joint venture, trust or other enterprise. 3. Neither any amendment nor repeal of this Article IX, nor the adoption of any provision of this Restated Certificate inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article IX, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE X Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Company. ARTICLE XI Whenever a compromise or arrangement is proposed between this Company and its creditors or any class of them and/or between this Company and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in A-25 a summary way of this Company or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Company under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Company under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Company, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Company, as the case may be, agree to any compromise or arrangement and to any reorganization of this Company as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Company, as the case may be, and also on this Company. A-26 CERTIFICATE OF AMENDMENT ------------------------ OF -- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ------------------------------------------------- OF -- SMARTAGE CORP. -------------- SmartAge Corp., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: I. The Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on October 4, 1999 under its current name. II. The Amendment to the Amended and Restated Certificate of Incorporation of the Corporation as set forth below has been duly adopted in accordance with the provisions of Section 242, and has been consented to in writing by the stockholders of the Corporation, in accordance with Section 228 of the General Corporation Law of the State of Delaware. III. Section 6.4(c) of Article VI of the Amended and Restated Certificate of Incorporation of the Corporation is amended to read in its entirety as follows: "(c) Adjustment of Conversion Price Upon Issuance of Additional Shares ----------------------------------------------------------------- of Common Stock. In the event this Company shall issue Additional Shares of - --------------- Common Stock after the Original Issue Date (i) without consideration, (ii) with respect to the Series A Preferred Stock, for consideration per share less than the Conversion Price for the Series A Preferred Stock in effect on the date of and immediately prior to such issue, (iii) with respect to the Series B Preferred Stock, for consideration per share less than the Conversion Price for the Series B Preferred Stock in effect on the date of and immediately prior to such issue, or (iv) with respect to the Series C Preferred Stock, for consideration per share less than the Conversion Price for the Series C Preferred Stock in effect on the date of and immediately prior to such issue, otherwise than in connection with a dividend or distribution as provided in subsection 6.6 or a recapitalization, reclassification or other change as provided in subsection 6.7, then and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock or upon exercise of outstanding stock options and warrants exercisable on the date thereof) plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price for such series of Series Preferred Stock in effect immediately prior to such issue or sale; and the denominator of which shall be the number of shares of Common -1- Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and up to 5,250,000 shares of Common Stock reserved, under the Company's 1998 Equity Incentive Plan or subsequent plans, for issuance upon exercise of outstanding stock options and warrants which are or become exercisable on the date thereof) plus the number of such Additional Shares of Common Stock so issued." IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by Brian McGee, its authorized officer, on this 14/th/ day of October, 1999. SMARTAGE CORP. /s/ Brian McGee By -------------------------------- Brian McGee Vice President -2- CERTIFICATE OF AMENDMENT ------------------------ OF -- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ------------------------------------------------- OF -- SMARTAGE CORP. -------------- SmartAge Corp., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: I. The Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on October 4, 1999 under its current name. II. The Amendment to the Amended and Restated Certificate of Incorporation of the Corporation as set forth below has been duly adopted in accordance with the provisions of Section 242, and has been consented to in writing by the stockholders of the Corporation, in accordance with Section 228 of the General Corporation Law of the State of Delaware. III. Section 6.4(c) of Article VI of the Amended and Restated Certificate of Incorporation of the Corporation is amended to read in its entirety as follows: "(c) Adjustment of Conversion Price Upon Issuance of Additional Shares ----------------------------------------------------------------- of Common Stock. In the event this Company shall issue Additional Shares of - --------------- Common Stock after the Original Issue Date (i) without consideration, (ii) with respect to the Series A Preferred Stock, for consideration per share less than the Conversion Price for the Series A Preferred Stock in effect on the date of and immediately prior to such issue, (iii) with respect to the Series B Preferred Stock, for consideration per share less than the Conversion Price for the Series B Preferred Stock in effect on the date of and immediately prior to such issue, or (iv) with respect to the Series C Preferred Stock, for consideration per share less than the Conversion Price for the Series C Preferred Stock in effect on the date of and immediately prior to such issue, otherwise than in connection with a dividend or distribution as provided in subsection 6.6 or a recapitalization, reclassification or other change as provided in subsection 6.7, then and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock or upon exercise of outstanding stock options and warrants exercisable on the date thereof) plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such -1- Conversion Price for such series of Series Preferred Stock in effect immediately prior to such issue or sale; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including all shares of Common Stock issuable upon conversion of the outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and up to 7,250,000 shares of Common Stock reserved, under the Company's 1998 Equity Incentive Plan or subsequent plans, for issuance upon exercise of outstanding stock options and warrants which are or become exercisable on the date thereof) plus the number of such Additional Shares of Common Stock so issued." IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by Brian McGee, its authorized officer, on this 31/st/ day of January, 2000. SMARTAGE CORP. By /s/ Brian McGee -------------------------------- Brian McGee Vice President of Finance -2- CERTIFICATE OF AMENDMENT ------------------------ OF -- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ------------------------------------------------- OF -- SMARTAGE CORP. -------------- SmartAge Corp., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: I. The Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on October 4, 1999 under its current name. II. The Amendment to the Amended and Restated Certificate of Incorporation of the Corporation as set forth below has been duly adopted in accordance with the provisions of Section 242, and has been consented to in writing by the stockholders of the Corporation, in accordance with Section 228 of the General Corporation Law of the State of Delaware. III. Article I of the Amended and Restated Certificate of Incorporation of the Corporation is amended to read in its entirety as follows: "ARTICLE I: The Name of the Company is SmartAge.com Corp." IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by Brian McGee, its authorized officer, on this 8/th/ day of February, 2000. SMARTAGE CORP. /s/ Brian McGee By -------------------------------- Brian McGee Vice President of Finance -1- EX-3.2 3 BYLAWS OF SMARTAGE CORPORATION EXHIBIT 3.2 BYLAWS OF SMARTAGE CORP. (formerly NETWEB INC.) (formerly NETWEB CORPORATION) (a Delaware corporation) As Amended April 24, 1998 And as Amended March 16, 1999 (effective as of March 26, 1999) BYLAWS OF SMARTAGE CORP. (formerly NETWEB INC.) (formerly (NETWEB CORPORATION) A Delaware Corporation TABLE OF CONTENTS
PAGE ---- Article I - STOCKHOLDERS................................................. 1 Section 1.1: Annual Meetings.................................... 1 Section 1.2: Special Meetings................................... 1 Section 1.3: Notice of Meetings................................. 1 Section 1.4: Adjournments....................................... 1 Section 1.5: Quorum............................................. 1 Section 1.6: Organization....................................... 2 Section 1.7: Voting; Proxies.................................... 2 Section 1.8: Fixing Date for Determination of Stockholders of Record.......................................... 2 Section 1.9: List of Stockholders Entitled to Vote.............. 3 Section 1.10: Action by Written Consent of Stockholders.......... 3 Section 1.11: Inspectors of Elections............................ 4 Article II - BOARD OF DIRECTORS.......................................... 5 Section 2.1: Number; Qualifications............................. 5 Section 2.2: Election; Resignation; Removal; Vacancies.......... 5 Section 2.3: Regular Meetings................................... 5
i BYLAWS OF SMARTAGE CORP. A Delaware Corporation TABLE OF CONTENTS (cont'd)
PAGE ---- Section 2.4: Special Meetings................................... 5 Section 2.5: Telephonic Meetings Permitted...................... 6 Section 2.6: Quorum; Vote Required for Action................... 6 Section 2.7: Organization....................................... 6 Section 2.8: Written Action by Directors........................ 6 Section 2.9: Powers............................................. 6 Section 2.10: Compensation of Directors.......................... 7 Article III - COMMITTEES................................................. 6 Section 3.1: Committees......................................... 6 Section 3.2: Committee Rules.................................... 7 Article IV - OFFICERS.................................................... 7 Section 4.1: Generally.......................................... 7 Section 4.2: Chief Executive Officer............................ 8 Section 4.3: Chairman of the Board.............................. 8 Section 4.4: President.......................................... 8 Section 4.5: Vice President..................................... 9 Section 4.6: Chief Financial Officer............................ 9 Section 4.7: Treasurer.......................................... 9 Section 4.8: Secretary.......................................... 9
ii BYLAWS OF SMARTAGE CORP. A Delaware Corporation TABLE OF CONTENTS (cont'd)
PAGE ---- Section 4.9: Delegation of Authority............................ 9 Section 4.10: Removal............................................ 9 Article V - STOCK........................................................ 9 Section 5.1: Certificates....................................... 9 Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificate........................ 10 Section 5.3: Other Regulations.................................. 10 Article VI - INDEMNIFICATION............................................. 10 Section 6.1: Indemnification of Officers and Directors.......... 10 Section 6.2: Advance of Expenses................................ 10 Section 6.3: Non-Exclusivity of Rights.......................... 11 Section 6.4: Indemnification Contracts.......................... 11 Section 6.5: Effect of Amendment................................ 11 Article VII - NOTICES.................................................... 11 Section 7.1: Notice............................................. 11 Section 7.2: Waiver of Notice................................... 11 Article VIII - INTERESTED DIRECTORS...................................... 12 Section 8.1: Interested Directors; Quorum....................... 12
iii BYLAWS OF SMARTAGE CORP. A Delaware Corporation TABLE OF CONTENTS (cont'd)
PAGE ---- Article IX - MISCELLANEOUS............................................... 12 Section 9.1: Fiscal Year........................................ 12 Section 9.2: Seal............................................... 12 Section 9.3: Form of Records.................................... 12 Section 9.4: Reliance Upon Books and Records.................... 13 Section 9.5: Certificate of Incorporation Governs............... 13 Section 9.6: Severability....................................... 13 Article X - AMENDMENT.................................................... 13 Section 10.1: Amendments......................................... 13
iv EXHIBIT 3.2 BYLAWS OF SMARTAGE CORP. (a Delaware corporation) As Amended April 24, 1998 and March 16, 1999 ARTICLE I STOCKHOLDERS Section 1.1: Annual Meetings. An annual meeting of stockholders shall be ----------- --------------- held for the election of directors at such date, time and place, either within or without the State of Delaware, as the Board of Directors shall each year fix. Any other proper business may be transacted at the annual meeting. Section 1.2: Special Meetings. Special meetings of stockholders for any ----------- ---------------- purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, the holders of shares of the Corporation that are entitled to cast not less than one percent (1%) of the total number of votes entitled to be cast by all shareholders at such meeting, or by a majority of the members of the Board of Directors. Special meetings may not be called by any other person or persons. Section 1.3: Notice of Meetings. Written notice of all meetings of ----------- ------------------ stockholders shall be given stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation, such notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 1.4: Adjournments. Any meeting of stockholders may adjourn from ----------- ------------ time to time to reconvene at the same or another place, and notice need not be given of any such adjourned meeting if the time, date and place thereof are announced at the meeting at which the adjournment is taken; provided, however, -------- ------- that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. Section 1.5: Quorum. At each meeting of stockholders the holders of a ----------- ------ majority of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except if otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation's stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the -------- ------- Corporation or any other corporation to vote any shares of the Corporation's stock held by it in a fiduciary capacity. Section 1.6: Organization. Meetings of stockholders shall be presided ----------- ------------ over by such person as the Board of Directors may designate, or, in the absence of such a person, the Chairman of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairman of the meeting and, subject to Section 1.11 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7: Voting; Proxies. Unless otherwise provided by law or the ----------- --------------- Certificate of Incorporation, and subject to the provisions of Section 1.8 of these Bylaws, each stockholder shall be entitled to one (1) vote for each share of stock held by such stockholder. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Voting at meetings of stockholders need not be by written ballot unless such is demanded at the meeting before voting begins by a stockholder or stockholders holding shares representing at least one percent (1%) of the votes entitled to vote at such meeting, or by such stockholder's or stockholders' proxy; provided, however, -------- ------- that an election of directors shall be by written ballot if demand is so made by any stockholder at the meeting before voting begins. If a vote is to be taken by written ballot, then each such ballot shall state the name of the stockholder or proxy voting and such other information as the chairman of the meeting deems appropriate. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon that are present in person or represented by proxy at the meeting and are voted for or against the matter. Section 1.8: Fixing Date for Determination of Stockholders of Record. ----------- -------------------------------- ---------------------- (a) Generally. In order that the Corporation may determine the --------- stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express 2 consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board of Directors, then the record date shall be as provided by applicable law. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may -------- ------- fix a new record date for the adjourned meeting. Section 1.9: List of Stockholders Entitled to Vote. A complete list of ----------- ------------------------------------- stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. Section 1.10: Action by Written Consent of Stockholders. ------------ ----------------------------------------- (a) Procedure. Unless otherwise provided by the Certificate of --------- Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner provided above. (b) Notice of Consent. Prompt notice of the taking of corporate action by ----------------- stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto in writing and, in the case of a Certificate Action (as defined below), if the Delaware General Corporation Law so requires, such notice shall be given prior to filing of the certificate in question. If the action which is 3 consented to requires the filing of a certificate under the Delaware General Corporation Law (a "Certificate Action"), then if the Delaware General ------------------ Corporation Law so requires, the certificate so filed shall state that written stockholder consent has been given in accordance with Section 228 of the Delaware General Corporation Law and that written notice of the taking of corporate action by stockholders without a meeting as described herein has been given as provided in such section. Section 1.11: Inspectors of Elections. ------------ ----------------------- (a) Applicability. Unless otherwise provided in the Corporation's ------------- Certificate of Incorporation or required by the Delaware General Corporation Law, the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (i) listed on a national securities exchange; (ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or (iii) held of record by more than 2,000 stockholders; in all other cases, observance of the provisions of this Section 1.11 shall be optional, and at the discretion of the Corporation. (b) Appointment. The Corporation shall, in advance of any meeting of ----------- stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. (c) Inspector's Oath. Each inspector of election, before entering upon ---------------- the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (d) Duties of Inspectors. At a meeting of stockholders, the inspectors of -------------------- election shall (i) ascertain the number of shares outstanding and the voting power of each share, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (e) Opening and Closing of Polls. The date and time of the opening and ---------------------------- the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the inspectors at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (f) Determinations. In determining the validity and counting of proxies -------------- and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with Section 4 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.11 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. ARTICLE II BOARD OF DIRECTORS Section 2.1: Number; Qualifications. Unless otherwise specified in the ----------- ---------------------- Certificate of Incorporation, the Board of Directors shall consist of one or more members. The number of directors shall be five (5), and thereafter shall be fixed from time to time by resolution of the Board of Directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation. Section 2.2: Election; Resignation; Removal; Vacancies. The Board of ----------- ----------------------------------------- Directors shall initially consist of the person or persons elected by the incorporator or named in the Corporation's initial Certificate of Incorporation. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Subject to the rights of any holders of Preferred Stock then outstanding: (i) any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors and (ii) any vacancy occurring in the Board of Directors for any cause, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, may be filled by the stockholders, by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Section 2.3: Regular Meetings. Regular meetings of the Board of Directors ----------- ---------------- may be held at such places, within or without the State of Delaware, and at such times as the Board of Directors may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board of Directors. Section 2.4: Special Meetings. Special meetings of the Board of Directors ----------- ---------------- may be called by the Chairman of the Board, the President or a majority of the members of the Board of Directors then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and 5 place of such meeting shall be given, orally or in writing, by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile or similar communication method. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting. Section 2.5: Telephonic Meetings Permitted. Members of the Board of ----------- ----------------------------- Directors, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or similar communications equipment shall constitute presence in person at such meeting. Section 2.6: Quorum; Vote Required for Action. At all meetings of the ----------- -------------------------------- Board of Directors a majority of the total number of authorized directors shall constitute a quorum for the transaction of business. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.7: Organization. Meetings of the Board of Directors shall be ----------- ------------ presided over by the Chairman of the Board, or in his or her absence by the President, or in his or her absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8: Written Action by Directors. Any action required or ----------- --------------------------- permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, respectively. Section 2.9: Powers. The Board of Directors may, except as otherwise ------------ ------ required by law or the Certificate of Incorporation, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Section 2.10: Compensation of Directors. Directors, as such, may receive, ------------ ------------------------- pursuant to a resolution of the Board of Directors, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board of Directors. ARTICLE III COMMITTEES Section 3.1: Committees. The Board of Directors may, by resolution ----------- ---------- passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors 6 as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or ------ resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in subsection (a) of Section 151 of the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation, or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation under Sections 251 or 252 of the Delaware General Corporation Law, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and unless the resolution of the Board of Directors expressly so provides, no such committee shall have the power or authority to declare a dividend, authorize the issuance of stock or adopt a certificate of ownership and merger pursuant to section 253 of the Delaware General Corporation Law. Section 3.2: Committee Rules. Unless the Board of Directors otherwise ----------- --------------- provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws. ARTICLE IV OFFICERS Section 4.1: Generally. The officers of the Corporation shall consist of ----------- --------- a Chief Executive Officer and/or a President, a Secretary, a Treasurer and such other officers, including a Chairman of the Board of Directors, Chief Financial Officer or one or more Vice Presidents, as may from time to time be appointed by the Board of Directors. All officers shall be elected by the Board of Directors; provided, however, that the Board of Directors may empower the Chief -------- ------- Executive Officer of the Corporation to appoint officers other than the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. Any 7 officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors. Section 4.2: Chief Executive Officer. Subject to the control of the Board ----------- ----------------------- of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are: (a) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation; (b) To preside at all meetings of the stockholders; (c) To call meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and (d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board of Directors has not designated any other officer to be the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer. Section 4.3: Chairman of the Board. The Chairman of the Board shall have ----------- --------------------- the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided in these bylaws and as the Board of Directors may from time to time prescribe. Section 4.4: President. The President shall be the Chief Executive ----------- --------- Officer of the Corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairman of the Board, and/or to any other officer, the President shall have the responsibility for the general management the control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the 8 President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board of Directors. Section 4.5: Vice President. Each Vice President shall have all such ----------- -------------- powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board of Directors or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer's absence or disability. Section 4.6: Chief Financial Officer. Subject to the direction of the ----------- ----------------------- Board of Directors and the President, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of chief financial officer. Section 4.7: Treasurer. The Treasurer shall have custody of all monies ----------- --------- and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board of Directors or the President may from time to time prescribe. Section 4.8: Secretary. The Secretary shall issue or cause to be issued ----------- --------- all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board of Directors or the President may from time to time prescribe. Section 4.9: Delegation of Authority. The Board of Directors may from ----------- ----------------------- time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 4.10: Removal. Any officer of the Corporation shall serve at the ------------ ------- pleasure of the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. ARTICLE V STOCK Section 5.1: Certificates. Every holder of stock shall be entitled to ----------- ------------ have a certificate signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Any or all of the signatures on the certificate may be a facsimile. 9 Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New ----------- ------------------------------------------------------------- Certificates. The Corporation may issue a new certificate of stock in the place - ------------ of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5.3: Other Regulations. The issue, transfer, conversion and ----------- ----------------- registration of stock certificates shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI INDEMNIFICATION Section 6.1 Indemnification of Officers and Directors. Each person who ----------- ----------------------------------------- was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he ---------- or she (or a person of whom he or she is the legal representative), is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor (as defined below) as a director or officer of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Delaware General Corporation Law, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking - -------- ------- indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. As used herein, the term "Reincorporated -------------- Predecessor" means a corporation that is merged with and into the Corporation in - ----------- a statutory merger where (a) the Corporation is the surviving corporation of such merger; (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware. Section 6.2: Advance of Expenses. The Corporation shall pay all expenses ----------- ------------------- (including attorneys' fees) incurred by such a director or officer in defending any such proceeding as they are incurred in advance of its final disposition; provided, however, that if the Delaware General Corporation Law then so - -------- ------- requires, the payment of such expenses incurred by such a director or officer in advance of the final disposition of such proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all 10 amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article VI or otherwise; and provided, further, that the Corporation shall not be required to advance -------- ------- any expenses to a person against whom the Corporation directly brings a claim, in a proceeding, alleging that such person has breached his or her duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction. Section 6.3: Non-Exclusivity of Rights. The rights conferred on any ------------ ------------------------- person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI. Section 6.4: Indemnification Contracts. The Board of Directors is ----------- ------------------------- authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification rights to such person. Such rights may be greater than those provided in this Article VI. Section 6.5: Effect of Amendment. Any amendment, repeal or modification ----------- ------------------- of any provision of this Article VI shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification. ARTICLE VII NOTICES Section 7.1: Notice. Except as otherwise specifically provided herein or ----------- ------ required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may in every instance be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, telex, overnight express courier, mailgram or facsimile. Any such notice shall be addressed to the person to whom notice is to be given at such person's address as it appears on the records of the Corporation. The notice shall be deemed given (i) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in the case of delivery by overnight express courier, on the first business day after such notice is dispatched, and (iv) in the case of delivery via telegram, telex, mailgram, or facsimile, when dispatched. 11 Section 7.2: Waiver of Notice. Whenever notice is required to be given ----------- ---------------- under any provision of these bylaws, a written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. ARTICLE VIII INTERESTED DIRECTORS Section 8.1: Interested Directors; Quorum. No contract or transaction ----------- ---------------------------- between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (i) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (ii) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IX MISCELLANEOUS Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be ----------- ----------- determined by resolution of the Board of Directors. Section 9.2: Seal. The Board of Directors may provide for a corporate ----------- ---- seal, which shall have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board of Directors. 12 Section 9.3: Form of Records. Any records maintained by the Corporation ----------- --------------- in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, magnetic tape, diskettes, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 9.4: Reliance Upon Books and Records. A member of the Board of ----------- ------------------------------- Directors, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Section 9.5: Certificate of Incorporation Governs. In the event of any ----------- ------------------------------------ conflict between the provisions of the Corporation's Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern. Section 9.6: Severability. If any provision of these Bylaws shall be held ----------- ------------ to be invalid, illegal, unenforceable or in conflict with the provisions of the Corporation's Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect. ARTICLE X AMENDMENT Section 10.1: Amendments. Stockholders of the Corporation holding a ------------ ---------- majority of the Corporation's outstanding voting stock shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Corporation's Certificate of Incorporation, the Board of Directors of the Corporation shall also have the power to adopt, amend or repeal Bylaws of the Corporation, except insofar as Bylaws adopted by the stockholders shall otherwise provide. 13 CERTIFICATION OF BYLAWS OF SMARTAGE CORP. (a Delaware corporation) KNOW ALL BY THESE PRESENTS: I, William Lohse, certify that I am the Secretary of SmartAge Corp., a Delaware corporation (the "Company"), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and correct copy of the Bylaws of the Company in effect as of the date of this certificate. Dated: March 26, 1999 /s/ William Lohse ----------------------------------- William Lohse, Secretary EX-3.3 4 AMENDED & RESTATED CERTIFICATE EXHIBIT A EXHIBIT 3.3 EXHIBIT A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SMARTAGE.COM CORP. SMARTAGE.COM CORP., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on January 20, 1998 under the name Netweb, Inc. SECOND: The Amended and Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been duly adopted in --------- accordance with the provisions of sections 245, 242 and 228 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation. THIRD: The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby --------- incorporated herein by this reference. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the President of the Corporation this _____ day of __________, 2000. SMARTAGE.COM CORP. By _________________________________ William Lohse Chief Executive Officer -1- EXHIBIT A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SMARTAGE.COM CORP. ARTICLE I The name of this Corporation is SMARTAGE.COM CORP. ARTICLE II The registered office of the Corporation within the State of Delaware is located at 30 Old Rudnick Lane, in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is CorpAmerica, Inc. ARTICLE III The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. ARTICLE IV A. Authorized Stock. The total number of shares of all classes of capital ---------------- stock which the Corporation shall have authority to issue is two hundred five million (205,000,000), of which two hundred million (200,000,000) shares of the par value of one hundredth of one cent ($.0001) each shall be Common Stock (the "Common Stock") and five million (5,000,000) shares of the par value of one hundredth of one cent ($.0001) each shall be Preferred Stock (the "Preferred Stock"). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions established by the Board of Directors of this Corporation (the "Board of Directors") in the resolution or resolutions providing for the issue of such Preferred Stock, and if such holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in this Amended and Restated Certificate of Incorporation, the only stockholder approval required shall be the affirmative vote of a majority of the combined voting power of the Common Stock and the Preferred Stock so entitled to vote. B. Preferred Stock. The Preferred Stock may be issued in any number of --------------- series, as determined by the Board of Directors. The Board of Directors may by resolution fix the designation and number of shares of any such series, and may determine, alter, or revoke the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued -2- series. The Board of Directors may thereafter in the same manner, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, increase or decrease the number of shares of any such series (but not below the number of shares of that series then outstanding). In case the number of shares of any series shall be decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. ARTICLE V The Corporation is to have perpetual existence. ARTICLE VI A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. Classified Board. The Board of Directors shall be divided into three ---------------- classes, designated Class I, Class II and Class III. Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the annual meeting of stockholders for fiscal year 2001, the directors first elected to Class II shall serve for a term ending on the annual meeting of stockholders for fiscal year 2002, and the directors first elected to Class III shall serve for a term ending on the annual meeting of stockholders for fiscal year 2003. Notwithstanding the foregoing, each director shall serve until his successor shall have been duly elected and qualified, unless he shall resign, become disqualified, disabled or shall otherwise be removed. At each annual election, directors chosen to succeed those whose terms then expire shall be of the same class as the directors they succeed, unless by reason of any intervening changes in the authorized number of directors, the Board shall designate one or more directorships whose term then expires as directorships of another Class In order to more nearly achieve equality of number of directors among the classes. Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as possible, in the event of any change in the authorized number of directors, each director then continuing to serve as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term, or his prior death, resignation or removal. If any newly created directorship may, consistently with the rule that the three classes shall be as nearly equal in number of directors as possible, be allocated to either class, the Board shall allocate it to that of the available class whose term of office is due to expire at the earliest date following such allocation. -3- C. Changes. The Board of Directors of this Corporation, by amendment to ------- the Corporation's bylaws, is expressly authorized to change the number of directors in any or all of the classes of directors without the consent of the stockholders. D. Elections. Elections of directors need not be by written ballot --------- unless the Bylaws of the Corporation shall so provide. ARTICLE VII A. Power of Stockholder to Act by Written Consent. No action required or ---------------------------------------------- permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. B. Special Meetings of Stockholders. Special meetings of the -------------------------------- stockholders of the Corporation may be called for any purpose or purposes, unless otherwise prescribed by statute or by this Amended and Restated Certificate of Incorporation, only at the request of the Chief Executive Officer of the Corporation or by a resolution duly adopted by the affirmative vote of a majority of the Board of Directors. C. Cumulative Voting. The stockholders of Corporation shall not have ----------------- cumulative voting. ARTICLE VIII The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of at least sixty-six and two-thirds percent (66 2/3%) of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board of Directors). The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation, provided, however, that in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provisions of the Bylaws of the Corporation. ARTICLE IX The books of the Corporation may be kept at such place within or without the State of Delaware as the bylaws of the Corporation may provide or as may be designated from time to time by the board of directors of the Corporation. -4- ARTICLE X Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receivers appointed for the Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority, in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. ARTICLE XI A. Limitation on Liability. A director of the Corporation shall not be ----------------------- personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) under Section 174 of the Delaware General Corporation Law; or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to further eliminate or limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. B. Indemnification. Each person who is or is made a party or is --------------- threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such -5- amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in the second paragraph hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation for any expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. If a claim under the first paragraph of this section is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Amended and Restated Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. -6- C. Insurance. The Corporation may maintain insurance, at its expense, to --------- protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. D. Repeal and Modification. Any repeal or modification of the foregoing ----------------------- provisions of this Article XI shall not adversely affect any right or protection of any director, officer, employee or agent of the Corporation existing at the time of such repeal or modification. ARTICLE XII The Corporation reserves the right to amend or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon a stockholder herein are granted subject to this reservation. ARTICLE XIII Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this Article XIII, or Articles VI, VII, VIII and XI. -7- EX-3.4 5 AMENDED & RESTATED BYLAWS EXHIBIT 3.4 AMENDED AND RESTATED B Y L A W S OF SMARTAGE.COM CORP. (a Delaware corporation) Adopted effective April __, 2000 TABLE OF CONTENTS
Page ---- ARTICLE I Offices.......................................................... 1 Section 1. Registered Office......................................... 1 Section 2. Other Offices............................................. 1 ARTICLE II Meetings of Stockholders........................................ 1 Section 1. Annual Meetings........................................... 1 Section 2. Special Meetings.......................................... 2 Section 3. Notice of Meeting......................................... 2 Section 4. List of Stockholders...................................... 2 Section 5. Quorum.................................................... 2 Section 6. Adjournments.............................................. 3 Section 7. Voting.................................................... 3 Section 8. Proxies................................................... 3 Section 9. Judges of Election........................................ 3 Section 10. Written Consent........................................... 3 Section 11. Waiver of Notice.......................................... 3 ARTICLE III Board of Directors............................................. 4 Section 1. Number.................................................... 4 Section 2. Election and Term of Office............................... 4 Section 3. Nominations............................................... 4 Section 4. Vacancies and Additional Directorships.................... 5 Section 5. Powers.................................................... 5 Section 6. Resignation and Removal of Directors...................... 5 Section 7. Compensation of Directors................................. 5 Section 8. Chairman of the Board..................................... 5 ARTICLE IV Meeting of the Board of Directors............................... 5 Section 1. Place..................................................... 5 Section 2. Regular Meetings.......................................... 6 Section 3. Special Meetings.......................................... 6 Section 4. Quorum.................................................... 6 Section 5. Adjourned Meetings........................................ 6 Section 6. Written Consent........................................... 6 Section 7. Communications Equipment.................................. 6 Section 8. Waiver of Notice.......................................... 7 ARTICLE V Committees of the Board.......................................... 7 Section 1. Designation, Power, Alternate Members and Term of Office.. 7 Section 2. Meetings, Notices and Records............................. 7 Section 3. Quorum and Manner of Acting............................... 8
-i- Section 4. Resignations.......................................... 8 Section 5. Removal............................................... 8 Section 6. Vacancies............................................. 8 Section 7. Compensation.......................................... 8 ARTICLE VI Officers.................................................... 8 Section 1. Officers.............................................. 8 Section 2. Duties................................................ 9 Section 3. Resignations.......................................... 9 Section 4. Removal............................................... 9 Section 5. Vacancies............................................. 9 Section 6. Chief Executive Officer............................... 9 Section 7. President............................................. 9 Section 8. Vice President........................................ 9 Section 9. Secretary............................................. 10 Section 10. Assistant Secretaries................................. 10 Section 11. Chief Financial Officer and Treasurer................. 10 Section 12. Assistant Treasurers.................................. 11 Section 13. Salaries.............................................. 11 ARTICLE VII Certificates of Stock...................................... 11 Section 1. Stock Certificates.................................... 11 Section 2. Books of Account and Record of Stockholders........... 11 Section 3. Transfers of Shares................................... 12 Section 4. Regulations........................................... 12 Section 5. Lost, Stolen or Destroyed Certificates................ 12 Section 6. Stockholder's Right of Inspection..................... 12 ARTICLE VIII Deposit of Corporate Funds................................ 13 Section 1. Borrowing............................................. 13 Section 2. Deposits.............................................. 13 Section 3. Checks, Drafts, Etc................................... 13 ARTICLE IX Record Dates................................................ 13 ARTICLE X Dividends.................................................... 14 ARTICLE XI Fiscal Year................................................. 14 ARTICLE XII Indemnification............................................ 14 Section 1. Right to Indemnification.............................. 14 Section 2. Right of Claimant to Bring Suit....................... 15 Section 3. Non-Exclusivity of Rights............................. 15 Section 4. Insurance............................................. 15
-ii- Section 5. Severability............................................. 16 Section 6. Intent of Article........................................ 16 ARTICLE XIII Corporate Seal............................................... 16 ARTICLE XIV Amendments.................................................... 16
-iii- B Y L A W S OF SMARTAGE.COM CORP. (a Delaware corporation) ARTICLE I --------- Offices ------- Section 1. Registered Office. The registered office of the Corporation ----------------- within the State of Delaware is located at 30 Old Rudnick Lane in the City of Dover, County of Kent, in the State of Delaware and CorpAmerica, Inc. is the registered agent. Section 2. Other Offices. The Corporation may also have other offices, ------------- either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the Corporation may require. ARTICLE II ---------- Meetings of Stockholders ------------------------ Section 1. Annual Meetings. Annual meetings of stockholders shall be held --------------- at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting. At the annual meeting the stockholders shall elect by a plurality vote the number of Directors equal to the number of Directors of the class whose term expires at such meetings (or, if fewer, the number of Directors properly nominated and qualified for election) to hold office until the third succeeding annual meeting of stockholders after their election. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than fifty (50) days nor more than seventy-five (75) days prior to the meeting; provided, however, that in the event that less than sixty-five (65) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be -1- brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 1 by any stockholder of any business properly brought before the annual meeting in accordance with said procedure. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 2. Special Meetings. Special meetings of the stockholders for any ---------------- proper purpose or purposes may be called only by the Chief Executive Officer of the Corporation or by a resolution adopted by the affirmative vote of a majority of the Board of Directors. Section 3. Notice of Meeting. Notice, signed by the Chief Executive ----------------- Officer, the President, any Vice President, the Secretary or an Assistant Secretary, of every annual or special meeting of stockholders stating the purpose or purposes for which the meeting is called, and the date and time when, and the place where it is to be held, shall be prepared in writing and personally delivered or mailed, postage prepaid by first class mail, to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting, except as otherwise provided by statute. If mailed, such notice shall be directed to a stockholder at his or her address as it shall appear on the stock record book of the Corporation, unless the stockholder shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice shall be deemed given when personally delivered or deposited to the United States mail, as the case may be; provided, however, that such notice may also be given by telegram, cablegram, radiogram or other means of electronically transmitted written copy and in such case shall be deemed given when ordered or, if a delayed delivery is ordered, as of such delayed delivery time, or when transmitted, as the case may be. Section 4. List of Stockholders. A complete list of the stockholders -------------------- entitled to vote at each meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder, shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of such meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting and during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Quorum. The presence at any meeting, in person or by proxy, of ------ the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be -2- necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. Section 6. Adjournments. In the absence of a quorum, stockholders ------------ representing a majority of the shares then issued and outstanding and entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 7. Voting. When a quorum is present at any meeting, the holders of ------ a majority of the shares of the Corporation, present in person or by proxy, shall decide any question brought before the meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question. Section 8. Proxies. Any stockholders entitled to vote may vote by proxy, ------- provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing, cabling or other means of electronically transmitted written copy) by the stockholder himself or herself or by his or her duly authorized attorney-in-fact. No proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Section 9. Judges of Election. The Board of Directors may appoint judges ------------------ of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer of the meeting at the meeting. Section 10. Written Consent. No action required or permitted to be taken at --------------- any annual or special meeting of the stockholders of the Corporation may be taken without a meeting and the power of the stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Section 11. Waiver of Notice. Notice of any meeting need not be given to ---------------- any stockholder who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, radiogram, cablegram or other means of electronically transmitted written copy. -3- ARTICLE III ----------- Board of Directors ------------------ Section 1. Number. The number of directors which shall constitute the ------ whole Board of Directors shall be fixed at five (5). Thereafter, the number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors or stockholders at the annual meeting or any special meeting called for that purpose. The Board of Directors shall be divided into three (3) classes, each class to serve for a term of three (3) years and to be as nearly equal in number as possible. Class I shall be comprised of directors who shall serve until the annual meeting of stockholders in 2001 and until their successors shall have been elected and qualified. Class II shall be comprised of directors who shall serve until the annual meeting of stockholders in 2002 and until their successors shall have been elected and qualified. Class III shall be comprised of directors who shall serve until the annual meeting of stockholders in 2003 and until their successors shall have been elected and qualified. Section 2. Election and Term of Office. Directors shall be elected at the --------------------------- annual meeting of the stockholders except as provided in Section 4 of this Article. Each Director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until a successor shall have been elected and qualified or until his or her death, resignation or removal in the manner hereinafter provided, whichever shall first occur. Section 3. Nominations. Subject to the rights of holders of any class or ----------- series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for election to the Board of Directors of the Corporation at a meeting of stockholders may be made on behalf of the Board by the Nominating Committee appointed by the Board, or by any stockholder of the Corporation entitled to vote for the election of directors at such meeting. Such nominations, other than those made by the Nominating Committee on behalf of the Board, shall be made by notice in writing delivered or mailed by first class United States mail, postage prepaid, to the Secretary or Assistant Secretary of the Corporation, and received by him or her not less than one hundred twenty (120) days prior to any meeting of stockholders called for the election of directors; provided, however, that if less than one hundred (100) days notice of the meeting is given to stockholders, such nomination shall have been mailed or delivered to the Secretary or the Assistant Secretary of the Corporation not later than the close of business on the seventh (7th) day following the day on which the notice of meeting was mailed. Such notice shall set forth as to each proposed nominee who is not an incumbent director (a) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (b) the principal occupation or employment of each such nominee, (c) the number of shares of stock of the Corporation which are beneficially owned by each such nominee and by the nominating stockholder, and (d) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations regulated by Regulation 14A of the Securities Exchange Act of 1934, as amended. The Chairman of the meeting may, if the facts warrant, determine and declare to the -4- meeting that a nomination was not made in accordance with the foregoing procedure, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. Section 4. Vacancies and Additional Directorships. If any vacancy shall -------------------------------------- occur among the directors by reason of death, resignation, or removal, or as the result of an increase in the number of directorships, the directors then in office shall continue to act and may fill any such vacancy by a vote of the majority of directors then in office, though less than a quorum, and each director so chosen shall hold office until the next annual election at which the term of the class to which he or she has been elected expires and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal. Section 5. Powers. The business of the Corporation shall be managed by its ------ Board of Directors, which may exercise all powers of the Corporation and do all lawful acts and things as are not by law or by the Certificate of Incorporation or these Bylaws reserved to the stockholders. Section 6. Resignation and Removal of Directors. Any director may resign ------------------------------------ at any time by giving written notice of such resignation to the Board of Directors or the Chief Executive Officer. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any director or the entire Board of Directors may be removed, but only for cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the Restated Certificate of Incorporation. Any director or the entire Board of Directors may be removed without cause, by the holders of sixty-six and two- thirds percent (66 2/3%) of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the Restated Certificate of Incorporation. Section 7. Compensation of Directors. Directors shall receive such ------------------------- reasonable compensation for their services as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 8. Chairman of the Board. The Chairman of the Board of Directors, --------------------- if there be one, shall perform such duties as from time to time may be assigned to him or her by the Board of Directors. ARTICLE IV ---------- Meeting of the Board of Directors --------------------------------- Section 1. Place. The Board of Directors of the Corporation may hold ----- meetings, both regular and special, either within or without the State of Delaware. -5- Section 2. Regular Meetings. The Board of Directors by resolution may ---------------- provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each Director who shall not have been present at the meeting at which such action was taken, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 3. Special Meetings. Special meetings of the Board of Directors ---------------- may be called by the Chief Executive Officer and shall be called by the Chief Executive Officer or Secretary at the written request of any two (2) directors. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, on at least two (2) days' notice prior to the time of the meeting, or shall be sent to him or her at such place by telegram, radiogram or cablegram, or other electronic means, or delivered to him or her personally, not later than four (4) hours before the time the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these Bylaws. Section 4. Quorum. At any meeting of the Board of Directors a majority of ------ the whole Board of Directors shall constitute a quorum for the transaction of business, and the act of the majority of those present at any meeting at which a quorum is present shall be sufficient for the act of the Board of Directors, except as may be otherwise specifically provided by law or by the Certificate of Incorporation. Section 5. Adjourned Meetings. If a quorum shall not be present at a ------------------ meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Four (4) hours notice of any such adjournment shall be given personally to each director who was not present at the meeting at which such adjournment was taken and, unless announced at the meeting, to the other directors; provided, that two (2) days' notice shall be given if notice is given by mail. Section 6. Written Consent. Any action required or permitted to be taken --------------- at any meeting of the Board of Directors may be taken without a meeting if all the members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors. Section 7. Communications Equipment. Any one or more members of the Board ------------------------ of Directors may participate in any meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be constitute presence in person at such meeting. -6- Section 8. Waiver of Notice. Notice of any meeting need not be given to ---------------- any director who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, radiogram or cablegram or other means of electronically transmitted written copy. ARTICLE V --------- Committees of the Board ----------------------- Section 1. Designation, Power, Alternate Members and Term of Office. The -------------------------------------------------------- Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one (1) or more committees. Each such committee shall consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution, shall have and may exercise the power of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board of Directors may designate one (1) or more directors as alternate members of any committee who, in the order specified by the Board of Directors, may replace any absent or disqualified member at any meeting of the committee. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these Bylaws; provided, however, that any committee member who ceases to be a member of the Board of Directors shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation. Section 2. Meetings, Notices and Records. Each committee may provide for ----------------------------- the holding of regular meetings, with or without notice, and a majority of the members of any such committee may fix the time, place and procedure for any such meeting. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any one (1) of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least two (2) days before the day on which the meeting is to be held, or shall be sent by telegram, radiogram or cablegram, or other means of electronically transmitted written copy, addressed to him or her at such place, or telephoned or delivered to him or her personally, not later than four (4) hours before the time the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof by telegram, radiogram, cablegram or other means of electronically transmitted written copy. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. Each committee may meet and transact any and all business delegated to that committee by the Board of Directors by means of a conference telephone or similar communications equipment provided that all persons participating in the meeting are able to hear and -7- communicate with each other. Participation in a meeting by means of conference telephone or similar communication shall constitute presence in person at such meeting. Section 3. Quorum and Manner of Acting. At each meeting of any committee --------------------------- the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business. Any determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. Section 4. Resignations. Any member of a committee may resign at any time ------------ by giving written notice of such resignation to the Board of Directors or the Chief Executive Officer of the Corporation. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer. Section 5. Removal. Any member of any committee may be removed at any time ------- by the affirmative vote of a majority of the whole Board of Directors with or without cause. Section 6. Vacancies. If any vacancy shall occur in any committee by --------- reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board of Directors. Section 7. Compensation. Committee members shall receive such reasonable ------------ compensation for their services as such, whether in the form of salary or a fixed fee for attendance at meetings, with reasonable expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any committee member from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE VI ---------- Officers -------- Section 1. Officers. The officers of the Corporation shall be a Chief -------- Executive Officer, a President, a Chief Financial Officer and Treasurer and a Secretary, and may also include one or more Vice Presidents, Assistant Secretaries or Assistant Treasurers, each of whom shall be elected by the directors, and shall hold office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. None of the officers of the Corporation except the Chairman or any Vice Chairman of the Board need be directors. Any number of offices may be held by the same person. -8- Section 2. Duties. All officers, as between themselves and the ------ Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws, or, to the extent not so provided, as may be provided by resolution of the Board of Directors or, as to all other officers by the Chief Executive Officer. Section 3. Resignations. Any officer may resign at any time by giving ------------ written notice of such resignation to the Board of Directors, the Chief Executive Officer, the President, a Vice President or the Secretary. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer. Section 4. Removal. Any officer may be removed at any time, either with ------- or without cause, by the vote of a majority of all the directors then in office. Section 5. Vacancies. A vacancy in any office by reason of death, --------- resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. Section 6. Chief Executive Officer. Subject to the direction of the ----------------------- Board of Directors, the Chief Executive Officer shall supervise and direct the daily management of the business, affairs and property of the Corporation. In the absence or disability of the Chief Executive Officer, or if there be none, the Chairman of the Board shall preside at all meetings of the stockholders. The Chief Executive Officer shall be charged with seeing that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be facsimile signature), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements, and other instruments. From time to time he or she shall report to the Board of Directors all matters within his or her knowledge which the interests of the Corporation may require to be brought to its attention. The Chief Executive Officer shall also perform such other duties as are assigned by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors. Section 7. President. The President, if there be one, shall perform such --------- duties as from time to time may be assigned to him or her by the Board of Directors or the Chief Executive Officer. The President may sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be facsimile signature), and may sign and execute in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements, and other instruments. Section 8. Vice President. In the absence or disability of the Chief -------------- Executive Officer and President, the Vice President, or if there be more than one, the Vice Presidents in the order of priority determined by the Board of Directors, shall perform all the duties of the Chief Executive Officer or President and, when so acting, shall have all the powers of and be subject to all restrictions upon the Chief Executive Officer or President, as the case may be. Any Vice President may also sign, with any other officer thereunto duly authorized, certificates of stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the Corporation deeds, -9- mortgages, bond and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent. Each Vice President shall perform such other duties as are assigned by these Bylaws or as from time may be assigned by the Board of Directors, the Chief Executive Officer or the President. Section 9. Secretary. The Secretary shall: (i) record all the --------- proceedings of the meetings of the stockholders, the Board of Directors, and all committees of the Board of Directors in a book or books to be kept for that purpose; (ii) cause all notices to be duly given in accordance with the provisions of these Bylaws as required by statute; (iii) whenever any committee shall be appointed in pursuance of a resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; (iv) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing capital stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (v) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (vi) have charge of the stock record and stock transfer books of the Corporation, and exhibit such stock books at all reasonable times to such persons as are entitled by statute to have access thereto; (vii) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing capital stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (viii) in general, perform all duties incident to the office of Secretary and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors, the Chief Executive Officer or the President. Section 10. Assistant Secretaries. At the request of the Secretary or in --------------------- his or her absence or disability, the Assistant Secretary designated by him or her (or in the absence of such designation, the Assistant Secretary designated by the Board of Directors or the President) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them by the Board of Directors, the President, Chief Executive Officer or the Secretary. Section 11. Chief Financial Officer and Treasurer. The Chief Financial ------------------------------------- Officer and Treasurer shall: (i) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (ii) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected in accordance with Article VIII, Section 2 of these Bylaws or to be otherwise dealt with in such manner as the Board of Directors may direct; (iii) cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositaries of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (iv) render to the Board of Directors or the Chief Executive Officer, whenever required, a statement of the financial condition of the Corporation and of all his or her transactions as Chief Financial Officer and Treasurer; (v) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he or she shall determine and upon application cause such books or duplicates thereof to be exhibited to any Director; (vi) be empowered, from time to time, to require from the officers or agents of the Corporation -10- reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation; (vii) sign (unless the Secretary or an Assistant Secretary or Assistant Treasurer shall sign) certificates representing stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (viii) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors or the Chief Executive Officer. Section 12. Assistant Treasurers. At the request of the Chief Financial -------------------- Officer and Treasurer or in his or her absence or disability, the Assistant Treasurer designated by him or her (or in the absence of such designation, the Assistant Treasurer designated by the Board of Directors or the President) shall perform all the duties of the Chief Financial Officer and Treasurer, and, when so acting, shall have all the powers of an be subject to all restrictions upon the Chief Financial Officer and Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned by the Board of Directors, the Chief Executive Officer or the Chief Financial Officer and Treasurer. Section 13. Salaries. The salaries of the officers of the Corporation -------- shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the Corporation. ARTICLE VII ----------- Certificates of Stock --------------------- Section 1. Stock Certificates. Every holder of capital stock of the ------------------ Corporation shall be entitled to have a certificate or certificates in such form as shall be approved by the Board of Directors, certifying the number of shares of capital stock of the Corporation owned by him or her. The certificates representing shares of capital stock shall be signed in the name of the Corporation by the Chief Executive Officer or the President or any Vice President, and by the Secretary, an Assistant Secretary, the Chief Financial Officer and Treasurer or an Assistant Treasurer (which signatures may be facsimiles) and sealed with the seal of the Corporation (which seal may be a facsimile). In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificates are issued, they may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still such at the date of their issue. Section 2. Books of Account and Record of Stockholders. The books and ------------------------------------------- records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board of Directors may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or by the transfer agent or registrar, if any, designated by the Board of Directors. There shall be entered on the stock books of the Corporation the number of each certificate issued, the number of shares represented -11- thereby, the name of the person to whom such certificate was issued and the date of issuance thereof. Section 3. Transfers of Shares. Transfers of shares of capital stock of ------------------- the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with the transfer agent, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon, if any. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof. Section 4. Regulations. The Board of Directors may make such additional ----------- rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more registrars and may further provide that no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Nothing herein shall be construed to prohibit the Corporation from acting as its own transfer agent or registrar. Section 5. Lost, Stolen or Destroyed Certificates. The holder of any -------------------------------------- certificate representing any share or shares of the capital stock of the Corporation shall immediately notify the Corporation of any loss, theft, or destruction of such certificate. The Board of Directors may direct that a new certificate or certificates be issued in the place of any certificate or certificates theretofore issued by it which the owner thereof shall allege to have been lost, stolen or destroyed upon the furnishing to the Corporation of an affidavit to that effect by the person claiming that the certificate has been lost, stolen or destroyed. When authorizing such issue of a new certificate of certificates, the Board of Directors may, in its discretion, require such owner or his or her legal representatives to give to the Corporation and its transfer agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board of Directors in it absolute discretion shall determine, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of a new certificate. Section 6. Stockholder's Right of Inspection. Any stockholder of record --------------------------------- of the Corporation, in person or by attorney or other agent, shall upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other -12- agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business. ARTICLE VIII ------------ Deposit of Corporate Funds -------------------------- Section 1. Borrowing. No loans or advances shall be obtained or --------- contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board of Directors. Such authorization may be general or confined to specific instances. Section 2. Deposits. All funds of the Corporation not otherwise employed -------- shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositaries as the Board of Directors may select, or as may be selected by any officer or officers or agent or agents authorized to do so by the Board of Directors. Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for ------------------- the payment of money, and all negotiable and non-negotiable notes or other negotiable or non-negotiable evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers or agent or agents of the Corporation, and in such manner, as from time to time shall be determined by the Board of Directors. ARTICLE IX ---------- Record Dates ------------ In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors. -13- ARTICLE X --------- Dividends --------- Subject to any agreement to which the Corporation is a party or by which it is bound, the Board of Directors may declare to be payable, in cash, in other property or in stock of the Corporation of any class or series, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board of Directors may at any time deem to be advisable. Before declaring any such dividend, the Board of Directors may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends. ARTICLE XI ---------- Fiscal Year ----------- The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. ARTICLE XII ----------- Indemnification --------------- Section 1. Right to Indemnification. Each person who was or is made a ------------------------ party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director, officer, or employee of the corporation or is or was serving at the request of the corporation as a director, officer, or employee of, or in some other representative capacity for, another corporation or a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, or employee or in any other capacity while serving as a director, officer, or employee, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, or employee and shall inure to the benefit of such person's heirs, executors and administrators; provided, however, that except as provided in Section 2 hereof with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article shall be a contract right and shall include the right to be -14- paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law so requires, the payment of such expenses incurred by a director, officer, employee or representative in such person's capacity as a director, officer, employee or representative (and not in any other capacity in which service was or is rendered by such person while a director, officer, employee or representative, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article or otherwise. Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 ------------------------------- of this Article is not paid in full by the corporation within ninety (90) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. The right to indemnification and ------------------------- the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be director, officer, employee or agent of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 4. Insurance. The corporation may maintain insurance, at its --------- expense, to protect itself and any director, officer, or employee of the corporation serving in any capacity on behalf of the corporation or at its request for any other entity to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. -15- Section 5. Severability. If any word, clause or provision of this ------------ Article XII or any award made hereunder shall for any reason be determined to be invalid, the provisions hereof shall not otherwise be affected thereby but shall remain in full force and effect. Section 6. Intent of Article. The intent of this Article XII is to ----------------- provide for indemnification to the fullest extent permitted by section 145 of the Delaware General Corporation Law. To the extent that such section or any successor section may be amended or supplemented from time to time, this Article XII shall be amended automatically and construed so as to permit indemnification to the fullest extent from time to time permitted by law. Neither an amendment nor repeal of this Article XII, nor the adoption of any provision of these Bylaws inconsistent with this Article XII, shall eliminate or reduce the effect of this Article XII in respect of any matter occurring, or action or proceeding accruing or arising or that, but for this Article XII, would accrue or arise, prior to such amendment repeal or adoption of any inconsistent provision. ARTICLE XIII ------------ Corporate Seal -------------- The Corporate Seal shall be circular in form and shall bear the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE XIV ----------- Amendments ---------- The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation, provided, however, that any adoption, amendment or repeal of Bylaws of the corporation by the Board of Directors shall require the approval of at sixty-six and two-thirds percent (66 2/3%) of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal these Bylaws, provided, however, that in addition to any vote of the holders of any class or series of stock of this corporation required by law or by the Restated Certificate of Incorporation of this corporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provisions of these Bylaws. -16- CERTIFICATE OF SECRETARY ------------------------ I, the undersigned, hereby certify: 1. That I am the duly elected, acting and qualified Secretary of SMARTAGE.COM CORP., a Delaware corporation; and 2. That the foregoing Bylaws, comprising 16 pages, constitute the Bylaws of such corporation as duly adopted at a meeting of the board of directors of such corporation held on March __, 2000. Dated: April __, 2000. _______________________________ Secretary -17- EX-4.2 6 SECOND AMENDED & RESTATED INVESTORS' RIGHTS AGRMT EXHIBIT 4.2 SMARTAGE CORP. -------------- SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ------------------------------------------------------- This SmartAge Corp. Second Amended and Restated Investors' Rights Agreement (this "Agreement") is made and entered into as of October 5, 1999 by and among --------- SmartAge Corp., a Delaware corporation (formerly known as Netweb Corporation) (the "Company"), the persons and entities listed on Exhibit A attached hereto ------- --------- (consisting of the Prior Investors (defined below) and the Series C Investors (defined below), collectively referred to herein as the "Investors"), and the --------- persons listed on Exhibit B attached hereto (the "Founders"). --------- -------- RECITALS -------- A. Certain of the Investors (the "Prior Investors") are holders of --------------- outstanding shares of the Company's Series A Preferred Stock ("Series A Stock") -------------- and Series B Preferred Stock ("Series B Stock") issued by the Company to such -------------- Prior Investors pursuant to that certain Series A Preferred Stock Purchase Agreement (the "Series A Agreement") and Series B Preferred Stock Purchase ------------------ Agreement (the "Series B Agreement"), dated respectively as of July 30, 1998 and ------------------ March 26, 1999 by and among the Company and the Prior Investors, and have also been granted certain information and registration rights and rights of first offer under that certain First Amended and Restated Investors' Rights Agreement dated as of March 26, 1999 by and among the Company and the Prior Investors (the "Prior Rights Agreement"). ---------------------- B. Certain Investors (the "Series C Investors") have agreed to purchase ------------------ shares of the Company's Series C Preferred Stock ("Series C Stock") pursuant to -------------- that certain Series C Preferred Stock Purchase Agreement by and among the Company and such Series C Investors dated as of the date hereof (the "Series C -------- Agreement"). The Series C Agreement provides that, as a condition to the Series - --------- C Investors' obligation to purchase Series C Stock thereunder, the Company will enter into this Agreement and the Series C Investors will be granted the rights set forth herein. C. The Company, the Investors and the Founders desire to enter into this Agreement in order to amend, restate and replace the rights and obligations set forth in the Prior Rights Agreement with the rights and obligations set forth in this Agreement, and Section 5.2 of the Prior Rights Agreement provides that the Prior Rights Agreement may be amended by the written consent of the Company and a majority of the Registrable Securities (as defined in section 2.1(b) of the Prior Rights Agreement) then outstanding. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows: 1. INFORMATION AND INSPECTION RIGHTS. --------------------------------- 1.1 Financial Information. The Company covenants and agrees that, --------------------- commencing on the date of this Agreement, for so long as an Investor holds at least 53,333 -1- shares of Series A Stock issued under the Series A Agreement or 90,909 shares of Series B Stock issued under the Series B Agreement (with the shares of Series B Stock held by Accel VI L.P., Accel Internet Fund II L.P., Accel Keiretsu VI Associates L.L.C. and Accel Investors `98 L.P. (collectively, the "Accel ----- Entities") treated as held by a single Investor for purposes of this Section - -------- 1.1) or 147,232 shares of Series C Stock (as adjusted for stock splits, reverse splits and recapitalizations) issued under the Series C Agreement (with the shares of Series C Stock held by SOFTBANK Capital Partners LP and SOFTBANK Capital Advisors Fund LP (collectively, the "SOFTBANK Entities") treated as held by a single Investor for purposes of this Section 1.1) and/or the equivalent number (on an as-converted basis) of shares of Common Stock of the Company ("Common Stock") issued upon the conversion of such shares of Series A Stock, ------------ Series B Stock or Series C Stock ("Conversion Stock"), the Company will: ---------------- (a) Annual Reports. Furnish to such Investor, as soon as -------------- practicable and in any event within 90 days after the end of each fiscal year of the Company, an audited consolidated Balance Sheet as of the end of such fiscal year, an audited consolidated Statement of Income and an audited consolidated Statement of Cash Flows of the Company and its subsidiaries for such year, setting forth in each case in comparative form the figures from the Company's previous fiscal year (if any), all prepared in accordance with generally accepted accounting principles and practices and accompanied by a report of an independent public accounting firm; (b) Quarterly Reports. Furnish to such Investor as soon as ----------------- practicable, and in any case within 45 days of the end of each fiscal quarter of the Company (except the last quarter of the Company's fiscal year), quarterly unaudited financial statements, including an unaudited Balance Sheet and an unaudited Statement of Income, including a comparison of actual results for the period to those contained in the business plan described in paragraph (c) below; (c) Annual Budget and Business Plan. Furnish to such Investors ------------------------------- as soon as practicable and in any event no later 30 days after the close of each fiscal year of the Company, an annual operating plan and budget, prepared on such basis as the Company deems reasonable (but including quarterly forecasts), for the next immediate fiscal year. 1.2 Inspection Rights. The Company shall permit each Investor ----------------- holding at least 227,272 shares of Series B Stock issued under the Series B Agreement, or 147,232 shares of Series C Stock (as adjusted for stock splits, reverse splits and recapitalizations) issued under the Series C Agreement and/or the equivalent number (on an as-converted basis) of shares of Conversion Stock, or any combination thereof, at such Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by such Investor, provided that such Investor gives the Company advance written notice of such request 15 days prior to such inspection; provided further that any inspection permitted under this Section 1.2 shall be conducted on normal business days (excludes weekends and bank holidays) and between the hours of 9:30 a.m. and 5:00 p.m. 1.3 Confidentiality. Each Investor acknowledges that the financial --------------- and other information received pursuant to Sections 1.1 and 1.2 is confidential information of the -2- Company, and hereby agrees to use and hold all such information in strict confidence and not to use or disclose any such information to any third party, except on the prior written consent of the Company or to the extent such information has previously been made publicly available by the Company; provided -------- that foregoing shall not apply to the Accel Entities each of which acknowledges that they are subject to an obligation to maintain and protect the confidentiality of the information, documents and materials obtained or received by them by virtue of their information and inspection rights under this Section 1, among other information, as is set forth in that certain letter agreement dated as of March 1, 1999 from Accel Partners to the Company. The obligations of each Investor under this Section 1.3 shall survive the termination of its information rights under Section 1.1, of its inspection rights under Section 1.2 or of this Agreement. 1.4 Termination of Information and Inspection Rights. The Company's ------------------------------------------------ obligations under Section 1.1 and 1.2 will terminate (i) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933 as amended (the "Securities Act"), covering the offer and sale of Common Stock for -------------- the account of the Company in which the aggregate public offering proceeds to the Company (before deduction of underwriters' discounts and commissions) equals or exceeds $20,000,000 and the public offering price per share of which equals or exceeds $5.50 per share before deduction of underwriters' discounts and commissions (such price per share of Common Stock to be appropriately adjusted to reflect Common Stock Events (as defined in subsection 6.5 of the Company's Restated Certificate of Incorporation)) (an "IPO"); (ii) upon a merger, sale, --- liquidation or consolidation of the Company in which the stockholders immediately prior to such event do not retain a majority of the voting power in the surviving corporation or company; or (iii) on the sale of all or substantially all of the Company's assets. The obligations of each Investor under Section 1.3 shall survive the termination of its rights under Section 1.1 or 1.2 of this Agreement. 2. REGISTRATION RIGHTS. ------------------- 2.1 Definitions. For purposes of this Section 2: ----------- (a) Registration. The terms "register," "registered," ------------ -------- ---------- and "registration" refer to a registration effected by preparing and filing a ------------ registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement by the Securities and Exchange Commission. (b) Registrable Securities. The term "Registrable ---------------------- ----------- Securities" means: (1) all the shares of Common Stock of the Company issued or - ---------- issuable upon the conversion of any shares of Series A Stock issued under the Series A Agreement or any shares of Series B Stock issued under the Series B Agreement or any shares of Series C Stock issued under the Series C Agreement, as such agreement may hereafter be amended from time to time that are now owned or may hereafter be acquired by any Investor or any Investor's successors and permitted assigns; (2) all the shares of Common Stock of the Company issued or issuable upon the conversion of any shares of Series C Stock issued upon exercise of any warrants, that are now owned or may be hereafter acquired by an Investor or any Investor's successors or permitted assigns; (3) the shares of Common Stock now held by the Founders and set forth in -3- Exhibit B attached hereto (the "Founders' Shares"); and (4) any shares of Common - --------- ---------------- Stock of the Company issued (or issuable upon the conversion or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1), (2) or (3) of this subsection (b); provided that Registrable Securities shall not, however, include any shares that formerly were Registrable Securities and that (a) have been sold or transferred by a person or entity in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement, (b) have been sold or transferred to the public pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended ("Rule 144") or (c) may, within a 90-day -------- period, be sold to the public without volume restrictions pursuant to Rule 144 unless the Holder of such shares holds more than 5% of the outstanding shares of Common Stock of the Company. (c) Registrable Securities Then Outstanding. The number of --------------------------------------- shares of "Registrable Securities Then Outstanding" shall mean the number of --------------------------------------- shares of Common Stock which are Registrable Securities and (1) are then issued and outstanding or (2) are then issuable pursuant to the exercise or conversion of then outstanding and then exercisable options, warrants or convertible securities for Registrable Securities. (d) Holder. The term "Holder" means any person owning of ------ ------ record Registrable Securities or any assignee of record of such Registrable Securities to whom rights under such sections have been duly assigned in accordance with this Agreement; provided, however, that for purposes of this -------- ------- Agreement, a record holder of shares of Series A Stock, Series B Stock or Series C Stock convertible into such Registrable Securities shall be deemed to be the Holder of such Registrable Securities; and provided, further, that Holders of -------- ------- Registrable Securities will not be required to convert their shares of Series A Stock, Series B Stock or Series C Stock into Common Stock in order to exercise the registration rights granted hereunder until immediately before the closing of the offering to which the registration relates. (e) Form S-3. The term "Form S-3" means such form under the -------- -------- Securities Act as is in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (f) SEC. The term "SEC" or "Commission" means the U.S. --- --- ---------- Securities and Exchange Commission. (g) Registrable Series A Stock. The term "Registrable Series A -------------------------- Stock" means (1) any shares of Common Stock of the Company issued or issuable upon conversion of any shares of Series A Stock issued under the Series A Agreement, (2) with respect to Sections 2.4, 2.8, 2.9 and 2.11 only, any shares of Common Stock of the Company issued or issuable upon conversion of any shares of Series A Stock issued upon exercise of those warrants issued pursuant to that certain Warrant Agreement to Purchase Shares of Series A Preferred Stock (as amended, the "Warrant Agreement") by and among Lycos Inc., Tripod, Inc. and the Company dated as of July 20, 1998, and (3) any shares of Common Stock of the Company issued (or issuable upon conversion or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1) of this subsection (g); provided that -------- -4- Registrable Series A Stock shall not, however, include any shares that formerly were Registrable Series A Stock and that (x) have been sold or transferred by a person or entity in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement, (y) that have been sold or transferred to the public pursuant to Rule 144 or (z) that may, within a 90-day period, be sold to the public without volume restrictions pursuant to Rule 144 unless the Holder of such shares holds more than 5% of the outstanding shares of Common Stock of the Company. (h) Registrable Series B Stock. The term "Registrable Series B -------------------------- Stock" means (1) any shares of Common Stock of the Company issued or issuable upon conversion of any shares of Series B Stock issued under the Series B Agreement, and (2) any shares of Common Stock of the Company issued (or issuable upon conversions or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1) of this subsection (h); provided that Registrable Series B Stock shall not, -------- however, include any shares that formerly were Registrable Series B Stock and that (x) have been sold or transferred by a person or entity in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement, (y) that have been sold or transferred to the public pursuant to Rule 144 or (z) that may, within a 90-day period, be sold to the public without volume restrictions pursuant to Rule 144 unless the Holder of such shares holds more than 5% of the outstanding shares of Common Stock of the Company. (i) Registrable Series C Stock. The term "Registrable Series C -------------------------- Stock" means (1) any shares of Common Stock of the Company issued or issuable upon conversion of any shares of Series C Stock issued under the Series C Agreement, (2) any shares of Common Stock of the Company issued or issuable upon conversion of any shares of Series C Stock issued upon exercise of any warrant, and (3) any shares of Common Stock of the Company issued (or issuable upon conversions or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, all such shares of Common Stock described in clause (1) or (2) of this subsection (i); provided that Registrable Series C Stock shall not, -------- however, include any shares that formerly were Registrable Series C Stock and that (x) have been sold or transferred by a person or entity in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement, (y) that have been sold or transferred to the public pursuant to Rule 144 or (z) that may, within a 90-day period, be sold to the public without volume restrictions pursuant to Rule 144 unless the Holder of such shares holds more than 5% of the outstanding shares of Common Stock of the Company. (j) Registrable Founders Stock. The term "Registrable Founders -------------------------- Stock" means (1) the Founders' Shares; and (2) any shares of Common Stock of the Company issued (or issuable upon the conversion or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, all such Founders Shares; provided that Registrable Securities shall not, however, include any shares that formerly were Registrable Founders Stock, and that (a) have been sold or transferred by a person or entity in a transaction in which rights under this Section 2 are not assigned in accordance with this Agreement, (b) that have been sold or transferred to the public pursuant to Rule 144, or (c) that may, within a 90-day period, be sold to the public without volume restrictions pursuant to Rule 144 unless the Holder of such shares holds more than 5% of the outstanding shares of Common Stock of the Company. -5- 2.2 Demand Registration. ------------------- (a) Request by Holders of Series B Preferred Stock. If the ---------------------------------------------- Company shall receive at any time after the earlier of March 26, 2003, or six (6) months after the IPO, a written request from Series B Investors collectively holding at least 30% of Registrable Series B Stock then held by the Series B Investors that the Company file a registration statement under the Securities Act covering the Registrable Securities pursuant to this Section 2.2, then the Company shall, within 20 days after the receipt of such written request, give notice of such request ("Request Notice") to all Holders, and use its best -------------- efforts to effect, as soon as reasonably practicable, the registration under the Securities Act of all Registrable Securities which Holders request to be registered and included in such registration by notice given by such Holders to the Company within 20 days after receipt of the Request Notice, subject only to the limitations of this Section 2; provided that the Registrable Securities -------- requested by all Holders to be registered pursuant to such request must have an anticipated aggregate public offering price (before any underwriting discounts and commissions) of not less than $15,000,000. (b) Request by Holders of Series C Preferred Stock. If the ---------------------------------------------- Company shall receive at any time after March 26, 2003, a written request from Series C Investors collectively holding at least 30% of Registrable Series C Stock then held by the Series C Investors that the Company file a registration statement under the Securities Act covering at least 30% of the Registrable Series C Stock pursuant to this Section 2.2, then the Company shall, within 20 days after the receipt of such written request, provide a Request Notice to all Holders, and use its best efforts to effect, as soon as reasonably practicable, the registration under the Securities Act of all Registrable Securities which Holders request to be registered and included in such registration by notice given by such Holders to the Company within 20 days after receipt of the Request Notice, subject only to the limitations of this Section 2; provided that the -------- Registrable Securities requested by all Holders to be registered pursuant to such request must have an anticipated aggregate public offering price (before any underwriting discounts and commissions) of not less than $20,000,000. (c) Underwriting. If the Investors initiating the above ------------ registration request under this Section 2.2 ("Initiating Holders") intend to ------------------ distribute the Registrable Securities covered by their request by means of an underwriting, then they shall so advise the Company as a part of their request made pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in subsections 2.2(a) or 2.2(b). In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Company (and reasonably satisfactory to a majority in interest of the Initiating Holders). Notwithstanding any other provision of this Section 2.2, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten then the Company shall so advise all Holders of Registrable Securities that would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be reduced as -6- required by the underwriter(s) and allocated first to the Initiating Holders, second to the Holders of Registrable Series B or Registrable Series C Stock, who are not the Initiating Holders, and third to any other stockholder holding Registrable Securities, on a pro rata basis among such Holders based on the total number of Registrable Securities then held by each such Holder. Any Registrable Securities excluded and withdrawn from such underwriting shall be withdrawn from the registration. (d) Maximum Number of Demand Registrations. The Company is -------------------------------------- obligated to (i) effect two (2) such registrations pursuant to Section 2.2(a) and (ii) effect two (2) such registrations pursuant to Section 2.2(b), and the Company shall not be obligated to effect a registration during the one hundred eighty (180) day period commencing with the date of the Company's IPO. (e) Deferral. Notwithstanding the foregoing, if the Company -------- shall furnish to Holders requesting the filing of a registration statement pursuant to this Section 2.2, a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for such registration statement to be filed, then the Company shall have the right to defer such filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the -------- ------- Company may not utilize this right more than twice in any twelve (12) month period. (f) Expenses. All registration expenses incurred in connection -------- with a registration pursuant to this Section 2.2, including without limitation all registration and qualification fees, printers' and accounting fees, fees and disbursements of counsel (and the reasonable fees and disbursements of a single counsel for all of the Registered Holders selling Registrable Securities pursuant to the registration under this Section 2.2, up to a maximum of $20,000), and underwriters' discounts and commissions shall be borne by the Company. Each Holder participating in a registration pursuant to this Section 2.2 shall bear such Holder's proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all discounts or commissions payable to underwriters in connection with such offering. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to this Section 2.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered, unless the Holders of a majority of the Registrable Securities then outstanding agree to forfeit their right to one (1) demand registration pursuant to this Section 2.2 (in which case such right shall be forfeited by all Holders of Registrable Securities); provided, further, however, that if at the time of such -------- ------- ------- withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company not known to the Holders at the time of their request for such registration and have withdrawn their request for registration with reasonable promptness after learning of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to this Section 2.2. 2.3 Piggyback Registrations. The Company shall notify all Holders ----------------------- of Registrable Securities in writing at least twenty (20) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the -7- Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration --------- statements relating to any registration under Section 2.2 or Section 2.4 of this Agreement or to any employee benefit plan, acquisition or corporate reorganization) and will afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by such Holder shall, within ten (10) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. (a) Underwriting. If a registration statement for which the ------------ Company gives notice under this Section 2.3 is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares (including Registrable Securities) from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first, to the ----- Company, second, to each of the Holders requesting inclusion of their ------ Registrable Series C Stock and Registrable Series B Stock in such registration statement, on a pro rata basis based on the total number of Registrable Series C Stock and Registrable Series B Stock then held by each such Holder, third, to ----- each of the Holders requesting inclusion of their Registrable Series A Stock and Registrable Founders Stock in such registration statement, on a pro rata basis based on the total number of Registrable Series A Stock and Registrable Founders Stock then held by each such Holder, fourth, to any other Holder holding ------ Registrable Securities and any other stockholders having registration rights that are pari passu with those of Holders, on a pro rata basis based ---- ----- on the total number of Registrable Securities then held by each such Holder, and fifth, to any other selling shareholders; provided, that with respect to each - ----- -------- of the Series B Investors or Series C Investors holding Registrable Securities, the number of shares of Registrable Securities to be included in a registration under this Section 2.3 shall be no less than 30% of the Series B Stock or Series C Stock requested by each such Holder to be sold pursuant to this Section 2.3 and no less than 20% of any other Registrable Securities requested by such Holder to be included in such registration; provided, further, that if the -------- ------- registration relates to an initial public offering of the Company's securities or an offering solely by stockholders of the Company exercising demand registration rights, then all Registrable Securities held by such Holder may be excluded from such registration and underwriting by the managing underwriter(s). If any Holder disapproves of the terms of any such underwriting, such Holder -8- may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s), delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder that is a partnership or corporation, the partners, retired partners, affiliates and shareholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "Holder", and any pro rata reduction with respect to such "Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Holder", as defined in this sentence. (b) Expenses. All expenses incurred in connection with a -------- registration pursuant to this Section 2.3 (excluding underwriters' and brokers' discounts and commissions), including, without limitation all federal and "blue sky" registration and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company (and the reasonable fees and disbursements of a single counsel for all of the Registered Holders selling Registrable Securities pursuant to the registration under this Section 2.3, up to a maximum of $20,000), shall be borne by the Company. 2.4 Form S-3 Registration. At any time that the Company is eligible --------------------- to utilize a Form S-3 registration statement, in case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, then the Company will: (a) Notice. Promptly give written notice of the proposed ------ registration and the Holder's or Holders' request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities; and (b) Registration. As soon as practicable, effect such ------------ registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities, as the case may be, as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within ten (10) days after receipt of written notice from the Company pursuant to Section 2.4(a); provided, however, -------- ------- that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders of Registrable Securities, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $2,500,000; -9- (3) if the Company shall furnish to the Holders of Registrable Securities a certificate signed by the President or Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement no more than once during any twelve month period for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 2.4; (4) if the Company has within the twelve (12) month period preceding the date of such request already effected two (2) registrations on Form S-3 for the Holders pursuant to this Section 2.4; or (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Expenses. Subject to the foregoing, the Company shall -------- file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered pursuant to this Section 2.4 as soon as practicable after receipt of the request or requests of the Holders for such registration. The Company shall pay all expenses incurred in connection with the first three registrations requested by the holders of Registrable Series C Stock and the first three registrations requested by the holders of all other Registrable Stock, pursuant to this Section 2.4, (excluding underwriters' or brokers' discounts and commissions, if any), including without limitation all filing, registration and qualification, printers' and accounting fees and the reasonable fees and disbursements of one counsel for the selling Holder or Holders (up to a maximum of $20,000). (d) Form S-3 Not Demand or Piggyback Registration. Form S-3 --------------------------------------------- registrations shall not be deemed to be demand or piggyback registrations as described in Sections 2.2 and 2.3 above. 2.5 Obligations of the Company. Whenever required to effect the -------------------------- registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously and as reasonably practicable: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and, in the case of a registration under Section 2.4 (S-3 Registration), use its best efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such Form S-3 registration statement effective for the earlier of up to one hundred twenty (120) days or until all registered securities of such Holders have been sold; provided, however, that if after the time of such registration a request is made to the Holders pursuant to Section 2.9 of this Agreement (or a similar request is made) for some period of time following the effective date of a Company registration and the Holders enter into such an agreement, then such 120 day period shall be extended for a period of time equal to the period that the Holder selling shares pursuant to a registration under Section 2.4 refrains from selling any Common Stock (or other securities) pursuant to such market stand-off agreement. -10- (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such number of copies of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering under Section 2.2 or 2.3, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Use its best efforts to notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, such obligation to continue as long as the registration statement is effective or all Registrable Securities held by a Holder have been sold, up to a maximum of 120 days from the date on which such registration statement is declared effective. 2.6 Furnish Information. It shall be a condition precedent to the ------------------- obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to timely and legally effect the registration of their Registrable Securities. 2.7 Delay of Registration. No Holder shall have any right to --------------------- obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2. 2.8 Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under Sections 2.2, 2.3 or 2.4: (a) By the Company. To the extent permitted by law, the -------------- Company will indemnify and hold harmless each Holder, the partners, members, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the -11- Securities Exchange Act of 1934, as amended, (the "1934 Act"), against any -------- losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (a "Violation"): --------- (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the 1934 Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the 1934 Act or any federal or state securities law in connection with the offering covered by such registration statement. In the event of a violation, the Company will reimburse each such Holder, partner, member, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this -------- ------- subsection 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder; provided further, however, that the foregoing indemnity agreement -------- ------- with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, with respect to any losses, claims, damages or liabilities arising from the sale by such Holder or underwriter of shares to any person if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the Company shall have timely furnished such Holder or underwriter sufficient copies of such prospectus (as so amended or supplemented) and of such prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. (b) By Selling Holders. To the extent permitted by law, each selling ------------------ Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, members, directors or officers or any person who controls such Holder within the meaning of the Securities Act or the -12- 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, partner, member or director, officer or controlling person of such other Holder may become subject under the Securities Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, partner, member, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, -------- ------- that the indemnity agreement contained in this is subsection 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further, that the -------- ------- total amounts payable in indemnity by a Holder under this Section 2.8(b) in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party ------ under this Section 2.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party; provided, however, that an indemnified party shall have the right to retain its - -------- ------- own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8. (d) Defect Eliminated in Final Prospectus. The foregoing ------------------------------------- indemnity agreements of the Company and Holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the registration statement in question becomes effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final ----- Prospectus"), such indemnity agreement shall not inure to the benefit of any - ---------- person if a copy of the Final Prospectus was furnished to the indemnified party and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. -13- (e) Contribution. In order to provide for just and equitable ------------ contribution to joint liability under the Securities Act in any case in which either (i) any Holder (including any of its partners, members, officers or directors) exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 2.8; then, and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such Holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Securities offered by and sold under the registration statement bears to the public offering price of all securities offered by and sold under such registration statement, and the Company and other selling Holders are responsible for the remaining portion; provided, however, -------- ------- that, in any such case, (A) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (f) Survival. The obligations of the Company and Holders under -------- this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration statement, and otherwise. 2.9 "Market Stand-Off" Agreement. Each Holder hereby agrees that it --------------------------- shall not, to the extent requested by the Company or an underwriter of securities of the Company, sell or otherwise transfer or dispose of any Registrable Securities or other shares of stock of the Company then owned by such Holder at the time the registration statement is filed or thereafter (other than to donees or partners of the Holder who agree to be similarly bound or shares of Company stock purchased in the public market) for that number of days so designated by the Company or the underwriter following the effective date of a registration statement of the Company filed under the Securities Act (not to exceed in any case 180 days after the effective date of the IPO registration statement, and 90 days after the effective date of any subsequent registration statement (except in the case of a partner of an Accel Entity who has been validly assigned Registrable Securities pursuant to Section 5.1(b) hereof, who shall be subject to the transfer and related restrictions in this Section only in connection with the Company's IPO registration); provided, however, that: -------- ------- (a) such agreement shall be applicable only to the first two such registration statements of the Company which covers securities to be sold on its behalf to the public in an underwritten offering but not to Registrable Securities sold pursuant to such registration statement; -14- (b) all executive officers and directors of the Company then holding Common Stock of the Company and all holders of 2.5 % or more of the Common Stock of the Company (determined on an as-converted basis) shall enter into similar agreements; and (c) if any party specified in subsection (b) above is released from any such agreement, then, after written notice of the same to the Company and after the Company has had a reasonable opportunity (after receipt of such notice) to obtain such agreement of such party, the holders of Registrable Series B Stock and Registrable Series C Stock shall be so released from their agreement under this Section. In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the shares subject to this Section and to impose stop transfer instructions with respect to the Registrable Securities and such other shares of stock of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 2.10 Rule 144 Reporting. With a view to making available the ------------------ benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, after such time as a public market exists for the Common Stock of the Company, the Company agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public; (b) Use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the 1934 Act (at any time after it has become subject to such reporting requirements); and (c) So long as a Holder owns any Registrable Securities, to furnish to the Holder forthwith upon request for a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the 1934 Act (at any time after it has become subject to the reporting requirements of the 1934 Act), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration (at any time after the Company has become subject to the reporting requirements of the 1934 Act). 2.11 Termination of the Company's Obligations. The Company shall have ---------------------------------------- no obligations pursuant to Sections 2.2, 2.3 and 2.4 with respect to any request or requests for registration made by any Holder on a date more than five (5) years after the closing date of the IPO. The Company shall further have no obligations pursuant to Sections 2.2, 2.3 and 2.4 with respect to any Registrable Securities, including any Registrable Series A Stock, Registrable Series B Stock or Registrable Series C Stock, proposed to be sold by a Holder that then holds -15- less than five percent (5%) of the outstanding shares of the Company if, after the closing date of the IPO, in the opinion of counsel to the Company all such Registrable Securities proposed to be sold by such Holder may be sold in a 90- day period without registration under the Securities Act pursuant to Rule 144 promulgated under the Securities Act. 2.12 Future Registration Rights. The Company shall have the right to -------------------------- grant registration rights which are pari passu with or subordinate to the registration rights granted hereunder without the consent of any party to this Agreement. 3. RIGHTS OF FIRST OFFER. --------------------- 3.1 General. The Company hereby grants each Investor and each ------- Founder the Rights of First Offer set forth in this Section 3. (a) Investor and Founder Right of First Offer. Each Investor ----------------------------------------- holding at least 53,333 shares of Series A Stock, at least 90,909 shares of Series B Stock or at least 147,232 shares of Series C Stock (or any permitted assignee of such Investor who holds such Series A Stock, Series B Stock or Series C Stock) (with the shares of Series B Stock and Series C Stock held by the Accel Entities or the SOFTBANK Entities, respectively, treated as held by a single Investor for purposes of this Section 3.1) (each such Investor or any permitted assignee thereof, an "Investor Rights Holder") and each Founder ---------------------- holding shares of Common Stock (or any permitted assignee of such Founder who holds such Common Stock) (each Investor Rights Holder and each such Founder or assignee thereof, are hereinafter referred to as a "Rights Holder"), has the ------------- right of first offer to purchase such Rights Holder's Pro Rata Share (as defined in Section 3.1(b) below), of all (or any part) of such Rights Holder's New Securities (as such terms are defined in Section 3.2 below) that the Company may from time to time issue after the date of this Agreement. (b) "Pro Rata Share" for purposes of this right of first -------------- offer is the ratio of (a) the number of shares of Series A Stock, Series B Stock, Series C Stock and Common Stock held by a Rights Holder and all shares of Common Stock issued in respect of such Series A Stock, Series B Stock and Series C Stock, to (b) a number of outstanding shares of Common Stock of the Company (calculated on a fully diluted basis assuming the exercise of outstanding stock options, warrants and conversion of all securities which are convertible or exercisable into Common Stock on the date immediately prior to such issuance). 3.2 New Securities Defined. "New Securities" shall mean any Common ---------------------- -------------- Stock or Peferred Stock of the Company, whether now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock; provided, however, -------- ------- than the term "new Securities" does not include: ---- --- ------- (i) shares or other securities of the Company's Common Stock (and/or related options or warrants) issued to employees, officers, directors, consultants, contractors, vendors, advisors, or other persons performing services for the Company (including, but not by way of limitation, distributors and sales representatives), and including any securities issuable upon exercise or conversion of any of the foregoing securities, pursuant to any stock -16- offering, plan, agreement, or arrangement approved by unanimous written consent of the Board of Directors or the vote of not less than a majority of the members of the Company's Board of Directors present and voting at a duly held meeting; provided that any issuance of such shares or other securities to William Lohse - -------- or any spouse, lineal descendant (whether natural or adopted) or antecedent, sibling, or any entity or person which is controlled by or under common control of William Lohse (a "Lohse Affiliate") shall require (for such shares not be ----- --------- considered Investor New Securities) approval by unanimous written consent of the Board of Directors or the vote of not less than a majority of the members of the Company's Board of Directors present and voting at a duly held meeting without counting the vote of William Lohse or any Lohse Affiliate; (ii) any shares of Series B Stock or Series C Stock issued under the Series B Agreement, the Series C Agreement or any warrant issued in connection with the Series C Agreement, respectively, as such agreements may be amended; (iii) any shares or other securities issuable upon conversion of or with respect to any then outstanding shares of Series A Stock, Series B Stock or Series C Stock of the Company (or any shares of Common Stock or other securities issuable upon conversion thereof, including as a Common Stock Event, as defined in subsection 6.5 of the Company's Amended and Restated Certificate of Incorporation); (iv) any shares or other securities issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding on the date of this Agreement, and any shares or securities issuable upon conversion of such shares or securities ("Warrant Securities"); ------------------ (v) any shares or other securities issued in connection with a Common Stock Event (as defined in subsection 6.5 of the Company's Amended and Restated Certificate of Incorporation); (vi) shares or other securities offered by the Company to the public pursuant to a registration statement filed under the Securities Act; (vii) shares or other securities issued to banks and other financial institutions or landlords in connection with the extension of credit to the Company (including loans, lines of credit, guarantees or other financing arrangements) or in connection with the lease of equipment or real property and in each case for other than equity financing purposes; provided -------- that such issuance has been approved by a majority of the Company's Board of Directors. (viii) shares or other securities issued pursuant to the acquisition or merger of another corporation or entity by the Company by consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in which the Company acquires, in a single transaction or Series of related transactions, all or substantially all of the assets of such other corporation or entity or fifty percent (50%) or more of the voting power of such other corporation or entity or fifty percent (50%) or more of the equity ownership of such other entity, or issued pursuant to the acquisition of technologies or products from a third party; or -17- (ix) any shares or other securities issued pursuant to approval by sixty percent (60%) of the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Stock voting collectively as a single class, and a majority of shares of Common Stock held by the Founders. 3.3 Procedures. In the event that the Company proposes to undertake ---------- an issuance of New Securities it shall give to each Rights Holder written notice of its intention to issue such New Securities (the "Notice"), describing the ------ type of New Securities and the price and the general terms upon which the Company proposes to issue such New Securities. Each Rights Holder receiving the Notice shall have ten (10) days from the date of mailing of any such Notice to agree in writing to purchase such Rights Holder's Pro Rata Share of such New Securities for the price and upon the general terms specified in the Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed such Rights Holder's Pro Rata Share. If any Rights Holder who has received the Notice fails to agree in writing within such ten (10) day period to purchase such Rights Holder's full Pro Rata Share of an offering of New Securities (each, a "Nonpurchasing Holder"), then -------------------- such Nonpurchasing Holder shall forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that it did not so agree to purchase. 3.4 Investor Overallotment Right. In the case of any Investor Rights ---------------------------- Holder who is a Nonpurchasing Holder, the Company shall promptly give each other Investor Rights Holder who has timely agreed to purchase its full Pro Rata Share of such offering of New Securities (a "Purchasing Holder") written notice of the ----------------- failure of any such Investor Nonpurchasing Holder to purchase such Investor Nonpurchasing Rights Holder's full Pro Rata Share of such offering of New Securities (the "Overallotment Notice"). Each Purchasing Holder shall have a -------------------- right of overallotment such that such Purchasing Holder may agree to purchase up to one-half of the Investor Nonpurchasing Holders' unpurchased Pro Rata Share of such offering on a pro rata basis according to the relative Pro Rata Share of the Purchasing Rights Holders, at any time within five (5) days after receiving the Overallotment Notice. 3.5 Failure to Exercise. In the event that the Rights Holders fail ------------------- to exercise in full the right of first offer within such ten (10) day period and such five (5) day overallotment period, then the Company shall have 120 days thereafter to sell the New Securities with respect to which the Rights Holders' rights of first offer hereunder were not exercised, at a price and upon general terms not materially more favorable to the purchasers thereof than specified in the Company's Notice to the Rights Holders. In the event that the Company has not issued and sold the New Securities within such 120 day period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to the Rights Holders pursuant to this Section 3. 3.6 Termination of Investors' Right of First Offer. The Rights ---------------------------------------------- Holder's right of first offer in this Section 3 shall terminate (i) on an IPO, or (ii) upon (a) the acquisition of all or substantially all the assets of the Company or (b) an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company's outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) or more of the voting power of the corporation or other entity surviving such transaction. -18- 4. COVENANTS OF THE COMPANY. ------------------------ 4.1 Proprietary Information and Inventions Agreement. The Company ------------------------------------------------ shall require all employees with access to material proprietary information of the Company, to execute and deliver a Proprietary Information and Inventions Agreement in the form attached to the Series C Agreement. 4.2 Stock Vesting. Unless otherwise approved by the Board of ------------- Directors, (a) all stock options or other stock equivalents of the Company issued after the date of this Agreement to employees, directors, consultants and other service providers, as equity compensation, shall be subject to vesting, as follows: (i) twenty-five percent (25%) of such stock shall vest at the end of the first year following the earlier of the date of issuance or such person's services commencement date with the Company, and (ii) the balance will vest at a rate no faster than in thirty-six (36) monthly installments thereafter, and (b) with respect to all shares of stock issued after the date of this Agreement which are purchased by any employees, directors or consultants, the Company's repurchase option shall provide the Company with the right to repurchase such shares (to the extent unvested) upon such person's termination of employment or service with the Company, all as permitted under applicable securities laws and other laws. 4.3 Directors and Officers Insurance. The Company will use all good -------------------------------- faith efforts to obtain a directors and officers (D&O) insurance policy, to the extent commercially available, with coverage as determined by the Board of Directors of the Company. 4.4 Loan Repayment. Without the approval of a majority of the Board -------------- of Directors of the Company (without counting the vote of William Lohse or any Lohse Affiliate), the Company shall not repay the currently outstanding loan made to the Company by William Lohse and evidenced by a promissory note dated June 30, 1998, earlier than the date that payment is required under the terms of Section 2 of the Lohse Note, or otherwise amend any term of the Lohse Note. 4.5 Lohse Transactions. Without the approval of a majority of the ------------------ Board of Directors of the Company (without counting the vote of William Lohse or any Lohse Affiliate), the Company shall not enter into any transaction (which could reasonably be expected to have a material effect on the Company) with, amend any material agreement with or issue any stock or securities to William Lohse or any Lohse Affiliate (except an issuance of securities to William Lohse in connection with the exercise of William Lohse's rights of first offer under Section 3 of this Agreement or the exercise of his rights or first refusal or co-sale under that certain Second Amended and Restated Right of First Refusal and Co-Sale Agreement dated as of the date hereof by and among the Company, the Investors and the Founders). 4.6 Reservation of Series C Stock. The Company shall reserve 200,000 ----------------------------- shares of Series C Stock for issuance to banks and other financial institutions or landlords in connection with the extension of credit to the Company (including loans, lines of credit, guarantees or other financing arrangements) or in connection with the lease of equipment or real property and in each case for other than equity financing purposes. -19- 4.7 Qualified Small Business Stock Status. The Company agrees to ------------------------------------- submit to the Internal Revenue Service (and to provide a copy of such reports to the Investors) any reports which it knows to be required under Section 1202(d)(1)(C) of the Code and any related Treasury Regulations; provided that the failure to timely submit such reports shall impose no liability on the Company. In addition, the Company agrees to undertake reasonable efforts to, within ten (10) days after any Investor has delivered to the Company a written request therefor, deliver to such Investor a written statement informing the Investor whether, in the Company's good-faith judgment and to its knowledge, such Investor's interest in the Company constitutes "qualified small business stock" as defined in Section 1202(c) of the Code, and the accuracy and correctness of such determination shall be without liability to the Company. The Company's obligation to furnish a written statement pursuant to this Section 2.7 shall continue notwithstanding the fact that a class of the Company's stock may be traded on an established securities market. 4.8 Termination of Covenants. All covenants of the Company contained ------------------------ in this Section 4 shall expire and terminate as to each Investor and each Founder upon the earlier of: (i) the effective date of the registration statement relating to the IPO, or (ii) upon (a) the acquisition of all or substantially all of the assets of the Company, or (b) an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company's outstanding voting securities immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the corporation or other entity surviving such transaction. 5. ASSIGNMENT AND AMENDMENT. ------------------------ 5.1 Assignment. Notwithstanding anything herein to the contrary: ---------- (a) Information and Inspection Rights. The information and --------------------------------- inspection rights set forth in Section 1 may be assigned only to (a) a party who acquires at least 100,000 shares of Series A Stock, and/or 227,272 shares of Series B Stock and/or 147,232 shares of Series C Stock issued under the Series C Agreement (with the shares of Series B Stock and Series C Stock held by the Accel Entities treated as held by a single Investor for purposes of this Section 5.1(a)) and/or an equivalent number (on an as-converted basis) of Registrable Securities issued upon conversion thereof or any combination thereof (all adjusted to reflect stock splits and the like), or (b) if the Investor is a corporation, partnership, limited partnership, limited liability company or other entity, a fund or other entity affiliated with the Investor (except to Microsoft Corporation or any of its affiliates (as such term is defined under the Securities Act) or to any direct competitor of the Company which shall not be entitled to be assigned or otherwise receive any information or inspection rights under Section 1 hereof, and any assignment or transfer of such rights in violation of this Section 5.1(a) to such parties shall be void and of no effect); provided, however that no party may be assigned any of the foregoing -------- ------- rights unless the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and provided further that any such assignee shall receive such -------- ------- assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 5. -20- (b) Registration Rights. The registration rights of a Holder ------------------- under Section 2 hereof may be assigned only (a) to a party who acquires at least 100,000 shares of Series A or Series B Stock, and/or 500,000 shares of Series C Stock, or all of a Holder's Registrable Securities, or (b) if the Investor is a corporation, partnership, limited partnership, limited liability company or other entity, to a fund or other entity affiliated with the Investor, or in the case of a fund, to the partners, retired partners, members or retired members of such Holder; provided, however that any number of shares of Registrable -------- ------- Securities may be transferred to a Holder's stockholders or partners in connection with pro rata distributions, or to a Holders' parent, sibling or spouse, or to a Holder's estate or (c) in connection with the Sale Agreement (as defined in Section 7.3). Any transfer or assignment of registration rights under this Section 5.1(b) shall only be effective if (i) the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and (ii) that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 5. (c) Rights of First Offer. The rights of first offer of a Rights --------------------- Holder under Section 3 hereof may be assigned only (a) in the case of an Investor to a party who acquires at least 100,000 shares of Series A Stock issued under the Series A Agreement and/or 227,272 shares of Series B Stock issued under the Series B Agreement and/or 339,000 shares of Series C Stock issued under the Series C Agreement (with the shares of Series B Stock and Series C Stock held by the Accel Entities treated as held by a single Investor for purposes of this Section 5.1(c)) and/or an equivalent number (on an as- converted basis) of Registrable Securities issued upon conversion thereof or any combination thereof (all adjusted to reflect stock splits and the like), or (b) if the Investor is a corporation, partnership, limited partnership, limited liability company or other entity, to a fund, or other entity affiliated with such Investor which acquires at least 50% of the shares initially issued to the Investor, or in the case of a fund which is an Accel Entity, to any partner thereof, or (c) in the case of Founder to a party who acquires at least 250,000 shares of Common Stock from such Founder; provided, however that no party may be -------- ------- assigned any of the foregoing rights unless the Company is given written notice by the assigning party at the time of such assignment stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and provided further that any ---------------- such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 5. (d) SOFTBANK Transfers. The SOFTBANK Entities, as an Investor, ------------------ may assign, in whole or in part, its rights and delegate its obligations hereunder (including, but not limited to, those in Sections 1, 2 and 3) to any of the entities listed on Exhibit C attached hereto; provided that such --------- transferee is not Microsoft Corporation or a direct competitor of the Company nor does such transferee work for Microsoft Corporation or a direct competitor of the Company. Any such assignee shall, as a condition to acquiring such shares, agree to be bound by the provisions of this Agreement pursuant to an agreement in form and substance acceptable to the Company. 5.2 Amendment of Rights. Subject to Section 2.12 and 5.3, any ------------------- provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of -21- the Company and sixty percent (60%) of the shares of the then outstanding Registrable Series A Stock, Registrable Series B Stock and Registrable Series C Stock voting collectively as a separate class, and a majority of the shares of the then outstanding Common Stock held by any two or more Founders. Any amendment or waiver effected in accordance with this Section 5.2 shall be binding upon each Investor, each Founder, each Holder, each permitted successor or assignee of such Investor or Holder and the Company. 5.3 New Investors. Notwithstanding anything herein to the contrary, ------------- if pursuant to Section 2.2 of the Series C Agreement, additional parties may purchase shares of Series C Stock as "New Investors" thereunder, then each such New Investor shall become a party to this Agreement as an "Investor" hereunder, without the need any consent, approval or signature of any Investor when such New Investor has both: (i) purchased shares of Series C Stock under the Series C Agreement and paid the Company all consideration payable for such shares and (ii) executed one or more counterpart signature pages to this Agreement, the Amended and Restated Right of First Refusal and Co-Sale Agreement and the Series C Agreement as an "Investor" with the Company's consent. 6. BOARD OF DIRECTORS. ------------------ 6.1 Board Size. The authorized number of directors constituting the ---------- Board of Directors of the Company (the "Board") shall be five (5); provided that ----- -------- in the event of a Lohse Termination or Lohse Resignation (as defined below) the authorized number of directors constituting the Board shall then be seven (7). The Company shall not alter the authorized number of directors in its certificate of incorporation, Bylaws or otherwise, without first obtaining the written consent, or affirmative vote, of the holders of at least a majority of the then outstanding shares of the Series B Stock, Series C Stock and Common Stock, consenting or voting (as the case may be), with the Series B Stock and Series C Stock voting as a separate class and the Common Stock voting as a separate class. Investors and the Founders agree that they shall during the term of this Agreement each vote all shares of Common Stock and Preferred Stock and other capital stock of the Company, now or hereafter directly or indirectly owned (of record or beneficially) by such holders, at all meetings of the stockholders of the Company, or by written consent in lieu thereof, to carry out the intent of this Section 6.1 (including amending the Amended and Restated Certificate of Incorporation of the Company to reflect the authorized number of directors constituting the Board called for by this Section). "Lohse ----- Resignation" means the voluntary resignation of William Lohse as the Company's - ----------- Chief Executive Officer in a writing delivered to the Board. "Lohse Termination" ----------------- means (i) the termination, removal or other failure of William Lohse to serve as the Company's Chief Executive Officer for any reason other than as a result of a Lohse Resignation, or (ii) a Constructive Termination. "Constructive ------------ Termination" shall mean the effective date of a written notice sent to the - ----------- Company by William Lohse stating his good faith determination of the occurrence of one of the following events (without the express written agreement of William Lohse): (a) a material reduction in William Lohse's salary, bonus or other benefits; (b) a material change in William Lohse's responsibilities or duties; or (c) a requirement that William Lohse report to the Company's offices to perform services as the Chief Executive Officer of the Company. -22- 6.2 Election and Removal. -------------------- (a) Election. The Investors and the Founders agree that they -------- shall during the term of this Agreement each vote all shares of Common Stock and Preferred Stock and other capital stock of the Company, now or hereafter directly or indirectly owned (of record or beneficially) by such holders, at all meetings of the stockholders of the Company, or by written consent in lieu thereof, to: (1) So long as William Lohse shall be the Company's Chief Executive Officer, Directors Elected By Stockholders. Cause at all times --------------------------------- that the following nominees shall be elected to the Board: (A) two nominees designated by a majority of the shares Common Stock held by the Founders (the "Common Stock Directors") one of whom shall be Lohse in the event Lohse is the ---------------------- Chief Executive Officer, (B) one nominee designated by holders of a majority of the outstanding shares of Series B Stock (the "Series B Director"); and (C) one ----------------- nominee mutually agreed upon by all of the Common Stock Directors, the Series B Director and the Series C Director (as defined below) (the "Outside Director") ---------------- and (D) one nominee mutually agreed upon by the holders of a majority of the outstanding shares of Series C Stock and by both of the Common Stock Directors (the "Series C Director"); or ----------------- (2) In the event of a Lohse Termination or Lohse Resignation, Directors Elected By Stockholders. Cause at all times --------------------------------- that the following nominees shall be elected to the Board: (A) two Common Stock Directors, (B) one nominee whom shall be the Chief Executive Officer of the Company chosen by the Board (the "CEO Director"), (C) the Series B Director; (D) ------------ the Outside Director; (E) the Series C Director; and (F) one nominee mutually agreed upon by the holders of a majority of the outstanding shares of Series C Stock, a majority of the outstanding shares of Series B Stock and by both of the Common Stock Directors (the "Preferred Director"). ------------------ (b) Initial Directors. The initial Common Stock Directors shall ----------------- be William Lohse (the Company's Chief Executive Officer) and John Thomsen, the initial Series B Director shall be Bud Colligan and the initial Series C Director shall be Bill Burnham. (c) Vacancy. If there shall be any vacancy in the office of a ------- director who was designated by the holders of any class or Series of shares or by the Common Stock Directors, the Series B Director and the Series C Director as described above, then a successor to hold office for the unexpired term of such director shall be designated in accordance with this Section 6.2. (d) Removal. Any director who shall have been elected to the ------- Board may be removed during his or her term of office, either with or without cause, by, and only by, the affirmative vote of shares representing a majority of the voting power of all the outstanding shares held by the holders who were entitled to elect such person; provided that in the case of an Outside Director, such director may be removed (i) by vote of the majority of the shares held by the Founders, the Series B Stock held by the Investors and the Series C Stock held by the Investors. The Prior Investors who hold Series B Stock, the Investors who hold Series C Stock -23- and the Founders agree to vote all shares of Common Stock and Preferred Stock of the Company held by them in favor of the removal of the Outside Director so designated for removal, and any vacancy created by such removal may be filled only in the manner provided in subsection 6.2(a)(1) above. (e) Notice; Cumulative Voting. The Company shall promptly give ------------------------- each of the Investors and the Founders written notice of any change in composition of the Board and of any proposal to remove or elect a new director. In any election of directors pursuant to this Section 6, the Investors and Founders agree to vote their shares in a manner sufficient to elect to the Board the individuals to be elected thereto as provided in this Section 6, utilizing cumulative voting, if applicable and to the extent necessary to do so. (f) Termination. The provisions of this Section 6 shall cease to ----------- be of any further force or effect upon the earlier to occur of: (i) the first date on which the total number of outstanding shares of Series B Stock is less than 2,000,000 shares (such number of shares being subject to proportional adjustment to reflect combination or subdivisions of such Series B Stock or dividends declared in shares of such stock) with respect to the Series B Director and the Outside Director; and the total number of outstanding shares of Series C Stock is less than 2,000,000 shares (such number of shares being subject to proportional adjustment to reflect combination or subdivisions of such Series C Stock or dividends declared in shares of such stock) with respect to the Series C Director; (ii) upon the merger or consolidation of the Company with or into any other corporation or corporations if such consolidation or merger is approved by the stockholders of the Company in compliance with applicable law and the Certificate of Incorporation and Bylaws of the Company; (iii) a sale of all or substantially all of the Company's assets; or (iv) the IPO. (g) Further Assurances. Each of the Investors, and the Founders ------------------ and the Company agree not to vote any shares of Company stock, or to take any other actions, that would in any manner defeat, impair, be inconsistent with or adversely affect the stated intentions of the parties under Section 6 of this Agreement. (h) Transferees; Legends on Certificates. ------------------------------------ (1) Effect on Transferees. Each and every transferee or --------------------- assignee of any shares of capital stock of the Company from any Investor and Founder shall be bound by and subject to the terms and conditions of this Agreement that are applicable to such transferee's transferor or assignor, and the Company shall require, as a condition precedent to the transfer of any shares of capital stock of the Company subject to this Agreement, that the transferee agrees in writing to be bound by, and subject to, all the terms and conditions of this Agreement. (2) Legend. The Investors and the Founders agree that all ------ Company share certificates now or hereafter held by them that represent shares of capital stock of the Company subject to this Agreement will be stamped or otherwise imprinted with a legend to read as follows: -24- "THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AGREEMENTS AND RESTRICTIONS WITH REGARD TO THE VOTING OF SUCH SHARES AND THEIR TRANSFER, AS PROVIDED IN THE PROVISIONS OF A SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION." (3) Enforcement of Agreement. Each of the Investors and the ------------------------ Founders, and the Company acknowledge and agree that any breach by any of them of this Agreement shall cause the other parties irreparable harm which may not be adequately compensable by money damages. Accordingly, in the event of a breach or threatened breach by a party hereof of any provision of this Agreement, the Company and each other Investor and/or Founder (as the case may be) shall each be entitled to the remedies of specific performance, injunction or other preliminary or equitable relief, including the right to compel any such breaching Investor and/or Founder (as the case may be), as appropriate, to vote such party's shares of capital stock of the Company in accordance with the provisions of this Agreement, in addition to such other rights remedies as may be available to the Company or any Investor and/or Founder (as the case may be) for any such breach or threatened breach, including but not limited to the recovery of money damages. 7. AMENDMENT AND RESTATEMENT OF CERTAIN FOUNDERS' AGREEMENTS; SALE OF ------------------------------------------------------------------ FOUNDERS'STOCK. -------------- 7.1 Amendment of the Agreement of Merger. Pursuant to Section 7.4.8 ------------------------------------ of that certain Agreement of Merger (the "Merger Agreement") dated as of ---------------- February 5, 1998 by and among Netweb, Inc. (a predecessor to the Company), Thomsen Enscore Computer Solutions, Inc. and each of John T. Thomsen, Erica Enscore (now known as Erica Thomsen) and William Lohse, the Company, John T. Thomsen, Erica Thomsen (formerly known as Erica Enscore) and William Lohse each agree as follows: (a) Section 4.2.6 of the Merger Agreement was terminated and stricken from the Merger Agreement, and from the date of the Prior Rights Agreement was of no further force or effect, and no party under the Merger Agreement has any right, obligation or liability under such Section 4.2.6. (b) As long as William Lohse remains a director or officer of the Company, and John Thomsen remains an employee of the Company and Mr. Thomsen beneficially owns (as determined under Section 13 of the 1934 Act, including without limitation beneficial ownership of shares held by minor children and trusts for the benefit of Mr. Thomsen's immediate family) an aggregate of at least 1,000,000 shares (including any of the restricted shares) of the Company's Common Stock: (a) William Lohse agrees to use his best efforts (including without limitation voting shares of Common Stock) to cause John Thomsen to be nominated and elected to the Board of the Company; and (b) Erica Thomsen may attend all meetings of the Company's Board in a nonvoting observer capacity; provided, however, that such observer shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information provided to such observer; and provided further, that the Company may exclude such observer from any meeting or portion thereof at which attendance by such -25- observer reasonably could be expected to adversely affect the attorney-client privilege between the Company and its counsel. The Company shall pay all expenses incurred by either John Thomsen or Erica Thomsen in attending such meetings of the board or any committee thereof. 7.2 Termination of the Stock Rights Agreement. Pursuant to the terms ----------------------------------------- of the Stock Rights and Restriction Agreement, dated as of February 5, 1999 , the Company, John T. Thomsen, Erica Thomsen and William Lohse each agreed that as of the date of the Prior Rights Agreement the Stock Rights Agreement was terminated in its entirety, and was from such date of no further force or effect, and no party under the Stock Rights Agreement has any right, obligation or liability thereunder. 7.3 Sale of Outstanding Shares of Capital Stock to the Company. No ---------------------------------------------------------- later than the earlier of (i) ninety (90) days after the Closing and (ii) a Change of Control (as defined below), the Founders and/or other stockholders of the Company shall enter into an agreement (the "Sale Agreement") to sell no less -------------- than 2,015,000, and up to 2,465,000 shares of the Company's capital stock to the SOFTBANK Entities for a price of $3.396 per share (as adjusted for stock splits, reverse stock splits, recapitalizations, stock dividends and the like). If such sale has not been consummated for any reason other than a failure to consummate such transaction by the SOFTBANK Entities, by the earlier of (i) thirty (30) days from the date of such Sale Agreement, and (ii) the Company's IPO, the number of shares of Common Stock issuable upon conversion of the Series C Stock shall be adjusted as set forth in Article VI, Section 6.4(e) of the Company's Amended and Restated Certificate of Incorporation. For purposes of this Agreement Change of Control shall mean: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company; or (iii) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger. The parties to this Agreement hereby agree that, the execution of this Agreement, fully satisfies the requirement set forth in Section 9 of the Restated Certificate of Incorporation to obtain consent of the Preferred Stockholders for a repurchase of shares. 8. GENERAL PROVISIONS. ------------------ 8.1 Notices. Any notice, request or other communication required or ------- permitted hereunder shall be in writing and shall be sent or delivered by (i) pre-paid registered/certified first class U.S. mail, (ii) hand, (iii) facsimile, or (iv) private nationally recognized express courier service (such as Federal Express or DHL), as follows: (a) if to an Investor, at such Investor's respective address as set forth on Exhibit A hereto. --------- (b) if to the Company, at SmartAge Corporation, 3450 California Street, San Francisco, California, 94118 -26- (c) if to a Founder, at such Founder's address as set forth on Exhibit B hereto. Any party hereto (and such party's permitted assigns) may by - --------- notice so given change its address for future notices hereunder. Notices delivered by hand or facsimile, shall be deemed given on the day on which such notice is delivered. Notices mailed or sent by courier as provided herein shall be deemed given on the third (3d) business day following the date so mailed or sent, or the date of actual receipt by a party, whichever is earlier. 8.2 Entire Agreement. This Agreement, together with all the Exhibits ---------------- hereto, constitutes and contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes the Prior Rights Agreement and any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof. This Agreement will amend and restate the Prior Rights Agreement in its entirety to read as set forth herein, when it has been duly executed by parties having the right to so amend and restate the Prior Rights Agreement. 8.3 Governing Law. This Agreement shall be governed by and construed ------------- exclusively in accordance with the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California, excluding that body of law relating to conflict of laws and choice of law. 8.4 Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, then such provision(s) shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms. 8.5 Third Parties. Nothing in this Agreement, express or implied, is ------------- intended to confer upon any person, other than the parties hereto and their successors and assigns, any rights or remedies under or by reason of this Agreement. 8.6 Successors and Assigns. Subject to the provisions of Section 5, ---------------------- the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the successors and permitted assigns of the parties hereto. 8.7 Captions. The captions to sections of this Agreement have been -------- inserted for identification and reference purposes only and shall not be used to construe or interpret this Agreement. 8.8 Counterparts. 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 instrument. 8.9 Costs And Attorneys' Fees. In the event that any action, suit or ------------------------- other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party's costs and attorneys' fees incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom. -27- 8.10 Adjustments for Stock Splits, Etc. Wherever in this Agreement --------------------------------- there is a reference to a specific number of shares of Common Stock or Preferred Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such class or Series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or Series of stock by such subdivision, combination or stock dividend. 8.11 Aggregation of Stock. All shares held or acquired by affiliated -------------------- entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -28- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. THE COMPANY: ----------- SMARTAGE, CORP. By: /s/ William Lohse ---------------------------------- Title:_______________________________ INVESTORS: --------- SOFTBANK Capital Partners LP By SOFTBANK Capital Partners LLC Its General Partner By:__________________________________ Title:_______________________________ SOFTBANK Capital Advisors Fund LP By SOFTBANK Capital Partners LLC Its General Partner By:__________________________________ Title:_______________________________ Accel VI L.P. By: Accel VI Associates L.L.C. Its General Partner By:__________________________________ Managing Member Accel Internet Fund II L.P. By: Accel Internet Fund II Associates L.L.C. Its General Partner By:__________________________________ Managing Member [SIGNATURE PAGE TO SMARTAGE CORP. SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT] -29- EX-4.3 7 STOCK PURCHASE WARRANT EXHIBIT 4.3 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 1 STOCK PURCHASE WARRANT THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. Void after __________, 2002 NETWEB CORPORATION WARRANT TO PURCHASE SHARES OF SERIES A PREFERRED STOCK ------------------------------------------------------ This Warrant is issued to Lycos, Inc. ("Holder") by SmartAge Corp. ------ (formerly known as Netweb Corporation), a Delaware corporation (the "Company"), ------- pursuant to the terms of that Agreement (the "Agreement") dated as of July 20, --------- 1998, and amended by the Amendment No. 1 dated March 23, 1999. 1. Purchase of Shares. Subject to the terms and conditions hereinafter ------------------ set forth and set forth in the Agreement, Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify Holder hereof in writing), to purchase from the Company up to the number of shares of Series A Preferred Stock of the Company ("Series A -------- Preferred") described in Section 2 below. The shares of Series A Preferred (or, - --------- if the Series A Preferred has converted into Common Stock, then Common Stock) issuable pursuant to this Warrant (the "Shares") shall also be subject to ------ adjustment as provided herein. 2. Number of Shares. The maximum aggregate number of Shares that can be ---------------- acquired upon exercise of the Warrant is 6.0% of the number of shares of common stock and preferred stock of the Company that are outstanding immediately after the final closing of the Company's Series A Preferred Stock equity financing resulting in proceeds to the Company of at least $1.0 million (the "Financing") --------- or 1,092,159 (such number of shares referred to as the "Outstanding Shares"). ------------------ During the term of this Warrant, the Warrant will be exercisable to acquire the following number of Shares on and after the following times: A. One and one half percent (1.5%) of the Outstanding Shares on that date on which all of the following events have occurred: (i) Lycos/Tripod Clicks (as defined in the 4 Agreement) has been integrated into the registration process for HomePage Studio (as defined in the Agreement) as a Default Option (as defined in the Agreement) in a mutually agreeable manner; (ii) such integrated registration process has been made publicly available through www.tripod.com, and (iii) such integrated process has -------------- performed in a commercially reasonable manner for a minimum of six (6) consecutive days. B. One and one half percent (1.5%) of the Outstanding Shares on that date on which all of the following events have occurred: (i) Lycos/Tripod Clicks (as defined in the Agreement) has been integrated into the registration process for the home page building services available through www.angelfire.com as a Default Option (as defined in ----------------- the Agreement) in a mutually agreeable manner; (ii) such integrated registration process has been made publicly available through www.angelfire.com; and (iii) such integrated process has performed ----------------- in a commercially reasonable manner for a minimum of six (6) consecutive days. C. Three percent (3%) of the Outstanding Shares as follows: (i) the first one percent (1%) of the Outstanding Shares in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts (as defined in the Agreement), for a total of ***; (ii) the next one percent (1%) of the Outstanding Shares in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts (as defined in the Agreement), for a total of ***; (iii) the remaining one percent (1%) of the Outstanding Shares in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts (as defined in the Agreement), for total of ***. 3. Purchase Price. The exercise price of the Warrant will be $0.9375 per -------------- share of Series A Preferred (such price, as adjusted pursuant to Section 8(a), is herein referred to as the "Exercise Price"). -------------- 4. Exercise Period. The Warrant is exercisable from the first --------------- anniversary of the date it is issued until four years from the date of issuance. In addition, any unexercised portion of the Warrant will expire upon termination of the Agreement pursuant to Section 14 of the Agreement. 5. Method of Exercise. While this Warrant remains outstanding and ------------------ exercisable in accordance with Section 3 above, the Holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by: (a) the surrender of the Warrant, together with a duly executed copy of a subscription in from and substance satisfactory to the Company, to the Secretary of the Company at its principal offices; and (b) the payment to the Company (i) by check or wire transfer of funds, of an amount equal to the aggregate Exercise Price for the number of Shares being purchased, or (ii) ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 5 at the request of the Holder in lieu of cash exercising this Warrant, Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of shares of Series A Preferred computed using the following formula: Y(A-B) ------ X = A Where X -- The number of Shares to be issued to Holder. Y -- The number of Shares being exercised by the Holder. A -- The fair market value of one share of the Company's Series A Preferred (or, if Series A Preferred has converted into Common Stock, then Common Stock). B -- The Exercise Price (as adjusted to the date of such Calculations). For purposes of this Section, the fair market value of a share (of Common Stock or Series A Preferred) shall mean the average of the closing bid and asked prices of the share as quoted in the over-the-counter market in which the shares are traded or the closing price quoted on any exchange or national market system on which the shares are listed, whichever is applicable, as published in The --- Wall Street Journal for the ten trading days prior to the date of determination - ------------------- of fair market value (or such shorter period of time during which such stock was traded over-the-counter or on such exchange). If the shares are not traded on the over-the-counter market or on an exchange, the fair market value shall be the price per share that the Company could obtain from a willing buyer for shares of the class or series of shares for which the Warrant is then exercisable, as determined by an independent third party accounting firm mutually acceptable to the Company and the Holder. . 6. Certificates for Shares. Upon the exercise of the purchase rights ----------------------- evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within seven (7) days of the delivery of the subscription notice and the Exercise Price. 7. Issuance of Shares. The Company covenants that the Shares, when issued ------------------ pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. 8. Adjustment of Exercise Price and Number of Shares. The number of and ------------------------------------------------- kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the Company ---------------------------------------------- shall at any time prior to the expiration of this Warrant subdivide its Series A Preferred, by split-up or otherwise, or combine its Series A Preferred, or issue additional shares of its Series A Preferred or Series A Preferred as a dividend with respect to any shares of its Series A 6 Preferred, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed upon the making of such dividend. (b) Reclassification, Reorganization and Consolidation. In case of -------------------------------------------------- any reclassification, capital reorganization, or change in the Series A Preferred (other than as a result of a subdivision, combination, or stock dividend provided for above), then, as a condition of such reclassification, reorganization, or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to Holder, so that Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Series A Preferred as were purchasable by Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same. (c) Notice of Adjustment. When any adjustment is required to be made -------------------- in the number or kind of shares purchasable upon exercise of the Warrant, or in the Warrant Price, the Company shall promptly notify the holder of such event and of the number of shares of Common Stock or other securities or property thereafter purchasable upon exercise of this Warrant. 9. No Fractional Shares of Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Warrant Price then in effect. 10. No Shareholder Rights. Prior to exercise of this Warrant, Holder --------------------- shall not be entitled to any rights of a shareholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of shareholder meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. 11. Transferability. The Warrant is not transferable (except in --------------- connection with a sale of all or substantially all of Lycos' assets or a merger or similar transaction in which Lycos' shareholders do not hold at least 50% of the voting power and equity of the surviving corporation, as long as such purchaser of assets or the successor entity is not a competitor of the Company as determined in good faith by the Company). 7 12. Representations by Holder. Holder hereby represents and warrants to ------------------------- the Company that: (a) This Warrant has been, and upon exercise of this Warrant the Shares shall be, acquired by Holder for investment for Holder's own account and not with a view to the sale or other distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Act"), and Holder has no present --- intention of selling or otherwise disposing of all or any portion of this Warrant or the Shares. (b) Holder has acquired this Warrant for Holder's own account and no one else has any beneficial ownership in this Warrant. (c) Holder understands that this Warrant, and the Shares issuable upon exercise hereof, are characterized as "restricted securities" under the Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Act and applicable regulations thereunder such securities may be resold without registration under the Act only in certain limited circumstances. Holder understands that no public market now exists for this Warrant, or the Shares issuable upon exercise hereof, and that it is uncertain whether a public market shall ever exist for such securities. (d) Rule 144 promulgated under the Act, which provides for certain limited, routine sales of unregistered securities, is not presently available with respect to this Warrant, and the Company is under no obligation to furnish the information that might be necessary to enable Holder to sell any portion of this Warrant under Rule 144. (e) Holder has had access to information regarding the Company, its present and prospective business, assets, liabilities and financial condition that Holder considers important to making the decision to invest in this Warrant and the Shares. Holder has had the opportunity to ask questions of and receive answers from the Company's representatives concerning this investment and to obtain any and all documents requested in order to supplement or verify any of the information supplied. (f) Holder recognizes that the investment in this Warrant and the Shares involves special and substantial risks. Holder recognizes (1) the highly speculative nature of the investment, (2) the financial hazards involved, (3) the lack of liquidity of this Warrant and the Shares and the restrictions upon transferability thereof, and (4) the tax consequences of investment in this Warrant and the Shares, among other matters. (g) Holder is capable of evaluating the merits and risks of an investment in this Warrant and the Shares and is financially capable of bearing a total loss of this investment. (h) Holder either (1) has a preexisting personal or business relationship with the Company or its principals or (2) by reason of Holder's business or financial experience, has the capacity to protect Holder's own interests in connection with this transaction. (1) The offer and sale of this Warrant and the Shares was not accomplished by the publication of any advertisement. 8 13. Compliance With Securities Act; Disposition of Shares. ----------------------------------------------------- (a) Legends. Any certificate for Shares issued upon exercise hereof ------- shall be imprinted with the legends set forth below: (1) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES MAY BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (2) Any legend required by the laws of the State of California or Delaware. The legend set forth in paragraph (1) above shall be removed by the Company from any certificate evidencing the Shares upon delivery to the Company of an opinion by counsel, reasonably satisfactory to the Company, that a registration statement under the Act is at that time in effect with respect to the legended security or that such security can be freely transferred in a public sale without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Shares. (b) Further Limitations on Disposition. Without in any way limiting ---------------------------------- the other representations of Holder set forth herein, Holder further agrees not to make any disposition of all or any portion of the Shares unless and until: (1) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (2) (i) Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) Holder shall have furnished the Company, at the expense of Holder or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition shall not require registration of such securities under the Act. (3) Notwithstanding the provisions of paragraphs (1) and (2) above, no such registration statement or opinion of counsel shall be required: (i) for any routine (as reasonably determined by the Company) transfer of any of the Shares in compliance with SEC Rule 144 or Rule 144A, or (ii) for any transfer of the Shares by Holder if a partnership or a corporation to (A) a partner of such partnership or shareholder of such corporation, or (B) the 9 estate of any such partner or shareholder; provided, that in each of the -------- foregoing cases the transferee agrees in writing to be subject to the terms of this Section. 14. Lock-Up Agreement. Holder agrees that it shall not, to the extent ----------------- requested by the Company or an underwriter of securities of the Company, sell or otherwise transfer or dispose of the Warrant or any Shares or other shares of stock of the Company then owned by such Holder at the time the registration statement is filed or thereafter for that number of days so designated by the Company or the underwriter following the effective date of a registration statement of the Company filed under the Securities Act (not to exceed in any case 180 days after the effective date of such registration statement), provided, however, that such agreement shall be applicable only to the first two such registration statements of the Company which covers securities to be sold on its behalf to the public in an underwritten offering. The Company shall have the right to place restrictive legends on the certificates representing the Shares subject to this Section and to impose stop transfer instructions with respect to the Shares and such other shares of stock of Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 15. Registration Rights. Commencing 45 days after the Company becomes ------------------- eligible to use the Form S-3, and as long as the Shares cannot be publicly sold pursuant to Rule 144 without volume limitations (or some other applicable exemption), Holder will have the same registration rights, pari passu with other "Holders" of "Registrable Securities," with respect to Form S-3 registrations under Section 2.3 (which addresses Form S-3 registrations) and Section 2.4 (to the extent it applies to Form S-3 registrations) of the Investors' Rights Agreement dated as of July __, 1998 by and among the Company and certain holders of the Company's Series A Preferred, among other parties (the "Investors Rights Agreement"), provided that Holder agrees to be bound by all covenants and obligations, and all of the Company's rights, under the Investors Rights Agreement with respect to any such registration as if Holder was a "Holder" of "Registrable Securities" under the Investors Rights Agreement; and the Shares shall be treated as "Registrable Securities" under the Investors Rights Agreement for purposes of Section 2.3 of that agreement. Once such a Form S-3 registration statement is effective, Holder will give the Company, by means of telecopier with confirmation of delivery and also by means of overnight mail, two business days' advance notice of its intention to sell shares. If the Company notifies Holder (by means of telecopier notice, personal notice or telephone notice confirmed by written notice delivered by telecopier or personally delivered) before 5:00 p.m. California time within two business days following the Company's receipt of Holder's notice of intention to sell shares that there exists material nonpublic information, then Holder will not sell any shares until such information is publicly disclosed and, if necessary, the prospectus amended or supplemented. The 90-day period referred to in the next sentence will be extended by the period of time of any such "blackout" period. The Company will use its best efforts to keep the registration statement effective for a period of 90 days or until Holder has has sold all its registered Shares. Holder will have the right to participate in two such registrations. 16. Successors and Assigns. The terms and provisions of this Warrant and ---------------------- the Agreement shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns. 17. Amendments and Waivers. Any term of this Warrant may be amended and ---------------------- the observance of any term of this Warrant may be waived (either generally or in a particular 10 instance and either retroactively or prospectively), with the written consent of the Company and Holder. Any waiver or amendment effected in accordance with this Section shall be binding upon each holder of any Shares purchased under this Warrant at the time outstanding (including securities into which such Shares have been converted), each future holder of all such Shares, and the Company. 18. Counterparts. This Warrant may be executed in any number of ------------ counterparts, each of which will be deemed an original and all of which taken together will constitute one and the same instrument. This Warrant will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the parties reflected hereon as signatories. Facsimile copies of such counterparts are acceptable. 19. Governing Law. This Warrant shall be governed by the laws of the ------------- State of California as applied to agreements among California residents made and to be performed entirely within the State of California. IN WITNESS WHEREOF, the parties have executed this Warrant as of the date first written above. SMARTAGE CORP. By: /s/ Carter J. Hostelley --------------------------------- Its: Vice President -------------------------------- Address: HOLDER LYCOS, INC. By: /s/ Edward M. Philip --------------------------------- Its: COO -------------------------------- 11 EX-4.4 8 WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED EXHIBIT 4.4 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT G THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. Void after April 30, 2003 SMARTAGE CORP. WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK ------------------------------------------------------ This Warrant to Purchase Shares of Series B Preferred Stock (the "Warrant") ------- is issued to Excite, Inc., a Delaware corporation ("Holder" or "Excite") by ------ ------ SmartAge Corp., a Delaware corporation (the "Company"), pursuant to the terms of ------- that certain Marketing and Services Agreement dated as of April 30, 1999, by and between Holder and the Company (the "Agreement"). Terms not defined in this --------- Warrant shall have the meaning given such terms in the Agreement. 1. Purchase of Shares. Subject to the terms and conditions hereinafter ------------------ set forth in this Warrant, Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify Holder hereof in writing), to purchase from the Company up to the number of shares of Series B Preferred Stock of the Company ("Series B Preferred") ------------------ described in Section 2 below. The shares of Series B Preferred (or, if the Series B Preferred has converted into Common Stock, then Common Stock) issuable pursuant to this Warrant (the "Shares") shall also be subject to adjustment as ------ provided herein. 2. Number of Shares. The maximum aggregate number of Shares that can be ---------------- acquired upon exercise of the Warrant is 1,325,408 Shares. During the term of the Agreement, the Warrant will be exercisable to acquire the following number of Shares on and after the following times: (a) with respect to the first 189,344 Shares, upon establishment of the first *** new Active Clicks' Members and Service Members. (b) with respect to an additional 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 37 (c) with respect to an additional 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). (d) with respect to an additional 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). (e) with respect to an additional 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). (f) with respect to an additional 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). (g) with respect to an additional and last 189,344 Shares, upon establishment of an additional *** new Active Clicks' Members and Service Members (for a cumulative total of *** Active Clicks' Members and Service Members). 3. Purchase Price. The exercise price of the Warrant will be $1.10 per -------------- share of Series B Preferred (such price, as adjusted from time to time pursuant to Section 8(a), is herein referred to as the "Exercise Price"). -------------- 4. Exercise Period. The Warrant is exercisable in whole or in part until --------------- four years from the date of issuance. In addition, any unexercised portion of the Warrant will expire upon termination or expiration of the Agreement by the Company. 5. Method of Exercise. While this Warrant remains outstanding and ------------------ exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. In the event of an incremental exercise pursuant to the terms of Section 2 above, the holder of such warrant shall receive a new warrant representing the unexercised portion of the original warrant. Such exercise shall be effected by: (a) the surrender of the Warrant, together with a duly executed copy of a subscription in from and substance satisfactory to the Company, to the Secretary of the Company at its principal offices; and (b) the payment to the Company (i) by check or wire transfer of funds, of an amount equal to the aggregate Exercise Price for the number of Shares being purchased, or (ii) if the Company in its discretion so allows, in lieu of cash exercising this Warrant, Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of shares of Series B Preferred computed using the following formula: Y(A-B) ------ X = A Where ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 38 X -- The number of Shares to be issued to Holder. Y -- The number of Shares of purchasable under this Warrant. A -- The fair market value of one share of the Company's Series B Preferred (or, if Series B Preferred has converted into Common Stock, then Common Stock). B -- The Exercise Price (as adjusted to the date of such calculations). For purposes of this Section, the fair market value of a share (of Common Stock or Series B Preferred) shall mean the average of the closing bid and asked prices of the share as quoted on the Nasdaq National Market on which the shares are traded or the closing price quoted on any exchange or national market system on which the shares are listed, whichever is applicable, as published in The --- Wall Street Journal for the ten trading days prior to the date of determination - ------------------- of fair market value (or such shorter period of time during which such stock was traded on the Nasdaq National Market or on such exchange). If the shares are not traded on the Nasdaq National Market or on such other exchange, the fair market value shall be the price per share that the Company could obtain from a willing buyer for shares of the class or series of shares for which the Warrant is then exercisable, as determined in good faith by the Company's Board of Directors. 6. Certificates for Shares. Upon the exercise of the purchase rights ----------------------- evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within fourteen (14) days of the delivery of the subscription notice and the Exercise Price. 7. Issuance of Shares. The Company covenants that the Shares, when issued ------------------ pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. 8. Adjustment of Exercise Price and Number of Shares. The number of and ------------------------------------------------- kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the Company ---------------------------------------------- shall at any time prior to the expiration of this Warrant subdivide its Series B Preferred, by split-up or otherwise, or combine its Series B Preferred, or issue additional shares of its Series B Preferred or Series B Preferred as a dividend with respect to any shares of its Series B Preferred, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed upon the making of such dividend. (b) Reclassification or Reorganization. In case of any ---------------------------------- reclassification, capital reorganization, or change in the Series B Preferred (other than as a result of a subdivision, combination, or stock dividend provided for above), then, as a condition of such reclassification, reorganization, or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to Holder, so that Holder shall have the Confidential and Proprietary Information 39 right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Series B Preferred as were purchasable by Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same. (c) Reorganization, Consolidation and Merger. In case of any ---------------------------------------- reorganization of the Company (or of any other corporation, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 5), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance. (d) Notice of Adjustment. When any adjustment is required to be made -------------------- in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of shares of Common Stock or other securities or property thereafter purchasable upon exercise of this Warrant, and such notice shall show in reasonable detail the facts upon which the adjustment is based. 9. No Fractional Shares of Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect. 10. No Stockholder Rights. Prior to exercise of this Warrant, Holder --------------------- shall not be entitled to any rights of a stockholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. 11. Transferability. The Warrant is not transferable (except in --------------- connection with a sale of all or substantially all of Excite's assets or a merger or similar transaction in which Excite's shareholders do not hold at least 50% of the voting power and equity of the surviving corporation or in connection with an internal reorganization of Excite to any wholly owned subsidiary which is controlled by Excite or a newly formed parent company which controls Excite, as long as such purchaser or the Confidential and Proprietary Information 40 successor entity is not a competitor of the Company as listed on Exhibit A --------- hereto). 12. Representations by Holder. Holder hereby represents and warrants to ------------------------- the Company that: (a) This Warrant has been, and upon exercise of this Warrant the Shares shall be, acquired by Holder for investment for Holder's own account and not with a view to the sale or other distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Act"), and Holder has no present --- intention of selling or otherwise disposing of all or any portion of this Warrant or the Shares. (b) Holder has acquired this Warrant for Holder's own account and no one else has any beneficial ownership in this Warrant. Holder is an "accredited investor" as such term is defined under Rule 501 of the Act. (c) Holder understands that this Warrant, and the Shares issuable upon exercise hereof, are characterized as "restricted securities" under the Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Act and applicable regulations thereunder such securities may be resold without registration under the Act only in certain limited circumstances. Holder understands that no public market now exists for this Warrant, or the Shares issuable upon exercise hereof, and that it is uncertain whether a public market shall ever exist for such securities. Moreover, Holder understands and agrees that the Company has no present plans to register or qualify the Warrant or the Shares issuable hereunder with the U.S. Securities and Exchange Commission ("SEC") or any other governmental authority --- and that the Company has no obligation to so register or qualify the Warrant or any or all such Shares for any future sale thereof by Holder. (d) Rule 144 promulgated under the Act, which provides for certain limited, routine sales of unregistered securities, is not presently available with respect to this Warrant, and the Company is under no obligation to furnish the information that might be necessary to enable Holder to sell any portion of this Warrant under Rule 144. (e) Holder has had access to information regarding the Company, its present and prospective business, assets, liabilities and financial condition that Holder considers important to making the decision to invest in this Warrant and the Shares. Holder has had the opportunity to ask questions of and receive answers from the Company's representatives concerning this investment and to obtain any and all documents requested in order to supplement or verify any of the information supplied. (f) Holder recognizes that the investment in this Warrant and the Shares involves special and substantial risks. Holder recognizes (1) the highly speculative nature of the investment, (2) the financial hazards involved, (3) the lack of liquidity of this Warrant and the Shares and the restrictions upon transferability thereof, and (4) the tax consequences of investment in this Warrant and the Shares, among other matters. (g) Holder is capable of evaluating the merits and risks of an investment in this Warrant and the Shares and is financially capable of bearing a total loss of this investment. Confidential and Proprietary Information 41 (h) Holder either (1) has a preexisting personal or business relationship with the Company or its principals or (2) by reason of Holder's business or financial experience, has the capacity to protect Holder's own interests in connection with this transaction. (i) The offer and sale of this Warrant and the Shares was not accomplished by the publication of any advertisement. 13. Compliance With Securities Act; Disposition of Shares. ----------------------------------------------------- (a) Legends. Any certificate for Shares issued upon exercise hereof ------- shall be imprinted with the legends set forth below: (1) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES MAY BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (2) Any legend required by the laws of the State of California or Delaware. (3) Any other legend reasonably deemed appropriate by counsel to the Company. The legend set forth in paragraph (1) above shall be removed by the Company from any certificate evidencing the Shares upon delivery to the Company of an opinion by counsel, reasonably satisfactory to the Company, that a registration statement under the Act is at that time in effect with respect to the legended security or that such security can be freely transferred in a public sale without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Shares. (b) Further Limitations on Disposition. Without in any way limiting ---------------------------------- the other representations of Holder set forth herein, Holder further agrees not to make any disposition of all or any portion of the Shares unless and until: (1) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (2) (i) Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) Holder shall have furnished the Company, at the expense of Holder or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition shall not require registration of such securities under the Act. Confidential and Proprietary Information 42 (3) Notwithstanding the provisions of paragraphs (1) and (2) above, no such registration statement or opinion of counsel shall be required: (i) for any routine (as reasonably determined by the Company) transfer of any of the Shares in compliance with SEC Rule 144 or Rule 144A, or (ii) for any transfer of the Shares by Holder if a partnership or a corporation to (A) a partner of such partnership or shareholder of such corporation, or (B) the estate of any such partner or shareholder; provided, that in each of the foregoing cases the -------- transferee agrees in writing to be subject to the terms of this Section. 14. Lock-Up Agreement. Holder agrees that it shall not, to the extent ----------------- requested by the Company or an underwriter of securities of the Company, sell or otherwise transfer or dispose of the Warrant or any Shares or other shares of stock of the Company then owned by such Holder at the time the registration statement is filed or thereafter for that number of days so designated by the Company or the underwriter following the effective date of a registration statement of the Company filed under the Securities Act (not to exceed in any case 180 days after the effective date of such registration statement for the first such registration statement or 90 days after the effective date of each subsequent registration statement thereafter); provided, however, that all -------- ------- executive officers and directors of the Company then holding Common Stock of the Company and all holders of 2.5% or more of the Company's Common Stock (determined on an as-converted basis) enter into similar agreements. The Company shall have the right to place restrictive legends on the certificates representing the Shares subject to this Section and to impose stop transfer instructions with respect to the Shares and such other shares of stock of Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 15. Successors and Assigns. The terms and provisions of this Warrant and ---------------------- the Agreement shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns. 16. Amendments and Waivers. Any term of this Warrant may be amended and ---------------------- the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and Holder. Any waiver or amendment effected in accordance with this Section shall be binding upon each holder of any Shares purchased under this Warrant at the time outstanding (including securities into which such Shares have been converted), each future holder of all such Shares, and the Company. 17. Counterparts. This Warrant may be executed in any number of ------------ counterparts, each of which will be deemed an original and all of which taken together will constitute one and the same instrument. This Warrant will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the parties reflected hereon as signatories. Facsimile copies of such counterparts are acceptable. 18. Governing Law. This Warrant shall be governed by the laws of the ------------- State of California as applied to agreements among California residents made and to be performed entirely within the State of California. IN WITNESS WHEREOF, the parties have executed this Warrant as of the date first written above. COMPANY SMARTAGE CORP. Confidential and Proprietary Information 43 By:_______________________________________ Name:_____________________________________ Its:______________________________________ Address: SmartAge Corp. 3450 California Street San Francisco, CA 91111 Attn: Carter Hostelley, Vice President Fax: (415) 674-3782 HOLDER EXCITE, INC. By:_______________________________________ Name:_____________________________________ Its:______________________________________ Address: Excite, Inc. 555 Broadway Redwood City, CA 94603 Attn:________________________ Fax: (650) 568-6030 [Counterpart signature page to SmartAge Corp. Warrant to Purchase Shares of Series B Stock] Exhibit A --------- SmartAge Corp. Competitors DoubleClick GSAnet Banner Swap - provides up to a 1:1 display ratio. 24/7 Media Home and Garden Banner Exchange - exclusively dedicated to home and garden related sites. Flycast HyperBanner - free web advertising system offering targeted exchange of web advertisement banners. Lycos i-Stores Banner Exchange - e-commerce targeted. Digital Work InterLink UK - free exposures, daily statistics, IP/URL tracking, and more. Allbusiness.com Jassan Banner X'Change - display the banners of the member sites to earn credits towards getting your own banner shown. Springfield Project KISS Banner Exchange - free banner swap program for KISS sites. 123Banners Link Trader Confidential and Proprietary Information 44 EX-4.5 9 WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED EXHIBIT 4.5 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT K THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. Void after April 30, 2003 SMARTAGE CORP. WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK ------------------------------------------------------ This Warrant to Purchase Shares of Series B Preferred Stock (the "Warrant") ------- is issued to Excite, Inc., a Delaware corporation ("Holder" or "Excite") by ------ ------ SmartAge Corp., a Delaware corporation (the "Company"), pursuant to the terms of ------- that certain Marketing and Services Agreement dated as of April 30, 1999, by and between Holder and the Company (the "Agreement"). Terms not defined in this --------- Warrant shall have the meaning given such terms in the Agreement. 1. Purchase of Shares. Subject to the terms and conditions hereinafter ------------------ set forth in this Warrant, Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify Holder hereof in writing), to purchase from the Company up to the number of shares of Series B Preferred Stock of the Company ("Series B Preferred") ------------------ described in Section 2 below. The shares of Series B Preferred (or, if the Series B Preferred has converted into Common Stock, then Common Stock) issuable pursuant to this Warrant (the "Shares") shall also be subject to adjustment as ------ provided herein. 2. Number of Shares. The maximum aggregate number of Shares that can be ---------------- acquired upon exercise of the Warrant is 1,136,064 Shares. During the term of the Agreement, the Warrant will be exercisable to acquire the following number of Shares on and after the following times: (a) with respect to the first 378,688 Shares, on the date when total revenues generated from the sale of Available Inventory through the Excite Buying Service reach $*** during the term of the Agreement. (b) with respect to an additional 189,344 Shares, on the date when total revenues generated from the sale of Available Inventory through the Excite Buying Service reach $*** during the term of the Agreement. (c) with respect to an additional 189,344 Shares, on the date when total revenues ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 50 generated from the sale of Available Inventory through the Excite Buying Service reach $*** during the term of the Agreement. (d) with respect to an additional 189,344 Shares, on the date when total revenues generated from the sale of Available Inventory through the Excite Buying Service reach $*** during the term of the Agreement. (e) with respect to an additional 189,344 Shares, on the date when total revenues generated from the sale of Available Inventory through the Excite Buying Service reach $*** during the term of the Agreement. 3. Purchase Price. The exercise price of the Warrant will be $1.10 per -------------- share of Series B Preferred (such price, as adjusted from time to time pursuant to Section 8(a), is herein referred to as the "Exercise Price"). -------------- 4. Exercise Period. The Warrant is exercisable in whole or in part until --------------- four years from the date of issuance. In addition, any unexercised portion of the Warrant will expire upon termination or expiration of the Agreement by the Company. 5. Method of Exercise. While this Warrant remains outstanding and ------------------ exercisable in accordance with Section 2 above, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. In the event of an incremental exercise pursuant to the terms of Section 2 above, the holder of such warrant shall receive a new warrant representing the unexercised portion of the original warrant. Such exercise shall be effected by: (a) the surrender of the Warrant, together with a duly executed copy of a subscription in from and substance satisfactory to the Company, to the Secretary of the Company at its principal offices; and (b) the payment to the Company (i) by check or wire transfer of funds, of an amount equal to the aggregate Exercise Price for the number of Shares being purchased, or (ii) if the Company in its discretion so allows, in lieu of cash exercising this Warrant, Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of shares of Series B Preferred computed using the following formula: Y(A-B) ------ X = A Where X -- The number of Shares to be issued to Holder. Y -- The number of Shares of purchasable under this Warrant. A -- The fair market value of one share of the Company's Series B Preferred (or, if Series B Preferred has converted into Common Stock, then Common Stock). B -- The Exercise Price (as adjusted to the date of such calculations). ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 51 For purposes of this Section, the fair market value of a share (of Common Stock or Series B Preferred) shall mean the average of the closing bid and asked prices of the share as quoted on the Nasdaq National Market on which the shares are traded or the closing price quoted on any exchange or national market system on which the shares are listed, whichever is applicable, as published in The --- Wall Street Journal for the ten trading days prior to the date of determination - ------------------- of fair market value (or such shorter period of time during which such stock was traded on the Nasdaq National Market or on such exchange). If the shares are not traded on the Nasdaq National Market or on such other exchange, the fair market value shall be the price per share that the Company could obtain from a willing buyer for shares of the class or series of shares for which the Warrant is then exercisable, as determined in good faith by the Company's Board of Directors. 6. Certificates for Shares. Upon the exercise of the purchase rights ----------------------- evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within fourteen (14) days of the delivery of the subscription notice and the Exercise Price. 7. Issuance of Shares. The Company covenants that the Shares, when issued ------------------ pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. 8. Adjustment of Exercise Price and Number of Shares. The number of and ------------------------------------------------- kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the Company ---------------------------------------------- shall at any time prior to the expiration of this Warrant subdivide its Series B Preferred, by split-up or otherwise, or combine its Series B Preferred, or issue additional shares of its Series B Preferred or Series B Preferred as a dividend with respect to any shares of its Series B Preferred, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed upon the making of such dividend. (b) Reclassification or Reorganization. In case of any ---------------------------------- reclassification, capital reorganization, or change in the Series B Preferred (other than as a result of a subdivision, combination, or stock dividend provided for above), then, as a condition of such reclassification, reorganization, or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to Holder, so that Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Series B Preferred as were purchasable by Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable Confidential and Proprietary Information 52 hereunder, provided the aggregate purchase price shall remain the same. (c) Adjustment for Reorganization, Consolidation or Merger. In case ------------------------------------------------------ of any reorganization of the Company (or of any other corporation, the stock or other securities of which are at the time receivable on the exercise of this Warrant), after the date of this Warrant, or in case, after such date, the Company (or any such corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in Section 5), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant, and the successor or purchasing corporation in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's obligations under this Warrant; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance. (d) Notice of Adjustment. When any adjustment is required to be made -------------------- in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of shares of Common Stock or other securities or property thereafter purchasable upon exercise of this Warrant, and such notice shall show in reasonable detail the facts on which the adjustment is based.. 9. No Fractional Shares of Scrip. No fractional shares or scrip ----------------------------- representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect. 10. No Stockholder Rights. Prior to exercise of this Warrant, Holder --------------------- shall not be entitled to any rights of a stockholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. 11. Transferability. The Warrant is not transferable (except in --------------- connection with a sale of all or substantially all of Excite's assets or a merger or similar transaction in which Excite's shareholders do not hold at least 50% of the voting power and equity of the surviving corporation or in connection with an internal reorganization of Excite to any wholly owned subsidiary which is controlled by Excite or a newly formed parent company which controls Excite, as long as such purchaser or the successor entity is not a competitor of the Company as listed on Exhibit A hereto). --------- 12. Representations by Holder. Holder hereby represents and warrants to ------------------------- the Company that: (a) This Warrant has been, and upon exercise of this Warrant the Shares shall be, acquired by Holder for investment for Holder's own account and not with a view to the sale or other distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Act"), and --- Confidential and Proprietary Information 53 Holder has no present intention of selling or otherwise disposing of all or any portion of this Warrant or the Shares. (b) Holder has acquired this Warrant for Holder's own account and no one else has any beneficial ownership in this Warrant. Holder is an "accredited investor" as such term is defined under Rule 501 of the Act. (c) Holder understands that this Warrant, and the Shares issuable upon exercise hereof, are characterized as "restricted securities" under the Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Act and applicable regulations thereunder such securities may be resold without registration under the Act only in certain limited circumstances. Holder understands that no public market now exists for this Warrant, or the Shares issuable upon exercise hereof, and that it is uncertain whether a public market shall ever exist for such securities. Moreover, Holder understands and agrees that the Company has no present plans to register or qualify the Warrant or the Shares issuable hereunder with the U.S. Securities and Exchange Commission ("SEC") or any other governmental authority --- and that the Company has no obligation to so register or qualify the Warrant or any or all such Shares for any future sale thereof by Holder. (d) Rule 144 promulgated under the Act, which provides for certain limited, routine sales of unregistered securities, is not presently available with respect to this Warrant, and the Company is under no obligation to furnish the information that might be necessary to enable Holder to sell any portion of this Warrant under Rule 144. (e) Holder has had access to information regarding the Company, its present and prospective business, assets, liabilities and financial condition that Holder considers important to making the decision to invest in this Warrant and the Shares. Holder has had the opportunity to ask questions of and receive answers from the Company's representatives concerning this investment and to obtain any and all documents requested in order to supplement or verify any of the information supplied. (f) Holder recognizes that the investment in this Warrant and the Shares involves special and substantial risks. Holder recognizes (1) the highly speculative nature of the investment, (2) the financial hazards involved, (3) the lack of liquidity of this Warrant and the Shares and the restrictions upon transferability thereof, and (4) the tax consequences of investment in this Warrant and the Shares, among other matters. (g) Holder is capable of evaluating the merits and risks of an investment in this Warrant and the Shares and is financially capable of bearing a total loss of this investment. (h) Holder either (1) has a preexisting personal or business relationship with the Company or its principals or (2) by reason of Holder's business or financial experience, has the capacity to protect Holder's own interests in connection with this transaction. (i) The offer and sale of this Warrant and the Shares was not accomplished by the publication of any advertisement. Confidential and Proprietary Information 54 13. Compliance With Securities Act; Disposition of Shares. ----------------------------------------------------- (a) Legends. Any certificate for Shares issued upon exercise hereof ------- shall be imprinted with the legends set forth below: (1) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES MAY BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (2) Any legend required by the laws of the State of California or Delaware. (3) Any other legend reasonably deemed appropriate by counsel to the Company. The legend set forth in paragraph (1) above shall be removed by the Company from any certificate evidencing the Shares upon delivery to the Company of an opinion by counsel, reasonably satisfactory to the Company, that a registration statement under the Act is at that time in effect with respect to the legended security or that such security can be freely transferred in a public sale without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Shares. (b) Further Limitations on Disposition. Without in any way limiting ---------------------------------- the other representations of Holder set forth herein, Holder further agrees not to make any disposition of all or any portion of the Shares unless and until: (1) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (2) (i) Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) Holder shall have furnished the Company, at the expense of Holder or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition shall not require registration of such securities under the Act. (3) Notwithstanding the provisions of paragraphs (1) and (2) above, no such registration statement or opinion of counsel shall be required: (i) for any routine (as reasonably determined by the Company) transfer of any of the Shares in compliance with SEC Rule 144 or Rule 144A, or (ii) for any transfer of the Shares by Holder if a partnership or a corporation to (A) a partner of such partnership or shareholder of such corporation, or (B) the estate of any such partner or Confidential and Proprietary Information 55 shareholder; provided, that in each of the foregoing cases the transferee agrees -------- in writing to be subject to the terms of this Section. 14. Lock-Up Agreement. Holder agrees that it shall not, to the extent ----------------- requested by the Company or an underwriter of securities of the Company, sell or otherwise transfer or dispose of the Warrant or any Shares or other shares of stock of the Company then owned by such Holder at the time the registration statement is filed or thereafter for that number of days so designated by the Company or the underwriter following the effective date of a registration statement of the Company filed under the Securities Act (not to exceed in any case 180 days after the effective date of such registration statement for the first such registration statement or 90 days after the effective date of each subsequent registration statement thereafter); provided, however, that all -------- ------- executive officers and directors of the Company then holding Common Stock of the Company and all holders of 2.5% or more of the Company's Common Stock (determined on an as-converted basis) enter into similar agreements. The Company shall have the right to place restrictive legends on the certificates representing the Shares subject to this Section and to impose stop transfer instructions with respect to the Shares and such other shares of stock of Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 15. Successors and Assigns. The terms and provisions of this Warrant and ---------------------- the Agreement shall inure to the benefit of, and be binding upon, the Company and the holders hereof and their respective successors and assigns. 16. Amendments and Waivers. Any term of this Warrant may be amended and ---------------------- the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and Holder. Any waiver or amendment effected in accordance with this Section shall be binding upon each holder of any Shares purchased under this Warrant at the time outstanding (including securities into which such Shares have been converted), each future holder of all such Shares, and the Company. 17. Counterparts. This Warrant may be executed in any number of ------------ counterparts, each of which will be deemed an original and all of which taken together will constitute one and the same instrument. This Warrant will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the parties reflected hereon as signatories. Facsimile copies of such counterparts are acceptable. 18. Governing Law. This Warrant shall be governed by the laws of the ------------- State of California as applied to agreements among California residents made and to be performed entirely within the State of California. IN WITNESS WHEREOF, the parties have executed this Warrant as of the date first written above. COMPANY SMARTAGE CORP. By:_______________________________ Confidential and Proprietary Information 56 Name:___________________________________ Its:____________________________________ Address: SmartAge Corp. 3450 California Street San Francisco, CA 91111 Attn: Carter Hostelley, Vice President Fax: (415) 674-3782 HOLDER EXCITE, INC. By:_____________________________________ Name:___________________________________ Its:____________________________________ Address: Excite, Inc. 555 Broadway Redwood City, CA 94603 Attn:________________________ Fax: (650) 568-6030 [Counterpart signature page to SmartAge Corp. Warrant to Purchase Shares of Series B Stock] Exhibit A --------- SmartAge Corp. Competitors DoubleClick GSAnet Banner Swap - provides up to a 1:1 display ratio. 24/7 Media Home and Garden Banner Exchange - exclusively dedicated to home and garden related sites. Flycast HyperBanner - free web advertising system offering targeted exchange of web advertisement banners. Lycos i-Stores Banner Exchange - e-commerce targeted. Digital Work InterLink UK - free exposures, daily statistics, IP/URL tracking, and more. Allbusiness.com Jassan Banner X'Change - display the banners of the member sites to earn credits towards getting your own banner shown. Springfield Project KISS Banner Exchange - free banner swap program for KISS sites. 123Banners Link Trader Confidential and Proprietary Information 57 1for1.com - offers targeted banner LinkBuddies - banner exchange exchange services. program with targeted marketing, hourly statistics and commercial sizebanners. 4 to 3 exchange rate is available. Ad Cycle LinkExchange (7) Ad Swap LinkMedia Network Ad-Xchange Macintosh Web Network Amiga Web Network Malaysia Banner Exchange - advertising exchanges for web site promotion. Australian Banner Link Exchange - Metallica X Change - a MetallicA includes a Sydney sub-exchange. banner x-change. BanEx MoneyClicks.com - banner ad exchange for finance websites. Banner Bazaar MS-Links Exchange - targeted banner advertising. Banner FX Exchange - designs free Net-On's Banner Exchange banners for members. Banner Mania - promote your site to Paramount Banner Network a targeted audience with free banner exchange that breaks down into various targeted categories. bannerCAST PegasoWeb - free reciprocal banner advertising. Also offers Engenius, software that automatically helps web site owners to improve their position on search engines listings. BannerSwap PostMaster Banner Network - business to business, technology oriented banner network. BannerWomen - banner advertising and Raleigh Banner Exchange - free exchange for targeting women online. banner advertising for businesses in Raleigh and Wake County, North Carolina. BannerWorks - targeted banner advertising Teen Starlet Banner Exchange network for professional business, technology, and business resource related sites. BannerXS TradeBanners BBS Xchange - banner exchange for Web Affects - offers 1 to 1 banner BBS-related sites. exchange service and web hosting. BetterDeals - free network offers Web Banner Links - directory with targeting by content and/or geography. brief reviews. Christian Banner Swap - promoting and Web Site Banner Advertising - an advertising christian churches, introduction ministries, businesses, and personal websites. Cowleys Australian Banner Bank - original Web Site Banner Advertising Australian banner exchange network. Introduction/Overview - contains information and links for beginners as well as experienced users. CyberLink Exchange WebLinker Banner Exchange Duthead's Banner Exchange WorldVillage Banner Exchange - featuring only family-friendly sites. Exchange-it Xlinkx Free Banners FreeMall Banner Exchange Gamers Link Xtreme GlobExchange Confidential and Proprietary Information 58 EX-10.1 10 1998 EQUITY INCENTIVE PLAN EXHIBIT 10.1 SMARTAGE CORPORATION 1998 EQUITY INCENTIVE PLAN As Adopted May 19, 1998 1. PURPOSE. The purpose of this Plan is to provide incentives to attract, ------- retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company's future performance through awards of Options and Restricted Stock. Capitalized terms not defined in the text are defined in Section 22 hereof. This Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act. 2. SHARES SUBJECT TO THE PLAN. -------------------------- 2.1 Number of Shares Available. Subject to Sections 2.2 and 17 -------------------------- hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be 5,250,000 Shares, as amended by the Board on 10/14/99, or such lesser number of Shares as permitted under Section 260.140.45 of Title 10 of the California Code of Regulations. Subject to Sections 2.2 and 17 hereof, Shares will again be available for grant and issuance in connection with future Awards under this Plan that: (a) are subject to issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option or (b) are subject to a Restricted Stock Award that otherwise terminates without Shares being issued. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted under this Plan. 2.2 Adjustment of Shares. In the event that the number of -------------------- outstanding shares of the Company's Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options and (c) the Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee and provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares. 3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted only ----------- to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in Section 5 hereto) and Restricted Stock Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A person may be granted more than one Award under this Plan. 4. ADMINISTRATION. -------------- 4.1 Committee Authority. This Plan will be administered by the ------------------- Committee or the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan; (c) select persons to receive Awards; (d) determine the form and terms of Awards; (e) determine the number of Shares or other consideration subject to Awards; (f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company; (g) grant waivers of Plan or Award conditions; (h) determine the vesting, exercisability and payment of Awards; (i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement; (j) determine whether an Award has been earned; and (k) make all other determinations necessary or advisable for the administration of this Plan. 4.2 Committee Discretion. Any determination made by the Committee -------------------- with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, and subject to Section 5.9 hereof, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan, provided such officers are members of the Board. 5. OPTIONS. The Committee may grant Options to eligible persons and will ------- determine whether such Options will be Incentive Stock Options within the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following: 5.1 Form of Option Grant. Each Option granted under this Plan will -------------------- be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan. 5.2 Date of Grant. The date of grant of an Option will be the date ------------- on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 5.3 Exercise Period. Options may be exercisable immediately (subject --------------- to repurchase pursuant to Section 11 hereof) or may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company ("Ten Percent Stockholder") will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically 2 or otherwise, in such number of Shares or percentage of Shares as the Committee determines. Subject to earlier termination of the Option as provided herein, each Participant who is not an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company shall have the right to exercise an Option granted hereunder at the rate of at least twenty percent (20%) per year over five (5) years from the date such Option is granted. 5.4 Exercise Price. The Exercise Price of an Option will be -------------- determined by the Committee when the Option is granted and may not be less than eighty-five percent (85%) of the Fair Market Value of the Shares on the date of grant; provided that (a) the Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (b) the Exercise Price of any Option granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof. 5.5 Method of Exercise. Options may be exercised only by delivery to ------------------ the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding Participant's investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price, and any applicable taxes, for the number of Shares being purchased. 5.6 Termination. Subject to earlier termination pursuant to Sections ----------- 17 and 18 hereof and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following: (a) If the Participant is Terminated for any reason except death, Disability or for Cause, then the Participant may exercise such Participant's Options only to the extent that such Options are exercisable upon the Termination Date and such Options must be exercised by the Participant, if at all, as to all or some of the Vested Shares calculated as of the Termination Date, within three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO) but in any event, no later than the expiration date of the Options. (b) If the Participant is Terminated because of Participant's death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause), then Participant's Options may be exercised only to the extent that such Options are exercisable by Participant on the Termination Date and must be exercised by Participant (or Participant's legal representative or authorized assignee), if at all, as to all or some of the Vested Shares calculated as of the Termination Date, within twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6) months, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond (i) three (3) months after the Termination Date when the Termination is for any reason other than the Participant's death or disability, within the meaning of Section 22(e)(3) of the Code, or (ii) twelve (12) months after the Termination Date when the Termination is for Participant's disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than the expiration date of the Options. (c) If the Participant is terminated for Cause, then Participant's Options shall expire on such Participant's Termination Date, or at such later time and on such conditions as are determined by the Committee. 3 5.7 Limitations on Exercise. The Committee may specify a reasonable ----------------------- minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable. 5.8 Limitations on ISOs. The aggregate Fair Market Value (determined ------------------- as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds $100,000, then the Options for the first $100,000 worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 18 hereof) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 5.9 Modification, Extension or Removal. The Committee may modify, ---------------------------------- extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant's rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 hereof for Options granted on the date the action is taken to reduce the Exercise Price; and provided, further, that the Exercise Price will not be reduced below the par value of the Shares, if any. 5.10 No Disqualification. Notwithstanding any other provision in ------------------- this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant or Participants affected, to disqualify any ISO under Section 422 of the Code. 6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company ---------------- to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following: 6.1 Form of Restricted Stock Award. All purchases under a Restricted ------------------------------ Stock Award made pursuant to this Plan will be evidenced by an Award Agreement ("Restricted Stock Purchase Agreement") that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant's execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within such thirty (30) days , then the offer will terminate, unless otherwise determined by the Committee. 6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a -------------- Restricted Stock Award will be determined by the Committee and will be at least eighty-five percent (85%) of the Fair Market Value of the Shares on the date the Restricted Stock Award is granted or at the time the purchase is consummated, except in the case of a sale to a Ten Percent Stockholder, in which case the Purchase Price will be one hundred percent (100%) of the Fair Market Value on the date the Restricted Stock Award is granted or at the time the purchase is consummated. Payment of the Purchase Price must be made in accordance with Section 7 hereof. 4 6.3 Restrictions. Restricted Stock Awards may be subject to the ------------ restrictions set forth in Section 11 hereof or such other restrictions not inconsistent with Section 25102(o) of the California Corporations Code. 5 7. PAYMENT FOR SHARE PURCHASES. --------------------------- 7.1 Payment. Payment for Shares purchased pursuant to this Plan may ------- be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law: (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of shares that: (i) either (A) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or (B) were obtained by Participant in the public market and (ii) are clear of all liens, claims, encumbrances or security interests. (c) by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; provided, further, that the portion of the Exercise Price or Purchase Price, as the case may be, equal to the par value of the Shares must be paid in cash or other legal consideration permitted by Delaware General Corporation Law. (d) by waiver of compensation due or accrued to the Participant for services rendered; (e) with respect only to purchases upon exercise of an Option, and provided that a public market for the Company's stock exists: (1) through a "same day sale" commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (2) through a "margin" commitment from the Participant and an NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (f) by any combination of the foregoing. 7.2 Loan Guarantees. The Committee may help the Participant pay for --------------- Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant. 8. WITHHOLDING TAXES. ----------------- 8.1 Withholding Generally. Whenever Shares are to be issued in --------------------- satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements. 8.2 Stock Withholding. When, under applicable tax laws, a ----------------- Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is 6 obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee. 9. PRIVILEGES OF STOCK OWNERSHIP. ----------------------------- 9.1 Voting and Dividends. No Participant will have any of the rights -------------------- of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Unvested Shares that are repurchased pursuant to Section 11 hereof. The Company will comply with Section 260.140.1 of Title 10 of the California Code of Regulations with respect to the voting rights of Common Stock. 9.2 Financial Statements. The Company will provide financial -------------------- statements to each Participant at Participant's request prior to such Participant's purchase of Shares under this Plan, and, at Participant's request, to each Participant annually during the period such Participant has Awards outstanding, or as otherwise required under Section 260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding the foregoing, the Company will not be required to provide such financial statements to Participants when issuance is limited to key employees whose services in connection with the Company assure them access to equivalent information. 10. TRANSFERABILITY. Awards granted under this Plan, and any interest --------------- therein, will not be transferable or assignable by Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. During the lifetime of the Participant an Award will be exercisable only by the Participant or Participant's legal representative and any elections with respect to an Award, may be made only by the Participant or Participant's legal representative. 11. RESTRICTIONS OF SHARES. ---------------------- 11.1 Right of First Refusal. At the discretion of the Committee, the ---------------------- Company may reserve to itself and/or its assignee(s) in the Award Agreement a right of first refusal to purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a third party, unless otherwise not permitted by Section 25102(o) of the California Corporations Code, provided, that such right of first refusal terminates upon the Company's initial public offering of Common Stock pursuant to an effective registration statement filed under the Securities Act. 11.2 Right of Repurchase. At the discretion of the Committee, the ------------------- Company may reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase Unvested Shares held by a Participant for cash and/or cancellation of purchase money indebtedness following such Participant's Termination at any time within the later of ninety (90) days after the Participant's Termination Date and the date the Participant purchases Shares under the Plan at the Participant's Exercise Price or Purchase Price, as the case may be, provided, that unless the Participant is an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company, such right of repurchase lapses at the rate of at least twenty percent (20%) per year over five (5) years from: (a) the date of grant of the Option or (b) in the case of Restricted Stock, the date the Participant purchases the Shares. 12. CERTIFICATES. All certificates for Shares or other securities ------------ delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, 7 regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. 13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a ------------------------ Participant's Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant's obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant's Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid. 14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from ----------------------------- time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, shares of Common Stock of the Company (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree. 15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is intended ---------------------------------------------- to comply with Section 25102(o) of the California Corporations Code. Any provision of this Plan which is inconsistent with Section 25102(o) shall, without further act or amendment by the Company or the Board, be reformed to comply with the requirements of Section 25102(o). An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (b) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted ----------------------- under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant's employment or other relationship at any time, with or without Cause. 17. CORPORATE TRANSACTIONS. ---------------------- 17.1 Assumption or Replacement of Awards by Successor or Acquiring ------------------------------------------------------------- Corporation. In the event of (a) a dissolution or liquidation of the Company, - ----------- (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor or acquiring corporation, which assumption, conversion or replacement will 8 be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder which merges with the Company in such merger, or which owns or controls another corporation which merges, with the Company in such merger) cease to own their shares or other equity interests in the Company, or (d) the sale of all or substantially all of the assets of the Company, any or all outstanding Awards may be assumed, converted or replaced by the successor or acquiring corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor or acquiring corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor or acquiring corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions and other provisions no less favorable to the Participant than those which applied to such outstanding Shares immediately prior to such transaction described in this Section 17.1. Notwithstanding the foregoing, in the event that a Participant is terminated by the Company or a Parent or Subsidiary of the Company for any reason except Cause within six months of the consummation of a transaction described in this Section 17.1 pursuant to which outstanding Awards are assumed or substituted as provided above, the vesting of such Participant's Options shall accelerate such that 50% of the Unvested Shares on the date of such Participant's Termination shall become Vested Shares. In the event such successor or acquiring corporation (if any) refuses to assume or substitute Awards, as provided above, pursuant to a transaction described in this Section 17.1, then notwithstanding any other provision in this Plan to the contrary, the vesting of such Awards will accelerate and the Options will become exercisable in full prior to the consummation of such event at such times and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate in accordance with the provisions of this Plan. 17.2 Other Treatment of Awards. Subject to any greater rights ------------------------- granted to Participants under the foregoing provisions of this Section 17, in the event of the occurrence of any transaction described in Section 17.1 hereof, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation or sale of assets. 17.3 Assumption of Awards by the Company. The Company, from time to ----------------------------------- time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under this Plan in substitution of such other company's award or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 18. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on --------------------------------- the date that it is adopted by the Board (the "Effective Date"). This Plan will be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that: (a) no Option may be exercised prior to initial stockholder approval of this Plan; (b) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company; (c) in the event that initial stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares issued hereunder shall be rescinded; and (d) Awards granted pursuant to an increase in the number of Shares approved by the Board which increase is not timely approved by stockholders shall be canceled, any Shares issued pursuant to any such Awards shall be canceled, and any purchase of Shares subject to any such Award shall be rescinded. In the event that initial stockholder approval is not obtained within twelve (12) months before or after the date this Plan is 9 adopted by the Board, all Awards granted hereunder will be canceled, any Shares issued pursuant to any Award will be canceled and any purchase of Shares hereunder will be rescinded. 19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided -------------------------- herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder approval. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of California. 20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the --------------------------------- Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval pursuant to Section 25102(o) of the California Corporations Code or the Code or the regulations promulgated thereunder as such provisions apply to ISO plans. 21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the -------------------------- Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 22. DEFINITIONS. As used in this Plan, the following terms will have the ----------- following meanings: "Award" means any award under this Plan, including any Option or Restricted Stock Award. "Award Agreement" means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award. "Board" means the Board of Directors of the Company. "Cause" means Termination because of (i) any willful material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the Company, the Participant's conviction for, or guilty plea to, a felony or a crime involving moral turpitude, any willful perpetration by the Participant of a common law fraud, (ii) the Participant's commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (iii) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent or Subsidiary of the Company and the Participant regarding the terms of the Participant's service as an employee, director or consultant to the Company or a Parent or Subsidiary of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, director or consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company and the Participant, (iv) Participant's disregard of the policies of the Company or any Parent or Subsidiary of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (v) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or a Parent or Subsidiary of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the committee appointed by the Board to administer this Plan, or if no committee is appointed, the Board. "Company" means Netweb Corporation or any successor corporation. 10 "Disability" means a disability, whether temporary or permanent, partial or total, as determined by the Committee. "Exercise Price" means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option. "Fair Market Value" means, as of any date, the value of a share of the Company's Common Stock determined as follows: (a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal; ----------------------- (b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal; ----------------------- (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall -------- Street Journal (or, if not so reported, as otherwise reported by -------------- any newspaper or other source as the Board may determine); or (d) if none of the foregoing is applicable, by the Committee in good faith. "Option" means an award of an option to purchase Shares pursuant to Section 5 hereof. "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain "Participant" means a person who receives an Award under this Plan "Plan" means this Netweb Corporation 1998 Equity Incentive Plan, as amended from time to time. "Purchase Price" means the price at which a Participant may purchase Restricted Stock "Restricted Stock" means Shares purchased pursuant to a Restricted Stock Award. "Restricted Stock Award" means an award of Shares pursuant to Section 6 hereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means shares of the Company's Common Stock, $0.0001 par value, reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and any successor security. "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 11 "Termination" or "Terminated" means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated in writing. In the case of any Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the "Termination Date"). "Unvested Shares" means "Unvested Shares" as defined in the Award Agreement. "Vested Shares" means "Vested Shares" as defined in the Award Agreement. 12 EX-10.2 11 2000 OMNIBUS EQUITY INCENTIVE PLAN EXHIBIT 10.2 SMARTAGE.COM CORP. 2000 OMNIBUS EQUITY INCENTIVE PLAN (Adopted by the Board on March __, 2000) TABLE OF CONTENTS -----------------
Page ---- SECTION 1. ESTABLISHMENT AND PURPOSE....................... 1 SECTION 2. DEFINITIONS..................................... 1 (a) "Affiliate"....................................... 1 (b) "Award"........................................... 1 (c) "Board of Directors".............................. 1 (d) "Change in Control"............................... 1 (e) "Code"............................................ 2 (f) "Committee"....................................... 2 (g) "Company"......................................... 2 (h) "Consultant"...................................... 2 (i) "Employee"........................................ 2 (j) "Exchange Act".................................... 2 (k) "Exercise Price".................................. 2 (l) "Fair Market Value"............................... 2 (m) "ISO"............................................. 3 (n) "Nonstatutory Option"............................. 3 (o) "Offeree"......................................... 3 (p) "Option".......................................... 3 (q) "Optionee"........................................ 3 (r) "Outside Director"................................ 3 (s) "Parent".......................................... 3 (t) "Participant"..................................... 3 (u) "Plan"............................................ 3 (v) "Purchase Price".................................. 3 (w) "Restricted Share"................................ 3 (x) "Restricted Share Agreement "..................... 3 (y) "SAR"............................................. 3 (z) "SAR Agreement"................................... 3 (aa) "Service"......................................... 3 (bb) "Share"........................................... 4 (cc) "Stock"........................................... 4 (dd) "Stock Option Agreement".......................... 4 (ee) "Stock Purchase Agreement"........................ 4 (ff) "Stock Unit"...................................... 4 (gg) "Stock Unit Agreement"............................ 4 (hh) "Subsidiary"...................................... 4 (ii) "Total and Permanent Disability".................. 4 SECTION 3. ADMINISTRATION.................................. 4 (a) Committee Procedures.............................. 4 (b) Committee Responsibilities........................ 4
-i- SECTION 4. ELIGIBILITY.................................................. 6 (a) General Rule................................................... 6 (b) Outside Directors.............................................. 6 (c) Limitation On Grants........................................... 6 (d) Ten-Percent Stockholders....................................... 6 (e) Attribution Rules.............................................. 7 (f) Outstanding Stock.............................................. 7 SECTION 5. STOCK SUBJECT TO PLAN........................................ 7 (a) Basic Limitation............................................... 7 (b) Annual Increase in Shares...................................... 7 (c) Additional Shares.............................................. 7 (d) Dividend Equivalents........................................... 7 SECTION 6. RESTRICTED SHARES............................................ 8 (a) Restricted Stock Agreement..................................... 8 (b) Payment for Awards............................................. 8 (c) Vesting........................................................ 8 (d) Voting and Dividend Rights..................................... 8 SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES................ 8 (a) Duration of Offers and Nontransferability of Rights............ 8 (b) Purchase Price................................................. 9 (c) Withholding Taxes.............................................. 9 (d) Restrictions on Transfer of Shares............................. 9 SECTION 8. TERMS AND CONDITIONS OF OPTIONS.............................. 9 (a) Stock Option Agreement......................................... 9 (b) Number of Shares............................................... 9 (c) Exercise Price................................................. 9 (d) Withholding Taxes.............................................. 9 (e) Exercisability and Term........................................ 9 (f) Nontransferability............................................. 10 (g) Exercise of Options Upon Termination of Service................ 10 (h) Effect of Change in Control.................................... 10 (i) Leaves of Absence.............................................. 10 (j) No Rights as a Stockholder..................................... 11 (k) Modification, Extension and Renewal of Options................. 11 (l) Restrictions on Transfer of Shares............................. 11 (m) Buyout Provisions.............................................. 11 SECTION 9. PAYMENT FOR SHARES........................................... 11 (a) General Rule................................................... 11 (b) Surrender of Stock............................................. 11 (c) Services Rendered.............................................. 11 (d) Cashless Exercise.............................................. 12 (e) Exercise/Pledge................................................ 12
-ii- (f) Promissory Note................................................. 12 (g) Other Forms of Payment.......................................... 12 SECTION 10. STOCK APPRECIATION RIGHTS.................................... 12 (a) SAR Agreement................................................... 12 (b) Number of Shares................................................ 12 (c) Exercise Price.................................................. 12 (d) Exercisability and Term......................................... 12 (e) Effect of Change in Control..................................... 13 (f) Exercise of SARs................................................ 13 (g) Modification or Assumption of SARs.............................. 13 SECTION 11. STOCK UNITS.................................................. 13 (a) Stock Unit Agreement............................................ 13 (b) Payment for Awards.............................................. 13 (c) Vesting Conditions.............................................. 14 (d) Voting and Dividend Rights...................................... 14 (e) Form and Time of Settlement of Stock Units...................... 14 (f) Death of Recipient.............................................. 14 (g) Creditors' Rights............................................... 15 SECTION 12. PROTECTION AGAINST DILUTION.................................. 15 (a) Adjustments..................................................... 15 (b) Dissolution or Liquidation...................................... 15 (c) Reorganizations................................................. 15 SECTION 13. DEFERRAL OF AWARDS........................................... 16 SECTION 14. AWARDS UNDER OTHER PLANS..................................... 16 SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES..................... 16 (a) Effective Date.................................................. 16 (b) Elections to Receive NSOs, Restricted Shares or Stock Units..... 17 (c) Number and Terms of NSOs, Restricted Shares or Stock Units...... 17 SECTION 16. ADJUSTMENT OF SHARES......................................... 17 (a) General......................................................... 17 (b) Reorganizations................................................. 17 (c) Reservation of Rights........................................... 17 SECTION 17. LEGAL AND REGULATORY REQUIREMENTS............................ 18 SECTION 18. WITHHOLDING TAXES............................................ 18 (a) General......................................................... 18 (b) Share Withholding............................................... 18 SECTION 19. LIMITATION ON PARACHUTE PAYMENTS............................. 18 (a) Scope of Limitation............................................. 18
-iii- (b) Supersedes Other Provisions..................................... 18 SECTION 20. NO EMPLOYMENT RIGHTS......................................... 18 SECTION 21. DURATION AND AMENDMENTS...................................... 19 (a) Term of the Plan................................................ 19 (b) Right to Amend or Terminate the Plan............................ 19 (c) Effect of Amendment or Termination.............................. 19 SECTION 22. EXECUTION.................................................... 19
-iv- SMARTAGE.COM CORP. ------------------ 2000 Omnibus Equity Incentive Plan ---------------------------------- (Adopted by the Board on March __, 2000) SECTION 1. ESTABLISHMENT AND PURPOSE. - -------------------------------------- The Plan was adopted by the Board of Directors effective ___________ __, 2000. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units, Options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights. SECTION 2. DEFINITIONS. - ------------------------ (a) "Affiliate" shall mean any entity other than a Subsidiary, if the --------- Company and/or one of more Subsidiaries own not less than fifty percent (50%) of such entity. (b) "Award" shall mean any award of an Option, a SAR, a Restricted Share ----- or a Stock Unit under the Plan. (c) "Board of Directors" shall mean the Board of Directors of the Company, ------------------ as constituted from time to time. (d) "Change in Control" shall mean the occurrence of either of the ----------------- following events: (i) A change in the composition of the Board of Directors, as a result of which fewer than one-half of the incumbent directors are directors who either: (A) Had been directors of the Company twenty-four (24) months prior to such change; or (B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the directors who had been directors of the Company twenty-four (24) months prior to such change and who were still in office at the time of the election or nomination; or (ii) Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act) who, by the acquisition or aggregation of securities, is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having -1- the right to vote at elections of directors (the "Base Capital Stock"); except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company. For purposes of this Subsection (ii), the term "person" shall not include an employee benefit plan maintained by the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- (f) "Committee" shall mean the committee designated by the Board of --------- Directors, which is authorized to administer the Plan under Section 3 hereof. The Committee shall have membership composition which enables the Options or other rights granted under the Plan to qualify for exemption under Rule 16b-3 with respect to persons who are subject to Section 16 of the Exchange Act. (g) "Company" shall mean SmartAge.com Corp., a Delaware corporation. ------- (h) "Consultant" shall mean a consultant or advisor who provides bona fide ---------- services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in the second sentence of Section 4(a) and Section 4(b). (i) "Employee" shall mean (i) any individual who is a common-law employee -------- of the Company or of a Subsidiary, (ii) a member of the Board of Directors, including (without limitation) an Outside Director, or an affiliate of member of the Board of Directors and (iii) a member of the board of directors of a Subsidiary; or (iv) an independent contractor or advisor who performs services for the Company or a Subsidiary. Service as a member of the Board of Directors, a member of the board of directors of a Subsidiary or as an independent contractor or advisor shall be considered employment for all purposes of the Plan except the second sentence of Section 4(a) and Section 4(b). (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. (k) "Exercise Price" shall mean, in the case of an Option, the amount for -------------- which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. "Exercise Price," in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR. (l) "Fair Market Value" shall mean (i) the closing price of a Share on the ----------------- principal exchange which the Shares are trading, on the date on which the Fair Market Value is determined (if Fair Market Value is determined on a date which the principal exchange is closed, Fair Market Value shall be determined on the last immediately preceding trading day), or (ii) if the Shares are not traded on an exchange but are quoted on the Nasdaq National Market or a successor quotation system, the closing price on the date on which the Fair Market Value is determined, or (iii) if the Shares are not traded on an exchange or quoted on the Nasdaq National -2- Market or a successor quotation system, the fair market value of a Share, as determined by the Committee in good faith. Such determination shall be conclusive and binding on all persons. (m) "ISO" shall mean an employee incentive stock option described in Code --- section 422. (n) "Nonstatutory Option" shall mean an employee stock option that is not ------------------- an ISO. (o) "Offeree" shall mean an individual to whom the Committee has offered ------- the right to acquire Shares under the Plan (other than upon exercise of an Option). (p) "Option" shall mean an ISO or Nonstatutory Option granted under the ------ Plan and entitling the holder to purchase Shares. (q) "Optionee" shall mean an individual or estate who holds an Option or -------- SAR. (r) "Outside Director" shall mean a member of the Board of Directors who ---------------- is not a common-law employee of the Company or of a Subsidiary. Service as an Outside Director shall be considered employment for all purposes of the Plan, except as provided in the second sentence of Section 4(a). (s) "Parent" shall mean any corporation (other than the Company) in an ------ unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a parent commencing as of such date. (t) "Participant" shall mean an individual or estate who holds an Award. ----------- (u) "Plan" shall mean this 2000 Omnibus Equity Incentive Plan of ---- SmartAge.com Corp., as amended from time to time. (v) "Purchase Price" shall mean the consideration for which one Share may -------------- be acquired under the Plan (other than upon exercise of an Option), as specified by the Committee. (w) "Restricted Share" shall mean a Common Share awarded under the Plan. ---------------- (x) "Restricted Share Agreement" shall mean the agreement between the -------------------------- Company and the recipient of a Restricted Share which contains the terms, conditions and restrictions pertaining to such Restricted Shares. (y) "SAR" shall mean a stock appreciation right granted under the Plan. --- (z) "SAR Agreement" shall mean the agreement between the Company and an ------------- Optionee which contains the terms, conditions and restrictions pertaining to his or her SAR. (aa) "Service" shall mean service as an Employee. ------- -3- (bb) "Share" shall mean one share of Stock, as adjusted in accordance with ----- Section 9 (if applicable). (cc) "Stock" shall mean the Common Stock of the Company. ----- (dd) "Stock Option Agreement" shall mean the agreement between the Company ---------------------- and an Optionee which contains the terms, conditions and restrictions pertaining to his Option. (ee) "Stock Purchase Agreement" shall mean the agreement between the ------------------------ Company and an Offeree who acquires Shares under the Plan which contains the terms, conditions and restrictions pertaining to the acquisition of such Shares. (ff) "Stock Unit" shall mean a bookkeeping entry representing the ---------- equivalent of one Common Share, as awarded under the Plan. (gg) "Stock Unit Agreement" shall mean the agreement between the Company -------------------- and the recipient of a Stock Unit which contains the terms, conditions and restrictions pertaining to such Stock Unit. (hh) "Subsidiary" shall mean any corporation, if the Company and/or one or ---------- more other Subsidiaries own not less than fifty percent (50%) of the total combined voting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. (ii) "Total and Permanent Disability" shall mean that the Optionee is ------------------------------ unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than twelve (12) months. SECTION 3. ADMINISTRATION. - --------------------------- (a) Committee Procedures. The Plan shall be administered by the Committee. -------------------- The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board of Directors. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing by all Committee members, shall be valid acts of the Committee. (b) Committee Responsibilities. Subject to the provisions of the Plan, -------------------------- the Committee shall have full authority and discretion to take the following actions: (i) To interpret the Plan and to apply its provisions; (ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan; -4- (iii) To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (iv) To determine when Shares are to be awarded or offered for sale and when Options are to be granted under the Plan; (v) To select the Offerees and Optionees; (vi) To determine the number of Shares to be offered to each Offeree or to be made subject to each Option; (vii) To prescribe the terms and conditions of each award or sale of Shares, including (without limitation) the Purchase Price, the vesting of the award (including accelerating the vesting of awards) and to specify the provisions of the Stock Purchase Agreement relating to such award or sale; (viii) To prescribe the terms and conditions of each Option, including (without limitation) the Exercise Price, the vesting or duration of the Option (including accelerating the vesting of the Option), to determine whether such Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the Stock Option Agreement relating to such Option; (ix) To amend any outstanding Stock Purchase Agreement or Stock Option Agreement, subject to applicable legal restrictions and to the consent of the Offeree or Optionee who entered into such agreement; (x) To prescribe the consideration for the grant of each Option or other right under the Plan and to determine the sufficiency of such consideration; (xi) To determine the disposition of each Option or other right under the Plan in the event of an Optionee's or Offeree's divorce or dissolution of marriage; (xii) To determine whether Options or other rights under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business; (xiii) To correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase Agreement; and (xiv) To take any other actions deemed necessary or advisable for the administration of the Plan. Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Options or other rights under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Offerees, all -5- Optionees, and all persons deriving their rights from an Offeree or Optionee. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan, any Option, or any right to acquire Shares under the Plan. SECTION 4. ELIGIBILITY. - ------------------------ (a) General Rule. Only Employees shall be eligible for the grant of ------------ Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who are employed as common-law employees by the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(6) of the Code are satisfied. (b) Outside Directors. Any other provision of the Plan notwithstanding, ----------------- the participation of Outside Directors in the Plan shall be subject to the following restrictions: (i) Outside Directors shall only be eligible for the grant of Restricted Shares, Stock Units, Nonstatutory Options and SARs. (ii) Each Outside Director shall automatically be granted a Nonstatutory Option to purchase ________ Shares (subject to adjustment under Section 16) as a result of their appointment as an Outside Director on, if after, the effectiveness of the Company's initial public offering of the Stocks. In addition, upon the conclusion of each regular annual meeting of the Company's stockholders occurring after 1999 and following the meeting at which they were appointed, each Outside Director who will continue serving as a member of the Board thereafter shall receive a Nonstatutory Option to purchase ___________ Shares (subject to adjustment under Section 16). All such Nonstatutory Options shall vest and become exercisable at the date of grant; (iii) The Exercise Price of all Nonstatutory Options granted to an Outside Director under this Section 4(b) shall be equal to one hundred percent (100%) of the Fair Market Value of a Share on the date of grant, payable in one of the forms described in Section 9(a), (b) and (d). (iv) All Nonstatutory Options granted to an Outside Director under this Section 4(b) shall terminate on the earliest of (A) the tenth (10th) anniversary of the date of grant of such Options or (B) the date twelve (12) months after the termination of such Outside Director's service for any reason. (c) Limitation On Grants. No Employee shall be granted Options to purchase -------------------- more than eight hundred thousand (800,000) Shares in any fiscal year of the Company. (d) Ten-Percent Stockholders. An Employee who owns more than ten percent ------------------------ (10%) of the total combined voting power of all classes of outstanding stock of the Company or any of its Subsidiaries shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Code section 422(c)(6). -6- (e) Attribution Rules. For purposes of Subsection (d) above, in ----------------- determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for his brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its shareholders, partners or beneficiaries. (f) Outstanding Stock. For purposes of Subsection (d) above, "outstanding ----------------- stock" shall include all stock actually issued and outstanding immediately after the grant. "Outstanding stock" shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person. SECTION 5. STOCK SUBJECT TO PLAN. - ---------------------------------- (a) Basic Limitation. Shares offered under the Plan shall be authorized ---------------- but unissued Shares or treasury Shares. The maximum aggregate number of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed (a) eight hundred thousand (800,000) Shares, plus the additional Common Shares described in Sections (b) and (c). The limitation of this Section 5(a) shall be subject to adjustment pursuant to Section 12. (b) Annual Increase in Shares. As of January 1 of each year, commencing ------------------------- with the year 2001, the aggregate number of Options, SARs, Stock Units and Restricted Shares that may be awarded under the Plan shall automatically increase by a number equal to the lesser of (i) two million (2,000,000) shares, (ii) 5% of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The aggregate number of Shares which may be issued under the Plan shall at all times be subject to adjustment pursuant to Section 16. The number of Shares which are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. (c) Additional Shares. If Restricted Shares or Common Shares issued upon ----------------- the exercise of Options are forfeited, then such Common Shares shall again become available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any other reason before being exercised, then the corresponding Common Shares shall again become available for Awards under the Plan. If Stock Units are settled, then only the number of Common Shares (if any) actually issued in settlement of such Stock Units shall reduce the number available under Section 5(a) and the balance shall again become available for Awards under the Plan. If SARs are exercised, then only the number of Common Shares (if any) actually issued in settlement of such SARs shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the Plan. The foregoing notwithstanding, the aggregate number of Common Shares that may be issued under the Plan upon the exercise of ISOs shall not be increased when Restricted Shares or other Common Shares are forfeited. (d) Dividend Equivalents. Any dividend equivalents paid or credited under -------------------- the Plan shall not be applied against the number of Restricted Shares, Stock Units, Options or SARs available for Awards, whether or not such dividend equivalents are converted into Stock Units. -7- SECTION 6. RESTRICTED SHARES - ------------------------------ (a) Restricted Stock Agreement. Each grant of Restricted Shares under the -------------------------- Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. (b) Payment for Awards. Subject to the following sentence, Restricted ------------------ Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents, or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine. (c) Vesting. Each Award of Restricted Shares may or may not be subject to ------- vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. The Committee may include among such conditions the requirement that the performance of the Company or a business unit of the Company for a specified period of one or more years equal or exceed a target determined in advance by the Committee. Such performance shall be determined by the Company's independent auditors. Such target shall be based on one or more of the criteria set forth in Appendix A. The Committee shall determine such target not later than the 90/th/ day of such period. In no event shall the number of Restricted Shares which are subject to performance based vesting conditions exceed 800,000, subject to adjustment in accordance with Section 16. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant's death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares of thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company. (d) Voting and Dividend Rights. The holders of Restricted Shares awarded -------------------------- under the Plan shall have the same voting, dividend and other rights as the Company's other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid. SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES. - ---------------------------------------------------------- (a) Duration of Offers and Nontransferability of Rights. Any right to --------------------------------------------------- acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Offeree within thirty (30) days after the grant of such right was communicated to him by the Committee. Such right shall not be transferable and shall be exercisable only by the Offeree to whom such right was granted. -8- (b) Purchase Price. The Purchase Price shall be determined by the -------------- Committee at its sole discretion. The Purchase Price shall be payable in one of the forms described in Sections 9(a), (b) or (c). (c) Withholding Taxes. As a condition to the purchase of Shares, the ----------------- Offeree shall make such arrangements as the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such purchase. (d) Restrictions on Transfer of Shares. Any Shares awarded or sold under ---------------------------------- the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares. SECTION 8. TERMS AND CONDITIONS OF OPTIONS. - -------------------------------------------- (a) Stock Option Agreement. Each grant of an Option under the Plan shall ---------------------- be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the Optionee's other compensation. A Stock Option Agreement may provide that a new Option will be granted automatically to the Optionee when he or she exercises a prior Option and pays the Exercise Price in a form described in Section 9. (b) Number of Shares. Each Stock Option Agreement shall specify the number ---------------- of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 16. Options granted to an Optionee in a single fiscal year of the Company shall not cover more than 800,000 Shares. (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise -------------- Price. The Exercise Price of an ISO shall not be less than 100 percent (100%) of the Fair Market Value of a Share on the date of grant, except as otherwise provided in Section 4(d). Subject to the foregoing in this Section 8(c), the Exercise Price under any Option shall be determined by the Committee at its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 9. (d) Withholding Taxes. As a condition to the exercise of an Option, the ----------------- Optionee shall make such arrangements as the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option. (e) Exercisability and Term. Each Stock Option Agreement shall specify the ----------------------- date when all or any installment of the Option is to become exercisable. The Stock Option -9- Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed ten (10) years from the date of grant (five (5) years for Employees described in Section 4(d)). A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee's service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 8(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire. (f) Nontransferability. During an Optionee's lifetime, his Option(s) shall ------------------ be exercisable only by him and shall not be transferable. In the event of an Optionee's death, his Option(s) shall not be transferable other than by will or by the laws of descent and distribution. (g) Exercise of Options Upon Termination of Service. Each Stock Option ----------------------------------------------- Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee's Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors or administrators of the Optionee's estate or any person who has acquired such Option(s) directly from the Optionee by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service. (h) Effect of Change in Control. The Committee may determine, at the time --------------------------- of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company, subject to the following limitations: (i) In the case of an ISO, the acceleration of exercisability shall not occur without the Optionee's written consent. (ii) If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting. (i) Leaves of Absence. An Employee's Service shall cease when such ----------------- Employee ceases to be actively employed by, or a consultant or adviser to, the Company (or any subsidiary) as determined in the sole discretion of the Board of Directors. For purposes of Options, Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to ISO status, an Employee's Service will be treated as terminating ninety (90) days after such Employee went on leave, unless such Employee's right to -10- return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan. (j) No Rights as a Stockholder. An Optionee, or a transferee of an -------------------------- Optionee, shall have no rights as a stockholder with respect to any Shares covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 9. (k) Modification, Extension and Renewal of Options. Within the limitations ---------------------------------------------- of the Plan, the Committee may modify, extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair his rights or increase his obligations under such Option. (l) Restrictions on Transfer of Shares. Any Shares issued upon exercise of ---------------------------------- an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares. (m) Buyout Provisions. The Committee may at any time (a) offer to buy out ----------------- for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish. SECTION 9. PAYMENT FOR SHARES. - ----------------------------- (a) General Rule. The entire Exercise Price of Shares issued under the ------------ Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Subsections (b) through (g) below. (b) Surrender of Stock. To the extent that a Stock Option Agreement so ------------------ provides, payment may be made all or in part by surrendering, or attesting to the ownership of, Shares which have already been owned by the Optionee or his representative for more than twelve (12) months. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes. (c) Services Rendered. At the discretion of the Committee, Shares may be ----------------- awarded under the Plan in consideration of services rendered to the Company or a Subsidiary prior to the award. If Shares are awarded without the payment of a Purchase Price in cash, the Committee -11- shall make a determination (at the time of the award) of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(c). (d) Cashless Exercise. To the extent that a Stock Option Agreement so ----------------- provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price. (e) Exercise/Pledge. To the extent that a Stock Option Agreement so --------------- provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of the aggregate Exercise Price. (f) Promissory Note. To the extent that a Stock Option Agreement so --------------- provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a full-recourse promissory note. However, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents. (g) Other Forms of Payment. To the extent that a Stock Option Agreement so ---------------------- provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules. SECTION 10. STOCK APPRECIATION RIGHTS. - ------------------------------------- (a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced ------------- by a SAR Agreement between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionee's other compensation. (b) Number of Shares. Each SAR Agreement shall specify the number of ---------------- Common Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Section 12. SARs granted to any Optionee in a single calendar year shall in no event pertain to more than 800,000 Common Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Section 12. (c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. A -------------- SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. (d) Exercisability and Term. Each SAR Agreement shall specify the date ----------------------- when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. A SAR Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability or retirement or other events and may provide for expiration -12- prior to the end of its term in the event of the termination of the Optionee's service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control. (e) Effect of Change in Control. The Committee may determine, at the time --------------------------- of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company, subject to the following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting. (f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person ---------------- having the right to exercise the SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Common Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds the Exercise Price. If, on the date when a SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. (g) Modification or Assumption of SARs. Within the limitations of the ---------------------------------- Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the Optionee, may alter or impair his or her rights or obligations under such SAR. SECTION 11. STOCK UNITS. - ----------------------- (a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall -------------------- be evidenced by a Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient's other compensation. (b) Payment for Awards. To the extent that an Award is granted in the form ------------------ of Stock Units, no cash consideration shall be required of the Award recipients. -13- (c) Vesting Conditions. Each Award of Stock Units may or may not be ------------------ subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant's death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company, except as provided in the next following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting. (d) Voting and Dividend Rights. The holders of Stock Units shall have no -------------------------- voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee's discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Common Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach. (e) Form and Time of Settlement of Stock Units. Settlement of vested Stock ------------------------------------------ Units may be made in the form of (a) cash, (b) Common Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or in installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12. (f) Death of Recipient. Any Stock Units Award that becomes payable after ------------------ the recipient's death shall be distributed to the recipient's beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipient's death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipient's death shall be distributed to the recipient's estate. -14- (g) Creditors' Rights. A holder of Stock Units shall have no rights other ----------------- than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. SECTION 12. PROTECTION AGAINST DILUTION. - --------------------------------------- (a) Adjustments. In the event of a subdivision of the outstanding Common ----------- Shares, a declaration of a dividend payable in Common Shares, a declaration of a dividend payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of: (i) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section 5; (ii) The limitations set forth in Sections 8(b) and 10(b); (iii) The number of NSOs to be granted to Outside Directors under Section 4(b); (iv) The number of Common Shares covered by each outstanding Option and SAR; (v) The Exercise Price under each outstanding Option and SAR; or (vi) The number of Stock Units included in any prior Award which has not yet been settled. Except as provided in this Section 12, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. (b) Dissolution or Liquidation. To the extent not previously exercised or -------------------------- settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. (c) Reorganizations. In the event that the Company is a party to a merger --------------- or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for: (i) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; (ii) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; -15- (iii) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; (iv) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or (v) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards. SECTION 13. DEFERRAL OF AWARDS. - ------------------------------ The Committee (in its sole discretion) may permit or require a Participant to: (a) Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company's books; (b) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or (c) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company's books. Such amounts shall be determined by reference to the Fair Market Value of such Common Shares as of the date when they otherwise would have been delivered to such Participant. A deferred compensation account established under this Section 13 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13. SECTION 14. AWARDS UNDER OTHER PLANS. - ------------------------------------ The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Common Shares available under Section 5. SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES. - ---------------------------------------------------- (a) Effective Date. No provision of this Section 15 shall be effective -------------- unless and until the Board has determined to implement such provision. -16- (b) Elections to Receive NSOs, Restricted Shares or Stock Units. An ----------------------------------------------------------- Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 15 shall be filed with the Company on the prescribed form. (c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number ---------------------------------------------------------- of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, Restricted Shares or Stock Units shall also be determined by the Board. SECTION 16. ADJUSTMENT OF SHARES. - -------------------------------- (a) General. In the event of a subdivision of the outstanding Stock, a ------- declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the value of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization or a similar occurrence, the Committee shall make appropriate adjustments in one or more of (i) the number of Shares available for future grants under Section 5, (ii) the number of Shares available for grants under Section 4(c), (iii) the number of Shares covered by each outstanding Option, (iv) the Exercise Price under each outstanding Option, (v) the number of shares covered by each outstanding award or (vi) the Purchase Price of each outstanding award. (b) Reorganizations. In the event that the Company is a party to a merger --------------- or other reorganization, outstanding Options shall be subject to the agreement of merger or reorganization. Such agreement may provide for the assumption of outstanding Options by the surviving corporation or its parent or for their continuation by the Company (if the Company is a surviving corporation); provided, however, that if assumption or continuation of the outstanding Options is not provided by such agreement then the Committee shall have the option of offering the payment of a cash settlement equal to the difference between the amount to be paid for one Share under such agreement and the Exercise Price, in all cases without the Optionees' consent. (c) Reservation of Rights. Except as provided in this Section 16, an --------------------- Optionee or Offeree shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. -17- SECTION 17. LEGAL AND REGULATORY REQUIREMENTS. - --------------------------------------------- Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the Company's securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable. SECTION 18. WITHHOLDING TAXES. - ----------------------------- (a) General. To the extent required by applicable federal, state, local or ------- foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied. (b) Share Withholding. The Committee may permit a Participant to satisfy ----------------- all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or she previously acquired. Such Common Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. SECTION 19. LIMITATION ON PARACHUTE PAYMENTS. - -------------------------------------------- (a) Scope of Limitation. This Section 19 shall apply to an Award only if: ------------------- (i) The independent auditors most recently selected by the Board (the "Auditors") determine that the after-tax value of such Award to the Participant, taking into account the effect of all federal, state and local income taxes, employment taxes and excise taxes applicable to the Participant (including the excise tax under section 4999 of the Code), will be greater after the application of this Section 19 than it was before the application of this Section 19; or (ii) The Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall be subject to this Section 19 (regardless of the after-tax value of such Award to the Participant). (b) Supersedes Other Provisions. If this Section 19 applies to an --------------------------- Award, it shall supersede any contrary provision of the Plan or of any Award granted under the Plan. SECTION 20. NO EMPLOYMENT RIGHTS. - -------------------------------- No provision of the Plan, nor any right or Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee. -18- The Company and its Subsidiaries reserve the right to terminate any person's Service at any time and for any reason, with or without notice. SECTION 21. DURATION AND AMENDMENTS. - ----------------------------------- (a) Term of the Plan. The amended and restated Plan, as set forth herein, ---------------- shall terminate automatically on the tenth anniversary of its adoption and may be terminated on any earlier date pursuant to Subsection (b) below. (b) Right to Amend or Terminate the Plan. The Board of Directors may amend ------------------------------------ the Plan at any time and from time to time. Rights and obligations under any Option granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of the person to whom the Option was granted. An amendment of the Plan shall be subject to the approval of the Company's stockholders only to the extent required by applicable laws, regulations or rules. (c) Effect of Amendment or Termination. No Shares shall be issued or sold ---------------------------------- under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan. SECTION 22. EXECUTION. - --------------------- To record the adoption of the amended and restated Plan by the Board of Directors effective as of ______________ __, 2000, the Company has caused its authorized officer to execute the same. CORP. SMARTAGE.COM By _______________________________ William Lohse Chief Executive Officer -19- EX-10.3 12 2000 EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.3 SMARTAGE.COM CORP. 2000 EMPLOYEE STOCK PURCHASE PLAN (Adopted by the Board on March __, 2000) TABLE OF CONTENTS
Page ---- SECTION 1 Purpose Of The Plan.............................................. 1 SECTION 2 Definitions...................................................... 1 (a) "Accumulation Period............................................. 1 (b) "Board".......................................................... 1 (c) "Code"........................................................... 1 (d) "Committee"...................................................... 1 (e) "Company"........................................................ 1 (f) "Compensation"................................................... 1 (g) "Corporate Reorganization"....................................... 1 (h) "Eligible Employee".............................................. 2 (i) "Exchange Act"................................................... 2 (j) "Fair Market Value".............................................. 2 (k) "IPO"............................................................ 2 (l) "Offering Period"................................................ 2 (m) "Participant".................................................... 2 (n) "Participating Company".......................................... 2 (o) "Plan"........................................................... 3 (p) "Plan Account"................................................... 3 (q) "Purchase Price"................................................. 3 (r) "Stock".......................................................... 3 (s) "Subsidiary"..................................................... 3 SECTION 3 Administration Of The Plan....................................... 3 (a) Committee Composition............................................ 3 (b) Committee Responsibilities....................................... 3 SECTION 4 Enrollment And Participation..................................... 3 (a) Offering Periods................................................. 3 (b) Accumulation Periods............................................. 3 (c) Enrollment....................................................... 3 (d) Duration of Participation........................................ 4 (e) Applicable Offering Period....................................... 4 SECTION 5 Employee Contributions........................................... 4 (a) Frequency of Payroll Deductions.................................. 4 (b) Amount of Payroll Deductions..................................... 4 (c) Changing Withholding Rate........................................ 4 (d) Discontinuing Payroll Deductions................................. 5 (e) Limit on Number of Elections..................................... 5 SECTION 6 Withdrawal From The Plan......................................... 5 (a) Withdrawal....................................................... 5
i (b) Re-enrollment After Withdrawal................................... 5 SECTION 7 Change In Employment Status...................................... 5 (a) Termination of Employment........................................ 5 (b) Leave of Absence................................................. 5 (c) Death............................................................ 6 SECTION 8 Plan Accounts And Purchase Of Shares............................. 6 (a) Plan Accounts.................................................... 6 (b) Purchase Price................................................... 6 (c) Number of Shares Purchased....................................... 6 (d) Available Shares Insufficient.................................... 6 (e) Issuance of Stock................................................ 7 (f) Unused Cash Balances............................................. 7 (g) Stockholder Approval............................................. 7 SECTION 9 Limitations On Stock Ownership................................... 7 (a) Five Percent Limit............................................... 7 (b) Dollar Limit..................................................... 7 SECTION 10 Rights Not Transferable.......................................... 8 SECTION 11 No Rights As An Employee......................................... 8 SECTION 12 No Rights As A Stockholder....................................... 8 SECTION 13 Securities Law Requirements...................................... 8 SECTION 14 Stock Offered Under The Plan..................................... 9 (a) Authorized Shares................................................ 9 (b) Antidilution Adjustments......................................... 9 (c) Reorganizations.................................................. 9 SECTION 15 Amendment Or Discontinuance...................................... 9 SECTION 16 Execution........................................................ 10
ii SMARTAGE.COM CORP. 2000 EMPLOYEE STOCK PURCHASE PLAN SECTION 1 --------- Purpose Of The Plan ------------------- The Plan was adopted by the Board on March __, 2000, effective as of the date of the IPO. The purpose of the Plan is to provide Eligible Employees with an opportunity to increase their proprietary interest in the success of the Company by purchasing Stock from the Company on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under section 423 of the Code. SECTION 2 --------- Definitions ----------- (a) "Accumulation Period" means a six (6) month period during which ------------------- contributions may be made toward the purchase of Stock under the Plan, as determined pursuant to Section 4(b). (b) "Board" means the Board of Directors of the Company, as constituted ----- from time to time. (c) "Code" means the Internal Revenue Code of 1986, as amended. ----- (d) "Committee" means a committee of the Board, as described in Section 3. --------- (e) "Company" means SmartAge.com Corp., a Delaware Corporation. ------- (f) "Compensation" means (i) the total compensation paid in cash to a ------------ Participant by a Participating Company, including salaries, wages, bonuses, incentive compensation, commissions, overtime pay and shift premiums, plus (ii) any pre-tax contributions made by the Participant under section 401(k) or 125 of the Code. "Compensation" shall exclude all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation. (g) "Corporate Reorganization" means: ------------------------ (i) The consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or (ii) The sale, transfer or other disposition of all or substantially all of the Company's assets or the complete liquidation or dissolution of the Company. 1 (h) "Eligible Employee" means any employee of a Participating Company who ----------------- meets both of the following requirements: (i) His or her customary employment is for more than five (5) months per calendar year and for more than 20 hours per week; and (ii) He or she has been an employee of a Participating Company for not less than __________ (__) consecutive months. The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ (j) "Fair Market Value" means the market price of Stock, determined by the ----------------- Committee as follows: (i) If Stock was traded on The Nasdaq National Market on the date in question, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by The Nasdaq National Market; (ii) If Stock was traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; or (iii) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in the Wall Street Journal or as reported ------------------- directly to the Company by Nasdaq or a stock exchange. Such determination shall be conclusive and binding on all persons. (k) "IPO" means the initial offering of Stock to the public pursuant to a --- registration statement filed by the Company with the Securities and Exchange Commission. (l) "Offering Period" means a twenty-four (24) month period with respect --------------- to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 4(a). (m) "Participant" means an Eligible Employee who elects to participate in ----------- the Plan, as provided in Section 4(c). (n) "Participating Company" means (i) the Company and (ii) each present or --------------------- future Subsidiary designated by the Committee as a Participating Company. 2 (o) "Plan" means this SmartAge.com Corp. 2000 Employee Stock Purchase ---- Plan, as it may be amended from time to time. (p) "Plan Account" means the account established for each Participant ------------ pursuant to Section 8(a). (q) "Purchase Price" means the price at which Participants may purchase -------------- Stock under the Plan, as determined pursuant to Section 8(b). (r) "Stock" means the Common Stock of the Company. ----- (s) "Subsidiary" means any corporation (other than the Company) in an ---------- unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. SECTION 3 --------- Administration Of The Plan -------------------------- (a) Committee Composition. The Plan shall be administered by the --------------------- Committee. The Committee shall consist exclusively of one or more directors of the Company, who shall be appointed by the Board. (b) Committee Responsibilities. The Committee shall interpret the Plan -------------------------- and make all other policy decisions relating to the operation of the Plan. The Committee may adopt such rules, guidelines and forms as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. SECTION 4 --------- Enrollment And Participation ---------------------------- (a) Offering Periods. While the Plan is in effect, two Offering Periods ---------------- shall commence in each calendar year. The Offering Periods shall consist of the twenty-four (24) month periods commencing on each January 1 and July 1, except that the first Offering Period shall commence on the date of the IPO and end on December 31, 2001. (b) Accumulation Periods. While the Plan is in effect, two Accumulation -------------------- Periods shall commence in each calendar year. The Accumulation Periods shall consist of the six (6) month periods commencing on January 1 and July 1, except that the first Accumulation Period shall commence on the date of the IPO and end on December 31, 2000. (c) Enrollment. Any individual who, on the day preceding the first day ---------- of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by executing the enrollment form prescribed for this purpose by the Committee. The enrollment form shall be filed with the Company at the prescribed location not later than fifteen (15) days prior to the commencement of such Offering Period. 3 (d) Duration of Participation. Once enrolled in the Plan, a Participant ------------------------- shall continue to participate in the Plan until he or she ceases to be an Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end of the Offering Period in which his or her employee contributions were discontinued under Section 5(d) or 9(b). A Participant who discontinued employee contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section 6(a) may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Subsection (c) above. A Participant whose employee contributions were discontinued automatically under Section 9(b) shall automatically resume participation at the beginning of the earliest Offering Period ending in the next calendar year, if he or she then is an Eligible Employee. (e) Applicable Offering Period. For purposes of calculating the purchase -------------------------- price under Section 8(b), the applicable Offering Period shall be determined as follows: (i) Once a Participant is enrolled in the Plan for an Offering Period, such Offering Period shall continue to apply to him or her until the earliest of: (A) the end of such Offering Period; (B) the end of his or her participation under Subsection (d) above; or (C) re-enrollment in a subsequent Offering Period under Paragraph (ii) below. (ii) In the event that the Fair Market Value of Stock on the last trading day before the commencement of the Offering Period in which the Participant is enrolled is higher than on the last trading day before the commencement of any subsequent Offering Period, the Participant shall automatically be re-enrolled for such subsequent Offering Period. (iii) When a Participant reaches the end of an Offering Period but his or her participation is to continue, then such Participant shall automatically be re-enrolled for the Offering Period that commences immediately after the end of the prior Offering Period. SECTION 5 --------- Employee Contributions ---------------------- (a) Frequency of Payroll Deductions. A Participant may purchase shares ------------------------------- of Stock under the Plan solely by means of payroll deductions. Payroll deductions, as designated by the Participant pursuant to Subsection (b) below, shall occur on each payday during participation in the Plan. (b) Amount of Payroll Deductions. An Eligible Employee shall designate ---------------------------- on the enrollment form the portion of his or her Compensation that he or she elects to have withheld for the purchase of Stock. Such portion shall be a whole percentage of the Eligible Employee's Compensation, but not less than one percent (1%) nor more than fifteen percent (15%). (c) Changing Withholding Rate. If a Participant wishes to change the ------------------------- rate of payroll withholding, he or she may do so by filing a new enrollment form with the Company at the prescribed location at any time. The new withholding rate shall be effective as soon as 4 reasonably practicable after such form has been received by the Company. The new withholding rate shall be a whole percentage of the Eligible Employee's Compensation, but not less than one percent (1%) nor more than fifteen percent (15%). (d) Discontinuing Payroll Deductions. If a Participant wishes to -------------------------------- discontinue employee contributions entirely, he or she may do so by filing a new enrollment form with the Company at the prescribed location at any time. Payroll withholding shall cease as soon as reasonably practicable after such form has been received by the Company. (In addition, employee contributions may be discontinued automatically pursuant to Section 9(b).) A Participant who has discontinued employee contributions may resume such contributions by filing a new enrollment form with the Company at the prescribed location. Payroll withholding shall resume as soon as reasonably practicable after such form has been received by the Company. (e) Limit on Number of Elections. No Participant shall make more than ---------------------------- two elections under Subsection (c) or (d) above during any Offering Period. SECTION 6 --------- Withdrawal From The Plan ------------------------ (a) Withdrawal. A Participant may elect to withdraw from the Plan by ---------- filing the prescribed form with the Company at the prescribed location at any time before the last day of an Accumulation Period. As soon as reasonably practicable thereafter, payroll deductions shall cease and the entire amount credited to the Participant's Plan Account shall be refunded to him or her in cash, without interest. No partial withdrawals shall be permitted. (b) Re-enrollment After Withdrawal. A former Participant who has ------------------------------ withdrawn from the Plan shall not be a Participant until he or she re-enrolls in the Plan under Section 4(c). Re-enrollment may be effective only at the commencement of an Offering Period. SECTION 7 --------- Change In Employment Status --------------------------- (a) Termination of Employment. Termination of employment as an Eligible ------------------------- Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 6(a). (A transfer from one Participating Company to another shall not be treated as a termination of employment.) (b) Leave of Absence. For purposes of the Plan, employment shall not be ---------------- deemed to terminate when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. Employment, however, shall be deemed to terminate ninety (90) days after the Participant goes on a leave, unless a contract or statute guarantees his or her right to return to work. Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work. 5 (c) Death. In the event of the Participant's death, the amount credited ----- to his or her Plan Account shall be paid to a beneficiary designated by him or her for this purpose on the prescribed form or, if none, to the Participant's estate. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant's death. SECTION 8 --------- Plan Accounts And Purchase Of Shares ------------------------------------ (a) Plan Accounts. The Company shall maintain a Plan Account on its books ------------- in the name of each Participant. Whenever an amount is deducted from the Participant's Compensation under the Plan, such amount shall be credited to the Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Company's general assets and applied to general corporate purposes. No interest shall be credited to Plan Accounts. (b) Purchase Price. The Purchase Price for each share of Stock purchased -------------- at the close of an Accumulation Period shall be the lower of: (i) Eighty-five percent (85%) of the Fair Market Value of such share on the last trading day in such Accumulation Period; or (ii) Eighty-five percent (85%) of the Fair Market Value of such share on the last trading day before the commencement of the applicable Offering Period (as determined under Section 4(e)) or, in the case of the first Offering Period under the Plan, eighty-five percent (85%) of the price at which one share of Stock is offered to the public in the IPO. (c) Number of Shares Purchased. As of the last day of each Accumulation -------------------------- Period, each Participant shall be deemed to have elected to purchase the number of shares of Stock calculated in accordance with this Subsection (c), unless the Participant has previously elected to withdraw from the Plan in accordance with Section 6(a). The amount then in the Participant's Plan Account shall be divided by the Purchase Price, and the number of shares that results shall be purchased from the Company with the funds in the Participant's Plan Account. The foregoing notwithstanding, no Participant shall purchase more than _____ shares of Stock with respect to any Accumulation Period nor more than the amounts of Stock set forth in Sections 9(b) and 14(a). The Committee may determine with respect to all Participants that any fractional share, as calculated under this Subsection (c), shall be (i) rounded down to the next lower whole share or (ii) credited as a fractional share. (d) Available Shares Insufficient. In the event that the aggregate ----------------------------- number of shares that all Participants elect to purchase during an Accumulation Period exceeds the maximum number of shares remaining available for issuance under Section 14(a), then the number of shares to which each Participant is entitled shall be determined by multiplying the number of shares available for issuance by a fraction, the numerator of which is the number of shares that such Participant has elected to purchase and the denominator of which is the number of shares that all Participants have elected to purchase. 6 (e) Issuance of Stock. Certificates representing the shares of Stock ----------------- purchased by a Participant under the Plan shall be issued to him or her as soon as reasonably practicable after the close of the applicable Accumulation Period, except that the Committee may determine that such shares shall be held for each Participant's benefit by a broker designated by the Committee (unless the Participant has elected that certificates be issued to him or her). Shares may be registered in the name of the Participant or jointly in the name of the Participant and his or her spouse as joint tenants with right of survivorship or as community property. (f) Unused Cash Balances. An amount remaining in the Participant's Plan -------------------- Account that represents the Purchase Price for any fractional share shall be carried over in the Participant's Plan Account to the next Accumulation Period. Any amount remaining in the Participant's Plan Account that represents the Purchase Price for whole shares that could not be purchased by reason of Subsection (c) above, Section 9(b) or Section 14(a) shall be refunded to the Participant in cash, without interest. (g) Stockholder Approval. Any other provision of the Plan -------------------- notwithstanding, no shares of Stock shall be purchased under the Plan unless and until the Company's stockholders have approved the adoption of the Plan. SECTION 9 --------- Limitations On Stock Ownership ------------------------------ (a) Five Percent Limit. Any other provision of the Plan notwithstanding, ------------------ no Participant shall be granted a right to purchase Stock under the Plan if such Participant, immediately after his or her election to purchase such Stock, would own stock possessing more than five percent (5%) of the total combined voting power or value of all classes of stock of the Company or any parent or Subsidiary of the Company. For purposes of this Subsection (a), the following rules shall apply: (i) Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code; (ii) Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and (iii) Each Participant shall be deemed to have the right to purchase _____shares of Stock under this Plan with respect to each Accumulation Period. (b) Dollar Limit. Any other provision of the Plan notwithstanding, no ------------ Participant shall purchase Stock with a Fair Market Value in excess of the following limit: Any other provision of the Plan notwithstanding, no Participant shall purchase Stock with a Fair Market Value in excess of $______ per calendar year (under this Plan and all other employee stock purchase plans of the Company or any parent or Subsidiary of the Company). 7 For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined in each case as of the beginning of the Offering Period in which such Stock is purchased. Employee stock purchase plans not described in section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then his or her employee contributions shall automatically be discontinued and shall resume at the beginning of the earliest Accumulation Period ending in the next calendar year (if he or she then is an Eligible Employee). SECTION 10 ---------- Rights Not Transferable ----------------------- The rights of any Participant under the Plan, or any Participant's interest in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by beneficiary designation or the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by beneficiary designation or the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 6(a). SECTION 11 ---------- No Rights As An Employee ------------------------ Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause. SECTION 12 ---------- No Rights As A Stockholder -------------------------- A Participant shall have no rights as a stockholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the last day of the applicable Offering Period. SECTION 13 ---------- Securities Law Requirements --------------------------- Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company's securities may then be traded. 8 SECTION 14 ---------- Stock Offered Under The Plan ---------------------------- (a) Authorized Shares. The maximum aggregate number of shares of Stock ----------------- available for purchase under the Plan is one million five hundred thousand (1,500,000), plus an annual increase to be added on the first day of the Company's fiscal year beginning in 2001 equal to the lesser of (i) ___________ (__________) shares, (ii) one percent (1%) of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The aggregate number of Shares available for purchase under the Plan shall at all times be subject to adjustment pursuant to Section 14. (b) Antidilution Adjustments. The aggregate number of shares of Stock ------------------------ offered under the Plan, the _____ share limitation described in Section 8(c) and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Committee for any increase or decrease in the number of outstanding shares of Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend, any other increase or decrease in such shares effected without receipt or payment of consideration by the Company, the distribution of the shares of a Subsidiary to the Company's stockholders or a similar event. (c) Reorganizations. Any other provision of the Plan notwithstanding, --------------- immediately prior to the effective time of a Corporate Reorganization, the Offering Period then in progress shall terminate and shares shall be purchased pursuant to Section 8, unless the Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation. The Plan shall in no event be construed to restrict in any way the Company's right to undertake a dissolution, liquidation, merger, consolidation or other reorganization. SECTION 15 ---------- Amendment Or Discontinuance --------------------------- The Board shall have the right to amend, suspend or terminate the Plan at any time and without notice. Except as provided in Section 14, any increase in the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the stockholders of the Company. In addition, any other amendment of the Plan shall be subject to approval by a vote of the stockholders of the Company to the extent required by an applicable law or regulation. 9 SECTION 16 ---------- Execution --------- To record the adoption of the Plan by the Board on March __, 2000, the Company has caused its authorized officer to execute the same. SMARTAGE.COM CORP. By Title 10 EX-10.4 13 INDEMNIFICATION AGREEMENT EXHIBIT 10.4 EXHIBIT A SMARTAGE.COM CORP. INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (the "Agreement"), effective as of _______, 2000, by and between, SMARTAGE.COM CORP., a Delaware corporation (the ----------------- "Company"), and _____________________ (the "Indemnitee"). 1. Indemnification. The Company shall indemnify Indemnitee to the --------------- fullest extent permitted by section 145 of the Delaware General Corporation Law, as amended (the "Delaware Law"), the Certificate of Incorporation (the "Certificate") and the Bylaws of the Company (the "Bylaws") in effect on the date hereof or as such Law, Certificate, and Bylaws may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader indemnification rights than the Law, Certificate or Bylaws permitted the Company to provide before such amendment), if and whenever he is or was a party or is threatened to be made a party to any Proceeding, against Expenses and Liabilities actually and reasonably incurred by Indemnitee or on his behalf in connection with the investigation, defense, settlement or appeal of such Proceeding. The right to indemnification conferred herein shall be presumed to have been relied upon by Indemnitee in serving or continuing to serve the Company as an officer or director and shall be enforceable as a contract right. Without in any way diminishing the scope of the indemnification provided by this Section 1, the Company will indemnify Indemnitee if Indemnitee: (a) was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact Indemnitee is or was an Agent, against Expenses and Liabilities actually and reasonably incurred in connection with such Proceeding if Indemnitee acted in good faith and in a manner reasonably believed to be in the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company or that Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful, or (b) was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was an agent of the Company, against Expenses and Liabilities actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action if Indemnitee acted in good faith, in a manner Indemnitee believed to be in the best interests of the Company and its stockholders. (c) to the extent that Indemnitee has been successful on the merits in defense of any Proceeding referred to in clause (a) or (b) above or in defense of any action, claim, issue or matter therein, Indemnitee shall be indemnified against Expenses actually and reasonably incurred by Indemnitee in connection therewith. -1- In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Indemnitee provided under this Agreement shall include those rights set forth below. 2. Advancement of Expenses and Costs. All reasonable Expenses incurred by --------------------------------- or on behalf of Indemnitee shall be advanced by the Company to Indemnitee within thirty (30) calendar days after the receipt by the Company of a statement or statements from Indemnitee requiring an advance or advances of Expenses from time to time, whether prior to or after final disposition of such Proceeding. The statement or statements shall reasonably evidence the Expenses incurred or to be incurred by him in connection therewith. If required by law at the time of such advance, Indemnitee hereby undertakes to repay the amounts advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified pursuant to the terms of this Agreement. 3. Other Rights to Indemnification. Indemnitee's rights of ------------------------------- indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may now or in the future be entitled under applicable law, the Certificate, Bylaws, agreement, vote of stockholders, resolution of directors, or otherwise. 4. Limitations on Indemnity. Any provision herein to the contrary ------------------------ notwithstanding, the Company shall not be obligated pursuant to this Agreement: (a) Insured Claims. To make any payment to Indemnitee to the extent that -------------- Indemnitee is indemnified other than pursuant to this Agreement or to the extent that Indemnitee is reimbursed pursuant to any director and officer insurance or other insurance the Company may maintain for Indemnitee's benefit; provided, however, that notwithstanding the availability of such insurance, Indemnitee may claim indemnification pursuant to this Agreement by assigning to the Company, at its request, any claims under such insurance to the extent Indemnitee is paid by the Company. (b) Claims Initiated by Indemnitee. To indemnify or advance expenses to ------------------------------ Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Delaware Law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit. (c) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and -------------------------- the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 5. Duration of Agreement. This Agreement shall continue so long as --------------------- Indemnitee shall be subject to any possible Proceeding by reason of the fact that he is or was an Agent. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors, administrators or other legal representatives. -2- 6. Miscellaneous. ------------- (a) Procedure. Any indemnification and advances provided for in Sections --------- 1 and 2 shall be made no later than thirty (30) calendar days, respectively, after receipt of a written request therefor of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company's Certificate or Bylaws providing for indemnification, is not paid in full by the Company within such period, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 6(l) of this Agreement, Indemnitee shall also be entitled to be paid for the Expenses (including attorney's fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in connection with any action or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 2 unless and until such defense is finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties' intention that if the Company contests Indemnitee's right to indemnification, the Company shall be entitled to select the forum in which Indemnitee's entitlement to indemnification will be heard. The Company shall notify the Indemnitee in writing as to the forum selected, which selection shall be from among the following: (i) The stockholders of the Company; (ii) A quorum of the Board consisting of Disinterested Directors; (iii) Independent Counsel selected by Indemnitee, and reasonably approved by the Board, which counsel shall make the determination in a written opinion; or (iv) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by Indemnitee and the last of whom is selected by the first two arbitrators so selected; or if for any reason three arbitrators are not selected within thirty (30) days after the appointment of the first arbitrator, then selection of additional arbitrators to complete the three person panel shall be made by the American Arbitration Association under its commercial arbitration rules now in effect. Neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholder) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. -3- (b) Mutual Acknowledgment. Both the Company and Indemnitee acknowledge --------------------- that in certain instances, federal or state law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. (c) Severability. If any provision or provisions of this Agreement shall ------------ be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. (d) Identical Counterparts. This Agreement may be executed in one or more ---------------------- counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. (e) Interpretation of Agreement. It is understood that the parties hereto --------------------------- intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law. (f) Headings. The headings of the paragraphs of this Agreement are -------- inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. (g) Definitions. For purposes of this Agreement: ----------- (i) "Agent" shall mean any person who is or was a director, ----- officer, employee, agent, fiduciary or other official of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; or was a director, officer, employee, agent, fiduciary or other official of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee, agent, fiduciary or other official of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation. -4- (ii) "Expenses" shall include all direct and indirect costs -------- (including, without limitation, attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Indemnitee for which he is otherwise not compensated by the Company or any third party) actually and reasonably incurred in connection with either the investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a Proceeding. (iii) "Liabilities" shall mean liabilities of any type ----------- whatsoever, including, but not limited to, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement of a Proceeding. (iv) "Proceeding" shall mean any action, suit arbitration, ---------- alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative to which Indemnitee is or was a party or is threatened to be a party by reason of the fact that he is or was an Agent or by reason of anything done or not done by Indemnitee in such capacity. (v) "Delaware Law" shall mean Title 8 of the Delaware Code ------------ as amended and in effect from time to time or any successor or other statutes of Delaware having similar import and effect. (h) Pronouns. Use of the masculine pronoun shall be deemed to include -------- usage of the feminine pronoun where appropriate. (i) Modification and Waiver. No supplement, modification or amendment of ----------------------- this Agreement shall be binding unless executed in writing by both of the parties to this Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. (j) Notice by Indemnitee and Defense of Claims. Indemnitee agrees ------------------------------------------ promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter which may be subject to indemnification covered hereunder, either civil, criminal or investigative; but the omission so to notify the Company will not relieve it from any liability which it may have to Indemnitee if such omission does not prejudice the Company's rights and if such omission does prejudice the Company's rights, it will relieve the Company from liability only to the extent of such prejudice; nor will such omission, in any event, relieve the Company from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof: -5- (i) The Company will be entitled to participate therein at its own expense; and (ii) Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election so to assume the defense thereof, the Company will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof except as otherwise provided below. Indemnitee shall have the right to employ his counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (A) the employment of counsel by Indemnitee has been authorized by the Company, or (B) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company, or (C) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense. (iii) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Company nor Indemnitee will unreasonably withhold their consent to any proposed settlement. (k) Notices. All notices, requests, demands and other communications ------- hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee: _____________________ _____________________ _____________________ If to Company: SMARTAGE.COM CORP. 3450 California Street San Francisco, CA 94118 Attention: President or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. -6- (l) Attorneys' Fees. In the event that any action is instituted by --------------- Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys' fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys' fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. (m) Consent to Jurisdiction. The Company and Indemnitee each hereby ----------------------- irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware. (n) Partial Indemnification. If Indemnitee is entitled under any ----------------------- provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by him in the investigation, defense, appeal or settlement of any Proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled. (o) Governing Law; Binding Effect. The parties agree that this Agreement ----------------------------- shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. This Agreement shall be binding upon Indemnitee and upon the Company, its successors and assigns, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SMARTAGE.COM CORP., a Delaware corporation By __________________________________________ Its _________________________________________ _____________________________________________ Indemnitee -7- EX-10.5 14 EMPLOYMENT AGMT WITH W. LOHSE EXHIBIT 10.5 AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into on March 9, 2000 by and between SMARTAGE.COM CORP. ("Corporation") and WILLIAM LOHSE ("Lohse"). The Corporation and Lohse agree as follows: 1. DEFINITIONS. 1.1 "Agreement" means only the agreement contained in this document and as modified in writing pursuant to Section 8.6 herein. 1.2 "Corporation" means SmartAge Corp. and any successor to its business or assets as provided by Section 8.3 herein or which becomes bound by this Agreement by operation of law. 1.3 "Board" means the Board of Directors of the Corporation. 1.4 "Cause" means acts of Lohse which: (i) breach Lohse's fiduciary duty as a Board member or Officer of the Corporation; (ii) violate the securities law involving an intent to obtain personal or family profit; (iii) involve or result in a criminal conviction resulting in incarceration; or (iv) consist of committing an act of fraud against, or the knowing misappropriation of property belonging to, Corporation either of which causes material harm to the Corporation. A termination for any other reason shall be a termination "Without Cause." 1.5 "Change in Control" means a change in the ownership or control of the Corporation effected through any of the following transactions: 1.5.1 The acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders, or 1.5.2 A merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 1.5.3 The sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. Provided however that a Change in Control shall not occur as a result of the sale in an Initial Public Offering or subsequent secondary offering of Corporation's securities which result in more than fifty percent (50%) of the common stock being held by others. -1- 1.6 "Disability" means any physical or mental illness preventing Lohse from performing services for the Corporation for one hundred twenty (120) consecutive calendar days. Disability shall be deemed to have occurred only after the following procedure has been satisfied: If within thirty (30) days after written notice of proposed Termination of this Agreement for Disability is given to Lohse by Corporation, Lohse has not been able to resume performance of his duties, Corporation may terminate this Agreement by giving written notice of Termination of this Agreement for Disability. Such notice may be given by Corporation following Lohse's inability to perform services by reason of physical or mental disability for ninety (90) consecutive calendar days. 1.7 "Effective Date" means March 9, 2000. 1.8 "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a limited liability partnership, a trust, any unincorporated organization or a government or political subdivision thereof. 1.9 "Termination" or "Terminated" means the termination of this Agreement and Lohse's services thereunder. A Termination affected by the Corporation or Board or their successors may either be "For Cause," as defined in Section 1.4 herein, or "Without Cause" which would include any Termination by the Corporation or Board or their successors that is not a Termination For Cause. A Termination effected by Lohse may either be for "Good Reason" as defined in Section 5.5.1 herein, or Without Good Reason which would include any Termination affected by Lohse other than a Termination for Good Reason. 1.10 "Monthly Payment" shall mean the amount set forth in Paragraph 4 below. 1.11 "Base Period" means the period of time prior to the Termination that is either (a) the twenty-four (24) month period preceding the month in which the Termination takes effect, or (b) if Lohse provides services for fewer than twenty-four (24) months, the period of time between the Effective Date and the Termination. 2. POSITION AND DUTIES. 2.1 Lohse shall serve the Corporation as its President and Chief Executive Officer reporting to the Board, of which Lohse is currently a member. The services to be performed by Lohse shall include, but not be limited to, any services consistent with his position which may be assigned to Lohse from time to time by the Board. 2.2 Lohse may perform services under this Contract at diverse locations including, but not limited to, Lohse's residence in Zephyr Cove, Nevada. Lohse may choose to work primarily out of the State of California. 2.3 As President and Chief Executive Officer, Lohse will devote his best efforts to perform services for the Corporation. Although Lohse may perform services for other organizations, subject to the limitations is Section 2.4 below, Lohse must not accept any other work that would jeopardize his ability to perform services to the best of his ability under this Contract. -2- 2.4 Lohse will not engage in competitive activity with the Corporation including, but not limited to, performing services for any competitor of the Corporation. 3. TERM. 3.1 The term of this Agreement shall commence as of the Effective Date and shall continue until the date this Agreement is Terminated For Cause, Without Cause, for Good Reason, Without Good Reason, Disability or death of Lohse. Either Corporation or Lohse may terminate this Agreement and Lohse's services hereunder at any time for any reason, with or without cause, by providing thirty (30) days written notice of termination to the other party. 4. COMPENSATION. 4.1 Monthly Payment. Lohse shall be paid under this Agreement as follows: --------------- 4.1.1 Lohse will be paid $12,500 per month. This payment will be made by Corporation to Lohse on the first business day of the month for services rendered in the preceding month. Effective upon the effective date of the Corporation's initial public offering (the "IPO Effective Date"), the amount of such payment will be increased to $16,666 per month. 4.1.2 In addition to the fee set forth in Section 4.1.1, Lohse will also be eligible for performance payments based upon achievement of certain written goals. The goals and corresponding performance payouts will be periodically set by Corporation in writing. These goals and the corresponding performance payouts must be approved by a majority of the Board of Directors [(without counting the vote of William Lohse)]. 4.1.3 Corporation will reimburse Lohse for reasonable business expenses provided Lohse submits invoices within sixty (60) days of the date such expenses are incurred. Extraordinary expenses, which include all expenses exceeding twenty-five thousand dollars ($25,000) in amount, must be pre- approved in writing by the Board. 4.1.4 Lohse will submit monthly invoices for all business expenses. Lohse will submit such invoice within fifteen (15) days of the end of each month. Assuming the invoice is in order and otherwise proper, Corporation will pay such invoice within fifteen (15) days of receipt. 4.2 Benefits. Lohse shall be eligible to participate in or receive -------- benefits under all of the Corporation's employee benefits plans upon the Effective Date to the extent permitted under the terms of such plans. 5. TERMINATION OF SERVICES. 5.1 The provisions of this Section 5 shall govern the payments, if any, which Lohse shall receive upon the Termination of this Agreement and services thereunder. -3- 5.2 Payment Upon Voluntary Termination. In the event that Lohse Terminates ---------------------------------- this Agreement Without Reason, Lohse shall be entitled to no payments form the Corporation except payment of his Base Salary through the date of Termination. In such case, Lohse would not be entitled to any payment for achievement of any goal unless that goal had been achieved prior to the effective date of the Termination. If Lohse terminates this Agreement and stops providing services for Good Reason, as defined in Section 5.5.1 below, then he would be entitled to the payments set forth in Section 5.5.1. 5.3 Termination by Corporation. In the event of a Termination of this -------------------------- Agreement and Lohse's services by the Corporation for the reasons set forth below, Lohse shall be entitled to the following: 5.3.1 Termination for Cause. If Corporation terminates this --------------------- Agreement for "Cause," then Lohse will be paid for his services through the date of Termination and for any goal achieved prior to the date of termination, but nothing else. 5.3.2 Termination without Cause. If this Agreement is Terminated by ------------------------- Corporation or the Board or their successors for any reason other than Cause as set forth herein, or if Lohse Terminates this Agreement for Good Reason, as defined in Section 5.5.1 below, the Corporation shall pay to Lohse the following: (a) twelve (12) months of Monthly Payments pursuant to Section 4.1.1 above (or the fee then in effect if subsequently agreed to in writing) and (b) an additional payment equal to twelve (12) months of Lohse's average performance payment during the Base Period, calculated by adding the total of all performance payments received by Lohse during the Base Period divided by the number of months in the Base Period, multiplied by twelve (12) months (the "Severance Payment"). 5.3.2.1 The Corporation shall make the Severance Payment either in a lump-sum payment, or in twelve (12) equal monthly payments, at the option of Lohse. If Lohse chooses the lump-sum payment option in such case, then the payment shall be made not later than the thirtieth (30) day following the date of Termination without Cause or Termination for Good Reason. 5.3.2.2 Although a payment triggering such section is not intended hereby, amounts otherwise due under this Section will be reduced if, and to the extent that, such reduction is required to avoid the imposition of the excise tax under section 4999 of the Internal Revenue Code and the loss of the deduction in accordance with section 280G of the Internal Revenue Code, if applicable. 5.4 If a Change in Control occurs during the term of this Agreement, Lohse may thereafter be entitled to a payment set forth in Section 5.4.2 in accordance with the terms hereof, subject to the following limitations: 5.4.1 Termination for Good Reason. The payments set forth in Section --------------------------- 5.3.2 hereof shall be made to Lohse if, after a Change in Control and within one year thereafter, Lohse Terminates for Good Reason, upon the happening of one or more of the following events, any of which will constitute Good Reason for Termination: -4- 5.4.1.1 Without Lohse's expense written consent, Lohse is either (a) assigned duties substantially inconsistent with Lohse's position, duties, responsibilities and status with Corporation immediately prior to a Change in Control, or (b) removed from the position be held prior to the Change in Control; 5.4.1.2 A reduction by Corporation of Lohse's Monthly Payment or performance compensation formula applicable to Lohse as in effect immediately prior to a Change in Control; or 5.4.1.3 The failure of the Corporation to obtain the assumption of this Agreement by a successor of Corporation as contemplated in Section 8.3 below. 6. USE OF CORPORATION APARTMENT. 6.1 The Corporation shall retain an apartment in the San Francisco Bay Area for use by its executives in transacting business on behalf of the Corporation that is equal to or substantially equal to the current apartment being provided to Lohse. Such apartment shall be allocated to the executives of the Corporation based on the order in which requests are made for it (i.e. first come first serve basis). 7. ARBITRATION. 7.1 Any controversy between the parties hereto, including the construction, application or breach of any of the terms, covenants or conditions of this Agreement, and all claims resulting to or arising from Lohse's services or the termination of those services or this Agreement, including all statutory claims, shall on a timely written request of one party served upon the other, be submitted to arbitration to be governed by the California Arbitration Act as set forth in the California Code of Civil Procedure (presently sections 1280 et -- seq.). - ---- 7.2 Unless otherwise mutually agreed to by Lohse and Corporation in writing, the parties will request the American Arbitration Association to submit a list of nine names of persons who could serve as an arbitrator. Corporation and Lohse shall alternatively remove names from the list (beginning with the party which loses a flip of the coin) until one name remains, and this person shall serve as the impartial arbitrator. The arbitration shall take place in the City and County of San Francisco, California. 7.3 The Arbitrator will have authority to award costs and attorneys' fees to the prevailing party unless the dispute in question concerns a claim of a statutory violation in which case the Arbitrator may award attorneys' fees as provided for in that statute. 8. GENERAL PROVISION. 8.1 Nonassignability. Neither this Agreement nor any right or interest ---------------- hereunder shall be assignable by Lohse, provided, however, that nothing in this Section shall preclude (i) Lohse from designing a beneficiary to receive any benefits payable hereunder upon Lohse's death, or (ii) Lohse's executors, administrators or other legal representatives or Lohse's estate from assigning any rights hereunder to the person or persons entitled thereto. -5- 8.2 Status. Mr. Lohse shall have the status of an employee of Corporation. ------ 8.3 Assumption. The Corporation shall require any successor in interest ---------- (whether as a result of purchase, merger, consolidation, Change in Control or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform the obligations under this Agreement. 8.4 No Attachment. Except as required or permitted by law, no right to ------------- receive payments under this Agreement shall be subject to anticipation, communication, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process of assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. The payments due Lohse under Section 5 herein shall not be deemed earned until the conditions set forth in Section 5 occur, if ever. 8.5 Binding Agreement. This Agreement shall be binding upon, and inure to ----------------- the benefit of, Lohse and the Corporation, and their respective heirs, successors and assigns. Each party acknowledges that no representations, inducements, promises or agreements have been made by any party, or anyone acting on behalf of any party, which are not embodied herein and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding on either party except as provided herein. 8.6 Amendment or Augmentation of Agreement; Supercedes Prior Consulting ------------------------------------------------------------------- Agreement. This Agreement may not be modified or amended except by an - --------- instrument in writing signed by the parties hereto. Unless expressly agreed to in writing by the parties hereto, no additional rights or compensation, even if given or accepted, shall be deemed to modify or otherwise affect the express terms and conditions of this Agreement. This Agreement supercedes that certain Consulting Agreement, effective as of January 20, 1998, entered into by and between Lohse and the Corporation, as amended (the "Consulting Agreement"), and effective upon the execution of this Agreement neither party to the Consulting Agreement shall have any further obligation or liability thereunder. Nothing herein, however, shall affect the parties' rights under any other agreement entered into by Lohse with the Corporation. 8.7 Waiver. No term or condition of this Agreement shall be deemed to have ------ been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 8.8 Severability. If, for any reason, any provision of this Agreement is ------------ held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall, to the full extent consistent with law, continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no -6- way affect the rest of such provisions not held so invalid, and the rest of such provision together with all other provisions of this Agreement shall, to the full extent consistent with law, continue in full force and effect. If this Agreement is held totally invalid or cannot be enforced, then to the full extent permitted by law any prior agreement, whether oral or written, express or implied, between the Corporation and/or its affiliates (or any successor thereof) and Lohse shall be deemed reinstated as if this Agreement had not been executed. 8.9 Notices. All notices, requests, demands and other communications ------- hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or if mailed by United States certified or registered mail, prepaid, to the parties or their permitted assignees at the following addresses (or at such other address as shall be given in writing by either party to the other): To: SmartAge Corp. 3450 California Street San Francisco, CA 94118 Attention: Chief Financial Officer To: William Lohse P.O. Box 69 Zephyr Cove, Nevada 89448 8.10 Headings. The headings of paragraphs herein are included solely for -------- convenience or reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 8.11 Governing Law. This Agreement has been executed and delivered in the ------------- State of California, and its validity, interpretation, performance and enforcement shall be governed by the laws of that State. 8.12 Interpretation of Agreement. The parties acknowledge that they are --------------------------- entering into this Agreement freely and voluntarily, with full understanding of the terms of this Agreement. Interpretation of the terms of this Agreement shall not be construed for or against either party on the basis of identity of the party who drafted the provisions in question. 8.13 Proprietary Information Agreement. Lohse will execute the SmartAge --------------------------------- Proprietary Information and Inventions Agreement for Employees (the "Employee Proprietary Information Agreement") effective upon the Effective Date ("Promissory Information Agreement"), which is attached hereto and incorporated herein by reference. If either party Terminates this Agreement, it will not affect the continuing validity of the Employee Proprietary Information Agreement or of the SmartAge Proprietary Information and Inventions Agreement which was previously executed by Lohse and the Corporation, and Lohse agrees to continue to -7- abide by all obligations set forth in the Proprietary Information Agreement even after the Termination of this Agreement. CORPORATION: SMARTAGE.COM CORP. By: /s/ Allan Barr By: -------------------------- -------------------------- Its: Chief Financial Officer Its: -------------------------- LOHSE: /s/ William Lohse - ------------------------------- WILLIAM LOHSE -8- EX-10.6 15 LEASE AGREEMENT EXHIBIT 10.6 OFFICE LEASE (303 Second Street, San Francisco) between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation as Landlord and SMARTAGE CORP., a Delaware corporation as Tenant Dated as of August 10, 1999 San Francisco, California TABLE OF CONTENTS
CLAUSE CLAUSE HEADINGS PAGE - ------ --------------- ---- 1. Definitions 1 2. Term; Conditions of Premises 1 3. Rental 1 4. Additional Charges for Expenses and Real Estate Taxes 2 5. Use 5 6. Services 5 7. Impositions Payable by Tenant 6 8. Alterations 6 9. Liens 7 10. Repairs 7 11. Destruction or Damage 7 12. Insurance 8 13. Waiver of Subrogation 9 14. Indemnification 9 15. Compliance with Legal Requirements 9 16. Assignment and Subletting 9 17. Rules; No Discrimination 11 18. Entry by Landlord 11 19. Events of Default 12 20. Termination upon Default 12 21. Continuation after Default 13 22. Other Relief 14 23. Landlord's Right to Cure Defaults 14 24. Attorney's Fees 14 25. Eminent Domain 14 26. Subordination 14 27. No Merger 15 28. Sale 15 29. Estoppel Certificate 15 30. No Light, Air, or View Easement 15 31. Holding Over 15 32. Security Deposit 15 33. Waiver 15 34. Notices and Consents 15 35. Complete Agreement 16 36. Corporate Authority 16 37. Partnership Authority 16 38. Limitation of Liability to Building 16 39. Miscellaneous 16 40. Abandonment 16 41. Substitution of Premises 17 42. American with Disabilities Act and Similar Acts 17 43. Exhibits 17 44. Landlord's Liability; Sale of Building 17 45. Name of Building 18 46. Hazardous Substance Disclosure 18 47. Real Estate Brokers 18 48. Limited Recourse 18
Addendum to Lease Exhibit A: Floor Plan Exhibit B: Rules and Regulations Exhibit C: Tenant Improvement Work Letter Exhibit D: Commencement of Term Agreement ii OFFICE LEASE BASIC LEASE INFORMATION Date: August 10, 1999 (the "Effective Date") Landlord: The Equitable Life Assurance Society of the United States, a New York corporation Tenant: SmartAge Corp., a Delaware corporation Building (Paragraph 1(a)): 303 Second Street, San Francisco, California 94107 Premises (Paragraph l(b)): Approximately 23,001 rentable square feet on the Fifth (5th) Floor of the South Tower of the Building, as more specifically outlined in Exhibit A attached hereto. The --------- actual rentable area of the Premises shall be measured and determined by Landlord promptly upon Landlord's completion of the demising walls as described in the Work Letter attached hereto as Exhibit C, in accordance with the standard Building Owners --------- and Managers Association ANSI/Z65.1-1996, and shall include a pro-rata share of the common area of the Building. If such measurement reflects rentable area of the Premises to be different from that set forth above, then the rentable area of the Premises will be adjusted upward or downward as may be appropriate, and the Base Rent payable by Tenant, Tenant's Expense Share and Tenant's Tax Share, will be adjusted accordingly. In that regard, Landlord and Tenant agree to execute the Commencement of Term Agreement attached hereto as Exhibit D incorporating such changes. --------- Term Commencement Date (Paragraph 2): The first day upon which both Landlord and Tenant shall have executed this Lease. Term Expiration Date (Paragraph 2): The day that is sixty (60) months after the Term Commencement Date. Rent Commencement Date: Rent shall commence on that date which is the earlier of (i) the date that Tenant occupies the Premises for the ordinary conduct of Tenant's business, or (ii) January 1, 2000. The Rent Commencement Date will be subject to a one day extension for each day of Landlord Delay. For purposes hereof, a "Landlord Delay" shall be a delay in substantial completion of the Base Building Improvement, beyond the Rent Commencement Date, which delay was not caused by unavoidable delays, or delays caused in whole or in part by Tenant or as otherwise necessitated by Tenant's construction schedule for the Tenant Improvements (as defined in Exhibit C). --------- Base Rent (Paragraph 3(a)): The annual Base Rent for the initial term shall be as follows: Years 1-2: Thirty-Six and No/100 Dollars ($36.00) per rentable square foot per annum for a total of Eight Hundred Twenty-Eight Thousand Thirty-Six and No/100
iii Dollars ($828,036.00) per annum/ or Sixty-Nine Thousand Three and No/100 Dollars ($69,003.00) per month. Year 3: Thirty-Seven and No/100 Dollars ($37.00) per rentable square foot per annum for a total of Eight Hundred Fifty-One Thousand Thirty-Seven and No/100 Dollars ($851,037.00) per annum/ or Seventy Thousand Nine Hundred Nineteen and 75/100 Dollars ($70,919.75) per month. Years 4-5: Thirty-Eight and No/100 Dollars ($38.00) per rentable square foot per annum for a total of Eight Hundred Seventy-Four Thousand Thirty-Eight and No/100 Dollars ($874,038.00) per annum/ or Seventy-Two Thousand Eight Hundred Thirty-Six and 50/100 Dollars ($72,836.50) per month. Base Expense Year (Paragraph 1(c)): 2000 Base Tax Year (Paragraph 1(c)): 2000 Tenant's Expense Share (Paragraph 4(a)): 3.28% Tenant's Tax Share: (Paragraph 4(a)): 3.28% Security Deposit (Paragraph 32): $977,543.00 First Month's Base Rent: The first month's Base Rent due upon Lease execution is $69,003.00. Tenant's Address for Notices: Prior to the Rent Commencement Date ----------------------------------- (Paragraph 34) SmartAge Corp. 3450 California Street San Francisco, CA 94118 Attn.: Chief Financial Officer On and after the Rent Commencement Date --------------------------------------- SmartAge Corp. 303 Second Street San Francisco, California 94107 Attn: Chief Financial Officer Landlord's Address for Notices: The Equitable Life Assurance Society of The United States (Paragraph 34) c/o Lend Lease Real Estate Investment, Inc. One Front Street, Suite. 1100 San Francisco, CA 94111 Attn.: Asset Management with a copy to: The Equitable Life Assurance Society of The United States - -------------- c/o Jones Lang La Salle Americas, Inc. 303 Second Street San Francisco, CA 94107 Attn.: Property Manager Brokers: Landlord's Broker: ----------------- (Paragraph 47): Jones Lang La Salle Americas, Inc. One Front Street, Suite. 1200 San Francisco, CA 94111 Telephone No.: (415) 395-4900
iv Tenant's Brokers: ---------------- Colliers International Two Embarcadero Center, Suite 1000 San Francisco, CA 94111 Telephone No.: (415) 788-3100 Addendum and Exhibits: Addendum to Lease: Paragraphs 49 to 63 Exhibit A: Floor Plans Outlining Premises Exhibit B: Rules & Regulations Exhibit C: Tenant Work Letter Exhibit D: Commencement of Term Agreement
The provisions of the Lease identified above in parentheses are those provisions where references to particular Basic Lease Information appear. Each such reference shall incorporate the applicable Basic Lease Information. In the event of any conflict between any Basic Lease Information and the Lease, the latter shall control. Tenant: Landlord: SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE a Delaware corporation SOCIETY OF THE UNITED STATES, a New York corporation By /s/ By /s/ ------------------------------- -------------------------------- Its CEO Its Investment Officer ------------------------------ ------------------------------- Date 8/24/99 Date 8-31-99 ----------------------------- ------------------------------ v OFFICE LEASE THIS LEASE, dated August 10, 1999, for purposes of reference only, is made and entered into by and between The Equitable Life Assurance Society of the United States ("Landlord") and SmartAge Corp., a Delaware corporation ("Tenant"). WITNESSETH: Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord the premises described in paragraph 1 (b) below for the term and subject to the terms, covenants, agreements and conditions hereinafter set forth, to each and all of which Landlord and Tenant hereby mutually agree. 1. Definitions. Unless the context otherwise specifies or requires, the ----------- following terms shall have the meanings herein specified: (a) The term "Building" shall mean the land, building or buildings, other improvements and other real property described in the Basic Lease Information, as well as any property interest in the area of the streets bounding the parcel described in the Basic Lease Information, and all other improvements on or appurtenances to said parcel or said streets. (b) The term "Premises" shall mean the portion of the Building located on the floor(s) specified in the Basic Lease Information which is crosshatched on the floor plan(s) attached to this Lease as Exhibit A. ---------- (c) The term "Base Expense Year" shall mean the calendar year specified in the Basic Lease Information as the Base Expense Year. (d) The term "Base Tax Year" shall mean the calendar year specified in the Basic Lease Information as the Base Tax Year. 2. Term; Condition of Premises. The term of this Lease shall commence --------------------------- and, unless sooner terminated as hereinafter provided, shall end on the dates respectively specified in the Basic Lease Information. Unless otherwise agreed by Landlord and Tenant in this Lease, Landlord shall deliver the Premises to Tenant on the commencement of the term in their then existing condition with no alterations being made by Landlord. If Landlord has undertaken in this Lease to make any alterations to the Premises prior to commencement of the term and the alterations are completed prior to the date set forth in the Basic Lease Information for commencement of the term, and if Tenant desires to take occupancy in advance of such date and Landlord consents to such prior occupancy, Landlord shall deliver the Premises to Tenant on such advance date as shall be mutually approved by Landlord and Tenant and, notwithstanding anything to the contrary contained herein, the term of this Lease shall commence upon such delivery. If Landlord, for any reason whatsoever, cannot deliver the Premises to Tenant at the commencement of the term, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but in that event rental shall be waived for the period between the commencement of the term and the time when Landlord delivers the Premises to Tenant. No delay in delivery of the Premises shall operate to extend the term hereof.* *See Lease Addendum 3. Rental. ------ (a) Tenant shall pay to Landlord throughout the term of this Lease as rental for the Premises the sum specified in the Basic Lease Information as the Base Rent. As additional rental hereunder, Tenant shall pay to Landlord the additional charges described in paragraph 4 below. (b) Monthly rental shall be paid to Landlord on or before the first day of the term hereof and on or before the first day of each and every successive calendar month thereafter during the term hereof. In the event the term of this Lease commences on a day other than the first day of a calendar month or ends on a day other than the last day of a calendar month, the monthly rental for the first and last fractional months of the term hereof shall be appropriately prorated. 1 (c) All sums of money due from Tenant hereunder not specifically characterized as rental shall constitute additional rent, and if any such sum is not paid when due it shall nonetheless be collectible as additional rent with the next installment of rental thereafter falling due, but nothing contained herein shall be deemed to suspend or delay the payment of any sum of money at the time it becomes due and payable hereunder, or to limit any other remedy of Landlord. (d) Tenant hereby acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder after the expiration of any applicable grace period described in paragraph 19(a) will cause Landlord to incur costs not contemplated by the Lease, the exact amounts of which will be difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any encumbrances covering the Building and the Premises. Accordingly, if any installment of rent or any other sums due from Tenant shall not be received by Landlord prior to the expiration of any applicable grace period described in paragraph 19 (a), Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant based on the circumstances existing as of the date of this Lease. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. (e) Any amount due from Tenant, if not paid when first due, shall bear interest from the date first due until paid at an annual rate equal to 4% over the annual prime rate of interest announced publicly by Citibank, N.A. in New York, New York from time to time (but in no event in excess of the maximum rate of interest permitted by law), provided that interest shall not be payable on late charges incurred by Tenant nor on any amounts upon which late charges are paid by Tenant to the extent such interest would cause the total interest to be in excess of that legally permitted. Payment of interest shall not excuse or cure any default hereunder by Tenant. (f) All payments due from Tenant shall be paid to Landlord, without deduction or offset, in lawful money of the United States of America at Landlord's address for notices hereunder, or to such other person or at such other place as Landlord may from time to time designate by notice to Tenant. 4. Additional Charges for Expenses and Real Estate Taxes ----------------------------------------------------- (a) For purposes of this Paragraph 4, the following terms shall have the meanings hereinafter set forth: (i) "Tenant's Tax Share" and "Tenant's Expense Share" mean the percentage figures so specified in the Basic Lease Information. Tenant's Tax Share and/or Tenant's Expense Share may be adjusted by Landlord as a result of any change in the rentable area of the Premises or the total rentable area of the Building. (ii) "Tax Year" means each twelve (12) consecutive month period commencing January 1st of each year during the Term, including, without limitation, any partial year during which the Lease may commence; provided that Landlord, upon notice to Tenant, may change the Tax Year from time to time to any other twelve (12) consecutive month period and, in the event of any such change, Tenant's Tax Share of Real Estate Taxes shall be equitably adjusted for the Tax Year involved in any such change. (iii) "Real Estate Taxes" means all taxes, assessments and charges of any kind whatsoever levied upon or with respect to the Building or any personal property of Landlord used in the operation thereof, or Landlord's interest in the Building or such personal property. Real Estate Taxes shall include, without limitation: all general real property taxes and general and special assessments, char __________ es, or assessments for transit, housing, police, fire, or other governmental services or purported benefits to the Building or the occupants thereof, service payments in lieu of taxes, business taxes, and any tax, fee, or excise on the act of entering into this Lease or any other lease of space in the Building, or on the use or occupancy of the Building or any part thereof, or on the rent payable under any lease or in connection with the business of renting space in the Building, that are now or hereafter levied or assessed against 2 Landlord by the United States of America, the State of California or any political subdivision thereof, public corporation, district, or any other political or public entity, and shall also include any other tax, fee, charge or other excise, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes, whether or not now customary or in the contemplation of the parties on the date of this Lease. Real Estate Taxes shall not include franchise, transfer, inheritance, or capital stock taxes or income taxes measured by the net income of Landlord from all sources unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for, or as an addition to, in whole or in part, any other tax that would otherwise constitute a Real Estate Tax. Real Estate Taxes shall also include legal fees, costs, and disbursements incurred in connection with proceedings to contest, determine, or reduce Real Estate Taxes. (iv) "Expense Year" means each twelve (12) consecutive month period commencing January 1st of each year during the Term, including, without any limitation, any partial year during which the Lease may commence; provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period and, in the event of any such change, Tenant's Expense Share of Expenses shall be equitably adjusted for the Expense Years involved in any such change. (v) "Expenses" means the total costs and expenses paid or incurred by Landlord in connection with the ownership, management, operation, maintenance and repair of the Building, including, without limitation: (i) the cost of air conditioning, electricity, steam, water, heating, mechanical, telephone, ventilating, escalator and elevator systems and all other utilities; (ii) the cost of repairs and replacements and all labor and material costs related thereto, and the cost of general maintenance, cleaning and service contracts and the cost of all supplies, tools and equipment required in connection thereof; (iii) the cost of the Building delivery and messenger service; (iv) the cost incurred by Landlord for all insurance carried on the Building or in connection with the use and/or occupancy thereof and the amount of any deductible on insured loss; (v) wages, salaries, payroll taxes and other labor costs and employee benefits; (vi) management fees; (vii) fees, charges and other costs of all independent contractors engaged by Landlord; (viii) accounting and legal expenses; (ix) Landlord's share of any shared expenses under any reciprocal easement agreement or similar document; (x) depreciation on personal property, including, without limitation, carpeting in public corridor and common areas and window coverings provided by Landlord; (xi) the rental paid for offices in the Building for the property manager and related management and operations personnel; (xii) the cost of any capital improvements made to the Building after completion of its construction as a labor-saving or energy saving device or to enhance the health and safety of the public (including tenants) or to effect other economies in the operation or maintenance of the Building, or made to the Building after the date of this Lease that are required under any governmental law or regulation or insurance carrier that was not applicable to the Building at the time that permits for the construction thereof were obtained, such cost to be amortized over the useful life thereof as Landlord shall reasonably determine in accordance with generally accepted accounting principles ("GAAP") and consistent with industry standards and sound management practices (including, without limitation, with respect to any improvements which result in cost savings with respect to the Building, such period as would allow Landlord to amortize the improvements to the extent of such cost savings in any year or to any greater extent deemed appropriate to Landlord), together with interest on the unamortized balance at the rate of ten percent (10%) per annum or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing such capital improvements; (xiii) assessments, costs and charges of the San Francisco Transit Management Association; (xiv) the cost of contesting the validity or applicability of any governmental enactments which may affect operating expenses; (xv) the costs of public art; and (xvi) any other expenses and costs of any kind whatsoever incurred in connection with the ownership, management, operation, maintenance and repair of the Building including, without limitation, capital expenditures required to bring the Building into compliance with laws enacted after the Building's temporary certificate of occupancy or the equivalent is validly issued (provided, that, such capital expenditures are amortized over the useful life thereof as reasonably determined by Landlord in accordance with GAAP and consistent with industry standards and sound management practices). See Lease Addendum. Landlord and Tenant acknowledge and agree that certain costs of the ownership, management, operation maintenance and repair of the Building may be allocated exclusively to a single component of the Building (for example, and without limitation, to an office area, a retail area or a parking facility) and certain of such costs may be allocated among such components. The determination of such costs and their allocation 3 shall be equitably made by Landlord in Landlord's sole discretion. (b) Tenant shall pay to Landlord as additional rent one twelfth (1/12) of Tenant's Tax Share of increases in the Real Estate Taxes for each Tax Year or portion thereof during the Term after the Base Tax Year when compared to Real Estate Taxes for the Base Tax Year (the "Tax Increases"), in advance, on or before the first day of each month during such Tax Year, in an amount estimated by Landlord in a writing delivered to Tenant. Landlord may revise such estimates from time to time and Tenant will thereafter make payments on the basis of such revised estimates. (c) Tenant shall pay to Landlord as additional rent one twelfth (1/12) of Tenant's Expense Share of increases in the Expenses for each Expense Year or portion thereof during the Term after the Base Expense Year when compared to Expenses for the Base Expense Year (the "Expense Increases"), in advance, on or before the first day of each month during such Expense Year, in an amount estimated by Landlord in a writing delivered to Tenant. Landlord may revise such estimates from time to time and Tenant will thereafter make payments on the basis of such revised estimates. (d) With reasonable promptness after the expiration of each Expense Year and Tax Year after the Base Expense Year and Base Tax Year, including, without limitation, the Expense Year and Tax Year during which this Lease terminates, Landlord will furnish Tenant with a statement (herein called "Landlord's Expense Statement" and "Landlord's Tax Statement"), prepared by Landlord or its accountant, setting forth in reasonable detail the Expenses and Real Estate Taxes for each such Expense Year and Tax Year and Tenant's Expense Share of the Expense Increases and Tenant's Tax Share of the Tax Increases, which statement shall be conclusive and binding upon Tenant. If the total of Tenant's Expense Share of the Expense Increases for such Expense Year as set forth in Landlord's Expense Statement exceeds the total estimated payments for Expense Increases paid by Tenant for such Expense Year, Tenant shall pay to Landlord (whether or not this Lease has terminated) the difference between the total amount of estimated payments paid by Tenant with respect to Expense Increases and the total of Tenant's Expense __________ re of the actual Expense Increases within thirty (30) after the receipt of Landlord's Expense Statement. If the total amount paid by Tenant for any such Expense Year shall exceed Tenant's Expense Share of the actual Expense Increases for such Expense Year, such excess shall be credited against the next installments of Expense Increases due from Tenant to Landlord hereunder. If this Lease has terminated and no amounts are due or to become due to Landlord from Tenant hereunder, any excess shall be paid to Tenant by check within sixty (60) days after such final determination of the actual Expenses. If the total of Tenant's Tax Share of the Tax Increases for any Tax Year as set forth in Landlord's Tax Statement exceeds the total estimated payments for Tax Increases paid by Tenant for such Tax Year, Tenant shall pay to Landlord (whether or not this Lease has terminated) the difference between the total amount of estimated payments paid by Tenant with respect to Tax Increases and the total of Tenant's Tax Share of the actual Tax Increases within thirty (30) days after the receipt of Landlord's Tax Statement. If the total amount paid by Tenant for any such Tax Year shall exceed Tenant's Tax Share of the actual Real Estate Taxes for such Tax Year, such excess shall be credited against the next installments of Tax Increases due from Tenant to Landlord hereunder. If this Lease has terminated and no amounts are due or to become due to Landlord from Tenant hereunder, any excess shall be paid to Tenant by check within sixty (60) days after such final determination of the actual Tax Increases. Notwithstanding anything to the contrary contained herein, in the event that the Expenses for any subsequent Expense Year are less than Expenses for the Base Expense Year or in the event that the Real Estate Taxes for any Tax Year are less than the Real Estate Taxes for the Base Tax Year, Tenant shall not be entitled to a credit against any Base Rent or other sums payable by Tenant hereunder or to a payment from Landlord to Tenant with respect thereto. (e) If the commencement date or expiration date shall occur on a date other than the first or last day, respectively, of a Tax Year and/or Expense Year, Tenant's Tax Share of the Tax Increases and/or Tenant's Expense Share of Expense Increases for which the commencement date or expiration date occurs shall be prorated based on a 365-day year, but shall remain subject to adjustment based on receipt of information after the expiration date. (f) [See Lease Addendum] 4 5. Use. ---- (a.) The Premises shall be used for general office purposes and no other without the prior written consent of Landlord, which may be granted or denied in Landlord's absolute discretion. Tenant shall not do or permit to be done in or about the Premises, nor bring or keep or permit to be brought or kept therein, anything which is prohibited by or would in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated, or which is prohibited by the standard form of fire insurance policy, or would in any way increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, or cause a cancellation of any insurance policy covering the Building or any part thereof or any of its contents. Tenant shall not do or permit anything to be done in or about the Premises which would in any way obstruct or interfere with the rights of other tenants of the Building, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purposes, nor shall Tenant cause, maintain or permit any nuisance or waste in, on or about the Premises. (b.) Tenant shall not cause or permit the storage, use, generation, release, or disposal (collectively, "Handling") of any Hazardous Materials (as defined below), in, on, or about the Premises or the Building by Tenant or any agents, employees, contractors, licensees, subtenants, customers, guests or invitees of Tenant (collectively with Tenant, "Tenant Parties"), except that Tenant shall be permitted to use normal quantities of office supplies or products (such as copier fluids or cleaning supplies) customarily used in the conduct of general business office activities("Common Office Chemicals"), providing that the Handling of such Common Office Chemicals shall comply at all times with all Hazardous Materials Laws (as defined below). Notwithstanding anything to the contrary contained herein, however, in no event shall Tenant permit any usage of Common Office Chemicals in a manner that may cause the Premises or the Building to be contaminated by any Hazardous Materials or in violation of any Hazardous Materials Laws. Tenant's obligations under this Paragraph shall survive the expiration or other termination of this Lease. For purposes of this Paragraph, "Hazardous Materials" means any explosive, radioactive materials, hazardous wastes, or hazardous substances, including without limitation, asbestos containing materials, PCB's, CFC's, or substances defined or regulated as hazardous substances or hazardous materials in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657; the Hazardous Materials Transportation Act of 1975, 42 U.S.C. Section 1001-1012, the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987; or any other Federal State or local law, ordinance or regulation. "Hazardous Materials Laws" shall mean all Federal, State, and local laws, ordinances and regulations defining, regulating, restricting or otherwise governing the storage, use, generation, release or disapproval of Hazardous Materials. 6. Services. --------- (a) Landlord shall maintain the public and common areas of the Building, including lobbies, stairs, elevators, corridors and restrooms, windows, HVAC, mechanical, plumbing and electrical equipment, and the structure itself in reasonably good order and condition and in a manner comparable to other Class A Buildings in San Francisco, except for damage occasioned by the acts of Tenant, its employees, agents, contractors or invitees, which damage shall be repaired by Landlord at Tenant's expense. (b) Landlord shall furnish the Premises with (1) electricity for lighting and the operation of customary office machines, (2) heat and air conditioning to the extent reasonably required for the comfortable occupancy by Tenant in its use of the Premises during the period from 7 a.m. to 6 p.m. on weekdays (except holidays), or such shorter period as may be prescribed by any applicable policies or regulations adopted by any utility or governmental agency, (3) elevator service, (4) lighting replacement (for building standard lights), (5) restroom supplies, (6) window washing with reasonable frequency, and (7) lobby attendant services and janitor service during the times and in the manner that such services are customarily furnished in comparable office buildings in the area. Landlord may establish reasonable measures to conserve energy, including but not limited to, automatic switching of lights after hours, so long as such measures do not unreasonably interfere with Tenant's use of the Premises. Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall the rental herein reserved be abated, or this Lease terminated by reason of (i) the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, (ii) failure to furnish or delay in furnishing any such services or by the making of 5 necessary repairs or improvements to the Premises or to the Building, or (iii) the limitation, curtailment, rationing or restrictions on use of water, electricity, gas or any other form of energy serving the Premises or the Building. Landlord shall use reasonable efforts diligently to remedy any interruption in the furnishing of such services. [See Lease Addendum] (c) Whenever heat-generating equipment or lighting other than building standard lights are used in the Premises by Tenant which affect the temperature otherwise maintained by the air conditioning system, Landlord shall have the right, after notice to Tenant, to install supplementary air conditioning facilities in the Premises or otherwise modify the ventilating and air conditioning system serving the Premises, and the cost of such facilities and modifications shall be borne by Tenant. Tenant shall also pay the cost of providing all cooling energy to the Premises in excess of that required for normal office use or during hours requested by Tenant when air conditioning is not otherwise furnished by Landlord. If there is installed in the Premises lighting requiring power in excess of that required for normal office use in the Building, or if there is installed in the Premises equipment requiring power in excess of that required for normal desk-top office equipment or normal copying equipment, as more particularly described in Exhibit __ attached hereto and made a part hereof, Tenant shall pay for the cost of such excess power, together with the cost of installing any additional risers or other facilities that may be necessary to furnish such excess power to the Premises. (d) In the event that Landlord, at Tenant's request, provides services to Tenant that are not otherwise provided for in this Lease, Tenant shall pay Landlord's reasonable charges for such services upon billing therefor, including, without limitation, Landlord's then current administrative fee therefor. 7. Impositions Payable by Tenant. In addition to the monthly rental and ------------------------------ other charges to be paid by Tenant hereunder, Tenant shall pay or reimburse Landlord for any and all of the following items (hereinafter collectively referred to as "Impositions"), whether or not now customary or in the contemplation of the parties hereto: taxes (other than local, state and federal personal or corporate income taxes measured by the net income of Landlord from all sources), assessments (including, without limitation, all assessments for public improvements, services or benefits, irrespective of when commenced or completed), excises, levies, business taxes, license, permit, inspection and other authorization fees, transit development fees, assessments or charges for housing funds, service payments in lieu of taxes and any other fees or charges of any kind, which are levied, assessed, confirmed or imposed by any public authority, but only to the extent the Impositions are: (a) upon, measured by or reasonably attributable to the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises, or the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, regardless of whether title to such improvements shall be in Tenant or Landlord; (b) upon, with respect to or by reason of the development, possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (c) upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. In the event that it shall not be lawful for Tenant to reimburse Landlord for the Impositions but it is lawful to increase the monthly rental to take into account Landlord's payment of the Impositions, the monthly rental payable to Landlord shall be revised to net Landlord the same net return without reimbursement of the Impositions as would have been received by Landlord with reimbursement of the Impositions. 8. Alterations. ------------ (a) Tenant shall make no alterations, additions or improvements to the Premises or install fixtures in the Premises without first obtaining Landlord's consent, which consent shall not be unreasonably withheld, provided however, that Landlord may withhold consent in its sole and absolute discretion if the cost of the work will exceed ten thousand dollars ($10,000) or there are any material modifications to any structural components of the Building or any of the Building's operating systems, including, without limitation, heating, ventilating, air conditioning, plumbing, electrical, and other operating systems. In connection with Tenant's request for Landlord's consent under this Lease and if the cost of the work exceeds ten thousand dollars ($10,000), Tenant shall pre-pay to Landlord a Two Hundred Fifty Dollar ($250.00) charge for Landlord's review of applicable documents and plans, together with any reasonable third-party costs and expenses incurred or to be incurred by Landlord related thereto. In no event, however, may the Tenant make any alterations, additions or improvements or install fixtures which, in Landlord's reasonable judgment, might adversely affect the structural components of the Building or Building mechanical, utility or life safety 6 systems. At the time such consent is requested, Tenant shall furnish to Landlord a description of the proposed work, an estimate of the cost thereof and such information as shall reasonably be requested by Landlord substantiating Tenant's ability to pay for such work. Landlord, at its sole option, may require as a condition to the granting of such consent to any work costing in excess of fifty thousand dollars ($50,000), that Tenant provide to Landlord, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to one and one- half (1 1/2) times any and all estimated costs of the proposed work, to insure Landlord against any liability for mechanics' and materialmen's liens and to insure completion of the work. Before commencing any work, Tenant shall give Landlord at least twenty (20) days written notice of the proposed commencement of such work in order to give Landlord an opportunity to prepare, post and record such notice as may be permitted by law to protect Landlord's interest in the Premises and the Building from mechanics' and materialmen's liens. Within a reasonable period following completion of any work for which plans and specifications were required to obtain a building permit for such work, Tenant shall furnish to Landlord "as built" plans showing the changes made to the Premises. (b) Any alterations, additions or improvements to the Premises shall be made by Tenant at Tenant's sole cost and expense, and any contractor, subcontractor or other person selected by Tenant to make the same shall be selected from Landlord's approved bidder list. Tenant's contractor and its subcontractors shall employ union labor to the extent necessary to insure, so far as may be possible, the progress of the alterations, additions or improvements and the performance of any other work or the provision of any services in the Building without interruption on account of strikes, work stoppage or similar causes of delay. All work performed by Tenant shall comply with the laws, rules, orders, directions, regulations and requirements of all governmental entities having jurisdiction over such work and shall comply with the rules, orders, directions, regulations and requirements of any nationally recognized board of insurance underwriters. All alterations, additions and improvements shall immediately become Landlord's property and, at the end of the term hereof, shall remain on the Premises without compensation to Tenant; provided, however, that if required by Landlord at the time the alterations, additions and improvements are made, Tenant shall, prior to the end of the term, at its sole cost and expense, remove the alterations, additions and improvements required to be removed by Landlord and repair and restore the Premises to their condition at the commencement of the term. 9. Liens. Tenant shall keep the Premises and the Building free from any ------ liens (and claims thereof) arising out of any work performed, materials furnished or obligations incurred by or for Tenant. Landlord shall have the right to post and keep posted on the Premises any notices that may be provided by law or which Landlord may deem to be property for the protection of Landlord, the Premises and the Building from such liens and claims. 10. Repairs. By entry hereunder, Tenant accepts the Premises as being in -------- the condition in which Landlord is obligated to deliver the Premises. Tenant shall, at all times during the term hereof and at Tenant's sole cost and expense, keep the Premises in good condition and repair; ordinary wear and tear and damage thereto by fire, earthquake, act of God or the elements excepted. Tenant hereby waives all rights to make repairs at the expense of Landlord or in lieu thereof to vacate the Premises, abate rent or terminate this Lease. Subject to Landlord's rights to require the removal of alterations, additions and improvements, Tenant shall at the end of the term hereof surrender to Landlord the Premises and all Alterations thereto in the as good as condition as when received, ordinary wear and tear and damage by fire, earthquake, act of God or the elements excepted. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, except as specifically herein set forth. No representations respecting the condition of the Premises or the Building have been made by Landlord or Landlord's agents to Tenant, except as specifically herein set forth. 11. Destruction or Damage. ---------------------- (a) In the event the Premises or the portion of the Building necessary for Tenant's use and enjoyment of the Premises are damaged by fire, earthquake, act of God, the elements or other casualty, Landlord shall repair the same, subject to the provisions of this paragraph hereinafter set forth, if (i) such repairs can, in Landlord's opinion, be made within a period of twelve (12) months after commencement of the repair work, (ii) the cost of repairing damage for which Landlord is not insured shall be less than ten percent (10%) of the then full insurable value of the Premises with respect to repairing any damage to the Premises, or five 7 percent (5%) of the then full insurable value of the Building with respect to repairing any damage to other areas of the Building, and (iii) the damage or destruction does not occur during the last twelve (12) months of the term of this Lease or any extension thereof. This Lease shall remain in full force and effect except that so long as the damage or destruction is not caused by the fault or negligence of Tenant, its contractors, agents, employees or invitees, an abatement of rental shall be allowed Tenant for such part of the Premises as shall be rendered unusable by Tenant in the conduct of its business during the time such part is so unusable. (b) As soon as is reasonably possible following the occurrence of any damage, Landlord shall notify Tenant of the estimated time and cost required for the repair or restoration of the Premises or the portion of the Building necessary for Tenant's occupancy. If, in Landlord's opinion, such repairs cannot be made within twelve (12) months as set forth in subparagraph (a) (i) above, Landlord or Tenant may elect by written notice to the other within thirty (30) days after Landlord's notice of estimated time and cost is given, to terminate this Lease effective as of the date of such damage or destruction. If Landlord is not obligated to effect the repair based upon the circumstances set forth in subparagraphs (a) (ii) or (a) (iii) above, Landlord shall have the right to terminate this Lease, by written notice to Tenant within thirty (30) days after Landlord's notice of time and cost is given, effective as of the date of such damage or destruction. If neither party so elects to terminate this Lease, this Lease shall continue in full force and effect, but the rent shall be partially abated as hereinabove in this paragraph provided, and Landlord shall proceed diligently to repair such damage. (c) A total destruction of the Building shall automatically terminate this Lease. Tenant waives California Civil Code Sections 1932, 1933, 1941 and 1942 providing for (among other things) termination of hiring upon destruction of the thing hired and the right to make repairs and to vacate the Premises under certain conditions. (d) In no event shall Tenant be entitled to any compensation or damages from Landlord, specifically including, but not limited to, any compensation or damages for (i) loss of the use of the whole or any part of the Premises, (ii) damage to Tenant's personal property in or improvements to the Premises, or (iii) any inconvenience, annoyance or expense occasioned by such damage or repair (including moving expenses and the expense of establishing and maintaining any temporary facilities). (e) Landlord, in repairing the Premises, shall not be required to repair any injury or damage to the personal property of Tenant, or to make any repairs to or replacement of any alterations, additions, improvements or fixtures installed on the Premises by or for Tenant. 12. Insurance. ---------- (a) Tenant agrees to procure and maintain in force during the term hereof, at Tenant's sole cost and expense, Commercial General Liability insurance in an amount not less than Two Million Dollars ($2,000,000) combined single limit for bodily injury and property damage for injuries to or death of persons and property damage occurring in, on or about the Premises or the Building. If the term of this Lease, including, without limitation, any option terms, is for a period of more than five (5) years, then at the date which is the fifth anniversary of the commencement of the term, the aforesaid amount of Two Million Dollars ($2,000,000) shall be increased as required by Landlord to reflect Landlord's then requirements for the aforesaid insurance. Such policy shall name Landlord, Landlord's managing agent and any other party reasonably designated by Landlord as additional insureds, shall insure Landlord and Landlord's managing agent's contingent liability as respect to acts or omissions of Tenant, shall be issued by a company licensed to do business in the State of California and otherwise reasonably acceptable to Landlord, and shall provide that the policy may not be canceled nor amended without thirty (30) days prior written notice to Landlord. Tenant may carry said insurance under a blanket policy, provided however, said insurance by Tenant shall include an endorsement confirming application to and coverage of Landlord. Said insurance shall be primary insurance to any other insurance that may be available to Landlord. Any other insurance available to Landlord shall be non-contributing with and excess to this insurance. (b) A copy of the certificate(s) of insurance shall be delivered to Landlord by Tenant prior to commencement of the term of this Lease and upon each renewal of such insurance. 8 (c) Tenant shall, prior to and throughout the term of this Lease, procure from each of its insurers under all policies of fire, theft, public liability, workers' compensation and any other insurance policies of Tenant now or hereafter existing, pertaining in any way to the Premises or the Building or any operation therein, a waiver, as set forth in paragraph 13 of this Lease, of all rights of subrogation which the insurer might otherwise, if at all, have against the Landlord or any officer, agent or employee of Landlord (including, without limitation, Landlord's managing agent). 13. Waiver of Subrogation. Landlord and Tenant shall each have included ---------------------- in all policies of fire, extended coverage, business interruption and other insurance respectively obtained by them covering the Demised Premises, the Building and contents therein, a waiver by the insurer of all right of subrogation against the other in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, Landlord and Tenant each waives all right of recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or would be covered by the insurance required to be maintained under this Lease by the party seeking recovery. 14. Indemnification. Tenant hereby waives all claims against Landlord for ---------------- damage to any property or injury or death of any person in, upon or about the Premises arising at any time and from any cause other than principally by reason of gross negligence or willful act of Landlord, its employees or contractors, and Tenant shall defend Landlord against, hold Landlord harmless from, and reimburse Landlord for any and all claims, liabilities, damages, losses, costs and expenses, including without limitation, attorneys' fees and costs arising out of or in any way connected with (a) injury to or death of any person, and (b) damage to or destruction of any property, attributable to or resulting from the condition, use or occupancy of the Premises by Tenant or Tenant's failure to perform its obligations under this Lease; except such as is caused principally by gross negligence or willful act of Landlord, its contractors or employees. The foregoing indemnity obligation of Tenant shall include reasonable attorneys' fees, investigation costs and all other reasonable costs and expenses incurred by Landlord from the first notice that injury, death or damage has occurred or that any claim or demand is to be made or may be made. The provisions of this paragraph shall survive the termination of this Lease with respect to any damage, injury or death occurring prior to such termination. 15. Compliance with Legal Requirements. Tenant, at its sole cost and ---------------------------------- expense, shall promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force; with the requirements of any board of fire underwriters or other similar body now or hereafter constituted; with any direction or occupancy certificate issued pursuant to any law by any public officer or officers; as well as the provisions of all recorded documents affecting the Premises (including, without limitation, any ground lease, mortgage or covenants, conditions and restrictions), insofar as any thereof relate to or affect the condition, use or occupancy of the Premises, including, without limitation, structural, utility system and life safety system changes necessitated by Tenant's acts, specific use of the Premises or by improvements made by or for Tenant. 16. Assignment and Subletting. -------------------------- (a) Tenant shall not hypothecate or encumber this Lease or any interest herein without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned, or delayed. Except in connection with a Permitted Transfer as defined in Paragraph 16(e) below, Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld by Landlord, transfer or assign this Lease or any interest herein, sublet the Premises or any part thereof, or permit the use of the Premises by any party other than Tenant. This Lease shall not, nor shall any interest herein, be assignable as to the interest of Tenant by operation of law without the consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any of the foregoing acts without such consent shall be void and shall, at the option of Landlord terminate this Lease. In connection with each consent requested by Tenant, Tenant shall submit to Landlord the terms of the proposed transaction, the identity of the parties to the transaction, the proposed documentation for the transaction, and all other information reasonably requested by Landlord concerning the proposed transaction and the parties involved. 9 (b) If the Tenant is a privately held corporation, or is an unincorporated association or partnership, or any other entity, the transfer, assignment or hypothecation of any stock or interest in such corporation, association, partnership or other entity in excess of fifty percent (50%) in the aggregate from the Ownership existing as of the date of this Lease shall be deemed an assignment or transfer within the meaning and provisions of this paragraph 16. If Tenant is a publicly held corporation, the public trading of stock in Tenant shall not be deemed an assignment or transfer within the meaning of this paragraph. (c) Without limiting the other instances in which it may be reasonable for Landlord to withhold its consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold its consent in the following instances: (1) if at the time consent is requested, or at any time prior to the granting of consent, Tenant is in default under this Lease or would be in default under this Lease but for the pendency of any grace or cure period under paragraph 19 below; (2) if the proposed assignee or sublessee is a governmental agency; (3) if, in Landlord's reasonable judgment, the use of the Premises by the proposed assignee or sublessee would not be comparable to the types of office use by other tenants in the Building, would entail any alterations which would lessen the value of the leasehold improvements in the Premises, or would conflict with any so-called "exclusive" or percentage lease then in favor of another tenant of the Building; (4) if, in Landlord's reasonable judgment, the financial worth of the proposed assignee or sublessee does not meet the credit standards applied by Landlord for other tenants under leases with comparable terms, or the character, reputation, or business of the proposed assignee or sublessee is not consistent with the quality of the other tenancies in the Building; (5) and (6) if the proposed assignee or sublessee is an existing tenant of the Building. (d) If, at any time during the term of this Lease, Tenant desires to assign its interest in this Lease or sublet all or any part of the Premises except in connection with a Permitted Transfer, Tenant shall give notice to Landlord setting forth the terms of the proposed assignment or subletting ("Tenant's Notice"). Landlord shall have the option, exercisable by notice given to Tenant within thirty (30) days after Tenant's Notice is given ("Landlord's Option Period"), either (1) to consent to the assignment, in which event the provisions of subparagraph (g) shall be applicable, or to consent to the subletting in which event the provisions of subparagraph (h) shall be applicable; (2) to become the assignee or sublessee of Tenant (instead of the entity specified in Tenant's Notice) upon the terms set forth in Tenant's Notice; (3) in the event of a proposed assignment, to terminate this Lease and to retake possession of the Premises; (4) in the event of a proposed subletting of the entire Premises, or a portion of the Premises for all or substantially all of the remainder of the term, to terminate this Lease with respect to, and to retake possession of, the space in question, together with, if only a portion of the Premises is involved, such rights of access to and from such portion as may be reasonably required for its use and enjoyment; or 5) to disapprove the proposed assignment or subletting. (e) [See Lease Addendum] (f) No sublessee (other than Landlord if it exercises its option pursuant to subparagraph (d) above) shall have a right further to sublet without Landlord's prior consent, which Tenant acknowledges may be withheld in Landlord's absolute discretion, and any assignment by a sublessee of its sublease shall be subject to Landlord's prior consent in the same manner as if Tenant were entering into a new sublease. No sublease, once consented to by Landlord, shall be modified or terminated by Tenant without Landlord's prior consent, which consent shall not be unreasonably withheld. 10 (g) In __________ assignment to an entity other than Landlord fifty, hundred percent (50%) o__ __________ ve the rate paid by Tenant, or other economic consideration received by Tenant as a result of such assignment, shall be paid to Landlord after first deducting the unamortized cost of reasonable leasehold improvements paid for by Tenant, the cost of architectural and engineering fees, and the cost of any real estate commissions actually incurred by Tenant in connection with such assignment and reasonable attorneys' fees and costs. (h) In the case of a subletting to an entity other than Landlord, fifty percent (50%) of any sums or economic consideration received by Tenant as a result of such subletting shall be paid to Landlord after first deducting (1) the rental due hereunder, prorated to reflect only rental allocable to the sublet portion of the Premises, (2) the cost of leasehold improvements made to the sublet portion of the Premises at Tenant's cost, including, architectural and engineering fees, amortized over the term of this Lease except for leasehold improvements made for the specific benefit of the sublessee, which shall be amortized over the term of the sublease, and (3) the cost of any real estate commissions and/or attorneys' fees and costs actually incurred by Tenant in connection with such subletting, amortized over the term of the sublease. (i) Regardless of Landlord's consent and regardless of whether Landlord consent is required pursuant to the terms hereof, no subletting or assignment shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay the rental and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or successor. Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto, and such action shall not relieve Tenant of liability under this Lease. (j) In the event Tenant shall assign this Lease or sublet the Premises or request the consent of Landlord to any assignment, subletting, hypothecation or other action requiring Landlord's consent hereunder, the Tenant shall pay Landlord's reasonable and standard processing fee (not to exceed Five Hundred Dollars ($500.00)) in each instance and Landlord's reasonable attorneys' fees and costs incurred in connection therewith. In no event shall any of these costs be reimbursable to Tenant. (k) Notwithstanding anything to the contrary contained herein, any and all unexercised options to extend or renew the term of the Lease or to expand the Premises and any and all rights of first refusal and similar rights are intended by both Landlord and Tenant to be personal to SmartAge Corp. and any Permitted Transferee and are not intended to benefit any other assignee or sublessee hereunder. Upon any assignment or subletting of the Premises or any portion thereof, any such options or rights shall automatically and without any further action by Landlord terminate and be of no further force and effect. 17. Rules; No Discrimination. Tenant shall faithfully observe and comply ------------------------- with the rules and regulations annexed to this Lease, and after notice thereof, all reasonable modifications thereof and additions thereto from time to time promulgated in writing by Landlord. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any of said rules and regulations. Tenant specifically covenants and agrees that Tenant shall not discriminate against or segregate any person or group of persons on account of race, sex, creed, color, national origin, or ancestry in the occupancy, use, sublease, tenure or enjoyment of the Premises. 18. Entry by Landlord. Landlord may with reasonable prior notice to ------------------ Tenant which shall in no event be more than 24 hours prior notice (except in the case of an emergency) enter the Premises at reasonable hours to (a) inspect the same;(b) exhibit the same to prospective purchasers, lenders or tenants, provided, however, that Landlord shall only exhibit the Premises to prospective tenants during the final ninety (90) days of Tenant's occupancy of the Premises; (c) make repairs or perform maintenance required of Landlord under the terms hereof or repairs to any adjoining space or utility services or make repairs, alterations or improvements to any other portion of the Building; (d) supply janitor service and any other service to be provided by Landlord to Tenant under this Lease; and (e) post notices of non-responsibility, provided, however, that all such work shall be 11 done as prom______ _____nably practical and so as to cause as little interference to Tenant as reasonably p__________nt hereby waives any claim for damages for any inconvenience to or interference with __________ business or any loss of occupancy or quiet enjoyment of the Premises occasioned by such __________. Landlord shall at all times have and retain a key with which to unlock all of the doors in, on or about the Premises (excluding Tenant's vaults, safes and similar areas designated in writing by Tenant in advance); and Landlord shall have the right to use any and all means which Landlord may deem proper to open Tenant's doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord in an emergency shall not be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof and Landlord shall have no liability to Tenant as a result thereof. 19. Events of Default. The following events shall constitute Events of ------------------ Default under this Lease: (a) a default by Tenant in the payment when due of any rent or other sum payable hereunder and the continuation of such default for a period of 5 days after notice from Landlord that the same is due; but, after the second occurrence in any calendar year, only the passage of five (5) days, and no notice, shall be required in such calendar year. (b) a __________ by Tenant in the performance of any of the other terms, covenants, agreements or c__________tions contained herein and, if the default is curable, the continuation of such default for a period of thirty (30) after notice by Landlord or beyond the time reasonably necessary for cure if the default is of a nature to require more than thirty (30) days to remedy, provided, however, in no event shall Tenant have more than a period of sixty (60) days to remedy any such default; (c) the bankruptcy or insolvency of Tenant, transfer by Tenant in fraud of creditors, an assignment by Tenant for the benefit of creditors, or the commencement of any proceedings of any kind by or against Tenant under any provision of the Federal Bankruptcy Act or under any other insolvency, bankruptcy or reorganization act unless, in the event any such proceedings are involuntary, Tenant is discharged from the same within sixty (60) days thereafter; (d) the appointment of a receiver for a substantial part of the assets of Tenant; (e) the abandonment of the Premises; and (f) the levy upon this Lease or any estate of Tenant hereunder by any attachment or execution and the failure to have such attachment or execution vacated within thirty (30) days thereafter. In no event shall this Lease be assigned or assignable by reason of any voluntary or involuntary bankruptcy proceedings, nor shall any rights or privileges hereunder be an asset of Tenant, the trustee, debtor-in-possession, or the debtor's estate in any bankruptcy, insolvency or reorganization proceedings. 20. Termination Upon Default. Upon the occurrence of any Event of Default ------------------------- by Tenant hereunder, Landlord may, at its option and without any further notice or demand, in addition to any other rights and remedies given hereunder or by law, terminate this Lease and exercise its remedies relating thereto in accordance with the following provisions: (a) Landlord shall have the right, so long as the Event of Default remains uncured, to give notice of termination to Tenant, and on the date specified in such notice this Lease shall terminate. (b) In the event of any such termination of this Lease, Landlord may then or at any time thereafter by judicial process, re-enter the Premises and remove therefrom all persons and property and again repossess and enjoy the Premises, without prejudice to any other remedies that Landlord may have by reason of Tenant's default or of such termination. (c) In the event of any such termination of this Lease, and in addition to any other rights and remedies Landlord may have, Landlord shall have all of the rights and remedies 12 of a landlord provided by Section 1951.2 of the California Civil Code. The amount of damages which Landlord may recover in event of such termination shall include, without limitation: (1) the worth at the time of award (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) of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided; (2) all legal expenses and other related costs incurred by Landlord following Tenant's default; (3) all costs incurred by Landlord in restoring the Premises to good order and condition, or in remodeling, renovating or otherwise preparing the Premises for reletting; (4) all costs (including, without limitation, any brokerage commissions) actually incurred by Landlord in reletting the Premises; and (5) any and all other damages suffered by Landlord. (d) After terminating this Lease, Landlord may remove any and all personal property located in the Premises and place such property in a public or private warehouse or elsewhere at the sole cost and expense of Tenant. In the event that Tenant shall not immediately pay the cost of storage of such property after the same has been stored for a period of thirty (30) days or more, Landlord may sell any or all thereof at a public or private sale in such manner and at such times and places as Landlord in its sole discretion may deem proper, without notice to or demand upon Tenant. Tenant waives all claims for damages that may be caused by Landlord's removing or storing or selling the property as herein provided, and Tenant shall indemnify and hold Landlord free and harmless from and against any and all claims, damages, liabilities, losses, costs and expenses, including, without limitation, all costs of court and attorneys' fees of Landlord occasioned thereby. (e) In the event of the occurrence of any of the events specified in paragraph 19(c) of this Lease, if Landlord shall not choose to exercise, or by law shall not be able to exercise, its rights hereunder to terminate this Lease, then, in addition to any other rights of Landlord hereunder or by law, (1) Landlord may discontinue the services provided pursuant to paragraph 6 of this Lease, unless Landlord has received compensation in advance for such services in the amount of Landlord's reasonable estimate of the compensation required with respect to such services, and (2) neither Tenant, as debtor-in-possession, nor any trustee or other person (collectively, the "Assuming Tenant") shall be entitled to assume this Lease unless on or before the date of such assumption, the Assuming Tenant (a) cures, or provides adequate assurance that the Assuming Tenant will promptly cure, any existing default under this Lease, (b) compensates, or provides adequate assurance that the Assuming Tenant will promptly compensate Landlord for any pecuniary loss (including, without limitation, attorneys' fees and disbursements) resulting from such default, and (c) provides adequate assurance of future performance under this Lease. For purposes of this subparagraph (e), "adequate assurance" of such cure, compensation or future performance shall be effected by the establishment of an escrow fund for the amount at issue or by bonding. (f) In the event any governmental authority having jurisdiction over the Real Property or the Building promulgates or revises any applicable law or imposes mandatory or voluntary controls or guidelines on Landlord or the Premises or the Building relating to the use or conservation of energy or utilities or the reduction of automobiles or other emissions (collectively "Controls") or in the event Landlord is required or elects to make alterations to the Premises or the Building in order to comply with such mandatory or voluntary Controls, Landlord may, in its sole discretion, comply with such Controls or make such alterations to the Premises and/or Building related thereto. Such compliance and the making of such alterations shall not entitle Tenant to any abatement of rent, constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including but no limited to, liability for consequential damages or loss of business by Tenant. In carrying out such compliance and alterations, Landlord shall use reasonable efforts to minimize any disruptions to Tenant's business in the Premises. 21. Continuation after Default. Landlord shall have the remedy described --------------------------- in California Civil Code Section 1951.4 (i.e. Landlord may continue this Lease in effect after Tenant's abandonment and recover rental as it becomes due, because Tenant has the right to sublet or assign, subject only to reasonable limitations). Even though Tenant has breached this Lease and abandoned the Premises, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all its rights and remedies as it becomes due under this Lease. Acts of maintenance or preservation or efforts to relet the Premises or the appointment of a receiver upon initiative of Landlord to protect 13 Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession. 22. Other Relief. The remedies provided for in this Lease are in addition ------------- to any other remedies available to Landlord at law or in equity, by statute or otherwise. 23. Landlord's Right to Cure Defaults. All agreements and provisions to ---------------------------------- be performed by Tenant under any of the terms of this Lease shall be at its sole cost and expense and without any abatement of rental. If Tenant shall fail to pay any sum of money, other than rental, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder and such failure shall continue for thirty (30) days after notice thereof by Landlord, or such longer period as may be allowed hereunder, Landlord may, but shall not be obligated so to do, and without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such other act on Tenant's part to be made or performed as in this Lease provided to the extent Landlord may deem desirable. All sums so paid by Landlord (with interest at an annual rate equal to four percent (4%) over the annual prime rate of interest announced publicly by Citibank, N.A., in New York, New York from time to time, but in no event in excess of the maximum interest rate permitted by law) and all necessary incidental costs shall be payable to Landlord on demand. 24. Attorneys' Fees. If any action arising out of this Lease is brought ---------------- by either party hereto against the other, then and in that event the unsuccessful party to such action shall pay to the prevailing party all costs and expenses, including reasonable attorneys' fees, incurred by such prevailing party, and if the prevailing party shall recover judgment in such action, such costs expenses and attorneys' fees shall be included in and as part of such judgment. 25. Eminent Domain. If all or any part of the Premises shall be taken as --------------- a result of the exercise of the part of eminent domain, this Lease shall terminate as to the part so taken as of the date of taking, and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Premises by notice to the other within thirty (30) days after such date, provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant's use of the balance of the Premises. In the event of any taking, 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 therewith, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease or otherwise. In the event of a partial taking of the Premises which does not result in a termination of this Lease, the monthly rental thereafter to be paid shall be equitably reduced. 26. Subordination. -------------- (a) This Lease shall be subject and subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the Building and to any and all advances made on the security thereof or Landlord's interest therein, and to all renewals, modifications, consolidations, replacements and extensions thereof. In the event any mortgage or deed of trust to which this Lease is subordinate is foreclosed or a deed in lieu of foreclosure is given to the mortgagee or beneficiary, Tenant shall attorn to the purchaser at the foreclosure sale or to the grantee under the deed in lieu of foreclosure; in the event any ground lease to which this Lease is subordinate is terminated, Tenant shall attorn to the ground lessor. Tenant agrees to execute within ten (10) days any documents required to effectuate such subordination, to make this Lease prior to the lien of any mortgage or deed of trust or ground lease as may be requested by the holder of any such mortgage or deed of trust or by the ground lease under any such ground lease, or to evidence such attornment. (b) In the event any mortgage or deed of trust which is entered into by Landlord after the date hereof to which this Lease is subordinate is foreclosed or a deed in lieu of foreclosure is given to the mortgagee or beneficiary, or in the event any ground lease to which this Lease is subordinate is terminated, this Lease shall not be barred, terminated, cut off or foreclosed, nor shall the rights and possession of Tenant hereunder be disturbed if Tenant shall not then be in default in the payment of rental and other sums due hereunder or otherwise be in default under the terms of this Lease, and if Tenant shall attorn to the purchaser grantee or 14 ground lessor as provided in subparagraph (a) above or, if requested, enter into a new lease for the balance of the term hereof upon the same terms and provisions as are contained in this Lease. (c) [See Lease Addendum] 27. No Merger. The voluntary or other surrender of this Lease by Tenant, ---------- or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or operate as an assignment to it of any or all such subleases or subtenancies. 28. Sale. In the event the original Landlord hereunder, or any successor ----- owner of the Building, shall sell or convey the Building, all liabilities and obligations on the part of the original Landlord, or such successor owner, under this Lease accruing thereafter shall terminate, and thereupon all such liabilities and obligations shall be binding upon the new owner. Tenant agrees to attorn to such new owner. 29. Estoppel Certificate. At any time and from time to time but on not --------------------- less than ten (10) days prior notice by Landlord, Tenant shall execute, acknowledge, and deliver to Landlord, promptly upon request, a certificate certifying (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, as modified, and stating the date and nature of each modification), (b) the date, if any, to which rental and other sums payable hereunder have been paid, (c) that no notice has been received by Tenant of any default which has not been cured, except as to defaults specified in the certificate, (d) whether there is then existing any claim by Tenant of default hereunder by Landlord, and, if so, specifying the nature thereof, and (e) such other matters as may be requested by Landlord. Any such certificate may be relied upon by any prospective purchaser, mortgagee or beneficiary under any deed of trust on the Building or any part thereof 30. No Light, Air, or View Easement. Tenant agrees that any diminution or -------------------------------- shutting off of light, air or view by any structure which may be erected (whether or not by Landlord) on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord, nor entitle Tenant to any reduction of rent or any other sums payable hereunder. 31. Holding Over. If Tenant holds possession of the Premises after ------------- expiration of the term of this Lease, Tenant shall become a tenant from month to month upon the terms herein specified but at a monthly rental equivalent to 150% of the then prevailing monthly rental payable by Tenant at the expiration of the term of this Lease, payable in advance on or before the first day of each month, and shall indemnify Landlord and any replacement tenant for the Premises for any damages or loss suffered by either Landlord or the replacement tenant resulting from Tenant's failure timely to vacate the Premises. 32. Security Deposit. Tenant shall, upon execution of this Lease, deposit ----------------- with Landlord the sum specified in the Basic Lease Information (the "deposit"). The deposit shall be held by Landlord as security for the faithful performance by Tenant of all the provisions of this Lease to be performed or observed by Tenant. If Tenant fails to pay rent or other sums due hereunder, or otherwise defaults with respect to any provision of this Lease beyond any applicable cure period, Landlord may use, apply or retain all or any portion of the deposit for the payment of any rent or other sum in default or for the payment of any other sum to which Tenant compensates Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of the deposit, Tenant shall within ten (10) days after demand therefor deposit cash with Landlord in an amount sufficient to restore the deposit to the full amount thereof and Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep the deposit separate from its general accounts or to pay any interest on the deposit. 33. Waiver. The waiver by Landlord of any agreement, condition or ------- provision herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other agreement, condition or provision herein contained, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be construed to waive or to lessen the right of Landlord to insist upon the performance by Tenant in strict accordance with such terms. The subsequent acceptance of rental hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any agreement, condition or provision of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of preceding breach at the time of acceptance of the rental. 34. Notices and Consents. All notices, consents, demands and other --------------------- communications 15 from one party to the other that are given pursuant to the terms of this Lease shall be in writing and shall be deemed to have been fully given when deposited in the United States mail, certified or registered, postage prepaid, and addressed as follows: to Tenant at the address specified in the Basic Lease Information, or to such other place as Tenant may from time to time designate in a notice to Landlord; to Landlord at the address specified in the Basic Lease Information, or to such other place as Landlord may from time to time designate in a notice to Tenant; or, in the case of Tenant, delivered to Tenant at the Premises. 35. Complete Agreement. There are no oral agreements between Landlord and ------------------- Tenant affecting this Lease, and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements, letters of intent and understandings if any, between Landlord and Tenant or displayed by Landlord to Tenant with respect to the subject matter of this Lease, the Building or related facilities. 36. Corporate Authority. (a) If Tenant signs as a corporation, each of ------------------- the persons executing this Lease on behalf of Tenant warrants that Tenant is a duly authorized and existing corporation, that Tenant has been and is qualified to do business in California, that the corporation has full right and authority to enter into this Lease, and that each and both of the persons signing on behalf of the corporation were authorized to do so. (b) [See Lease Addendum] 37. Partnership Authority. If Tenant is a partnership, joint venture, or ---------------------- other unincorporated association, each individual executing this Lease on behalf of Tenant warrants that this Lease is binding on Tenant and that each and both of the persons signing on behalf of Tenant were authorized to do so. 38. Limitation of Liability to Building. The liability of Landlord to ------------------------------------ Tenant for any default by Landlord under this Lease or arising in connection with Landlord's operation, management, leasing, repair, renovation, alteration, or any other matter relating to the Building or the Premises, shall be limited to the interest of Landlord in the Building. Tenant agrees to look solely to Landlord's interest in the Building for the recovery of any judgment against Landlord, and Landlord shall not be personally liable for any such judgment or deficiency after execution thereon. The limitations of liability contained in this paragraph 38 shall apply equally and inure to the benefit of Landlord, its successors and their respective, present and future partners of all tiers, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective heirs, successors and assigns. Under no circumstances shall any present or future general partner of Landlord (if Landlord is a partnership) or individual trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have any liability for the performance of Landlord's obligations under this Lease. 39. Miscellaneous. The words "Landlord" and "Tenant" as used herein shall -------------- include the plural as well as the singular. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. Time is of the essence of this Lease and each and all of its provisions. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. The agreements, conditions and provisions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, executors, administrators, successors and assigns of the parties hereto. Tenant shall not, without the consent of Landlord, use the name of the Building for any purpose other than as the address of the business to be conducted by Tenant in the Premises. Upon the request of Landlord, Tenant shall provide to Landlord from time to time, at no expense to Landlord, copies of such financial statements with respect to Tenant as may have been prepared by or for Tenant; provided, that, Landlord shall keep confidential any information identified by Tenant as confidential (except that Landlord may share such information on a confidential basis with its lenders, accountants, attorneys, consultants and prospective purchasers, as necessary). Landlord's acceptance of a partial rent payment shall not constitute a waiver of any rights of Tenant or Landlord, including, without limitation, any right Landlord may have to recover possession of the Premises, in unlawful detainer, or otherwise. If any provisions 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. This Lease shall be governed by and construed pursuant to the laws of the State of California. 40. Abandonment. Tenant shall not abandon the Premises or any part ------------ thereof at any time during the term of this Lease. Tenant understands that if Tenant should leave the Premises or any part thereof abandoned, the risk of fire, other casualty, and vandalism to the Premises and the Building will be increased and that, therefore, such action by 16 Tenant shall constitute a material breach of this Lease, whether or not Tenant continues to pay rent and additional rent under this Lease. If Tenant shall vacate, abandon or surrender the Premises, or be dispossessed by process of law or otherwise, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned, at the option of Landlord, and Landlord may sell or otherwise dispose of such personal property in any commercially reasonable manner. 42. Americans with Disabilities Act and Similar Acts. Notwithstanding ------------------------------------------------- anything to the contrary contained herein or in the Lease, Tenant, at its sole cost and expense, shall (i) cause the Premises to comply with the provisions of the Americans With Disabilities Act, 42. U.S.C. 12101 et seq. and any governmental regulations with respect thereof (the "ADA"), Title 24 of the California Administrative Code ("Title 24"), and other similar federal, state, and local laws and regulations, including, without limitation, any alterations required under ADA for the purposes of "public accommodations" (as that term is used in the ADA), and (ii) reimburse Landlord upon demand for any and all costs and expenses incurred by Landlord to comply with ADA, Title 24, or such similar federal, state, or local laws and regulations in any other portion of the Building in which the Premises are located arising out of Tenant's use of or construction in the Premises. Except as provided above, Tenant shall have no responsibility to comply with such laws in portions of the Building outside of the Premises. 43. Exhibits. The exhibit(s) and addendum, if any, specified in the Basic --------- Lease Information are attached to this Lease and by this reference made a part hereof 44. Landlord's Liability; Sale of Building. The term "Landlord," as used --------------------------------------- in this Lease, shall mean only __________ owner or owners (or lessee or lessees under any ground lease) of the Building at the time in question. Tenant acknowledges and agrees that the liability of Landlord with respect to its obligations under this Lease is limited to Landlord's interest in the Building, and Tenant agrees to look solely to Landlord's interest in the Building or the proceeds of any transfer thereof to satisfy any claim or judgment against or any liability or obligation of Landlord to Tenant under this Lease. In no event shall any partner, officer, director, employee, trustee, beneficiary, advisor, investment manager, manager, agent, member, advisor, or shareholder of Landlord have any personal liability to Tenant with respect to any liability or obligation of Landlord to Tenant, and no recourse shall be had by Tenant against any such parties or the assets of any such parties to satisfy any claim or judgment of Tenant for Landlord's breach of any of its obligations under this Lease. In addition, in the event of any conveyance of title to the Building, Landlord shall be relieved of all liability with respect to Landlord's obligations to be performed under this Lease after the date of such conveyance. If Tenant provides Landlord with any security for Tenant's performance of its obligations hereunder, Landlord shall transfer such security to the grantee or transferee of Landlord's interest in the Real Property, and once such transfer has been made, Landlord shall be released from any further responsibility or liability of such security. Wherever in this Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or limits any right of Tenant to assert any claim against Landlord or to seek recourse against any property of Landlord or (c) agrees to indemnify Landlord against any matters, the relevant release, waiver, limitation or indemnity shall run in favor of and apply to Landlord, the constituent shareholders, partners, trustees, beneficiaries, members or other owners of Landlord, and the directors, officers, employees and agents of Landlord and each such constituent shareholder, partner or other owner. 17 45. Name of Building. Tenant shall not use the name of the Building for ----------------- any purpose other than as the address of the business conducted by Tenant in the Premises without the written consent of Landlord. Landlord reserves the right to change the name of the Building and Landlord shall not be liable to Tenant for any loss, cost or expense in account of any such change of name. 46. Hazardous Substance Disclosure. California law requires landlords to ------------------------------- disclose to tenants the existence of certain Hazardous Materials. Accordingly, the existence of gasoline and other automotive fluids, asbestos containing materials, maintenance fluids, copying fluids and other office supplies and equipment, certain construction and finish materials, tobacco smoke, cosmetics and other personal items must be disclosed. Gasoline and other automotive fluids are found in the garage area of the Building. Cleaning, lubricating and hydraulic fluids used in the operation and maintenance of the Building are found in the utility areas of the Building not generally accessible to Building occupants or the public. Many Building occupants use copy machines and printers with associated fluids and toners, and pens, markers, inks, and office equipment that may contain Hazardous Materials. Certain adhesives, paints and other construction materials and finishes used in portions of the Building may contain Hazardous Materials. Although smoking is prohibited in the public areas or the Building, these areas may from time to time be exposed to tobacco smoke. Building occupants and other persons entering the Building from time to time may use or carry prescription and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some of which may contain Hazardous Materials. 47. Real Estate Brokers. Landlord and Tenant each represents and warrants -------------------- to the other that such party has negotiated this Lease directly with the Real Estate Broker(s), if any, identified in the Basic Lease Information and has not authorized or employed, or acted by implication to authorize or to employ, any other real estate broker or salesman to act for such party in connection with this Lease. Each party shall indemnify, defend and hold the other harmless from and against any and all claims by any real estate broker or salesman other than the Real Estate Broker(s), if any, identified in the Basic Lease Information for a commission, finder's fee or other compensation as a result of the inaccuracy of such party's representation above. Landlord will pay any commission owing to the Real Estate Brokers, if any, identified in the Basic Lease Information above pursuant to a separate agreement. 48. Limited Recourse. Notwithstanding anything to the contrary in the ----------------- Lease or in any document delivered by Landlord in connection with the consummation of the transaction contemplated hereby, it is expressly understood and agreed that The Equitable Life Assurance Society of the United States is acting solely on behalf and for the benefit of Separate Account No. S-16III and Landlord's liability shall be limited to, and payable and collectable only out of, assets allocated to, or held by Landlord for the benefit of, Separate Account No. S-16III (including, without limitation, the Building) and no other property or asset of Landlord or of any of Landlord's directors, officers, employees, shareholders, contractholders or policyholders, shall be subject to any lien, levy, execution, setoff or other enforcement procedure for satisfaction of any right or remedy of Tenant in connection with the transaction contemplated hereby. IN WITNESS WHEREOF, the parties have executed this Lease on the respective dates indicated below:
TENANT LANDLORD SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE SOCIETY OF a Delaware corporation THE UNITED STATES, a New York corporation By: /s/ By: /s/ ------------------------------------------------- ---------------------------------------------- Its: CEO Its: Investment Officer -------------------------------------------- ----------------------------------------- By: _________________________________________________ By: ______________________________________________ Its: ____________________________________________ Its: _________________________________________ Date of Execution Date of Execution by Tenant: 8/24/99 by Landlord: 8-31-99 ------------------------------------- --------------------------------
18 ADDENDUM TO LEASE This Addendum ("Addendum") is made to be a part of that certain Office Lease between The Equitable Life Assurance Society of the United States, a New York corporation ("Landlord"), and SmartAge Corp., a Delaware corporation ("Tenant"), dated as of August 10, 1999 (the "Lease"). To the extent there is any inconsistency between the terms and provisions of the Lease and the terms and provisions of this Addendum, this Addendum shall govern and control. All capitalized words used herein which have defined meanings in the Lease shall have the same defined meanings herein. Landlord and Tenant have agreed as follows: 49. [Insert after the last sentence of Paragraph 2 on page I of the Lease] Notwithstanding the foregoing, and except for delays caused by fire, earthquake, act of God or the elements, in the event that Landlord does not deliver the Premises to Tenant within one hundred eighty (180) days after the Effective Date, then Tenant as its sole remedy shall have (a) the right to terminate this Lease upon seven (7) business days prior written notice to Landlord (unless, within such seven (7) business day period, Landlord delivers possession of the Premises to Tenant. 50. [Insert in Paragraph 4(a)(v) as the second sentence on Page 3 of the Lease] Notwithstanding the foregoing __________ purposes of this Lease, Expenses shall not include: (1) Real Estate Taxes, since Tenant is obligated to pay Tenant's Tax Share of Tax Increases pursuant to other provisions hereof; (2) Leasing commissions paid to agents of Landlord, other brokers or any other persons in connection with the leasing of premises in the Building; attorneys' fees, costs, disbursements and other expenses incurred in connection with the negotiation or disputes with tenants, or in connection with leasing, renovating, or improving space for tenants or other occupants or prospective tenants or other occupants of the Building; (3) The cost of utilities, services and other benefits (including but not limited to after-hours HVAC, supplemental condenser water, etc.) for which individual tenants (including Tenant) reimburse Landlord or directly pay service providers, or costs in connection with services or other benefits provided selectively to one or more tenants (other than Tenant) and which do not benefit Tenant; (4) The depreciation or amortization (except to the extent specifically provided in Paragraph 4(a)(v) above) of the Building; (5) Costs of capital alterations, improvements, replacements, capital repairs to the Building or other capital items which, in accordance with GAAP and consistent with industry standards and sound management practices, should not be expensed, except as otherwise included as an Expense in this Lease; (6) Rent and other related expenses incurred in leasing air- conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature (excluding equipment not affixed to the Building which is used in providing janitorial or similar services), except for rent and other related expenses incurred while repairs or replacements are being made to keep permanent systems in operation; (7) Principal, interest, points and fees on debt or amortization payments on any real property mortgages or deeds of trust, or ground lease payments; (8) Advertising and marketing costs incurred with respect to advertising or solicitation of new tenants for the Building; (9) Any compensation paid to clerks, attendants or other persons in commercial concessions operated by or on behalf of Landlord, excluding the Building concierge operations and the operation of the garage; (10) The costs of repair to the Building, including the Premises and other costs and expenses (which would otherwise be included as part of Expenses), to the extent such costs are reimbursed by insurance, guaranties, warranties, governmental agencies, or other tenants or occupants; (11) Interest, fines or penalties assessed as a result of Landlord's failure to make payments in a timely manner unless such failure is commercially reasonable under the circumstances; (12) Costs to the extent resulting from the gross negligence or willful misconduct of Landlord, its employees or contractors; (13) Landlord's general overhead and administrative expenses, including executive salaries and service personnel, to the extent not allocable to the operation or management of the Building; (14) Payments in respect to overhead or profits to subsidiaries or affiliates of Landlord, or to any party affiliated with Landlord, for management or other services in or to the Building, or for supplies or other materials, to the extent that the cost of such services, supplies, or materials exceeds the fair market cost that would be charged by non-affiliated third parties dealing with Landlord on an arms-length basis; (15) Costs of complying with laws, codes, regulations, or ordinances relating to hazardous materials to the extent such costs are incurred as a result of the presence of hazardous materials in the soil or groundwater under the Building on or before the date of execution of this Lease. The parties agree that the clean-up of hazardous materials required because of the use __________ction of building materials (other than those known to be hazardous at the time of the installation) shall be either an Expense, or to the extent that such clean-up constitutes an improvement to the Building, a capital improvement pursuant to this Lease. To the extent that such clean-up of hazardous materials is a capital improvement, the cost thereof shall be payable by Tenant to Landlord as capital improvement amortization under this Lease, amortized over the remaining useful life of the Building as reasonably determined by Landlord. 51. [Insert in Paragraph 4(a)(v) as the third and fourth sentences on Page 3 of the Lease] Actual expenses for the Base Expense Year shall be adjusted to equal the greater of Landlord's Expenses (aa) at the actual occupancy rate of the Building during the Base Expense Year, or (bb) as though 95% of the total area of the Building had been occupied during the Base Expense Year. Actual expenses for each subsequent Expense Year shall be adjusted to equal Landlord's reasonable estimate of the Expenses had the total area of the Building been occupied for such Expense Year. 52. [Insert in Paragraph 4 as a new Paragraph 4(f) on page 4 of the Lease] 4(f). Tenant shall have the right to audit the books and records of Landlord applicable to the immediately preceding Expense Year (i) once every three years during the term of this Lease, or (ii) in any year during the term of the Lease if the amount paid by Tenant during the applicable Expense Year on account of Expense Increases has increased more than ten percent (10%) over the amount paid by Tenant on account of Expense Increases during the immediately preceding Expense Year, provided, that, Tenant provides written notice thereof to Landlord within one hundred twenty (120) days after receipt of Landlord's Expense Statement. Landlord shall make the books and records available at Landlord's office in the Building or at such other reasonable location as Landlord shall designate, during reasonable business hours on business days, commencing on such date as Landlord shall designate. Such audit shall be completed within thirty (30) days after commencement. If such audit discloses that adjustments to the Expense Increase payable by Tenant are necessary, such adjustments shall be made in the manner set forth in Paragraph 4(d) above. Tenant's auditor shall be a certified public accountant paid on an hourly basis and shall not be compensated on a contingency basis. Tenant shall be solely responsible for the costs of any such audit. Notwithstanding anything to the contrary contained herein and with reasonable promptness after the expiration of the Tenant's Base Expense Year and Base Tax Year, Landlord shall provide Tenant with a copy of Landlord's Expense Statement and Tax Statement for the Base Expense Year and Base Tax Year. 53. [Insert after the last sentence of Paragraph 6(b) on page 6 of the Lease] Notwithstanding the foregoing, in the event that there is a continuous interruption in the supply of water, electricity, gas, or other form of energy serving the Premises or the 2 Building for a period of more than seven (7) consecutive business days which interruption substantially interferes with the conduct of Tenant's business in the Premises (or a portion thereof), and Tenant in fact ceases to use the Premises (or a portion thereof) by reason of such interruption, then Tenant shall be entitled to an abatement in Base Rent due under this Lease. Abatement of Base Rent shall be allowed for such part of the Premises as shall be rendered unusable for the conduct of Tenant's business and shall commence on the eighth (8th) consecutive business day after cessation of use by Tenant and receipt by Landlord of written notice from Tenant of such cessation. Abatement shall continue until the earlier of (i) resumption of the applicable energy supply, or (ii) resumption of Tenant's use of the Premises or applicable portion thereof. 54. [The following shall be inserted in Paragraph 16 as a new Paragraph 16(e) on page 10 of the Lease] 16(e). The provisions of subparagraphs (a) and (b) above notwithstanding, no consent by Landlord shall be required for an assignment or sublease by Tenant to a Tenant Affiliate or Tenant Successor (a "Permitted Transfer" to a "Permitted Transferee"), provided, that, any such assignment or subletting to a Tenant Affiliate or Tenant Successor shall be subject to the following conditions: (i) Tenant shall furnish Landlord written notice of the assignment or subletting and the identity of the assignee or sublessee within thirty (30) days after the effective date of such assignment or subletting; (ii) Tenant shall furnish Landlord with a fully-executed copy of the sublease or assignment instrument, if any, and, with respect to any and all assignments (whether to an Tenant Affiliate or a Tenant Successor), Landlord shall furnish Tenant with a fully- executed copy of an instrument in writing, in form and substance satisfactory to Landlord, pursuant to which the assignee assumes all of the obligations and liabilities accruing from and after such assignment and imposed upon Tenant herein or arising hereunder; (iii) at the time of the proposed assignment or subletting, there shall be no uncured Events of Default under this Lease; and (iv) in connection with an assignment to a Tenant Successor, such Tenant Successor shall deliver to Landlord either a cash deposit as described in Paragraph 32 of the Lease or a Letter of Credit as described in Paragraph 57 below. In no event shall a subletting or assignment to a Permitted Assignee release or relieve Tenant of any of its obligations under this Lease. For purposes hereof, (i) "Tenant Affiliate" shall mean any corporation, partnership or other entity which controls, is controlled by or is under common control with Tenant; (ii) "Tenant Successor" shall mean any entity which acquires all or substantially all of the stock or assets of Tenant or any entity into which Tenant may become merged or consolidated or other reorganization; and (iii) "control" in this context shall mean the right directly or indirectly to exercise in excess of fifty percent (50%) of the voting or governing power of an entity. 55. [The following shall be inserted in Paragraph 36 as a new Paragraph 36(b) on page 16 of the Lease] 36(b). If Landlord signs as a corporation, each of the persons executing this Lease on behalf of Landlord warrants that Landlord is a duly authorized and existing corporation, that Landlord has been and is qualified to do business in California, that the corporation has full right and authority to enter into this Lease, and that each and both of the persons signing on behalf of the corporation were authorized to do so. 56. PARKING. Tenant shall have the right to rent from Landlord up to one -------- (1) unreserved parking space in the Building garage for each two thousand five hundred (2,500) rentable square feet leased by Tenant in the Premises on a monthly basis throughout the term of this Lease. Such spaces shall be rented by Tenant at the then prevailing monthly rate established by Landlord from time to time or Landlord's agents for such parking access. 3 Tenant shall be responsible for any taxes imposed by any governmental authority in connection with such spaces. Tenant's continued right to use such parking spaces is conditioned upon Tenant and Tenant's employees abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility. Landlord specifically reserves the right to change the location, size, configuration, design, layout and all other aspects of the parking facility, and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, close-off or restrict access to the parking facility for purposes of permitting or facilitating any such maintenance, construction, alterations or improvements. Landlord may totally or partially delegate its responsibilities hereunder to a parking operator in which such operator shall have the rights of control as delegated by Landlord. The parking spaces rented by Tenant pursuant to this Paragraph are provided to Tenant solely for use by Tenant's own personnel (not including Tenant's invitees and guests) and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval. Monthly parking pass holders shall have twenty-four (24) hour access to the Building garage. 57. LETTER OF CREDIT. In lieu of the cash deposit described in Paragraph ---------------- 32 of the Lease, Tenant shall, upon signing this Lease, deliver to Landlord an irrevocable and unconditional letter of credit (the "Letter of Credit") governed by the Uniform Customs and Practice for Documentary Credits (1993 revisions), International Chamber of Commerce Publication No. 500, as revised from time to time, in the amount of Nine Hundred Seventy-Seven Thousand Five Hundred Forty-Three and No/100 Dollars ($977,543.00), issued to Landlord, as beneficiary, in form and substance satisfactory to Landlord, by a bank (an "Approved Bank") approved by Landlord qualified to transact banking business in California with an office in the City and County of San Francisco at which drafts drawn on the Letter of Credit may be presented for payment. The full amount of the Letter of Credit shall be available to Landlord upon presentation of Landlord's sight draft accompanied only by the Letter of Credit and Landlord's signed statement that Landlord is entitled to draw on the Letter of Credit pursuant to this Lease. Tenant shall maintain the Letter of Credit for the entire term of this Lease, subject only to reduction in the amount of the Letter of Credit as provided in this Paragraph. The Letter of Credit shall expressly state that the Letter of Credit and the right to draw thereunder may be transferred or assigned by Landlord to any successor or assignee of Landlord under this Lease. The Letter of Credit shall also provide that it shall be deemed automatically renewed, without amendment, for consecutive periods of one (1) year each during the term of this Lease (plus a period of thirty (30) days after the Term Expiration Date), unless the Approved Bank sends written notice ("Issuer Notice") to Landlord by any method specified in Paragraph 34 of the Lease, not less than sixty (60) days next preceding the then expiration date of the Letter of Credit that it elects not to have such Letter of Credit renewed. If Landlord receives an Issuer Notice, and not later than thirty (30) days prior to the expiry date of the Letter of Credit Tenant fails to furnish Landlord with a replacement Letter of Credit pursuant to the terms and conditions of this Paragraph 57, then Landlord shall have the right to draw the full amount of the Letter of Credit, by sight draft, and shall hold the proceeds of the Letter of Credit as a cash security deposit pursuant to the terms and conditions of Paragraph 32 of the Lease. Notwithstanding the foregoing, in the event that Tenant is not in default on the commencement of the Third, Fourth and Fifth Lease Years, as applicable, and Tenant has not previously been in default under this Lease more than once, Tenant shall have the right, at its sole cost and expense, to obtain an amendment to the Letter of Credit in each of said Lease Years which reduces the amount of the Letter of Credit so that the amount of the Letter of Credit for said Lease Years is as follows: Lease Year 3 $733,157.00 Lease Year 4 $488,772.00 Lease Year 5 $244,386.00 4 58. ROOFTOP SPACE. During the term of this Lease, Tenant shall have the ------------- right to install and maintain outdoor seating on the roof of the Building for Tenant's and its employee's use, in the area adjacent to the Premises depicted on Exhibit A (the "Rooftop Space"), provided, --------- that, (i) Tenant obtains and places small flower boxes to delineate the perimeter of the Rooftop Space, (ii) Landlord reasonably approves the outdoor seating furniture and flower boxes to be utilized by Tenant, (iii) Tenant complies, at its sole cost and expense, with any and all laws, statutes, ordinances and governmental rules, regulations or requirements applicable to Tenant's use of the Rooftop Space, (iv) Tenant, at its sole cost and expense, provides janitorial service for the Rooftop Space and maintains the outdoor seating and flower boxes in good condition and repair, and (v) Tenant's use of the Rooftop Space does not constitute a nuisance. Tenant's right to utilize the Rooftop Space is expressly conditioned upon Tenant's installation of an access door to the Rooftop Space from the Premises, at Tenant's sole cost and expense, in compliance with any and all applicable laws, __________es, ordinances and governmental rules, regulations or requirements. Tenant shall indemnify, defend and hold Landlord harmless from and against any costs or expenses, including, without limitation, reasonable attorneys' fees and costs, incurred by Landlord in connection with Tenant's use of the Rooftop Space. This indemnity shall survive the termination or earlier expiration of this Lease. 59. SIGNAGE. During the term of this Lease, Tenant shall have the right, ------- at its sole cost and expense, to erect and maintain signage on the exterior door to the Premises. The exact location, size, materials and design for all such signage shall be compatible with Landlord's Building signage program and shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld. Tenant shall comply, at its sole cost and expense, with any and all laws, statutes, ordinances and governmental rules, regulations or requirements applicable to such signage. Tenant shall have the right and the obligation to remove any such signage prior to the expiration of the term of this Lease. Landlord shall provide the initial identification of Tenant's name on the directory located in the main lobby of the Building. 60. NON-DISTURBANCE AGREEMENT. At Tenant's request, Landlord shall submit ------------------------- to any current lienholder on the Property for execution a non- disturbance agreement in the form customarily used by such lienholder, provided that this Lease shall continue in full force and effect, and Landlord shall have no responsibility to Tenant, if one or more of such lienholders is unwilling to execute such agreement. 61. GROSS NEGLIGENCE. The term "gross negligence" as used in this Lease ---------------- shall mean "any action or inaction taken with a reckless disregard for the consequences". 62. RATIFICATION OF LEASE: Landlord and Tenant hereby ratify and confirm --------------------- all of the provisions of the Lease as amended by this Addendum. 63. TIME IS OF THE ESSENCE: Time is of the essence of the Lease Agreement ---------------------- and each of its provisions. IN WITNESS WHEREOF, Landlord and Tenant have entered into this Addendum as of the date of the Lease. Tenant: Landlord: SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE SOCIETY OF a Delaware corporation THE UNITED STATES, a New York corporation By /s/ By /s/ -------------------------- --------------------------- Its CEO Its Investment Officer -------------------------- --------------------------- Date 8/24/99 Date 8-31-99 -------------------------- --------------------------- 5 EXHIBIT A FLOOR PLANS OF PREMISES ----------------------- A-1 EXHIBIT A [GRAPHICS HERE] EXHIBIT B RULES AND REGULATIONS 1. The sidewalks, halls, passages, exits, entrances, shopping malls, elevators, escalators and stairways of the Building shall not be obstructed by any of the tenants or used by them for any purpose other than for ingress to and egress from their respective premises. The halls, passages, exits, entrances, shopping malls, elevators, escalators and stairways are not for the general public, and Landlord shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the judgment of Landlord would be prejudicial to the __________ character, reputation and interests of the Building ________, provided that nothing __________ contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. No tenant and no employee or invitee of any tenant shall go upon the roof of the Building except such roof or portion thereof as may be contiguous to the premises of a particular tenant and may be designated in writing by Landlord as a roof deck or roof garden area. 2. No sign, placard, placard, name, advertisement or notice visible from the exterior of any tenant's premises shall be inscribed, painted, affixed or otherwise displayed by any tenant on any part of the Building without the prior written consent of Landlord. Landlord will adopt and furnish to tenants general guidelines relating to signs inside the Building on the office floors. Each tenant shall conform to such guidelines, but may request approval of Landlord for modifications, which approval will not be unreasonably withheld. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of the Tenant by a person approved by Landlord, which approval will not be unreasonably withheld. Material visible from outside the Building will not be permitted. 3. Their Premises shall not be used for the storage of merchandise held for sale to the general public or for lodging. No cooking shall ________ done or permitted by any tenant on the premises, except that use by the tenant of food and beverage vending machines and Underwriters' Laboratory approved microwave ovens and equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations. 4. No tenant shall employ any person or persons other than Landlord's janitorial service for the purpose of cleaning the premises, unless otherwise approved by Landlord. No person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the same. No tenant shall cause any unnecessary labor by reason of such tenant's carelessness or indifference in the preservation of good order and cleanliness. Janitor service will not be furnished on nights when rooms are occupied after 9:30 P.M. unless, by prior arrangement with Landlord, service is extended to a later hour for specifically designated rooms. 5. Landlord will furnish each tenant, free of charge, with two keys to each door lock in its premises. Landlord may make a reasonable charge for any additional keys. No tenant shall have any keys made. No tenant shall alter any lock or install a new or additional lock or any bolt on any door of its premises without the prior consent of Landlord. The tenant shall in each case furnish Landlord with a key for any such lock. Each tenant, upon the termination of its tenancy, shall deliver to Landlord all keys to doors in the Building which shall have been furnished to the tenant. 6. The freight elevator shall be available for use by all tenants in the Building, subject to such reasonable scheduling as Landlord in its discretion shall deem appropriate. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. Landlord shall have the right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Building. Heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such property from any cause, and all damage done to the Building by moving or maintaining such property shall be repaired at the expense of the tenant. 7. No tenant shall use or keep in the premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material other than limited quantities thereof reasonably necessary for the operation or maintenance of office equipment, or, without Landlord's prior approval, use any method of heating or air conditioning other than that supplied by Landlord. 19 EXHIBIT B RULES AND REGULATIONS No tenant shall use or keep or permit to be used or kept any foul or noxious gas or substance in the premises, or permit or suffer the premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations, or interfere in any way with other tenants or those having business therein. 8. Landlord shall have the right, exercisable _________ notice and without liability to any tenant, to change the name and street address of the Building. 9. Landlord reserves the right to exclude from the Building between the hours of 6 P.M. and 7 A.M. and at all hours on Saturdays, Sundays and legal holidays all persons who do not present a pass signed by Landlord to the Building. Landlord will furnish passes to persons for whom any tenant requests the same in writing. Each tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In the case of invasion, mob, riot, public excitement or other circumstances rendering such action advisable in Landlord's opinion, Landlord reserves the right to prevent access to the Building during the continuance of the same by such action as Landlord may deem appropriate. 10. The directory of the Building will be provided for the display of the name and location of tenants and a reasonable number of the principal officers and employees of tenants, and Landlord reserves the right to exclude any other names therefrom. Any additional name which a tenant desires to have added to the directory shall be subject to Landlord's approval and may be subject to a charge therefor. 11. No curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or decorations shall be attached to, hung or placed in, or used in connection with any exterior window in the Building without the prior consent of Landlord. If consented to by Landlord, such items shall be installed on the office side of the standard window covering and shall in no way be visible from the exterior of the Building. 12. Messenger services and suppliers of bottled water, food, beverages, and other products or services shall be subject to such reasonable regulations as may be adopted by Landlord. Landlord may establish a central receiving station in the Building for delivery and pick-up by all messenger services, and may limit delivery and pick-up at tenant premises to Building personnel. 13. Each tenant shall see that the doors of its premises are closed and locked and that all water faucets or apparatus, cooking facilities and office equipment (excluding office equipment required to be operative at all times) are shut off before the tenant or its employees leave the premises at night, so as to prevent waste or damage, and for any default or carelessness in this regard the tenant shall be responsible for any damage sustained by other tenants or occupants of the Building or Landlord. On multiple-tenancy floors, all tenants shall keep the doors to the Building corridors closed at all times except for ingress and egress. 14. The toilets, urinals, wash bowls and other restroom facilities shall not be used for any purpose other than that for which they were constructed, no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it. 15. Except with the prior consent of Landlord, no tenant shall sell, or permit the sale at retail, of newspapers, magazines, periodicals, theatre tickets or any other goods or merchandise to the general public in or on the premises, nor shall any tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business or from the premises for the service or accommodation of occupants of any other portion of the Building, nor shall the premise of any tenant be used for manufacturing of any kind, or any business or activity other than that specifically provided for in such tenant's lease. 16. No tenant shall install any antenna, loudspeaker, or other device on the roof or exterior walls of the Building. 20 EXHIBIT B RULES AND REGULATIONS 17. There shall not be used in any portion of the Building, by any tenant or its invitees, any hand _______________ handling equipment except those equipped with rubber tires and side guards unless otherwise approved by Landlord. 18. Each tenant shall store its refuse within its premises. No material shall be placed in the refuse boxes or _____________ material is of such nature that it may not be disposed of in the ordinary and customary ____________ of removing and disposing of refuse in the City and County of San Francisco without being in violation of any law or ordinance governing such disposal. All refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. 19. Canvassing, peddling, soliciting, and distribution of handbills or any other written materials in the Building are prohibited, and each tenant shall cooperate to prevent the same. 20. The requirements of the tenants will be attended to only upon application by telephone or in person at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord. 21. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a wavier of such Rules and Regulations in favor of ________ tenant or tenants, _________ prevent Landlord from ________ enforcing any such Rules and Regulations against __________ all of the tenants of the Building. 22. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of premises in the Building. 23. Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building, and for the preservation of good order therein. 21 EXHIBIT C TENANT IMPROVEMENT WORK LETTER ------------------------------ This Exhibit C is made to be a part of that certain Office Lease --------- between The Equitable Life Assurance Society of the United States, a New York corporation ("Landlord"), and SmartAge Corp., a Delaware corporation ("Tenant"), dated as of August 10, 1999 (the "Lease"). To the extent there is any inconsistency between the terms and provisions of the Lease and the terms and provisions of this Exhibit C, this Exhibit C shall govern and control. All --------- --------- capitalized words used herein which have defined meanings in the Lease shall have the same defined meanings herein. Landlord and Tenant have agreed as follows: 1. TENANT ACCEPTS PREMISES IN "AS IS" CONDITION. Upon the full -------------------------------------------- execution and delivery of this Lease by Landlord and Tenant, Tenant accepts the Premises in their presently existing, "As-Is" condition, except for the Base Building Improvements (as defined below) to be constructed by Landlord pursuant to this Work Letter. By execution hereunder, Tenant acknowledges that it has had the opportunity to inspect the Premises and the Building prior to signing the Lease and finds them to be in good and satisfactory condition. The Lease, with the exception of Tenant's obligation to pay Base Rent for the Premises, shall become effective with respect to the Premises upon the Term Commencement Date. Tenant's obligation to pay Base Rent for the Premises shall commence upon the Rent Commencement Date, as described in the Basic Lease Information. Except as specifically provided below or in the Lease, Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Premises or any part of the Premises, or to pay for any such work, and neither Landlord nor Landlord's agents have made any representations to Tenant with respect to the condition of the Premises. 2. CONSTRUCTION OF TENANT IMPROVEMENTS. Tenant shall substantially ----------------------------------- complete any and all alterations of, or improvements to, the Premises (the "Tenant Improvements"), in accordance with the Final Plans (as defined below) submitted to and approved by Landlord. The Tenant Improvements shall be made and performed in a safe and workmanlike manner, using only first-class materials, in compliance with the minimum Building standard specification for interior tenant improvements developed by Landlord for uniform application in the Building, and in accordance with the provisions of the following provisions of this Exhibit C: --------- (a) No work with respect to the Tenant Improvements shall proceed without Landlord's reasonable prior written approval of: (1) Tenant's contractor(s) and subcontractor(s) (selected from a list of contractors and subcontractors approved by Landlord, which list may include the names of contractors and subcontractors submitted by Tenant to Landlord for Landlord's prior approval); (2) certificates of insurance furnished to Landlord from a company or companies approved by Landlord; (i) by Tenant's general contractor, evidencing commercial general liability insurance (with contractual liability and products and completed operations coverages) with a minimum combined single limit for bodily injury and property damage in an amount not less than Two Million Five Hundred Thousand Dollars ($2,500,000) per occurrence, endorsed to name Landlord, Landlord's managing agent and any other party designated by Landlord as an additional insured, and workers' compensation insurance, as required by law; (ii) by any and all subcontractors, evidencing commercial general liability insurance (with contractual liability and products and completed operations coverages) with a minimum combined single limit for bodily injury and property damage in an amount not less than One Million Dollars ($1,000,000) per occurrence, endorsed name Landlord, 1 Landlord's managing agent and any other party designated by Landlord as an additional insured, and workers' compensation insurance, as required by law; and (iii) by Tenant evidencing builder's risk insurance with respect to the Tenant Improvements, in such amounts as are deemed reasonable by Landlord, and workers' compensation insurance, as required by law; and (3) detailed plans and specifications for such work, prepared by a licensed architect approved in writing by Landlord (the "Tenant's Architect"), which indicate that such work will not exceed the design load capacities and performance criteria of the Building, including, without limitation, its electrical, HVAC and weight capacities, and construction means and methods. (b) Except as otherwise expressly provided herein, the Tenant Improvements shall be undertaken at Tenant's sole cost and expense and in strict conformance with all applicable laws, regulations, building codes and the requirements of any building permit and all other applicable permits or licenses issued with respect to such work. Tenant shall be solely responsible for obtaining all such permits and licenses from the appropriate governmental authorities, and any delay in obtaining such permits or licenses shall not be deemed to extend the commencement date or the expiration date of the term of the Lease or to waive or toll Tenant's rental and other obligations with respect to the Premises. Copies of all permits and licenses shall be furnished to Landlord before any work is commenced, and any work not acceptable to any governmental authority or agency having or exercising jurisdiction over such work, or not reasonably satisfactory to Landlord, shall be promptly replaced and corrected at Tenant's expense. (c) Tenant shall provide Landlord with a construction schedule and all revisions thereto. All work by Tenant shall be scheduled through Landlord and shall be diligently and continuously pursued from the date of its commencement through its completion. Landlord hereby agrees to use its reasonable efforts to facilitate such work and to ensure access by Tenant to and availability to Tenant of all freight elevators and all such similar facilities necessary to facilitate such work, subject, however, to the rules and regulations established by Landlord for construction work in the Building. All work shall be conducted in a manner that maintains harmonious labor relations and does not unreasonably interfere with or delay any other work or activities being carried out by Landlord in the Building. Landlord or Landlord's agent shall have the right to enter the Premises and inspect the Premises and the Tenant Improvements at all reasonable times during the construction of the Tenant Improvements. (d) Tenant shall cause the Tenant's Architect to prepare and submit to Landlord for its approval complete architectural plans, drawings and specifications for all Tenant Improvements, including, without limitation, complete engineered mechanical and electrical working drawings for the Premises, showing the subdivision, layout, finish and decoration work desired by Tenant therefor, and any internal or external communications or special utility facilities which will require installation of conduits or other improvements within common areas, all in such form and in such detail as may be required by Landlord. Such complete plans, drawings and specifications are referred to herein as "Final Plans". Tenant shall submit the Final Plans for the approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Within seven (7) business days after Landlord receives the Final Plans for approval, Landlord shall give its written approval of the Final Plans, or provide Tenant with specific written objections to the Final Plans. If Landlord objects to the Final Plans, Landlord shall make itself available to meet with Tenant and the Tenant's Architect within five (5) business days after said objection to resolve the objections and to deliver to the Tenant's Architect such information as may be necessary to enable the Tenant's Architect to cause the Final Plans to be revised consistent with Landlord's objections. No delay in the scheduling of completion of the Tenant Improvements resulting from Landlord's review, revision and approval of the Final Plans (except delays caused by Landlord's failure to comply with 2 the seven (7) and five (5) day period mentioned above where such review and approval by Landlord could have been reasonably completed within such timeframes) shall be deemed to extend the commencement date or expiration date of the term of the Lease or waive or toll Tenant's rental obligations with respect to the Premises. In the event that Tenant and/or its contractors and subcontractors desire to change the Final Plans subsequent to approval by Landlord, Tenant shall provide notice of such proposed change to Landlord for Landlord's written approval, which approval shall not be unreasonably withheld, conditioned or delayed, and which approval shall be required prior to the implementation of such proposed change. Landlord shall approve or disapprove the proposed change within five (5) business days after Landlord's receipt of all final plans and specifications therefor or within such time period after such five (5) business day period which is reasonably practical. At the conclusion of construction, Tenant shall cause the Tenant's Architect to provide two (2) complete sets of record drawings of the Tenant Improvements, as constructed, which shall not materially deviate from the Final Plans, and Tenant shall also cause to be provided a project closeout package, including, without limitation, a punchlist sign-off, project team list, permit cards, unconditional lien releases and final construction costs itemized by trade. (e) Tenant shall enter into a contract (the "General Contract") with one of the bidding contractors ("Tenant's Contractor") for the construction of the Tenant Improvements selected from a list of contractors approved by Landlord (which list may include the names of contractors submitted by Tenant to Landlord for Landlord's prior approval). (f) With respect to fire and life safety systems work required under the General Contract ____________ shall cause Tenant's Contractor __________ and review bids from at least three (3) subcontractors (the "Fire and Life Safety Bidders") from a list of contractors approved by Landlord (which list may include the names of subcontractors submitted by Tenant to Landlord for Landlord's prior approval) and to enter into a subcontract with one of the Fire and Life Safety Bidders. With respect to all mechanical systems work required under the General Contract, Tenant shall cause Tenant's Contractor to solicit and review bids from at least three (3) subcontractors (the "Mechanical Bidders") from a list of contractors approved by Landlord (which list may include the names of subcontractors submitted by Tenant to Landlord for Landlord's prior approval) and to enter into a subcontract with one of the Mechanical Bidders. With respect to all electrical systems work required under the General Contract, Tenant shall cause Tenant's Contractor to solicit and review bids from at least three (3) subcontractors for all such work (the "Electrical Bidders") from a list of contractors approved by Landlord (which list may include the names of subcontractors submitted by Tenant to Landlord for Landlord's prior approval) and to enter into a subcontract with one of the Electrical Bidders. To the extent Tenant's Contractor desires to subcontract other work required under the General Contract, Tenant shall cause Tenant's Contractor to solicit bids for such proposed subcontract (the "Other Work Bid________), at least one (1) of which, if Landlord so elects, shall be a subcontractor design __________ Landlord, and, with the prior written notice to Landlord, to enter into such subcontract with one of the Other Work Bidders. Tenant's Contractor may engage such laborers and suppliers as it deems appropriate, subject to the provisions of subparagraph (g) below. (g) Notwithstanding anything to the contrary contained herein, all major contractors' and subcontractors contracts for the Tenant Improvements shall be union contracts, and Tenant shall use its commercially reasonable efforts to ensure that union labor is employed in connection with the design and construction of the Tenant Improvements. (h) Tenant hereby designates Tenant's Vice President of Finance, or any other person designated by Tenant from time to time, as its representative in connection with the design and construction of the Tenant Improvements, and Landlord shall be entitled to rely upon the decisions and agreements made by such representative as binding upon Tenant. 3 (i) Although Landlord has the right to review, request revisions to and approve the Final Plans, Landlord's sole interest in doing so is to protect the Building and Landlord's interest in the Building, and Landlord is not in any way warranting or representing that Tenant's Final Plans are suitable for their intended use or comply with applicable laws and regulations. Landlord shall have no liability whatsoever in connection with Tenant's Final Plans, nor any responsibility for any omissions or errors contained therein. Accordingly, Tenant shall not rely upon Landlord's approval for any purpose other than for the purpose of acknowledging the consent of Landlord to proceed with the requested action, and Landlord shall incur no liability of any kind by reason of the granting of such approvals. (j) Nothing in this Exhibit C shall affect the obligations of Tenant --------- under the Lease with respect to any alterations, additions and improvements within the Premises, including, without limitation, any obligation to obtain the prior written consent of Landlord in connection therewith. 3. TENANT IMPROVEMENT ALLOWANCE. Subject to the terms and conditions ---------------------------- of this Paragraph 3, Landlord shall pay on behalf of Tenant up to a maximum amount of Eight Hundred Five Thousand Thirty-Five and No/100 Dollars ($805,035.00) (or a maximum of $35.00 per rentable square foot of Premises) for the construction of Tenant Improvements in the Premises (the "Tenant Improvement Allowance"), including without limitation, all architectural and engineering fees incurred in connection therewith, project and construction management fees, real property improvements, and all sums payable to Landlord as provided in Paragraph 4 below. The Tenant Improvement Allowance shall not be used for any equipment or furniture purchases, ________ expenses, or the installation of a security system. The Tenant Improvement Allowance __________ be paid as follows: upon the presentation of invoices to Landlord from Tenant or the person performing the work or rendering the services or providing the materials and such supporting documentation _________ Landlord may reasonably require, including, without limitation, identification of the work completed and/or material supplied, mechanic lien releases and certificates of payment issued by the Tenant's Architect and Tenant's designated representative, Landlord shall pay such invoices on or before the fifteenth (15th) day of the following month to the person performing the work or rendering the services or providing the materials. Notwithstanding anything to the contrary contained herein or in the Lease, the obligation of Landlord to make any one or more payments pursuant to the provisions of this Paragraph 3 shall be suspended without further act of the parties during any such time as there exists a material default under the Lease. The Tenant Improvement Allowance must be utilized by Tenant, if at all, prior to that date which is seven (7) months after the Effective Date. As of such date, Tenant shall forfeit any remaining balance of the Tenant Improvement Allowance that Tenant has not utilized pursuant to the terms of this Exhibit C. Tenant --------- shall bear the cost of any and all Tenant Improvements to the Premises in exces__________ Tenant Improvement Allowance. 4. REIMBURSEMENT AND COMPENSATION. Tenant shall reimburse Landlord ------------------------------ for any and all reasonable out-of-pocket costs incurred by Landlord in connection with the design and __________ of the Final Plans (including, without limitation, any conceptual plans and/or working drawings related thereto) for the Tenant Improvements, and Landlord shall be entitled to construction management fee in connection with its supervision of the construction of the Tenant Improvements and administration of the Tenant Improvement Allowance in an amount equal to three percent (3%) of the total cost of Tenant Improvements. Landlord may obtain any reimbursement or compensation required hereunder by deducting the amount of such reimbursement and/or compensation from the Tenant Improvement Allowance. 5. TENANT'S INDEMNITY. Tenant shall indemnify, defend and hold ------------------ Landlord harmless from and against any and all claims, liens, expenses, costs, losses, fines, liabilities and/or damages (including, without limitation, attorneys' fees and costs) arising out of or in any way connected with the construction by Tenant of the Tenant Improvements, except to the extent caused by the gross negligence or willful misconduct of Landlord or its employees, contractors or agents. Tenant's liability insurance will be primary with respect to Tenant's indemnity. 6. NOTICE OF NONRESPONSIBILITY. Landlord shall have the right to --------------------------- 4 post in a conspicuous location on the Premises, as well as record within the City and County of San Francisco, Notice (s) of Nonresponsibility in connection with any and all Tenant Improvements constructed by Tenant hereunder. 7. BASE BUILDING IMPROVEMENTS. Landlord shall be responsible for -------------------------- constructing the Base Building Improvements, at its sole cost and expense, in conformance with all applicable laws, regulations, building codes and the requirements of all permits or licenses issued with respect to such work. Subject to unavoidable delays, or delays caused in whole or in part by Tenant or as otherwise necessitated by Tenant's construction schedule for the Tenant Improvements, Lessor shall use commercially reasonable efforts to commence the Base Building Improvements contemporaneously with commencement of the Tenant Improvements. Landlord shall diligently and continuously pursue the construction of the Base Building Improvements from the date of its commencement through its completion. For purposes hereof, the term "Base Building Improvements" shall mean (i) upgrading the common area, including the restrooms, on the Fifth Floor of the South Tower of Building to meet the current Uniform Building Code, ADA, Title 24 and other applicable life-safety code requirements to the extent required by the building permit for the Tenant Improvements, (ii) installation of demising walls as delineated on Exhibit A (excluding the finish --------- of said walls on the interior of the Premises), and (iii) modification of the common area corridor walls (excluding the finish of said walls on the interior of the Premises). Notwithstanding anything to the contrary contained herein or in the Lease, the obligation of Landlord to proceed with the construction of the Base Building Improvements shall be suspended without further act of the parties during any such time as there exists default by Tenant under the Lease beyond any applicable cure periods. 8. MISCELLANEOUS. ------------- (a) Landlord's Representative. Landlord has designated Bruce Kimbrew ------------------------- as its sole representatives with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full ____________ and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter. (b) Tenant's Default. Notwithstanding any provision to the contrary ---------------- contained in this Lease, if a default by Tenant exists under the Lease or this Work Letter and continues beyond any applicable cure period or has occurred beyond any applicable cure period at any time on or before the substantial completion of the Tenant Improvements and Base Building Improvements, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance, and (ii) all other obligations of Landlord under the terms of this Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of this Lease (in which case, Tenant shall be responsible for __________ in the substantial completion of the Base Building Improvements caused by such _________ by Landlord). (c) Applicability of Work Letter. This Work Letter shall not be ---------------------------- deemed applicable to any additional space added to the original Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions thereto in the event of damage or destruction of the Premises, condemnation of the Premises, or renewal or extension of the initial term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement thereto. (d) Execution in Conjunction with Lease. This Work Letter is being ----------------------------------- executed in conjunction with the Lease and is subject to each and every term and condition thereof, including, without limitation, the limitations of Landlord's liability set forth therein. 5 IN WITNESS WHEREOF, the undersigned have executed this Exhibit C --------- concurrently with the execution of the Lease. SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE a Delaware corporation SOCIETY OF THE UNITED STATES, a New York corporation By: /s/ By: /s/ ---------------------------- ---------------------------- Its: Chief Executive Officer Its: Investment Officer --------------------------- --------------------------- Date: 8/24/99 Date: 8/31/99 -------------------------- ------------------------- 6 EXHIBIT D COMMENCEMENT OF TERM AGREEMENT ------------------------------ This Commencement of Term Agreement ("Addendum") is executed as of the ____day of _________, 1999/2000, by and between The Equitable Life Assurance Society of the United States, a New York corporation ("Landlord") and SmartAge Corp., a Delaware corporation ("Tenant"), in connection with that certain Office Lease (the "Lease"), dated as of August 10, 1999, by and between Landlord and Tenant with respect to the Premises located at 303 Second Street (the "Premises"). NOW, THEREFORE, the parties hereby agree as follows: 1. The Term Commencement Date of the Term of the Lease is ___________. 2. The Rent Commencement Date is ___________. 3. The Expiration Date of the Term of the Lease is __________. The Premises is approximately ___________ rentable square feet. 5. The monthly/annual Base Rent is $___________. 6. Tenant's Expense Share is ________%. 7. Tenant's Tax Share is ____%. IN WITNESS WHEREOF, Landlord and Tenant have entered into this Addendum as of the date of the Lease. Tenant: Landlord: SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE a Delaware corporation SOCIETY OF THE UNITED STATES, a New York corporation By:____________________________ By:____________________________ Its:___________________________ Its:___________________________ Date:__________________________ Date:__________________________ FIRST AMENDMENT TO OFFICE LEASE ------------------------------- THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered into as of November 18, 1999, by and between THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation ("Landlord"), and SMARTAGE CORP., a Delaware corporation ("Tenant"). R E C I T A L S: A. Landlord and Tenant entered into that certain Office Lease dated as of August 10, 1999 (the "Lease"), for certain premises comprising approximately twenty-three thousand one (23,001) rentable square feet (the "Initial Premises") on the Fifth (5/th/) Floor of the South Tower in that certain building owned by Landlord located at 303 Second Street, San Francisco, California (the "Building"); and B. Landlord and Tenant now desire to amend the Lease to provide for an expansion of the Initial Premises to include certain premises comprising approximately nineteen thousand three hundred forty-seven (19,347) additional rentable square feet, on the Fifth (5/th/) Floor of the South Tower of the Building (the "Expansion Premises"). The Initial Premises and the Expansion Premises comprise the entirety of the Fifth (5/th/) Floor of the South Tower of the Building. A G R E E M E N T NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby amend the Lease and agree as follows: 1. Expansion Premises. Effective as of the Effective Date (as defined ------------------ below), Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Expansion Premises, upon all of the terms and conditions set forth in the Lease, as amended herein. Effective as of the Effective Date, the term "Premises", as defined in the Lease, shall be amended to include the Initial Premises and the Expansion Premises, and Exhibit A (Floor Plan of Premises) to --------- the Lease shall be deleted in its entirety and replaced with the Revised Exhibit --------------- A (Floor Plan of Premises) attached hereto. - - 2. Amendment to Basic Lease Information. Effective as of the Effective ------------------------------------ Date (as defined below), Landlord and Tenant agree that the provisions of the Basic Lease Information of the Lease listed below shall be amended in their entirety to provide the following: Premises (Paragraph l(b)): Approximately 42,348 rentable square feet on the Fifth (5th) Floor of the South Tower of the Building, as more specifically outlined in the Revised Exhibit A attached ----------------- hereto. Landlord and Tenant agree that this constitutes the rentable square feet of the Premises and that Landlord has no right to remeasure the Premises. Term Expiration Date (Paragraph 2): February 28, 2005. Rent Commencement Date: Initial Premises - Rent for the Initial Premises shall commence on that date which is ---------------- the earlier of (i) the date that Tenant occupies the Initial Premises for the ordinary conduct of Tenant's business, or (ii) January 1, 2000 ("Initial Premises Rent Commencement Date"). Expansion Premises - Rent for the Expansion Premises shall commence on that date which ------------------ is the earlier of (i) the date that Tenant occupies the Expansion Premises for the ordinary conduct of Tenant's business, or (ii) April 1, 2000 ("Expansion Premises Rent Commencement Date").
A-I Base Rent (Paragraph 3(a)): Initial Premises - The annual Base Rent for the for the Initial Premises during the initial term of the Lease shall be as follows: Initial Premises Rent Commencement bate - February 28, 2002: Thirty-Six and No/100 Dollars ($36.00) per rentable square foot of Initial Premises per annum for a total of Eight Hundred Twenty- Eight Thousand Thirty-Six and No/100 Dollars ($828,036.00) per annum/ or Sixty-Nine Thousand Three and No/100 Dollars ($69,003.00) per month. March 1, 2002 - February 28, 2003: Thirty-Seven and No/100 Dollars ($37.00) per rentable square foot of Initial Premises per annum for a total of Eight Hundred Fifty-One Thousand Thirty-Seven and No/100 Dollars ($851,037.00) per annum/ or Seventy Thousand Nine Hundred Nineteen and 75/100 Dollars ($70,919.75) per month. March 1, 2003 - February 28, 2005: Thirty-Eight and No/100 Dollars ($38.00) per rentable square foot of Initial Premises per annum for a total of Eight Hundred Seventy- Four Thousand Thirty-Eight and No/100 Dollars ($874,038.00) per annum/ or Seventy-Two Thousand Eight Hundred Thirty-Six and 50/100 Dollars ($72,836.50) per month. Expansion Premises - The annual ------------------ Base Rent for the for the Expansion Premises during the initial term of the Lease shall be as follows: Expansion Premises Rent Commencement Date - February 28, 2002: Forty and No/100 Dollars ($40.00) per rentable square foot of Expansion Premises per annum for a total of Seven Hundred Seventy- Three Thousand Eight Hundred Eighty and No/100 Dollars ($773,880.00) per annum/ or Sixty- Four Thousand Four Hundred Ninety and No/100 Dollars ($64,490.00) per month. March 1, 2002 - February 28, 2003: Forty-One and No/100 Dollars ($41.00) per rentable square foot of Expansion Premises per annum for a total of Seven Hundred Ninety-Three Thousand Two Hundred Twenty-Seven and No/100 Dollars ($793,227.00) per annum/ or Sixty- Six Thousand One Hundred Two and 25/100 Dollars ($66,102.25) per month. March 1, 2003 - February 28, 2005: Forty-Two and No/100 Dollars ($42.00) per rentable square foot of Expansion Premises per annum for a total of Eight Hundred Twelve Thousand Five Hundred Seventy-Four and No/100 Dollars ($812,574.00) per annum/ or Sixty- Seven Thousand Seven Hundred Fourteen and 50/100 Dollars ($67,714.50) per month. Tenant's Expense Share (Paragraph 4(a)): 6.04% Tenant's Tax Share: (Paragraph 4(a)): 6.04% Security Deposit (Paragraphs 32 and 57): $1,629,768.62 2 3. First Month's Base Rent for Expansion Premises. The first month's Base ---------------------------------------------- Rent for the Expansion Premises in the amount of Sixty-Four Thousand Four Hundred Ninety and No/100 Dollars ($64,490.00) is due upon Tenant's execution of the First Amendment. 4. Security Deposit. ----------------- (a) Upon the Effective Date, the Security Deposit (the "deposit" as referenced in Paragraph 32 of the Lease) shall increase by Six Hundred Fifty-Two Thousand Two Hundred Twenty-Five and 64/100 Dollars ($652,225.64) for a total Security Deposit of One Million Six Hundred Twenty-Nine Thousand Seven Hundred Sixty-Eight and 62/100 Dollars ($1,629,768.62), as reflected in Paragraph 2 hereof. (b) Notwithstanding anything to the contrary contained in the Lease, as amended hereby, in the event that during the term of the Lease Tenant delivers evidence in form reasonably satisfactory to Landlord that Tenant has been profitable for four (4) consecutive quarters based on an Earnings Before Interest, Taxes and Depreciation/Amortization (EBITDA), and after Debt Service (principal and interest) test, and has a tangible net worth (excluding goodwill and other intangible assets) equal to or in excess of Fifty Million Dollars ($50,000,000), the required Security Deposit (or "deposit") may be reduced to an amount equal to one month of the then current Base Rent. In the event that Tenant satisfies the foregoing conditions and Landlord then holds the Security Deposit (or "deposit") in the form of a Letter of Credit, Tenant shall replace the Letter of Credit with cash in an amount equal to one month of the then current Base Rent. Upon receipt of the cash Security Deposit (or "deposit"), Landlord shall return the Letter of Credit to Tenant. 5. Letter of Credit. ----------------- (a) In lieu of delivering cash to Landlord to increase the Security Deposit as provided in Paragraph 32 of the Lease, Tenant shall, upon execution of this First Amendment, deliver to Landlord an amendment to the Letter of Credit which increases the amount of the Letter of Credit to One Million Six Hundred Twenty-Nine Thousand Seven Hundred Sixty-Eight and 62/100 Dollars ($1,629,768.62) and otherwise is in accordance with the terms and conditions of Paragraph 57 of the Lease, as amended herein. (b) The third paragraph of Paragraph 57 of the Lease shall be deleted in its entirety and replaced with the following: Notwithstanding the foregoing, in the event that Tenant is not in default on March 1, 2002, March 1, 2003, and March 1, 2004, as applicable, and Tenant has not previously been in default under this Lease more than once, Tenant shall have the right, at its sole cost and expense, to obtain an amendment to the Letter of Credit which reduces the amount of the Letter of Credit, and the "deposit" or Security Deposit, so that the amount thereof on and after such dates is as follows: March 1, 2002 $1,222,326.47 March 1, 2003 $ 814,884.31 March 1, 2004 $ 407,442.16 6. Sublet of Expansion Premises. Subject to the terms and conditions of ---------------------------- Paragraph 16 of the Lease (excluding Landlord's rights set forth in Subparagraphs 16(d)(2) through (4) of the Lease), Tenant shall have the right to sublease the Expansion Premises or portions thereof for a term or terms not to exceed two (2) years (which term or terms shall in no event expire during the last year of the term of the Lease); provided, that, in no event shall any such sublet premises comprise an area of less than five thousand (5,000) rentable square feet or an area greater than ten thousand (10,000) rentable square feet. Any other hypothecation, encumbrance, transfer, assignment or sublet of the Expansion Premises shall be governed by all of the terms and conditions of Paragraph 16 of the Lease. 7. Parking. The first sentence of Paragraph 56 of the Lease shall be ------- deleted in its entirety and replaced with the following: Tenant shall have the right to rent from Landlord up to seventeen (17) unreserved parking 3 spaces in the Building garage on a monthly basis throughout the term of the Lease. 8. Expansion Premises Tenant Improvement Allowance. In connection with ----------------------------------------------- the tenant improvements to be constructed by Tenant in the Expansion Premises, Landlord has agreed to pay on behalf of Tenant up to a maximum amount of Six Hundred Seventy-Seven Thousand One Hundred Forty-Five and No/100 Dollars ($677,145.00) (or $35.00 per rentable square foot of Expansion Premises) (the "Expansion Premises Allowance"). The Expansion Premises Allowance shall be paid by Landlord pursuant to the terms and conditions of Exhibit C to the Lease, as --------- amended herein. 9. Amendment to Exhibit C, Tenant Improvement Work Letter. ------------------------------------------------------ (a) The first sentence of Paragraph 3 of Exhibit C to the Lease shall --------- be deleted in its entirety and replaced with the following: Subject to the terms and conditions of this Paragraph 3, Landlord shall pay on behalf of Tenant up to a maximum amount of One Million Four Hundred Eighty-Two Thousand One Hundred Eighty and No/100 Dollars ($1,482,180.00) (or a maximum of $35.00 per rentable square foot of Premises) for the construction of Tenant Improvements in the Premises (the "Tenant Improvement Allowance"), including without limitation, all architectural and engineering fees incurred in connection therewith, project and construction management fees, real property improvements, and all sums payable to Landlord as provided in Paragraph 4 below. (b) The fifth and sixth sentences of Paragraph 3 of Exhibit C to the --------- Lease shall be deleted in their entirety and replaced with the following: The Tenant Improvement Allowance must be utilized by Tenant, if at all, prior to June 30, 2000. As of such date, Tenant shall forfeit any remaining balance of the Tenant Improvement Allowance that Tenant has not utilized pursuant to the terms of this Exhibit C. --------- (c) The first sentence of Paragraph 4 of Exhibit C to the Lease shall --------- be deleted in its entirety and replaced with the following: Tenant shall reimburse Landlord for any and all reasonable out-of-pocket costs incurred by Landlord in connection with the design and review of the Final Plans (including, without limitation, any conceptual plans and/or working drawings related thereto) for the Tenant Improvements, and Landlord shall be entitled to construction management fee in connection with its supervision of the construction of the Tenant Improvements and administration of the Tenant Improvement Allowance in an amount equal to two and one-half percent (2.5%) of the total cost of Tenant Improvements. (d) Paragraph 7 of Exhibit C to the Lease and all references in the --------- Lease to "Base Building Improvements" shall be deleted in their entirety. (e) The following shall be added to Exhibit C to the Lease as a new --------- Paragraph 7: 7. DEMOLITION COSTS. Landlord shall pay on behalf of Tenant up to ---------------- Eight Thousand Six Hundred Ninety-Four and No/100 Dollars ($8,694.00) (or $2.00 per rentable square foot of raised floor space in the Expansion Premises) of any demolition costs incurred by Tenant in connection with the raised floor in the Expansion Premises (the "Demolition Reimbursement"). The Demolition Reimbursement shall be paid by Landlord on behalf of Tenant in the same manner and pursuant to the same conditions as provided for the disbursement of the Tenant Improvement Allowance in Paragraph 3 above. The Demolition Reimbursement shall be in addition to the Tenant Improvement Allowance. the Demolition Reimbursement must be utilized by Tenant, if at all, prior to June 30, 2000. A of such date, Tenant shall forfeit any remaining balance of the Demolition Reimbursement Tenant has not utilized pursuant to the terms of this Exhibit C. --------- 10. Tenant Accepts Expansion Premises in "As Is" Condition. Upon the full ------------------------------------------------------ execution and delivery of this First Amendment by Landlord and Tenant, Tenant accepts the 4 Expansion Premises in their presently existing, "As-Is" condition. By execution hereunder, Tenant acknowledges that it has had the opportunity to inspect the Expansion Premises prior to signing this First Amendment and finds them to be in good and satisfactory condition. The Lease, as amended hereby, with the exception of Tenant's obligation to pay Base Rent for the Expansion Premises, shall become effective with respect to the Expansion Premises upon the Effective Date hereof. Tenant's obligation to pay Base Rent for the Expansion Premises shall commence upon the Expansion Premises Rent Commencement Date, as described in the Basic Lease Information. Except as expressly set forth in Exhibit C to --------- the Lease, as amended herein, and in Paragraph 8 hereof, Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Expansion Premises or any part of the Expansion Premises, or to pay for any such work, and neither Landlord nor Landlord's agents have made any representations to Tenant with respect to the condition of the Expansion Premises. 11. Broker; Real Estate Commissions. Landlord and Tenant each represents ------------------------------- and warrants to the other that such party has negotiated this First Amendment directly with the Real Estate Brokers identified in the Basic Lease Information of the Lease and has not authorized or employed, or acted by implication to authorize or employ, any other real estate broker or salesman to act for such party in connection with this First Amendment. Each party shall indemnify, defend and hold the other harmless from and against any and all claims by any real estate broker or salesman other than the Real Estate Brokers identified in the Basic Lease Information of the Lease for a commission, finder's fee or other compensation as a result of the inaccuracy of such party's representation above. Landlord will pay any commission owing to the Real Estate Brokers identified in the Basic Lease Information of the Lease pursuant to a separate agreement. 12. Miscellaneous. ------------- (a) Effective Date. As used herein, the term "Effective Date" shall -------------- mean the first day upon which both Landlord and Tenant shall have executed this First Amendment. (b) Incorporation; Defined Terms. The Lease is hereby incorporated ---------------------------- into this First Amendment by reference. All capitalized terms used and not otherwise defined in this First Amendment, but defined in the Lease, shall have the same meaning in this First Amendment as in the Lease. (c) Effect of Amendment on Lease. Except to the extent the Lease is ---------------------------- expressly modified by this First Amendment, the terms and provisions of the Lease shall remain unmodified and in fall force and effect. In the event of conflict between the terms of the Lease and the terms of this First Amendment, the terms of this First Amendment shall control. (d) Entire Agreement. The Lease, as amended by the First Amendment, ---------------- embodies the entire understanding between Landlord and Tenant with respect to its subject matter and can be changed only by an instrument in writing signed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date and year first set forth above. "TENANT" "LANDLORD" SMARTAGE CORP., THE EQUITABLE LIFE ASSURANCE a Delaware corporation SOCIETY OF THE UNITED STATES, a New York corporation By: /s/ By: /s/ ----------------------------------- ----------------------------------- Its: VP Finance Its: Investment Officer ---------------------------------- ---------------------------------- Date: 12 Nov 1999 Date: 11-19-99 --------------------------------- --------------------------------- By: ----------------------------------- Its: ---------------------------------- Date: --------------------------------- 5 Revised Exhibit A ----------------- (Floor Plan of Premises) 6 [GRAPHICS HERE] EX-10.7 16 LEASE AGREEMENT EXHIBIT 10.7 OFFICE LEASE 3450 California Street San Francisco, California BASIC LEASE INFORMATION ----------------------- Effective Date: August 6, 1998 Landlord: WESTERN INVESTMENT REAL ESTATE TRUST, a California real estate investment trust Tenant: NETWEB CORPORATION, a Delaware corporation
Lease Reference --------------- Premises and Building Address: Second Floor, 3450 California Street, San Francisco, California Paragraph 1 Approximate Area of Premises: 4,592 rentable square feet Term Commencement: Upon delivery of possession of the Premises to Tenant (the "Commencement Date"), which is currently anticipated to be September 1, 1998 or sooner Paragraph 2 Term Expiration: The last day of the calendar month containing the 5th anniversary of the Commencement Date Paragraph 2 Base Rent: Paragraph 3(a)
Period Base Rent ------ --------- First Lease Year $ 94,136.00 per annum Second Lease Year $ 96,983.00 per annum Third Lease Year $ 99,876.00 per annum Fourth Lease Year $102,861.00 per annum Fifth Lease Year $105,937.00 per annum Parking Rent: Up to 10 stalls designated for use by Tenant, at an aggregate charge of $400.00 per month Paragraph 3(a) Tenant's Percentage Share: 40% Paragraph 4(a)
-i- Security Deposit: $7,845.00 Paragraph 16 Tenant's Address for Notices: Paragraph 20 Netweb Corporation 3641 Sacramento Street, #A San Francisco, California 94118 Attn: Carter Hostelley Telephone: 415/674-3787 Facsimile: 415/674-3782 Landlord's Address Paragraph 20 for Notices: Western Investment Real Estate Trust 3450 California Street San Francisco, California 94118 Attn: L. Gerald Hunt Telephone: 415/929-0211 Facsimile: 415/929-0905 Broker: CAC Group, Daron P. Craft ("Landlord's Broker"), and Realty Investments, Jeffrey J. Hutchins ("Tenant's Broker") Paragraph 21(k) Exhibit: Paragraph 22
Exhibit A - Rules and Regulations The provisions of the Lease identified above in the margin are those provisions where references to particular Basic Lease Information appear. Each such reference shall incorporate the applicable Basic Lease Information. In the event of any conflict between any Basic Lease Information and the Lease, the latter shall control. -ii- OFFICE LEASE 3450 California Street San Francisco, California THIS LEASE is made and entered as of the Effective Date into by and between WESTERN INVESTMENT REAL ESTATE TRUST, a California real estate investment trust ("Landlord"), and NETWEB CORPORATION, a Delaware corporation ("Tenant"). WITNESSETH 1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases -------- from Landlord for the term of this Lease and at the rental and upon the conditions set forth below, the Premises described in the Basic Lease Information. The Premises are comprised of the Second Floor of the building commonly known as 3450 California Street, San Francisco, California (the "Building"). The Premises, the Building and the legal parcel on which the Building is located, together with parking facilities and other appurtenances, are collectively, the "Property." Landlord shall, prior to term commencement, have the carpet in the Premises professionally cleaned. In all other respects, Tenant shall take the Premises in their "AS-IS" condition, and Landlord shall have no obligation whatsoever to remodel, alter or improve the Premises for use by Tenant to provide any improvement or construction allowance to Tenant, or to pay or reimburse Tenant for any remodeling, alterations or improvements to the Premises. 2. Term. ---- (a) The term of this Lease shall commence on the date specified in the Basic Lease Information and, unless sooner terminated as hereinafter provided, shall end on the date specified in the Basic Lease Information. If Landlord shall permit Tenant to occupy the Premises prior to the date of term commencement, such occupancy shall be subject to all the terms of this Lease. If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant on the Date of term commencement, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but in that event, subject to any contrary provisions in any agreement with Landlord covering initial improvement of the Premises, rental shall be waived for the period between commencement of the term and the time when Landlord can deliver possession. In the event that Landlord shall not have delivered possession of the Premises to Tenant on or before November 30, 1998, Tenant shall have a right to terminate and cancel this Lease by written notice to Landlord given within fifteen days following such date and, in any event, prior to tender of possession of the Premises to Tenant. (b) Landlord shall have an option upon the terms provided below to terminate this Lease in the event that the lease from time to time in effect for the Ground Floor of the Building shall expire or be cancelled or terminated, whether in accordance with its terms, by reason the default of the tenant thereunder, by voluntary act of the parties, or otherwise. Landlord may exercise such option upon written notice to Tenant given at least 270 days prior to the effective date of termination of this Lease, which notice may be given at any time during the term and either prior to or following the effective date of termination of the Ground Floor lease. -1- Upon the effective date of termination stated in Landlord's notice, the term of this Lease shall end in the same manner as if such effective date were the day originally specified in this Lease for the expiration of the term, except that Tenant shall not be required to pay the installments of the Base Rent that would otherwise be due in respect of the last 60 days of the term. 3. Rent. ---- (a) Tenant shall pay to Landlord as rental the amount specified in the Basic Lease Information as the Base Rent. Base Rent for the first month of the term shall be payable upon Tenant's execution of this Lease, and Base Rent shall thereafter be payable in advance on or before the first day of each calendar month of the term. For purposes of determining the dates upon which the Base Rent increases as provided in the Basic Lease Information, the term "Lease Year" shall mean a period of twelve consecutive full calendar months, with the first Lease Year also including any partial calendar month at the beginning of the term of this Lease. In addition to the Base Rent and the other rents and charges due hereunder, Tenant shall pay to Landlord, as additional rental, the monthly amount specified in the Basic Lease Information for the right and license to use parking stalls as specified in the Basic Lease Information, which amount shall be payable monthly, in advance, throughout the term of this Lease. (b) Tenant shall pay, as additional rent, all amounts of money required to be paid to Landlord by Tenant hereunder in addition to Base Rent, whether or not the same be designated "additional rent." (c) If any installment of rent or any other sums due from Tenant shall not be received by Landlord within five (5) days following the date due, Tenant shall pay to Landlord a late charge equal to five percent (5 %) of such overdue amount. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. (d) Any amount due to Landlord, if not paid when due, shall bear interest from the date due until paid at the rate of 1 1/2% per month or, if less, the highest rate permissible under applicable law. Payment of interest shall not excuse or cure any default hereunder by Tenant. (e) All payments due from Tenant to Landlord hereunder shall be made to Landlord without deduction or offset, except as may be expressly permitted herein, in lawful money of the United States of America at the address for payment set forth in the Basic Lease Information, or to such other person or at such other place as Landlord may from time to time designate by notice to Tenant. 4. Property Taxes and Operating Expenses. ------------------------------------- (a) Tenant shall pay, during the term, the percentage share specified in the Basic Lease Information of the full amount of all Property Taxes assessed in respect of the -2- Property, and such percentage share of the full amount of all Operating Expenses paid or incurred by Landlord. If during any calendar year during the term, the Building is not fully occupied on the average, Operating Expenses and Property Taxes shall be adjusted to equal Landlord's reasonable estimate of Operating Expenses and Property Taxes had the total rentable area of the Building been fully occupied during such calendar year. (b) For the purposes hereof, "Property Taxes" shall mean all real property taxes, assessments or governmentally imposed fees or charges (and any tax or assessment levied wholly or partly in lieu thereof) levied, assessed, confirmed, imposed, or which become a lien against the Property or payable during the term, including without limitation, any tax or assessment imposed by a governmental authority in connection with, or in the event of, a change in ownership of the Property. Property Taxes shall, also include the cost of protesting real property taxes and assessments. (c) For the purposes hereof, "Operating Expenses" shall mean all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership and operation of the Property, including, without limitation: (i) all license, permit, and inspection fees; (ii) premiums for any insurance maintained by Landlord with respect to the Property; (iii) any and all wages, salaries and related expenses and benefits of all on-site and off-site employees engaged in operation, maintenance and security; (iv) any and all supplies, materials, and equipment rental; (v) all maintenance, repair, replacement, janitorial, security, and service costs; (vi) management fees or a management cost recovery equal to ten percent of Operating Expenses (exclusive of the amount of Property Taxes); (vii) professional services fees; (viii) amortization of the cost of capital improvements (together with interest thereon at the rate paid by Landlord or which would have been paid if Landlord had borrowed such funds) intended to reduce other Operating Expenses or are required by law; (ix) any and all charges for heat, water, gas, electricity and other utilities used or consumed in the Building and common areas (exclusive of amounts billed and paid directly to and by Tenant and other tenants of the Building); and (x) all other operating, management, and other expenses incurred by Landlord in connection with the operation of the Property. Operating Expenses shall not include the cost of repairs or restoration occasioned by a casualty to the extent covered by insurance proceeds made available to Landlord, taxes on Landlord's income from all sources, expenses incurred in leasing to or procuring of tenants, leasing commissions, legal fees related to other tenants' leases, advertising expenses, expenses for the renovating of space for new tenants, debt service payments by Landlord except as allowed above, nor any depreciation allowance or expense. Expenditures for capital improvements shall be amortized over a period appropriate under generally accepted accounted principles, with interest allowed thereon as provided above. (d) Tenant shall make payments to Landlord in respect of its percentage share of Property Taxes and Operating Expenses, monthly in advance as additional rental hereunder, in amounts from time to time estimated by Landlord. Within 90 days after the close of each calendar year, or as soon after such 90- day period as practicable, Landlord shall deliver to Tenant a statement of actual Property Taxes and Operating Expenses for such calendar year. Landlord may determine some items of Property Taxes and Operating Expenses on a cash basis and other items on an accrual basis, so long as such determination is consistently applied to the -3- same item during all accounting periods. If on the basis of such statement Tenant owes an amount that is less than the estimated payments for such calendar year previously made by Tenant, Landlord shall credit such excess against Operating Expenses and Property Taxes subsequently payable by Tenant. If on the basis of such statement Tenant owes an amount that is more than the estimated payments for such calendar year previously made by Tenant, Tenant shall pay the deficiency to Landlord within 15 days after delivery of the statement. Tenant's proportionate share of any net recovery realized by Landlord in a contest concerning the imposition of Property Taxes shall be refunded to Tenant or, at Landlord's option, shall be applied in respect of other rents and charges due under this Lease. The obligations of Landlord and Tenant under this subparagraph with respect to the reconciliation between estimated payments and actual Property Taxes and Operating Expenses for the last year of the term shall survive the termination of this Lease. 5. Other Taxes. Tenant shall pay or reimburse Landlord for any taxes ----------- upon, measured by or reasonably attributable to the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises or leasehold improvements made in or to the Premises at Tenant! s expense; for any taxes, assessments, fees or charges imposed by any public authority or private community maintenance association upon or by reason of the development, possession, use or occupancy of the Premises or the parking facilities used by Tenant in connection with the Premises; and for any gross receipts tax imposed with respect to the rental payable hereunder. 6. Use. --- (a) The Premises shall be used and occupied by Tenant for general office use and in accordance with the Rules and Regulations attached to this Lease as Exhibit A and for no other purpose. Tenant shall, at Tenant's expense, --------- comply promptly with all applicable statutes, ordinances, rules, regulations, orders and requirements in effect during the term regulating the use by Tenant of the Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance, or which unreasonably disturbs other tenants of the Building, nor shall Tenant, its employees, agents or invitees damage the Premises, the Building or related improvements, nor place or maintain any signs on or visible from the exterior of the Premises without Landlord's written consent, which consent may be withheld in Landlord's sole and absolute discretion, or use any corridors, sidewalks or other areas outside of the Premises for storage or any purpose other than access to the Premises. Tenant shall not conduct any auction at the Premises. Notwithstanding any other provision of this Lease, Tenant shall not use, keep or permit to be used or kept on the Premises any foul or noxious gas or substance, nor shall Tenant do or permit to be done anything in and about the Premises, either in connection with activities hereunder expressly permitted or otherwise, which would cause an increase in premiums payable under, or a cancellation of, any policy of insurance maintained by Landlord in connection with the Premises or the Building or which would violate the terms of any covenants, conditions or restrictions affecting the Building or the land on which it is located. (b) Tenant shall faithfully observe and comply with the rules and regulations attached to this Lease as Exhibit A and, after notice thereof, all --------- reasonable modifications thereof -4- and additions thereto from time to time promulgated in writing by Landlord. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any of said rules and regulations, but Landlord shall use good faith efforts to enforce the rules and regulations consistently. (c) Tenant shall strictly comply with all statutes, laws, ordinances, rules, regulations, and precautions now or hereafter mandated or advised by any federal, state, local or other governmental agency with respect to the use, generation, storage, or disposal of hazardous, toxic, or radioactive materials (collectively, "Hazardous Materials"). As herein used, Hazardous Materials shall include, but not be limited to, those materials identified in Sections 66680 through 66685 of Title 22 of the California Code of Regulations, Division. 4, Chapter 30, as amended from time to time, and those substances defined as "hazardous substances," "hazardous materials," "hazardous wastes," "chemicals known to cause cancer or reproductive toxicity," "radioactive materials," or other similar designations in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., 33 U.S.C. Section 1251 et seq., 42 U.S.C. Section 300(f) et seq., 42 ------- U.S.C. 7401 et seq., California. Health and Safety Code Section 25249.5 et seq., -- --- California Water Code Section 13000 et seq., California Health and Safety Code Section 39000 et seq. and any other governmental statutes, ordinances, rules, regulations, and precautions adopted pursuant to the preceding laws or other similar laws, regulations and guidelines now or hereafter in effect. Tenant shall not cause, or allow anyone else whom Tenant has lawful authority to control to cause, any Hazardous Materials to be used, generated, stored, or disposed of on or about the Premises or the Building, other than reasonable quantities of office and cleaning supplies in their retail containers. Tenant shall defend (with counsel approved by Landlord), indemnify and hold Landlord, its trustees, employees and agents, any entity having a security interest in the Premises or the Building, and its and their employees and agents (collectively, "Indemnitees") harmless from and against, and shall reimburse the Indemnitees for, all liabilities, claims, costs, damages, and depreciation of property value, including all foreseeable and unforeseeable consequential damages, directly or indirectly arising out of the use, generation, storage, or disposal of Hazardous Materials by Tenant or any person claiming under Tenant, including, without limitation, the cost of any required or necessary investigation, monitoring, repair, cleanup, or detoxification and the preparation of any closure or other required plans, whether such action is required or necessary prior to or following the termination of this Lease, as well as penalties, fines and claims for contribution to the full extent that such action is attributable, directly or indirectly, to the use, generation, storage, or disposal of Hazardous Materials by Tenant or any person claiming under Tenant. Neither the consent by Landlord to the use, generation, storage, or disposal of Hazardous Materials nor the strict compliance by Tenant with all statutes, laws, ordinances, rules, regulations, and precautions pertaining to Hazardous Materials shall excuse Tenant from Tenant's obligation of indemnification set forth above. Tenant's obligations under this paragraph shall survive the expiration or termination of this Lease. (d) If removal of any asbestos-containing materials which may exist within the Premises (other than any which may have been installed, placed or released by Tenant) is at any -5- time during the Term required as a matter of law, Landlord shall cause such materials to be removed at Landlord's expense promptly following notice from Tenant, which notice shall be accompanied by a copy of reports of inspections or tests done by or on behalf of Tenant showing that such materials are present in the Premises; provided, however, that if the cost of removal thereof will equal or exceed $20,000, Landlord may, at its option, terminate this Lease upon thirty days written notice to Tenant, without removing such materials. Tenant shall do any and all alterations, additions, repairs and maintenance, as well as any and all work relating to installation, upgrading or maintaining utility and other services, in a manner that will minimize any disturbance of asbestos-containing materials and any need to remove or abate such materials. Any such work that may involve or relate to asbestos-containing materials shall be done in such manner as Landlord shall, in its discretion, approve in advance in writing. 7. Services and Utilities. ---------------------- (a) Tenant agrees to pay, before delinquency, all fees and charges for water, gas, electricity, sewers, heat, power, rubbish and garbage collection, janitorial service and any and all other similar charges incurred by Tenant with respect to and during its occupancy of the Premises, including but not limited to use, connection, hook-up and standby fees and penalties for discontinued or interrupted service. Said charges shall be paid directly to the utility or service provider unless Landlord shall, at its option, supply or provide any such utility or service. Tenant may, at its expense, arrange for the installation and operation of T-I lines for use in connection with the operation of Tenant's business. Tenant may, at its expense, install and operate a ventilating and air-conditioning system for the Premises in accordance with code requirements and all of the terms and conditions of this Lease (including but not limited to Paragraph 6(d) above), subject to Landlord's advance written approval of the location of system components and of plans specifically showing structural alterations or additions required by such system (or showing that none are needed). For any and each utility or service supplied or provided by Landlord, Tenant shall pay to Landlord, as additional rent, the charge established by Landlord for utilities furnished or services provided to the Premises. In the case of any utility service provided by Landlord that could be provided directly to Tenant by a local utility company, Landlord warrants that its charge to Tenant for such utility will not exceed the charge that Tenant would pay if such company furnished service directly to Tenant. (b) Landlord shall not be liable for damages, consequential or otherwise, nor shall there be any rent abatement, arising out of any curtailment or interruption whatsoever in utility services; provided, however, that if utilities provided by Landlord are interrupted for a period of more than 48 hours and such interruption is due to Landlord's fault or the failure of equipment under Landlord's control, and if the Premises are hereby rendered untenantable for the use intended, then the rents and charges due under this Lease shall be abated during the period of utility interruption. 8. Maintenance, Repairs and Alterations. ------------------------------------ (a) Landlord shall keep and maintain in good and tenantable condition and repair, the roof, structural walls, exterior painting, and parking and other common areas; -6- provided, however, that Landlord shall not be required to make repairs necessitated by reason of the negligence of Tenant or anyone claiming under Tenant, or by reason of failure of Tenant to perform or observe any conditions or agreements in this Lease contained, or caused by alterations, additions, or improvements made by Tenant or anyone claiming under Tenant. Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises or the Building in good order, condition and repair. Landlord, and not Tenant, shall be responsible to repair and maintain the following: utility lines which serve other tenants in common with Tenant (except to the extent the same are the responsibility of the utility company); damage resulting from any breach of this Lease by Landlord (subject to the waiver of subrogation provisions hereof); and remediation and restoration work expressly made the responsibility of Landlord hereunder. (b) Except for the maintenance and repair responsibilities of Landlord expressly provided above, Tenant shall, at Tenant's expense, maintain the entirety of the Premises and the utilities and systems serving the same in good condition and repair, and Tenant shall perform all such items of repairs, maintenance and alteration as may at any time or from time to time be required in order to comply with the provisions of all laws, statutes, ordinances and regulations affecting the Premises. If Tenant fails to do so Landlord may, but shall not be required to, enter the Premises and put them in good condition, and Landlord's costs thereof shall automatically become due and payable as additional rent. At the expiration of the term Tenant shall deliver up possession of the Premises in good condition and repair, only ordinary wear and tear excepted. (c) Subject to the provisions of Paragraph 6(d) above, Tenant acknowledges and agrees that the Premises have been inspected by Tenant, and are hereby accepted by Tenant in their "AS-IS" condition, without any obligation on Landlord's part to perform or pay for any work or make any improvements, alterations or additions in or to the Premises. Tenant shall not without Landlord's prior consent, not to be unreasonably withheld, make any alterations, improvements or additions in or about the Premises. As a condition to giving such consent, Landlord may require that Tenant remove any such alterations, improvements or additions at the expiration of the term, and to restore the Premises to their prior condition. Before commencing any work relating to alterations, additions or improvements affecting the Premises, Tenant shall notify Landlord of the expected date of commencement thereof and of the anticipated cost thereof, and shall furnish complete drawings and specifications describing such work as well as such information as shall reasonably be requested by Landlord substantiating Tenant's ability to pay for such work. Landlord shall then have the right at any time and from time to time to post and maintain on the Premises such notices as Landlord reasonably deems necessary to protect the Premises, the Building and Landlord from mechanics' liens or any other liens. In any event, Tenant shall pay when due all claims for labor or materials furnished to or for Tenant at or for use in the Premises. Tenant shall not permit any mechanics' liens to be levied against the Premises for any labor or materials furnished to Tenant or claimed to have been furnished to Tenant or to Tenant's agents or contractors in connection with work performed or claimed to have been performed on the Premises by or at the direction of Tenant. All alterations, improvements or additions in or about the Premises performed by or on behalf of Tenant shall be -7- done by contractors designated or approved by Landlord, in a first-class, workmanlike manner which does not disturb or interfere with other tenants and in compliance with all applicable laws, ordinances, regulations and orders of any governmental authority having jurisdiction thereover, as well as the requirements of insurers of the Premises and the Building. Prior to commencing any such work if required by Landlord, Tenant shall purchase builder's risk insurance in an amount no less than the value of the completed work of alteration, addition or improvement on an all-risk basis, covering all perils then customarily covered by such insurance. In addition, prior to the commencement of any such work, if Landlord so requests, Tenant shall furnish to Landlord performance and payments bonds in a form and issued by a surety reasonably acceptable to Landlord in an amount equal to the cost of such work of alteration, improvement or addition. Notwithstanding anything in this paragraph to the contrary, upon Landlord's request, Tenant shall remove any contractor, subcontractor or material supplier from the Premises and the Building if the work or presence of such person or entity results in labor disputes in or about the Building or damage to the Premises or the Building. Upon completion of work performed for Tenant, at Landlord's request Tenant shall deliver to Landlord evidence of full payment therefor and full and unconditional waivers and releases of liens for all labor, services and/or materials used. Unless Landlord requires their removal, as set forth above, all alterations, improvements or additions which may be made on the Premises shall become the property of Landlord and remain upon and be surrendered with the Premises at the termination or expiration of the term; provided, however, that Tenant' s machinery, equipment and trade fixtures, other than any which may be affixed to the Premises so that they cannot be removed without material damage to the Premises, shall remain the property of Tenant and shall be removed by Tenant. 9. Insurance and Indemnity. ------------------------ (a) Tenant shall obtain and during the term of this Lease commercial general liability insurance with a combined single limit for personal injury and property damage in an amount not less than $2,000,000, and employer's liability and workers' compensation insurance as required by law. Tenant's commercial general liability insurance policy shall be endorsed to provide that (1) it may not be cancelled or altered in such a manner as adversely to affect the coverage afforded thereby without 30 days' prior written notice to Landlord, (2) Landlord is named as additional insured, (3) the insurer acknowledges acceptance of the mutual waiver of claims by Landlord and Tenant pursuant to subparagraph (b) below, and (4) such insurance is primary with respect to Landlord and that any other insurance maintained by Landlord is excess and noncontributing with such insurance. If, in the opinion of Landlord's insurance adviser, based on a substantial increase in recovered liability claims generally, the specified amounts of coverage are no longer adequate, within 30 days following Landlord's request, such coverage shall be appropriately increased. Tenant shall also obtain and maintain insurance ("Personal Property Insurance") covering leasehold improvements paid for by Tenant and Tenant's personal property and fixtures from to time in, on, or at the Premises, in an amount not less than 100% of the full replacement cost, without deduction for depreciation, providing protection against events protected under "All Risk Coverage," as well as against sprinkler drainage, vandalism, and malicious mischief. Any proceeds from the Personal Property Insurance shall be used for the repair or replacement of the property damaged or destroyed, unless this Lease is terminated under an applicable provision herein. If the Premises are not repaired or -8- restored following damage or destruction in accordance with other provisions herein, Landlord shall receive any proceeds from the Personal Property Insurance allocable to Tenant's leasehold improvements. Tenant shall obtain and maintain business interruption insurance in an amount adequate to provide for payment of Base Rent and other amounts due Landlord under this Lease during a one year interruption of Tenant's business by fire or other casualty. Prior to the commencement of the term, Tenant shall deliver to Landlord duplicates of such policies or certificates thereof with endorsements, and at least 30 days prior to the expiration of such policy or any renewal thereof, Tenant shall deliver to Landlord replacement or renewal binders, followed by duplicate Policies or certificates within a reasonable time thereafter. If Tenant fails to obtain such insurance or to furnish Landlord any such duplicate policies or certificates as herein required, Landlord may, at its election, after written notice to Tenant (except that notice shall not be required if coverage has lapsed or threatens to lapse) but without any obligation so to do, procure and maintain such coverage and Tenant shall reimburse Landlord on demand as additional rent for any premium so paid by Landlord. Tenant shall have the right to provide all insurance coverage required herein to be provided by Tenant pursuant to blanket policies so long as such coverage is expressly afforded by such policies. (b) Landlord hereby waives all claims against Tenant, and Tenant' s trustees, and its and their officers, directors, partners, employees, agents and representatives for loss or damage to the extent that such loss or damage is insured against under any valid and collectable insurance policy insuring Landlord or would have been insured against but for any deductible amount under any such policy, and Tenant waives all claims against Landlord including Landlord's trustees, and its and their officers, directors, partners, employees, agents and representatives (collectively, "Landlord's Parties") for loss or damage to the extent such loss or damage is insured against under any valid and collectable insurance policy insuring Tenant or required to be maintained by Tenant under this Lease, or would have been insured against but for any deductible amount under any such policy. (c) As insurance is available to protect it, and as long as such waiver does not violate public policy, Tenant hereby waives all claims against Landlord and Landlord's Parties for damage to any property or injury to or death of any person in, upon or about the Premises, the Building or the Property arising at any time and from any cause, and Tenant shall hold Landlord and Landlord's Parties harmless from and defend Landlord and Landlord's Parties against (i) all claims for damage to any property or injury to or death of any person arising in or from the use of the Premises by Tenant, except as to Landlord or any of Landlord's Parties such as is caused by the sole negligence or willful misconduct of Landlord or that of Landlord's Parties otherwise entitled to indemnification, or (ii) arising from the negligence or willful misconduct of Tenant, its employees, agents or contractors in, upon or about those portions of the Building other than the Premises. The foregoing indemnity obligation of Tenant shall include attorneys' fees, investigation costs and all other costs and expenses incurred by Landlord or any of Landlord's Parties from the first notice that any claim or demand is to be made or may be made. The provisions of this paragraph shall survive the expiration or termination of this Lease with respect to any damage, injury or death occurring prior to such time. -9- 10. Damage or Destruction. --------------------- (a) If during the term the Premises are totally or partially destroyed, or any other portion of the Building is damaged in such a way that Tenant's use of the Premises is materially interfered with, from a risk which is wholly covered by insurance proceeds made available to Landlord for such purpose, Landlord shall proceed with reasonable diligence to repair the damage or destruction and this Lease shall not be terminated; provided, however, that if in the opinion of Landlord's architect or contractor the work of repair cannot be completed in 90 days following such damage or destruction, Landlord may at its election terminate this Lease by notice given to Tenant within 30 days following the event or such longer period as may reasonably be necessary to obtain information from its architect or contractor. (b) If during the term the Premises are totally or partially destroyed, or any other portion of the Building is damaged in such a way that Tenant's use of the Premises is materially interfered with, from a risk which is not wholly covered by insurance proceeds made available to Landlord for repair or reconstruction, Landlord may at its election by notice to Tenant given within 30 days following the event or such longer period as may reasonably be necessary for Landlord to obtain information from its architect or contractor, either restore the Premises or terminate this Lease. (c) In case of destruction or damage which materially interferes with Tenant's use of the Premises, if this Lease is not terminated as above provided, rent shall be abated during the period required for the work of repair based upon the degree of interference with Tenant's use of the Premises. Except for abatement of rent, Tenant shall have no claim against Landlord for any loss suffered by Tenant due to damage or destruction of the Premises or any work of repair undertaken as herein provided. Tenant expressly waives the provisions of Section 1932 and Section 1933(4) of the California Civil Code which are superseded by this paragraph. (d) In the event that the Building is entirely destroyed by a casualty or the time reasonably required to restore the Premises, as determined in good faith by Landlord, exceeds 180 days, Tenant may terminate this Lease by written notice to Landlord given within 30 days following tile casualty. 11. Eminent Domain. If all or any part of the Premises shall be taken as a -------------- result of the exercise of the power of eminent domain or sold by Landlord under threat thereof, this Lease shall terminate as to the part so taken as of the date of taking or sale and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Premises by notice to the other within 30 days after such date if the portion of the Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant's use of the balance of the Premises for Tenant's purposes. In the event of any taking or such sale, 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 therewith, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease or otherwise. In the event of a partial taking of the Premises which does not result in a termination -10- of this Lease, the monthly rental thereafter to be paid shall be equitably reduced on a square footage basis. 12. Assignment and Subletting. ------------------------- (a) Tenant shall not assign this Lease or any interest herein or sublet the Premises or any part thereof without the prior consent of Landlord, which consent shall not be unreasonably withheld; Tenant shall not hypothecate this Lease or any interest herein or permit the use of the Premises by any party other than Tenant without the prior consent of Landlord, which consent may be withheld by Landlord in its discretion. This Lease shall not, nor shall any interest herein, be assignable as to the interest of Tenant by operation of law without the consent of Landlord. Any of the foregoing acts without such consent shall be void and shall, at the option of Landlord, terminate this Lease. In connection with each consent requested by Tenant, Tenant shall submit to Landlord the terms of the proposed transaction, the identity of the parties to the transaction, the proposed documentation for the transaction, current financial statements of any proposed assignee or sublessee and all other information reasonably requested by Landlord concerning the proposed transaction and the parties involved therein. As a further condition to any consent granted by Landlord, the proposed assignee or sublessee shall agree in writing to perform for the benefit of Landlord all of the Tenant's obligations under this Lease or so much thereof as are allocable to any portion of the Premises proposed to be sublet. Notwithstanding the foregoing, Landlord's consent shall not be required, and Landlord shall not have the recapture right provided below in subparagraph (c) of this Paragraph, in the case of a registered public offering of Tenant's stock, the merger of Tenant into or with another entity, or a sale of all or substantially all of the assets or stock of Tenant as a going concern, provided, in the case of any such offering, merger or sale, that Tenant is not in default hereunder, and that Tenant or the merged entity, in the case of the issuance or sale of stock or a merger, or the purchaser of Tenant's assets, has a net worth equal to or in excess of $1,000,000 following the conclusion of such transaction and any related transactions. (b) Without limiting the other instances in which it may be reasonable for Landlord to withhold its consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold its consent in the following instances: (1) the proposed assignee or sublessee is a governmental agency; (2) in Landlord's reasonable judgment, the use of the Premises would entail any alterations which would lessen the value of the leasehold improvements in the Premises, or would require increased services by Landlord; (3) in Landlord's reasonable judgment, the financial worth of the proposed assignee or sublessee does not meet the credit standards applied by Landlord for other tenants under leases with comparable terms, or the character, reputation or business of the proposed assignee or sublessee is not consistent with the quality of the other tenancies in the Building; -11- (4) in Landlord's reasonable judgment, the proposed assignee or sublessee does not have a good reputation as a tenant of property; (5) Landlord has received from any prior lessor to the proposed assignee or subtenant a negative report concerning such prior lessor's experience with the proposed assignee or subtenant; (6) Landlord has experienced previous defaults by or is in litigation with the proposed assignee or subtenant; (7) the use of the Premises by the proposed assignee or subtenant will violate any applicable law, ordinance or regulation; (8) the proposed assignee or subtenant is a person with whom Landlord is negotiating to lease space in the Building or is currently a tenant in the Building; (9) Tenant is in default of any obligation of Tenant under this Lease, or Tenant has defaulted under this Lease on three or more occasions during the 12 months preceding the date that Tenant shall request consent; or (10) in the case of a subletting of less than the entire Premises, if the subletting would result in the division of the Premises into more than two subparcels or would require access to be provided through space leased or held for lease to another tenant or improvements to be made outside of the Premises. (c) If at any time or from time to time during the term of this Lease Tenant desires to sublet all or any part of the Premises, Tenant shall give notice to Landlord setting forth the terms of the proposed subletting and the space so proposed to be sublet. Landlord shall have the option, exercisable by notice given to Tenant within 20 days after Tenant's notice is given, to terminate the Lease as to that portion of the Premises proposed to be sublet, effective as of the date of the proposed subletting. Landlord may enter into a lease with the proposed subtenant. If Tenant proposes to assign this Lease, Landlord may, by notice given within 20 days of Tenant's notice, elect to terminate this Lease as of the date of the proposed assignment. If Landlord so terminates this Lease, Landlord may, if it elects, enter into a new lease covering the Premises or a portion thereof with the intended assignee or subtenant on such terms as Landlord and such person may agree, or enter into a new lease covering the Premises or a portion thereof with any other person; in such event, Tenant shall not be entitled to any portion of the profit, if any, which Landlord may realize on account of such termination and reletting. Landlord's exercise of its aforesaid option shall not be construed to impose any liability upon Landlord with respect to any real estate brokerage commission(s) or any other costs or expenses incurred by Tenant in connection with its proposed subletting or assignment. If Landlord does not exercise its options to terminate this Lease or sublet the Premises, Tenant shall be free to sublet such space to any third party on the same terms set forth in the notice given to Landlord, subject to obtaining Landlord's prior consent as hereinabove provided. -12- (d) As used in this paragraph, the term "assign" or "assignment" shall include, without limitation, any sale, transfer or other disposition of all or any portion of Tenant's estate under this Lease, whether voluntary or involuntary, and whether by operation of law or otherwise including any of the following: (1) If Tenant is a corporation: (i) any dissolution, merger, consolidation or other reorganization of Tenant, or (ii) a sale of more than 50 % of the value of the assets of Tenant, or (iii) if Tenant is a corporation with fewer than 500 shareholders, sale or other transfer of a controlling percentage of the capital stock of Tenant. The phrase "controlling percentage" means the ownership of, and the right to vote, stock possessing at least 50 % of the total combined voting power of all classes of Tenant's stock issued, outstanding and permitted to vote for the election of directors; (2) If Tenant is a trust, the transfer of more than 50 % of the beneficial interest of Tenant, or the dissolution of the trust; (3) If Tenant is a partnership or joint venture, the withdrawal, or the transfer of the interest of any general partner or joint venturer or the dissolution of the partnership or joint venture; or (4) If Tenant is composed of tenants-in-common, the transfer of interest of any co-tenants, or the partition or dissolution of the co- tenancy. (e) No sublessee shall have a further right to sublet, and any assignment by a sublessee of its sublease shall be subject to Landlord's prior consent in the same manner as if Tenant were entering into a new sublease. (f) In the case of an assignment, all sums or other economic consideration received by Tenant as a result of such assignment shall be paid to Landlord after first deducting the cost of any real estate commissions and reasonable attorneys' fees incurred in connection with such assignment, and the cost of improvement work done or construction or improvement allowances given by Tenant in connection with such assignment. In the event such consideration is received by Tenant in installments, the portion of each installment to be paid to Landlord shall be determined by subtracting from the installment an amount equal to the total amount of the foregoing permitted deductions divided by the total number of installments. (g) In the case of a subletting, all sums or economic consideration received by Tenant as a result of such subletting shall be paid to Landlord after first deducting (1) the rental due hereunder, prorated to reflect only rental allocable to the sublet portion of the Premises, and (2) the cost of any real estate commissions and reasonable attorneys' fees incurred in connection with such subletting, together with the cost of improvement work done or construction or improvement allowances given by Tenant in connection with such subletting, amortized over the term of the sublease. (h) Regardless of Landlord's consent, no subletting or assignment shall release -13- Tenant of Tenant's obligations or alter the primary liability of Tenant to pay the rental and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or successor. Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant without notifying Tenant or any successor of Tenant, and without obtaining its or their consent thereto and such action shall not relieve Tenant of liability under this Lease. (i) If Tenant shall assign or sublet the Premises or request the consent of Landlord to any assignment or subletting or if Tenant shall request the consent of Landlord for any act that Tenant proposes to do, then Tenant shall pay Landlord's reasonable attorneys' fees incurred in connection therewith. (j) The voluntary or other surrender of this Lease by Tenant, the mutual cancellation thereof or the termination of this Lease by Landlord as a result of Tenant's default shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies. 13. Default by Tenant. ----------------- (a) Any of the following events shall constitute events of default under this Lease: (1) a default by Tenant in the payment of any rent or other sum payable hereunder which continues for 10 days after written notice from Landlord (which notice may be that required or permitted pursuant to Section 1161 et seq. of the California Code of Civil Procedure or successor -- --- statutes, with the provisions of this Lease not requiring the giving of a notice in addition to such statutory notice to terminate this Lease and Tenant's right to possession of the Premises); (2) a default by Tenant in the performance of any of the other terms, covenants, agreements or conditions contained herein and, if the default is curable, the continuation of such default for a period of 30 days after notice by Landlord or beyond the time reasonably necessary for cure if the default is of the nature to require more than 30 days to remedy, provided that if Tenant has defaulted in the performance of the same obligation more than one time in any twelve-month period and notice of such default has been given by Landlord in such instance, no cure period shall thereafter be applicable hereunder; (3) the bankruptcy or insolvency of Tenant, any transfer by Tenant in fraud of creditors, assignment by Tenant for the benefit of creditors, or the -14- commencement of any proceedings of any kind by or against Tenant under any provision of the Federal Bankruptcy Act or under any other insolvency, bankruptcy or reorganization act unless, in the event any such proceedings are involuntary, Tenant is discharged from the same within 60 days thereafter; the appointment of a receiver for a substantial part of the assets of Tenant; or the levy upon this Lease or any estate of Tenant hereunder by any attachment or execution; or (4) the abandonment of the Premises. (b) Upon the occurrence of any event of default by Tenant hereunder, Landlord may, at its option and without any further notice or demand, in addition to any other rights and remedies given hereunder or by law, do any of the following: (1) Landlord shall have the right, so long as such default continues, to give notice of termination to Tenant, and on the date specified in such notice this Lease shall terminate. (2) In the event of any such termination of this Lease, Landlord may then or at any time thereafter, re-enter the Premises and remove therefrom all persons and property and again repossess and enjoy the Premises, without prejudice to any other remedies that Landlord may have by reason of Tenant's default or of such termination. (3) In the event of any such termination of this Lease, and in addition to any other rights and remedies Landlord may have, Landlord shall have all of the rights and remedies of a landlord provided by Section 1951.2 of the California Civil Code. The amount of damages which Landlord may recover in event of such termination shall include, without limitation, (i) the worth at the time of award (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) of the amount by which the unpaid rent for balance of the term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided, (ii) all legal expenses and other related costs incurred by Landlord following Tenant's default, (iii) all costs incurred by Landlord in restoring the Premises to good order and condition, or in remodeling, renovating or otherwise preparing the Premises for reletting, and (iv) all costs (including, without limitation, any brokerage commissions) incurred by Landlord in reletting the Premises. (4) For the purpose of determining the unpaid rent in the event of a termination of this Lease, or the rent due hereunder in the event of a reletting of the Premises, the monthly rent reserved in this Lease shall be deemed to be the sum of the rental due under paragraph 3 above and the amounts last payable by Tenant pursuant to paragraph 4 above and any "free rent" or rent waived or abated by Landlord as an inducement for Tenant to enter into this Lease. (5) Landlord's acceptance of payment from Tenant of less than the amount of rent then due shall not constitute a waiver of any rights of Landlord or Tenant -15- including, without limitation, any right of Landlord to recover possession of the Premises. (6) After terminating this Lease, Landlord may remove any and all personal property located in the Premises and place such property in a public or private warehouse or elsewhere at the sole cost and expense of Tenant. (c) Even though Tenant has breached this Lease and abandoned the Premises, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all its rights and remedies under this Lease, including the right to recover rental as it becomes due under this Lease. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon initiative of Landlord to protect Landlord's interest under this Lease, shall not constitute a termination of Tenant's right to possession. (d) Tenant hereby waives all rights under California Code of Civil Procedure Section 1179 and California Civil Code Section 3275 providing for relief from forfeiture, and any other right now or hereafter existing to redeem the Premises or reinstate this Lease after termination pursuant to this paragraph or by order or judgment of any court or by any legal process. (e) Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereby against the other on any matters not relating to personal injury or property damage but otherwise arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and any emergency statutory or any other statutory remedy. (f) The remedies provided for in this Lease are in addition to any other remedies available to Landlord at law or in equity, by statute or otherwise. 14. Landlord's Right to Cure Defaults. If Tenant shall fail to pay any sum --------------------------------- of money, other than rental, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder and such failure shall continue for 30 days after notice thereof by Landlord, Landlord may, but shall not be obligated so to do, and without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such other act on Tenant's part to be made or performed as in this Lease provided. All sums so paid by Landlord and all necessary incidental costs shall be deemed additional rent hereunder and shall be payable to Landlord on demand, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the nonpayment thereof by Tenant as in the case of default by Tenant in the payment of rental. 15. Default by Landlord. Landlord shall not be in default under this Lease ------------------- unless Landlord fails to perform obligations required of Landlord hereunder within a reasonable time, but in no event later than 30 days after notice by Tenant to Landlord specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than 30 days are required for performance, then Landlord shall not -16- be in default if Landlord commences performance within such 30 day period and thereafter diligently prosecutes the same to completion. 16. Security Deposit. On execution of this Lease Tenant shall deposit with ---------------- Landlord the sum specified in the Basic Lease Information (the "Deposit"). The Deposit shall be held by Landlord as security for the performance by Tenant of all of the provisions of this Lease. Following an event of default by Tenant under this Lease, Landlord may use, apply or retain all or any portion of the Deposit to remedy defaults in the payment of any rental or other charge hereunder, to repair damages to the Premises caused by Tenant, to clean the Premises upon the expiration or termination of this Lease, or otherwise to compensate Landlord for any loss or damage sustained due to any breach or default on the part of Tenant. If Landlord so uses or applies all or any portion of the Deposit, then within 10 days after demand therefor Tenant shall deposit cash with Landlord in an amount sufficient to restore the Deposit to the full amount thereof, and Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep the Deposit separate from its general accounts. If Tenant performs all of Tenant's obligations hereunder, the Deposit, or so much thereof as has not theretofore been applied by Landlord, shall be returned, without payment of interest for its use, to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's' interest hereunder) at the expiration of the term hereof, and after Tenant has vacated the Premises. No trust relationship is created herein between Landlord and Tenant with respect to the Deposit. 17. Estoppel Certificate. -------------------- (a) Tenant shall at any time within 10 days following request from Landlord execute, acknowledge and deliver to Landlord a statement certifying (1) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect), (2) the date to which the rent, the Deposit, and other sums payable hereunder have been paid, (3) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults, if any, which are claimed, and (4) such other matters as may reasonably be requested by Landlord. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Building. Landlord shall, within 10 days following notice from Tenant, provide to Tenant an estoppel certificate relating to the interest of Tenant under this Lease, on commercially reasonable terms. (b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (1) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (2) that there are no uncured defaults in Landlord's performance, and (3) that not more than one month's rent has been paid in advance. (c) If Landlord desires to finance or refinance the Building, within 10 days of Landlord's request, Tenant shall deliver to any lender designated by Landlord such financial statements of Tenant as may be reasonably required by such lender; provided, however, that Tenant may provide such financial statements as Tenant may generally have prepared in the normal course of the operation of its business, whether audited or unaudited. All such financial -17- statements shall be received by Landlord in confidence and shall be used for the purposes herein set forth. 18. Subordination: Amendment for Lender. This Lease, at Landlord's option, ----------------------------------- shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the Building and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, beneficiary, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof. If any mortgage or deed of trust to which this Lease is subordinate is foreclosed or a deed in lieu of foreclosure is given to the mortgagee or beneficiary, Tenant shall attorn to the purchaser at the foreclosure sale or to the grantee under the deed in lieu of foreclosure; if any ground lease to which this Lease is subordinate is terminated, Tenant shall attorn to the ground lessor. Tenant agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be, or to evidence such attornment. 19. Attorneys' Fees. If either party commences an action or proceeding --------------- against the other party arising out of or in connection with this Lease, or institutes any proceeding in a bankruptcy or similar court which has jurisdiction over the other party or any or all of its property or assets, the prevailing party in such action or proceeding and in any appeal in connection therewith shall be entitled to have and recover from the unsuccessful party reasonable attorneys' fees, court costs, expenses and other costs of investigation and preparation. If such prevailing party recovers a judgment in any such action, proceeding, or appeal, such attorneys' fees, court costs and expenses shall be included in and as a part of such judgment. In addition, if Landlord shall employ the services of an attorney by reason of any default or failure of timely performance by Tenant and suit is not brought by reason thereof, or Tenant cures following the bringing of suit, or the suit is otherwise settled and compromised prior to entry of judgment, Tenant shall pay to Landlord, as additional rental, all reasonable attorneys' fees and costs incurred by Landlord. 20. Notices. All notices, consents, demands and other communications from ------- one party to the other given pursuant to the terms of this Lease shall be in writing and shall be deemed to have been fully given when deposited in the United States mail, certified or registered, postage prepaid, or delivered to a generally recognized overnight courier service (such as Fed Ex, U.P.S., Airborne or similar national couriers) for next-day delivery, charges prepaid, and addressed as follows: to Tenant at the address specified in the Basic Lease Information or to such other place as Tenant may from time to time designate in a notice to Landlord; to Landlord at the address specified in the Basic Lease Information, or to such otter place and with such other copies as Landlord may from time to time designate in a notice to Tenant; or, in the case of -18- Tenant, delivered to Tenant at the Premises. In, addition, such communications shall be deemed given when transmitted to a party by electronic facsimile, with confirmation of receipt to the telephone number specified in the Basic Lease Information, as it may be changed by notice. 21. General Provisions. ------------------ (a) This Lease shall be governed by and construed in accordance with the laws of the State of California. (b) The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. (c) This Lease contains all agreements of the parties with respect to any matter mentioned herein and supersedes any oral and any prior written understanding, conditions, representations, agreements or covenants, and may be modified in writing only, signed by the parties. (d) No waiver by Landlord or Tenant of any provision hereof shall be deemed a waiver of any other provision or of any subsequent breach by Tenant or Landlord of the same or any other provision. Landlord's or Tenant's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of consent to or approval of any subsequent act. The acceptance of rent or any partial payment hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. (e) If Tenant remains in possession of the Premises or any part thereof after the expiration of the term with the consent of Landlord, such occupancy shall be a tenancy from month to month at a rental in the amount of 150% of the last month's rental during the term plus all other charges payable hereunder, and upon all of the terms hereof. (f) Subject to the provisions of this Lease restricting assignment or subletting by Tenant, this Lease shall bind the parties, their personal representatives, successors and assigns. (g) Landlord and Landlord's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers or lenders, and making such alterations, repairs, improvements or additions to the Premises or to the Building as Landlord may deem necessary or desirable. Landlord shall give Tenant reasonable advance written notice of any entry of the Premises pursuant to this Paragraph, except that notice shall not be required in an emergency. In the event that the Premises are rendered untenantable for a period in excess of 48 hours by reason of work by Landlord therein that is not made necessary by reason of Tenant's default, by the requirements of any insurer or by the provisions of applicable laws or rules of law, then the rents and charges due under this Lease shall be abated during the period the Premises are untenantable. Landlord may at any time -19- during the last 180 days of the term place on or about the Premises any ordinary "For Lease" signs. (h) If Tenant is a corporation, each individual executing this Lease on behalf of Tenant represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of the corporation in accordance with a duly adopted resolution of the Board of Directors and that this Lease is binding upon the corporation in accordance with its terms. (i) The term "Landlord" as used herein means the then owner of the Building and in the event of a sale of the Building the selling owner shall be automatically relieved of all obligations of Landlord hereunder, except for acts or omissions of Landlord theretofore occurring. (j) Any liability which may arise as a consequence of the execution of this Lease by or on behalf of Landlord shall be a liability of Landlord and not the personal liability of any partner, shareholder, owner, member, officer, director, agent, trustee, employee or beneficiary of Landlord. Notwithstanding anything to the contrary set forth in this Lease, Tenant agrees that there shall be absolutely no personal liability on the part of Landlord with respect to any of the obligations of Landlord under this Lease, and Tenant shall look solely to the equity, if any, of Landlord in the Building for the satisfaction of any liability of Landlord to Tenant. Tenant's exculpation of personal liability of Landlord is absolute and without any exception whatsoever. (k) Tenant warrants that it has had no dealings with any real estate broker or agent other than the Brokers identified in the Basic Lease Information in connection with the Premises or this Lease. Tenant shall indemnify Landlord and hold it harmless from and against all claims, demands, costs or liabilities (including, without limitation, attorneys' fees) asserted by any party other than such Brokers based upon dealings of that third party with Tenant in connection with the Premises or this Lease. Landlord, and not Tenant, shall be responsible to pay Landlord's Broker, and Landlord shall indemnify Tenant and hold it harmless from and against all claims, demands, costs or liabilities (including, without limitation, attorneys' fees) asserted by such Broker based upon dealings of that party with Landlord in connection with the Premises or this Lease. 22. Exhibits. Any and all exhibits and addenda referred to above in this -------- Lease and annexed hereto are attached to this Lease and by this reference made a part hereof. 23. Exculpation. Landlord and Tenant hereby acknowledge that Landlord is a ----------- California unincorporated association doing business as a real estate investment trust. The trustees, officers, agents and employees of Landlord have no power to bind its shareholders personally, and no obligation of Landlord under this Agreement shall be binding personally upon its shareholders, trustees, officers, agents, or employees. All persons dealing with Landlord, its trustees, officers, agents, employees or representatives shall look solely to the property of -20- Landlord for satisfaction of claims of any nature arising in connection with the affairs of Landlord. IN WITNESS WHEREOF, the parties have executed this Lease on the respective dates indicated below: TENANT LANDLORD NETWEB CORPORATION, WESTERN INVESTMENT REAL ESTATE a Delaware corporation TRUST, a California real estate investment trust By /s/ By /s/ -------------------------------- ---------------------------- Name William Lohse Name L. Gerald Hunt ----------------------------- Its Chairman Its Senior Vice President ------------------------------- By /s/ By /s/ -------------------------------- ----------------------------- Name Anna Zornosa Name Dennis D. Ryan ------------------------------- --------------------------- Its President Its CFO -------------------------------- ----------------------------- Tenant's T.I.N.: 88-0386603 - ----------------------------------- -21- EXHIBIT A --------- OFFICE LEASE 3450 California Street San Francisco, California Rules and Regulations 1. The sidewalks, halls, passages, exits, entrances and stairways of the Building shall not be obstructed by Tenant or used by it for any purpose other than for ingress to and egress from the Premises. The halls, passages, exits, entrances and stairways not for the general public and Landlord shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the judgment of Landlord would be prejudicial to the safety, character, reputation and interests of the Building and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. No tenant and no employee or invitee of any tenant shall go upon the roof of the Building. Landlord shall have the right at any time without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefor to change the arrangement and/or location of entrances or passageways, doors or doorways, corridors, stairs or other common areas of the Building. 2. Tenant may at its expense install and maintain a tasteful, professionally made sign bearing Tenant's name on the exterior door of the Premises, so long as the same may be done in compliance with applicable laws, codes and regulations and Tenant shall have received Landlord's prior approval of the design and placement of said sign. Tenant shall remove said sign upon expiration or termination of this Lease and restore the exterior door to its condition before installation of such sign. No other sign, placard, picture, name, advertisement or notice visible from the exterior of Tenant's Premises shall be inscribed, painted, affixed or otherwise displayed by Tenant on any part of the Building without the prior written consent of Landlord. Landlord may adopt and furnish to tenants general guidelines relating to signs inside the Building. Tenant agrees to conform to such guidelines. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by Landlord. Material visible from outside the Building will not be permitted. 3. The Premises shall not be used for the storage of merchandise held for sale to the general public or for lodging. No cooking shall be done or permitted on the premise, except that private use by Tenant of an Underwriters' Laboratory approved refrigerator, U.L. approval microwave oven and U.L. approved equipment for brewing coffee, teas, hot chocolate and similar beverages shall be permitted, provided that such use is in accordance with all applicable Federal, state and municipal laws, codes, ordinances, rules and regulations. 4. Landlord will furnish each tenant free of charge with two keys to each door lock -1- provided in the Premises by Landlord. Landlord may make a reasonable charge for any additional keys. No tenant shall have any such keys copied or any keys made. After delivery of possession of the Premises to Tenant, Tenant may, at its expense, rekey existing locks or have new locks of equal or better quality installed, so long as Tenant provides to Landlord, for emergency use only, a master key to each new or rekeyed lock. Tenant, upon the termination of this Lease, shall deliver to Landlord all keys to doors in the Building. 5. Landlord may designate appropriate entrances for deliveries or other movement to or from the Premises of equipment, materials, supplies, furniture or other property, and Tenant shall not use any other entrances for such purposes. All persons employed and means or methods used to move equipment, materials, supplies, furniture or other property in or out of the Building must be approved by Landlord prior to any such movement. Landlord shall have the right to prescribe the maximum weight, size and position of all equipment, materials, furniture or other property brought into the Building. Heavy objects shall, if considered necessary by Landlord, stand on a platform of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such property from any cause, and all damage done to the Building by moving or maintaining such property shall be repaired at the expense of Tenant. 6. No tenant shall use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material other than limited quantities thereof reasonably necessary for the operation or maintenance of office equipment. No tenant shall use any method of heating or air conditioning other than that, if any, supplied by Landlord. No tenant shall use or keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations, or interfere in any way with other tenants or those having business in the Building, nor shall any animal or birds be brought or kept in the Premises or the Building. 7. Landlord shall have the right, exercisable without notice and without liability to any tenant, to change the name or street address of the Building. 8. No curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or decorations shall be attached to, hung or placed in, or used in connection with any window of the Building without the prior written consent of Landlord. In any event, with the prior written consent of Landlord, such items shall be installed on the office side of Landlord's standard window covering and shall in no way be visible from the exterior of the Building. Tenant shall keep window coverings closed when the effect of sunlight (or the lack thereof) would impose unnecessary loads on the Building systems. 9. No tenant shall obtain for use in the Premises ice, drinking water, food, beverage, towel or other similar services, except at such reasonable hours and under such reasonable regulations as may be fixed by Landlord. 10. Each tenant shall ensure that the doors of its Premises are closed and locked and -2- that all water faucets, water apparatus and utilities are shut off before Tenant or Tenant's employees leave the Premises so as to prevent waste or damage, and for any default or carelessness in this regard, Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. 11. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it. 12. Except with the prior written consent of Landlord, no tenant shall sell or permit the sale in the Premises, or use or permit the use of any sidewalk or mall area adjacent to the Premises for the sale, of newspapers, magazines, periodicals, theatre or travel tickets or any other goods or merchandise at retail to the general public in or on the Premises, nor shall any tenant carry on or permit or allow any employee or other person to carry on the business of stenography, typewriting. printing or photocopying or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, nor shall the Premises of any tenant be used for manufacturing of any kind, or any business or activities other than that specifically provided for in such tenant's lease. 13. No tenant shall install any radio or television antenna, satellite dish, loudspeaker or other device on the roof or exterior walls of the Building. No TV or radio or recorder shall be played in such a manner as to cause a nuisance to any other tenant. 14. There shall not be used in any space, or in the public halls of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards or such other material handling equipment as Landlord may approve. No other vehicles of any kind shall be brought by any tenant into the Building or kept in or about its Premises. 15. Each tenant shall store all its trash and garbage within its Premises until removal of the same to such location in the Building as may be designated from time to time by Landlord. No material shall be placed in the trash boxes or receptacles, if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of office building trash and garbage in the City in which the Building is located without being in violation of any law or ordinance governing such disposal. 16. All loading and unloading of merchandise, supplies, materials, garbage and refuse shall be made only through such entryways and at such times as Landlord shall designate. The Tenant shall not obstruct or permit the obstruction of any designated loading area and at no time shall Tenant park or allow its officers, agents or employees to park vehicles therein except for loading and unloading. 17. Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building are prohibited, and each tenant shall cooperate to prevent the same. -3- 18. The requirements of tenants will be attended to only upon application in writing at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord. 19. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Building. 20. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the agreements, covenants, conditions and provisions of any lease of Premises in the Building. 21. Landlord reserves the right to make such other rules and regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building and for the preservation of good order therein. -4- GUARANTEE OF LEASE The undersigned, WILLIAM LOHSE and VICTORIA LOHSE, Husband and Wife ("Guarantor"), in consideration of the leasing of those certain premises (the "Premises") located in the City and County of San Francisco, State of California, described in the written lease (the "Lease") by and between WESTERN INVESTMENT REAL ESTATE TRUST, a California real estate investment trust ("Landlord"), and NETWEB CORPORATION, a Delaware corporation ("Tenant") does hereby covenant and agree as follows: 1. Guarantor does hereby unconditionally and irrevocably guarantee the full, faithful and timely payment and performance by Tenant and its successors and assigns of all of the covenants, terms and conditions of Tenant to be kept and performed pursuant to the Lease. If Tenant shall default at any time in the payment of any rentals, charges or other sums due under the Lease or in the performance of any of the other covenants and obligations of Tenant thereunder, Guarantor shall on demand of Landlord fully and promptly pay all such rentals, charges and other sums and otherwise perform at Guarantor's sole cost and expense all such covenants and obligations, including (without limitation) the payment of interest on past due obligations of Tenant of any and all costs advanced by Landlord, and of any and all damages and expenses (including attorneys' fees and litigation costs) that may arise in consequence of Tenant's default. Guarantor hereby waives all requirements of notice of the acceptance of this Guarantee and all requirements of notice of breach or non-performance by Tenant, including but not limited to presentment, demand, protest, notice of protest, notice of dishonor, notice of non-payment and notice of acceptance of this Guarantee. 2. Guarantor's obligations hereunder are independent of, and may exceed, the obligations of Tenant. A separate action or actions may, at Landlord's option, be brought and prosecuted against Guarantor, whether any action is first or subsequently brought against Tenant or whether Tenant is joined in any such action, and Guarantor may be joined in any action or proceeding commenced by Landlord against Tenant relating to or arising in connection with the Lease. Guarantor waives any right to require Landlord to proceed against Tenant or pursue any other remedy in Landlord's power whatsoever, any right to complain of delay in the enforcement of Landlord's rights under the Lease, any right to demand by Landlord and any right to prior action by Landlord of any nature whatsoever against Tenant. 3. This Guarantee shall remain and continue in full force and effect and shall not be discharged in whole or in part by any alteration, renewal, extension, modification, or amendment or by any assignment, subletting, hypothecation or other transfer of the Lease. Guarantor hereby consents to and waives notice of any of the foregoing and agrees that its liability hereunder shall be based upon the obligations of Tenant set forth in the Lease as the same may be from time to time altered, renewed, extended, modified, amended or assigned. 4. Guarantor's obligations hereunder shall remain fully binding although Landlord may have waived one or more defaults by Tenant or extended the time of performance by Tenant or granted other indulgences to Tenant, or may have released, returned or misapplied other security for the performance of Tenant's obligations under the Lease (including any other guarantees or -1- any security therefor), or may have released Tenant from the performance of its obligations under the Lease. Guarantor hereby waives any and all rights of subrogation, reimbursement, indemnity or contribution which Guarantor may have against Tenant or any other guarantor or any other person who now or hereafter has direct or contingent liability for all or any portion of the obligations guaranteed hereby, or against any security deposit or other property which now or hereafter serves as collateral security for performance of the Lease. Any indebtedness of Tenant now or hereafter held by Guarantor is hereby subordinated to the obligations and indebtedness of Tenant to Landlord; and any indebtedness of Tenant to Guarantor, if Landlord so requests, shall be collected, enforced and received by Guarantor as trustee for Landlord on account of the obligations and indebtedness of Tenant to Landlord, without affecting the liability of Guarantor under this Guarantee. 5. This Guarantee shall remain in full force and effect notwithstanding the institution by or against Tenant of bankruptcy, reorganization, readjustment, receivership or insolvency proceedings of any nature, and notwithstanding the rejection, disaffirmance or abandonment of the Lease in any such proceedings or otherwise. 6. Guarantor hereby consents and agrees that the courts of the State in which the Premises are located shall have jurisdiction over Guarantor's person in actions arising under or relating to the Lease or this Guarantee, and Guarantor agrees that any action brought by Guarantor arising out of or relating to the Lease or this Guarantee shall be filed in the State in which the Premises are located. 7. If this Guarantee is signed by more than one party, their obligations shall be joint and several, and the release of one or more of such parties or of any other guarantor of the Lease shall not release any other party. 8. This Guarantee shall be applicable to and binding upon the heirs, executors, administrators, representatives, successors and assigns of Guarantor and shall inure to the benefit of the heirs, executors, administrators, representatives, successors and assigns of Landlord. Landlord may, without notice, assign this Guarantee in whole or in part. 9. In any litigation between Landlord and Guarantor relating to or arising in connection with this Guarantee, the prevailing party shall be entitled to recover its costs and the reasonable fees and experts of its attorneys. 10. The execution of this Guarantee prior to or following execution of the Lease shall not invalidate this Guarantee or lessen the obligations of Guarantor hereunder. This Guarantee may be attached to the Lease, and the execution by Guarantor of this Guarantee as so designated and the delivery hereof as an attachment to the Lease shall constitute the due execution and delivery of this Guarantee. -2- IN WITNESS WHEREOF, Guarantor has executed this Guarantee this 6th day of August, 1998. GUARANTOR: /s/ William Lohse -------------------------------- William Lohse /s/ Victoria Lohse ------------------------------- Victoria Lohse Husband and Wife, whose home address is POB 69 ------------------------------ Zephyr Cove, NV 89498 ------------------------------ ------------------------------ Social Security Number of William Lohse: 554 70 4460 ------------------------------ Social Security Number of Victoria Lohse 559 76 6982 ------------------------------ EX-10.8 17 LEASE AGREEMENT EXHIBIT 10.8 STATE OF NORTH CAROLINA LEASE COUNTY OF MECKLENBURG THIS LEASE, made and entered into this the ____________ day of December, 1999, by and between Rotunda Building, LLC, hereinafter referred to as "Landlord" and SmartAge, Inc. a California corporation, hereinafter called "Tenant"; W I T N E S S E T H: -------------------- THAT for and in consideration of the mutual agreements of the parties, including the rental agreed to be paid by Tenant to Landlord, Landlord hereby leases to Tenant, and Tenant leases and rents from Landlord the following described premises on the terms and conditions hereinafter set forth, to wit: ARTICLE I BASIC LEASE TERMS
Section 1.1. Commencement, Termination and Base Rent. --------------------------------------- Building: The Rotunda Building 4201 Congress Street, Charlotte, North Carolina 28209 Location of Premises: Suite 375 on the third (3rd) floor of the Building. Rentable Area of Building: 223,856 square feet Rentable Area of Premises 9,553 square feet Usable Area of Premises: 8,387 square feet Lease Term: Commencement Date: March 1, 2000 (subject to the provisions of Section 3.1) Termination Date: February 28, 2006 (subject to the provisions of Section 3.1) Base Rent: Initial Annual Base Rent: $224,495.50 Initial Monthly Base Rent: $18,707.96 Security Deposit: As provided in Section 14.24 of this Lease
Section 1.2. Address of Landlord and Tenant; Notices. --------------------------------------- Rental and Other Payments To: NationsBank Lockbox Rotunda Building, LLC Box 651526 101 North Tryon Street, 5th Floor Charlotte, NC 28265 Correspondence To: Rotunda Building, LLC c/o Lincoln Harris 4201 Congress Street, Suite 175 Charlotte, North Carolina 28209 Address of Tenant: SmartAge, Inc. 4201 Congress Street, Suite 375
Charlotte, NC 28209 Attn: ____________ All sums of money to be paid to Tenant by Landlord and all written notices by Landlord to Tenant shall be delivered to the Premises (as hereinafter defined) unless a different address for Tenant is set forth above. All sums of money to be paid to Landlord by Tenant and all written notices by Tenant to Landlord shall be delivered to the respective addresses of Landlord as set forth above. All notices required or permitted under this Lease shall be in writing, signed by the party giving such notice and transmitted by certified mail, postage prepaid, and shall be deemed given when deposited in an official depository of the United States Mails. Either party may change the address to which money due or notices shall be sent by giving the other party written notice of such change of address. Tenant hereby appoints as its agent for service of process in all dispossessory, distraint and summary ejectment proceedings which may be brought against it by Landlord, any person occupying the Premises, provided that if no person is occupying the Premises, then Tenant agrees that such service may be made by attachment thereof to the main entrance to the Premises. ARTICLE II LEASED PREMISES -1- Section 2.1. Description of Premises. The premises this day leased and demised ----------------------- (hereinafter called "the Premises") are to be located within the Building identified in Article I (hereinafter called the "Building") which is located on the real property described in Exhibit A attached hereto and incorporated herein by reference (said land and the building and improvements thereon being herein called the "Property"). The Premises are shown as outlined on the floor plan of the Building attached hereto as Exhibit B and incorporated herein by reference. The Premises shall be measured by landlord's Space Planner who will certify the rentable (using a 13.9% Common Area Factor) and usable square footage of the Premises, using BOMA standards, and the Rentable and Usable Area of the Premises and the Initial Annual and Monthly Base Rent set forth in Article 1, Section 1.1, shall be adjusted accordingly based upon an Initial Annual Base Rent of $23.50 per rentable square foot of the Premises. Section 2.2. Tenant's Acceptance of Property. Except as specifically provided ------------------------------- to the contrary in Exhibit "C" attached to this Lease, Tenant shall accept the Premises in "as is" condition and Landlord shall have no obligation to upfit the same. Except as expressly set forth herein, neither Landlord nor its agents have made any representations with respect to the Premises, the Building or the Property and no rights, easements or licenses are acquired by the Tenant by implication or otherwise. The taking of possession of the Premises by Tenant shall be conclusive that the Premises and the Building were in satisfactory condition at the time possession was taken, subject only to latent defects not reasonably discoverable by Tenant. If Landlord is required to do any work in the Premises, then Tenant must notify Landlord in writing within thirty (30) days of the taking of possession of the Premises of any incomplete "punch list" items. Any items not contained in such notice shall be deemed fulfilled. In the event that someone other than Landlord constructs any improvements to the Premises, then those improvements must be constructed using, at least, finishes which are standard to the Building and according to plans and specifications approved by Landlord in advance, and Tenant will furnish Landlord with a complete set of as- built plans and specifications within sixty (60) days of the completion of these improvements. In all cases, Tenant's mechanical and electrical work, and any penetration of floors, must be performed by Landlord's contractors and subcontractors. Section 2.3. Common Areas. Tenant and its employees, agents, invitees and ------------ licensees are granted the right, in common with others and subject to the exclusive control and management thereof at all times by Landlord, to the nonexclusive use of such of the areas as are from time to time designated as Common Areas by Landlord. These areas shall include the facilities in the Building which are designated for the general use, in common, of the occupants of the Building, and, to the extent the same are provided, the parking areas, sidewalks, roadways, loading platforms, restrooms, ramps, maintenance and mechanical areas, lobbies, corridors, elevators, stairwells and landscaped areas. Section 2.4. Quiet Enjoyment. The Landlord agrees that the Tenant, on paying --------------- the stipulated rental and keeping and performing the agreements and covenants herein contained, shall hold and enjoy the Premises for the term aforesaid, subject, however, to the terms of this Lease. Section 2.5. Upfitting Allowance. Landlord shall provide Tenant with an ------------------- upfitting allowance of $20.00 per rentable square foot of the Premises (the "Landlord's Contribution") for upfitting work above and below the finished ceiling to be paid upon completion of upfitting to the contractor performing the work, or to Tenant if Tenant has paid the contractor and submits copies of paid invoices and lien waivers to Landlord, or credited against Landlord's cost of upfitting the premises if Landlord upfits the Premises. All Tenant Work (defined herein) shall be performed in accordance with the provisions of Exhibit "C" to this Lease. Any cost of upfitting in excess of said upfitting allowance shall be paid entirely by Tenant within ten (10) days of submission of an invoice for the same from Landlord or from the contractor performing the upfitting. In the event Tenant contracts directly with a third party to provide upfit construction or other related services, such party shall carry general liability insurance in such amount as is satisfactory to Landlord. Prior to the commencement of any work to be performed by any such third party, Tenant shall provide Landlord with copies of such third party's certificate of insurance or such other evidence of insurance as may be reasonably requested by Landlord. ARTICLE III LEASE TERM Section 3.1. Term. The term of this Lease shall commence and end on the ---- Commencement Date and Termination Date, respectively, set forth in Article I. However, if due to causes beyond Landlord's reasonable control, including without limitation, the inability of Landlord, despite due diligence, to complete any work that it is obligated to perform in the Premises or to obtain possession of the Premises because of a holdover tenant therein, Landlord is unable to deliver the Premises to Tenant by the Commencement Date, then in such case the Commencement Date and Termination Date shall be deferred by the number of days of such delays provided, however, if Landlord's inability to deliver the Premises to Tenant by the Commencement Date is due to any delay, act or omission of Tenant, including without limitation, requested changes orders or the failure of Tenant to provide requested information in a reasonable amount of time, then in such case, Tenant's rental shall begin on the originally scheduled Commencement Date, notwithstanding any deferred delivery of possession of the Premises to Tenant, and such rental obligation shall continue through the deferred Termination Date. At any time prior to said Commencement Date, Tenant shall have the right, at its own risk, to enter upon the Premises for any reasonable purpose expressly permitted by Landlord; provided, however, that such entry shall not interfere with any work being done by or on behalf of Landlord therein, and Tenant shall indemnify Landlord against any loss or liability arising from such entry. Section 3.2. Holding Over. If Tenant continues to occupy the Premises after the ------------ last day of the term hereof or after the last day of any renewal or extension of the term hereof and if Landlord elects to accept rent, a monthly tenancy terminable at will by either party on not less than thirty (30) days' written notice shall be created which shall be on the same conditions as those herein specified, except Tenant shall pay 150% of the monthly rent paid for the last full month of the lease term for each month or partial month during which Tenant retains possession of the Premises after such expiration or termination date. Tenant shall indemnify Landlord against all liabilities and damages sustained by Landlord by reason of such retention of possession. The provisions of this section shall not constitute a waiver by Landlord of any reentry rights available under this Lease or by law. ARTICLE IV BASE RENT AND ADJUSTMENTS Section 4.1. Base Rental. The Tenant covenants and agrees to pay to Landlord as ----------- rental for the Premises, without setoff or demand thereof, the Initial Monthly Base Rent set forth in Article I, adjusted as hereinafter provided, on the first day of each month, in advance, during the term of this Lease; provided. however, that if the term of this Lease does not begin on the first day or end on the last day of a month, the Rental for that partial month shall be prorated by multiplying the Monthly Base Rent by a fraction, the numerator of which is the number of days of the partial month included in the term and the denominator of which is the total number of days in the full calendar month that is being prorated. -2- Section 4.2. Adjustment of Annual and Monthly Base Rent. On the first day of the ------------------------------------------ month during which each anniversary of the Commencement Date occurs during the term of this Lease or any renewal thereof, the Annual Base Rent shall be adjusted to an increased amount equal to the sum of (i) Annual Base Rent for the immediately preceding lease year: plus (ii) the product of the Annual Base Rent for the immediately preceding lease year multiplied by three percent (3%) (the "Adjusted Base Rent"). The adjusted Monthly Base Rent shall be determined by dividing the Adjusted Annual Base Rent by 12. Section 4.3. Additional Monthly Rent. Beginning on the first day of the month ----------------------- during which the first anniversary of the Commencement Date occurs, and thereafter as adjusted by Landlord on each January 1, the Tenant shall pay to Landlord as additional monthly rent (the "Additional Monthly Rent") an amount equal to one-twelfth (1/12) of the product of (i) the Rentable Area of the Premises and (ii) the amount by which the Landlord estimates the Operating Cost (as hereinafter defined) per square foot of Rentable Area of the Building for such calendar year will exceed the Operating Cost per square foot of Rentable Area of the Building for the Base Year. For the purposes of this Lease, the Base Year shall be the calendar year during which the Commencement Date occurs. Landlord shall advise Tenant of such estimated amount at least fifteen (15) days prior to the commencement of such first anniversary date or calendar year as the case may be. Landlord's failure to so advise Tenant shall not, however, affect Tenant's obligation to pay such Additional Monthly Rent when so advised. Within ninety (90) days after the end of each calendar year or within such further time period reasonably required by Landlord, Landlord shall determine the actual Operating Cost per square foot of Rentable Area of the Building by dividing the actual Operating Cost, after making the adjustment required by the next following paragraph, by the Rentable Area of the Building as set forth in Article I. If the actual Operating Cost per square foot of Rentable Area of the Building for any such calendar year less the Operating Cost per square foot of Rentable Area of the Building during the Base Year (the "Excess Operating Cost per square foot of Rentable Area") exceeds the amount per square foot paid by Tenant for the preceding calendar year pursuant to Landlord's estimate, then Tenant shall pay to Landlord an amount equal to the Excess Operating Cost per square foot of Rentable Area of the Building multiplied by the Rentable Area of the Premises ("Excess Operating Cost of the Premises") less the amount paid during such calendar year by Tenant in accordance with the estimate furnished to Tenant by Landlord. In the event Tenant has paid for any calendar year an amount per square foot of Rentable Area of the Premises pursuant to Landlord's estimate, which when added to the Operating Cost per square foot of Rentable Area during the Base Year, exceeds the actual Operating Cost per square foot of Rentable Area of the Building for such calendar year, then such excess amount multiplied by the Rentable Area of the Premises shall be refunded to Tenant within thirty (30) days following the date of such determination by Landlord. In no event shall Tenant be entitled to any refund if the effect of such refund would be to reduce the amount of the Annual and Monthly Base Rent. If the Lease does not begin on January 1 or end on December 31 and accordingly if the first adjustment period (from the first anniversary of the Commencement Date to December 31 of such calendar year) or the last adjustment period (from January 1 of the last year of the Lease term to the Termination Date) do not represent a full calendar year, then in such case the Excess Operating Cost of the Premises for such calendar year at the beginning and/or end of the Lease term shall be prorated by multiplying the Excess Operating Cost of the Premises by a fraction, the numerator of which is the number of days of such adjustment period at the beginning and/or end of the Lease term and the denominator of which is 365. Such amount shall be paid by Tenant within thirty (30) days following receipt of a bill for such amount from Landlord. Notwithstanding the foregoing, for the purpose of determining Operating Cost, the controllable components of Operating Cost (the "Controllable Operating Cost") shall not increase from any one (1) calendar year to the next by more than five percent (5%) nor more than a total of eighteen percent (18%) over the term of the Lease subsequent to the Base Year. For the purpose of the foregoing sentence, the Controllable Operating Cost shall be deemed to mean those components of Operating Cost exclusive of ad valorem real and personal property taxes, utilities, insurance costs, and any other cost or expense, the charge of which is beyond the exclusive control of Landlord. For the purpose of estimating Operating Cost per square foot of Rentable Area and for the purpose of determining actual Operating Cost per square foot of Rentable Area under the provisions of this Section, all amounts shall be adjusted so that estimated Operating Cost will be based upon what such cost would reasonably be if ninety-five percent (95%) of the Building were occupied, and actual Operating Cost will be calculated on the basis of 95% assumed occupancy or actual occupancy, whichever is greater. In connection with this Section 4.3, Landlord shall, upon notice from Tenant, make available during Landlord's business hours for Tenant's review those books and records utilized by Landlord in computing the amount of Additional Monthly Rent payable by Tenant. The term "Operating Cost" shall mean and include all costs, expenses, taxes, and disbursements of every kind and nature which Landlord shall pay or become obligated to pay in connection with the management, operation, maintenance, replacement and repair of all building systems, components and appurtenances according to first class management principles for a building located in Charlotte, North Carolina and according to what is best for the Building in the Landlord's judgment. Such costs will include, but will not be limited to, maintenance, operation, and repair of personal property, fixtures, machinery, equipment, systems and apparatus used in connection with the Building; cleaning; ad valorem personal and real property taxes associated with the ownership and operation of the Building; insurance; security; any assessments that may be payable to any Owners' or Merchants' Association on the same basis as other buildings in the area in which the Building is located; management fees; utilities; seasonal decorations, redecoration of public areas; contract services; amortization of non-permanent equipment (example: trash containers) which otherwise might be leased; and those items listed on Exhibit D which are not identified in this paragraph. Operating Cost shall not include costs for tenant improvements, interest and principal payments on loans for the Building, real estate leasing commissions, salaries and other compensation for executive officers of the Landlord or Manager; expenditures for which the Landlord has been reimbursed (other than pursuant to Additional Rent provisions in tenant leases); expenses incurred in enforcing obligations of other tenants: and capital expenditures or capital leases (except for costs associated with capital expenditures or capital leases by Landlord which are for the purpose of reducing Operating Cost). Section 4.4. Late Payment. If rent or any other payment due hereunder from ------------ Tenant to Landlord remains unpaid ten (10) days after said payment is due, the amount of such unpaid rent or other payment shall be increased by a late charge to be paid to Landlord by Tenant in an amount equal to five percent (5%) of the amount of the delinquent rent or other payment. The amount of the late charge to be paid for such month shall be computed on the aggregate amount of delinquent rent and other payment then outstanding for such month. Landlord and Tenant agree that such late charge shall not be deemed to be a penalty, it being understood between the parties that late payments by Tenant shall result in additional administrative expense to Landlord which is difficult and impractical to ascertain and that such late charge is a reasonable estimate of the loss and expense to be suffered by Landlord as a result of such late payment by Tenant. If rent or any other sums due Landlord by Tenant hereunder shall not be paid within thirty (30) days of its due date, then in such case in addition to the late charge provided for hereinabove, such rent or other sum shall bear interest beginning on the thirty-first (31st) day after its due date at the rate of eighteen percent (18%) per annum (or, if less, the highest rate allowed by law). If rent or any other sums due Landlord by Tenant hereunder is collected by or through an attorney at law Tenant agrees to pay Landlord's actual and reasonable attorneys' fees incurred with respect thereto not in excess of fifteen percent (15%), or if the laws of the State of North Carolina in -3- effect at the time of such collection limit the amount so payable as attorneys' fees, then the maximum percentage not in excess of fifteen percent (15%) allowed by such laws, of the amount so collected. Nothing herein shall relieve Tenant of the obligation to pay rent or any other payment on or before the date on which any such payment is due, nor in any way limit Landlord's remedies under this Lease or at law in the event said rent or other payment is unpaid after it is due. Amounts due hereunder shall be deemed to be additional rent and the failure to pay the same within five (5) days after written notice shall constitute a default of this Lease. Section 4.5. Application of Payments Received from Tenant. Landlord, acting in -------------------------------------------- its sole discretion, shall have the right to apply any payments made by Tenant to the satisfaction of any debt or obligation of Tenant to Landlord regardless of the instructions of Tenant as to application of any sum whether such instructions be endorsed upon Tenant's check or otherwise, unless otherwise agreed upon by both parties in writing. The acceptance by Landlord of a check or checks drawn by anyone other than Tenant shall in no way affect Tenant's liability hereunder nor shall it be deemed an approval of any assignment of this Lease by Tenant. Section 4.6. Security Deposit. Tenant shall deposit with Landlord the amount ---------------- shown as the security deposit set forth in Article I, to be held as collateral security for the payment of any rentals and other sums of money for which Tenant shall become liable to Landlord, and for the faithful performance by Tenant of all covenants and conditions herein contained. If at any time during the Lease term any of the rent herein reserved shall be overdue and unpaid, or any other sum payable by Tenant to Landlord hereunder shall be overdue and unpaid, then Landlord may, at its option, appropriate and apply any portion of said deposit to the payment of any such overdue rent or other sum. In the event of the failure of Tenant to keep and perform any of the terms, covenants and conditions of this Lease to be kept and performed by Tenant, then Landlord, at its option, may appropriate and apply said entire deposit, or so much thereof as may be necessary, to compensate the Landlord for loss or damage sustained or suffered by Landlord due to such breach on the part of Tenant. Should the entire deposit, or any portion thereof, be appropriated and applied by Landlord for the payment of overdue rent or other sums due and payable to Landlord by Tenant hereunder, then Tenant shall, upon the written demand of Landlord, forthwith remit to Landlord a sufficient amount in cash to restore said security to the original sum deposited, and Tenant's failure to do so within ten (10) days after receipt of such demand shall constitute a breach of this Lease. Said deposit shall be returned to Tenant at the end of the term of this Lease or any extension thereof, provided Tenant shall have made all such payments and performed all such covenants and agreements. Landlord's obligation with respect to the security deposit are those of a debtor and not a trustee. LANDLORD WILL MAINTAIN THE SECURITY DEPOSIT IN AN ACCOUNT AT A NATIONAL BANKING INSTITUTION LOCATED, IN CHARLOTTE, NORTH CAROLINA, SEPARATE AND APART FROM LANDLORD'S GENERAL FUNDS AND MAY, BUT IS NOT OBLIGATED TO, MAINTAIN SAID SECURITY DEPOSIT IN AN INTEREST BEARING ACCOUNT, AND ALL INTEREST ACCRUING THEREON SHALL BE THE PROPERTY OF LANDLORD. ARTICLE V UTILITIES, SERVICES AND MAINTENANCE Section 5.1. Landlord's Services and Maintenance. Landlord shall provide the ----------------------------------- following services: (1) provide for normal office use heating and air conditioning unit or units in good condition and repair in the Premises; (2) city water from the Building fixtures for drinking, lavatory and toilet purposes; (3) customary cleaning and janitorial services in the Premises Monday through Friday, excluding Federal holidays; (4) customary cleaning, mowing, grounds keeping, snow removal and trash removal in the area of the Building; (5) window washing in the Premises, inside and outside, at reasonable intervals; (6) adequate passenger elevator service in common with other tenants of the Building; (7) customary security services consistent with first-class office buildings in Charlotte, North Carolina comparable to the Building; (8) heating, air conditioning, customary cleaning and janitorial services, and electricity for the Common Areas in the Building; (9) replacement of lamps (both fluorescent and incandescent) only in the Building standard lighting fixtures as specified by Landlord for the Premises and Common Areas of the Building (any lamps for non Building standard lighting fixtures shall be Tenant's responsibility); and (10) keep the Building open to guests, invitees, employees and customers of Tenant Monday through Friday from 7:00 a.m. until 7:00 p.m. and on Saturday from 7:00 a.m. to 2:00 p.m., excluding federal holidays. Landlord shall not be obligated to furnish any services or utilities, other than those stated above. If Landlord elects to furnish services or utilities requested by Tenant, in addition to those listed above or at times other than those stated above, Tenant shall pay to Landlord the prevailing charges for such services and utilities within thirty (30) days after billing. If Tenant fails to make any such payment, Landlord may, without notice to Tenant and in addition to Landlord's other remedies under this Lease, discontinue any or all of such additional or after-hours services. No such discontinuance of any service shall result in any liability of Landlord to Tenant or be considered an eviction or a disturbance of Tenant's use of the Premises. Landlord shall have no liability or responsibility to Tenant for loss or damage should the furnishing of any of the utilities and services as herein provided be prohibited or stopped for repairs, alterations or improvements or by reason of causes beyond Landlord's control including, without limitation, accidents, strikes, storms, Acts of God, labor trouble or disturbances lockouts or orders or regulations of the federal, state or municipal government. The cost of Landlord's performing any maintenance, repair or replacement caused by the negligence of Tenant, its employees, agents, servants, licensees, subtenants, contractors or invitees, or the failure of Tenant to perform its obligations under this Lease shall be paid by Tenant, except to the extent of insurance proceeds, if any, actually collected by Landlord with regard to the damage necessitating such repairs. Section 5.2. Tenant's Services and Maintenance. Tenant shall make arrangements --------------------------------- directly with the public utility electric company serving the Building for all electric power or current required by Tenant in the Premises, including the provision of electric power for heat and air conditioning. and directly with the telephone company or companies for all telephone service required by Tenant. Tenant shall pay for all electric and telephone service used or consumed in the Premises, including the cost of installation of any separate meters. Landlord shall not be responsible for the maintenance, repair or replacement of any systems which are located within the Premises and are supplemental or special to the Building's standard systems, whether installed pursuant to a work letter or otherwise, for any lamps, whether fluorescent or incandescent, for any special or non Building standard lighting fixtures, or for any floor or wall coverings in the Premises. Tenant shall be responsible for all services, maintenance and repairs not specifically delegated to Landlord hereunder which are required by tenant in its occupancy of the Premises and to keep the interior of the Premises in good condition and repair. -4- If heat generating machines or equipment are used in the Premises by Tenant which affect the temperature otherwise maintained by the Building heating and air conditioning system, Landlord shall have the right to install supplemental air conditioning units in the Premises and the cost of the units, and the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord within thirty (30) days of demand by Landlord. Section 5.3. Extra Services. Whenever Landlord knows that any tenant (including -------------- Tenant) is using extra services because of either nonbusiness-hours use or high consumption, Landlord may directly charge that tenant for the extra use and exclude those charges from Operating Expenses. Extra services include: (i) Non-Business Use. Landlord provided utilities and services required by Tenant during nonbusiness hours shall be supplied upon reasonable advance verbal notice. If more than one tenant directly benefits from these services then the cost shall be allocated proportionately between or among the benefiting tenants based upon the amount of time each tenant benefits and the square footage each leases. (ii) Excess Utility Use. Tenant shall not place or operate in the Premises any electrically operated equipment or other machinery, other than typewriters, personal computers, adding machines, reproduction machines, and other machinery and equipment normally used in office, which will overload the Building's electrical system. If Tenant uses any Landlord provided service or utility in excess of that reasonably required for normal office use, Landlord may require payment for such extra use. (iii) Payment. Tenant's charges for the utilities and services provided under (i) and (ii) above shall be one hundred and ten percent (110%) of Landlord's actual cost of labor and utilities. Tenant's failure to pay the charges in (i) and (ii) above within thirty (30) days of receiving a proper and correct invoice shall entitle Landlord to the same remedies it has upon Tenant's failure to pay Base Rent, Additional Rent, or any other charges due under this Lease. ARTICLE VI ALTERATIONS, REPAIRS AND MAINTENANCE Section 6.1. Alterations. Tenant agrees that it will make no alterations, ----------- additions or improvements to the Premises without the prior written consent of the Landlord and that all alterations, additions or improvements made by or for the Tenant, including, without limitation, any and all subdividing partitions, walls or railings of whatever type, material or height, excepting movable office furniture installed at the expense of Tenant, shall, when made, become the property of the Landlord and shall remain upon and be surrendered with the Premises as a part thereof at the end of the Lease term, except with regard to improvements made to the Premises after the initial upfitting of the Premises, if Landlord, at the time of giving its consent thereto, shall notify Tenant that it may be required to remove same at the end of the term, then in such case, upon Landlord's request, Tenant shall remove such improvements at the end of the term, and restore the Premises to the condition existing prior to the making of such improvements,, normal wear and tear excepted. Tenant shall not core drill or in any other manner attempt to penetrate or penetrate the floors of the Building without obtaining permission of Landlord. In the event that Tenant constructs any improvements to the Premises, then those improvements must be constructed (a) using, at least, finishes which are standard to the Building and according to plans and specifications and using only contractors and subcontractors approved by Landlord in advance, and (b) in compliance with all applicable laws, ordinances, rules, building codes, and regulations of Federal, State, municipal and county authorities, including without limitation, the procurement of a building permit, and (c) in a diligent, good and workmanlike manner. Tenant, or Tenant's contractor, shall obtain a Builders' Risk Insurance Policy in such amount as is reasonably requested by Landlord, naming Landlord and Building Manager as an additional insured and providing that it will not be canceled without giving Landlord at least 15 days prior written notice thereof. Any mechanical or electrical work and any penetration of floors must be performed by Landlord's contractors and subcontractors. Upon completion of any such construction by Tenant, Tenant must furnish Landlord with a complete set of as-built plans and specifications for the same. Tenant will not permit and will indemnify Landlord and hold it harmless from any mechanic's or materialmen's liens against the Premises, in connection with any such improvements. Section 6.2. Right of Entry. The Tenant agrees that Landlord shall have the -------------- right to enter and to grant licenses to enter the Premises at any time upon reasonable prior notice to Tenant, with exception to emergency situations, (a) to examine the Premises, (b) to make alterations and repairs to the Premises or to the Building (including the right, during the progress of such alterations or repairs, to keep and store within the Premises all necessary materials, tools and equipment) or (c) to exhibit the Premises to prospective purchasers or tenants and that no such entry shall render the Landlord liable to any claim or cause of action for loss of or damage to property of the Tenant by reason thereof, nor in any manner affect the obligations and covenants of this Lease. Section 6.3. Tenant's Care of Premises. Tenant shall: ------------------------- (i) keep the Premises and fixtures in good order, including without limitation, maintenance and repair, including replacement if necessary, of all doors (exterior and interior), all interior plate glass and window glass, and all wall and floor coverings, effecting all such maintenance and repairs at its own expense and employing materials and labor of a kind and quality equal to the original installations; (ii) make repairs and replacements to the Premises or Building needed because of Tenant's misuse or primary negligence, or as provided in any other provision of this Lease including without limitation, Article VIII, Section 8.5, except to that extent that the repairs or replacements are covered by Landlord's insurance or the insurance Landlord is required to carry under Article VIII, Section 8.1, whichever is greater; (iii) repair and replace special equipment or decorative treatments above Building Standard installed by or at Tenant's request and that serve the Premises only, or any trade fixtures of Tenant, except to the extent the repairs or replacements are needed because of Landlord's misuse or primary negligence, and are not covered by Tenant's insurance or the insurance Tenant is required to carry under Article VIII, Section 8.2, whichever is greater. (iv) if Tenant fails to replace or repair equipment or other installations in or about the Premises as above provided, then immediately after advising Tenant in writing as to the necessity therefor, Landlord may accomplish the required work and add the cost thereof to the next due Monthly Base Rent, but Tenant shall not be liable to Landlord for any failure to fulfill the obligations of this Section until such time as the Tenant shall be notified, as aforesaid, in writing of the requirements therefor. -5- Section 6.4. Landlord's Repairs. Landlord shall make the repairs and ------------------ replacements to maintain the Building in a condition comparable to other first class office buildings in the Charlotte, North Carolina area. This maintenance shall include the roof, foundation, exterior walls, interior structural walls, all structural components, and all systems, such as mechanical, electrical, HVAC, and plumbing, Section 6.5. Time for Repair. Repairs or replacements required under Section 6.3 --------------- or 6.4 shall be made within a reasonable time (depending on the nature of the repair or replacement needed) after receiving notice or having actual knowledge of the need for a repair or replacement. Section 6.6. Surrendering the Premises. Upon the Termination Date or the date ------------------------- the last extension term, if any, ends, whichever is later, Tenant shall surrender the Premises to Landlord in the same broom clean condition that the Premises were in on the Commencement Date except for: (i) ordinary wear and tear: (ii) damage by the elements, fire, and other casualty unless Tenant would be required to repair under Section 6.3; (iii) condemnation; (iv) damage arising from any cause not required to be repaired or replaced by Tenant; and (v) alterations as permitted by this Lease unless Landlord notifies Tenant to remove the same. On surrender Tenant shall remove from the Premises its personal property, trade fixtures, and any alterations required to be removed under Section 6.1 and repair any damage to the Premises caused by the removal. Any items not removed by Tenant as required above shall be considered abandoned. Landlord may dispose of abandoned items as Landlord chooses and bill Tenant for the cost of their disposal, minus any revenues received by Landlord for their disposal. ARTICLE VII USE AND COVENANTS Section 7.1. Use and Occupancy. Tenant agrees that the Premises will be used ----------------- only for general office purposes, that no unlawful use of the Premises will be made, that no sign, name, legend, notice or advertisement of any kind will be fixed, printed, painted or displayed on any part of the Building without the prior written approval of Landlord, except that the name and suite number of the Tenant may be displayed in a manner prescribed by Landlord. Section 7.2. Parking. Tenant agrees for itself, its employees, agents and ------- invitees to comply with the parking rules contained in the Parking Rules and Regulations attached hereto as Exhibit E together with all reasonable modifications and additions thereto which Landlord may from time to time make. Tenant shall use parking spaces only in a manner which is compatible with the day-to-day general use of the Building by its employees, visitors, customers, invitees, guests and other tenants in the Building. Tenant agrees that Landlord shall have the right to tow vehicles of Tenant and its employees, agents, guests and visitors that are parked in such a way as to be in violation of the Parking Rules and Regulations. Landlord reserves the right from time to time without notice to Tenant to (a) change the location or configuration of the Parking Areas, or any portion thereof; (b) change the number of parking spaces located within the Parking Areas, or any portion thereof, (c) install systems to control and monitor parking in the Parking Areas, or any portions thereof, including without limitation, a parking gate and identification card system; (d) utilize parking guards or attendants to supervise and control parking within the Parking Areas and to enforce the parking rules; (e) have full access to the Parking Areas (including the right to close or alter the means of access to the Parking Areas, or portions thereof) to make repairs and alterations thereto, to prevent a taking by adverse possession or prescription or to comply with applicable legal and governmental requirements; (f) modify the parking rules; (g) tow motor vehicles parked in violation of the parking rules; and (h) enforce the parking rules by appropriate legal action. Section 7.3. Building Rules and Regulations. The Tenant has read the rules and ------------------------------ regulations attached hereto as Exhibit F and made a part hereof and hereby agrees to abide by and conform to the same and to such further reasonable rules and regulations as the Landlord may from time to time make or adopt for the care, protection and benefit of the Building or the general comfort and welfare of its occupants. The Tenant further agrees that the Landlord shall have the right to waive any and all of such rules in the case of any one or more tenants without affecting the Tenant's obligations under this Lease and that the Landlord shall not be responsible to the Tenant for the nonconformance by any other tenant to any rules or regulations. Section 7.4. Hazardous Substances. Tenant shall not cause or permit any -------------------- Hazardous Substance to be used, stored, generated or disposed of on or in the Premises by Tenant, Tenant's agents, employees, contractors or invitees, without first obtaining Landlord's written consent. If Hazardous Substances are used, stored, generated or disposed of on or in the Premises whether with or without Landlord's consent or if the Premises become contaminated in any manner for which Tenant is legally liable, Tenant shall indemnify and hold harmless the Landlord from any and all claims, damages, fines, judgments, penalties, costs, liabilities or losses (including, without limitation, a decrease in value of the Premises, Building, or Property damages due to loss or restriction of rentable or usable space, or any damages due to adverse impact on marketing of the space, and any and all sums paid for settlement of claims, attorney's fees, consultant and expert fees) arising during or after the Lease Term and arising as a result of such use, storage, generating or disposal of contamination by Tenant. This indemnification includes, without limitation, any and all costs incurred due to any investigation of the site or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on the Premises and such results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions to return the Premises to the condition existing prior to the presence of any such Hazardous Substance on Premises. Tenant shall first obtain Landlord's approval for any such remedial action. As used herein, `Hazardous Substance" means any substance which is toxic, ignitable, reactive, or corrosive and which is regulated by any local government, the State of North Carolina, or the United States government. "Hazardous Substance" includes any and all material or substances which are defined as "hazardous waste", "extremely hazardous waste" or a "hazardous substance" pursuant to state, federal or local governmental law. "Hazardous Substance" includes but is not restricted to asbestos, polychlorobiphenyls ("PCB's") and petroleum. ARTICLE VIII -6- INSURANCE AND INDEMNITY Section 8.1. Landlord's Insurance. Landlord shall keep the Building insured -------------------- against damage and destruction by fire, earthquake, vandalism, and other perils in the amount of at least 80% of the replacement value of the Building, as the value may exist from time to time. In addition, Landlord shall maintain a policy of comprehensive general public liability insurance with respect to the Common Areas, covering bodily injury, death and property damage, with a contractual liability endorsement, in the amount of at least ($1,000,000.00) per occurrence and with an aggregate limit of at least One Million Dollars ($1,000.000.00). Landlord's responsibility to insure its Building shall not obligate Landlord's to insure fixtures or other property of Tenant. Section 8.2. Tenant's Insurance. Tenant shall keep in force, during the full ------------------ term of this Lease or any renewal or extension thereof, workmen's compensation insurance and comprehensive general public liability insurance issued by a nationally recognized insurance company, with such limits as may be reasonably requested by Landlord from time to time, but with minimum limits not less than $1,000,000.00 in the aggregate on account of bodily injury, including death, or property damage, or both, in any one occurrence. Said policy shall name Landlord and Building Manager as an additional insured and provide that it shall not be canceled for any reason unless and until Landlord is given thirty (30) days' notice in writing by the insurance company. The insurance policy or other evidence of coverage satisfactory to Landlord shall be deposited with Landlord upon occupancy of Premises by Tenant. Section 8.3. Insurance Criteria. Insurance policies required by this Lease ------------------ shall: (i) be issued by insurance companies licensed to do business in the state of North Carolina with general policyholder's ratings of at least A and the financial rating of at least XI in the most current Best's Insurance Reports ------------------------ available on the Commencement Date. If the Best's ratings are changed or discontinued, the parties shall agree to an equivalent method of rating insurance companies. If the parties cannot agree they shall submit the dispute to arbitration. (ii) be primary policies - not as contributing with, or in excess of, the coverage that the other party may carry; (iii) be permitted to be carried through a "blanket policy" or "umbrella" coverage; (iv) have deductibles not greater than $1,000.00; and (v) be maintained during the entire Term and any extension Terms. Section 8.4. Increase in Insurance Premium. If, because of anything done, ------------------------------ caused to be done, permitted or omitted by the Tenant, the premium rate for any kind of insurance affecting the Building shall be raised, the Tenant agrees that the amount of the increase in premium which the Landlord shall thereby be obligated to pay for such insurance shall be paid by the Tenant to the Landlord, on demand, and that if the Landlord shall demand that the Tenant remedy the condition which caused the increase in the insurance premium rate, the Tenant will remedy such condition within thirty (30) days after such demand. The Tenant agrees that it shall not do or cause to be done or permit on the Premises, anything deemed more hazardous than use as a normal business office. Section 8.5. Tenant's Indemnity. The Tenant agrees to indemnify and save ------------------ harmless the Landlord and the agents, servants and employees of the Landlord against and from any and all claims by or on behalf of any person, firm or corporation arising by reason of injury to any person, including death, or property occurring in or about the Premises, the Building or the property, occasioned in whole or in part by any act or omission on the part of the Tenant or any employee (whether or not acting within the scope of employment), agent, visitor, licensee, invitee, contractor, subcontractor, assignee or tenant of the Tenant, or by reason or nonperformance of any covenant in this Lease on the part of the Tenant and also for any matter or thing growing out of the occupancy or use of the Premises by the Tenant or anyone holding or claiming to hold through or under the Tenant. Tenant agrees to pay for all damage to the Building or Property as well as all damage to tenants or occupants thereof, caused by Tenant's misuse or neglect of said Premises, its apparatus or appurtenances. Landlord shall not be liable to Tenant for any damage by or from any act of negligence or willful misconduct of any co-tenant or other occupant of the Building or by any owner or occupant of adjoining or contiguous property. Section 8.6. Landlord's Indemnity. The Landlord agrees to indemnify and save -------------------- harmless the Tenant and the agents, servants and employees of the Tenant from any and all claims for personal injury, death or property damage, for incidents occurring in or about the Premises, Building or Property and caused by the negligence or willful misconduct of Landlord, its agents or employees (whether or not acting within the scope of employment). Section 8.7. Tenant's Personal Property. Tenant shall keep its personal -------------------------- property and trade fixtures in the Premises and Building insured with "all risks" insurance in an amount to cover one hundred percent (100%) of the replacement cost of the said property and fixtures. Tenant shall also keep any non-Building standard improvements made to the Premises at Tenant's request insured to the same degree as Tenant's personal property. Tenant agrees that all personal property in the Premises shall be and remain at Tenant's sole risk, and Landlord shall not be liable for any damage to, or loss of such personal property arising from any acts of negligence of any persons or from fire or from the leaking of the roof or from the bursting, leaking, or overflowing of water, sewer, sprinkler or steam pipes or from any other cause whatsoever; Tenant expressly agrees to indemnify and save Landlord harmless in all such cases. Section 8.8. Waiver of Subrogation. Each party waives claims arising in any --------------------- manner in its (Injured Party's) favor and against the other party for loss or damage to Injured Party's property located within or constituting a part or all of the Building. This waiver applies to the extent the loss or damage is covered by: (i) the Injured Party's insurance; or (ii) the insurance the Injured Party is required to carry under Article VIII, whichever is greater. The waiver also applies to each party's directors, officers, employees, shareholders, and agents. The waiver does not apply to claims caused by a party's willful misconduct. If despite a party's best efforts it cannot find an insurance company meeting the criteria in Section 8.3 that will give the waiver at reasonable commercial rates, then it shall give notice to the other party within thirty (30) days after the Lease's Commencement Date, The other party shall then have thirty (30) days to find an insurance company that will issue the waiver at reasonable commercial rates. If the other party also cannot find such an insurance company, then both parties shall be released from their obligation to obtain the waiver. -7- If an insurance company is found but it will give the waiver only at rates greater than reasonable commercial rates, then the parties can agree to pay for the waiver under any agreement they can negotiate. If the parties cannot in good faith negotiate an agreement, then both parties shall be released from their obligation to obtain the waiver. ARTICLE IX DAMAGES TO PREMISES Section 9.1. Definition. "Relevant Space" means: ---------- (i) the Premises as defined in Article II, excluding Tenant's non-Building- Standard fixtures; (ii) access to the Premises; and (iii) any part of the Building that provides essential services to the Premises. Section 9.2. Repair of Damage. If the Relevant Space is damaged in part or whole ---------------- from any cause and the Relevant Space can be substantially repaired and restored within one hundred and eighty (180) days from the date of the damage using standard working methods and procedures, Landlord shall at its expense promptly and diligently repair and restore the Relevant Space to substantially the same condition as existed before the damage. This repair and restoration shall be made within one hundred and eighty (180) days from the date of the damage unless the delay is due to causes beyond Landlord's reasonable control. If the Relevant Space cannot be repaired and restored within the one hundred and eighty (180) day period, then either party may, within ten (10) days after determining that the repairs and restoration cannot be made within one hundred and eighty (180) days, cancel the Lease by giving notice to the other party. Nevertheless, if the Relevant Space is not repaired and restored within one hundred and eighty (180) days from the date of the damage, then Tenant may cancel the Lease at any time after the one hundred and eightieth (180th) day and before the two hundred and tenth (210th) day following the date of damage. Tenant shall not be able to cancel this Lease if its willful misconduct caused the damage unless Landlord is not promptly and diligently repairing and restoring the Relevant Space. Section 9.3. Abatement. Unless the damage is caused by Tenant's willful --------- misconduct, the Base Rent and Additional Rent shall abate in proportion to that part of the Premises that is unfit for use in Tenant's business. The abatement shall consider the nature and extent of interference to Tenant's ability to conduct business in the Premises and the need for access and essential services. The abatement shall continue from the date the damage occurred until ten (10) business days after Landlord completes the repairs and restoration to the Relevant Space or the part rendered unusable and notice to Tenant that the repairs and restoration are completed, or until Tenant again uses the Premises or the part rendered unusable, whichever is first. In the event of a full abatement of rent as aforesaid, the term of this Lease shall be extended automatically for a period equal to the period of such abatement. Section 9.4. Tenant's Property. Notwithstanding any thing else in Section 9.1, ----------------- Landlord is not obligated to repair or restore damage to Tenant's trade fixtures, furniture, equipment, or other personal property, or any Tenant improvements. Section 9.5. Damage to Building. If: ------------------ (i) more than forty percent (40%) of the Building is damaged and the Landlord decides not to repair and restore the Building; (ii) any mortgagee of the Building shall not allow adequate insurance proceeds for repair and restoration; (iii) the damage is not covered by Landlord's insurance required by Article VIII, Section 8.1; or (iv) the Lease is in the last twelve (12) months of its term; then Landlord may cancel this Lease. To cancel, Landlord must give notice to Tenant within thirty (30) days after the Landlord knows of the damage. The notice must specify the cancellation date, which shall be at least thirty (30) but not more than sixty (60) days after the date notice is given. Section 9.6. Cancellation. If either party cancels this Lease as permitted by ------------ this Article, then this Lease shall end on the day specified in the cancellation notice, The Base Rent, Additional Rent, and other charges shall be payable up to the cancellation date and shall account for any abatement. Landlord shall promptly refund to Tenant any prepaid, unaccrued Rent and Additional Rent, accounting for any abatement, plus security deposit, if any, less any sum then owing by Tenant to Landlord. ARTICLE X EMINENT DOMAIN Section 10.1. Eminent Domain. If more than twenty percent (20%) of the floor -------------- area of the Premises is taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, then either party hereto shall have the right to terminate this Lease effective on the date physical possession is taken by the condemning authority or private purchaser. If less than twenty percent (20%) of the floor area of the Premises is taken for any public or quasi-public use in said manner, this Lease shall not terminate. However, in the event any portion of the Premises is taken and the Lease not terminated, the rental specified herein shall be reduced during the unexpired term of this Lease in proportion to the area of the Premises so taken and the reduction shall be effective on the date physical possession is taken by the condemning authority or private purchaser. Any election to terminate this Lease following condemnation shall be evidenced only by written notice of termination delivered to the other party not later than fifteen (15) days after the date on which physical possession is taken by the condemning authority or private purchaser and shall be deemed effective as of the date of said taking. If, however, the Lease is not terminated following a partial condemnation, Landlord shall promptly -8- make all necessary repairs or alterations to the Building and Premises which are required to make the Building usable by Tenant subsequent to such taking. All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) whether for the whole or a part of the Premises, shall be the property of the Landlord whether such award is compensation for damages to Landlord's or Tenant's interest, provided Landlord shall have no interest in any award made to Tenant for loss of business or for the taking of Tenant's fixtures and other property within the Premises if a separate award for such items is made to Tenant. ARTICLE XI DEFAULT AND WAIVER Section 11.1. Tenant's Default. Each of the following constitutes a default: ---------------- (i) Tenant's failure to pay Base Rent, Additional Rent or any other sum due hereunder within five (5) days after Tenant receives notice from Landlord of Tenant's failure to pay Base Rent, Additional Rent, or such other sum; (ii) Tenant's failure to pay Base Rent or Additional Rent by the due date, at any time during a calendar year in which Tenant has already received two notices of its failure to pay Base Rent or Additional Rent by the due date; (iii) Tenant's failure to perform or observe any other Tenant obligation after a period of thirty (30) days or the additional time, if any, that is reasonably necessary to promptly and diligently cure the failure, after it receives notice from Landlord setting forth in reasonable detail the nature and extent of the failure and identifying the applicable Lease provision; (iv) Tenant's abandoning or vacating the Premises if Tenant fails to timely pay the Base Rent, Additional Rent, and other charges due under the Lease by the due date. (v) Tenant's failure to vacate or stay any of the following within thirty (30) days after they occur: A. a petition in bankruptcy is filed by or against Tenant; B. Tenant is adjudicated as bankrupt or insolvent; C. a receiver, trustee, or liquidator is appointed for all or a substantial part of Tenant's property; or D. Tenant makes an assignment for the benefit of creditors. Section 11.2. Landlord's Remedies. ------------------- (i) Landlord, in addition to the remedies given in this Lease or under the law, may do one or more of the following if Tenant commits a Default under Section 11.1: A. end this Lease, and Tenant shall then surrender the Premises to Landlord; B. enter and take possession of the Premises either with or without process of law and remove Tenant, with or without having ended the Lease; and C. alter locks and other security devices at the Premises. Tenant waives claims for damages by reason of Landlord's reentry, repossession, or alteration of locks or other security devices and for damages by reason of any legal process. (ii) Landlord's exercise of any of its remedies or its receipt of Tenant's keys shall not be considered an acceptance of surrender or a surrender of the Premises by Tenant. A surrender must be agreed to in writing by Landlord. (iii) If Landlord ends this Lease or ends Tenant's right to possess the Premises because of a default, Landlord may hold Tenant liable for Base Rent, Additional Rent, and other indebtedness accrued to the date the Lease ends. Tenant shall also be liable for the Base Rent, Additional Rent and other indebtedness that otherwise would have been payable by Tenant during the remainder of the term had there been no default, reduced by any sums Landlord receives by reletting the Premises during the term. If Landlord is able to relet the Premises during any part of the remainder of the term, at a rental in excess of that provided for under this Lease, Tenant shall not be entitled to any such excess rental and Tenant waives any claim thereto. (iv) Tenant shall also be liable for that part of the following sums paid by Landlord and attributable to that part of the term ended due to Tenant's default: A. reasonable broker's fees incurred by Landlord for reletting part or all of the Premises prorated for the part of the reletting term ending concurrently with the then current term of this Lease; B. the cost of removing and storing Tenant's property; C. the cost of minor repairs, alterations, and remodeling necessary to put the Premises in a condition reasonably acceptable to a new Tenant: and D. other necessary and reasonable expenses incurred by Landlord in enforcing its remedies. -9- (v) Landlord may sue and take any other action provided by law to collect the amounts due hereunder at any time and from time to time without waiving its rights to sue for and collect further amounts due from Tenant hereunder. Section 11.3. Waiver. The waiver by Landlord of any breach of any covenant or ------ agreement herein contained shall not be deemed to be waiver of such covenant or agreement or any subsequent breach of the same or any other covenant or agreement herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any breach by Tenant of any covenant or agreement of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such breach at the time of acceptance of such rent. Section 11.4. Landlord's Default. Landlord's failure to perform or observe any ------------------ of its Lease obligations after a period of thirty (30) days or the additional time, if any, that is reasonably necessary to promptly and diligently cure the failure after receiving notice from Tenant, is a default. The notice shall be in writing and give in reasonable detail the nature and extent of the failure and identify the Lease provisions(s) containing the obligations(s). If Landlord commits a default, Tenant may pursue any remedies given to Tenant under the laws of the State of North Carolina. Section 11.5. Exception to Cure Periods. The cure periods provided for in ------------------------- Article XI, Section 11.1 shall not apply to: (i) emergencies; and (ii) failure to maintain the insurance required by Article VIII. Section 11.6. Survival. The remedies provided in this Article XI and the -------- indemnities provided in Article VIII, Sections 8.5 and 8.6 shall survive the ending of this Lease. Any other provision of this Lease which by its nature would require the survival of the ending of this Lease, shall also survive the ending of this Lease. ARTICLE XII ASSIGNMENT AND SUBLETTING Section 12.1. Consent Required. Tenant shall not transfer, mortgage, grant a ---------------- security interest in, encumber, or assign this Lease, or any interest therein, or sublease all or part of the Premises, without Landlord's advance written consent, which in the case of an assignment or sublease, shall not be unreasonably withheld or delayed. However, Landlord may withhold its consent to the granting of a security interest in, or mortgaging of Tenant's leasehold estate, or any interest therein, in Landlord's sole discretion. Assignments requiring Landlord's consent shall include, and be deemed to mean, without limitation, assignments by operation of law, an imposition (whether or not consensual) of a lien, mortgage, or encumbrance upon Tenant's interest in this Lease (the consent to which Landlord may withhold in its sole discretion as provided above), an arrangement (including, without limitation, management agreements, concessions and licenses) that allow the use and occupancy of all or part of the Premises by anyone other than Tenant, a transfer of voting control of Tenant (if Tenant is a corporation) and a transfer of more than fifty percent (50%) of the interest in the capital of Tenant if Tenant is a partnership or limited liability company. Section 12.2. Reasonableness. The Landlord's consent, with regard to subleases -------------- and assignments, shall not be considered unreasonably withheld if: (i) the proposed subtenant's or assignee's financial responsibility does not meet the same criteria Landlord uses to select comparable Building tenants; (ii) the proposed subtenant's or assignee's business is not suitable for the Building considering the business of the other tenants and the Building's prestige; (iii) the proposed use is inconsistent with the use permitted by Article VII, Section 7.1; or (iv) the proposed use violates an exclusive use granted to a prior tenant. Section 12.3. Procedure. With regard to a proposed sublease or assignment, --------- Tenant shall provide Landlord in writing: (i) the name and address of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business it will operate in the Premises; (iii) the terms of the proposed sublease or assignment; and (iv) reasonable financial information so that Landlord can evaluate the proposed subtenant or assignee under this paragraph. Landlord shall, with regard to a sublease or assignment only, within thirty (30) days after receiving the information required under this Article, give notice to Tenant to permit or deny the proposed sublease or assignment. If Landlord does not give notice within the thirty (30) day period, then Tenant may sublease part or all of the Premises, or assign the Lease, upon the terms Tenant gave in the information under this Article, subject to the conditions of Section 12.4. Section 12.4. Conditions. Subleases and Assignments by Tenant are also subject ---------- to: (i) The terms of this Lease (ii) the Term shall not extend beyond the Term; (iii) Tenant is not released and shall remain liable for all Lease obligations; (iv) Consent to one sublease or assignment does not waive the consent requirement for future assignments or subleases; and (v) Fifty (50%) percent of the consideration (Excess Consideration) received by Tenant from an assignment or sublease that exceeds the amount Tenant must pay Landlord, which amount is to be prorated where a part of the Premises is subleased or assigned, shall also be paid to Landlord. Excess Consideration shall exclude reasonable leasing commissions paid by Tenant, payments attributable to the amortization of the cost of Tenant improvements made to the Premises at Tenant's cost for the assignee or sublessee, and other reasonable, out-of-pocket costs paid by Tenant in connection thereunder. Tenant shall pay this Excess Consideration to Landlord within ten (10) days of receipt of same. Each payment shall be sent with a detailed statement showing: A. The total consideration paid by the subtenant or assignee and B. Any exclusions from the consideration permitted by this paragraph. Landlord shall have the right to audit Tenant's books and records to verify the accuracy of the detailed statement. Section 12.5. Leasehold Mortgage or Security Interest. If Landlord consents to --------------------------------------- Tenant's granting a security interest in, or mortgaging, Tenant's leasehold estate, which consent Landlord may withhold in its sole discretion, Tenant shall indemnify Landlord and hold Landlord harmless from any loss, cost or expense, including reasonable attorney's fees, incurred by Landlord with respect thereto, as a result of such security interest or mortgage. If Landlord consents to any such security interest or mortgage, it shall not be considered a waiver of the requirement to obtain Landlord's consent with regard to any future security interest or mortgage, of the Tenant's leasehold estate. Section 12.6. Remedy. If Tenant believes that Landlord has unreasonably ------ withheld its consent under this Article, Tenant's sole remedy will be to seek a declaratory judgment that Landlord has unreasonably withheld its consent or an order of specific performance or mandatory injunction of Landlord's agreement to give its consent. Tenant shall not have any right to recover damages or to terminate this Lease. -10- ARTICLE XIII SUBORDINATION Section 13.1. Subordination. Tenant shall, upon request by Landlord, subject and subordinate all or any of its rights under this Lease to any and all mortgages and deeds of trust now existing or hereafter placed on the Building; provided, however, that Tenant will not be disturbed in the use or enjoyment of the Premises so long as it is not in default hereunder, Tenant agrees that this Lease shall remain in full force and effect notwithstanding any default or foreclosure under any such mortgage or deed of trust and that it will attorn to the mortgagee, trustee or beneficiary of such mortgage or deed of trust, and the successor or assign of any of them, and to the purchaser or assignee under any foreclosure. Tenant will, upon request by Landlord, execute and deliver to Landlord, or to any other person designated by Landlord, any instrument or instruments, including but not limited to such subordination, attornment and nondisturbance agreements as may be required by the beneficiary in any first deed of trust on the Property required to give effect to the provisions of this paragraph and shall execute and deliver to Landlord such amendments to this Lease as may be required by a proposed beneficiary in a first deed of trust on the Property; provided, however, that such amendments do not materially increase the obligations and duties of Tenant hereunder. ARTICLE XIV GENERAL PROVISIONS Section 14.1. Transfer of Landlord's Interest. The term "Landlord" as used in ------------------------------- this Lease means only the owner or the mortgagee in possession for the time being of the Building or Property or the owner of the lease of the Building or Property so that in the event of any sale of said Building or Property of said lease, or in the event of a lease of said Building, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest or between the parties and the purchaser at any such sale or lease of the Building or Property, that the purchaser or the lessee of the Building or Property has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder. Notwithstanding anything to the contrary contained in this Lease, it is specifically understood and agreed that the liability of the Landlord hereunder shall be limited to the equity of the Landlord in the Property in the event of a breach or the failure of Landlord to perform any of the terms, covenants, conditions and agreements of this Lease to be performed by Landlord. In furtherance of the foregoing, the Tenant hereby agrees that any judgment it may obtain against Landlord or Landlord's general partners as a result of the breach of this Lease as aforesaid shall be enforceable solely against the Landlord's interest in the Property. Any security given by Tenant to Landlord to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to the successor in interest to Landlord; and, upon acknowledgment by such successor of receipt of such security and its express assumption of the obligation to account to Tenant for such security in accordance with the terms of this Lease, Landlord shall thereby be discharged of any further obligation relating thereto. Landlord's assignment, sale or transfer of the Lease or of any or all of its rights herein shall in no manner affect Tenant's obligations hereunder. Tenant shall thereafter attorn and look to such assignee, as Landlord, provided Tenant first has written notice of such assignment of Landlord's interest. Section 114.2. Landlord Not Partner. It is expressly understood and agreed that -------------------- the Landlord is not a partner, joint venturer or associate of Tenant in the conduct of Tenant's business, that the provisions of this Lease with respect to the payment by Tenant of rent are not sharing of profits and that the relationship between the parties hereby is and shall remain at all times that of landlord and tenant. No provision of this Lease shall be construed to impose upon the parties hereto any obligation or restriction not expressly set forth herein. Section 14.3. Recording. The recording of this Lease is prohibited except as --------- allowed in this section. However, at the request of either party, the parties shall promptly execute and record, at the cost of the requesting party, a short form memorandum describing the Premises and stating the term of this Lease, its Commencement and Termination Dates, and any other information the parties agree to include. Section 14.4. Additional Instruments. The parties agree to execute and deliver ---------------------- any instruments in writing necessary to carry out any agreement, terms, condition or assurance in this Lease whenever occasion shall arise and reasonable request for such instrument shall be made. Section 14.5. Lease Not An Offer. Landlord has given this Lease to Tenant for ------------------ review. It is not an offer to lease. This Lease shall not be binding unless signed by both parties. Section 14.6. Pronouns. All pronouns and any variations thereof shall be deemed -------- to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person(s), firm(s), or corporation(s) may require. Section 14.7. Counterparts. This Lease may be executed in counterparts, all of ------------ which taken together, shall be deemed one original. Section 14.8. Amendment and Modification. This Lease embodies the full agreement -------------------------- of the parties and supersedes any and all prior understandings or commitments concerning the subject matter of this Lease. Any modification or amendment must be in writing and signed by both parties. Section 14.9. Binding Effect. This Lease shall be binding upon and inure to the -------------- benefit of the parties hereto, their assigns, administrators, successors, estates, heirs and legatees respectively, except as herein provided to the contrary. Section 14.10. Controlling Law. This Lease and the rights of the Landlord and --------------- Tenant hereunder shall be construed and enforced in accordance with the law of the State of North Carolina. Section 14.11. Partial Invalidity. In the event that any part or provision of ------------------ this Lease shall be determined to be invalid or unenforceable, the remaining parts and provisions of said Lease which can be separated from the invalid, unenforceable provision shall continue in full force and effect. -11- Section 14.12. Captions. The section titles, numbers and captions contained in -------- this Lease are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, modify, or describe the scope or intent of this Lease nor any provision herein. Section 14.13. Relocation. In the event a Tenant occupies office space ---------- amounting to less than fifty percent (50%) of the total area of a floor, the Landlord shall have the right to relocate the Tenant to another reasonably comparable location within the Building of substantially similar size, upfit and layout. Landlord will pay all actual costs of the relocation, such as the cost of replacing reasonable amounts of stationery and envelopes and the reasonable cost of moving furniture and connecting office equipment. Such a relocation is to be preceded by the Landlord's giving the Tenant thirty (30) days written notice of such a move. Section 14.14. Time of Essence. Time is of the essence in the performance of --------------- the provisions of this Lease. Section 14.15. Warranties. Tenant warrants that it has had no dealing with any ---------- broker or agent in connection with the negotiation or execution of this Lease other than The Harris Group of the Carolinas, Inc. and Tenant agrees to indemnify and hold Landlord harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction. Section 14.16. Authority of Parties. Each party warrants that it is authorized -------------------- to enter into this Lease, that the person signing on its behalf is duly authorized to execute the Lease, and that no other signatures are necessary. Section 14.17. Consent Not Unreasonably Withheld. When either party hereto is --------------------------------- required to give its consent to the other party prior to doing or refraining from doing some act hereunder, it is agreed that the party whose consent is required shall not unreasonably withhold or delay such consent, unless it is specifically stated that the party whose consent is required may withhold such consent in its sole discretion, or words of similar import. Section 14.18. Estoppel Certificates. Tenant shall execute, acknowledge and --------------------- deliver to Landlord, from time to time during the term of this Lease within ten (10) days after Landlord provides Tenant with written notice to do so, an estoppel certificate certifying in writing that the Lease is in full force and effect, unmodified, or modified solely as set forth in such estoppel certificate including confirmation of the Commencement Date and the Initial Termination Date, the date or dates to which rent has been paid and that Landlord has, as of the date of such estoppel certificate, fully and completely performed and complied with each of these terms and conditions of this Lease, without exception or except as only set forth in such estoppel certificate. Any such estoppel certificate may be conclusively relied upon by any prospective purchaser or encumbrancer of the Building or Property. The failure of Tenant to so deliver such estoppel certificate in such period of time shall mean that the Lease is in full force and effect, without modification, that rent has not been prepaid under the Lease except as expressly required in the Lease and that Landlord has, as of the date on which Tenant failed to deliver such estoppel certificate, fully and completely performed and complied with each of these terms and conditions, without exception. Section 14.19. Rights Reserved by Landlord. Notwithstanding any other provision --------------------------- of this Lease, Landlord shall at all times have the right to (a) grant to any tenant an exclusive use to conduct a particular type of business in the Building, (b) change the name or address of the Building, (c) to install and maintain signs on the exterior or interior of the Building, (d) to retain pass keys to all locks within or into the Premises, (e) to make any alterations, additions or improvements to the Building or Property as Landlord may deem in its sole discretion necessary for the safety, protection, preservation. or improvement of the Building or Property, and to change the arrangement and/or location of entrances, passageways. doors, corridor, elevators, stairs, toilets and public parts of the Building and Property. Section 14.20. Financial Information. Tenant acknowledges that the financial --------------------- capability of Tenant to perform its obligations hereunder is material to Landlord and that Landlord would not enter into this Lease but for its belief, based on its review of Tenant's financial statements, that Tenant is capable of performing such financial obligations. Tenant hereby represents, warrants and certifies to Landlord that its financial statements previously furnished to Landlord were at the time given true and correct in all material respects and that there have been no material subsequent changes thereto as of the date of this Lease. At any time during the Lease term, Tenant shall provide Landlord, ten (10) days prior written notice from Landlord, with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be adjusted by an independent certified public accountant. Section 14.21. Right of First Refusal. During the term of this Lease, and any ---------------------- renewal term hereof, provided Tenant is not then in default, if Landlord receives a bona fide offer to lease space adjacent to and on the same floor as Tenant (the "Adjacent Space"), before Landlord enters into a lease for the Adjacent Space, Landlord shall first notify Tenant of the terms and conditions, including without limitation, the term, rental rate, escalations thereof, and Tenant improvement allowance, of the bona fide offer. If within five (5) business days after receipt of Landlord's notice, Tenant agrees in writing to lease all of the Adjacent Space subject to the offer, upon such terms and conditions, Landlord and Tenant shall enter into a written lease agreement for such space upon such terms and conditions. If Tenant does not deliver its written notice to Landlord agreeing to lease all of such Adjacent Space upon the terms and conditions offered to Tenant, within five (5) business days after receipt of such notice, or if Landlord and Tenant do not enter into a written lease agreement for said space within ten (10) business days after delivery of Tenant's timely notice to Landlord, and Landlord's tender or a written lease agreement or amendment to Tenant, then in such case, this right of first refusal, and any purported exercise thereof shall lapse and be of no further force or effect with regard to such Adjacent Space and Landlord will be free to lease such Adjacent Space to the initial bonafide Offeror or to others on the same or any other terms and conditions to which Landlord and such other prospective tenants may agree, whether or not such terms and conditions are more or less favorable than those offered to Tenant. Time is of the essence of the provisions of this paragraph. Notwithstanding the foregoing, when Tenant has refused to lease the Adjacent Space on three (3) separate occasions when such space has been offered to Tenant under this Section, this right of first refusal shall expire, terminate and be of no further force or effect. Notwithstanding the foregoing further, any such space offered is subject to any prior rights granted to others with regard to said space and Landlord shall at all times have the right to renew the lease of any existing tenant in the Adjacent Space. Section 14.22. Option to Terminate. After the end of the second year of the ------------------- term of this Lease, provided Tenant is not then in default hereunder, and Tenant has a bona fide need for more than 7,000 rentable square feet of additional space, and Landlord is unable to provide Tenant with such additional space within the Building consisting of no more than two (2) non-contiguous spaces, by the end of the third year of the Lease term, then in such case Tenant shall have the one-time option to terminate this Lease after the end of the third (3rd) year of the Lease by giving Landlord at least one hundred eighty (180) days prior written notice of its exercise of said option to terminate. If Tenant exercises its option to terminate, then in such case the Lease shall be terminated as of the date set forth in the notice, provided that day is at least one hundred eighty (180) days subsequent to the notice. Tenant shall pay an early termination fee (the "Early Termination Fee") for the early termination in an amount equal to Tenant's pro rata share of the unamortized costs of Tenant Improvements, space planning, real estate commissions, and attorney fees in connection with this Lease amortized at ten percent (10%) per annum over the term of the Lease in equal monthly installments, plus the sum of four (4) months of the Monthly -12- Base Rent in effect as of the date of termination. Upon exercise of its option to terminate, Tenant shall pay the Early Termination Fee to Landlord and vacate and surrender possession of the Premises to Landlord on or before the effective date of termination (the "Early Termination Date") and comply with all terms and conditions of the Lease, including without limitation, the payments of all rentals, up to the Early Termination Date. In the event Tenant fails to pay the Early Termination Fee and/or fails to surrender possession of the Premises to Landlord, on or before the Early Termination Date, then Landlord may either (a) treat the termination as effective and exercise all remedies at law or in equity to collect the Early Termination Fee and/or obtain possession of the Premises, or (b) treat the termination as ineffective, in which case the Lease shall continue in accordance with its terms. Upon receipt of Tenant's notice of its exercise of the option to terminate, Landlord shall have the right to show the Premises to other prospective tenants. Section 14.23. Expansion Space. In the event Tenant desires to lease additional --------------- space in the Building adjacent to and on the same floor as the Premises, then in such case, provided Tenant notifies Landlord in writing thereof, Landlord will advise Tenant if or when any space adjacent to the Premises may become available for lease, and Landlord will negotiate in good faith with Tenant to attempt to reach an agreement on the lease of such space to Tenant. Section 14.24. Security Deposit and Letter of Credit. As security for the ------------------------------------- performance of its obligations under this Lease (the "Security Deposit"), Tenant shall, within three (3) business days after the full execution of this Lease by both parties, deliver to Landlord an irrevocable, unconditional, transferable, standby letter of credit in favor of Landlord, as beneficiary, and issued for Tenant, as account party (the "Letter of Credit") issued by a national banking association. reasonably acceptable to Landlord, insured by the Federal Deposit Insurance Corporation, with offices located in San Francisco, California, and in form and content satisfactory to Landlord, in the amount of $307,796.10, representing the total cost of Tenant improvements made to the Premises, real estate commissions paid in connection with the Lease and two (2) months of rental payments under the Lease. In the event Tenant fails to deliver the Letter of Credit to Landlord within the three (3) business day period, Landlord may, until such time as the Letter of Credit is delivered to Landlord, at Landlord's sole option, postpone commencement of upfitting in the Premises or terminate the Lease by giving written notice thereof to Tenant, without prejudice to or in limitation of any other remedies Landlord may have for such failure on the part of Tenant. The Letter of Credit shall permit partial draws and have an expiration date of April 30, 2006. Landlord shall be permitted to draw upon the Letter of Credit to fund the performance of any obligation(s) of Tenant under the Lease beyond the expiration of any applicable notice and cure period under the Lease. The issuing bank shall be required (up to the face amount of the Letter of Credit) to disburse amounts to Landlord under the Letter of Credit based solely on the written statement of Landlord (i) certifying that Tenant is in default of the performance of its obligation(s) under the Lease beyond the expiration of any applicable notice and cure period (if any) pursuant to the Lease and (ii) certifying the amount due to Landlord as a result of such uncured default(s) (which shall be the amount payable, up to an aggregate ceiling amount equal to the face amount of the Letter of Credit, to Landlord under the Letter of Credit). If Landlord's interest in the Premises is sold or otherwise transferred, Landlord shall have the right to transfer the Letter of Credit to the new owner (and the Letter of Credit shall expressly permit such transfers), and Landlord shall thereupon be released from all liability for the safekeeping and administration of the Letter of Credit and Tenant shall thereafter look solely to such new owner for the safekeeping and administration of the Letter of Credit. The terms hereof shall apply to every transfer of the Letter of Credit. Said letter of credit must be payable in Charlotte, North Carolina, and no other requirements other than those set forth above shall be necessary for Landlord to collect on the same. Provided Tenant has not defaulted in the first two (2) years of the Lease term then as of the beginning of the third (3rd) year of the Lease term Tenant may substitute for the existing Letter of Credit a new Letter of Credit with the same terms and conditions as the then existing Letter of Credit, except that the amount thereof shall be reduced by twenty-five percent (25%) to $230,847.08. Upon completion of the third (3rd) year of the Lease term without any default by Tenant, Tenant may replace the then current Letter of Credit with a new Letter of Credit with the same terms and conditions as the existing Letter of Credit except that the amount thereof shall be reduced to $153,898.05. Upon completion of the fourth (4th) year of the Lease term without any default by Tenant, the then current Letter of Credit may be replaced by a new Letter of Credit with the same terms and conditions as the then existing Letter of Credit, except that the amount thereof shall be reduced to $76,949.03. Upon completion of the Lease term, provided Tenant has not been in default prior to the end of the Lease term, and upon the expiration of a period of sixty (60) days next following the end of the Lease term, the Letter of Credit then in effect will terminate unless Landlord has already received full payment thereon. In the event the original Letter of Credit remains in effect and is not replaced, the original Letter of Credit (or if replaced the then existing Letter of Credit) shall remain in force from the period beginning as of the execution of the Lease and extending through the sixtieth (60th) day next following the end of the term of the Lease.* Notwithstanding anything to the contrary contained in the Lease, in the event that during the term of the Lease if Tenant is then current with all monetary obligations under the Lease and is not otherwise in default thereof, and Tenant delivers evidence in form reasonably satisfactory to Landlord that Tenant has been profitable for four (4) consecutive quarters based on an Earnings Before Interest, Taxes and Depreciation/Amortization (EBITDA), and after Debt Service (principal and interest) test, and has a tangible net worth (excluding goodwill and other intangible assets) equal to or in excess of Fifty Million Dollars ($50,000,000), the required Security Deposit (or "deposit") may be reduced to an amount equal to one month of the then current Base Rent. In the event that Tenant satisfies the foregoing conditions and Landlord then holds the Security Deposit in the form of a Letter of Credit, Tenant shall replace the Letter of Credit with cash in an amount equal to one month of the then current Base Rent. Upon receipt of the cash Security Deposit, provided Tenant is current with all monetary obligations under the Lease and not otherwise in default thereof, Landlord shall return the Letter of Credit to Tenant. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK * The language of page 13a is inserted above. -13- However, the Letter of Credit may provide that it be in force for successive periods of one (1) year each (except for the last period which shall begin on the relevant anniversary of the execution of this Lease and extend through the sixtieth (60th ) day next following the end of the Lease term), beginning upon the execution of this Lease and provide for automatic successive renewals upon each anniversary of the effective date thereof, unless the Bank gives written notice to Landlord and Tenant at least sixty (60) days prior to the relevant anniversary and renewal thereof, that it will not renew the Letter of Credit, in which case, Tenant shall have thirty (30) days after the beginning of such sixty (60) day period within which to provide Landlord with a new Letter of Credit which complies with this Section 14.24 that is effective as of the expiration of the prior Letter of Credit, and if Tenant does not provide such substitute Letter of Credit within such thirty (30) day period, then notwithstanding any other provision of this Lease, and any cure period provided herein, Tenant shall be deemed immediately in default without any requirement of notice from Landlord and Landlord shall have the right to collect on the then existing Letter of Credit based on such default. -13a- IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed the date and year first above written. WITNESS: ROTUNDA BUILDING, LLC /s/ By /s/ Jonny Harris - ------------------------------- --------------------------- ATTEST: SMARTAGE, INC. /s/ Brian McGee By /s/ Brian McGee - ------------------------------- ----------------------------- Corp Secretary Vice President [CORPORATE SEAL] -14- EXHIBIT "A" ROTUNDA PROPERTY DESCRIPTION -------------------- To find the point of BEGINNING, begin at the intersection of the centerline of the right-of-way of Barclay Downs Drive with the centerline of the right-of-way of the southerly most section of Carnegie Boulevard at the point where it becomes Fletcher Road: thence S. 89-45-28 W. 1175.52 feet to a point in the centerline of said Carnegie Boulevard; thence N. 0-14-32 W. 40 feet to a point in the northerly margin of the right-of-way of the southerly most portion of Carnegie Boulevard; thence along the margin of said right-of-way N. 89-45-28 E. 798.88 feet to a point in the margin of said right-of-way, the BEGINNING POINT; thence from said BEGINNING POINT in a northwesterly direction with the arc of a circular curve to the right having a radius of 20.0 feet an arc distance of 31.42 feet to a point; thence N. 0-13-41 W. 629.10 feet to a point; thence in a northeasterly direction with the arc of a circular curve to the right having a radius of 20.0 feet, an arc distance of 36.10 feet to a point in the southerly margin of the right-of-way of the northerly portion of Carnegie Boulevard; thence with the margin of said right-of-way S. 76-38-16 E. 34.27 feet to a point; thence continuing with said margin of said right-of-way in an easterly direction with the arc of a circular curve to the left having a radius of 477.80 feet an arc distance of 252.76 feet to a point, thence in a southeasterly direction with the arc of a circular curve to the right, having a radius of 35.0 feet an arc distance of 59.02 feet to a point in the westerly margin of the right-of-way of Barclay Downs Drive; thence with the margin of said right-of-way three calls and distances as follows: (1) in a southerly direction with the arc of a circular curve to the right, having a radius of 522.96 feet, an arc distance of 97.92 feet to a point; (2) S. 0-23-30 W. 178.7 feet to a point; (3) S. 1-26-30 W. 330.52 feet to a point; thence in a southwesterly direction with the arc of a circular curve to the right having a radius of 35.0 feet, an arc distance of 53.95 feet to a point in the northerly margin of the right-of-way of the southerly portion of Carnegie Boulevard; thence along said margin of the right-of-way of Carnegie Boulevard S. 89-45-28 W. 293.81 feet to the BEGINNING POINT, said property consisting of 5.3466 acres as shown on survey of Mitchell W. Davis dated December 18, 1986, last revised August 10, 1987. EXHIBIT "B" FLOOR PLAN ---------- [drawing, third floor plan] EXHIBIT "C" TENANT WORK ----------- The provisions of this Section shall apply to any and all alterations or physical additions to the Premises over and above the Landlord's Work, regardless of whether the alterations or physical additions are undertaken prior to the Commencement Date or during the Term of the Lease. All alterations and physical additions to the Premises shall be done at Tenant's sole cost and expense, except as specifically provided in Article III of this Exhibit C, and are herein called "Tenant Work". Capitalized terms used herein that are not defined herein shall have the same meaning given to such terms in the Lease. ARTICLE I. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS 1. Tenant Space Plan. If Tenant desires to undertake Tenant Work, Tenant will deliver to Landlord a detailed space plan containing the information described in Article IV of this Exhibit C, together with other relevant information and written instructions relating thereto (said space plan and other information and instructions being herein called the "Tenant Space Plan"). 2. Landlord Review. Landlord will review the Tenant Space Plan to confirm that the Tenant Work contemplated thereby (i) conforms with or exceeds the standards of the Project and the requirements listed in Article IV of this Exhibit C, and (ii) will not impair the structural, mechanical, electrical or plumbing integrity of the Project. Landlord shall either approve or disapprove the Tenant Space Plan within ten (10) days after the date Landlord receives the Tenant Space Plan. If Landlord does not approve the Tenant Space Plan, Landlord will inform Tenant in writing of its objections and Tenant will revise the same and deliver a corrected version to Landlord for its approval within ten (10) days after the date Tenant receives Landlord's disapproval notice. The approval and revision process for the revised Tenant Space Plan shall be the same as described in the previous two sentences. 3. Tenant Working Drawings. After the Tenant Space Plan has been approved by Landlord, Tenant shall cause working drawings (the "Tenant Working Drawings") of the Tenant Work to be prepared and shall deliver the same to Landlord for its approval within twenty (20) days after the date of Landlord's approval of the Tenant Space Plans. The Tenant Working Drawings shall consist of complete sets of plans and specifications, including detailed architectural, structural, mechanical, electrical and plumbing plans for the Tenant Work. The Tenant Working Drawings shall be substantially consistent with the Tenant Space Plan without any material changes. The Tenant Working Drawings shall be prepared at Tenant's expense by architects and engineers selected by Tenant and approved by Landlord. The approval process for the Tenant Working Drawings shall be identical to the approval process for the Tenant Space Plan described in paragraph 2 of this Article I. ARTICLE II. SELECTION OF A CONTRACTOR AND CONSTRUCTION OF TENANT WORK 1 Bid Letting. Tenant shall promptly submit the approved Tenant Working Drawings to Landlord's contractor (the "Building Contractor") and, if Tenant chooses, to any other reputable contractor(s) selected by Tenant and reasonably agreed to by Landlord (the "Tenant Contractor(s)") for pricing. Within ten (10) days of the date Tenant submits the bid proposals to the contractor(s), Tenant shall review the bid proposals and construction schedules received by such date. 2. Selection of Bid. Tenant may negotiate with the Tenant Contractor(s) and Landlord agrees to assist Tenant in its negotiation with the Building Contractor, but in any event Tenant shall accept one of the bids and enter into a contract with the selected contractor within ten (10) days after the date Tenant receives the bid proposals. Tenant agrees to notify Landlord promptly of its decision. 3. Building Contractor - Construction Coordination. If Tenant accepts the Building Contractor's bid, then Landlord shall supervise and manage construction and completion of the Tenant Work by the Building Contractor in accordance with the Tenant Working Drawings: provided, however, Landlord shall not be required to install any portion of the Tenant's Work which does not conform to any applicable regulations, laws, ordinances, codes or rules. Such conformity shall be the obligation of Tenant. 4. Tenant Contractor - Construction Coordination. (a) If Tenant accepts a Tenant Contractor's bid, then the Tenant Contractor shall (and its contract shall so provide): (i) conduct its work in such a manner so as not to unreasonably interfere with other tenants, Project operations, or any other construction occurring on or in the Project or the Premises; (ii) execute a set of and comply with the Contractor Rules and Regulations attached hereto as Schedule I and comply with all additional rules and regulations relating to construction activities in or on the Project as may be reasonably promulgated from time to time and uniformly enforced by Landlord or its agents; (iii) maintain such insurance and bonds in force and effect as may be reasonably requested by Landlord or as required by applicable law (but in any event said bonds shall be in amounts equal to the full value or cost of the work being done by the Tenant Contractor); and (iv) be responsible for reaching an agreement with Landlord and its agents as to the terms and conditions for all contractor items relating to the conducting of its work including, but not limited to, those matters relating to hoisting, systems interfacing, use of temporary utilities, storage of materials, access to the Premises and the Project and the purchase and return of Building standard as well as other reusable materials. (b) Landlord shall have the right to approve all subcontractors to be used by the Tenant Contractor, which approval shall not be unreasonably withheld as long as such subcontractors satisfy the requirements of this paragraph 4. (c) As a condition precedent to Landlord permitting the Tenant Contractor to commence the Tenant Work, Tenant and the Tenant Contractor shall deliver to Landlord such assurances or instruments as may be reasonably requested by Landlord -17- to evidence the Tenant Contractor's and its subcontractor's compliance or agreement to comply with the provisions of this paragraph 4. 5. Tenant Contractor - Hold Harmless. Tenant shall indemnify and hold harmless Landlord, its agents, contractors (including Building Contractor) and any mortgagee of Landlord from and against any and all losses, damages, costs (including costs of suit and attorneys' fees), liabilities or causes of action for injury to, or death of, any person, for damage to any property and for mechanic's, materialmen's or other liens or claims arising out of or in connection with the work done by Tenant Contractor (and Tenant Contractor's subcontractors and subcontractors) under its contract with Tenant. 6. Tenant Contractor - Mechanic's and Materialmen's Liens. Tenant shall notify in writing all materialmen, contractors, artisans, mechanics, laborers and other parties hereafter contracting with Tenant for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Premises that they must look solely to Tenant for payment for same and shall simultaneously send copies of all such notifications to Landlord for its review. Should any mechanic's or other liens be filed against any portion of the Project, including the Premises, by reason of Tenant's or Tenant Contractor's acts or omissions or because of a claim against Tenant or Tenant Contractor, Tenant shall inform Landlord of such lien immediately and cause the same to be cancelled or discharged of record by bond or otherwise within twenty (20) days after receipt of notice by Tenant. If Tenant fails to cancel or discharge the lien within said twenty (20) day period. Landlord may, at its sole option, cancel or discharge the same and upon Landlord's demand, Tenant shall promptly reimburse Landlord for all costs (including attorneys' fees) incurred in canceling or discharging such liens. 7. Payment of Landlord. Tenant shall pay to Landlord all amounts payable by Tenant pursuant to this Exhibit C within ten (10) days after billing by Landlord. Statements or invoices may be rendered by Landlord during the progress of the Tenant Work so as to enable Tenant to pay the Building Contractor, subject to the terms of Article III, without advancing Landlord's funds to pay the cost of Tenant Work. 8. Default. The failure by Tenant to comply with the provisions of paragraphs 4, 5, 6 or 7 of this Article II shall constitute a default by Tenant under terms of Section 11.1 of the Lease and Landlord shall have the benefit of all remedies provided for in the Lease. 9. Change Orders. Tenant may authorize changes in the Tenant Work; provided that any changes must meet the criteria set forth in Article I of this Exhibit C. Tenant shall also be responsible for any delays or additional costs caused by such change orders. 10. As-Built Plans. Upon completion of the Tenant Work, Tenant shall deliver to Landlord a copy of the as-built plans and specifications for the Tenant Work within thirty (30) days of completing the same. Upon receipt, Landlord will transfer such plans to Landlord's Master Plans at a cost to be borne by Tenant. ARTICLE III. MONETARY MATTERS 1. Landlord's Contribution. Tenant shall be responsible for all costs and expenses incurred in connection with the Tenant Work, including those costs and expenses associated with the preparation of architectural and engineering plans. However, Landlord shall contribute $191,060 toward the completion of the Tenant Work ("Landlord's Contribution"). 2. Payment of Landlord Contractor. If Tenant elects to have the Landlord Contractor do the Tenant Work, Landlord shall pay to the Landlord Contractor the Landlord's Contribution as it becomes due. Once the Landlord's Contribution has been paid in full by Landlord, Tenant shall pay all remaining costs and expenses incurred in connection with the Tenant Work. 3. Payment of Tenant Contractor. If Tenant elects to have Tenant Contractor do the Tenant Work, Tenant shall pay all billed costs as construction progresses and Landlord shall, upon presentation by Tenant of proof of payment, pay to Tenant a portion of Landlord's Contribution equal to the amount paid by Tenant to Tenant Contractor. However, in no event shall Landlord be required to pay to Tenant an amount in the aggregate greater than Landlord's Contribution. 4. Unpaid Amounts. If any portion of Landlord's Contribution remains unpaid after the Tenant Work has been completed, Landlord and Tenant shall split such unpaid amount on a 50-50 basis and Landlord shall credit Tenant's portion of such unpaid amount against the first Base Rental payments due under the Lease. ARTICLE IV. MINIMUM INFORMATION REQUIRED OF TENANT SPACE PLAN Tenant shall provide to Landlord a Tenant Space Plan that contains architectural, mechanical, electrical and plumbing plans prepared and stamped by a licensed architect or engineer, as the case may be, indicating: 1. Location and type of all partitions. 2. Location and types of all doors indicating hardware and providing a keying schedule. 3. Location and type of glass partitions, windows, doors and framing. 4. Location of telephone equipment room accompanied by a signed approval of the telephone company. 5. Critical dimensions necessary for construction. 6. Location, circuit number and specifications of all electrical devices, outlets, switches, telephone outlets, etc. 7. Location and type of all lighting and access control systems. 8. Location and type of equipment that will require special electrical requirements. Provide manufacturers' specifications for use and operation. 9. A load analysis of all electrical devices. 10. Location, weight per square foot and description of any exceptionally heavy equipment or filing system exceeding 50 psf live load. -18- 11. Location, type and specifications of the HVAC distribution systems and controls. 12. Requirements for special air conditioning or ventilation. 13. Type and color of floor covering. 14. Location, type and color of wall covering. 15. Location, type and color of paint and/or finishes. 16. Location and type of plumbing, including special sprinkler requirements. 17. Location and type of kitchen equipment. Details Showing: 1. All millwork with verified dimensions and dimensions of all equipment to be built-in. 2. Corridor entrances. 3. Bracing or support of special walls, glass partitions, etc., if desired. If not included with the Tenant Space Plan, the Building architect will design, at Tenant's expense, all support or bracing required. -19- SCHEDULE 1 TO EXHIBIT C CONSTRUCTION RULES & REGULATIONS -------------------------------- PLANS - ----- 1. All plans must be approved by Landlord prior to commencement of work. 2. Participation plan must detail all demolition and buildback. 3. Electrical plan must detail all electrical demolition and buildback. If a new panel and/or transformer are added, the installation is to be designed by an architect selected by Landlord. Engineering fees will be borne by the Tenant. The new panel and/or transformer will be metered and the additional electrical use will be billed to the Tenant on a monthly basis. Additional items that would require an electrical meter may include air-cooled, self-contained air conditioning units, above building standard office/computer equipment, etc. 4. The mechanical/plumbing plan must detail all thermostat, troffer and duct relocation, removal or addition. The addition of any independent air conditioning units must be shown. The air-cooled units are to be electrically metered as indicated above and a charge for heat dissipation will be included as well. A BTU or gallon meter is to be installed for each chilled water unit. All meter charges will be billed back to the Tenant on a monthly basis. All plumbing detail (deletion or addition) must be shown. 5. A complete set of final, revised plans must be submitted to Landlord upon completion of work. This complete set must include two copies of the mechanical/plumbing plan. 6. The Tenant will be charged with the cost to transfer the partition, mechanical, electrical and plumbing changes to Landlord's master plans. The cost for such transfer is $.25 per square foot with a minimum charge of $200.00. INSURANCE - --------- The General Contractor and all subcontractors shall carry the minimum statutory limits of workmen's compensation and quantities of general liability insurance deemed by Landlord to be sufficient for the proposed tenant construction. Original certificates of such insurance are to be submitted prior to the commencement of work. PERMITS - ------- Permits and licenses necessary for the work shall be secured and paid for by the General Contractor. The permits are to be posted at a readily accessible area near the construction site. GENERAL RULES - ------------- 1. All materials used must meet City, State and Federal building codes. 2. Lien waivers from all contractors shall be furnished to the Landlord within thirty (30) days after completion of tenant construction. 3. The following work shall be performed only after normal working hours: . All demolition, trash removal, laying tack strip, drilling/cutting of the concrete slab or a concrete structural member, noisy or vibration causing buildback (screw guns, etc.) and material stocking. . All work resulting in offensive odors such as the use of latex enamel paint, lacquer, glue used in file floor installation, etc. . All work which is the subject of any complaint from another tenant regarding interference from the construction with such tenant's use of its premises. . All work requiring access to the ceiling on a floor below a lease space being remodeled (which work must also be scheduled through the Project management office). 4. The General Contractor must notify the Project management office prior to the commencement of any dusty work (demolition, sheetrock cutting, sanding, extensive sweeping, etc.) so that additional filtering capacity on the air handler distribution systems can be provided at a cost of $35.00 per floor. 5. At the end of construction, the Building staff will change out the filters and clean the coils in both mechanical rooms on the remodel floor. The Tenant will be charged $700.00 for this service. 6. Only building standard locksets keyed to the Project's restricted keyware may be used throughout leased spaces. 7. Reasonable amounts of water and electricity will be furnished to the General Contractor without cost for use in lighting, operating portable power tools. drinking water, etc. The General Contractor shall make all connections, furnish any necessary extensions and remove same upon completion of work. 8. Restroom facilities are not to be used for the cleaning of tools or paint materials. Contractors shall utilize only those facilities specifically designated by the Project manager. 9. The General Contractors shall carefully protect all walls, carpet, ceiling files, floors, furniture and fixtures in common and other tenant areas and repair or replace any damaged property without cost to Landlord. -20- 10. All Contractors shall confine use of the premises to the designated construction site so as not to disrupt other tenants. 11. At no time will abusive language or actions or loud radios be tolerated. 12. A copy of these rules and regulations must be posted on the construction site in a manner allowing easy access by all workers. It is the General Contractor's responsibility to instruct his employees and subcontractors to familiarize themselves with these rules and regulations. ELEVATOR USAGE - -------------- 1. The use of the freight elevators shall be scheduled by the Tenant or General Contractor with the Project management office. Reservations as far in advance as possible is encouraged. 2. All construction materials, tools and trash are to be transferred to and from the construction site via the freight elevators. The passenger elevators are to be used to transport people only. ---- 3. Situations may arise when the General Contractor may be required to share the freight elevators with the Building crew or tenants. This sharing shall be carried out in a professional manner. 4. Special elevator use such as access to the top of an elevator cab must be scheduled through Landlord. Sufficient time should be allowed to arrange the provision of elevator personnel to perform the requested service. The Tenant will be responsible for any charges incurred in these special arrangements. SECURITY, BUILDING ACCESS, LOADING DOCK AREA - -------------------------------------------- 1. Tenant will be responsible for providing the General Contractor with security clearance into the Building as well as access into the lease space. 2. The loading dock area has a 30 minute parking limit during normal working hours. Vehicles parked beyond that time period will be towed away at the individual owner's expense. Arrangements must be made through the Project management office for any extended parking privileges in the loading dock area after normal working hours. CONSTRUCTION - ------------ 1. On multi-tenant floors, a demising partition must separate lease spaces. 2. If the Tenant desires wallcovering at exterior columns, it is advised that a reveal be placed between the window mullions and the sheetrock. This procedure should help keep condensate from bleeding onto the fabric. 3. Should the remodel of a lease space affect the public corridor, it is the Tenant's responsibility to duplicate the finishes in the hallway so that the new construction is not visible. 4. It is recommended that the Tenant review the condition of all finishes that will not be affected by the remodeling of its lease space (i.e. exterior window mullions, doors, frames, head track, etc.) because the improvements in place are being provided in their existing condition, on an "as is" basis. ELECTRICAL WORK - --------------- 1. All additional circuits added to existing or new electrical panels must be properly labeled or marked indicating the equipment serviced by each new circuit. 2. All electrical panels, junction boxes and pull boxes which are opened or removed for additional circuits or terminations shall be covered, closed or replaced, with no exceptions. 3. During construction, provisions are to be made so that all lights can be, and are, turned off each night. Failure to comply will result in a $50.00 a day charge billed to the Tenant. 4. Upon completion of work, all light fixtures in the work area are to be working properly and fully lit and cleaned, including replacement of tubes and ballasts as required in light fixture. 5. All new building equipment shall be building standard or approved by landlord, through its manager. All light switches and outlets are to be at building standard height. 6. All floor penetrations shall be caulked, cemented or filled with materials which are fire-rated and match specifications of original floor composition. 7. In remodeling of lease spaces involving 10,000 square feet or more, all electrical wiring and cabling as well as telephone cabling that is not to be reused is to be removed. 8. All electrical work is to be performed by an electrical contractor approved by Landlord. MECHANICAL/PLUMBING WORK - ------------------------ 1. The mechanical contractor will be responsible for securing and temporarily relocating HVAC thermostats and relocating the thermostats on the walls as indicated on the mechanical plans. 2. All duct tap cutouts not used on main ducts shall be covered with a duct plate and insulation which will be secured to the main duct. -21- 3. All new flex ducts shall be externally insulated. 4. The mechanical contractor shall verify airflow delivery against the mechanical plan as per NEBB and TEBB procedures. Mechanical contractor shall submit the air balance report to the Building Chief Engineer along with a copy of his certification. 5. Upon completion of the mechanical work, the contractor will demonstrate to the Building Chief Engineer that all relocated or new thermostats function correctly and are property calibrated. 6. All new equipment shall be building standard or approved by Landlord. All thermostats are to be at building standard height. 7. All floor penetrations shall be caulked, cemented or filled with materials which are fire-rated and match specifications of original floor composition. 8. In remodels of lease space involving 10,000 square feet or more, ail duct and plumbing lines that are not to be reused are to be removed. 9. All new plumbing should be installed in such a way that it may be cut off and repaired without affecting other lease spaces. SPECIAL CONDITIONS - ------------------ 1. Use of any welding or cutting torch must be approved by Landlord. The contractor must schedule the time the torch will be used and he must have a fire extinguisher present while the torch is in use. 2. Use of any varnishes, lacquers, glues or other combustible materials or materials which may produce offensive odors must be approved and the application thereof scheduled through Landlord. 3. Any work that will involve the draining of a sprinkler line must be approved by Landlord. In all instances, the system will not be left inoperable overnight. 4. Should any portion of a remodel interfere with the fire alarm system, the work must be scheduled through Landlord's management office in advance. Any costs associated with false alarms that are caused by the General Contractor, his employees or subcontractors shall be absorbed by the General Contractor. 5. A Material Safety Data Sheet information sheet must be posted in any area where any hazardous and/or harmful materials are in use. Strict adherence to rules listed in this sheet is required. CLEAN-UP - -------- The General Contractor shall keep the construction site free of accumulation of debris and rubbish. Trash must be removed via the freight elevators after normal working hours in a vehicle provided by General Contractor. Any dust or dirt outside the construction site is to be cleaned on a daily basis. The General Contractor should provide subcontractors with a floor mat to prevent dust and dirt tracking into public corridors and elevators. Final clean up, including vacuuming after new carpet installation as well as the provisions of the vacuums, is the responsibility of the General Contractor. Non-compliance with these rules and regulations may result in barring the responsible parties from future activities in the Building. Additionally, if construction is not performed in a manner that is equal to or greater than what is considered consistent with the standards of the Project, then repairs and changes will be performed by the Landlord at the Tenant's expense (cost plus 15%). These rules and regulations are subject to change without notice. ACCEPTED BY: ________________________ DATE: _______________________ (Tenant) ACCEPTED BY: ________________________ DATE: _______________________ (General Contractor) ACCEPTED BY: ________________________ DATE: _______________________ (Landlord) -22- EXHIBIT "D" OPERATING COST ITEMS -------------------- Said "Operating Cost" shall include, but not necessarily be limited to, the following items: A. Cleaning 1. Wages (includes social security, unemployment compensation, fringe benefits, etc.). 2. Supplies/Materials (including ordinary repairs and replacement of equipment). 3. Outside Service (includes window cleaning, contract cleaning, drapery or venetian blind cleaning, etc.). 4. Miscellaneous. B. Heating, Ventilating, and Air Conditioning 1. Wages (includes social security, unemployment compensation, fringe benefits, etc.). 2. Supplies/Materials. 3. Outside Services. 4. Repairs (includes ordinary repairs and minor replacements required to keep the equipment in good operating condition). 5. Miscellaneous. C. Elevators 1. Wages (includes social security, unemployment compensation, fringe benefits, etc.). 2. Supplies/Materials. 3. Outside Service. 4. Repairs (includes ordinary repairs and minor replacements required to keep the equipment in good operating condition). 5. Miscellaneous. D. General Expenses - Building 1. Wages (security guards, matrons, store keeper and other direct building wages not included elsewhere; including social security, unemployment compensation, insurance, fringe benefits, etc.). 2. Supplies/Materials (includes toilet supplies, keys, signs, and other miscellaneous supplies not included elsewhere). 3. Contract Services (includes rubbish handling, exterminating, directory services, fire extinguisher services, etc.). 4. Redecorating Public Areas. 5. Plumbing Repairs. 6. Sewer Charges. 7. Water Charges. 8. Landscape Expenses. 9. General Repairs (those repairs necessary to keep the Building and walkways, etc., in good condition). 10. Security. 11. Garbage Pickup. 12. Seasonal decorations. E. Administrative Expenses. 1. Salaries 2. Building Office Expenses (including telephone, stationery, supplies, stamps, equipment repairs, dues, subscriptions, etc.). 3. Legal (except litigation, bad debts, or leasing expenses). 4. Professional Fees (including accounting and engineering connected with Building operations; but not including leasing costs or commissions). 5. Management Fees. F. Energy 1. Electricity (after deduction for electricity paid by other tenants for extra services). 2. Gas (net of gas charged to tenants). G. Insurance 1. Fire and extended coverage premium. 2. Earthquake and extended coverage premium. 3. Liability and extended coverage premium. 4. Other broad form coverages. H. Taxes 1. Real estate taxes and assessments. 2. Personal property taxes (for the Building's personal property, including license expenses). I. Extraordinary Repairs - Large nonrecurring major repairs spread over the normal life of the component. J. Capital Investments made in an attempt to reduce operating costs spread over the life of the equipment or leasing of equipment to attempt to effect said reduction. -23- EXHIBIT "E" PARKING RULES AND REGULATIONS ----------------------------- Parking: The following rules, regulations and rights apply to the use of all portions of the complex designated from time to time by Landlord as parking areas (the "Parking Areas"): (a) Only Tenant and employees of Tenant may park their motor vehicles in those portions of the Parking Areas designated by Landlord from time to time as unreserved tenant parking areas (the "Unreserved Parking Areas"). (b) Guests, invitees and visitors of Tenant may park their motor vehicles only in those portions of the Parking Areas designated by Landlord from time to time as visitor parking areas (the "Visitor Parking Areas"). (c) Only Tenant and those employees, guests, invitees and visitors of Tenant who are physically handicapped may park their motor vehicles in those portions of the Parking Areas designated by Landlord from time to time as handicapped parking areas (the "Handicapped Parking Areas"). (d) Parking in the Unreserved Parking Areas, the Visitor Parking Areas and the Handicapped Parking Areas shall be on a nonexclusive, "as- available" basis. (e) No representation or warranty is made by Landlord as to the number or location of parking spaces comprising the Parking Areas, or any portion thereof. (f) Motor vehicles shall only be parked in striped parking spaces located within the Parking Areas and no motor vehicles shall be parked in any other location within the complex. (g) Not more than one motor vehicle may be parked on each parking space and no motor vehicle may be parked on more than one parking space within the Parking Areas. (h) Parking Areas shall not be used for any purpose other than the parking of permitted motor vehicles thereon. No commercial activity shall be conducted from the Parking Areas. (i) No repairs (other than emergency repairs) or washing of motor vehicles shall be permitted in the Parking Areas. (j) Tenant, its employees, agents, guests, visitors and invitees assume full responsibility and Landlord shall have no liability for (a) all loss, damage, injury or death caused to the person or property of third parties by reason of their use of the Parking Areas; and (b) protecting the motor vehicles of such third parties against theft, vandalism and damage and for protecting their person against injury and assault by reason of their use of the Parking Areas. (k) Tenant shall indemnify Landlord against all loss, damage, cost and expense (including attorney's fees) sustained by Landlord by reason of the use of the Parking Areas by Tenant, its employees, agents, guests, visitors and invitees or by violation of these Rules by any of said persons, other than damage caused by the negligence of Landlord, the Beneficiaries or the Manager. (l) A violation of these Rules shall entitle Landlord to revoke the parking privileges of the offending party, in addition to other rights and remedies available to Landlord. -24- EXHIBIT "F" BUILDING RULES AND REGULATIONS ------------------------------ The following rules and regulations have been adopted by the Landlord for the care, protection and benefit of the Building and for the general comfort and welfare of the tenants. 1. The sidewalks, entrances, halls, passages, elevators and stairways shall not be obstructed by the Tenant or used by Tenant or its employees for any other purpose than for ingress and egress. 2. Toilet rooms and other water apparatus shall not be used for any purposes other than those for which they were constructed. 3. The Tenant shall not do anything in the Premises, or bring or keep anything therein, which shall in any way conflict with any law, ordinance, rule or regulation affecting the occupancy and use of the Premises, which are or may hereafter be enacted or promulgated by any public authority or by the Board of Fire Underwriters. 4. In order to insure proper use and care of the Premises, neither the Tenant nor any employee of the Tenant shall: (a) Keep animals or birds on the Premises. (b) Use Premises as sleeping apartments. (c) Maintain or utilize bicycles or other vehicles in the Premises. (d) Make improper noises or disturbances of any kind, sing, play or operate any musical instrument, radio or television set without first securing consent of Landlord. (e) Engage in or permit games of chance or any form of gambling or immoral conduct in or about the Premises. (f) Mark or defile elevators, toilet rooms, walls, windows, doors or any part of the Building. (g) Allow any furniture, packages or articles of any kind to remain in corridors except for short periods incidental to moving same in or out of Building or to clean or rearrange occupancy of leased space. (h) Deposit waste paper, dirt or other substances in corridors, stairways, elevators, toilets, rest rooms, or any other part of the Building not leased to it. (i) Fasten any article, drill holes, drive nails or screws into walls, floors, doors or partitions, or otherwise mar or deface any of them by paint, paper or otherwise, unless written consent is first obtained from the Landlord, except for customary interior decorations. (j) Operate any machinery within the Building, except customary motor driven office equipment, such as recorders and transcribers, calculators, electric typewriters, and the like. Special electrical or other motor driven equipment used in the trade or profession of the Tenant may be operated only with the proper consent of the Landlord. (k) Tamper or interfere in any way with windows, doors, locks, air conditioning controls, heating, lighting, electric plumbing fixtures. (l) Leave Premises unoccupied without locking all doors, extinguishing lights and turning off all water outlets. (m) Install or operate vending machines of any kind in the Premises without written consent of Landlord. 5. The Tenant shall have cleaned, at its expense, not less than semiannually, the carpet that has been provided by the Landlord for Tenant's use, utilizing the cleaning company with which the Landlord has contracted to do this work. 6. The Landlord shall have the right to prohibit any advertising by the Tenant which, in its opinion, tends to damage the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, the Tenant shall discontinue any such advertising. 7. The Landlord reserves the right to designate the time when and method whereby freight, furniture, safes, goods, merchandise and other articles may be brought into, moved or taken from the Building and the Premises leased by the Tenant; and workmen employed, designated or approved by the Landlord must be employed by Tenants for repairs, painting, material moving and other similar work that may be done on the Premises. Tenants moving in or out of the Premises must do so between the hours of 5:30 p.m. and 7:30 a.m., Monday through Friday, or anytime Saturday or Sunday. 8. The Landlord shall not be responsible for damage to furniture caused by janitor or any other servant personnel, nor for any loss of property from the Premises however occurring. The Tenant will reimburse the Landlord for the cost of repairing any damage to the Premises or other parts of the Building caused by the Tenant or the agents or employees of the Tenant, including replacing any glass broken. 9. The Landlord shall furnish a reasonable number of door keys and/or Building entrance access cards for the needs of the Tenant, which shall be surrendered on termination of the lease, and reserves the right to require a deposit to insure their return at termination of lease. The Tenant shall obtain keys and/or cards only from the Landlord, shall not obtain duplicate keys and/or cards from any outside source, and shall not alter the locks or effect any substitution. 10. The Tenant shall not install in the Premises any metal safes or permit any concentration of excessive weight in any portion thereof without first having obtained the written permission of Landlord. 11. The Landlord reserves the right at all times to exclude boot-blacks, newsboys, loiterers, vendors, solicitors and peddlers from the Building, and to require registration, satisfactory identification and credentials from all persons seeking access to any part of the Building outside of ordinary business hours. The Landlord will exercise its best judgment in the execution of such control but shall not be held liable for the granting or refusal of such access. -25- 12. The Landlord reserves the right to exclude the general public from the Building upon such days and at such hours as in the Landlord's judgment will be for the best interests of the Building and its tenants. 13. The attaching of wires to the outside of the Building is absolutely prohibited, and no wires shall be run or installed in any part of the Building without the Landlord's permission and at Landlord's direction. 14. Requests for services of janitors or other Building employees must be made at the office of the Building Manager. 15. The Landlord shall have the right to make such other and further reasonable rules and regulations as, in the judgment of the Landlord, may from time to time be necessary for the safety, care and cleanliness of the Premises and for the preservation of good order therein, effective five (5) days after all Tenants have been given written notice thereof. 16. Whenever used herein, the singular shall include the plural and the masculine the feminine and/or neuter as the context may indicate. 17. Tenant agrees to cooperate with Landlord and other tenants of the Building in preventing its employees from parking in spaces reserved for visitors to the Building; Landlord does not, however, agree to be responsible for policing the visitor parking areas. -26- EX-10.9 18 AGREEMENT AMONG THE REGISTRANT EXHIBIT 10.9 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AGREEMENT This Agreement, dated as of July 20, 1998 (the "Effective Date"), is made by and between Lycos, Inc., a Delaware corporation with a principal place of business at 400-2 Totten Pond Road, Waltham, MA 02154-2000 ("Lycos"), Tripod, Inc., a Delaware corporation with a principal place of business at 191 Water Street, Williamstown, MA 01267 ("Tripod") (Lycos and Tripod are collectively referred to as "Lycos/Tripod"), and Netweb Corp., a Delaware corporation with a principal place of business at 3641 Sacramento Street, Suite A, San Francisco, California 94118 ("Netweb"). Recitals -------- A. Lycos/Tripod are the owners or licensees of certain Web services (collectively, the "Lycos/Tripod Services"), which are accessible through the URLs www.lycos.com and www.tripod.com; ------------- B. Netweb is a provider of Internet related services to small and growing companies, including its Banner Exchange Service, through which Netweb provides proprietary technology and a network of participating Web sites from which to display and distribute ad banners. Essentially, the Banner Exchange Service permits the publishers of personal homepages and smaller commercial Web sites to promote their sites with banner ads displayed on other publishers' sites within the "SmartClicks' Network" (as defined below) in exchange for banner ads promoting the other publishers' sites displayed on their sites. The number of ads received by each publisher is fewer than the number displayed by each publisher, and Lycos/Tripod and Netweb will share equally in the difference; C. Lycos/Tripod desire to have Netweb establish a Banner Exchange Service for both the Lycos and Tripod homepage builders ("Lycos Clicks" and "Tripod Clicks", collectively referred to herein as "Lycos/Tripod Clicks") and to receive a percentage of the Impressions (as defined below) generated from the Lycos/Tripod Clicks; D. Lycos/Tripod also desire to receive Stock Purchase Warrants entitling Lycos/Tripod to purchase Netweb stock; and E. Netweb desires to provide the Lycos/Tripod Clicks to Lycos/Tripod homepage builders, and to provide Lycos/Tripod with the Stock Purchase Warrants that are excercisable dependent on Lycos/Tripod achieving certain performance milestones. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lycos, Tripod and Netweb hereby agree as follows: Lycos/Tripod Confidential GO115086_1-DOC Terms ----- 1. Definitions. ----------- 1.1 "Banner Exchange Technology" means Netweb's proprietary software, -------------------------- including the source and executable code, which shall be used by Netweb to perform the Lycos/Tripod Clicks. 1.2 "Banner Exchange Service" means that service provided to ----------------------- Lycos/Tripod Clicks' Members using the Banner Exchange Technology. 1.3. "Lycos/Tripod Member" means an entity that uses the Lycos/Tripod ------------------- Services. 1.4 "Lycos/Tripod Clicks' Member" means an entity that registered for --------------------------- the Lycos/Tripod Clicks via the Lycos/Tripod Sites and is approved by the parties to have the right to display its ad banner throughout the Lycos/Tripod Network using the Banner Exchange Technology. 1.5 "Lycos/Tripod Network" means a networked collection of sites on -------------------- the World Wide Web comprised of all Lycos/Tripod Clicks' Members participating in the Lycos/Tripod Clicks. 1.6 "Lycos/Tripod Sites" means Lycos/Tripod's World Wide Web sites on ------------------ the Internet located at www.tripod.com, www.lycos.com, and all internally linked -------------- sub-pages. 1.7 "Lycos/Tripod Clicks' Member Site" means each Lycos/Tripod Clicks' -------------------------------- Member's World Wide Web site on the Internet and all internally linked sub- pages. 1.8 "SmartClicks' Member" means an entity that registered for a banner ------------------- exchange service on the SmartClicks' Site. 1.9 "SmartClicks' Network" means a networked collection of sites on -------------------- the World Wide Web comprised of all Lycos/Tripod Clicks' Members, SmartClicks embers, and all other Sponsors' web sites for which Netweb provides banners exchange services. 1.10 "SmartClicks' Site" means SmartClicks' World Wide Web site on the ----------------- Internet located at http://www.smartclicks.com and all internally linked sub- -------------------------- pages. 1.11 "Lycos/Tripod Generated Impressions" means *** percent (***%) of ---------------------------------- all Impressions derived from the Lycos/Tripod Network. 1.12 "Lycos/Tripod Clicks' Member Data" means information specific to -------------------------------- a Lycos/Tripod Clicks' Member that shall be obtained electronically by Lycos/Tripod as part of the process of such third party registering for the Lycos/Tripod Services and registering for Lycos/Tripod Clicks. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 2 1.13 "Impressions" means the delivery of an ad banner to a browser. ----------- 1.14 "Account" means a device by which a Lycos/Tripod Clicks' Member ------- Site accrues credits which are then used by such Lycos/Tripod Clicks' Member in displaying its ad banner within the SmartClicks' Network. Each such Account contains information which identifies the Lycos/Tripod Clicks' Member Site, the Lycos/Tripod Clicks' Member Site's statistics, and the Lycos/Tripod Clicks' Member's ad banner. 1.15 "Active Lycos/Tripod Account" means any Account whose associated --------------------------- Lycos/Tripod Clicks' Member Site meets each of the following conditions: 1) it conforms to Lycos/Tripod's normal terms of service and quality assurance requirements; 2) is enabled to show ad banners using the Banner Exchange Technology; 3) has submitted its own ad banner which has been approved by Netweb to be shown in the SmartClicks' Network; and 4) has displayed at least one ad banner served by the Banner Exchange Technology within the previous *** calendar days. 1.16 "Lycos/Tripod Privacy Vow" means that vow which Lycos/Tripod makes ------------------------ to its Lycos/Tripod Members with respect to the use of personal information or other Lycos/Tripod Clicks' Member Data and which is displayed at the following Internet addresses www.Lycos/Tripod.com/planet/membership/signup/privacy.html ---------------------------------------------------------- and www.lycos.com/lycosinc/legal.html as may be modified from time to time. 1.17 "Sponsor" means a third party which has entered into a definitive ------- agreement with Netweb for purposes of establishing a banner exchange. 2. Member Data. Lycos/Tripod Clicks' Member Data shall be the property of ----------- each party and each party is permitted to use such Lycos/Tripod Clicks' Member Data for marketing and the purposes outlined in Section 6, provided that a Lycos/Tripod Clicks' Member generating such Member Data has permitted use of its Member Data for such purposes and further provided that such use of Member Data shall conform to and abide by the Lycos/Tripod Privacy Vow. 3. Member Sites and Ad Banners. Netweb shall enable Lycos/Tripod Clicks' --------------------------- Members using Lycos/Tripod Clicks to display their ad banners pursuant to the specific requirements and limitations of the Banner Exchange Technology, provided however, that each Lycos/Tripod Clicks' Member Site conforms to Lycos/Tripod's customary terms of service and quality assurance requirements and that each ad banner submitted by a Lycos/Tripod Clicks' Member shall be approved by Netweb prior to display on the SmartClicks' Network. Netweb's approval of any ad banner shall not be unreasonably withheld. Ad banner approval will generally take place within twenty four (24) hours of submission to Netweb by a Lycos/Tripod Clicks' Member, and, in any event, will take place no later than seventy-two (72) hours after submission. *** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISION 3 4. Netweb Obligations. ------------------ a. Service Level. Netweb agrees to provide Lycos/Tripod Clicks to ------------- Lycos/Tripod Clicks' Members in a professional and reliable manner consistent with the manner provided to other SmartClicks' Members. b. Hosting, Maintaining, and Serving. Netweb agrees to host, --------------------------------- maintain, administer and serve all ad banners and statistical information related to a Lycos/Tripod Clicks' Member's use of Lycos/Tripod Clicks. c. Launch. Netweb shall launch Lycos Clicks and Tripod Clicks on or ------ about September 1, 1998. 5. Member Data Collection and Maintenance. Lycos/Tripod shall collect, -------------------------------------- maintain, and administer all Lycos/Tripod Clicks' Member Data. Lycos/Tripod shall provide Netweb with the Member Data necessary to provide the Banner Exchange Service as soon as the Lycos/Tripod Clicks' Member Data is received by Lycos/Tripod. Lycos/Tripod shall provide the Lycos/Tripod Clicks' Member Data to Netweb in an electronic file format as mutually agreed. In the event that, due to technical difficulties, Lycos/Tripod fails to provide Netweb with the Lycos/Tripod Clicks' Member Data within twenty four (24) hours of the Lycos/Tripod Member's registration for a total of *** percent (***%) of the registering Lycos/Tripod Members, and this failure continues for thirty (30) consecutive days, Netweb shall take over the registration process for Lycos/Tripod Clicks. 6. Marketing and Promotion. ----------------------- a. Naming. All parties shall display a word, phrase, or logo ------ (respectively, "Lycos Brand", "Tripod Brand" and "SmartAge Brand") when marketing and promoting Lycos/Tripod Clicks to prospective and existing Lycos/Tripod Clicks' Members. Lycos/Tripod agrees that the Lycos and Tripod Brands shall include the phrase "Clicks" (e.g., "Lycos/Tripod Clicks") and Netweb agrees that the SmartAge Brand shall consist of "Powered by SmartAge" or other similar phrase, word, or logo. The Lycos Brand, the Tripod Brand and the SmartAge Brand shall be in size, form, and design reasonably agreeable to the other parties. b. Promotion. Lycos/Tripod shall promote Lycos/Tripod Clicks by --------- placing graphical hyperlinks ("Promotional Links"), at their sole discretion, throughout the Lycos/Tripod Sites, for example, within the Homepage Builder, the homepage directory, the member homepage communities ("pods"), and the Tripod Insider, and the analogous locations on the Lycos Site, if and when Lycos offers to users personal homepage services. c. Newsletter. Netweb shall distribute two co-branded newsletters ---------- ("Newsletter") to Lycos/Tripod Clicks' Members on a weekly basis. Each such Newsletter will be titled "The Newsletter for Lycos' Homepage Builder" and "The Newsletter for Tripod's Homepage Builder" or similar titles, and will display "Sponsored by SmartAge" or other similar phrase as mutually agreed. Netweb shall design and provide content for each Newsletter and ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 4 may sell Newsletter advertising space to third parties. Netweb shall retain all advertising revenues earned. Each Newsletter also may include information and solicitations relevant to small and growing businesses. Each Newsletter shall be subject to Lycos/Tripod's reasonable approval, provided however that such approval will be granted within two business days of Lycos/Tripod receiving such a request for approval from Netweb. 7. Description Page. All Promotional Links will be hyperlinked to a ---------------- description page ("Description Pages") which will include general information explaining the benefits of Lycos/Tripod Clicks and identifying SmartAge as the administrative contact for Lycos/Tripod Clicks. Such information shall be provided by Netweb subject to the reasonable approval of Lycos/Tripod. Lycos/Tripod, in their sole discretion, shall design the Description Pages which will include a "Powered by SmartAge" button at the bottom of the page. Lycos/Tripod shall serve the Description Pages under a URL substantially similar to www.tripod.com/tripod/description and lycos.com/lycos/description. 8. Registration. Lycos/Tripod shall provide Lycos/Tripod Members with ------------ the opportunity to register for Lycos/Tripod Clicks ("Clicks' Registration"). Click's Registration shall be separate from other Lycos/Tripod registration processes and shall require prospective Lycos/Tripod Clicks' Members to submit information as determined by Netweb, provided however that such information is not required in conjunction with another Lycos/Tripod registration process. It is the intent of Netweb to minimize the amount of such information required during Clicks' Registration as both parties acknowledge and understand that this may have a material effect on the number of Lycos/Tripod Members that register for Lycos/Tripod Clicks. 9. Traffic Sharing. --------------- a. Lycos/Tripod Generated Impressions. Netweb shall allocate to ---------------------------------- Lycos/Tripod *** percent (***%) of Lycos/Tripod Generated Impressions derived from Active Lycos/Tripod Accounts. For example, if the total number of Impressions per day in the Lycos/Tripod Network is ***. The total number of Lycos/Tripod Generated Impressions is ***% of this amount, or *** per day. The percentage of Lycos/Tripod Generated Impressions allocated to Lycos/Tripod is ***%, resulting in *** Impressions per day being allocated to Lycos/Tripod or *** on a monthly basis. b. Bonus & Minimum Impressions. The number of Impressions allocated --------------------------- to Lycos/Tripod for the months of July 1998 and August 1998 will be equal to the number of Impressions allocated to Lycos/Tripod during each such month, pursuant to Section 9(a), plus *** Impressions ("Bonus Impressions"). For the months of September 1998 and October 1998, Lycos/Tripod will receive no less than *** Impressions ("Minimum Impressions") regardless of the actual number of Impressions allocated to Lycos/Tripod pursuant to Section 9(a) during each such month. Netweb shall allocate the Bonus Impressions or any shortfall from the Minimum Impressions within the first five (5) business days of the relevant subsequent month. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 5 c. Use of Allocated Impressions. Lycos/Tripod may use its allocated ---------------------------- Impressions, as calculated using the methodology described in this Section 9, to promote the Lycos/Tripod Sites or the Lycos/Tripod Services or may sell the allocated Impressions to third parties. Allocated Impressions may be used on any web site with available ad banner inventory within the SmartClicks' Network, and will be delivered evenly throughout the web sites in SmartClicks' Network. Allocated Impressions will be used to display Lycos/Tripod ad banner(s) in a continuous and automatic manner as mutually agreed. Lycos/Tripod's use of the allocated Impressions is subject to certain Banner Exchange Technology requirements, limitations and restrictions as specified on Exhibit C, as may be modified from time to time by mutual agreement of the parties. d. Reporting. Netweb shall provide Lycos/Tripod with a weekly summary --------- report specifying the total number of Active Lycos/Tripod Accounts, ad banners shown within the Lycos/Tripod Network, Impressions earned during the month, and other such information as the parties mutually agree. In addition, on a weekly basis, Netweb shall provide Lycos/Tripod with a list of Sponsors. Lycos/Tripod shall provide Netweb with weekly summary report specifying the number of page views per day on the Description Pages, the number of Lycos/Tripod Members that register to Lycos/Tripod Clicks on a daily basis, and other such information as the parties mutually agree. 10. Warrants. Netweb agrees to issue to Lycos/Tripod Series A Preferred -------- Stock Purchase Warrants (the "Warrants"), in the form set forth in attached Exhibit A. The Warrants will be exercisable to acquire shares of Netweb's Preferred Series A Stock in an amount equal to up to *** percent (***%) of the number of shares of common stock and preferred stock of Netweb outstanding immediately after the final closing (the "Close") of Netweb's Series A Preferred Stock equity financing (the "Financing") which Close will take place on or about July 24, 1998. The Warrants will be exercisable at a price of $.9375 per share and will be issued to Lycos/Tripod in accordance with the achievement of the performance objectives described in Exhibit B. The number of Warrants will be adjusted for subsequent issuances of stock, stock splits, reverse stock splits and similar events. 11. Technical Review. Netweb warrants and represents that the next version ---------------- of SmartClicks' ad serving software will be able to support multiple scheduler and data base servers, and that the intent of Netweb is to have the next versions of SmartClick's ad serving software launched by September 30, 1998. Both parties acknowledge and understand that changing technical specifications or requirements may cause delay in launching such software, but that such delay shall not extend beyond October 31, 1998. 12. Netweb's Internet Service Provider. No later than three (3) months ---------------------------------- after SmartClicks' peak bandwidth usage reaches 10 Megabits per second, Netweb shall relocate its web servers to a co-located facility that is reasonably agreeable to Lycos/Tripod. 13. Exclusivity. Netweb agrees not to execute a substantially similar ----------- agreement with ***, ***, ***, or ***, or ***, ***, ***, *** or ***, or any *** is ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 6 *** with *** or ***. Notwithstanding any other statements in this Section 13, during the Term, Netweb shall not provide personal or business page site hosting at no charge to end users (except as related to special promotions), and shall not provide fee based personal or business page site hosting if Netweb itself is hosting the pages. Lycos and Tripod agree not to execute a substantially similar agreement with *** or ***; provided, however, that Lycos/Tripod may execute a substantially similar agreement with *** or *** upon at least sixty (60) days prior written notice to Netweb. In the event that Lycos or Tripod terminates its exclusivity obligations pursuant to the prior sentence, Netweb may pursue agreements with other personal or business page site hosting services, but shall not provide personal or business page hosting (except as provided herein) for one year following the receipt of notice by Lycos/Tripod. 14. Term: The term ("Term") of this Agreement shall commence on the ---- Effective Date and continue for one year unless terminated earlier as provided in 20 below. This Agreement shall renew automatically for successive one year periods unless either Netweb or either Lycos or Tripod gives written notice of non-renewal to the other party at least sixty (60) days prior to any such renewal date. 15. Marks: Lycos and Tripod hereby grant to Netweb the non-exclusive, ----- non-transferable right to use the Lycos and Tripod' trademarks, service marks, logos and the like solely for the purposes specified in this Agreement. Netweb hereby grants Lycos and Tripod the non-exclusive, non-transferable right to use Netweb's trademarks, service marks, logos and the like solely for the purposes specified in this Agreement. Except as expressly stated herein, no party shall make any other use of another party's marks. Upon request of a party, another party shall provide appropriate attribution of the use of the requesting party's marks. (e.g., "Tripod(R) is a registered service mark of Tripod, Inc. All Rights Reserved."). 16. Representations and Warranties: Each party hereby represents and warrants ------------------------------ as follows: a. Corporate Power. Such party is duly organized and validly existing --------------- under the laws of the state of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof. b. Due Authorization. Such party is duly authorized to execute and ----------------- deliver this Agreement and to perform its obligations hereunder. c. Binding Agreement. This Agreement is a legal and valid obligation ----------------- binding upon it and enforceable with its terms. The execution, delivery and performance of this Agreement by such party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 7 d. Intellectual Property Rights. ---------------------------- i. Netweb has the full and exclusive right to grant or otherwise permit Lycos and Tripod to use the Banner Exchange Technology and Service, and to use Netweb's intellectual property, and Netweb is aware of no claims by any third parties adverse to any of such intellectual property rights. ii. Lycos and Tripod have the full and exclusive right to grant or otherwise permit Netweb access to the Lycos/Tripod Sites and to use Lycos' and Tripod's intellectual property, and Lycos and Tripod are aware of no claims by any third parties adverse to any of such intellectual property rights. iii. If a party's (the "Infringing Party") intellectual property rights are alleged or held to infringe the intellectual property rights of a third party, the Infringing Party shall, at its own expense, and in its sole discretion, (1) procure for the non-Infringing Party the right to continue to use the allegedly infringing intellectual property or (2) replace or modify the intellectual property to make it non-infringing; provided, however, if neither option is possible or economically feasible and if the inability to use such intellectual property would cause a material breach of this Agreement (as determined by the non-Infringing Party), the Infringing Party may terminate this Agreement. The representations and warranties and covenants in this Section 16 are continuous in nature and shall be deemed to have been given by each party at execution of this Agreement and at each stage of performance hereunder. These representations, warranties and covenants shall survive termination or expiration of this Agreement. 17. Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED IN ---------------------- SECTION 16 ABOVE, EACH PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NO PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO SUCH PARTY'S SITE(S) AND NO PARTY SHALL BE LIABLE FOR THE CONSEQUENCES OF ANY INTERRUPTIONS OR ERRORS RELATED THERETO. LYCOS AND TRIPOD SPECIFICALLY DISCLAIM ALL LIABILITY FOR THE BANNER EXCHANGE TECHNOLOGY AND SERVICE, AND NETWEB SPECIFICALLY DISCLAIMS ALL LIABILITY FOR THE LYCOS SITE, THE TRIPOD SITE AND THE CONTENT THEREIN. 18. Indemnification. --------------- a. Netweb Indemnity. Netweb will at all times indemnify and hold ---------------- harmless Lycos and Tripod and their officers,directors,shareholders, employees, employees, accountants, attorneys, agents, successors and assigns from and against any and all third party claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, arising out of or 8 related to any breach of any warranty, representation, covenant or agreement made by Netweb in this Agreement (but specifically excluding banners). Lycos or Tripod shall give Netweb prompt written notice of any claim, action or demand for which indemnity is claimed. Netweb shall have the right, but not the obligation, to control the defense and/or settlement of any claim in which it is named as a party and which arises as a result of Netweb's breach of any warranty, representation, covenant or agreement under this Agreement. Lycos and Tripod shall have the right to participate in any defense of a claim by Netweb with counsel of Lycos' and Tripod' choice at Lycos' and Tripod' own expense. The foregoing indemnity is conditioned upon: prompt written notice by Lycos or Tripod to Netweb of any claim, action or demand for which indemnity is claimed; complete control of the defense and settlement thereof by Netweb; and such reasonable cooperation by Lycos and Tripod in the defense as Netweb may request. b. Lycos/Tripod Indemnity. Lycos and Tripod will at all times ---------------------- defend, indemnify and hold harmless Netweb and its officers, directors, shareholders, employees, accountants, attorneys, agents, successors and assigns from and against any and all third party claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, arising out of or related to any breach of any warranty, representation, covenant or agreement made by Lycos or Tripod in this Agreement (but specifically excluding any content posted by users and appearing in personal home pages, search results, chat or bulletin boards). Netweb shall give Lycos and Tripod prompt written notice of any claim, action or demand for which indemnity is claimed. Lycos and Tripod shall have the right, but not the obligation, to control the defense and/or settlement of any claim in which they are named as parties and which arises as a result of Lycos' or Tripod's breach of any warranty, representation, covenant or agreement under this Agreement. Netweb shall have the right to participate in any defense of a claim by Lycos or Tripod with counsel defense of Netweb chose at its own expense. The foregoing indemnity is conditioned upon; prompt written notice by Netweb to Lycos and Tripod of any claim, action or demand for which indemnity is claimed; complete control of the defense and settlement thereof by Lycos and Tripod; and such reasonable cooperation by Netweb in the defense of Lycos and Tripod may request. c. Settlement. No party shall, without the prior written consent of ---------- the other parties, settle, compromise or consent to the entry of any judgment with respect to any pending or threatened claim unless the settlement, compromise or consent provides for and includes an express, unconditional release of all claims, damages, liabilities, costs and expenses, including reasonable legal fees and expenses, against the indemnified party. 19. Confidentiality, Press Releases. ------------------------------- a. Non-Disclosure Agreement. The parties agree and acknowledge ------------------------ that, as a result of negotiating, entering into and performing this Agreement, each party has and will have access to certain of the other parties' Confidential Information (as defined below). Each party also understands and agrees that misuse and/or disclosure of that information could adversely affect another party's business. Accordingly, the parties agree that, during the Term of this Agreement and thereafter, each party shall use and reproduce the other partyies' Confidential Information only for purposes of this Agreement and only to the extent necessary for such purpose and shall restrict disclosure of the other parties' Confidential Information to its 9 employees, consultants or independent contractors with a need to know and shall not disclose another party's Confidential Information to any third party without the prior written approval of the other party. Notwithstanding the foregoing, it shall not be a breach of this Agreement for any party to disclose Confidential Information of another party if required to do so under law or in a judicial or other governmental investigation or proceeding, provided the other party has been given prior notice and the disclosing party has sought all available safeguards against widespread dissemination prior to such disclosure. b. Confidential Information Defined. As used in this Agreement, the -------------------------------- term "Confidential Information" refers to: (i) the terms and conditions of this Agreement; (ii) each party's trade secrets, business plans, strategies, methods and/or practices; and (iii) other information relating to a party that is not generally known to the public, including information about a party's personnel, products, customers, marketing strategies, services or future business plans. Notwithstanding the foregoing, the term "Confidential Information" specifically excludes (A) information that is now in the public domain or subsequently enters the public domain by publication or otherwise through no action or fault of another party; (B) information that is known to a party without restriction, prior to receipt from another party under this Agreement, from its own independent sources as evidenced by such party's written records, and which was not acquired, directly or indirectly, from another party; (C) information that a party receives from any third party reasonably known by such receiving party to have a legal right to transmit such information, and not under any obligation to keep such information confidential; and (D) information independently developed by a party's employees or agents provided that the party can show that those same employees or agents had no access to the Confidential Information received hereunder. c. Press Releases. Lycos, Tripod and Netweb may prepare -------------- individually or jointly press releases concerning the existence of this Agreement and the terms hereof, provided however, that no such press release or other public statements concerning the existence or terms of this Agreement shall be made or released to any medium except with the prior approval of Lycos, Tripod and Netweb or as required by law. 20. Termination. Any party may terminate this Agreement if (a) another ----------- party files a petition for bankruptcy or is adjudicated bankrupt; (b) a petition in bankruptcy is filed against another party and such petition is not dismissed within sixty (60) days of the filing date; (c) another party becomes insolvent or makes an assignment for the benefit of its creditors pursuant to any bankruptcy law; (d) a receiver is appointed for another party or its business; or (e) by mutual consent of the parties. In the event of a material breach of a material provision of the Agreement, the breaching party shall have thirty (30) days to cure the breach after receipt of written notice identifying the matter constituting the material breach. If such breach is not cured by the end of the thirty (30) day period then the non-breaching party may terminate the Agreement upon thirty (30) days written notice to the breaching party. In addition, Lycos/Tripod may terminate this Agreement at any time prior to the tenth business day following the date on which Lycos/Tripod receives the final documents relating to the Financing or the Series A Preferred Stock, in the event that Lycos/Tripod, in their sole and absolute discretion, do not approve of the terms and conditions of any of the documents relating to the Financing or the Series A Preferred Stock. Lycos/Tripod may exercise their right of termination referred to in the 10 preceding sentence by providing Netweb with a written notice of termination prior to 5:00 p.m. (Pacific Time) on July 31, 1998. 21. Force Majeure. In the event that any party is prevented ------------- from performing, or is unable to perform, any of its obligations under this Agreement due to any cause beyond the reasonable control of the party invoking this provision, the affected party's performance shall be excused and the time for performance shall be extended for the period of delay or inability to perform due to such occurrence. 22. Relationship of Parties. Netweb and Lycos/Tripod are independent ----------------------- contractors under this Agreement, and nothing herein shall be construed to create a partnership, joint venture or agency relationship between Netweb and Lycos/Tripod. Neither party has authority to enter into agreements of any kind on behalf of the other. 23. Assignment, Binding Effect. Neither Lycos, Tripod nor Netweb may -------------------------- assign this Agreement or any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other. Notwithstanding the foregoing, Lycos and Tripod may assign this Agreement to any successor of Lycos or Tripod, respectively, and Netweb may assign this Agreement to any successor of Netweb. 24. Choice of Law and Forum. This Agreement, its interpretation, ----------------------- performance or any breach thereof, shall be construed in accordance with, and all questions with respect thereto shall be determined by, the laws of the Commonwealth of Massachusetts applicable to contracts entered into and wholly to be performed within said state. Netweb hereby consents to the personal jurisdiction of the Commonwealth of Massachusetts, acknowledges that venue is proper in any state or Federal court in the Commonwealth of Massachusetts, agrees that any action related to this Agreement must be brought in a state or Federal court in the Commonwealth of Massachusetts, and waives any objection Netweb has or may have in the future with respect to any of the foregoing. 25. Good Faith. The parties agree to act in good faith with respect to ---------- each provision of this Agreement and any dispute that may arise related hereto. 26. Additional Documents/Information. The parties agree to sign and/or -------------------------------- provide such additional documents and/or information as may reasonably be required to carry out the intent of this Agreement and to effectuate its purposes. 27. Counterparts. This Agreement may be executed in multiple ------------ counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 28. No Waiver. The waiver by a party of a breach or a default of any --------- provision of this Agreement by another party shall not be construed as a waiver of any succeeding breach of the same or any other provision, nor shall any delay or omission on the part of a party to exercise or avail itself of any right, power or privilege that it has, or may have hereunder, operate as a waiver of any right, power or privilege by such party. 11 29. Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties hereto and their respective heirs, successors and assigns. 30. Severability. Each provision of this Agreement shall be severable ------------ from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 31. Notices. All notice required to be given under this Agreement must ------- be given in writing and delivered either in hand, by certified mail, return receipt requested, postage pre-paid, or by Federal Express or other recognized overnight delivery service, all delivery charges pre-paid, and addressed: If to Tripod: Tripod, Inc. 191 Water Street Williamstown, MA 01267 Fax no. (413) 458-2465 Attention: Chief Executive Officer with a copy to: General Counsel Lycos, Inc. 400-2 Totten Pond Road Waltham, MA 02154 Fax no. (781) 370-2600 If to Lycos: Lycos, Inc. 400-2 Totten Pond Road Waltham, MA 02154 Fax No. (781) 370-2600 Attention: Chief Operating Officer with a copy to: General Counsel Lycos, Inc. 400-2 Totten Pond Road Waltham, MA 02154 Fax no. (781) 370-2600 If to Netweb: Anna Zornosa, President Netweb Corp. 3641 Sacramento Street, Suite A San Francisco, CA 94118 with a copy to: Kevin Kelso, Outside Legal Counsel Fenwick & West LLP 2 Palo Alto Square 12 Palo Alto, CA 94306 32. Entire Agreement. This Agreement contains the entire understanding ---------------- of the parties hereto with respect to the transactions and matters contemplated hereby, supersedes all previous agreements between Lycos, Tripod and Netweb concerning the subject matter, and cannot be amended except by a writing signed by both parties. No party hereto has relied on any statement, representation or promise of any other party or with any other officer, agent, employee or attorney for another party in executing this Agreement except as expressly stated herein. 33. Limitations of Liability. UNDER NO CIRCUMSTANCES SHALL ANY PARTY ------------------------ BE LIABLE TO ANOTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM SUCH PARTY'S PERFORMANCE OR NON-PERFORMANCE PURSUANT TO ANY PROVISION OF THIS AGREEMENT (INCLUDING SUCH DAMAGES INCURRED BY THIRD PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR DAMAGES IN EXCESS OF THE AMOUNT RECEIVED BY SUCH PARTY UNDER THIS AGREEMENT, PROVIDED THAT THIS SECTION DOES NOT LIMIT ANY PARTY'S LIABILITY TO ANOTHER FOR (A) WILLFUL AND MALICIOUS MISCONDUCT; (B) DIRECT DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY; (C) BODILY INJURY OR DEATH CAUSED BY NEGLIGENCE; OR (D) INDEMNIFICATION OBLIGATIONS HEREUNDER. IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date set forth above. NETWEB CORP. LYCOS, INC. By: /s/ Carter J. Hostelley By: /s/ Edward M. Philip ------------------------- ----------------------- Name: Carter J. Hostelley Name: Edward M. Philip ------------------- ---------------------- Title: Director Business Manage. Title: CEO ------------------------- -------------------- Date: _________________________ Date: ____________________ 13 EXHIBIT B WARRANT PERFORMANCE OBJECTIVES The Warrants will be exercisable as follows: (a) the first one percent (1%) in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts; (b) the next one percent (1%) in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts; (c) the next two percent (2%) in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts; and (d) the final two percent (2%) in one half of one percent (0.5%) increments for every *** Active Lycos/Tripod Accounts. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 22 EXHIBIT C BANNER EXCHANGE TERMS & CONDITIONS ---------------------------------- By joining the SmartClicks Banner Network, SmartClicks' Members have indicated agreement to the following terms and conditions. Compliance with the terms and conditions ensures that only appropriate sites become SmartClicks Members and that all network advertising meets SmartClicks standards. Anyone violating these terms will be removed from the SmartClicks Banner Network. 1. SmartClicks reserves the right to refuse to continue membership to any Web site in the SmartClicks network that contains nudity, sexual situations, pornography, hate groups, illegal activities, is offensive or for any other reason. 2. SmartClicks also reserves the right to reject any banner that contains nudity, profanity, is offensive or for any other reason. 3. Members agree to insert the provided SmartClicks HTML code for displaying banners on their Web site. The SmartClicks HTML code may not be modified in any way without written permission from SmartClicks. 4. Only one (1) SmartClicks banner can be placed on a page. A page is what is displayed on one screen, so members who use frames must count all individual pages in the frame as one page for banner placement purposes. 5. SmartClicks Banner Network banners must be displayed on the page such that the banner is easily visible. Banners that are "hidden," where the visitor has no way to view banner, will result in immediate termination of the account. 6. A member may not artificially inflate traffic counts to his/her site using any device, program, robot or other means. A banner cannot be placed on a page that reloads automatically. Banners loaded via the SmartClicks HTML may not be placed in newsgroups, unless permission is granted from SmartClicks. Logs are checked frequently for inflated traffic counts. Anyone caught artificially inflating traffic counts will have the offending account terminated immediately. A member may then offer a defense to have the account re-instated. SmartClicks' logs and/or judgments in these matters will prevail. 7. A member may not display the SmartClicks HTML on sites other than the one to which the account is addressed to click-thru to, unless written permission is granted from SmartClicks. A member may display the SmartClicks HTML on any of the pages on the site, as long as there is a path of links from the page that the banner clicks thru to, to the page on which the banner is displayed. Displaying banners on other sites or other locations is grounds for termination of the account. 23 8. A banner that appears on your site at any time may be a banner for another member, for a sponsor or for SmartClicks. Ratings restrictions apply. 9. SmartClicks reserves the right not to accept any advertisements from entities whose product or advertisement are deemed by SmartClicks to be inappropriate or for any other reason. 10. A member may cancel their membership with SmartClicks Banner Network at any time by sending a cancellation notice, containing the account number and password that you wish to cancel, to accounts@smartclicks.com and removing the ------------------------ SmartClicks HTML code from the Web site. Cancellations take place immediately. 11. The SmartClicks name, logo, software, databases, reports, Web site, and information are proprietary and cannot be used without permission from SmartClicks. Exception: each member has the right to use information compiled by SmartClicks for the member's site or in the promotion of the member's site. 12. Members agree that their Web site information (name, URL, traffic counts, etc.) may be used by SmartClicks. 13. In accordance with the terms of the Agreement, the information members provide to SmartClicks will be kept confidential and will not be distributed, except in aggregate, to any outside agency. 14. In accordance with the terms of this Agreement, SmartClicks, its administrators, partners and sponsors cannot be held liable for any damage or loss of information that may occur from the use of SmartClicks' services. 15. Members agree to use SmartClicks at their own risk. 16. SmartClicks makes every effort to verify and maintain a high standard of quality for our services, but SmartClicks does not make any guarantees regarding the dependability or accuracy of SmartClicks' services. 17. SmartClicks will attempt to correct inconsistencies in credits due any member if member offers some proof of inconsistency. 18. SmartClicks reserves the right to modify or change these Terms and Conditions as it deems necessary. It is the member's responsibility to keep current with changes in the Terms and Conditions, since changes are effective for all members, regardless of when member joined. Updates will be evident by the date modified on the Site Map page. 24 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AMENDMENT NO. 1 This Amendment No. 1 to the original Agreement (the "Original Agreement") between the parties dated July 20, 1998, is made as of the 23rd day of March, 1999, and is made by and between Lycos, Inc., a Delaware corporation with a principal place of business at 400-2 Totten Pond Road, Waltham, MA 02154-2000 ("Lycos"), Tripod, Inc., a Delaware corporation with a principal place of business at 160 Water Street, Williamstown, MA 01267 ("Tripod") (Lycos and Tripod are collectively referred to as "Lycos/Tripod"), and SmartAge Corp. (formerly known as Netweb Corp.), a Delaware corporation with a principal place of business at 3641 Sacramento Street, Suite A, San Francisco, California 94118 ("SmartAge"). 1. Unless otherwise indicated, all capitalized terms used in this Amendment No. 1 shall have the meanings set forth in the Original Agreement, with the exception of "Netweb" which is referred to throughout this Amendment No. 1 as "SmartAge" 2. Recitals A and C of the Original Agreement are hereby deleted and replaced in their entirety by the following: A. Lycos/Tripod are the owners or licensees of certain Web services (collectively, the "Lycos/Tripod Services"), which are accessible through the URLs www.lycos.com, www.tripod.com, and www.angelfire.com; ------------- -------------- ------------------ C. Lycos/Tripod desire to have SmartAge establish a Banner Exchange Service for the Lycos, Tripod, and Angelfire homepage builders (collectively referred to herein as "Lycos/Tripod Clicks") and to receive a percentage of the Impressions (as defined below) generated from the Lycos/Tripod Clicks; 3. Section 1 of the Original Agreement is amended to delete definition 1.6 and to replace definition 1.6 in its entirety with the following: 1.6 "Lycos/Tripod Sites" means Lycos/Tripod's World Wide Web sites on ------------------ the Internet located at www.tripod.com, www.lycos.com, -------------- www.angelfire.com, and all internally linked sub-pages. ----------------- 4. Section 1 of the Original Agreement is amended to include the following definitions: 1.18 *** means the *** for Lycos/Tripod Clicks as part of the process of *** for a Web page building or other free service offered via a Lycos Media Property. From a Lycos/Tripod Member's ***, *** means a Lycos/Tripod Member will be *** to *** for Lycos/Tripod Clicks when *** for a Web page building or other free service via a ***. In the event that a Lycos/Tripod Member does not want *** for Lycos/Tripod Clicks such *** will be able to ***. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Lycos/Tripod Confidential 1.19 "HomePage Studio" means that Web page building service offered to a Lycos/Tripod Member via www.tripod.com and referred to by Tripod as -------------- "HomePage Studio". 1.20 "Lycos Media Properties" (each a Lycos Media Property) means Lycos' Web sites located at www.lycos.com, www.tripod.com, www.angelfire.com, ------------- -------------- ----------------- www.whowhere.lycos.com, and, if the proposed merger transaction with ---------------------- Wired Digital is consummated, www.hotbot.com. -------------- 5. Section 6(c) of the Original Agreement is hereby deleted and replaced in its entirety by the following: 6(c). Newsletter. SmartAge shall distribute two (2) co-branded weekly ---------- newsletters ("Newsletter") to those Lycos/Tripod Clicks' Members which register for Lycos/Tripod Clicks through www.lycos.com and ------------- www.tripod.com, provided however, that such Lycos/Tripod Clicks' Members -------------- shall have the option to unsubscribe from the Newsletter. Each such Newsletter will be titled "The Newsletter for Lycos' Homepage Builder" and "The Newsletter for Tripod's Homepage Builder" or similar titles, and will display "Sponsored by SmartAge" or other similar phrase as mutually agreed. SmartAge shall design and provide content for each Newsletter and may sell Newsletter advertising space to third parties. SmartAge shall retain all advertising revenues earned. Each Newsletter also may include information and solicitations relevant to small and growing businesses. Each Newsletter shall be subject to Lycos/Tripod's reasonable approval, provided however that such approval will be granted within forty eight (48) business hours of Lycos/Tripod receiving such a request for approval from SmartAge. If Lycos/Tripod does not respond to such request within such time period, then SmartAge shall have the right to distribute such Newsletter. It is the intent of the parties to work together to evaluate developing a newsletter for those Lycos/Tripod Clicks' Members which register for Lycos/Tripod Clicks through www.angelfire.com. ----------------- 6. Section 8 of the Original Agreement is hereby deleted and replaced in its entirety by the following: 8. Registration. Lycos/Tripod shall provide Lycos/Tripod Members with ------------ the opportunity to register for Lycos/Tripod Clicks. Lycos/Tripod agrees to integrate registration for Lycos/Tripod Clicks with the registration process for the page building services on www.lycos.com, ------------- www.angelfire.com, and the HomePage Builder such that it is the Default ----------------- Option, provided however, that a Lycos/Tripod Member will have the option not to register for Lycos/Tripod Clicks. Lycos/Tripod further agrees to evaluate such integration of the Lycos/Tripod Clicks registration into services offered via other Lycos Media Properties. Both parties agree that each such Lycos/Tripod Clicks registration shall be integrated into the Lycos/Tripod Services registration process in a manner, form and with technical specifications as are mutually agreed to by the parties. It is the intent of the parties to minimize the amount of information required during the Lycos/Tripod Clicks registration process as both parties acknowledge and understand that this may have a material effect on the number of Lycos/Tripod Members that register for Lycos/Tripod Clicks. 2 7. Section 9(d) of the Original Agreement is hereby deleted and replaced in its entirety by the following: 9(d). Reporting. SmartAge shall provide Lycos/Tripod with a weekly --------- summary report specifying the total number of Active Lycos/Tripod Accounts, ad banners shown within the Lycos/Tripod Network, Impressions earned during, the month, and other such information as the parties mutually agree, provided that such information relating to www.anizelfire.com shall be shown in a separate manner unless otherwise ------------------ agreed to by the parties. In addition, on a weekly basis, SmartAge shall provide Lycos/Tripod with a list of Sponsors. Lycos/Tripod shall provide SmartAge with weekly summary report specifying the number of page views per day on the Description Pages, the number of Lycos/Tripod Members that register to Lycos/Tripod Clicks on a daily basis, and other such information as the parties mutually agree. 8. Section 13 of the Original Agreement is hereby deleted, and replaced in its entirety with the following: 13. Lycos and Tripod agree not to execute a substantially similar agreement with LinkExchange or another banner exchange provider; provided, however, that Lycos/Tripod may execute a substantially similar agreement with Link Exchange or another banner exchange provider upon at least sixty (60) days prior written notice to SmartAge. 9. Exhibit A of the Original Agreement is hereby deleted and replaced in its entirety with the attached Exhibit 1. 10. Exhibit B of the Original Agreement is hereby deleted and replaced in its entirety with the attached Exhibit 2. Except as expressly amended herein, the Original Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date set forth above. SMARTAGE CORP. LYCOS, INC. By: /s/ William Lohse By: /s/ Edward M. Philip ------------------------------ ------------------------------- Name: William Lohse Name Edward M. Philip ---------------------------- ----------------------------- Title: CEO Title COO --------------------------- ----------------------------- Date: 4/3/99 Date: 3/23/99 ---------------------------- ----------------------------- 3 EXHIBIT 2 WARRANT PERFORMANCE OBJECTIVES The Warrants will be exercisable to acquire shares of SmartAge's Preferred Series A Stock in an amount equal to up to a maximum of six percent (6%) of the 18,202,655 shares of common stock and preferred stock of SmartAge outstanding immediately after the July 30, 1998 close of the Financing or 1,092,159 shares. The Warrant will be exercisable at a price of $.9375 per share, and the will be issued to Lycos/Tripod in accordance with the achievement of the performance objectives as follows: 1. One and one half percent (1.5%) or 273,040 shares of Preferred Series A Stock on that date on which all of the following events have occurred: (a) Lycos/Tripod Clicks has been integrated into the registration process for HomePage Studio as a Default Option in a mutually agreeable manner; (b) such integrated registration process has been made publicly available through www.tripod.com; and (c) such integrated process has performed in a commercially - --------------- reasonable manner for a minimum of six (6) consecutive days. 2. One and one half percent (1.5%) or 273,040 shares of Preferred Series A Stock on that date on which all of the following events have occurred: (a) Lycos/Tripod Clicks has been integrated into the registration process for the home page building services available through www.angelfire.com as a Default ----------------- Option in a mutually agreeable manner; (b) such integrated registration process has been made publicly available through www.angelfire.com; and (c) such ------------------ integrated process has performed in a commercially reasonable manner for a minimum of six (6) consecutive days. 3. Three percent (3%) or 546,080 shares of Preferred Series A Stock as follows: (a) the first one percent (1%) or 182,027 shares in one half of one percent (0.5%) or 91,014 share increments for every *** Active Lycos/Tripod Accounts (for a total of ***); (b) the next one percent (1%) or 182,026 shares in one half of one percent (0.5%) or 91,014 share increments for every *** Active Lycos/Tripod Accounts (for a total of ***); (c) the remaining one percent (1%) or 182,027 shares in one half of one percent (0.5%) or 91,014 share increments for every *** Active Lycos/Tripod Accounts (for total of ***). ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 12 EX-10.10 19 MARKETING & SERVICES AGREEMENT EXHIBIT 10.10 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MARKETING AND SERVICES AGREEMENT This Marketing and Services Agreement ("Agreement") is entered into as of April 30, 1999 (the "Effective Date") by and between SmartAge Corp., a Delaware corporation, with principal place of business at 3450 California Street, San Francisco, CA 94118 ("SmartAge") and Excite, Inc., a Delaware corporation, with principal place of business at 555 Broadway, Redwood City, CA ("Excite"). RECITALS A. SmartAge is a provider of Internet related services to small and growing companies which services are accessible through the Internet addresses: www.smartage.com including its SmartClicks' banner exchange service, which - ---------------- provides a proprietary technology and a network of participating Web sites from which to display and distribute ad banners for members. B. Excite maintains sites on the Internet at http://www.excite.com (the "Excite Site"), at http://www.Classifieds2000.com (the "Classifieds2000 Site") and at http://www.webcrawler.com (the "WebCrawler Site") and others (collectively, the "Excite Network") which, among other things, allow its users to search for and access content and other sites on the Internet. For purposes of this Agreement, the parties hereby acknowledge that the terms and conditions contained in this Agreement do not apply to Excite's rights with respect to the site on the Internet located at http://home.netscape.com and/or other URLs or locations designated by Netscape Communications Corporation. C. Excite desires to have SmartAge establish a content affiliate network for Excite and to market such network to its users, and to have Affiliate Data (as defined below) be jointly owned by the parties. D. Excite desires to have SmartAge establish an automated advertising buying service on its behalf for purposes of selling advertising placements on the Excite Network (as defined below), and to provide SmartAge with a portion of the revenues generated from the service. Excite further desires to sell advertising placements on the Excite Network through an automated advertising buying service that SmartAge shall establish for users of the SmartAge Site (as defined below), and to provide SmartAge with a portion of the revenues from such sales. E. SmartAge desires to establish a banner exchange service for Excite and to provide Excite with Allocated Impressions (as defined in Section 4.4) generated from the service. F. SmartAge desires to sell SmartAge and third party provided services to users of the Excite Network, and to provide Excite with a portion of the revenues generated from such sales. G. SmartAge desires to provide Excite with Stock Purchase Warrants (as defined below) that shall be exercisable dependent on Excite achieving certain performance milestones. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, SmartAge and Excite hereby agree as follows: 1. DEFINITIONS. 1.1 "Account" means a device by which a Clicks' Member Site stores accrued ------- credits which are then used by such Clicks' Member in displaying its ad banner within the SmartClicks' Network. Each such Account contains information that identifies the Clicks' Member Site, statistics generated from the Clicks' Member Site, and the Clicks' Member's ad banner(s). 1.2 "Active Affiliate"- see definition under 1.6 below. ---------------- 1.3 "Active Clicks' Member" means any Clicks' Member whose associated --------------------- Clicks' Member Site meets each of the following conditions: 1) it has been approved by SmartAge; 2) is enabled to show ad banners using the Banner Exchange Technology; 3) has submitted its own ad banner which has been approved by SmartAge to be shown on the SmartClicks' Network; and 4) has displayed at least one ad banner served by the Banner Exchange Technology in a given month. 1.4 "Advertiser" means a third party that purchases or is considering ---------- purchasing Available Inventory. 1.5 "Advertiser Data" means information about an Advertiser that shall be --------------- obtained electronically by SmartAge as part of the process of such Advertiser placing an order for Available Inventory via the Buying Services (as defined in Section 3.1 (c)). 1.6 "Affiliate" means a user that has completed the registration process --------- for the EAN Program and has been approved by SmartAge per the EAN Program Affiliate Guidelines to display Syndicated Content on its Web site. An Affiliate shall be considered an Active Affiliate at any time that such Affiliate has Syndicated Content on its Web site and is generating a minimum of *** (***) Referrals in a given month. 1.7 "Affiliate Data" means registration information specific to a third -------------- party that shall be obtained electronically by SmartAge as part of the process of such third party registering to become an Affiliate of the EAN Program. Affiliate Data shall also include Affiliate Referral data (i.e., traffic statistics, credits awarded). 1.8 "Available Inventory" means general rotation, channel, and key word ------------------- ad banner advertisement placements available for purchase on the Excite Network. 1.9 "Banner Exchange Service" means that service provided to Clicks' ----------------------- Members using the Banner Exchange Technology. 1.10 "Banner Exchange Technology" means SmartAge's proprietary software, -------------------------- including the source and executable code, which shall be used by SmartAge to serve Clicks' Members' ad banners in the SmartClicks' Network. 1.11 "Clicks' Member" means a third party that registered for the Banner -------------- Exchange Service via the Excite Site or the Excite Network and is approved by SmartAge to have the right to display its ad banner throughout the SmartClicks' Network. 1.12 "Clicks' Member Data" means registration information specific to a ------------------- third party that shall be obtained electronically by SmartAge as part of the process of such third party registering for the Banner Exchange Service. 1.13 "Clicks' Member Site" means each Clicks' Member's World Wide Web ------------------- site on the Internet and all internally linked sub-pages. 1.14 "Co-Branded Page" means any Web page on the Excite Network or the --------------- SmartAge Site that displays the name, brand, logo, trademark, service mark or other identifying mark of both Excite ("Excite Brand") and SmartAge ("SmartAge Brand") in manner as mutually agreed and as specified within this Agreement. 1.15 "Content Affiliate Service" means the serving of Excite originated ------------------------- Syndicated Content by SmartAge in the form of HTML snippets. 1.16 "EAN Program" means the Excite Affiliate Network Program which ----------- program shall enable a user to become an Affiliate and display Syndicated Content on its Web site. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 2 1.17 "EAN Program Affiliate Guidelines" means those guidelines established -------------------------------- by Excite and used by SmartAge in approving a third party to become an Affiliate. The EAN Program Affiliate Guidelines are attached hereto as Exhibit C, as may be modified by Excite from time to time. 1.18 "EAN Services" means those services pursuant to Section 2.1 that ------------ SmartAge shall provide to Excite in establishing, maintaining, and administering the EAN Program. 1.19 "Excite Banner Guidelines" means those guidelines established by Excite ------------------------ and used by SmartAge in approving an ad banners, submitted by Affiliates or by Advertisers purchasing Available Inventory through the Buying Services, before it is displayed on the SmartClicks' Network or the Excite Network. The Excite Banner Guidelines are attached hereto as Exhibit D, as may be modified from time to time. 1.20 "Excite Network" means the Excite Site including without limitation its -------------- international Web sites, and other such wholly owned or controlled media properties as mutually agreed and as specified on Exhibit E attached hereto, as may be modified from time to time. 1.21 "Excite Site" means Excite's World Wide Web site on the Internet ----------- located at www.excite.com and all internally linked sub-pages. -------------- 1.22 "Impression" means the delivery of an ad banner to a browser. ---------- 1.23 "Membership Growth Warrant" means the Stock Purchase Warrant that shall ------------------------- be issued to Excite in the event that Excite achieves those performance milestones in manner and as specified in Exhibit A, attached hereto. The Membership Growth Warrant shall be in form set forth in Exhibit G. 1.24 "Offered Services" means those services, specifically excluding the ---------------- Banner Exchange Service, which SmartAge shall be responsible for providing to users of the Excite Network. Offered Services shall include both SmartAge owned and provided services, and third party provided services in which SmartAge is an authorized reseller as defined in Exhibit I. 1.25 "Redeemable Points" means the benefit that shall accrue to an Affiliate ----------------- when a user of such Affiliate's Web site accesses the Excite Site via a Syndicated Content based hyper-link. Such benefit shall accrue in the form of points that may be redeemed by an Affiliate to display ad banners on the SmartClicks' Network pursuant to Section 2.1 or for other redemption as identified by Excite. Excite will give reasonable consideration to suggestions by SmartAge to add redemption opportunities to the EAN Program. Furthermore, it is also the intent of the parties to evaluate using such points for discounts on SmartAge provided services, as determined by SmartAge and Excite, or Excite provided services as determined by Excite. 1.26 "Redemption Rate" means the exchange rate at which Redeemable Points --------------- may be redeemed for Impressions pursuant to Section 2.6 (a) or other redemption as determined by Excite. 1.27 "Referral" means a third party that accesses the Excite Site via -------- Syndicated Content on an Affiliate's Web site. 1.28 "Sales Growth Warrant" means the Stock Purchase Warrant that shall be -------------------- issued to Excite in the event that Excite achieves those performance milestones in manner and as specified in Exhibit B. The Sales Growth Warrant shall be in form set forth in Exhibit K. 1.29 "Service Member" means a third party that purchases an Offered Service, -------------- or any other service provided by SmartAge or a third party under contract to SmartAge, via the Excite Network. Confidential and Proprietary Information 3 1.30 "Service Member Data" means registration information specific to a ------------------- third party that shall be obtained electronically by SmartAge as part of the process of such third party purchasing an Offered Service. 1.31 "SmartAge Member" means a third party that registered for a service --------------- via a SmartAge promotion, the home page of the SmartAge Site, or the home page of the SmartClicks' Site. 1.32 "SmartAge Site" means SmartAge's World Wide Web site on the Internet ------------- located at www.smartage.com and all internally linked sub-pages. ---------------- 1.33 "SmartAge Sourced Affiliate" means a third party that becomes an -------------------------- Affiliate as a result of a SmartAge promotion or via the SmartAge Site. 1.34 "SmartAge Sourced Active Affiliate" means a SmartAge Sourced --------------------------------- Affiliate that is simultaneously an Active Affiliate. 1.35 "SmartAge Sourced-Lead" means an Advertiser that purchased Available --------------------- Inventory via the SmartAge Buying Service (as defined in Section 3.1 (b)) or has met each of the following conditions: (i) it has been referred to Excite by SmartAge; (ii) has not purchased Available Inventory from Excite within the prior twelve (12) month period; and (iii) purchased Available Inventory. 1.36 "SmartClicks' Site" means SmartAge's World Wide Web site on the ----------------- Internet located at www.smartclicks.com and all internally linked sub-pages. ------------------- 1.37 "SmartClicks' Member" means a third party that registered for the ------------------- SmartClicks' banner exchange service via the SmartClicks' Site. 1.38 "SmartClicks' Network" means that networked collection of Web sites -------------------- participating in a banner exchange service owned and operated by SmartAge and using the Banner Exchange Technology. 1.39 "SmartClicks Terms and Conditions" means the terms, conditions, -------------------------------- requirements, limitations and restrictions, as may be reasonably modified by SmartAge from time to time, which are described on the page of the SmartClicks' Site which has a title which is substantially similar to "SmartClicks Terms and Conditions." 1.40 "Stock Purchase Warrants" means the Sales Growth Warrant and the ----------------------- Membership Growth Warrant collectively, which shall be issued and exercisable to purchase SmartAge Series B Preferred stock in number of shares as calculated dependent on Excite achieving certain performance milestones pursuant to Sections 3.12 and 4.5, respectively. 1.41 "Syndicated Content" means the text, data, hyper-links and other ------------------ information provided by Excite to users and Affiliates in conjunction with the EAN Program via dynamic content modules. 1.42 "Terms and Conditions" means the terms, conditions, requirements, -------------------- limitations and restrictions, as may be reasonably modified by the parties from time to time, which shall be described on that page of the SmartClicks' Site, SmartAge Site, Excite Site, or Excite Network as applicable, which shall have the title substantially similar to "Terms and Conditions" attached in Exhibit H. 2. EXCITE AFFILIATE NETWORK PROGRAM. 2.1 SmartAge EAN Obligations. ------------------------ a. EAN Registration Process. SmartAge agrees to build and administer ------------------------ an Internet-based registration process for the EAN Program which process shall enable a user to register to become an Affiliate via the Excite Confidential and Proprietary Information 4 Site. Such registration process shall be in manner, form and design, and request specific Affiliate Data as determined by SmartAge and Excite, subject to the reasonable approval of Excite. b. Affiliate Approval. SmartAge agrees to be responsible for ------------------ approving prospective Affiliates according to the EAN Program Affiliate Guidelines and will use commercially reasonable efforts to ensure that such guidelines are followed. c. Syndicated Content and Tracking. SmartAge agrees to serve ------------------------------- Syndicated Content to Affiliates. SmartAge further agrees to track Referrals and the accumulation of Redeemable Points. Both parties agree that such serving and tracking shall be in manner and form as determined by SmartAge and Excite, subject to the reasonable approval of Excite. d. Redemption and Fulfillment. SmartAge agrees to provide a -------------------------- mechanism through which Affiliates can redeem Redeemable Points and submit ad banners to SmartAge for display on the SmartClicks' Network. Such mechanism shall be in manner and form as determined by SmartAge and Excite, subject to the reasonable approval of Excite. e. Ad Banner Approval. SmartAge shall be responsible for approving ------------------ ad banners submitted by Affiliates in redeeming Redeemable Points pursuant to Section 2.1 (d) herein. Such approval shall be according to the Excite Banner Guidelines and SmartAge agrees to use commercially reasonable efforts to ensure that such guidelines are followed. In the event that Excite, in its sole discretion, determines that an Affiliate's ad banner does not meet the Excite Banner Guidelines or is unacceptable for any other reason, SmartAge will make commercially reasonable efforts to remove such ad banner from the SmartClicks' Network within forty-eight (48) hours of written notice by Excite. Excite may modify the Excite Banner Guidelines at any time by providing written notice of such modification to SmartAge and by the parties updating Exhibit D to reflect such modification. f. Hosting, Maintaining, and Serving. SmartAge agrees to host, --------------------------------- maintain, administer and serve all registration pages, administrative pages, statistical pages, and ad banners related to an Affiliate's use of the EAN Program in a professional, reliable, and timely manner. g. Affiliate Data Collection and Maintenance. SmartAge agrees to ----------------------------------------- collect, maintain, and administer all Affiliate Data at a location and on software and equipment as determined by SmartAge. SmartAge further agrees to provide to Excite on a monthly basis all Affiliate Data including but not be limited to: company name, URL, address, phone and fax number, Affiliate Referrals, point balances and points redeemed, as well as the name, title, and e-mail address of such company's primary contact. Such Affiliate Data shall be provided in aggregate, as well as on an individual Affiliate basis. Such Affiliate Data shall be provided in form, manner, and timeliness as mutually agreed. h. Customer Support. SmartAge agrees to respond to all customer ---------------- service issues and provide all customer service support related to use of the EAN Program in a professional and reliable manner, provided however, that all such customer service shall be provided to Affiliates via e-mail unless otherwise agreed by SmartAge. i. Launch Date. SmartAge agrees that the first date upon which a ----------- user shall be able to register for the EAN Program and receive Syndicated Content, pursuant to Sections 2.1 (a), (b) and (c) herein, shall be on or about April 6, 1999, provided however, that Excite has fulfilled all its relevant obligations pursuant to Section 2.2 (c), and provided all reasonably necessary assistance to SmartAge in meeting such launch date. 2.2 Excite EAN Obligations. ---------------------- Confidential and Proprietary Information 5 a. ***. Excite agrees to be *** *** for and *** related to the --- development, acquisition, licensing or other means of controlling the Syndicated Content. Excite further agrees to make *** *** efforts to ensure the accuracy, reliability, and timelines of the ***. b. Administration. Excite agrees to host, maintain, and administer -------------- the Syndicated content in a professional, reliable, and timely manner. c. Assistance & Information. Excite agrees to assist SmartAge and to ------------------------ provide text, data, and other relevant information that SmartAge reasonably requests for the specific purposes of developing, maintaining, and administering the EAN Program pursuant to Section 2.1. Such Excite assistance and information shall be provided on a timely basis and be at no cost to SmartAge unless otherwise mutually agreed in writing. d. ***. Excite agrees to grant SmartAge a ***, ***, and *** to --- electronically ***, ***, ***, and *** the *** to *** for the specific purposes of SmartAge fulfilling its duties and obligations under this Agreement. Such *** of *** shall be for the term of this Agreement. 2.3 Marketing & Promotion of EAN. ---------------------------- a. Branding. Both parties agree that each Web page a user shall see -------- when accessing the EAN Program shall be a Co-Branded Page and shall display the Excite Brand and the SmartAge Brand with equal prominence. In the event that a Co-Branded Page displays more than one Excite Brand, then the SmartAge Brand shall be equal in prominence to the most prominent Excite Brand displayed on such Web page. On each Co-Branded Page, the Excite Brand shall be "Excite Network" and the SmartAge Brand shall be "Powered by SmartAge" or similar word or phrase as mutually agreed. The Excite and SmartAge Brands shall be in size, form, design and page location as determined by Excite, subject to the reasonable approval of SmartAge. b. SmartAge E-Mail Promotion. SmartAge agrees to promote the EAN ------------------------- Program within its periodic e-mail distributions to its database of SmartAge Members, provided however, that the aggregate number of such promotions shall be no less than *** e-mails per calendar quarter and further provided that each such promotion may contain content and other information not related to the EAN Program. Both parties agree that each e-mail promotion shall contain promotional information, a hyper-link that shall link to the URL for the EAN Description Page (as defined in Section 2.4 (a)), and other EAN Program related information as determined by Excite subject to the reasonable approval of SmartAge. SmartAge, in its sole discretion, shall determine any text, data, hyper-links or other information included in any such e-mail promotion not relating to the EAN Program. c. SmartAge Other Promotion. In addition to its e-mail promotion ------------------------ obligations pursuant to Section 2.3 (b) herein, SmartAge has the right to promote the EAN Program to existing and prospective SmartAge Members via the SmartAge Site, ad banners on the SmartClicks' Network and through other means as it solely determines. d. Excite Promotion. Excite agrees to actively promote the EAN ---------------- Program using e-mail, the Excite Site and Excite Network, and through other reasonable means as it solely determines, provided however, that in each such promotion the SmartAge Brand shall be displayed. Excite further agrees that each such promotion shall include a hyper-link or other reference which shall refer prospective Affiliates to the URL for the EAN Description Page. e. Banner Exchange Service. Both parties agree that users shall be ----------------------- provided the option of registering for the Banner Exchange Service as part of the EAN Program registration process. Such registration option shall be in form and manner as mutually agreed by the parties. 2.4 EAN Web Page Requirements. ------------------------- ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 6 a. EAN Description Page. Users shall access the EAN Program solely -------------------- through an initial Web page that shall display content and other information describing the EAN Program ("EAN Description Page"). The EAN Description Page shall be in form and design, and contain text, data, hyper-links and other information as determined by Excite, subject to the reasonable approval of SmartAge. Each promotion pursuant to Sections 2.3 (b), (c), and (d) shall hyper- link to or reference the URL for the EAN Description Page. The EAN Description Page shall be served from a location as determined by Excite, subject to the reasonable approval of SmartAge. b. Registration and Other Pages. The EAN Description Page shall ---------------------------- include a prominent graphical hyper-link that shall display "JOIN NOW" or other such similar statement that prompts users to register for the EAN Program. Such prominent graphical hyperlink shall be linked to a registration page, which shall be in form and design and request Affiliate Data as determined by SmartAge, subject to the reasonable approval of Excite. All other Web pages that a user shall access via the EAN Description Page, including but not limited to administrative and statistical reporting pages, shall be served, and be in form and design as determined by SmartAge, subject to the reasonable approval of Excite. c. ***. SmartAge agrees to *** the *** of those *** that it --- *** pursuant to Section 2.4 (b) herein, such that a user's browser shall display a *** with *** in the *** position. For example, "***" displays "***" in the *** position and "***" in the *** position. 2.5 Exclusivity. ----------- a. SmartAge Exclusivity. During the term of this Agreement, SmartAge -------------------- shall be the exclusive provider of the EAN Services to Excite, its Affiliates, and users of such Affiliates' Web sites. b. EAN Exclusivity. SmartAge agrees not to provide a substantially --------------- similar Content Affiliate Service to any of the Excite competitors specifically identified in Exhibit F for a period of one hundred five (105) days commencing on April 6, 1999 pursuant to Section 2.1 (i), provided however, that such exclusivity shall not apply to any such competitor which has executed a definitive agreement with SmartAge prior to the Effective Date. Excite shall have the right to modify such competitor list on one (1) occasion during such one hundred five (105) day period by providing SmartAge with written notice of such modification and by the parties updating Exhibit F to reflect such modification. 2.6 Redemption of Points. -------------------- a. Redemption Rates. Pursuant to Section 2.1 (d), the Redemption Rate ---------------- shall be *** (***) *** per Referral unless otherwise mutually agreed in writing. It is the intent of Excite to redeem Redeemable Points using ad banner Impressions generated from the Banner Exchange Service pursuant to Section 4.4 (c). Furthermore, it is the intent of the parties to evaluate using such Redeemable Points in exchange for discounts on SmartAge provided services as determined by SmartAge and Excite, or Excite provided services as determined by Excite. b. Redemption Shortfall. Both parties agree that in the event the -------------------- number of Redeemable Points exceeds the number of Impressions generated through the Banner Exchange Service, then Excite shall have the right to use Impressions generated from other sources to fulfill any such shortfall. Excite shall also have the right but not the obligation to purchase additional Impressions from SmartAge pursuant to Section 4.4 (d), for purposes of fulfilling any such redemption requirements. c. Price of SmartAge Impressions. Excite agrees that any Impressions ----------------------------- purchased from SmartAge to redeem Redeemable Points pursuant to Sections 2.6(a) and (b) herein, shall be purchased at a minimum price of *** dollars ($***) per one thousand (1,000) impressions unless otherwise agreed in writing. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 7 d. Reporting. SmartAge agrees to provide Excite with a monthly report --------- specifying the number of Impressions served to redeem Redeemable Points, the number of Affiliates redeeming Redeemable Points, the balance of Redeemable Points yet to redeemed, and any other information as mutually agreed. Such monthly report shall be accessed by Excite using a unique password via an Internet address or in any other manner as both parties mutually agree. e. Payment. Excite agrees to pay all fees due SmartAge from the ------- redemption of Redeemable Points, pursuant to Sections 2.6 (b), (c) and 4.4 (d), within thirty (30) business days of the end of the month in which SmartAge provided Impressions were served and fees generated. 2.7 Incentive Payment. ----------------- a. Advertising Revenue Share. Excite agrees to provide SmartAge with ------------------------- an incentive ("Incentive Payment") to promote the EAN Program pursuant to Sections 2.3 (b) and (c). Such Incentive Payment shall enable SmartAge to participate in the advertising revenues generated from Excite served Web pages. Specifically, Excite shall share collected ad banner advertising revenues, after commissions which shall not exceed ***%, that it generates from Web pages which are accessed by users via a *** based hyper-link on an Affiliate's Web site ("EAN Advertising Revenues"), provided however that such Affiliate is a SmartAge Sourced Active Affiliate. Each Incentive Payment shall be calculated based upon the largest number of SmartAge *** in the given month, and the corresponding percentage of EAN Advertising Revenues per the following incentive schedule ("Incentive Schedule"):
SmartAge *** Percentage of EAN Advertising Revenues - ---------------------------------- -------------------------------------- up to *** ***% *** to *** ***% *** to *** ***% *** to *** ***% greater than *** ***%
b. Calculation of Incentive Payment. The following steps shall be used by -------------------------------- Excite when calculating the Incentive Payment due SmartAge pursuant to Section 2.7 (a) herein, on a monthly basis: (1) Determine the *** of SmartAge *** on the *** day of the *** calendar month. (2) Determine the *** of EAN Advertising Revenues per the *** corresponding to the *** month's number of SmartAge ***. (3) Determine the total EAN Advertising Revenues generated during the *** month. (4) *** the *** EAN Advertising Revenues by the *** of EAN Advertising Revenues derived using the ***. The *** is the Incentive Payment due SmartAge for *** month. For example, if there are *** SmartAge *** in the *** month, then the percentage of EAN Advertising Revenues per the Incentive Schedule payable to SmartAge is ***%. Therefore, if Excite generates $*** in EAN Advertising Revenues, then the Incentive Payment that Excite shall pay SmartAge for the given month is ***% of this amount, or $***. c. Reporting. SmartAge agrees to provide Excite on a monthly basis the --------- number of SmartAge Sourced Active Affiliates at the end of the given month. Excite agrees to provide SmartAge with a monthly summary report specifying the following: ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 8 (1) The total EAN Advertising Revenues generated in the given month. (2) The percentage share of total EAN Advertising Revenues that Excite shall pay to SmartAge per the Incentive Schedule. (3) The Incentive Payment amount for the given month. (4) Any other information as mutually agreed. Such monthly summary report shall be submitted to SmartAge within thirty (30) business days of the end of the month in which such information pertains, provided that SmartAge is able to report the number of SmartAge Sourced Active Affiliates at the end of the given month within ten (10) days of the end of the month. d. Payment. Excite agrees to pay any such Incentive Payment due ------- SmartAge, pursuant to Sections 2.7 (a), (b) and (c) herein, within thirty (30) business days of the end of the month in which such revenues were generated, provided however, that such payment shall be net of incorrect, unauthorized or fraudulent purchases, and provided that SmartAge is able to report the number of SmartAge Sourced Active Affiliates at the end of the given month within ten (10) days of the end of the month. In the event that SmartAge provides the SmartAge Sourced Active Affiliates data later than ten (10) days after the end of the month, Excite's Incentive Payment for that month may be delayed a corresponding amount of time. 2.8 Discontinuance of EAN by Excite. ------------------------------- Excite may discontinue the EAN Program at any time upon thirty (30) days notice to SmartAge, but in any event, the provisions of Section 2.5 (a) shall still apply. 3. AD BUYING SERVICES. 3.1 Buying Services Obligations. --------------------------- a. Excite Buying Service. SmartAge agrees to build and administer an --------------------- Internet-based advertisement buying service which SmartAge shall provide to Excite, such that Advertisers shall be able to purchase general rotation, channel, and keyword ad banner advertising placements on the Excite Network via the Excite Site ("Excite Buying Service"). Notwithstanding Section 4.2 (e), the definition of the Excite Buying Service shall not include any other method of distributing ad banners, and Excite may participate in all other forms of ad banner distribution not mentioned in this Section 3.1, including, without limitation, auctions, promotions, giveaways, contests or charities, provided however, that SmartAge shall have the right to provide such ad banner distribution methods on behalf of Excite, if SmartAge can meet minimum service requirements for each such method as determined in Excite's reasonable discretion, and to the extent that no pre-existing obligations exist on the part of Excite to allow other entities to provide such services. The Excite Buying Service shall be automated pursuant to Section 3.1 (c) herein, and shall enable an Advertiser to perform at minimum the following tasks ("Minimum User Functionality"): . Select and submit an order for an ad banner advertisement . Pay for an order using a credit card . Submit ad banner creative . Access impression and click-through reports. b. SmartAge Buying Service. SmartAge agrees to build and administer an ----------------------- Internet-based advertisement buying service, which shall enable Advertisers to purchase SmartAge, Excite Network, and third party provided general rotation, channel, and keyword ad banner advertising placements via the SmartAge Site ("SmartAge Buying Service"). Such service shall be automated pursuant to Section 3.1 (c) herein, and shall enable an Advertiser to perform the Minimum User Functionality. Confidential and Proprietary Information 9 c. Automated Service. SmartAge agrees that the Excite Buying Service and ----------------- the SmartAge Buying Service (together, the "Buying Services") shall be automated in manner such that an Advertiser shall be able to perform the Minimum User Functionality pursuant to Section 3.1 (a) herein, without manual intervention from SmartAge, provided however that such Advertiser is using the Buying Services in a manner consistent with normal operations. d. Ad Banner Approval. SmartAge shall be responsible for approving ad ------------------ banners submitted by Advertisers prior to each such ad banner being served on the Excite Network. Such approval shall be according to the Excite Banner Guidelines and SmartAge agrees to use commercially reasonable efforts to ensure that such guidelines are followed. In the event that Excite, in its sole discretion, determines that any such ad banner displayed on the Excite Network does not meet the Excite Banner Guidelines or is unacceptable for any other reason, SmartAge will make commercially reasonable efforts to remove such ad banner from the Excite Network within forty-eight (48) hours of written notice by Excite. Excite may modify the Excite Banner Guidelines at any time by providing at least five (5) days prior written notice of such modification to SmartAge and by the parties updating Exhibit D to reflect such modification. e. Buying Service Hosting, Maintaining, and Serving. SmartAge agrees to ------------------------------------------------ host, maintain, administer and serve all registration pages, administrative pages, statistical pages, and ad banners related to the Buying Services in a professional, reliable, and timely manner. f. Advertiser Data Collection and Maintenance. SmartAge agrees to ------------------------------------------ collect, maintain, and administer all Advertiser Data at a location and on software and equipment as determined by SmartAge. SmartAge further agrees to provide to Excite on a monthly basis all Advertiser Data related to the Excite inventory sold through the Buying Services including but not be limited to: company name, URL, address, phone and fax number, as well as the name, title, and e-mail address of such company's primary contact. Such Advertiser Data shall be provided in form and manner as mutually agreed, and no later than ten (10) days after the end of each month. g. Customer Support. SmartAge agrees to respond to all customer service ---------------- issues and provide all customer service support related to use of the Buying Services in a professional and reliable manner, provided however, that all such customer service shall be provided to Advertisers via e-mail unless otherwise agreed by SmartAge unless Advertiser specifically requests manual intervention. h. Promotion of SmartAge Buying Service. SmartAge agrees to provide ------------------------------------ *** placement within those sections of the SmartAge Site relevant to prospective users of the SmartAge Buying Service (for example, the "Promote" section) as determined by SmartAge. Such placement shall be for purposes of promoting the SmartAge Buying Service and shall contain a promotional link and informational content and be in size, form, design, and page location as determined by SmartAge. SmartAge agrees to promote the SmartAge Buying Service with e-mail distribution to SmartAge's entire database of existing and prospective customers. Each such e-mail shall be in form and manner, and include content as provided by SmartAge. 3.2 Excite Buying Service Obligations. --------------------------------- a. Available Inventory. Excite agrees to offer some, though not ------------------- necessarily all, Available Inventory to Advertisers for purchase via the Buying Services upon the launch dates pursuant to Section 3.3 (a) and (b), and subject to the terms and conditions of this Agreement. b. Exclusive Right. SmartAge shall be the exclusive provider of the --------------- Excite Buying Service with such exclusive right commencing no later than on or about ***, 1999, provided however, that such service, in Excite's reasonable discretion, is *** to any other substantially similar service available on the Internet in terms of the following criteria, taken as a whole: (i) depth of coverage; (ii) timeliness; and (iii) reputation and ranking based upon a cross- section of a minimum of three third party reviewers in terms of features, functionality, quality and other qualitative factors that are mutually deemed material in nature. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 10 c. Referrals for Excite. Upon SmartAge being granted the exclusive right -------------------- pursuant to Section 3.2 (b) herein, Excite agrees to refer all individual ad banner placement leads of an amount less than or equal to a predefined amount (the "Referral Threshold"), to the Excite Buying Service. The Referral Threshold shall be *** dollars ($***) per month through December 31, 1999. Excite shall have the right to change the Referral Threshold on one (1) occasion every six (6) months thereafter for the term of this Agreement, provided however, that Excite shall provide SmartAge with at least fifteen (15) days written notice prior to any such change in the Referral Threshold. d. Keyword Inventory Availability. Excite shall provide Available ------------------------------ Inventory information relating to keyword inventory ("Available Keyword Inventory") to SmartAge on a daily basis. Excite shall also make commercially reasonable efforts to verify such Available Keyword Inventory related to specific orders within one (1) business day of receipt of such orders by Excite. Such Available Keyword Inventory information shall be as determined by Excite and in manner, form, and timeliness as mutually agreed. e. Genro and Channel Inventory Availability. Excite shall provide ---------------------------------------- Available Inventory information relating to general rotation and channel inventory ("Available Genro And Channel Inventory") to SmartAge on a monthly basis. Such Available Genro And Channel Inventory information shall be as determined by Excite and in manner, form, and timeliness as mutually agreed. If SmartAge does not sell all of the reserved Available Inventory SmartAge will serve Excite house ads for the unsold portion of that Available Inventory. f. Support, Assistance & Information. Excite agrees to provide --------------------------------- assistance to SmartAge and text, data, and other relevant information that SmartAge reasonably requests for the specific purposes of developing, maintaining, and administering the Buying Services pursuant to Sections 3.1 and 3.3. Such Excite assistance and information shall be provided on a timely basis and be at no cost to SmartAge unless otherwise mutually agreed in writing. Excite will link to the Excite Buying Service through the following sources: 1) Ad Info pages found at: i) http://www.excite.com/info/advertising/ --------------------------------------- ii) http://www.webcrawler.com/info/advertising ------------------------------------------ iii) http://www.excite.com/info/advertising/?brand=c2k ------------------------------------------------- 2) The "Advertise On (name of brand)" links to these pages are located on every one of the Excite Network's pages, subject to sole discretion of Excite. 3) Automated email reply to all prospects that fill out the contract information form found at each URL listed above. 4) The Excite Network Online Media Kit at: i) http://www.excite.com/corp/media kit/tech specs/price ----------------------------------------------------- list/ ---- 3.3 Buying Service Launch Dates. --------------------------- a. Excite Buying Service. SmartAge agrees that the first date upon which --------------------- Advertisers shall be able to purchase Available Inventory via the Excite Buying Service shall be no later than on or about August 7, 1999, provided however, that Excite has fulfilled all its relevant obligations and provided all reasonably necessary assistance to SmartAge in meeting such launch date pursuant to Section 3.2 (e). In the event that SmartAge has not Launched the SmartAge Buying Service on April 21, 1999, this August 7, 1999 date shall be delayed for a number of days equal to the number of days after April 21, 1999 that the SmartAge Buying Service Launch takes place. b. SmartAge Buying Service. SmartAge agrees that the first date upon ----------------------- which Advertisers shall be able to purchase ad banner inventory via the SmartAge Buying Service shall be no later than on or about April 21, ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 11 1999. SmartAge further agrees that the first date upon which Advertisers shall be able to purchase Available Inventory via the SmartAge Buying Service shall be no later than on or about April 21, 1999, provided however, that Excite has fulfilled all its relevant obligations and provided all reasonably necessary assistance to SmartAge in meeting such launch date pursuant to Section 3.2 (e). 3.4 Marketing & Promotion. --------------------- a. Branding of Excite Buying Service. Both parties agree that each Web --------------------------------- page an Advertiser shall see when accessing the Excite Buying Service shall be a Co-Branded Page and shall display the Excite Brand with more prominence than the SmartAge Brand, provided however, that the SmartAge Brand shall be displayed in a prominent manner. On each Co-Branded Page, the Excite Brand shall be "Excite Network" and the SmartAge Brand shall be "Powered by SmartAge" or similar word or phrase as mutually agreed. The Excite and SmartAge Brands shall be in size, form, design and page location as determined by Excite, subject to the reasonable approval of SmartAge. b. SmartAge Promotion. SmartAge will promote the SmartAge Buying Service ------------------ to existing and prospective SmartAge Members at least *** per quarter via the SmartAge Site, ad banners on the SmartClicks' Network, and through other means as it determines, provided however, that in no instance shall SmartAge represent itself as an agent or representative of Excite or the Excite Network. c. Excite Promotion. Excite will promote the Excite Buying Service ---------------- through reasonable means as it determines, provided however, that in each such promotion the SmartAge Brand shall be displayed at a minimum in the form of text such as "Powered by SmartAge" or similar word or phrase as mutually agreed. Excite further agrees that each such promotion shall include a hyper-link or other reference which shall refer prospective Advertisers to the Buying Service Description Page (as defined in Section 3.5 (a)). 3.5 Buying Service Web Page Requirements. ------------------------------------ a. Description Page. Advertisers shall access the Excite Buying Service ---------------- exclusively through an initial Web page that shall display content and other information describing the Excite Buying Service ("Buying Service Description Page"). The Buying Service Description Page shall be in form and design, and contain text, data, hyper-links and other information as determined by SmartAge, subject to the reasonable approval of Excite. Each promotion pursuant to Sections 3.4 (a) and (b) shall be hyper-linked to or reference the URL of the Buying Service Description Page. The Buying Service Description Page shall be served by SmartAge. b. Order Pages. The Buying Service Description Page shall include a ----------- prominent graphical hyper-link that shall display "BUY NOW" or other such similar statement that prompts an Advertiser to place an order via the Excite Buying Service. Such prominent graphical hyperlink shall be linked to Web pages that describe the terms and conditions of each order and which shall enable an Advertiser to place an order ("Order Pages"). Such Order Pages shall be in form and design, and request Advertiser Data as determined by SmartAge, subject to the reasonable approval of Excite. All Order Pages and other Web pages that an Advertiser shall access via the Buying Service Description Page, including but not limited to administrative and statistical reporting pages, shall be served by SmartAge, and be in form and design as determined by SmartAge, subject to the reasonable approval of Excite. c. ***. SmartAge agrees to *** the *** of those *** that it *** --- pursuant to Section 3.5 (b) herein, such that an Advertiser's *** shall display a *** with *** in the *** position. For example, "***" displays "***" in the *** position and "***" in the *** position. d. SmartAge Buying Service. SmartAge shall have the right to establish, ----------------------- maintain, and administer the SmartAge Buying Service in a manner as determined by SmartAge, provided however, that it shall be required ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 12 to meet the Minimum User Functionality requirements pursuant to Section 3.1 (b) and those other terms and conditions of the SmartAge Buying Service as specified within this Agreement. e. Order Processing. SmartAge agrees to forward Available Inventory ---------------- orders placed through the Buying Services to Excite electronically, in form and manner, and on a *** basis as mutually agreed. SmartAge further agrees to be responsible for processing *** payments ("Payment Processing") via a secure Web page and in a reasonably secure, accurate, reliable, and timely manner. 3.6 Other Limitations & Requirements. -------------------------------- a. Key Word *** Position. SmartAge agrees that the Excite Network shall --------------------- represent the *** key word offer in the SmartAge Buying Service for a period of twelve (12) months commencing upon the launch date pursuant to Section 3.3 (b). After expiration of such twelve (12) month period, Excite shall have the right of *** to purchase such *** position for the term of the Agreement, upon terms and conditions as mutually agreed. In the event that Excite does not grant SmartAge the *** right to provide the Excite Buying Service, for any reason, pursuant to Section 3.2 (b), then such *** position rights shall immediately terminate. b. Key Word *** Position. SmartAge agrees to provide Excite with the --------------------- *** (***) most *** positions ("***") within the SmartAge Buying Service for the specific purposes of offering Advertisers key word ad banner placements on the Excite Network. Such *** shall be for a period of *** (***) months commencing upon the launch date pursuant to Section 3.3 (b). After expiration of such *** (***) month period, Excite shall continue to have the *** position and SmartAge shall grant Excite the right of *** to purchase such *** position for such specific purposes for the term of the Agreement, upon terms and conditions as mutually agreed. c. Banner ***. SmartAge agrees to provide Excite with the *** position ---------- within the SmartAge Buying Service for the specific purposes of offering Advertisers *** and *** banner inventory placements on the Excite Network for a period of *** (***) months commencing on the launch date, pursuant to Section 3.3 (b). SmartAge further agrees to provide Excite the *** position for such specific purposes for the term of the Agreement, provided however, that such position shall be *** only to *** ad banner inventory. Excite shall have the right of *** to purchase the *** position for such specific purposes for the term of the Agreement, upon terms and conditions as mutually agreed. In the event that Excite does not grant SmartAge the *** right to provide the Excite Buying Service, for any reason, pursuant to Section 3.2 (b), then such *** position rights shall immediately terminate. d. Banner ***. SmartAge agrees to provide Excite with the *** and *** ---------- positions within those sections of the SmartAge Buying Service that offer Advertisers *** and *** banner placements. Such *** positions shall be for a period of *** (***) months from the launch date pursuant to Section 3.3 (b). SmartAge further agrees to provide Excite the *** position for such specific purposes for the term of the Agreement, provided however, that such position shall be *** only to *** ad banner inventory. Excite shall have the right of *** to purchase such *** position for such specific purposes the term of the Agreement, upon terms and conditions as mutually agreed. e. Private-Label Buying Service. Excite understands and acknowledges ---------------------------- that SmartAge has the right to provide Private-Label Buying Services with *** restrictions ***. For purposes of this Section 3.6 (e), Private-Label Buying Service means any banner advertisement and/or key word buying service provided by SmartAge to a third party. 3.7 Buying Service Channel Resolution. --------------------------------- ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 13 a. Advertiser Referral. SmartAge agrees to refer Advertisers to Excite ------------------- that expressly communicate interest in purchasing Available Inventory or other Excite advertising products not offered through the SmartAge Buying Service. SmartAge shall refer such Advertisers to Excite by making available Excite contact information as may be modified from time to time. Prior to referring Advertisers, SmartAge shall request information from each Advertiser for specific purposes of documenting such referral as a prospective lead. SmartAge and Excite shall determine information to be obtained from such prospective leads. All purchases from SmartAge Sourced-Leads, including those that purchase through the SmartAge Buying Service, shall count towards offsetting the Sales Minimums as defined in and pursuant to Section 3.10 (a). b. SmartAge Sourced-Leads Reporting. SmartAge agrees to provide Excite -------------------------------- with a monthly activity report of prospective SmartAge Sourced-Leads that have been referred to Excite during the prior month pursuant to Section 3.7 (a) herein. Such monthly report shall specify the name of each Advertiser, contact information, date of referral, and other information as mutually agreed. Such monthly report shall be accessed by Excite using a unique password via an Internet address or in any other manner as mutually agreed by the parties. c. Excite Reporting. Excite agrees to provide SmartAge with a monthly ---------------- activity report of SmartAge Sourced-Leads that have purchased directly from Excite during the prior month. Said activity report shall specifying at minimum the following: (1) The total number of SmartAge Sourced-Leads which purchased Available Inventory from Excite during the prior month. (2) The name of each SmartAge Sourced-Lead that purchased Available Inventory from Excite during the prior month. (3) The date of each such purchase during the prior month. (4) The total dollar amount of all such purchases during the prior month. (5) Any other information as mutually agreed. Each such monthly report shall be provided to SmartAge no later than thirty (30) business days after the end of the month for which such information pertains. Both parties agree that each such monthly report shall be accessed by SmartAge in a manner as both parties mutually agree. 3.8 Buying Service Pricing & Revenue Share. -------------------------------------- a. Pricing. Excite shall, in its sole discretion, set pricing on all -------- Available Inventory and set the maximum dollar order size per order. Excite shall also have the right to modify such pricing or order size at any time, provided however, that Excite agrees to provide SmartAge with at least five (5) business days written notice prior to any such change taking effect. b. Purchase Incentives. Notwithstanding Section 3.8 (a) herein, Excite ------------------- acknowledges and understands that SmartAge may from time to time provide certain incentives ("Purchase Incentives"), owned by SmartAge, to SmartAge Members to prompt purchase of Available Inventory. Purchase Incentives shall include but are not limited to SmartAge ad banner Impressions and SmartAge free services. c. Revenue Share. Excite agrees to pay SmartAge *** percent (***) of all ------------- revenues generated from the sale of Available Inventory via the Buying Services, provided however, that such payment shall be net of non-collectable, incorrect, unauthorized, or fraudulent sales of Available Inventory. 3.9 Buying Service Payment & Administration. --------------------------------------- ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 14 a. Payment Transfer. SmartAge shall be responsible for all Payment ---------------- Processing through the Buying Services pursuant to Section 3.5 (e). SmartAge agrees that funds deposited into one (1) or more SmartAge bank accounts as a direct result of Payment Processing shall be transferred to Excite on a monthly basis via wire transfer, check, or through other means as mutually agreed, provided however, that each such transfer of funds shall be net of the following: (1) The revenue share fee due SmartAge pursuant to Section 3.8 (c). (2) Non-collectable, incorrect, unauthorized, or fraudulent sales which result in SmartAge reimbursing funds to a third party. (3) Credit card processing related charges directly attributable to Payment Processing and incurred by SmartAge, up to maximum of ***% per transfer of funds. b. Billing and Reporting. SmartAge shall be responsible for the --------------------- management and administration of all invoicing, reimbursements, and online reporting related to the Buying Services in a professional, reliable, and timely manner. c. Bad Debt Management. SmartAge shall be responsible for the collection ------------------- of all delinquent or otherwise uncollected revenues related to orders that were fulfilled by Excite in a manner consistent with the terms and conditions of the Buying Services. 3.10 Buying Service Reporting. ------------------------ a. Payment Transfer Reporting. SmartAge agrees to provide Excite with a -------------------------- monthly summary report pursuant to Section 3.8 (a), specifying the following: (1) The total number of Available Inventory orders placed and processed via the Buying Services in the given month. (2) The total dollar value resulting from Payment Processing in the given month. (3) The total dollar value of incorrect, unauthorized, or fraudulent orders and the total dollar value reimbursed to third parties in the given month. (4) The total credit card processing related charges for the given month. (5) The total dollar value of the SmartAge revenue share fee pursuant to Section 3.8 (c). (6) The total dollar value of the funds transferred to Excite for the given month. (7) Any other information as mutually agreed. Such monthly summary report shall be submitted to Excite within five (5) business days of the end of the month in which such information pertains. Included with this submission shall be a letter from an officer of SmartAge verifying, to the best of their knowledge, the authenticity of such monthly report. b. Order Fulfillment Reporting. SmartAge agrees to provide Excite with a --------------------------- monthly summary report specifying the following: (1) The total number of orders fulfilled via the Buying Services in the given month. Such information shall be shown in aggregate, by Advertiser and by Buying Service. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 15 (2) The total dollar value of orders fulfilled via the Buying Services in the given month. Such information shall be shown in aggregate, by Advertiser and by Buying Service. (3) Any other information as mutually agreed. c. Periodic Adjustments. Periodically during the term of this Agreement -------------------- but no less than once per 90 day period, the parties shall reconcile their records pursuant to Sections 3.8 (a) and (b) herein. In the event that any material discrepancy should arise from such reconciliation, the party owing the other a reimbursement shall pay such reimbursement within five (5) business days of verification and acknowledgement of the payment due. 3.11 Buying Service Sales Minimums. ----------------------------- a. Sales Minimums. SmartAge shall guarantee to Excite the following -------------- monthly minimums in revenues generated and received from SmartAge Sourced-Leads ("Sales Minimums") according to the following table: Month Minimum ----- ------- June 1999 $*** July 1999 $*** August 1999 $*** September 1999 $*** October 1999 $*** November 1999 $*** December 1999 $*** January 2000 $*** February 2000 $*** March 2000 $*** April 2000 $*** For each such month that SmartAge generates less than the corresponding monthly Sales Minimum, SmartAge agrees to make up such shortfall by purchasing Available Inventory on the Excite Network for purposes of marketing SmartAge. Such shortfall purchase shall be as determined by SmartAge, subject to the reasonable approval of Excite, provided however, that SmartAge shall be able to make such purchase at an average of *** percent (***%) off the then-current stated gross rates for such Available Inventory. In the event that SmartAge generates less than the corresponding monthly Sales Minimums in any three (3) one-month periods commencing August 31, 1999, whether consecutive or not, then Excite shall have the right to discontinue its obligations pursuant to Section 3.2 (a) to offer Available Inventory via the Buying Services. 3.12 Sales Growth Warrant. SmartAge agrees to issue a Sales Growth Warrant -------------------- to Excite, in form set forth in Exhibit G, dependent on the total revenues generated from the sale of Available Inventory via the Excite Buying Service meeting those performance milestones in manner and as specified pursuant to Exhibit B, upon the date on which the first such performance milestones are met by Excite. 4. BANNER EXCHANGE SERVICE. 4.1 SmartAge Banner Exchange Obligations. ------------------------------------ a. Service Level. SmartAge agrees to provide the Banner Exchange Service ------------ to Clicks' Members in a professional and reliable manner consistent with that manner provided to SmartClicks' Members. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 16 b. SmartClicks' Network. SmartAge agrees to enable Clicks' Members using -------------------- the Banner Exchange Service to display their ad banners within the larger SmartClicks' Network pursuant to: 1) the terms, conditions, requirements, limitations and restrictions of the SmartClicks' Terms and Conditions; and 2) the prior approval of SmartAge. c. Hosting, Maintaining, and Serving. SmartAge agrees to host, maintain, --------------------------------- administer and serve all ad banners, registration pages, statistical information, and description pages related to a Clicks' Member's use of the Banner Exchange Service in a professional, reliable, and timely manner. d. Member Data Collection and Maintenance. SmartAge agrees to collect, -------------------------------------- maintain, and administer all Clicks' Member Data at a location and on software and equipment as determined by SmartAge. SmartAge further agrees to identify and track all Clicks' Members separately from other SmartClicks' Members in form and manner as determined by SmartAge subject to the reasonable approval of Excite. All such Clicks' Member Data shall be jointly owned and shall be made available to Excite in a manner and on a periodic basis as mutually agreed. e. Customer Support. SmartAge agrees to respond to all customer service ---------------- issues and provide all customer service support related to use of the Banner Exchange Service in a professional and reliable manner consistent with the manner provided to other SmartClicks' Members. 4.2 Banner Exchange Marketing & Promotion. ------------------------------------- a. Naming. Excite agrees to use the name "SmartClicks" ("SmartClicks' ------ Brand") when marketing and promoting the Banner Exchange Service via the Excite Network or in other reasonable manner to prospective and existing Clicks' Members. The SmartClicks' Brand shall be in size, form, and design as determined by SmartAge, subject to the reasonable approval of Excite. b. Clicks' Promotion. Excite will actively promote the Banner Exchange ----------------- Excite users, where appropriate throughout the Excite Network with consistent Such promotion will include persistent and temporal links, ad banners, e-mail, and other promotional mechanisms as determined by Excite, provided however, that in each such promotion the SmartClicks' Brand shall be displayed. Excite further agrees that each such promotion shall include a hyper-link ("Clicks' Promotional Link") or other reference which shall refer prospective Clicks' Members to the Clicks' Description Page (as defined in Section 4.3 (a)). c. Branding of Banner Ads. Ad banners displayed on behalf of Clicks' ---------------------- Members on the SmartClicks Network shall be co-branded such that each ad banner shall include an Excite Brand on the lower right hand corner of the such ad banner in form and manner as mutually agreed. d. Launch of Service. Both parties agree that the first date upon which ----------------- a prospective Clicks' Member can register for the Banner Exchange Service shall be no later than fifteen (15) business days after the Effective Date for the Excite Site, thirty (30) days after such date for the WebCrawler Site, and forty-five (45) days after such date for the Classified2000 Site and other such Excite Network Web sites as mutually agreed. e. Banner Exchange Exclusivity. Excite agrees not to offer third party --------------------------- provided banner exchange services, specifically excluding any promotional, advertising or other such marketing agreements that Excite has entered into as of the Effective Date, provided however, that the Banner Exchange Service is, in Excite's sole discretion, *** to any other similar banner exchange service available from a third party on the Internet in terms of the following factors, taken as a whole: (i) depth of coverage, (ii) timeliness and (iii) reputation and ranking based on a cross-section of a minimum of three (3) third party reviewers in terms of features, functionality, quality and other qualitative factors that are mutually deemed material in nature. 4.3 Banner Exchange Web Page Requirements. ------------------------------------- ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 17 a. Description Page. Each Clicks' Promotional Link on the Excite Network ---------------- shall be linked to one (1) or more description pages (each a "Clicks' Description Page") which shall include general information provided by SmartAge explaining the benefits of the Banner Exchange Service. Each Clicks' Description Page shall be in form and design, and served from a location as determined by SmartAge, subject to the reasonable approval of Excite. b. Registration Page(s). SmartAge agrees that each such Clicks' -------------------- Description Page shall include a prominent graphical hyperlink which shall display "JOIN NOW" or other such similar statement which prompts prospective Clicks' Members to register for the Banner Exchange Service. Such prominent graphical hyperlink shall be linked to one or more registration pages (each a "Clicks' Registration Page"). Clicks' Registration Pages shall be in form and design, and shall include a minimum number of fields and request specific Clicks' Member Data as determined by SmartAge, subject to the reasonable approval of Excite. Clicks' Registration Pages shall be served from a location as solely determined by SmartAge. c. Integration with Excite Services. Both parties agree to evaluate -------------------------------- integrating registration for the Banner Exchange Service into the registration process for other services that Excite offers or plans to offer its users, such as the EAN Program, a homepage hosting service, free e-mail service, or other such Excite services as mutually agreed. 4.4 Allocated Impressions. --------------------- a. Traffic Sharing. SmartAge agrees to allocate to Excite *** percent --------------- (***%) of the total Impressions ("Allocated Impressions") generated from all Clicks' Member Sites. "Clicks' Impressions" shall be defined as the total Impressions generated from all Clicks' Member Sites. b. Use of Allocated Impressions. Excite shall be able to use its ---------------------------- Allocated Impressions, as calculated in Section 4.4 (a) herein, in the following ways: 1) to promote Excite and/or the Excite Network; 2) to promote or to sell to a third party, provided however, that such third party is not a direct competitor of SmartAge as specified -in Exhibit J; 3) to provide to Affiliates as an incentive for the EAN Program pursuant to Section 2.6 (a), and 4) to use in any other manner as determined by Excite subject to the reasonable approval of SmartAge provided however the following: (1) Allocated Impressions shall be used in a continuous and automatic manner as mutually agreed such that any ad banners provided by Excite to SmartAge for purposes of using such Allocated Impressions shall be continuously displayed within the SmartClicks' Network on Web sites with available ad banner inventory unless otherwise mutually agreed. (2) usage of such Allocated Impressions is subject to the Banner Exchange Technology and the specific terms, conditions, requirements, limitations and restrictions of the SmartClicks' Terms and Conditions as currently specified in Exhibit H attached hereto. c. Resale Of SmartAge Impressions. *** percent (***%) of all Clicks' ------------------------------ Impressions shall accrue to SmartAge. SmartAge agrees to grant Excite the right to sell SmartAge's allocation of Clicks' Impressions, provided however, that any such Impressions shall be purchased from SmartAge at a minimum price of *** dollars ($***) per thousand (1,000) impressions. Both parties agree that each such purchase shall be evidenced by an executed insertion order agreement ("IO"), and the payment and delivery of such SmartAge Impressions shall be as mutually agreed and documented in each such IO. d. Adjustments to Allocated Impressions. Excite acknowledges and ------------------------------------ understands that SmartAge may need to adjust the number of Allocated Impressions from time to time to compensate for variations that may occur due to the unique aspects of the scheduling and targeting of excess ad banner inventory within the SmartClicks Network. In the event that any such adjustment is both material in nature and results in a reduction in the number of Impressions allocated to Excite in any calendar quarter, SmartAge agrees to make good such ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 18 reduction by increasing the allocation of Impressions to Excite in the following calendar quarter by the amount of such reduction. e. Activity Reporting. SmartAge agrees to provide Excite with a daily ------------------ summary report specifying the total number of Active Clicks' Member Accounts, ad banners shown by Clicks' Members, Impressions allocated during any prior day, the current balance of unused Impressions, and any other information as mutually agreed. Such summary report shall be accessed by Excite using a unique password via an Internet address or in any other manner as both parties may mutually agree. 4.5 Membership Growth Warrant. SmartAge agrees to issue a Membership Growth ------------------------- Warrant to Excite in form set forth in Exhibit G, dependent upon the achievement of certain performance milestones for Active Clicks' Members and Service Members, in manner and as specified in Exhibit B, upon the date on which the first such performance milestones are met by Excite. 5. SMARTAGE SERVICES. 5.1 General Obligations. ------------------- a. Excite Offers SmartAge Services. Excite agrees to offer and promote ------------------------------- the Offered Services to users of the Excite Site and the Excite Network, under the terms and conditions of this Agreement. Each Offered Service shall be as determined by SmartAge, subject to the reasonable approval of Excite. b. Service & Maintenance. SmartAge agrees to be responsible for --------------------- providing the Offered Services to users of the Excite Site and Excite Network in a professional, reliable, and timely manner. SmartAge further agrees to be responsible for maintaining and administering the Offered Services to ensure that each consistently performs as reasonably expected by Service Members and as represented by SmartAge. c. Credit Card Processing. SmartAge agrees to be responsible for the ---------------------- processing of all credit card payments related to the sale of Offered Services in a reasonably secure, accurate, reliable, and timely manner. d. Customer Support. SmartAge agrees to be responsible for all customer ---------------- service issues and provide all customer service support related to the use of the Offered Services. Such customer service and support shall be provided in a professional and reliable manner, provided however, that all such customer service shall be provided to Service Members via e-mail unless otherwise agreed by SmartAge. e. Member Data Collection and Maintenance. SmartAge agrees to collect, -------------------------------------- maintain, and administer all Service Member Data at a location and on software and equipment as determined by SmartAge. 5.2 SmartAge Services Marketing & Promotion. --------------------------------------- a. SmartAge Branding. Both parties agree that each Offered Service shall ----------------- be marketed and promoted as a SmartAge or third party provided service ("Service Brand") to prospective and existing Service Members provided however, that each Service Brand be determined by SmartAge, subject to the reasonable approval of Excite. Service Brands shall be in size, form, design and page location as determined by SmartAge, subject to the reasonable approval of Excite. b. Promotion of Offered Services. Excite agrees to actively and with ----------------------------- consistent frequency promote the Offered Services throughout the Excite Network through reasonable means as it determines from time to time. Excite further agrees that each such promotion shall include a hyper-link ("Services Promotional Link") or other reference which shall refer prospective or existing Service Members to a Services Description Page (as defined in Section 5.3 (a)). Confidential and Proprietary Information 19 c. Launch of Offered Services. Excite agrees that the first date upon -------------------------- which a prospective Service Member shall be able to purchase an Offered Service shall be no later than thirty (30) business days after the Effective Date unless otherwise mutually agreed in writing. d. Exclusivity. Excite shall not directly solicit or target prospective ----------- or existing Service Members with offers that are competitive with any individual Offered Service (as defined in Exhibit I) during the term of this Agreement, provided, however, that such an Offered Service is available for use and is offered by SmartAge. In the event that SmartAge has not launched or decides to discontinue a particular Offered Service, then Excite shall be free to promote an equivalent service to users of the Excite Network including prospective or existing Service Members. In the event that Excite is acquired, such restrictions shall only apply to the Excite Network and its direct successors, and not the acquiring company. In the event that SmartAge offers an additional service not specified on Exhibit I, SmartAge agrees that Excite shall have the right but not the obligation to evaluate such new SmartAge service and to offer it to users of the Excite Network under the same or equivalent terms as those described within this Agreement. e. SmartAge not an Agent. SmartAge shall not represent or market itself --------------------- as a sales representative of the Excite Network and will not allow any SmartAge sales representatives, if any, to solicit Advertisers for the purpose of purchasing Available Inventory through SmartAge. Additionally, SmartAge will not accept orders from any recognized advertising agency and will promptly direct inquiries regarding the purchase of Available Inventory from advertising agencies directly to Excite. SmartAge shall not expressly nor impliedly, directly or indirectly, alter, enlarge or limit the representations or warrantees contained in Excite's most current written internet and advertising services warranty as distributed or changed from time to time by Excite for the applicable service. Subject to 3.2 (c) ("Referral Threshold") Excite retains the absolute right to contact any party in regards to Excite business without any obligation to contact SmartAge. Without limiting the generality of the foregoing, neither party shall sign the other party's name to any commercial paper, contract or other instrument and shall not contract any debt or enter into any agreement, either express or implied, binding the other party to the payment of money and/or in any other regard. 5.3 Web Page Requirements. --------------------- a. Description Page. Each Services Promotional Link shall be hyper- ---------------- linked to a corresponding description page ("Services Description Page") which shall include without limitation general information explaining the benefits of each Offered Service as provided by SmartAge. Each Services Description Page shall be in form and design, and served from a location as determined by SmartAge, subject to the reasonable approval of Excite. b. Service Registration Pages. Each Services Description Page shall -------------------------- include a prominent graphical hyper-link that shall display "BUY NOW" or other such similar statement that prompts a prospective or existing Service Member to evaluate purchasing an Offered Service. Such prominent graphical hyperlink shall be linked to one (1) or more registration pages (each a "Services Registration Page") which shall describe the terms and conditions of a purchase and enable a user to place an order for an Offered Service. Such Services Registration Pages shall be in form and design and request Service Member Data as determined by SmartAge, subject to the reasonable approval of Excite. SmartAge shall be responsible for the Services Registration Pages and all other Web pages that a prospective or existing Service Member shall access via each Services Description Page, including but not limited to administrative and statistical reporting pages. Each Services Registration Page shall be served from a location as determined by SmartAge, subject to the reasonable approval of Excite. 5.4 Pricing & Revenue Share. ----------------------- a. Pricing. SmartAge shall, in its sole discretion, set pricing for each ------- Offered Service, provided however, that the Offered Services shall be offered and promoted individually, in combination, or in aggregate to prospective and existing Service Members for a *** to *** by *** to *** of such service or services. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 20 b. Purchase Incentives. Notwithstanding Section 5.4 (a) herein, Excite ------------------- acknowledges and understands that SmartAge may from time to time provide certain incentives ("Services Incentives") owned by SmartAge to prompt purchase of an Offered Service. Services Incentives shall include but are not limited to SmartAge ad banner impressions and SmartAge free services. c. Revenue Share. SmartAge agrees to pay Excite a referral fee of *** ------------- percent (***%) of all revenues generated from the initial sale of the Offered Services for a period of *** months, provided however, that such revenues shall be net of the following: . Third party fees in the event that such Offered Service is third party provided; . Non-collectable, incorrect, unauthorized, or fraudulent purchases of the Offered Services. 5.5 Payment & Reporting. ------------------- a. Payment. SmartAge agrees to pay all fees due Excite from purchases of ------- the Offered Services, pursuant to Section 5.4 (c), within thirty (30) business days of the end of the month in which such fees were generated. b. Reporting. SmartAge agrees to provide Excite with a monthly summary --------- report specifying at minimum the following: (1) The total number of Service Members which purchased Offered Services in the given month. (2) The total dollar value of all revenues generated from Service Members per Offered Service in the given month. (3) The total dollar value of all non-collectible, incorrect, unauthorized, or fraudulent sales in the given month. (4) The calculation of the fees payable to Excite per Offered Service for the given month pursuant to Section 5.4 (c). (5) Any other information as mutually agreed. c. Billing, Reporting, and Collections. SmartAge shall be responsible ----------------------------------- for the management and administration of all invoicing, reimbursements, online reporting, and collections of all delinquent or otherwise uncollected revenues related to the Offered Services. 5.6 Membership Guarantees. Excite will *** a minimum combined number --------------------- of Service Members and Active Clicks' Members over the first *** (***) months after the launch of the EAN Program pursuant to Section 2.1 (i), according to the following membership goals schedule ("Membership Goals"): -------------------------------------------------------------------- By the end of the first 3-month *** Service/Active Clicks' period after EAN launch Members -------------------------------------------------------------------- By the end of the 6-month period *** Service/Active Clicks' after EAN launch Members -------------------------------------------------------------------- By the end of the 9-month period *** Service/Active Clicks' after EAN launch Members -------------------------------------------------------------------- By the end of the 12-month period *** Service/Active Clicks' after EAN launch Members -------------------------------------------------------------------- ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 21 In the event that the Membership Goals are not met per the above schedule in any given three (3) month period, Excite will provide SmartAge up to *** dollar ($***) of *** promotion on the Excite Network, which promotion shall be run during the month following any such deficient three (3) month period. Such discount shall be as mutually agreed and such promotion shall be used to promote the Offered Services in a manner and only to the extent necessary to meet the stated Membership Goals. 6. MEMBER DATA. 6.1 Ownership of Data. Both parties each acknowledge that all data of any ----------------- kind regarding the EAN Program, the Excite Buying Service, the Banner Exchange Service, and the Offered Services including without limitation Affiliate Data, the serving of Syndicated Content, Redeemable Points, Advertiser Data, Clicks' Member Data, and Service Member Data ("Total Data") shall be jointly owned by the parties such that during the term of this Agreement all such data shall be treated as Confidential Information (as defined in Section 9) of both parties. Each party shall be permitted to use such data for marketing and other purposes without notice or approval of the other party, provided however the following: (i) The third party generating such data has not prohibited its use for such purposes; (ii) such data may not be sold to a third party, (iii) use of such data by a party shall not be specifically identified as originating from the other party unless otherwise agreed in writing and (iv) Total Data shall not be used by SmartAge to specifically target only SmartAge Members originating from Excite and shall not be used by Excite to specifically target only SmartAge Members originating from SmartAge. 6.2 Transfer of Data. Both parties agree that all data pursuant to Section ---------------- 6.1 herein, collected by a party shall be made available to the other upon request, provided however, that such data shall provided in form, manner, and timeliness as mutually agreed. 7. POLICIES AND PROCEDURES. 7.1 Policies & Procedures. Both parties agree that the Terms and --------------------- Conditions applicable to use of the services, Web sites, networks, or programs as described within this Agreement shall apply to users, and both parties reserve the right to reject any user that does not comply with such applicable Terms and Conditions unless as otherwise specified within this Agreement or as mutually agreed in writing. 7.2 Approval of Member Sites and Ad Banners. Each Affiliate and Clicks' --------------------------------------- Member Site and its ad banners must be approved before submitting ad banners to the SmartClicks' Network and prior to being served using the Banner Exchange Technology. Such approval will be based upon the standard Terms and Conditions that SmartClicks' Members are subject to unless as otherwise specified within this Agreement or as mutually agreed in writing. 8. TRADEMARKS. 8.1 SmartAge Trademarks. SmartAge hereby grants to Excite, for the term of ------------------- this Agreement, a non-exclusive, non-transferable license to use and display the SmartAge Brand, including without limitation its name and logo and other trademarks, trade names, service marks, and service names that SmartAge uses from time to time on the Excite Site and the Excite Network in connection with the terms and conditions of this Agreement provided however that: (i) Excite will at all times use the appropriate trademark or service mark notice as SmartAge may from time to time specify with respect to any use of the SmartAge Brand; (ii) Excite will not modify the SmartAge Brand or use it for any purpose other than as set forth herein; and (iii) Excite will not engage in any action associated with the SmartAge Brand that adversely affects the good name, good will, image or reputation of SmartAge. Excite agrees that all use of the SmartAge Brand hereunder shall inure to the benefit of SmartAge. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 22 8.2 Excite Trademarks. Excite hereby grants to SmartAge, for the term of ----------------- this Agreement, a ***, *** license to use and display the Excite Brand, including without limitation its name and logo and such other trademarks, trade names, service marks, and service names that Excite uses from time to time on the SmartAge Site and the SmartClicks' Network in connection with the terms and conditions of this Agreement provided however that: (i) SmartAge will at all times use the appropriate trademark or service mark notice as Excite may from time to time specify with respect to any use of the Excite Brand; (ii) SmartAge will not modify the Excite Brand or use it for any purpose other than as set forth herein; and (iii) SmartAge will not engage in any action associated with the Excite Brand that adversely affects the good name, good will, image or reputation of Excite. SmartAge agrees that all use of the Excite Brand hereunder shall inure to the benefit of Excite. 8.3 Limitation. Except as expressly set forth herein, no license to either ---------- party's brands, trademarks or other such identifying marks is granted under this Agreement and neither party may use the other party's identifying marks without prior written consent. 9. TERM AND TERMINATION. 9.1 Term. This Agreement shall become effective on the Effective Date and ---- shall continue in effect for an initial term of twenty-four (24) months subject to earlier termination pursuant to Sections 9.2 and 9.3 as described herein. 9.2 Termination Without Cause. Either party may terminate this Agreement ------------------------- for any reason or no reason upon providing the other party at least sixty (60) calendar days prior written notice of such termination provided however that no such termination without cause may occur within ninety (90) days of the Effective Date, except for the nonpayment of any amount due Excite, which shall be subject to a five (5) day cure period. 9.3 Default. In the event either party defaults in the performance of any ------- material obligation required to be performed hereunder, and such default is not cured within thirty (30) calendar days after written notice thereof by the other party, then the non-defaulting party, at its option, may, in addition to any other remedies it may have, immediately terminate the Agreement by giving written notice of termination to the defaulting party. 9.4 Insolvency. The Agreement may be terminated by either party, ---------- immediately on notice, (a) if the other party becomes insolvent, (b) upon the institution by the other party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of its debts, (c) upon the institution of such proceedings against the other party, which are not dismissed or otherwise resolved in such other party's favor within forty-five (45) days thereafter, (d) upon the other party's making a general assignment for the benefit of creditors, or (e) upon the other party's dissolution or ceasing to conduct business in the normal course. 9.5 No Liability for Damages. Neither party shall be liable for damages of ------------------------ any kind as a result of exercising its right to terminate this Agreement according to its terms, and termination will not affect any other right or remedy at law or in equity of either party. 9.6 Effect of Termination. Upon termination or expiration of the --------------------- Agreement, each party shall cease to perform all services for the other party as described in this Agreement. Each party shall also immediately discontinue any use of the other party's tradename and trademarks and all promotional activities related to the other party's products or services. Each party further agrees to immediately return all materials in its possession belonging to the other party. 9.7 Survival. Except as otherwise set forth herein, all rights and -------- obligations of the parties pursuant to the following Sections shall survive any termination of this Agreement: Sections 6, 8, 9.5, 9.6, 9.7, 10, 11, 12, 13, and 14. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 23 10. CONFIDENTIALITY. a. Each party to this Agreement acknowledges that it may receive confidential information ("Confidential Information") of the other party. For purposes of this Agreement, Confidential Information shall mean any trade secret, information, process, technique, algorithm, computer program (source and object codes), design, drawing, formula, test data, business development and marketing plans and concepts, records and files, financial data and budgetary information, income or sales data or projections, customer lists, information regarding customers, facilities, suppliers, plans, or market analysis. b. Each party covenants and agrees that: (1) it will not, at any time, reveal, divulge, or make known to any person, firm, corporation, or other entity any Confidential Information of the other party; (2) it will not publish, communicate, divulge, disclose or use such information for any purpose not authorized by the other party, nor make copies or disclose in any manner Confidential Information to any third party without prior written consent of the other party; (3) it will not use the Confidential Information of the other party for any purpose except to the extent required to accomplish the intent of this Agreement; and (4) it will return to any documents (including copies, if any) containing Confidential Information of the other party after the need for such information has expired, or upon the request of the other party, and in any event, upon completion or termination of this Agreement. c. Each party shall take reasonable security precautions, at least as great as the precautions it takes to protect its own trade secrets, with respect to the Confidential Information which it receives and shall disclose Confidential Information on a need to know basis only to its subsidiary, agent or subcontractor who is obligated to treat the Confidential Information in a manner consistent with all the obligations of this Agreement. d. The term Confidential Information does not include information which the receiving party can demonstrate by competent written proof: (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 to 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; or (iv) is the subject of written permission to disclose provided by the other party. e. Each party agrees that any breach of obligations under this Section 10 shall be a material breach of this Agreement and result in irreparable harm to the non-disclosing party for which damages would be an inadequate remedy and, in addition to the rights and remedies otherwise available at law, the non- disclosing party shall be entitled to equitable relief, including injunction, in the event of such breach. 11. LIMITATION OF LIABILITY. 11.1 Aggregate Liability. In no event, except under Section 13 of this ------------------- Agreement, shall either party be liable for monetary damages of any form, whether direct, indirect, special, punitive, or consequential damages (including, but not limited to, damages for loss of business profits, business interruption, loss of programs or information, and the like), or any other damages arising in any way out of the availability, use, reliance on, or inability to use the EAN Program, the Syndicated Content, the Buying Services, the Banner Exchange Service or the Offered Services or any information, even if the other party knows of the possibility of such damages, and regardless of the form of action, whether in contract, tort (including without limitation negligence), or otherwise. 11.2 Service Interruptions. SmartAge and Excite will endeavor to keep their --------------------- respective web sites and services operational at all times, but certain technical difficulties may, from time to time, result in temporary service interruptions. Neither party shall be liable to the other for any consequences of such services interruptions. Confidential and Proprietary Information 24 11.3 Force Majeure. Neither party shall be responsible for any failure or ------------- delay in performance of its obligations under this Agreement because of circumstances beyond its reasonable control, including, without limitation, acts of God, network failures or telecommunications failures. 12. WARRANTIES. 12.1 Mutual Representations and Warranties: Each party hereby represents ------------------------------------- and warrants as follows: a. Each party is duly organized and validly existing under the laws of the state of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof. b. Each party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder. 12.2 Intellectual Property Rights. ---------------------------- a. SmartAge has the full and exclusive right to grant or otherwise permit Excite access to the SmartAge Site, SmartAge's intellectual property, and any applicable third party's intellectual property, and SmartAge is aware of no claims by any third parties adverse to any of such intellectual property rights. b. Excite has the full and exclusive right to grant or otherwise permit SmartAge access to the Excite Site, Excite Network, Excite's intellectual property, and any applicable third party's intellectual property, and Excite is aware of no claims by any third parties adverse to any of such intellectual property rights. c. If a party's (the "Infringing Party") intellectual property rights are alleged or held to infringe the intellectual property rights of a third party, the Infringing Party shall, at its own expense, and in its sole discretion, (1) procure for the non-Infringing Party the right to continue to use the allegedly infringing intellectual property or (2) replace or modify the intellectual property to make it non-infringing; provided, however, if neither option is possible or economically feasible and if the inability to use such intellectual property would cause a material breach of this Agreement (as determined by the non-Infringing Party), the Infringing Party may terminate this Agreement. 12.3 Limitation of Warranty. EXCEPT AS EXPRESSLY WARRANTED IN THIS SECTION ---------------------- HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY FURTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 13. INDEMNIFICATION. 13.1 SmartAge Indemnification. SmartAge shall indemnify, defend and hold ------------------------ harmless Excite and its officers, directors, employees and agents (the "SmartAge Indemnified Parties") from and against any and all claims, demands, liabilities, damages, actions, causes of action, costs or expenses of any kind or nature, including reasonable attorney's fees and costs (together "Claims") arising out of any allegation, suit or claim made or threatened by any third party against SmartAge Indemnified Parties, for infringement or misappropriation of any copyright, trademark, trade secret or service mark of any third party with respect to SmartAge's material and negligent breach of an obligation to Excite under this Agreement. 13.2 Excite Indemnification. Excite shall indemnify, defend and hold ---------------------- harmless SmartAge and its officers, directors, employees and agents (the "Excite Indemnified Parties") from and against any and all claims, demands, liabilities, damages, actions, causes of action, costs or expenses of any kind or nature, including reasonable attorney's fees and costs (together, "Claims") arising out of any allegation, suit or claim made or Confidential and Proprietary Information 25 threatened by any third party against Excite Indemnified Parties, for infringement of copyright, trademark, trade secret or service mark of any third party due to Excite' material and negligent breach of an obligation to SmartAge under this Agreement. 13.3 Provision of Indemnity. Any party entitled to indemnity under ---------------------- Sections 13.1 or 13.2 herein (the "Indemnified Party") shall promptly notify the other party in writing (the "Indemnifying Party") of any Claim for which the Indemnified Party seeks indemnification, and shall permit the Indemnifying Party to control the defense of any such Claim with counsel of Indemnifying Party's choice. The Indemnified Party shall reasonably cooperate in the defense of any Claim, and may, at its own cost and expense, participate in any defense with counsel of its choice. In the event the Indemnifying Party fails after written notice to perform its obligations under this Section 12, the Indemnified Party may at its election take any action, including the settlement of any Claim, without further notice to the Indemnifying Party, and without waiving any rights or Claims against the Indemnifying Party it may have under this Agreement, at law or in equity. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. 14. MISCELLANEOUS. 14.1 MatchLogic. Both parties agree to evaluate using Excite's wholly ---------- owned subsidiary MatchLogic to provide the mechanism to redeem Redeemable Points and serve ad banners for the EAN Program pursuant to Section 2.1 (d). Both parties further agree to evaluate, when reasonably possible, expanding the relationship between the parties specifically through SmartAge adapting or incorporating the MatchLogic technologies and capabilities into the Banner Exchange Technology. For example, such adaptation may potentially include without limitation using the MatchLogic technology to manage the serving of ad banners on the SmartClicks' Network. 14.2 Media Releases. Within thirty (30) days of the Effective Date, the -------------- parties agree to issue a joint press release concerning the existence of this Agreement and the related terms hereof, provided however, such press release shall not make any reference to the Excite Buying Service. The parties further agree that within thirty (30) days of the launch of the Excite Buying Service, the parties shall issue an additional joint press release describing such service. No press release or other public statement concerning the existence or terms of this Agreement shall be made or released to any medium except as provided within this Agreement and with the prior written approval of the parties or as required by law. Excite further agrees that any such joint press release shall include a statement from an EVP of Excite and the CEO of SmartAge. 14.3 Audit Rights. Either party or its designated agent shall have the ------------ right upon thirty (30) days prior written notice to audit the other party's server logs, data files, accounting records or other reasonably necessary documents for the sole purpose and to the extent necessary to ensure compliance with the terms of this Agreement. Such audit(s) shall be conducted at the auditing party's own expense, provided however, that such audits shall be limited to one occasion per six (6) month period and further provided that each such audit shall be performed by a third party mutually approved in writing. In the event that such audit discloses that the audited party has under paid by ten percent (10%) or more, it will reimburse the auditing party for the reasonable costs of such audit. Both parties agree to cooperate with the other party or its designated agent in all reasonable aspects regarding such audit(s) and to provide the other party with appropriate access to all reasonably necessary documentation related thereto. In the event the audit reveals an under payment of fees due, the underpaying party shall pay such fees due to the other party other immediately upon written notice and verification. 14.4 Assignment. Neither party may assign or transfer any of its rights, ---------- duties or obligations herein to any party without the prior written consent of the other party and any purported attempt to do so shall be null and void; provided that no consent shall be required for assignment to an affiliate or to an entity acquiring all or substantially all of the assigning party's business. Confidential and Proprietary Information 26 14.5 Relationship of Parties. SmartAge and Excite are independent ----------------------- contractors and nothing in this Agreement is intended or will create any form of partnership, joint venture, agency, franchise, sales representative or employment relationship between the parties. Neither party has the authority, without the other party's prior written approval, to bind or commit the other party in any way. 14.6 Waiver. No waiver of any provision of the Agreement shall be ------ effective unless made in writing and signed by the party against whom enforcement is sought. No waiver of any breach of any provision of the Agreement shall constitute a waiver of any subsequent breach of the same or any other provision of the Agreement. 14.7 Governing Law and Dispute Resolution. Any dispute regarding the ------------------------------------ interpretation or validity hereof shall be governed by the laws of the State of California, U.S.A, exclusive of that body of law relating to choice of law. Any dispute arising under the Agreement shall be resolved by binding arbitration under the International Rules and administration of the American Arbitration Association. The hearing shall be held in California, or such other location as the parties may agree. The panel shall render its decision in writing, and judgement upon the panel's award may be entered in any court of appropriate jurisdiction. 14.8 Severability. The provisions of this Agreement are severable. If any ------------ one or more such provisions are judicially determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions or portions of the Agreement shall be binding on and enforceable by and between the parties hereto. 14.9 Notices. All notices required or permitted under this Agreement will ------- be in writing, will reference this Agreement and will be deemed given: (a) when actually delivered in person; (b) when sent by confirmed facsimile; or (c) the next business day after deposit with a commercial overnight carrier specifying next-day delivery, with written verification of receipt. All communications will be sent to the address set forth below or to such other address as may be designated by a party by giving written notice to the other party pursuant to this Section 14.9: Confidential and Proprietary Information 27 SmartAge 3450 California Street San Francisco, CA 94118 Attn: Christopher Dean, VP Business Development Excite 555 Broadway Redwood City, CA Attn: Denise McGuire, VP Business Development 14.10 Counterparts. This Agreement may be executed in two (2) ------------ counterparts, each of which shall be deemed an original and both of which together shall constitute one instrument. 14.11 Entire Agreement. This Agreement and the Exhibits hereto constitute ---------------- the entire agreement between the parties and supersede all prior agreements and understandings between them relating to the subject matter hereof. No modifications of the Agreement shall be binding on either party unless it is in writing and signed by the party to be charged. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed themselves or by their duly authorized representatives on the dates set forth below to be effective as of the Effective Date. SMARTAGE EXCITE BY: /s/ Christopher Dean BY: /s/ Robert C. Hood ----------------------------- -------------------------- NAME: Christopher Dean NAME: Robert C. Hood --------------------------- ------------------------ TITLE: Vice President of Business Development TITLE: EVP-CFO -------------------------------------- ----------------------- Confidential and Proprietary Information 28 EXHIBIT A MEMBERSHIP GROWTH WARRANT The Stock Purchase Warrant in the form set forth in Exhibit G shall be issued to Excite and exercisable into shares of SmartAge Series B Preferred stock at an exercise price of $1.10 per share upon the achievement of performance milestones as follows: Performance Milestones: - - 189,344 shares of Series B Preferred stock of SmartAge for the first *** combined Active Clicks' Members and Service Members. - - 189,344 shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. - - 189,344 shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. - - 189,344shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. - - 189,344shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. - - 189,344 shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. - - 189,344 shares of Series B Preferred stock of SmartAge for the next *** combined Active Clicks' Members and Service Members for a total of ***. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 29 EXHIBIT B SALES GROWTH WARRANT The Stock Purchase Warrant in the form set forth in Exhibit K shall be issued to Excite and exercisable into shares of SmartAge Series B Preferred Stock at an exercise price of $1.10 per share upon the achievement of performance milestones as follows: - - 378,688 shares of Series B Preferred stock of SmartAge when total revenues generated from the sale of Available Inventory via the Excite Buying Service reach $*** during the term of the Agreement. - - 189,344 shares of Series B Preferred stock of SmartAge when total revenues generated from the sale of Available Inventory via the Excite Buying Service reach $*** during the term of the Agreement. - - 189,344 shares of Series B Preferred stock of SmartAge when total revenues generated from the sale of Available Inventory via the Excite Buying Service reach $*** during the term of the Agreement. - - 189,344 shares of Series B Preferred stock of SmartAge when total revenues generated from the sale of Available Inventory via the Excite Buying Service reach $*** during the term of the Agreement. - - 189,344 shares of Series B Preferred stock of SmartAge when total revenues generated from the sale of Available Inventory via the Excite Buying Service reach $*** during the term of the Agreement. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information EXHIBIT C EAN PROGRAM AFFILIATE GUIDELINES A prospective Affiliate will be approved into the EAN, and thus approved to generate *** ("***") for *** into said *** site and to generate and redeem reward points for banners and other services (as provide by the Agreement) on the SmartAge SmartClicks banner exchange service, provided that said Affiliate web site: 1. does not advertise or enable the sale of *** or *** products; 2. does not advertise or enable the sale of ***; 3. does not fall within the *** or *** content category; 4. does not fall within the "***" content category does not engage in any ***. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Confidential and Proprietary Information 31 EXHIBIT D EXCITE BANNER ADVERTISING General Terms and Conditions Advertiser acknowledges that the sole obligation of Excite Inc. ("Excite") is to display an advertising banner (the "Banner") from Advertiser which conforms to the specifications set forth elsewhere in the insertion order (the insertion order and these General Terms and Conditions are referred to collectively herein as the "Agreement"). In this regard, Advertiser agrees that (i) Excite has the right to market, display, perform, transmit and promote the Banner, and (ii) users of Excite's services have the right to access and use the Banner and any content and/or services directly linked to the Banner (the "Advertiser Web Content"). All advertising will be invoiced monthly and payment in full will be due upon receipt of the invoice. Payment for all Gaming, Tobacco, or Alcohol Advertisers will be due and paid in advance in monthly installments. The first monthly payment must be paid prior to the display of the first of the Banners. Subsequent monthly installment will be due and must be paid on the first of each month thereafter. Advertiser understands that once this Agreement is executed there shall be no refunds or proration of rates even if Advertiser elects to discontinue display of the Banner prior to expiration of the advertising term. Orders are accepted subject to the terms and provisions of the current price list. Advertising prices set forth in the price list are subject to change; any price changes will apply to any additional advertising services requested by Advertiser after such price change. UNDER NO CIRCUMSTANCES SHALL EXCITE BE LIABLE TO THE ADVERTISER FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE FORESEEABLE, AND WHETHER OR NOT EXCITE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM ANY ASPECT OF THE ADVERTISING RELATIONSHIP PROVIDED FOR HEREIN. EXCITE SHALL IN NO EVENT BE LIABLE TO ADVERTISER FOR MORE THAN THE TOTAL AMOUNT PAID TO EXCITE BY ADVERTISER HEREUNDER. EXCITE MAKES NO REPRESENTATIONS, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING EXCITE'S SERVICES OR ANY PORTION THEREOF, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCITE SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING (I) THE NUMBER OF PERSONS WHO WILL ACCESS THE BANNER AND (II) ANY BENEFIT ADVERTISER MIGHT OBTAIN FROM INCLUDING THE BANNER WITHIN EXCITE'S WEB SITE. Advertiser is solely responsible for any legal liability arising out of or relating to (1) the Banner and/or (2) the Advertiser Web Content. Advertiser represents and warrants that the Banner complies with Excite's advertising standards; and that Advertiser holds the necessary rights to permit the use of the Banner by Excite for the purpose of this Agreement; and that the use, reproduction, distribution, or transmission of the Banner will not violate any criminal laws or any rights of any third parties, including, but not limited to, such violations as infringement or misappropriation of any copyright, patent, trademark, trade secret, music, image, or other proprietary or property right, false advertising, unfair competition, defamation, invasion of privacy or rights of celebrity, violation of any anti-discrimination law or regulation, or any other right of any person or entity; (4) neither the Banner nor the Advertiser's Web Content shall advertise or enable the sale of alcohol to persons under 21; (5) neither the Banner nor the Advertiser's Web Content shall advertise or enable the sale of tobacco or tobacco products to persons under 21; and (6) Advertiser's Web Content complies with all laws, rules and regulations of the state, country or territory in which it is located. Advertiser agrees to indemnify Excite and to hold Excite harmless from any and all liability, loss, damages, claims, or causes of action, including reasonable legal fees and expenses that may be incurred by Excite, arising out of or related to Advertiser's breach of any of the foregoing representations and warranties. Confidential and Proprietary Information 32 Excite reserves the right to reject any advertising which is not consistent with Excite's standards. In addition, Excite shall have the right, at any time, to remove any of Advertiser's advertising if Excite determines, in its sole discretion, that the Banner, Advertiser Web Content or any portion thereof (i) violates Excite's then applicable advertising policy, or (ii) is otherwise objectionable to Excite, in which event Excite shall refund to Advertiser a pro rata portion of the fee which Advertiser has paid to Excite for display of the Banner (if Advertiser has paid Excite a flat fee). Excite and Advertiser are independent contractors, and neither Excite nor Advertiser is an agent, representative or partner of the other. Excite may terminate this Agreement at any time in the event of material breach of this Agreement by Advertiser. This Agreement sets forth the entire agreement between Advertiser and Excite, and supersedes any and all prior agreements (whether written or oral) of Excite and Advertiser with respect to the subject matter set forth herein; provided, however, that all pricing will be governed by Excite's then-current price list, whether in print or electronic form. This Agreement may only be modified, or any rights under it waived, by a written document executed by both parties. This Agreement shall be interpreted, construed and enforced in all respects in accordance with laws of the State of California, without regard to the actual state or country of incorporation or residence of Advertiser. Advertiser hereby irrevocably consents to the exclusive jurisdiction of the courts of the State of California and the federal courts situated in the State of California in connection with any action arising under this Agreement. Advertiser may not assign this Agreement, in whole or in part. Policies for Adult-Content Advertisers Adult advertisers may only buy inventory that matches them to an audience seeking adult content: adult keywords and adult-content pages. Personals content is available to Adult content advertisers with specific creative guidelines. Adult content advertisers may not buy General Rotation. Adult ad banners and jump pages are subject to strict review prior to ad production. Excite reserves the right to refuse any inappropriate banner or jump page submissions. Banner Guidelines for Adult Content Keywords and Pages . No Partial nudity. . No anatomical body part(s) may be shown in the image. . No profane or explicit language may be used in any part of the text. . Promoting or suggestion of physical acts between men, women, teenagers, children/child porn, or animals will not be allowed. . Banners containing more than one person's image will be strictly reviewed. . Advertising for, or banners linking to, escort services will not be allowed. Banner Guidelines for Personals Content Pages Adult content banners on Personals content pages must adhere to creative guidelines for Adult content keywords and pages in addition to the following guidelines: . No suggestion of nudity. . No suggestion of physical acts between men, women, teenagers, children/child porn or animals in images or text. Confidential and Proprietary Information 33 Jump Page Guidelines The jump page must give the Web user the ability to return to Excite content. The back button or closing the browser cannot be used to spawn additional browsers with adult content, nor may any browser functionality be reprogrammed to retain the user on the site or jump page. Also, daughter windows cannot be spawned on the jump pages. Additionally: . Only one image on the jump page. Maximum size is 123 x 123 pixels. . Banner image creative guidelines apply to jump pages. . Text must state "This site contains Adult Content." . Text must ask potential customers to claim if they are over 18 in order to enter the site and must also give minors/others to option to exit the jump page/adult content site. . Suggested text is as follows: a) "Click here to enter only if you are 18 and over" b) "If you are under 18, click here to exit" Additional text is limited to: a) "18 and over only" b) "Adults only" Confidential and Proprietary Information 34 EXHIBIT E Excite Network Web sites: www.excite.com - -------------- www.webcrawler.com - ------------------ www.classifieds2000.com - ----------------------- Excite international sites, including without limitation: Australia China France Germany Italy Japan Netherlands Sweden U.K. Confidential and Proprietary Information 35 EXHIBIT F EXCITE COMPETITORS: Alta Vista Infoseek LookSmart Lycos/HotBot AOL/Netscape Communications Corporation Planet Direct Snap! (Cnet) Yahoo Confidential and Proprietary Information 36 EXHIBIT H By joining the SmartClicks ad network, members have indicated agreement to the following terms and conditions. Compliance with the terms and conditions ensures that only appropriate sites become SmartClicks members and that all network advertising meets SmartClicks standards. Any account or member violating these terms will be immediately removed from the SmartClicks ad network. 1. SmartClicks reserves the right to refuse to continue membership to any Web site in the SmartClicks network that contains or has links to nudity, sexual situations, pornography, hate groups, illegal activities, offensive material or for any other reason. 2. SmartClicks reserves the right to refuse to continue membership to any Web site deemed to be competition, including, but not limited to, other banner exchange services. 3. SmartClicks reserves the right to reject any banner that contains nudity, profanity, offensive material or for any other reason. 4. Members agree to insert the provided SmartClicks HTML code for displaying banners on their Web site. The SmartClicks HTML code may not be modified in any way without written permission from SmartClicks. 5. Only one (1) SmartClicks banner may be placed on a page. A page is what is displayed on one screen, so members who use frames must count all individual pages in the frame as one page for banner placement purposes. 6. SmartClicks ad network banners must be displayed on the page such that the banner is easily visible. Banners may not be "hidden" so that a visitor has no way to view the banner. 7. SmartClicks banners must remain static on the member's Web site, and may not be rotated with those of any other banner exchange service. 8. A member may not artificially inflate traffic counts to his/her site using any device, program, robot or other means. A banner may not be placed on a page that reloads automatically. Banners loaded via the SmartClicks HTML may not be placed in newsgroups, e-mail, chat rooms or guestbooks, unless permission is granted from SmartClicks. Any member whose account is terminated for artificially inflated traffic counts may offer a defense to have the account re- instated. SmartClicks' logs and/or judgments in these matters will prevail. 9. A member may not display the SmartClicks HTML on sites other than the one to which the account is addressed to click through to, unless written permission is granted from SmartClicks. A member may display the SmartClicks HTML on any of the pages on the site, as long as there is a path of links from the page that the banner clicks through to, to the page on which the banner is displayed. 10. A banner that appears on a member site may at any time be a banner for another member, for a sponsor or partner, for SmartClicks or for other SmartAge services. Ratings restrictions apply. 11. SmartClicks reserves the right not to accept any advertisements from entities whose product or advertisement are deemed by SmartClicks to be inappropriate, or for any other reason. 12. Members may cancel their accounts with the SmartClicks ad network at any time by sending a request for cancellation, containing the account number and password of the account in question, via e-mail to accounts@smartclicks.com, and removing the SmartClicks HTML code from the Web site. Cancellations take place immediately. Confidential and Proprietary Information 46 13. The SmartClicks name, logo, software, databases, reports, Web site and information are proprietary and cannot be used without permission from SmartClicks. Exception: each member has the right to use information compiled by SmartClicks for the member's site or in the promotion of the member's site. 14. Members agree that their Web site information (name, URL, traffic counts, etc.) may be used by SmartClicks, provided however, that it is the intent of SmartAge to be consistent with the then current TrustE guidelines as of the Effective Date. 15. The information members provide to SmartClicks will be kept confidential and will not be distributed, except in aggregate, to any outside agency, without the permission of the member, provided however, that it is the intent of SmartAge to be consistent with the then current TrustE guidelines as of the Effective Date. 16. SmartClicks, its administrators, partners and sponsors cannot be held liable for any damage or loss of information that may occur from the use of SmartClicks' services. 17. Members agree to use SmartClicks at their own risk. 18. SmartClicks makes every effort to verify and maintain a high standard of service quality, but SmartClicks does not make any guarantees regarding the dependability or accuracy of SmartClicks' services. 19. SmartClicks will attempt to correct inconsistencies in credits due any member based on the member's proof of inconsistency. 20. SmartClicks reserves the right to modify or change these Terms and Conditions at any time, as it deems necessary. It is the member's responsibility to keep current with changes in the Terms and Conditions, since changes are effective for all members, regardless of when the member joined. Updates will be evident by the date modified on the home page. Confidential and Proprietary Information 47 EXHIBIT I
Design and Build - ------------------------------------------------------------------------------------------------------------------------------------ Service Category Description - ------------------------------------------------------------------------------------------------------------------------------------ SiteWatch Build SiteWatch is a monitoring service that tracks the performance of "your site" by measuring the response time of the server, server downtime, and other metrics. - ------------------------------------------------------------------------------------------------------------------------------------ Tune-Up Build A multifunctional diagnostic tool that helps administer and maintain web sites, including HTML checking, spell checking, broken link checking, browser optimization and others. - ------------------------------------------------------------------------------------------------------------------------------------ Browser Snapshot Build A web site diagnostic tool to shows how a web site is displayed by different browser platforms. - ------------------------------------------------------------------------------------------------------------------------------------ .GIF Lube Build A tool which shrinks the size of .gif images and optimizes .gifs to improve load times on Web sites - ------------------------------------------------------------------------------------------------------------------------------------ GIF optimization Build A second, but different .gif optimization tool. The leading GIF optimization solution - ------------------------------------------------------------------------------------------------------------------------------------ Site Scan Build/Adm A multifunctional web site diagnostic tool that specializes in searching for broken links. - ------------------------------------------------------------------------------------------------------------------------------------ Market and Promote - ------------------------------------------------------------------------------------------------------------------------------------ Service Category Description - ------------------------------------------------------------------------------------------------------------------------------------ BannerCreater Promotion A simple free and for pay banner creation tool used to support the banner exchange service. - ------------------------------------------------------------------------------------------------------------------------------------ HTML Inserter Promotion A tool which automatically inserts the HTML into a user's web page required to display banners for the banner exchange - ------------------------------------------------------------------------------------------------------------------------------------ SiteRank Promotion A tool which measures a web site's relative search results position on the major search engines given a set of user-supplied key words. - ------------------------------------------------------------------------------------------------------------------------------------ TrafficPack Promotion A bundled suite of services that combines banner advertising with SmartAge Site Rank, SmartAge Site Watch & SmartAge Submit/Add-it Pro - ------------------------------------------------------------------------------------------------------------------------------------ SmartStarters Promotion A program where banner exchange users purchase banners in very small increments on the SmartClicks Network only. - ------------------------------------------------------------------------------------------------------------------------------------ Online Media Offers Promotion A program that offers a suite of Media purchasing (banners, key words) on multiple networks - ------------------------------------------------------------------------------------------------------------------------------------ Traditional Media Promotion A program that offers a suite of offline media offers including, but not limited to a Offers newspaper ad, yellow page ad, radio Ad, coupon program - ------------------------------------------------------------------------------------------------------------------------------------ WebSite Post Office Promotion A service that helps small businesses create customer mailing lists and them helps them manage the creation of messages. - ------------------------------------------------------------------------------------------------------------------------------------ Advanced Promotion A directory service which helps small business promote themselves amongst the banner User exchange network, and helps them find the products and services they desire. Directory/Service finder - ------------------------------------------------------------------------------------------------------------------------------------ Sell - ------------------------------------------------------------------------------------------------------------------------------------ Service Category Description - ------------------------------------------------------------------------------------------------------------------------------------ SmartOpps Sell A program that bring the top existing affiliate programs to the banner exchange members, incents them to join and helps them make money off of the affiliate programs. - ------------------------------------------------------------------------------------------------------------------------------------ Smart Affiliate Sell An application that lets banner exchange members build their own affiliate programs Program with the same functionality and sophistication as leading large vendor affiliate programs. - ------------------------------------------------------------------------------------------------------------------------------------
Confidential and Proprietary Information 48 EXHIBIT J SMARTAGE COMPETITORS: LinkExchange HyperBanner BannerSwap 1-2-3 Banners ValueClick Digital Work AtWeb Springfield Project Confidential and Proprietary Information 49 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION Amendment to Marketing and Services Agreement This Amendment to Marketing and Services Agreement (this "Amendment") is entered into and effective as of April 30, 1999 (the "Effective Date") by and between SmartAge Corp., a Delaware corporation, with principal place of business at 3450 California Street, San Francisco, CA 94118 ("SmartAge") and Excite, Inc., a Delaware corporation, with principal place of business formerly at 555 Broadway, Redwood City, CA, but currently at 450 Broadway, Redwood City, CA 94063 ("Excite"). RECITALS: SmartAge and Excite entered into a Marketing and Services Agreement (the "Agreement") dated April 30, 1999. SmartAge and Excite now wish to amend the Agreement. Not therefore, the parties agree as follows: 1. Section 3.2(b). Section 3.2(b) is hereby deleted and replaced with the -------------- following: (b) Exclusive Right. SmartAge shall be the exclusive provider of the --------------- Excite Buying Service with such exclusive right commencing no later than on or about ***, 1999, provided however, that such service, in Excite's reasonable discretion, is best of breed compared to any other substantially similar service available on the Internet in terms of the following criteria, taken as a whole: (i) depth of coverage; (ii) timeliness; and (iii) reputation and ranking based upon a cross-section of a minimum of three third party reviewers in terms of features, functionality, quality and other qualitative factors that are mutually deemed material in nature. However, Excite may sell its advertising through automated buying services belonging to third parties and operated on such third party Web sites, provided that *** do not *** at such *** through *** on the *** to *** . 2. Section 3.3. Section 3.3 is hereby deleted and replaced with the following: ----------- (a) Excite Buying Service. SmartAge agrees that the first date upon --------------------- which Advertisers shall be able to purchase Available Inventory via the Excite Buying Service shall be no later than on or about ***, 1999, provided however, that Excite has fulfilled all its relevant obligations and provided all reasonably necessary assistance to SmartAge in meeting such launch date pursuant to Section 3.2. (b) SmartAge Buying Service. SmartAge agrees that the first date upon ----------------------- which Advertisers shall be able to purchase ad banner inventory via the SmartAge Buying Service shall be no later than on or about ***, 1999. SmartAge further agrees that the first date upon which Advertisers shall be able to purchase Available Inventory via the SmartAge Buying Service shall be no later than on or about ***, 1999. 3. Section 3.11(a). Section 3.11(a) is hereby deleted and replaced with the --------------- following: a. Sales Minimums. SmartAge shall guarantee to Excite the following -------------- monthly minimums in revenues generated and received from SmartAge Sourced- Leads ("Sales Minimums") according to the following table: *** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION -1- Month Minimum ----- ------- September 1999 $*** October 1999 $*** November 1999 $*** December 1999 $*** January 2000 $*** February 2000 $*** March 2000 $*** April 2000 $*** May 2000 $*** June 2000 $*** July 2000 $*** For each such month that SmartAge generates less than the corresponding monthly Sales Minimum, SmartAge agrees to make up such shortfall by purchasing Available Inventory on the Excite Network for purposes of marketing SmartAge. Such shortfall purchase shall be as determined by SmartAge, subject to the reasonable approval of Excite, provided however, that SmartAge shall be able to make such purchase at an *** of *** percent (***%) *** the then-current stated gross rates for such Available Inventory. In the event that SmartAge generates less than the corresponding monthly Sales Minimums in any three (3) one-month periods commencing November 15, 1999, whether consecutive or not, then Excite shall have the right to discontinue its obligations pursuant to Section 3.2(a) to offer Available Inventory via the Buying Services. 4. Integration. ----------- This Amendment, the Agreement and the Exhibits thereto constitute the entire agreement between the parties and supersede all prior agreements and understandings between them relating to the subject matter hereof. The Agreement remains unchanged to the extent not modified in this Amendment. No modifications of the Agreement shall be binding on either party unless it is in writing and signed by the party to be charged. Sections 14.4 through 14.10 of the Agreement are hereby incorporated by reference into this Amendment. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed themselves or by their duly authorized representatives on the dates set forth below to be effective as of the Effective Date. SMARTAGE CORP. EXCITE, INC. By: /s/ C. Dean By: /s/ Elizabeth M. Berez ------------------------------ ------------------------------ Signature Signature _________________________________ _________________________________ Print Name Print Name Title:___________________________ Title:___________________________ ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION -2- Date:__________________________ Date:___________________ -3- EX-10.11 20 BANNER EXCHANGE SERVICE AGREEMENT EXHIBIT 10.11 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BANNER EXCHANGE SERVICES AGREEMENT This Banner Exchange Services Agreement ("Agreement") is entered into as of March 30, 1999 (the "Effective Date") by and between SmartAge Corp., a Delaware corporation, with principal place of business at 3450 California Street, San Francisco, CA 94118 ("SmartAge") and theglobe.com, inc., a Delaware corporation, with principal place of business at 31 West 21/st/ Street, New York, NY 10010 ("Globe"). RECITALS SmartAge is a provider of Internet related services to small and growing companies. Through its SmartClicks' banner exchange service, SmartAge provides a proprietary technology and a network of participating Web sites from which to display and distribute ad banners for members. SmartAge desires to establish a banner exchange service for Globe. Globe desires to have SmartAge establish a banner exchange service for Globe for the purposes of offering an additional service to users of its Web site and receiving a share of Available Impressions (as defined below) generated from the Globe Network (as defined below). SmartAge and Globe desire to enter into this Agreement for the specific purposes of SmartAge providing the banner exchange service to users of Globe's Web site and Globe marketing and promoting the banner exchange service to the existing and prospective Globe customers. 1. DEFINITIONS. 1.1 "Account" means a device by which a Globe Member Site accrues credits ------- which are then used by a Globe Member in displaying an ad banner within the SmartClicks' Network. Each such Account contains information that identifies the Globe Member Site, statistics generated from the Globe Member Site, and the Globe Member's ad banner. 1.2 "Active Globe Account" means any Account whose associated Globe Member -------------------- Site meets each of the following conditions: 1) it has been approved by SmartAge; 2) it is enabled to show ad banners using the Banner Exchange Technology; 3) it has submitted its own ad banner which has been approved by SmartAge to be shown in the SmartClicks' Network; and 4) it has displayed at least one ad banner served by the Banner Exchange Technology within the previous thirty (30) calendar days. 1.3 "Available Impressions" means *** percent (***%) of all Impressions --------------------- derived from the Globe Network. 1.4 "Banner Exchange Technology" means SmartAge's proprietary software, -------------------------- which is used to: 1) serve ad banners in the SmartClicks' Network, and 2) give Globe Members the ability to manage their own Accounts. 1.5 "Banner Exchange Service" means that service provided to Globe Members ----------------------- using the Banner Exchange Technology. 1.6 "Co-Branded Page" means any Web page on the SmartAge Site or Globe --------------- Site which displays the name, brand, logo, trademark, service mark or other identifying mark of both parties in manner as mutually agreed and as specified within this Agreement. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 1.7 "Globe Member" means a third party that registered for the Banner ------------ Exchange Service via the Globe Site and is approved by the parties to have the right to display its ad banner throughout the SmartClicks' Network using the Banner Exchange Technology. 1.8 "Globe Member Site" means each Globe Member's World Wide Web site on ----------------- the Internet and all internally linked sub-pages. 1.9 "Globe Network" means a networked collection of Web sites on the World ------------- Wide Web comprised of all Globe Members participating in the Banner Exchange Service. 1.10 "Globe Site" means the World Wide Web sites on the Internet containing ---------- the domain name "theglobe" and all internally linked sub-pages. 1.11 "Home Page Builder" means that Web based authoring tool provided by ----------------- Globe that shall enable a user to build a customized Web site, as part of a Globe service. 1.12 "Impression" means the delivery of an ad banner to a browser. ---------- 1.13 "Launch Date" means that first date upon which a prospective Globe ----------- Member can register for the Banner Exchange Service via the Globe Site. 1.14 "Member Data" means registration information specific to a third party ----------- that shall be obtained electronically by SmartAge as part of the process of such third party registering for the Banner Exchange Service via the Globe Site. 1.15 "SmartAge Site" means SmartAge's World Wide Web site on the Internet ------------- located at http://www.smartage.com and all internally linked sub-pages. 1.16 "SmartClicks' Member" means a third party that registered for the ------------------- SmartClicks' banner exchange service via the SmartClicks' Site. 1.17 "SmartClicks' Network" means that networked collection of Web sites on -------------------- the World Wide Web participating in a banner exchange service provided by SmartAge using the Banner Exchange Technology. 1.18 "SmartClicks' Site" means SmartClicks' World Wide Web site on the ----------------- Internet located at http://www.smartclicks.com and all internally linked sub- pages. 1.19 "SmartClicks Terms and Conditions" means the terms, conditions, -------------------------------- requirements, limitations and restrictions, as may be reasonably modified by SmartAge from time to time, which are described on the page of the SmartClicks' Site which has a title which is substantially similar to "SmartClicks Terms and Conditions" and are currently as attached as Exhibit A, as may be modified from time to time. 2. SMARTAGE OBLIGATIONS. 2.1 Service Level. SmartAge agrees to provide the Banner Exchange ------------- Service to Globe Members in a professional and reliable manner consistent with that manner provided to SmartClicks' Members. SmartAge agrees that for every two ad banners displayed through the Banner Exchange Service on a Globe Member Site, the Active Globe Account will be credited to allow one ad banner promoting the Globe Member Site. 2 2.2 SmartClicks' Network. SmartAge agrees to enable Globe Members using -------------------- the Banner Exchange Service to display their ad banners within the SmartClicks' Network pursuant to: 1) the terms, conditions, requirements, limitations, and restrictions of the SmartClicks Terms and Conditions, and 2) the prior approval of SmartAge. SmartAge agrees to provide the Globe written notice prior to significantly changing the SmartClicks Terms and Conditions. In the event the Globe determines such change is material in nature, the Globe shall have the right to terminate the Agreement pursuant to Section 8.2. 2.3 Hosting, Maintaining, and Serving. SmartAge agrees to host, maintain, --------------------------------- administer and serve all ad banners, registration pages, statistical information, and description pages related to a Globe Member's use of the Banner Exchange Service. 2.4 Member Data Collection and Maintenance. SmartAge agrees to collect, -------------------------------------- maintain, and administer all Member Data at a location and on software and equipment as determined by SmartAge. 2.5 Customer Support. SmartAge agrees to respond to all customer service ---------------- issues and provide all customer service support related to use of the Banner Exchange Service, in a professional and reliable manner consistent with that manner provided to SmartClicks' Members. SmartAge agrees to work with Globe customer care to resolve customer service issues and to respond promptly to questions by Globe customer service. SmartAge will provide to Globe weekly status reports regarding customer service, including the number of inquiries and material complaints, and the resolution of such complaints. Such status reports shall be provided in a manner and form as mutually agreed. 3. MARKETING AND PROMOTION. 3.1 Naming. Both parties shall display a word, phrase, or logo ------ (respectively, "Globe Brand" and "SmartAge Brand") when marketing and promoting the Banner Exchange Service to existing and prospective Globe Members. The parties agree that, if approved by Globe's counsel, the Globe Brand shall include the phrase "Clicks" (e.g., GlobeClicks) and the SmartAge Brand shall be "Powered by SmartAge" or similar phrase. Both the Globe and SmartAge Brands shall be in size, form, design and page location as mutually agreed. 3.2 Promotion. Globe agrees to promote the Banner Exchange Service to --------- users of the Globe Site by placing a text hyperlink ("Promotional Link") in the HP Builder Tool Bar under "Promotional Tools/Promotions". In addition, Globe shall provide rotating Promotional Links as follows: on the home page of the Globe Site, in the technology and business themed areas, and in other themed areas at Globe's discretion. Globe agrees to work with SmartAge to select additional mutually agreeable sections of the Globe Site within which to promote the Banner Exchange Service. Globe further agrees to promote the Banner Exchange Service via a press release pursuant to Section 3.5 herein. 3.3 E-Mail Promotion. Before or within ten (10) days after the Launch ---------------- Date, Globe agrees to promote the Banner Exchange Service to its entire database of existing and prospective members (other than members who have opted out of receiving such messages) with an email message devoted to the launch of the Banner Exchange Service. Each calendar quarter thereafter, Globe shall include a standard text promotion of the Banner Exchange Service as part of the email newsletter that it sends to its entire database of existing and prospective members (other than members who have opted out of receiving such messages). Each such e-mail distribution shall be in a manner, form and include content as provided by SmartAge, subject to the approval of Globe. 3.4 Integration into Home Page Builder. The Globe and SmartAge will work ---------------------------------- together to integrate registration for the Banner Exchange Service into the Home Page Builder. As of the Launch Date users who register for the Globe Site for the *** shall *** for the Banner Exchange Service as ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 3 a result of *** for the Home Page Builder, unless such user specifically "***" of *** for the Banner Exchange Service or "***" of having their personal information disclosed to a party other than Globe. Globe reserves the right to change the *** so that users who *** for Globe are not *** registered for the Banner Exchange Service but must "***" if they want to join the Banner Exchange Service, provided however, that Globe shall provide SmartAge with at least three (3) business days notice prior to any such change. In the event that Globe changes the registration process to opt-in, Globe agrees to work with SmartAge to resolve any issues that led to such *** in *** and to consider at its option alternative integration processes with the intent of reinstating the ***. Both parties agree that such integration shall be performed in manner and with technical specifications as mutually agreed, provided however, that such integration is completed no later than thirty (30) days after the Effective Date. Existing members of the Globe Site will be able to register for the Banner Exchange Service and will not be automatically registered. 3.5 Press Release. Both parties agree to promote the Banner Exchange ------------- Service via a joint press release that shall contain information as mutually agreed and shall be issued no later than thirty (30) days after the Effective Date. Except as stated above, neither party shall make any press release or other public statement about this Agreement without the prior written consent of the other party, which shall not be unreasonably withheld. 3.6 Launch of Service. Both parties agree that the Launch Date shall be ----------------- thirty (30) days after the Effective Date of this Agreement, unless otherwise mutually agreed in writing. 3.7 Exclusivity. SmartAge agrees not serve ad banners within the Globe ----------- Network of the direct competitors of Globe as specified on Exhibit D attached hereto. Globe agrees not to serve ad banners on the Globe Site of the direct competitors of SmartAge as specified on Exhibit E attached hereto. SmartAge and Globe agree that either party may modify its respective list of direct competitors upon thirty (30) days prior written notice to the other party. 3.8 Trademarks. Except as expressly set forth herein, no license to ---------- either party's Brands, trademarks or other such identifying marks ("Marks") is granted under this Agreement and neither party may use the other party's identifying marks without prior written consent. Title to and ownership of the trademark owner's Marks shall remain with the owner. The licensee shall use the Marks exactly in the form provided and in conformance with any trademark usage policies. The licensee shall not take any action inconsistent with the owner's ownership of the Marks and any benefits accruing from the use of such Marks shall automatically vest in the owner. Promptly following the other party's reasonable request, each party agrees to submit to the other party's representative samples of their use of the Marks. 4. WEB PAGE REQUIREMENTS. 4.1 Description Page. Each Promotional Link on the Globe Site shall be ---------------- linked to one or more description pages (each a "Description Page") which each shall include general information provided by SmartAge explaining the benefits of the Banner Exchange Service. Each Description Page shall be a Co-Branded Page and shall display the Globe Brand and the SmartAge Brand with equal prominence. The Description Page(s) shall be in form and design, and served from a location as determined by SmartAge, subject to the approval of Globe. 4.2 Registration Page(s). Each Description Page shall include a prominent -------------------- graphical hyperlink, which shall display "JOIN NOW", or other such similar statement which prompts prospective Globe Members to register for the Banner Exchange Service. Such prominent graphical hyperlink shall be linked to one or more registration pages (each a "Registration Page") as mutually agreed by the parties. Each Registration Page shall be a Co-Branded Page and shall display the Globe Brand and SmartAge Brand with equal prominence. The Registration Page(s) shall be in form and design, and shall include a minimum number of fields and request ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 4 specific Member Data as determined by SmartAge, subject to reasonable approval of Globe. The Registration Page(s) shall be served from a location as solely determined by SmartAge. The registration process shall be as currently specified on Exhibit B attached hereto. 5. OWNERSHIP. SmartAge and Globe acknowledge and understand that Member Data shall be collected and maintained by SmartAge, and shall be jointly owned by the parties such that during the term of this Agreement, the Member Data shall be treated as Confidential Information (as defined in Section 9) of both parties. Each party shall each be permitted to use Member Data for marketing and other purposes without notice or approval of the other party, provided however the following: (i) neither party shall use any Member Data in a manner that identifies (or permits the identification of) the origin of the Member Data as being solely from the other party; (ii) SmartAge shall not permit the targeting of Globe Members based on their status as Globe Members, and Globe shall not permit the targeting of SmartAge Members based on their status as SmartAge Members; and (iii) use of Member Data shall not be used by SmartAge to specifically target only Globe Members and shall not be used by Globe to specifically target only SmartAge Members. Each party shall use the Member Data in accordance with the privacy policy under which it was collected. 6. ALLOCATED IMPRESSIONS. 6.1 Traffic Sharing. SmartAge agrees that the number of Impressions --------------- allocated to Globe shall be calculated as a percentage of the total Available Impressions generated by the Globe Network. This percentage shall be based upon the number of Globe Members participating in the Banner Exchange Service per the following schedule: Globe Members % of Available Impressions ------------- -------------------------- Up to *** members ***% ***-*** members ***% Over *** members ***% For example, if there are 10,000 Globe Members in the Globe Network which each on average generate 50 Impressions per day, then the total number of Available Impressions per day in the Globe Network is 250,000. Therefore, the total number of Impressions allocated to Globe, pursuant to this Section 6.1 herein, is ***% of this amount, which results in *** Impressions per day being allocated to Globe or *** on a 30-day basis. 6.2 Use of Allocated Impressions. Globe shall be able to use its allocated ---------------------------- Impressions, as calculated in Section 6.1, to promote Globe or to sell to a third party, provided the following: (a) if the allocated Impressions are to be used for the purposes of promoting Globe, then they may be used on any Web site with available ad banner inventory within the SmartClicks' Network; (b) if the allocated Impressions are to be used for reselling to a third party, then they may be used on any Web site with available ad banner inventory within the Globe Network; (c) allocated Impressions shall be used in a continuous and automatic manner as mutually agreed such that any ad banners provided by Globe to SmartAge for purposes of using such allocated Impressions shall be continuously displayed within the SmartClicks' Network on Web sites with available ad banner inventory unless otherwise mutually agreed. ***CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION 5 (d) usage of such allocated Impressions is subject to the Banner Exchange Technology and the specific terms, conditions, requirements, limitations, and restrictions of the SmartClicks Terms and Conditions as currently specified on Exhibit A attached hereto. 6.3 Adjustments to Allocated Impressions. Globe acknowledges and ------------------------------------ understands that SmartAge may need to adjust the number of allocated Impressions from time to time to compensate for variations that may occur due to the unique aspects of the scheduling and targeting of excess ad banner inventory within the SmartClicks' Network. In the event that any such adjustment is both material in nature and results in a reduction in the number of Impressions allocated to Globe in any calendar quarter, SmartAge agrees to make good such reduction by increasing the allocation of Impressions to Globe in the following calendar quarter by the amount of any such reduction. 6.4 Activity Reporting. SmartAge agrees to provide Globe with access to ------------------ real-time reports specifying the total number of Active Globe Accounts, ad banners shown within the Globe Network, Impressions allocated to Globe during any prior day, the current balance of such unused Impressions, the total number of Globe Member Sites and the URL's for each such site that were not approved by SmartAge pursuant to Section 7.2, and any other information as mutually agreed. Such summary report shall be accessed by Globe using a unique password via an Internet address or in any other manner as both parties may mutually agree. Globe shall have the right to inspect the relevant records of SmartAge for the specific purposes of reasonably verifying such reports, provided however, that the Globe will provide SmartAge with at least fourteen (14) business days prior written notice before any such inspection and further provided, that Globe agrees to limit any such inspections to no more than one (1) occasion per calendar quarter unless it has material evidence that such records are maintained in an unreliable or fraudulent manner. Any such inspection shall be conducted during normal business hours and in a manner that does not unreasonably interfere with SmartAge's business. Such activity reports shall be substantially similar to Exhibit C attached hereto. 7. POLICIES & PROCEDURES. 7.1 Policies & Procedures. All of SmartAge's normal rules, requirements, --------------------- operating policies, and procedures regarding the Banner Exchange Technology and the Banner Exchange Service shall apply to Globe Members and the Globe Network pursuant to the terms and conditions of this Agreement. SmartAge reserves the right to reject any Globe Member or Globe Member Site that does not comply with such policies and procedures. The parties agree to discuss and consider proposals with respect to SmartAge's policies and procedures and adult advertising opportunities on the Globe Network. 7.2 Approval of Member Sites and Ad Banners. Each Globe Member Site and --------------------------------------- its ad banners must be approved before submitting ad banners to the Globe Network and prior to being served using the Banner Exchange Technology. Such approval will be based upon the specific terms, conditions, requirements, limitations, and restrictions of the SmartClicks Terms and Conditions. SmartAge shall take necessary precautions and make a commercially reasonable effort not to serve any ad banners promoting or referencing illegal products or services. 7.3 Removal of Ad Banners. At Globe's request, SmartAge shall make ---------------------- commercially reasonable efforts to remove from the Globe Network within forty- eight (48) hours on a normal basis any ads that Globe does not want to appear on the Globe Network. 7.4. Additional Restrictions. Globe may notify SmartAge of additional ------------------------ restrictions for banner ads to the Globe Network. SmartAge shall implement such restrictions provided that they are technically feasible and further provided that such restrictions are consistent with the then-current SmartClicks Terms and Conditions. 6 8. TERM & TERMINATION. 8.1 Term. This Agreement shall become effective on the Effective Date and ---- shall continue in effect for an initial term of one (1) year, subject to earlier termination pursuant to Sections 8.2 and 8.3 as described herein. Thereafter, the Agreement shall renew for successive one (1) year periods unless either party provides written notice to the other party of its intent not to renew at least sixty (60) days prior to the termination of the then-current term. 8.2 Default. In the event either party defaults in the performance of any ------- material obligation required to be performed hereunder, and such default is not cured within thirty (30) calendar days after written notice thereof by the other party, then the non-defaulting party, at its option, may, in addition to any other remedies it may have, immediately terminate the Agreement by giving written notice of termination to the defaulting party. For purposes of this Section 8.2, any violation of Sections 2.2, 3.7, 7.3, or 7.4 shall be considered a material default. 8.3 Insolvency. The Agreement may be terminated by either party, ---------- immediately on notice, (a) if the other party becomes insolvent, (b) upon the institution by the other party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of its debts, (c) upon the institution of such proceedings against the other party, which are not dismissed or otherwise resolved in such other party's favor within forty-five (45) days thereafter, (d) upon the other party's making a general assignment for the benefit of creditors, or (e) upon the other party's dissolution or ceasing to conduct business in the normal course. 8.4 No Liability for Damages. Neither party will be liable for damages ------------------------ of any kind as a result of exercising its right to terminate this Agreement according to its terms, and termination will not affect any other right or remedy at law or in equity of either party. 8.5 Effect of Termination. Upon termination or expiration of the --------------------- Agreement, each party shall cease to perform all services for the other party as described in this Agreement. Each party shall also immediately discontinue any use of the other party's tradename and trademarks and all promotional activities related to the other party's products or services. Each party further agrees to immediately return all materials in its possession belonging to the other party. 8.6 Survival. Except as otherwise set forth herein, all rights and -------- obligations of the parties pursuant to the following Sections shall survive any termination of this Agreement: Sections 3.8, 5, 8.4, 8.5, 8.6, 9, 10.1, 11, 12, and 13. 9. CONFIDENTIALITY. (a) Each party to this Agreement acknowledges that it may receive confidential information ("Confidential Information") of the other party. For purposes of this Agreement, Confidential Information shall mean any trade secret, information, process, technique, algorithm, computer program (source and object codes), design, drawing, formula, test data, business development and marketing plans and concepts, records and files, financial data and budgetary information, income or sales data or projections, customer lists, information regarding customers, facilities, suppliers, plans, or market analysis. (b) Each party covenants and agrees that: (1) it will not, at any time, reveal, divulge, or make known to any person, firm, corporation, or other entity any Confidential Information of the other party; (2) it will not publish, communicate, divulge, disclose or use such information for any purpose not authorized by the other party, nor make copies or disclose in any manner Confidential Information to any third party without prior written consent of the other party; (3) it will not use the Confidential Information of the other party for any purpose except to 7 the extent required to accomplish the intent of this Agreement; and (4) it will return to the other party any documents (including copies, if any) containing Confidential Information of the other party after the need for such information has expired, or upon the request of the other party, and, in any event, upon completion or termination of this Agreement. (c) Each party shall take reasonable security precautions, at least as great as the precautions it takes to protect its own trade secrets, with respect to the Confidential Information which it receives and shall disclose Confidential Information on a need to know basis only to its subsidiary, agent or subcontractor who is obligated to treat the Confidential Information in a manner consistent with all the obligations of this Agreement. (d) The term Confidential Information does not include information which the receiving party can demonstrate by competent written proof: (1) is now, or hereafter becomes, through no act or failure to act on the part of the receiving party, generally known or available; (2) is known to the receiving party at the time of receiving such information as evidenced by its records; (3) is hereafter furnished to the receiving party by a third party, as a matter of right and without restriction on disclosure; (4) is the subject of written permission to disclose provided by the other party; or (5) is required to be disclosed by law. (e) Each party agrees that any breach of obligations under this Section 9 shall be a material breach of this Agreement and result in irreparable harm to the non-disclosing party for which damages would be an inadequate remedy and, in addition to the rights and remedies otherwise available at law, the non- disclosing party shall be entitled to equitable relief, including injunction, in the event of such breach. 10. LIMITATION OF LIABILITY. 10.1 Aggregate Liability. In no event shall either party be liable for ------------------- special, punitive, or consequential damages (including, but not limited to, damages for loss of business profits, business interruption, loss of programs or information, and the like), or any other damages arising in any way out of this Agreement. 10.2 Service Interruptions. SmartAge and Globe will endeavor to keep their --------------------- respective Web sites and services operational at all times, but certain technical difficulties may, from time to time, result in temporary service interruptions. Neither party shall be liable to the other for any consequences of such services interruptions. 11. WARRANTIES. NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, REGARDING ANY MATTER, INCLUDING IMPLIED WARRANTIES OR MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. 12. INDEMNIFICATION. 12.1 SmartAge Indemnification. SmartAge shall indemnify, defend and hold ------------------------ harmless Globe and its officers, directors, employees and agents (the "SmartAge Indemnified Parties") from and against any and all claims, demands, liabilities, damages, actions, causes of action, costs or expenses of any kind or nature, including reasonable attorney's fees and costs (together "Claims") arising out of any allegation, suit or claim made or threatened by any third party against SmartAge Indemnified Parties relating to (a) the Banner Exchange Technology and the Banner Exchange Service, including the banner ads, and (b) acts, omissions, or misrepresentations to the extent that SmartAge is deemed a principal of Globe. 8 12.2 Globe Indemnification. Globe shall indemnify, defend and hold --------------------- harmless SmartAge and its officers, directors, employees and agents (the "Globe Indemnified Parties") from and against any and all claims, demands, liabilities, damages, actions, causes or action, costs or expenses of any kind or nature, including reasonable attorney's fees and costs (together, "Claims") arising out of any allegation, suit or claim made or threatened by any third party against Globe Indemnified Parties relating to (a) the content of the Globe Site specifically excluding Globe Member-generated or controlled content, the Banner Exchange Technology and Banner Exchange Service, including the banner ads, and (b) acts, omissions, or misrepresentations to the extent that Globe is deemed a principal of SmartAge. 12.3 Provision of Indemnity. Any party entitled to indemnify under ---------------------- Sections 12.1 or 12.2 herein (the "Indemnified Party") shall promptly notify the other party (the "Indemnifying Party") of any Claim for which the Indemnified Party seeks indemnification, and shall permit the Indemnifying Party to control the defense of any such Claim with counsel of Indemnifying Party's choice. The Indemnified Party shall reasonably cooperate in the defense of any Claim, and may, at its own cost and expense, participate in any defense with counsel of its choice. In the event the Indemnifying Party fails after written notice to perform its obligations under this Section 12, the Indemnified Party may at its election take any action, including the settlement of any Claim, without further notice to the Indemnifying Party, and without waiving any rights or Claims against the Indemnifying Party it may have under this Agreement, at law or in equity. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. 13. MISCELLANEOUS. 13.1 Assignment. Neither party may assign this Agreement or transfer any ---------- of the rights, duties or obligations herein to any party (except to an affiliated company) without the prior written consent of the other party and any purported attempt to do so shall be null and void. 13.2 Relationship of Parties. SmartAge and Globe are independent ----------------------- contractors and nothing in this Agreement is intended or will create any form of partnership, joint venture, agency, franchise, sales representative or employment relationship between the parties. Neither party has the authority, without the other party's prior written approval, to bind or commit the other party in any way. 13.3 Waiver. No waiver of any provision of the Agreement shall be ------ effective unless made in writing. No waiver of any breach of any provision of the Agreement shall constitute a waiver of any subsequent breach of the same or any other provision of the Agreement. 13.4 Governing Law and Dispute Resolution. Any dispute regarding the ------------------------------------ interpretation or validity hereof shall be governed by the laws of the State of New York, exclusive of that body of law relating to choice of law. Both parties submit to jurisdiction in New York and agree that any cause of action arising under this Agreement shall be brought in a court in New York, New York. 13.5 Severability. The provisions of this Agreement are severable. If ------------ any one or more such provisions are judicially determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions or portions of the Agreement shall be binding on and enforceable by and between the parties hereto. 13.6 Notices. All notices required or permitted under this Agreement will ------- be in writing, will reference this Agreement and will be deemed given: (a) when actually delivered; (b) when sent by confirmed facsimile; or (c) the next business day after deposit with a commercial overnight carrier specifying next- day delivery, with written verification of receipt. All communications will be sent to the address set forth below or to such other address as may be designated by a party by giving written notice to the other party pursuant to this Section 13.6: 9 SmartAge 3450 California Street San Francisco, CA 94118 Attention: VP of Business Development Globe 31 West 21/st/ Street, 4/th/ floor New York, NY 10010 Attention: General Counsel 13.7 Counterparts. This Agreement may be executed in two (2) counterparts, ------------ each of which shall be deemed an original and both of which together shall constitute one instrument. 13.8 Entire Agreement. This Agreement constitutes the entire agreement ---------------- between the parties and supersedes all prior agreements and understandings between them relating to the subject matter hereunder. No modifications of the Agreement shall be binding on either party unless it is in writing and signed by the party to be charged. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed themselves or by their duly authorized representatives on the dates set forth below to be effective as of the Effective Date. SmartAge Globe BY: /s/ BY:/s/ ---------------------------------- ----------------------------- NAME: Christopher S. Dean NAME: William A. Margiloff ------------------------------ ------------------------- TITLE: V.P. of Bus. Dev. TITLE: Director of Sales ----------------------------- ------------------------- 10 EXHIBIT A By joining the SmartClicks ad network, members have indicated agreement to the following terms and conditions. Compliance with the terms and conditions ensures that only appropriate sites become SmartClicks members and that all network advertising meets SmartClicks standards. Any account or member violating these terms will be immediately removed from the SmartClicks ad network. 1. SmartClicks reserves the right to refuse to continue membership to any Web site in the SmartClicks network that contains or has links to nudity, sexual situations, pornography, hate groups, illegal activities, offensive material or for any other reason. 2. SmartClicks reserves the right to refuse to continue membership to any Web site deemed to be competition, including, but not limited to, other banner exchange services. 3. SmartClicks reserves the right to reject any banner that contains nudity, profanity, offensive material or for any other reason. 4. Members agree to insert the provided SmartClicks HTML code for displaying banners on their Web site. The SmartClicks HTML code may not be modified in any way without written permission from SmartClicks. 5. Only one (1) SmartClicks banner may be placed on a page. A page is what is displayed on one screen, so members who use frames must count all individual pages in the frame as one page for banner placement purposes. 6. SmartClicks ad network banners must be displayed on the page such that the banner is easily visible. Banners may not be "hidden" so that a visitor has no way to view the banner. 7. SmartClicks banners must remain static on the member's Web site, and may not be rotated with those of any other banner exchange service. 8. A member may not artificially inflate traffic counts to his/her site using any device, program, robot or other means. A banner may not be placed on a page that reloads automatically. Banners loaded via the SmartClicks HTML may not be placed in newsgroups, e-mail, chat rooms or guestbooks, unless permission is granted from SmartClicks. Any member whose account is terminated for artificially inflated traffic counts may offer a defense to have the account re- instated. SmartClicks' logs and/or judgments in these matters will prevail. 9. A member may not display the SmartClicks HTML on sites other than the one to which the account is addressed to click through to, unless written permission is granted from SmartClicks. A member may display the SmartClicks HTML on any of the pages on the site, as long as there is a path of links from the page that the banner clicks through to, to the page on which the banner is displayed. 10. A banner that appears on a member site may at any time be a banner for another member, for a sponsor or partner, for SmartClicks or for other SmartAge services. Ratings restrictions apply. 11. SmartClicks reserves the right not to accept any advertisements from entities whose product or advertisement are deemed by SmartClicks to be inappropriate, or for any other reason. 12. Members may cancel their accounts with the SmartClicks ad network at any time by sending a request for 11 cancellation, containing the account number and password of the account in question, via e-mail to accounts@smartclicks.com, and removing the SmartClicks HTML code from the Web site. Cancellations take place immediately. 13. The SmartClicks name, logo, software, databases, reports, Web site and information are proprietary and cannot be used without permission from SmartClicks. Exception: each member has the right to use information compiled by SmartClicks for the member's site or in the promotion of the member's site. 14. Members agree that their Web site information (name, URL, traffic counts, etc.) may be used by SmartClicks. 15. The information members provide to SmartClicks will be kept confidential and will not be distributed, except in aggregate, to any outside agency, without the permission of the member. 16. SmartClicks, its administrators, partners and sponsors cannot be held liable for any damage or loss of information that may occur from the use of SmartClicks' services. 17. Members agree to use SmartClicks at their own risk. 18. SmartClicks makes every effort to verify and maintain a high standard of service quality, but SmartClicks does not make any guarantees regarding the dependability or accuracy of SmartClicks' services. 19. SmartClicks will attempt to correct inconsistencies in credits due any member based on the member's proof of inconsistency. 20. SmartClicks reserves the right to modify or change these Terms and Conditions at any time, as it deems necessary. It is the member's responsibility to keep current with changes in the Terms and Conditions, since changes are effective for all members, regardless of when the member joined. Updates will be evident by the date modified on the home page. 12 EXHIBIT B [GRAPH APPEARS HERE] [GRAPH APPEARS HERE] 13 [GRAPH APPEARS HERE] 14 EXHIBIT C X-Clicks Management Center [GRAPH APPEARS HERE] Program Activity 15 [GRAPH APPEARS HERE] 16 Monthly Summary - graphics to be added this week [GRAPH APPEARS HERE] Help [GRAPH APPEARS HERE] 17 Daily Breakdown [GRAPH APPEARS HERE] Account Breakdown [GRAPH APPEARS HERE] 18 Account Breakdown Daily Breakdown 19 Transfer Credits [GRAPH APPEARS HERE] Creative Submission [GRAPH APPEARS HERE] 20 Creative Submission [GRAPH APPEARS HERE] 21 EXHIBIT D Portals and related services: AOL Excite Yahoo! Lycos-Tripod, Whowhere, Wired Properties, Angelfire InfoSeek-WBS Go Network Altavista Infospace Snap! Looksmart-Hypermart MSN-Hotmail, web page building Go2net Email and related services: Bigfoot Mail.com USA.NET Prontomail Juno Communities and related services: Xoom Fortune City Geocities Talkcity DejaNews Nettaxi Bianca Hotcommunity Hyperbanner Acme.com 22 EXHIBIT E Link Exchange Digital Work Hyperbanner Banner swap EuroBanner LogicLink At Web Allbusiness.com Weborder Inc.Magazine 123 Banners WomenBanner Banner Ad Ad Exchange International The Next Link Ad Cycle CyberLink ICE Trafficx Free banners BeFree LinkShare Hyper Exchange Ad Archer Trade Banners GSA Net.com 23 EX-23.1 21 CONSENT OF KPMG LLP Exhibit 23.1 The Board of Directors SmartAge.com Corp.: We consent to the use of our report dated February 25, 2000, except as to the second paragraph of Note 11 for which the date is March 6, 2000, relating to the balance sheets of SmartAge.com Corp. as of December 31, 1998 and 1999, and the related statements of operations, redeemable convertible preferred stock and stockholders' equity, and cash flows for the period from January 20, 1998 (inception) to December 31, 1998 and the year ended December 31, 1999, and our report dated February 25, 2000 on the related financial statement schedule which reports are included herein, and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG LLP San Francisco, California March 8, 2000 EX-27.1 22 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEETS AND STATEMENTS OF OPERATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. OTHER 12-MOS DEC-31-1998 DEC-31-1999 JAN-20-1998 JAN-01-1999 DEC-31-1998 DEC-31-1999 620,422 19,891,948 0 0 179,727 988,653 0 79,448 0 0 819,558 21,954,374 357,307 2,749,477 43,939 448,470 1,219,201 26,230,813 404,714 4,845,507 0 0 0 7,427,787 266 1,023 1,605 1,688 77,105 13,219,297 1,219,201 26,230,813 0 0 278,341 2,598,471 56,902 1,539,866 56,902 1,539,866 0 0 0 0 0 0 (2,692,240) (13,767,431) 0 0 (2,692,240) (14,184,069) 0 0 0 0 0 0 (2,692,240) (14,184,069) (0.18) (0.90) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----