netscape

netscape
As filed with the Securities and Exchange Commission on June 23, 1995
Registration No. 33- / V
'••*?
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form s-i
•1'
*BF. 0 3 3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
35 14 4214
I
..*-•-"
-NETCCATE COMMUNICATIONS
CORPORATION
(Exact aame of Registrant as specified In Its charier)
Delaware
(State or other Jurisdiction of
Incorporation or orgaalxatloa)
7372
(Primary Standard Industrial
Classification Code Number)
94-3200270
(I.RS. Employer
Identification Number)
5 0 ] East Mlddtefleld Road
Mountain View, CA 94043
(415) 254-1900
i I-JV
_ \ ~ (Address, iadndlag tip code, and telephone number, Including
area code, of Registrant's principal executive offices)
I
Peter U S . Currle
Vice President and Chler Financial Officer
Netscape Communications Corporation
501 East Mlddlefleld Road
•
Mountain View, CA 94043
. -, ; ' ;
(415) 254-1900
(Name, address, including zip code, and telephone number, Including area code, of agent for service)
Copies to;
Larry W. So-nslnl, E M .
James N. Slrawbridge, Esq.
Jose F. Maclas, Esq.
Dehra B. Rosier, Esq.
Wil on Sonsinl Goodrich A Rosatl
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
(415) 493-9300
William D. Sherman, Esq.
Peter E. Williams III, Esq.
C. Jeffrey Char, Esq.
Aki Y. Sttojl, Esq.
Morrison & Foerster
755 Page Mill Koad
Palo Alto, California 94304
(415) 813-5600
I
Approximate dale of commencement of proposed sale to the public
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), check the following box. D
If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act,
please check the following box and list the Securities Act registration statement number of the earlier effective registration
statement for the same offering. D .
If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for
the same offering. D
If delivery of the prospectus is expected to be made pursuant to Rule 434. please ch jck the following box. D
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Common Stock, $.0001 par value
Proposed Maximum Aggregate
Offering Price ( I T
Amount of
Registration Fee
$56,350,000
$19,431.03
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(a).
The Registrant hereby amends this Registration Statement on inch date or dates ai mar 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 ai the Commission, acting pursuant to said Section 8(a),
may determine.
NETSCAPE COMMUNICATIONS CORPORATION
Cross-Reference Sheet
Pursuant to Item 501 (b) of Regulation S-K Showing Location in
Prospectus of Information Required by Items of Form £-1
Form S-l Item Number »nJ Heading
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges
Ijootlow In Proaptctm
Outside Front Clover Page
Inside Front Cover Page
Prospectus Summary; The Company;
Risk Factors
4. Use of Proceeds
Prospectus Summary; Use of Proceeds
5. Determination of Offering Price
Outside Front Cover Page; Underwriters
6. Dilution
7. Selling Security Holders
8. Plan of Distribution
Dilution
Not Applicable
Outside and Inside Front Cover Pages;
Underwriters
Prospectus Summary, Dividend Policy;
Capitalization; Description of Capital
Stock
Not Applicable
Outside and Inside Front Cover Pages;
Prospectus Summary, The Company,
Risk Factors; Use of Proceeds; Dividend
Policy, Capitali?ation; Dilution; Selected
Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Certain Transactions; Principal
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Legal Matters; Experts; Consolidated
Financial Statements
9. Description of Securities to be Registered
10. Interests of Named Experts and Counsel
11. Information with Respect to the Registrant
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities
Not Applicable
2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be used in connection with an
offering in tbe United States (the "U.S. Prospectus") and the other to be used in connection with a
concurrent international offering (the "International Prospectus"). The two prospectuses are identical except
for the front cover and inside front cover pages. The form of U.S. Prospectus is included herein and is followed
by the differing front cover and inside front cover pages to be used in the International Prospectus. The pages
for the International Prospectus included herein are labelled "Alternative Page for International Prospectus."
PKOSPMCTVS (Subject to Completion)
Issued June 23, 1995
3,500,000 Shares
NETSCAPE
COMMON STOCK
Of the 3,500.000 Share* of Common Stock offered, 3,000,000 Share* are being offend Initially In the United Stale* and Canada by the
U.S. Underwriter* and S00,000 Shan* arm being offend initially otatlde of the United Stattt and Canada by the International
Underwriter*. See "Underwriter*." All of the Share* of Common Stock offered hereby axe being told by the Company.
Prior to thi* offering, there hat been no public market for the Common Stock of the Company, ft i* currently
estimated that the initial public offering price wilt be between • and I per tha^e. See "Underwriter*"
far a diteiiulan of the factor* to be comidered in determining the initial pul'lit offering price.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5.
ffi"S'
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE
$
Price to
Public
Per Share
Total(S) .
A
SHARE
Underwriting
Dittounti and
CommU*lon*(l)
Proceed* to
Company(2)
s
(1) The Company has agreed to indemnify the U.S. Underwriters and the International Underwriter* against certain
liabilities, including liabilities under the Securities Act of 19S3, as amended.
(2 Before deducting expenses payable by the Company estimated at S'760,000.
The Company has granted the U.S. Underwriters an option, exercisable within SO days of the date hereof, to
purchase up to an aggregate of C$5,000 additional Shares at the price to publit less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions and proceeds to Company will be S
,
S
andS
, respectively. See "Underwriters."
The Shares are offered, subject to prior sale, when, as and if accepted by the Underwriters
named herein and subject to approval of certain legal matters by Morrison fy Foerster, counsel
for the Underwriters. It is expected that delivery of certificates for the Shares will be made on
or about
, 1996, at the office of Morgan Stanley $ Co. Incorporated, New York, N.Y.,
against payment therefor in New York funds.
MORGAN STANLEY
Incorporated
, 1996
& CO.
HAMBRMCHT & QUIST
No person is authorized ID connection with any offering made hereby to give any information or to make
any representation other than as contained in this Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to buy by any person in any
jurisdiction in which It Is unlawful for such person to make such an offering or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any circumstances imply that the
information contained herein is correct as of any date subsequent to the date hereof.
Until
, 1995 (25 days after the commencement of this offering), all dealers effecting
transactions in the Common Stock, whether or not participating In this distribution, may be required to
deliver a Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS
Prospectus Summary
The Company
Risk Factors
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Business
Management
,
Certain Transactions
Principal Stockholders
Description of Capital Stock
Shares Eligible for Future Sale
Certain United States Federal Tax Considerations for Non-U.S. Holders of Common Stock
Underwriters
Legal Matters
Experts
Additional Information
Index to Consolidated Financial Statements
,,.
3
4
5
13
13
14
15
16
17
22
40
47
48
49
51
53
55
58
58
58
F-l
The Company intends to furnish to its stockholders annual reports containing consolidated financial
statements audited by an independent public accounting firm and quarterly reports for the first three quarters
of each fiscal year containing interim unaudited financial information.
The Company has applied for registration of the following trademarks: Netscape, Netscape Navigator
and the Company's logo. This Prospectus also includes product names and other trade names and trademarks
of the Company and of other organizations.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-AIXOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THF
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
• «»««.
Except as otherwise noted herein, all information in this Prospectus assumes (ii a two-for-one stock split
of the Common Stock, (U) the conversion of each outstanding share of Preferred Stock into two shares of
Common Stock, which will occur automatically upon the closing of the offering, (Hi) an increase in the
authorized number of shares of Common Stock from 30,000.000 to 100,000,000. (iv) an increase in the
authorized number of shares of undestgnated Preferred Stock from 2,000.000 to 5,000.000, and (iv) no
exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriters,"
[ARTWORK TO BE FILED BY AMENDMENT]
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed information and the consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
Netscape Communications Corporation is a leading provider of open cbent, server and integrated
applications software that enables infonnation exchange and commerce over the Internet and private Internet
Protocol networks. The Company's products are designed to deliver high levels of performance, ease of use
and security. These products allow individuals and organizations to execute secure financial transactions across
the Internet, such as the buying and selling of merchandise, publications, software and information. In
addition, through the use of the Company's software, organizations can extend their internal information
systems and enterprise applications to geographically dispersed facilities, remote offices and mobile employees.
To reach a diverse and worldwide audience, Netscape delivers its suite of products and services through
multiple distribution channels. The Company offers its products via a direct sales force, telesales and the
Internet as well as through original equipment manufacturers, systems integrators, value added resellers and
software retailers. To accelerate the acceptance of the Company's products and facilitate the adoption of the
Internet as a commercial marketplace, Netscape has also initiated or is pursuing strategic relationships with
leading telecommunications, commerce and computing companies with complementary resources and
technologies. These companies include Apple Computer, Inc., Delphi Internet Services Corporation, Digital
Equipment Corporation, First Data Corporation, MasterCard International, Inc., MCI Telecommunications
Corporation, Novell, Inc., RSA Data Security, Inc., Silicon Graphics, Inc. and Sun Microsystems, Inc.
THE OFFERING
Common Stock offered
U.S. offering
International offering
Total
Common Stock to be outstanding after the offering
Use of proceeds
Proposed Nasdaq National Market symbol
3.000,000 shares
500,000 shares
3,500.000 shares
30,502,244 shares(l)
For general corporate purposes, including working capital
and capital expenditures
NSCP
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Period from
Inception
(April 4, 1994) to
December 31, 1994
Consolidated Statement of Operations Data:
Revenues
Gross profit
Total operating expenscs{2)
Operating loss
Net loss
$
Actual
Consolidated Balance Sheet Data:
Working capital (deficit)
Total assets
Deferred
revenue
Long-term obligations
Total stockholders' equity (deficit)
$(2,587,063)
12,312,523
7,244,626
2,352.411
(271,484)
695,871
476,781
9,001,556
(8,524,775)
(8,469,845)
March 31, 1995
Pro Forma(3)
$14,712,937
29,612,523
7,244,626
2,352,411
17,028,516
Quarter Ended
March 31, 1995
$ 4,737,591
4,402,690
7,119,731
(2,717,041)
(2,699,023)
As Adjusted (4)
$56,277,937
71,177.523
7,244.626
2,352,411
58,593,516
(1) Based on shares of Common Stock outstanding at May 31, 1995. Excludes J .084,800 shares of Common Stock issuable upon
exercise of outstanding options at May 31, 1995, with a weighted average exercise price of $0.16 per share. See "Capitalization."
"Management — Stock Plans" and Note 6 of Notes to Consolidated Financial Statements.
(2) Total operating expenses for the quarter ended March 31, 1995 include $861,512 in amortization of deferred compensation related to
stock option grants. See Note 6 of Notes to Consolidated Financial Statements.
(3) The pro forma balances reflect the issuance of 2,000.000 (hares of Scries C Preferred Stock in April 1995 for net cash proceeds of
approximately $17,300,000.
(4) Adjusted to reflect the issuance of 2,000,000 shares of Series C Preferred Stock in April 1995 for ML cash proceeds of approximately
$17,300,000 and the sale of the shares of Common Stock offered hereby (at an assumed initial public offering price of $13.00 per
share and after deducting the estimated underwriting discounts and commissions and estimaied offering expenses) and the
application of the net proceeds therefrom. See "Use o f Proceeds," "Capitalization" and "Underwriters." See Note 10 of Notes to
Consolidated Financial Statements.
THE COMPANY
Netscape Communications Corporation ("Netscape" or the "Company") is a leading provider of open
client, server and integrated applications software that enables information exchange and commerce over the
Internet and private Internet Protocol ("IP") networks. The Company's products are designed to deliver high
levels of performance, ease of use and security. These products allow individuals and organizations to execute
secure financial transactions across the Internet, such as the buying and selling of merchandise, publications,
software and information. In addition, through the use of the Company's software, organizations can extend
their internal information systems and enterprise applications to geographically dispersed facilities, remote
offices and mobile employees.
The Internet is a global web of computer networks which International Data Corporation ("IDC")
estimates had approximately 38 million users worldwide at the end of 1994. IDC estimates that today
approximately 73%, or 28 million, of these users are in organizations connecting private IP networks to the
Internet to access e-mail and newsgroups. By 1999, IDC estimates that there will be nearly 200 million users
of the Internet. Of these users, IDC estimates that 125 million users will have full Internet access, which, in
addition to e-mail and newsgroups, includes file transfer capabilities and access to graphic and multimedia
information on the World Wide Web (the "Web").
The Internet provides organizations with new means to conduct business. Commercial uses of the
Internet include business-to*business and business-to-consumer transactions, product marketing, advertising,
entertainment, electronic publishing, electronic services and customer support. The Company believes that
organizations will also increasingly use the Internet and private IP networks to improve communications,
distribute information, lower operating costs and re-engineer operations.
The Company's goal is to make its software the de facto standard for navigating, publishing information
and executing transactions on the Internet and private IP networks. The Netscape Navigator, introduced in
December 1994, was the first commercially available client for the Web to include built-in security
capabilities, which facilitate commercial transactions over the Internet. The Company's products enable the
creation, editing, organization and retrieval of documents that contain audio and Wdeo clips, graphical images
and formatted text. These products are also designed to provide enhanced security for the controlled access of
confidential information on the Internet and private IP networks and the execution of financial transactions.
The Company's core development group includes key members of the engineering teams that developed the
original Mosaic Web client at NCSA and the original Web server software at CHRN and NCSA, as well as
leading software security specialists.
To reach a diverse and worldwide audience, Netscape delivers its suite of products and services through
multiple distribution channels. The Company offers its products via a direct sales force, telesales and the
Internet as well as through original equipment manufacturers, systems integrator, value added resellers and
software retailers. To accelerate the acceptance of the Company's products and further facilitate the adoption
of the Internet as a commercial marketplace, Netscape has initiated or is pursuing strategic relationships with
leading telecommunications, commerce and computing companies with complementary resources and
technologies. These companies include Apple Computer, Inc., Delphi Internet Services Corporation, Digital
Equipment Corporation, First Data Corporation, MasterCard International, Inc., MCI Telecommunications
Corporation, Novell, Inc., RSA Data Security, Inc., Silicon Graphics, Inc. and Sun Microsystems, Inc.
The Company was incorporated in Delaware in April 1994. Netscape's home page can be located on the
Web at http://home.netscape.com. The Company's principal executive office is located at 501 East
Middlefield Road, Mountain View, California 94043 and its telephone number is (415) 254-1900. Except as
otherwise noted herein, all references to "Netscape" or the "Company" shall mean Netscape Communications Corporation, a Delaware corporation and its Japanese subsidiary, Netscape Communications (Japan),
Ltd.
RISK FACTORS
In evaluating the Company's business, prospective investors should consider carefully the following
factors in addition to the other information presented in this Prospectus.
Limited Operating History; Accumulated Deficit. The Company was founded in April 1994 and
commenced shipment of its initial product in December 1994. Accordingly, the Company has only a limited
operating history upon which an evaluation of the Company and its prospects can be based. The Company's
prospects must be considered in light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and rapidly evolving markets. To
address these risks, the Company must, among other things, respond to competitive developments, continue to
attract, retain and motivate qualified persons, and continue to upgrade its technologies and commercialize
products and services incorporating such technologies. There can be no assurance that the Company will be
successful in addressing such risks. The Company has incurred net losses since: inception and expects to
continue to operate at a loss for the foreseeable future. As of March 31, 1995, the Company had an
accumulated deficit of $11.2 million. Although the Company has experienced revenue growth in recent
periods, such growth rates will not be sustainable and are not indicative of future operating results. There can
be no assurance that the Company will achieve or sustain profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Potential Fluctuations in Quarterly Results. As a result of the Company's limited operating history, the
Company does not have historical financial data for a significant number of periods on which to base planned
operating expenses. Accordingly, the Company's expense levels are based in part on its expectations as to future
revenues and to a large extent are fixed. However, the Company typically operates with no backlog. As a result,
quarterly sales and operating results generally depend on the volume and timing of and ability to fulfill orders
received within the quarter, which are difficult to forecast. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenues shortfall. Accordingly, any significant shortfall of
demand for the Company's products and services in relation to the Company's expectations would have an
immediate adverse impact on the Company's business, operating results and financial condition. In addition, the
Company plans to increase its operating expenses to fund greater levels of research and development, increase its
sales and marketing operations, develop new distribution channels and broaden its customer support capabilities.
To the extent that such expenses precede or are not subsequently followed by increased revenues, the Company's
business, operating results and financial condition will be materially adversely affeded.
The Company has in the past and expects in the future to experience significant fluctuations in quarterly
operating results that may be caused by many factors, including demand for the Company's products,
introduction or enhancement of products by the Company and its competitors, market acceptance of new
products, mix of distribution channels through which products are sold, mix of products and services sold, and
general economic conditions. As a result, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied upon as any indication of future
performance. Due to all of the foregoing factors, it is likely that in some futute quarter the Company's
operating results will be below the expectations of public market analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Developing Market; Unproven Acceptance of the Company's Products. The market for the Company's
software and services has only recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants who have introduced or developed products and services for communication and commerce over the Internet and private IP networks. As is typical in the case of a new and rapidly
evolving industry, demand and market acceptance for recently introduced products and services are subject to
a high level of uncertainty. The industry is young and has few proven products. Moreover, critical issues
concerning the commercial use of the Internet (including security, reliability, cost, ease of use and access, and
quality of service) remain unresolved and may impact the growth of Internet use. While the Company believes
that its software products offer significant advantages for commerce and communication over the Internet and
private IP networks, there can be no assurance that commerce and communication over the Internet or private
IP networks will become widespread, or that the Company's products for commerce and communication over
the Internet or private IP networks will become widely adopted for these purposes.
In particular, client software may be subject to price erosion due to free client software distributed by
online services providers, Internet access providers and others. In addition, it is likely that computer operating
systems companies will bundle client software with their operating systems at little or no additional cost to
users, which would also cause the price of the Company's client products to decline. Further, market
acceptance of the Company's server and integrated application software products is substantially dependent
upon the adoption of the Internet and private IP networks for commerce and communications. The adoption
of tbe Internet for commerce and communications, particularly by those individuals and enterprises which
have historically relied upon alternative means of commerce and communication, generally requires the
acceptance of a new way of conducting business and exchanging information. In particular, enterprises that
have already invested substantial resources in other means of conducting commerce and exchanging
information may be particularly reluctant to adopt a new strategy that may make their existing personnel and
infrastructure obsolete. In addition, there can be no assurance that individual PC users in business or at home
will adopt the Internet for online commerce or communication.
Because the market for the Company's products and services is new and evolving, it is difficult to predict
with any assurance the future growth rate, if any, and size of this market. There can be no assurance that the
market for the Company's products and services will develop, that the Company's products or services will be
adopted, or that individual PC users in business or at home will use the Internet or private IP networks for
commerce and communication. If the market fails to develop, develops more slowly than expected or becomes
saturated with competitors, or if tbe Company's products do not achieve market acceptance, the Company's
business, operating results and financial condition will be materially adversely affected. See "Business —
Industry Background."
Competition. The market for Internet-based software and services is new, intensely competitive, rapidly
evolving and subject to rapid technological change. The Company expects competition to persist, intensify and
increase in the future. Almost all of the Company's current and potential competitors have longer operating
histories, greater name recognition, larger installed customer bases and significantly greater financial, technical
and marketing resources than the Company. The additional competition could materially adversely affect the
Company's business, operating results or financial condition. The Company's current and potential competitors can be divided into several groups: Microsoft Corporation ("Microsoft"), browser software vendors, Web
server software and service vendors, PC and Unix software vendors and online service providers.
Microsoft has licensed browser software from Spyglass Inc. {"Spyglass"), and has announced its
intention to improve and bundle the browser with its Windows 95 operating system. Microsoft's browser will
access the Microsoft Network, its announced online service, and will also offer Internet access. While the
anticipated penetration of this software into Microsoft's installed base of PC user*, will increase the size and
usefulness of the Internet, it could also have a material adverse impact on Netscape's ability to sell client
software. In addition, Microsoft may choose to develop Web server software as a complement to its product
line and to support the Microsoft Network. This could have a materially adverse impact on Netscape's ability
to sell server software or integrated applications. Microsoft has a longer operating history, a much larger
installed base and number of employees and dramatically greater financial, technical and marketing resources,
access to distribution channels and name recognition than the Company.
In addition, International Business Machines Corporation ("IBM") has incorporated client software in
its OS/2 operating system, and the Company believes that other PC operating system vendors, including
Apple Computer, Inc. ("Apple"), will also eventually incorporate some Web client functionality into their
operating systems as standard features. This may also be true of Unix operating systems vendors, such as Sun
Microsystems. Inc. ("Sun"), Hewlett-Packard Company ("HP"), IBM. Digital Equipment Corporation
("Digital"), The Santa Cruz Operation, Inc. ("SCO") and Silicon Graphics, Inc. ("SGI"). If these
companies incorporate Web client functionality into their software products, they could subsequently offer this
functionality at little or no additional cost to customers. Further, in the event that client products incorporated
into operating systems by Microsoft or other Unix or PC software vendors gain market acceptance, these
10
organizations will be better positioned than the Company to sell Web server and applications software
products. In addition, software companies which have server products in other product categories may choose
in the future to enhance the functionality of existing products or develop new products which incorporate
support for Hypertext Transfer Protocol ("HTTP"). For example, Lotus Development Corporation ("Lotus,"
whose potential acquisition by IBM has recently been announced) may extend Notes in this manner, and
Novell, Inc. ("Novell") may provide add-ons to Netware for Web publishing. In addition, Oracle Corporation
("Oracle"), Sybase, Inc. ("Sybase") and Informix Software, Inc. ("Informix") may incorporate Web server
functionality into their database products. Additional competition could come from client/server applications
and tools vendors, other database companies, multimedia companies, document management companies,
networking software companies, network management companies and educational software companies. There
can be no assurance that the Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not materially adversely affect its
business, operating results and financial condition. See "Business — Competition."
New Product Development and Technological Change. Substantially all of the Company's revenues have
been derived, and substantially all of the Company's future revenues are expected to be derived, from the
license of its software and sale of its associated services. Accordingly, broad acceptance of the Company's
products and services by customers is critical to the Company's future success, as is the Company's ability to
design, develop, test and support new software products and enhancements on a timely basis that meet
changing customer needs and respond to technological developments and emerging industry standards. There
can be no assurance that the Company will be successful in developing and marketing new software products
and enhancements that meet changing customer needs and respond to such technological changes or evolving
industry standards. The Company's current products are designed around certain standards, including, for
example, security standards, and current and future sales of the Company's products will be dependent, in
part, on industry acceptance of such standards. Other companies, like Microsoft and IBM are proposing
alternative standards, the adoption of which could have a material adverse effect on the Company's business,
operating results or financial condition. In addition, there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development, introduction and marketing of
new products and enhancements, or that its new products and enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. The Company will be substantially
dependent in the near future upon its server and integrated application software products that are still being
developed or have been recently released. In particular, the Company has not yet commercially released the
Netscape Publishing System, the Netscape Community System or the Netscape IStore integrated applications software products, the Netscape News Server or the Netscape authoring tools. Further, because the
Company has only recently commenced shipment of its products, there can be no assurance that, despite
testing by the Company and by current and potential customers, errors will not be found in the Company's
products, or, if discovered, successfully corrected in a timely manner. If the Company is unable to develop on
a timely basis new software products, enhancements to existing products or error corrections, or if such new
products or enhancements do not achieve market acceptance, the Company's business, operating results and
financial condition will be materially adversely affected. See "Business — Products" and "— Research and
Development."
Evolving Distribution Channels. The Company's distribution strategy is to develop multiple distribution
channels. The Company has historically sold its products through direct sales and OEMs, Tbe Company
expects to increasingly utilize OEMs and has only recently begun utilizing systems integrators, VARs and
software retailers (collectively, "Resellers"). The Company expects that any material increase in sales
through Resellers as a percentage of total revenues, especially in the percentage of sales through OEMs and
VARs, will adversely affect the Company's average selling prices and gross maigins due to the lower unit
prices that are typically charged when selling through indirect channels. Moreover, there can be no assurance
that the Company will be able to attract Resellers that will be able to market the Company's products
effectively and will be qualified to provide timely and cost-effective customer support and service. In addition,
the Company's agreements with Resellers typically do not restrict Resellers from distributing competing
products, and in many cases may be terminated by either party without cause. Further, in some cases the
Company has granted exclusive distribution rights which are limited by territory and in duration. Conse-
quently, the Company may be adversely affected should any Reseller fail to adequately penetrate its market
segment. The inability to recruit, or the loss of, important Resellers, or their inability to penetrate their
respective market segments, could materially adversely affect the Company's business, operating results or
financial condition. See "Business— Marketing and Distribution."
The Company plans to expand its field sales force and its telesales organization There can be no assurance
that such internal expansion will be successfully completed, that the cost of such expansion will not exceed the
revenues generated, or that the Company's sales and marketing organization will be able to successfully compete
against the significantly more extensive and well-funded sales and marketing operations of many of the Company's
current or potential competitors. The Company's inability to effectively manage its internal expansion could have a
material adverse effect on the Company's business, operating results or financial condition.
In addition to expanding its direct sales channels, the Company will continue to distribute its products
electronically through the Internet. Distributing the Company's products through the Internet makes the
Company's software more susceptible than other software to unauthorized copying and use. The Company
currently allows potential customers to electronically download its client and server software for a free trial
period. There can be no assurance that, upon expiration of the evaluation period, the Company will be able to
collect payment from users that retain a copy of the Company's software. If, as a result of changing legal
interpretations of liability for unauthorized use of the Company's software or otherwise, users were to become
less sensitive to avoiding copyright infringement, the Company's business, operating results and financial
condition would be materially adversely affected.
Management of Growth. The rapid execution necessary for the Company to fully exploit the market
window for its products and services requires an effective planning and management process. The Company's
rapid growth has placed, and is expected to continue to place, a significant strain on the Company's
managerial, operational and financial resources. As of June 5,1995, the Company had grown to 213 employees
from 102 employees on January 16, 1995, and the Company expects this rapid growth to continue. The
Company recently hired James L. Barksdale as its new President and Chief Executive Officer in January 1995
and Peter L.S. Currie as its Vice President and Chief Financial Officer in April 1995. In addition, most of the
Company's development and engineering staff was only recently hired. To manage its growth, the Company
must continue to implement and improve its operational and financial systems and to expand, train and
manage its employee base. For example, the Company is currently in the process of building its internal
maintenance and support organization. The Company is also in the process of evaluating and purchasing a
major new management information system. There can be no assurance that the Company will be able to
purchase or successfully implement this system on a timely basis. Further, the Company will be required to
manage multiple relationships with various customers and other third parties. Although the Company believes
that it has made adequate allowances for the costs and risks associated with this expansion, there can be no
assurance that the Company's systems, procedures or controls will be adequate to support the Company's
operations or that Company management will be able to achieve the rapid execution necessary to fully exploit
the market window for the Company's products and services. The Company's future operating results will also
depend on its ability to expand its sales and marketing organizations, implement a VAR channel to penetrate
different and broader markets and expand its support organization commensurate with the increasing base of
its installed products. If the Company is unable to manage growth effectively, the Company's business,
operating results and financial condition will be materially adversely affected. See "Business — Research and
Development" and "— Employees."
Security Risks and System Disruptions. Despite the implementation into the Company's products of the
Secure Sockets Layer ("SSL"), the Company's security architecture based on encryption and authentication
technology licensed from RSA Data Security, Inc. ("RSA"), the Company's products may be vulnerable to
break-ins and similar disruptive problems caused by Internet users. Such computer break-ins and other
disruptions would jeopardize the security of information stored in and transmitted through the computer
systems of end users of the Company's products, which may result in significant liability to the Company and
may also deter potential customers. Persistent security problems continue to plague public and private data
networks. Recent break-ins reported in the press and otherwise occurred at General Electric Co. ("GE"),
Sprint Corporation ("Sprint"), and IBM, as well as the computer systems of NETCOM On-Line Communication Services, Inc. ("NETCOM") and the San Diego Supercomputer Center, and have included incidents
8
involving hackers bypassing firewalls by posing as trusted computers and involving the theft of confidential
information. Alleviating problems caused by third parties may require significant expenditures of capital and
resources by the Company and may cause interruptions, delays, or cessation of service to the Company's
customers; such expenditures or interruptions could have a material adverse effect on the Company's business,
operating results or financial condition. Moreover, the security and privacy concerns of existing and potential
customers, as well as concerns related to computer viruses, may inhibit the growth of the Internet marketplace
generally, and the Company's customer base and revenues in particular. The Company attempts to limit its
liability to customers, including liability arising from a failure of the security feature contained in the
Company's products, through contractual provisions. However, there can be no assurance that such limitations
will be enforceable. The Company currently does not have product liability insurance to protect against these
risks and there can be no assurance that such insurance will be available to the Company on commercially
reasonable terms. See "Business — Security Risks."
In addition, the Company maintains secure Web servers which contain confidential information of the
Company and its customers. The Company's operations are dependent in part upon its ability to protect its
network infrastructure against damage from physical break-ins, natural disasters, operational disruptions and
other events. Any damage or failure that causes interruptions in the Company's operations could materially
adversely affect the Company's business, operating results or financial condition. In addition, physical breakins could result in the theft or loss of confidential or critical business information of the Company or its
customers. See "Business — Facilities."
Government Regulation and Legal Uncertainties. The Company is not currently subject to direct
regulation by any government agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to or commerce on the Internet. However, due to
the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be
adopted with respect to the Internet, covering issues such as user privacy, pricing and characteristics and
quality of products and services. For example, the Exon Bill (which was recently approved by the Senate)
would prohibit distribution of obscene, lascivious or indecent communications on the Internet. The adoption of
any such laws or regulations may decrease the growth of the Internet, which could in turn decrease the
demand for the Company's products and increase the Company's cost of doing business or otherwise have an
adverse effect on the Company's business, operating results or financial condition. Moreover, the applicability
to the Internet of existing laws governing issues such as property ownership, libel and personal privacy is
uncertain. Further, due to the encryption technology contained in the Company's products, such products are
subject to U.S. export controls. There can be no assurance that such export controls, either in their current
form or as may be subsequently enacted, will not limit the Company's ability to distribute products outside of
the United States or electronically. While Netscape takes precautions against unlawful exportation, the global
nature of the Internet makes it virtually impossible to effectively control the distribution of the Company's
products. In addition, federal or state legislation or regulation may further limit levels of encryption or
authentication technology. Any such export restrictions or new legislation or regulation could have a material
adverse impact on the Company's business, operating results or financial condition. See "Business —
Marketing and Distribution."
Dependence on the Internet. Although some sales of the Company's products will depend upon growth of
private IP networks, sales of the Company's products will depend in large part upon a robust industry and
infrastructure for providing Internet access and carrying Internet traffic. The Internet may not prove to be a
viable commercial marketplace because of inadequate development of the necessary infrastructure, such as a
reliable network backbone or timely development of complementary products, such as high speed modems.
Because global commerce and online exchange of information on the Internet and other similar open wide
area networks are new and evolving, it is difficult to predict with any assurance whether the Internet will prove
to be a viable commercial marketplace. There can be no assurance that the infrastructure or complementary
products necessary to make the Internet a viable commercial marketplace will be developed, or, if developed,
that the Internet will become a viable commercial marketplace. If the necessary infrastructure or complementary products are not developed, or if the Internet does not become a viable commercial marketplace, the
Company's business, operating results and financial condition will be materially adversely affected. See
"Business — Industry Background."
Dependence on Key Personnel. The Company's performance is substantially dependent on the performance of its executive officers and key employees, most of whom have worked together for only a short period of
time. Given the Company's early stage of development, the Company is dependent on its ability to retain and
motivate high quality personnel, especially its management and highly skilled development teams. The
Company does not have "key person" life insurance policies on any of its employees. The loss of the services of
any of its executive officers or other key employees could have a material adverse effect on the business,
operating results or financial condition of the Company.
The Company's future success also depends on its continuing ability to identify, hire, train and retain
other highly qualified technical and managerial personnel. Competition for such personnel is intense, and there
can be no assurance that the Company will be able to attract, assimilate or retain other highly qualified
technical and managerial personnel in the future. The inability to attract and retain the necessary technical
and managerial personnel could have a material adverse effect upon the Company's business, operating results
or financial condition. See "Business — Employees" and "Management."
Proprietary Rights, In December 1994, the Company entered into an agreement with the University of
Illinois (the "University") and Spyglass. Under the terms of the agreement, the University and Spyglass
agreed not to assert any claim of trademark infringement arising out of the Company's prior use of the word
"Mosaic" or other symbols or words used by the Company to market itself or its products. The University and
Spyglass further agreed not to assert against the Company any claim of copyright infringement, trade secret
misappropriation or related claims based on the Company's use of former University employees in the
development of the Company's present and future products. As consideration for these covenants not to assert
any such claims, the Company agreed to make certain payments to the University over a two-year period. If
the Company does not make these payments within the specified time periods, the University or Spyglass
could assert claims of intellectual property infringement against the Company. Such h'tigation could result in
substantial costs and diversion of resources even if ultimately decided in favor of the Company. Further,
although the Company believes that it has not infringed the intellectual property rights of the University or
Spyglass, any such litigation and the outcome of such h'tigation could have a material adverse effect on the
Company's business, operating results or financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business — Proprietary Rights."
The Company's success and ability to compete is dependent in part upon its proprietary technology.
While the Company relies on trademark, trade secret and copyright law to protect its technology, the
Company believes that factors such as the technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and reliable product maintenance are more
essential to establishing and maintaining a technology leadership position. The Company presently has no
patents or patent applications pending. There can be no assurance that others will not develop technologies
that are similar or superior to the Company's technology. The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's products or technology without
authorization, or to develop similar technology independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries, and the global nature of the Internet
makes it virtually impossible to control the ultimate destination of the Company's products. The Company
generally enters into confidentiality or license agreements with its employees, consultants and vendors, and
generally controls access to and distribution of its software, documentation and other proprietary information.
To license its products, the Company primarily relies on "shrink wrap" licenses that are not signed by the enduser and, therefore, may be unenforceable under the laws of certain jurisdictions. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult. There can be no assurance that the steps taken by the Company will
prevent misappropriation of its technology or that such agreements will be enforceable. In addition, litigation
may be necessary in the future to enforce the Company's intellectual property rights, to protect the Company's
10
)
trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims
of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating results or financial condition.
Unisys Corporation ("Unisys")recently announced its intention to require the payment of royalties for
the use of compression technology associated with the Graphics Interchange Format ("GIF"), a popular file
format based on compression technology patented by Unisys. The Company's products have the ability to
decompress files, including files stored in GIF. White the Company has received notice of Unisys' intention to
enforce such patent, the Company believes its technology falls outside the scope of such patent. However, the
Company could incur additional costs and liability should its products be found to be within the scope of the
Unisys patent. The assertion of these patent rights by Unisys, if successful, could result in additional costs to
the Company or prevent the Company's products from enabling users to view files compressed in GIF. From
time to time the Company has, in addition to the notice from Unisys, received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights. Although the Company does not believe
that its products infringe the proprietary rights of any third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not
be asserted or prosecuted against the Company or that any such assertions or prosecutions will not materially
adversely affect the Company's business, financial condition or results of operations. Irrespective of the
validity or the successful assertion of such claims, the Company would incur significant costs and diversion of
resources with respect to the defense thereof which could have a material adverse effect on the Company's
business, financial condition or results of operations. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's intellectual property rights. There
can be no assurance, however, that under such circumstances, a license would be available on reasonable
terms or at all.
Risks Associated with International Expansion. A key component of the Company's strategy is its
planned expansion into international markets. In particular, the Company intends to establish foreign
subsidiaries in Europe by the end of 1995. If the international revenues generated by these subsidiaries are not
adequate to offset the expense of establishing and maintaining these foreign operations, the Company's
business, operating results or financial condition could be materially adversely affected. To date, the Company
has only limited experience in developing localized versions of its products and marketing and distributing its
products internationally. There can be no assurance that the Company will be able to successfully market, sell
and deliver its products in these markets. In addition to the uncertainty as to the Company's ability to expand
its international presence, there are certain risks inherent in doing business on an international level, such as
unexpected changes in regulatory requirements, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates, seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world and potentially adverse tax consequences, which could
adversely impact the success of the Company's international operations. There can be no assurance that one or
more of such factors will not have a material adverse effect on the Company's future international operations
and, consequently, on the Company's business, operating results and financial condition. See "Business —
Marketing and Distribution."
Concentration of Stock Ownership. Upon completion of this offering, the present directors, executive
officers and their respective affiliates will beneficially own approximately 69,5% of the outstanding Common
Stock, assuming no exercise of the underwriters' over-allotment option and 68.4% of the outstanding Common
Stock assuming full exercise of the underwriters' over-allotment option. As a result, these stockholders will be
able to exercise significant influence over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. Such concentration of ownership may also have
the effect of delaying or preventing a change in control of the Company. See "Description of Capital Stock —
Antitakeover Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware Law" and
"Principal Stockholders."
No Prior Public Market. Possible Volatility of Stock Price. Prior to this offering, there has been no
public market for the Company's Common Stock, and there can be no assurance that an active public market
11
for the Common Stock will develop or be sustained after the offering. The initial offering price will be
determined by negotiation between the Company and the Underwriters based upon several factors. See
"Underwriters" for a discussion of the factors to be considered in determining the initial public offering price.
The market price of the Company's Common Stock is likely to be highly volatile and could be subject to wide
fluctuations in response to quarterly variations in operating results, announcements of technological innovations or new products by the Company or its competitors, changes in financial estimates by securities analysts,
or other events or factors. In addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the market prices of equity securities of many high technology
companies and that often have been unrelated to the operating performance of such companies. In the past,
following periods of volatility in the market price of a company's securities, securities class action litigation has
often been instituted against such a company. Such litigation could result in substantial costs and a diversion
of management's attention and resources, which would have a material adverse effect on the Company's
business, operating results and financial condition. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. See "Underwriters."
Shares Eligible for Future Sale. Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the Common Stock. See "Shares
Eligible for Future Sale" and "Description of Capital Stock."
Effect of Certain Charter Provisions; Antitakeover Effects of Certificate of Incorporation, Bylaws and
Delaware Law. The Board of Directors has the authority to issue 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 any further vote or action by the stockholders. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of any Preferred Stock that may be
issued in the future. The issuance of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company. The Company has no present
plans to issue shares of Preferred Stock. Further, certain provisions of the Company's Amended and Restated
Certificate of Incorporation, including provisions that create a classified board of directors, and Amended and
Restated Bylaws and of Delaware law could delay or make difficult a merger, tender offer or proxy contest
involving the Company. See "Management — Executive Officers and Directors," "Description of Capital
Stock — Preferred Stock" and "•— Antitakeover Effects of Provisions of the Certificate of Incorporation,
Bylaws and Delaware Law."
Dilution. Investors participating in this offering will incur immediate, substantial dilution. To the extent
outstanding options to purchase the Company's Common Stock are exercised, there will be further dilution.
See "Dilution."
12
16
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,500,000 shares of Common Stock being offered
hereby are estimated to be approximately $41.6 milh'on at an assumed initial public offering price of
$13.00 per share (approximately $47.9 million if the Underwriters' over-allotment option is exercised in full).
The principal purposes of this offering are to obtain additional capital, create a public market for the
Company's Common Stock and facilitate future access by the Company to public equity markets. The
Company expects to use the net proceeds from this offering for general corporate purposes, including working
capital and capital expenditures. A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary technologies; however,
there are no plans, negotiations or discussions with respect to any such transactions at the present time.
Pending use of the net proceeds for the above purposes, the Company intends to invest such funds in shortterm, interest-bearing, investment grade obligations.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock or other securities. The Company
currently anticipates that it will retain all of its future earnings for use in the expansion and operation of its
business and does not anticipate paying any cash dividends in the foreseeable future.
13
\f
CAPITALIZATION
The following table sets forth (i) the total capitalization of the Company at March 31,1995, (ii) the pro
forma capitalization at March 31,1995 assuming the conversion of each outstanding share of Preferred Stock,
including 2,000.000 shares of Series C Preferred Stock issued in April 1995. into two shares of Common
Stock, and (in) the as adjusted capitalization at March 31, 1995 assuming the conversion of the Preferred
Stock and reflecting the sale by the Company of 3,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $13.00 per share and after deducting estimated underwriting discounts
and commissions and estimated offering expenses.
March 31. IMS
Actual
Long term obligations (1)
Total stockholders' equity (deficit):
Preferred Stock, $0.0001 par value, issuable in series;
7,608,222 shares authorized, 7,008,222 shares issued and
outstanding, actual; 11,286,222 shares authorized, none
issued and outstanding, pro forma; 5,000,000 shares
authorized, none issued and outstanding, as adjusted . . .
Common Stock, $0.0001 par value; 20,000,000 shares
authorized, 8,759,800 shares issued and outstanding,
actual; 30,000,000 shares authorized, 26,776,244 shares
issued and outstanding, pro forma; 100,000,000 shares
authorized, 30,276,244 shares issued and outstanding, as
adjusted(2)
Additional paid-in capital
Deferred compensation
Accumulated deficit
$
Pro Forma
2,352,411
$ 2.352,411
701
—
876
12,612,953
(1,717,146)
(11,168,868)
Total stockholders' equity (deficit)
(271,484)
Total capitalization
$
2,080,927
As adjusted
$
2,352,411
—
2,678
29,911,852
(1,717,146)
(11,168,868)
3,028
71,476,502
(1,717,146)
(11,168,868)
17,028,516
58,593,516
$ 19,380,927
$ 60,945,927
(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2) As of March 31,1995, there were options outstanding to purchase a total of 3,795,800 shares of Common
Stock at a weighted average exercise price of $0.10 per share and 2,364,638 shares were reserved for grant
of future options under the Company's 1994 Stock Option Plan. Subsequent to March 31, 1995 and
through May 31, 1995, the Board of Directors granted options to purchase an additional 1,671,000 shares
at a weighted average exercise price of $0.27 per share. In addition, the Board of Directors adopted the
1995 Stock Option Plan, the 1995 Employee Stock Purchase Plan and the 1995 Director Option Plan,
pursuant to which 4,500,000, 1,000,000 and 100,000 shares, respectively, were reserved for issuance
thereunder. See "Management — Stock Plans" and Notes 6 and 10 of Notes to Consolidated Financial
Statements.
14
ia
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1995, including the issuance of
2,000,000 shares of Series C Preferred Stock in April 199S for net proceeds of appioximately $17,300,000, was
$16,983,516 or $0.63 per share of Common Stock. Pro forma net tangible book value per share is determined
by dividing the pro forma tangible book value of the Company (total tangible asset* less total liabilities) by the
number of outstanding shares of Common Stock at that date (assuming the conversion of each outstanding
share of Preferred Stock, including 2,000,000 shares of Series C Preferred Stock issued in April 1995, into two
shares of Common Stock). After giving effect to the sale by the Company of the 3,500,000 shares of Common
Stock offered hereby (based upon an assumed initial public offering price of $13.00 per share and after
deduction of estimated underwriting discounts and commissions and estimated offering expenses), the
Company's pro forma net tangible book value at March 31, 1995 would have been $58,548,516 or $1.93 per
share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of
$1.30 per share and an immediate dilution to new investors of $11.07 per share. The following table illustrates
the per share dilution:
Assumed initial public offering price per share
Pro forma net tangible book value per share as of March 31, 1995
Increase in pro forma net tangible book value per share attributable to new
investors
Pro forma net tangible book value per share after offering
Dilution per share to new investors
$13.00
$ 0.63
1.30
The following table sets forth on a pro forma basis as of March 31, 1995 the difference between the
number of shares of Common Stock purchased from the Company, the total consideration paid, and the
average price per share paid by the existing stockholders and by the new investors (based upon an assumed
initial public offering price of $13.00 per share before deduction of estimated underwriting discounts and
commissions and estimated offering expenses), assuming the conversion of each outstanding share of
Preferred Stock, including 2,000,000 shares of Series C Preferred Stock issued in April 1995, into two shares
of Common Stock:
Share* Purchased
Ni
Existing stockholders
26,776,244
New investors
Total
3,500,000
30,276,244
Total Consideration
$28,024,805
45,500,000
$73,524,805
Average
Price
Per Share
$ 1.05
13.00
The foregoing table assumes no exercise of the Underwriters' over-allotment option and no exercise of
stock options outstanding at March 31, 1995. As of March 31, 1995, there were options outstanding to
purchase a total of 3,795,800 shares of Common Stock at a weighted average exercise price of $0.10 per share
and 2,364,638 shares were reserved for grant of future options under the Company's 1994 Stock Option Plan.
Subsequent to March 31, 1995 and through May 31,1995, the Board of Directors granted options to purchase
an additional 1,671,000 shares at a weighted average exercise price of $0.27 per share. In addition, the Board
of Directors adopted the 1995 Stock Option Plan, the 1995 Employee Stock Purchase Plan and the 1995
Director Option Plan, pursuant to which 4,500,000, 1,000,000 and 100,000 shares, respectively, were reserved
for issuance thereunder. To the extent that any of these options are exercised, there will be further dilution to
new investors. See "Capitalization," "Management — Stock Plans" and Notes 6 and 10 of Notes to
Consolidated Financial Statements.
15
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with the consolidated
financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere herein. The consolidated statement of operations data set forth
below with respect to the period from inception (April 4, 1994) to December 31, 1994, and the consolidated
balance sheet data at December 31, 1994, are derived from, and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this Prospectus and should be read in conjunction with
those consolidated financial statements and notes thereto. The consolidated statement of operations data for
the quarter ended March 31,1995, and the balance sheet data at March 31, 1995, are derived from unaudited
consolidated financial statements that have been prepared on the same basis as the audited financial
statements and in the opinion of management, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for such period. The historical results
are not necessarily indicative of the results of operations to be expected in tbe future.
lnc«ptloa
(April 4,1994) to
December 31,1994
Consolidated Statement of Operations Data:
Revenues:
Product revenues
Service revenues
Total
revenues
Cost of revenues:
Cost of product revenues
Cost of service
revenues
Total cost of revenues
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Property rights agreement and related charges
Total operating expenses
Operating loss
Interest income
Interest expense
Net loss
Net loss per share
Shares used in computing net loss per share
Consolidated Balance Sheet Data:
Working capital (deficit)
Total assets
Long-term obligations
Stockholders* equity (deficit)
16
$
Quarter
Ended
March 31,1995
378,490
317,381
695,871
$ 4,496,031
241,560
4,737,591
114,777
104,313
219,090
273,169
61,732
334,901
476,781
4,402,690
2,031,986
2,813,689
1,669,193
2,486,688
9,001,556
(8,?24,775)
55,238
(308)
$(8,469,845)
$
(0.25)
33,481,438
1,981,292
2,897,915
1,740,524
500,000
7,119,731
(2,717,041)
45,074
(27,056)
$(2,699,023)
.$
(0.08)
34,255,882
December 31, 1994
March 31, 1995
$(1,337,613)
7,158,641
725,000
1,083,585
$(2,587,063)
12,312,523
2,352,411
(271,484)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Oferricw
Netscape Communications Corporation is a leading provider of open client, server and integrated
applications software that enables information exchange and commerce over the Internet and private IP
networks. The Company was formed in April 1994 and commenced shipments of its initial product in
December 1994. Through March 31, 1995, the Company derived the substantial majority of its revenues from
product licenses. In particular, for the quarter ended March 31, 1995, product revenue from Netscape
Navigator and Netscape Commerce Server accounted for 52% and 32%, respectively, of the Company's total
product revenues. In addition, bundled product licenses that included both Netscape Navigator and Netscape
Commerce Server, accounted for an additional 10% of the Company's product revenues in the quarter ended
March 31, 1995.
The Company has only a limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of development, particularly companies in
new and rapidly evolving markets. To address these risks, the Company must, among other things, respond to
competitive developments, continue to attract, retain and motivate qualified persons, and continue to upgrade
its technologies and commercialize products and services incorporating such technologies. There can be no
assurance that the Company will be successful in addressing such risks. The Company has incurred net losses
since inception and expects to continue to operate at a loss for the foreseeable future. As of March 31, 1995.
the Company had an accumulated deficit of $11.2 million. Although the Company has experienced revenue
growth in recent periods, such growth rates will not be sustainable and are not indicative of future operating
results. There can be no assurance that the Company will achieve or sustain profitability.
Results of Operations
Revenues
The Company derives its revenues from license fees for its software products and fees for services, which
are generally charged separately from software licenses. Product revenues consist of product licensing fees, and
service revenues consist of fees for maintenance and support services, training, consulting and advertising
space. Product revenues are recognized upon delivery only if no significant obligations of the Company remain
and collection of the resulting receivable is considered probable. Product returns and sales allowances (which
have not been significant through March 31, 1995) and costs of free telephone support are estimated and
provided for at the time of sale. Service revenues from customer maintenance fees for ongoing customer
support and product updates are recognized ratably over the term of the maintenance agreement, which is
typically 12 months. Payment for maintenance fees are generally made in advance and are non-refundable.
Service revenues from training and consulting are recognized when the services are performed. Service
revenues from the sale of advertising space are recognized in the period in which the advertisement is
displayed on the Company's home page.
Total Revenues. Total revenues were $696,000 and $4,738,000 for the period from inception (April 4,
1994) through December 31, 1994 (the "Inception Period") and for the quarter ended March 31, 1995,
respectively. The Inception Period reflects only two weeks of product sales and seivice revenues. The quarter
ended March 31, 1995 is the first full quarter in which the Company's products and services were made
commercially available. Digital and SGI accounted for 14% and 9%, respectively, of total revenues in the
quarter ended March 31, 1995.
Product Revenues. Product revenues were $379,000 and $4,496,000 for the Inception Period and for the
quarter ended March 31, 1995, respectively. Product revenues in the Inception Period and the quarter ended
March 31, 1995 were attributable to licenses of Netscape Navigator, Netscajie Commerce Server and
Netscape Communications Server. During each of these periods, licenses of Netscape Navigator accounted
for a majority of the Company's product revenues.
17
Through the quarter ended March 31,1995, the Company had distributed substantially all of its products
through direct sales (including field sales and telesales), sales over the Internet through the Company's
electronic store and OEMs. Beginning in the quarter ending June 30, 1995, the Company began offering its
products through VARs and through distribution for retail sale. Currently, only the Company's Netscape
Navigator Personal Edition product is being offered through distribution for retail sale.
Service Revenues. Service revenues were $317,000 and $242,000 for the Inception Period and for the
quarter ended March 31, 1995, respectively. In each of the Inception Period and the quarter ended March 31,
1995, service revenues were attributable to fees for consulting, maintenance and support and, to a lesser
extent, training. The Company began selling advertising space on its home page in the quarter ending June 30,
1995. The Company expects that service revenues will increase as a percentage of total revenues in the future.
International Revenues. International revenues (sales outside of North America) were immaterial in the
Inception Period and were approximately 10% of total revenues for the quarter ended March 31,1995. As of
March 31, 1995, all international revenues had been recognized by the U.S. parent corporation and
denominated in U.S. currency. The Company established a subsidiary in Japan in December 1994 and intends
to establish subsidiaries in Europe. Although its Japanese subsidiary had not recognized any revenues as of
March 31, 1995, it had entered into several OEM reseller arrangements pursuant to which it has received
prepaid royalty payments denominated and collected in Japanese currency. Such prepaid royalties have been
deferred at March 31, 1995 due to the Company's remaining obligation to deliver foreign country localized
versions of its products. The Company expects to invoice customers of its international subsidiaries in local
currencies. The Company has not engaged in foreign currency hedging activities, and international revenues
are currently subject to currency exchange fluctuation risks. The Company anticipates that international
revenues will increase as a percentage of total revenues in the future, and, as a result, foreign currency
exposure may increase.
Cost of Revenues
Cost of Product Revenues. Cost of product revenues consists primarily of th< cost of product media and
duplication, manuals, packaging materials, amounts paid for licensed technology, and fees paid to third party
vendors for sales administration, order fulfillment and free telephone support. Cost of product revenues was
$115,000 and $273,000 for the Inception Period and for the quarter ended March 31, 1995, respectively, and
was 30% and 6%, respectively, of the related product revenues. In each of the Inception Period and the quarter
ended March 31, 1995, cost of product revenues consisted primarily of the cost of product media and
duplication, manuals, packing materials and fees paid to third party vendors. The Company believes that cost
of product revenues may increase as a percentage of the related product revenues in future periods due to
amounts paid for licensed technology to be incorporated in future products and increased costs associated with
providing free telephone support. Some of the Company's products include free telephone support for a certain
period of time and such costs are accrued at the time of sale. Increases in the cost of product revenues as a
percentage of the related product revenues would adversely effect gross margins. All development costs
incurred to date in the research and development of new software products and enhancements to existing
software products have been expensed as incurred. As a result, cost of product revenues does not include
amortization of capitalized software development costs. See Note 1 of Notes to Consolidated Financial
Statements.
Cost of Service Revenues. Cost of service revenues consists primarily of personnel related costs incurred
in providing customer support, consulting services and training to customers. Cost of service revenues also
includes fees paid to a third party related to the sale of advertising space on the Company's home page. Cost of
service revenues was $104,000 and $62,000 for the Inception Period and for the quarter ended March 31,
1995, respectively, and was 33% and 26%, respectively, of related service revenues. In each of the Inception
Period and the quarter ended March 31,1995, cost of service revenues related primarily to consulting services
and to maintenance and support provided by the Company. In future periods, the Company believes that the
cost of service revenues will increase as a percentage of the related service revenues as a result of personnel
related costs incurred in building the Company's customer support and training organizations and due to fees
18
L.
incurred in connection with selling advertising space. Increases in the cost of service revenues as a percentage
of related service revenues would have an adverse impact on the Company' gross margins.
Gross margins may be impacted by the mix of distribution channels used by the Company, the mix of
products sold, the mix of product revenues versus service revenues and the mix of international versus North
American revenues. The Company typically realizes higher gross margins on direct sales than on sales through
indirect channels and higher gross margins on product revenues than on service revenues. If sales through
indirect channels, especially OEMs and VARs, increase as a percentage of total revenue, or if, as the
Company anticipates, service revenues increase as a percentage of total revenues, the Company's gross
margins will be adversely impacted.
Operating Expenses
The Company's operating expenses have increased in absolute dollar amounts in every consecutive
quarter through the quarter ended March 31,1995. This trend reflects the Company's rapid transition from the
product development phase to its first full quarter of marketing and licensing products and offering services.
The Company believes that continued expansion of operations is essential to achieving and maintaining
market leadership. As a consequence, the Company intends to continue to increase expenditures in all
operating areas.
The Company has recorded deferred stock compensation of $2,579,000 for the difference between the
grant price and the deemed fair value of the Company's Common Stock for 6,654,600 shares subject to
options granted in the first quarter of 1995. The deferred stock compensation is being amortized to operating
expenses over the related 50-month vesting periods of the options. In addition, the Company intends to record
a significant amount of deferred stock compensation in the second quarter of 1995. The amortization of all
such deferred stock compensation amounts over future periods, generally 50 months, will have a material
adverse impact on the Company's results of operations.
Research and Development. Research and development expenses consist primarily of salaries and
consulting fees to support product development. Research and development expenses were $2,032,000 and
$1,981,000 for the Inception Period and for the quarter ended March 31, 1995, respectively, and were 292%
and 42%, respectively, of total revenues. Research and development expenses for the quarter ended March 31,
1995 included a non-cash charge of $16,000 related to the amortization of deferred stock compensation. To
date, all software development costs have been expensed as incurred. The Company believes that significant
investments in research and development are required to remain competitive in the software business. As a
consequence, the Company intends to increase the absolute amount of its research and development
expenditures in the future.
Sales and Marketing. Sales and marketing expenses consist primarily of salaries (including sales
commissions), consulting fees, trade show expenses, advertising and cost of marketing literature. Sales and
marketing expenses were $2,814,000 and $2,898,000 for the Inception Period and for the quarter ended
March 31, 1995, respectively, and were 404% and 61%, respectively, of total revenues. Sales and marketing
expenses for the quarter ended March 31, 1995 included a non-cash charge of $25,000 related to the
amortization of deferred stock compensation. The Company intends to increase the level of sales and
marketing expenses in future periods.
General and Administrative. General and administrative expenses consist primarily of salaries and fees
for professional services. General and administrative expenses were $1,669,000 and $1,741,000 for the
Inception Period and for the quarter ended March 31, 1995, respectively, Bnd were 240% and 37%,
respectively, of total revenues. General and administrative expenses for the quarter ended March 31, 1995
included a non-cash charge of $821,000 related to the amortization of deferred stock compensation. The
Company intends to increase the level of general and administrative expenses in future periods.
Property Rights Agreement and Related Charges. The Company has segregated certain expenses
totaling $2,487,000 and $500,000 for the Inception Period and for the quarter ended March 31, 1995,
respectively. These expenses relate to an agreement with the University of Illinois and Spyglass and associated
19
costs, including fees for expert and professional services, trademark search costs and other related expenses.
The Company will incur additional charges related to this agreement in the event that it enters into certain
types of agreements with two specified companies. See Note 5 of Notes to Consolidated Financial Statements.
Income Taxes
As of December 31, 1994, the Company bad federal net operating loss carryforwards of approximately
$7,000,000. The Company also had federal research and development tax credit carryforwards of approximately $90,000. The net operating loss and credit carryforwards will expire in 2009 if not utilized. The
Company also has state net operating loss carryforwards of approximately $5,000,000 which will expire in 2002
if not utih'zed. Utilization of the net operating losses and credits may be subject to a substantial annual
limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar
state provisions. See Note 7 of Notes to Consolidated Financial Statements.
Factors Affecting Operating Results
As a result of the Company's limited operating history, the Company dees not have historical financial
data for a significant number of periods on which to base planned operating expenses. Accordingly, the
Company's expense levels are based in part on its expectations as to future revenues and to a large extent are
fixed. However, the Company typically operates with no backlog. As a result, quarterly sales and operating
results generally depend on the volume and timing of and ability to fulfill orders received within the quarter,
which are difficult to forecast. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenues shortfall. Accordingly, any significant shortfall of demand for the
Company's products and services in relation to the Company's expectations would have an immediate adverse
impact on the Company's business, operating results and financial condition. In addition, the Company plans
to increase its operating expenses to fund greater levels of research and development, increase its sales and
marketing operations, develop new distribution channels and broaden its customer support capabilities. To the
extent that such expenses precede or are not subsequently followed by increased revenues, the Company's
business, operating results and financial condition will be materially adversely affected.
The Company has in the past and expects in the future to experience significant fluctuations in quarterly
operating results that may be caused by many factors, including demand for the Company's products,
introduction or enhancement of products by the Company and its competitors, market acceptance of new
products, mix of distribution channels through which products are sold, mix of products and services sold, and
general economic conditions. As a result, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied upon as any indication of future
performance. Due to all of the foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely affected.
Liquidity and Capital Resources
The Company has primarily financed its operations through private sales of equity securities. In the
quarter ended March 31,1995, cash provided by operating activities of $803,000 was primarily attributable to
an increase in deferred revenues, partially offset by the growth in accounts receivable and a net loss. Cash used
in investment activities in the quarter ended March 31, 1995 related primarily to $1,667,000 in capital
expenditures. Cash flows from financing activities in the quarter ended March 31, 1995 of $2,584,000 were
primarily attributable to the net proceeds from the issuance of installment notes payable, and, to a lesser
extent, Common Stock.
Deferred revenues consists of the unrecognized portion of revenues received pursuant to maintenance and
support contracts and pursuant to OEM reseller agreements with significant obligations remaining. Pursuant
to the OEM reseller agreements, the Company receives non-refundable prepaid royalties. The significant
obligations resulting in the deferral of revenues relate primarily to unreleased products. Deferred revenues
increased from $2,575,000 at December 31, 1994 to $7,245,000 at March 31, 1995 due to an increase in the
number of OEM reseller agreements and, to a lesser extent, the number of maintenance and support contracts.
20
Capital expenditures were approximately $2,663,000 and $1,667,000 for the Inception Period and the
quarter ended March 31, 1995. respectively. The Company has no material commitments other than
obligations under installment notes payable and operating leases. The Company estimates that 1995 capital
expenditures will be approximately $12,000,000, of which $5,000,000 is related to the implementation of a new
management information systems. See Note 3 of Notes to Consolidated Financial Statements.
At March 31, 1995, the Company's principal source of liquidity was approximately $4,900,000 in cash
and cash equivalents. In addition, the Company completed an equity financing in April 1995 that resulted in
net proceeds of approximately $17,300,000 to the Company. Further, the Company has a $2,200,000 debt
facility agreement, secured by certain assets of the Company, of which $100,000 was available at March 31,
1995. See Note 4 of Notes to Consolidated Financial Statements.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," during the Inception Period. The adoption of SFAS
No. 115 did not have a material impact on the Company's results of operations or financial condition.
The Company believes that the net proceeds from this offering, together with available funds and cash
flows expected to be generated by operations, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. Thereafter, if cash generated by operations is
insufficient to satisfy the Company's liquidity requirements, the Company may stJl additional equity or debt
securities or obtain additional credit facilities. The sale of additional equity or convertible debt securities will
result in additional dilution to the Company's stockholders.
21
BUSINESS
Orerriew
Netscape is a leading provider of open client, server and integrated applications software that enables
information exchange and commerce over the Internet and private IP networks. The Company's products are
designed to deliver high levels of performance, ease of use and security. These products allow individuals and
organizations to execute secure financial transactions across the Interact, such as the buying and selling of
merchandise, publications, software and information. In addition, through the use of the Company's software,
organizations can extend their internal information systems and enterprise applications to geographically
dispersed facilities, remote offices and mobile employees.
Industry Background
Internet
The Internet is a global web of computer networks which International Data Corporation ("IDC")
estimates had approximately 38 million users worldwide at the end of 1994. IDC estimates that today
approximately 73%, or 28 million, of these users are in organizations connecting private IP networks to the
Internet to access e-mail and newsgroups. By 1999, IDC estimates that there will be nearly 200 million users
of the Internet. Of these users, IDC estimates that 125 million users will have full Internet access, which, in
addition to e-mail and newsgroups, includes file transfer capabilities and access to graphic and multimedia
information on the World Wide Web.
Developed over 25 years ago, this "network of networks" allows any computer attached to the Internet to
talk to any other using the Internet Protocol. The Internet has historically been used by academic institutions,
defense contractors and government agencies primarily for remote access to host computers and for sending
and receiving e-mail and has traditionally been subsidized by the U.S. Federal Government. As an increasing
number of commercial entities have come to rely on the Internet for business communications and commerce,
the level of federal subsidies has significantly diminished, and funding for the Interact infrastructure and
backbone operations has shifted primarily to the private sector. In addition, according to industry market
research, in October 1994 the number of commercial domains on the Internet surpassed the number of
educational domains for the first time. Industry sources also estimate that in the 12 months ending January
1995, approximately 2.6 million additional servers were connected to the Internet, for a total of approximately
4.9 million Internet servers.
Further, individuals are connecting directly to the Interact through Internet ascess services such as those
provided by MCI Telecommunications Corporation ("MCI"), NETCOM, Performance Systems International, Inc. ("PSI"), and UUNET Technologies, Inc. ("UUNET"). These services are growing as easy-touse software packages make accessing the Internet as easy as getting onto th« popular consumer online
services. To compete with these direct Internet access providers, consumer online services including America
OnLine, Inc. ("AOL"), CompuServe, Inc. ("CompuServe"), and Prodigy Services Co. ("Prodigy"), have
also introduced Internet access gateways for their existing subscribers. With these gateways, the online
services effectively become large Internet "on-ramps," bringing large numbeis of subscribers onto the
Internet. IDC estimates that by the end of 1996, more than 16 million subscribers to consumer online services
will have full Internet access, as compared to less than one million at the end of 1994.
World Wide Web
Much of the recent growth in Internet use by businesses and individuals has been driven by the
emergence of a network of servers and information available on the Internet called the World Wide Web
("Web"). The Web, based on a client/server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to exploit the capabilities of the
Internet, The Web enables users to find, retrieve and link information on the Internet in a consistent way that
makes the underlying complexities transparent to the user. Electronic documents are published on Web
servers in a common format described by the Hypertext Markup Language ("HTML"). Web client software
can retrieve these documents across the Interact by making requests using & standard protocol called
Hypertext Transfer Protocol ("HTTP"). The first Web client (or "browser") with a graphical user interface
to utilize these protocols was NCSA Mosaic, first released in April 1993 by the National Center for
Supercomputing Applications at the University of Illinois ("NCSA"). The Netscajw Navigator, introduced in
22
December 1994, was the first commercially available Web client to include built-in security capabilities,
facilitating commercial transactions over the Internet.
The proliferation of Web clients has created significant demand for software to enable Internet servers
and private servers on corporate networks to function as Web servers. These servers are used by content
providers to offer their products and services on the Internet and to publish confidential company information
to employees inside the enterprise. Industry market research estimates that there were over 22,000 Webcapable servers on the Internet by May 1995, as compared with approximately 1,265 in June 1994. Web usage
is expected to be further fueled by advances in Web client, server and application software, in concert with
technological developments that drive cost reductions and performance enhancements,
Internet Commerce
The Internet provides organizations with new means to conduct business. Commercial uses of the
Internet include business-to-business and business-to-consumer transactions, product marketing, advertising,
entertainment, electronic publishing, electronic services and customer support. The Internet offers a new and
powerful medium for traditional retail and mail order businesses to target and manage a wider customer base
more rapidly, economically and productively. The Company believes that only a small fraction of this retail
business is currently conducted electronically. Another important application for Internet commerce is
electronic publishing through advertiser supported and fee-based Internet services. Electronic publishing
offers substantial savings as compared to publishing on paper or computer discs. In addition, Web software
permits the publishing of audio files and video clips as well as text and graphical data.
In addition to retailers and publishers, other new businesses are appearing on the Web as it provides
access to a growing base of education, business and home customers. Business information providers such as
DowJones, Individual, Inc., and Reuters have started customized news services on the Web. Financial service
institutions are providing online banking information, stock information and trading services. Examples of
popular consumer information services recently introduced include ESPNet, Knight-Ridder's Mercury Center
and Sportsline U.S.A. Companies from many industries are publishing product and company information to
their channel partners and customers, providing customer support via the Web, allowing customers to
immediately buy products online, and collecting customer feedback and demographic information
interactively.
Enterprise Applications
As an increasing number of organizations provide their employees with Web access from their desktops,
an opportunity is emerging for internal information systems and enterprise applications hosted on internal Web
servers. The Internet enables organizations to extend their internal information systems and enterprise
applications to geographically dispersed facilities, remote offices, and mobile employees using Web client and
server software. IDC estimates that shipments of IP-enabled computers increased from 1.5 million in 1992 to
5.2 million in 1994. The Company believes that organizations will increasingly use private IP networks to
improve communications, distribute information, lower operating costs and re-engineer operations.
For example, Web servers with secure communications capabilities will enable organizations to
electronically publish confidential company information within departments and across company locations.
Secure news servers can be used to host discussion groups and facilitate corporate communications in a
manner similar to groupware products such as Lotus Notes. Through the use of Web client and server
software, organizations can implement "team computing," thereby allowing engineers and product marketing
people to collaborate more effectively to speed product development and improve time to market. In addition,
sales, product and order information can be published in internal Web servers for access by a sales force to
ensure that information critical to the selling process is readily available.
23
'Ll
The Company believes that the market opportunity for Web server software inside the internal enterprise
application is substantial. IDC estimates that by the end of 1995 there will be more than 10 million servers on
private enterprise networks, and that number is estimated to grow to more than 25 million in 1997.
Netscape
Netscape is a leading provider of open client, server and integrated applications software that enables
information exchange and commerce over the Internet and private IP networks. The Company's products arc
designed to deliver high levels of performance, ease of use and security. These products allow individuals and
organizations to execute secure financial transactions across the Internet, such as the buying and selling of
merchandise, publications, software and information. In addition, through the use of the Company's software,
organizations can extend their internal information systems and enterprise applications to geographically
dispersed facilities, remote offices and mobile employees.
The Company's goal is to make its software the de facto standard for publishing information and
executing transactions on the Internet and private IP networks. The Company's strategy is to enable enhanced
communications and electronic commerce by developing and offering industry leading software and services.
The Company's strategy includes the following key elements:
Offer Complete Suite of Easy-to-Use, High Performance, Secure Internet and IP-based Software
To address the issues that have historically limited the use of the Internet as a popular communications
network and commercial marketplace, the Company's products include the following features:
Comprehensive Product Line. The Company offers a suite of client, servei and integrated applications
software products that support communications, electronic commerce, electronic publishing and related uses
for the enterprise and the individual.
Ease of Use. The Company's client software provides a consistent point and click graphical user
interface that is independent of the server protocol, client operating system or means of network access. The
Company's server software facilitates the operation of Web server sites by providing capabilities such as
subscriber administration and content management.
High Performance and Scalability. The Company's products are engineered for rapid retrieval and
display of information, even at the relatively low 14.4 kbps dial-up transmission speeds employed by many
users. The Company's suite of products support a complete spectrum of multimedia content, including a
variety of text, graphical images and audio and video formats, and are compatible with industry standard Web
servers and browsers. In addition, the Company's server products employ a multiprocessing technology which
enables them to support a large number of users.
Multi-platform Support. The Company's software is designed to operate on most popular computer
platforms including Microsoft Windows and Windows NT, Apple Macintosh and numerous versions of the
Unix operating system. In addition, the Company expects to support Windows 95.
Enhanced Security. The Company's products employ leading IBM OS/2 open standards for data and
communications security and are designed to enable secure commerce and communications. The Company
has defined and implemented its security architecture, the Secure Sockets Layer, based upon encryption and
server authentication technology licensed from RSA Data Security, Inc., a leader in computer data security. A
group of 19 industry-leading companies in the banking, credit card, communications, software and computer
hardware businesses have announced their support for SSL.
Leverage Relationships With Leading Strategic Partners
To accelerate the acceptance of the Company's products and facilitate the adoption of the Internet as a
communications network and a commercial marketplace, the Company has developed strategic partnerships
with leading technology, infrastructure and financial services partners.
Technology Providers. The Company has entered into and intends to further pursue selected technology
licenses and partnerships. These relationships are designed to ensure the compatibility of Netscape's products
with other complementary, leading technologies and tools. For example, to facilitate content creation and
management for the Internet, the Company has worked with leading multimedia publishing providers, such as
24
Adobe Systems Incorporated and Macromedia, Inc. To enhance the functionality of its Netscape Navigator
Personal Edition client product, the Company has licensed complementary networking software from Shiva
Corporation and the Eudora electronic mail application from Qualcomm, Inc. The Company also has a license
to bundle tbe Oracle database with its integrated applications products. Further, Netscape intends to
incorporate Sun's Java programming language into certain of its products, further enhancing the capability of
Netscape's clients to display and manipulate information.
Infrastructure Providers. The Company has developed and intends to continue to develop strategic
relationships with the leading telecommunications companies and Internet access service providers worldwide.
For example, MCI deploys Netscape client and server software for the intemetMCI service and marketplaceMCI online. In addition, Pacific Bell has selected Netscape client software for its Internet product
offerings. The Company also has Internet access agreements with MCI, Portal Information Network and
NETCOM to allow purchasers of the Netscape Navigator Personal Edition to choose between those service
providers in automatically registering for Internet access. The Company intends to allow additional Internet
service providers to offer their service through Netscape's user registration servei.
Financial Services Providers. The Company is pursuing relationships with leading banks and transaction
processing companies, such as First Data Corporation and Wells Faigo Bank, N.A., to establish a secure
financial payment system on the Internet. Netscape is also a member of the CommerceNet consortium, which
is working towards the first large scale market trial of electronic commerce on the Internet.
Support and Enhance Open Industry Standards
By leveraging existing technologies and standards, the Company intends to shorten its product time to
market and accelerate and broaden market acceptance of its products. All of Netscape's products are designed
based on existing Internet standards and are compatible with the installed base of Web servers and clients.
The Company also actively participates in leading standard setting organizations including the Internet
Engineering Task Force and the World Wide Web Consortium. The Company intends to implement and
proactively contribute to future standards created by these standard setting entities. For example, the
Company has proposed its SSL security architecture to the World Wide Web Consortium as a new open
standard for secure Internet communications. In addition, the Company has joined a consortium of companies
to invest in Terisa Systems, Inc. ("Terisa"), which will promote and sell development tools using security
protocols, such as SSL and Secure Hypertext Transfer Protocol ("SHTTP"). The Company intends to
incorporate SHTTP into its products and intends to work as a shareholder in Terisa to promote the broadest
adoption of open security protocols as SSL and SHTTP. The Company has also proposed its extensions to the
HTML language to the World Wide Web Consortium for inclusion in a new generation of the HTML
standard.
Develop Multiple Distribution Channels
The Company's objective is to become the de facto industry standard by rapidly disseminating its
products and services through multiple distribution channels worldwide.
Direct Channels. The Company's direct distribution channels include a direct sales force and telesales.
The direct sales force targets medium to large-sized organizations for Internet commerce and enterprise
communications market opportunities. These organizations require server software for individual sites or online services, typically large-scale applications, often including financial transaction processing and security.
Other enterprise applications require multi-server installations and large site licenses for clients. In cases
where customers require industry-specific applications, the Company also provides training, support and
consulting.
Indirect Channels. The Company distributes its products indirectly through OEMs, systems integrators,
VARs and software retailers. Computer equipment OEMs, systems integrators and VARs complement the
Company's direct sales efforts for institutional customers and provide sales support and service primarily for
server products. Telecommunication and online service companies, as providers of Internet access, also sell the
Company's products to individual business and home PC users for personal information publishing, browsing
and shopping. For example, the Company has agreements with Digital, SGI, Sun, Apple, Mitsubishi
25
Corporation ("Mitsubishi"), Toshiba Corporation ("Toshiba"), NEC Corporation ("NEC"), Sony Corporation ("Sony"), Novell, MCI, Pacific Bell, Delphi Internet Services Corporation ("Delphi") and others to
bundle Netscape's server or client software with certain of their product offerings. Customers can also
purchase Netscape Navigator Personal Edition software at traditional software retailers.
Internet Distribution. Organizations and individuals also have the option to evaluate and purchase
software directly from the Company via the Internet. The Company believes that this strategy has facilitated
the acceptance of its products and establishment of its brand name.
Industry Lending Technical and Management Teams
The Company believes that one of its key competitive advantages is its development and management
teams. The Company's core development group includes key members of the engineering teams that
developed the original Mosaic Web client at NCSA and the original Web seiver software at Centre for
European Particle Research ("CERN") and NCSA, as well as leading software security specialists.
The Company has also established a senior management team which combines leading executives from
several of the key industries involved in the Internet, including telecommunications, software and computing
industries. For example, James H. Clark, the Company's Chairman, is the founder and former Chairman of
the Board of Silicon Graphics, Inc. and James L. Barksdale, the Company's President and Chief Executive
Officer, was President and Chief Executive Officer of AT&T Wireless Services and Chief Operating Officer as
well as Chief Information Officer of Federal Express Corporation.
Products
The Company provides a comprehensive line of client, server and application software for communications and commerce on the Internet and private IP networks. These products enable the retrieval and
presentation of information and dynamically changing data in multiple forms, including video, audio and
graphical content. These products are designed to provide enhanced security for the controlled access of
confidential information on private IP networks and the Internet and the execution of financial transactions.
U.S. End
Market
Individual PC User
Enterprise
Internet Commerce
Product Type
Client
Server
Integrated Application
Netscape Product
Navigator LAN Edition
Navigator Personal Edition
Communications Server
Commerce Server
Proxy Server
News Server*
Merchant System
Publishing System*
Community System*
IStore*
User
Price
$39
S45
$1,500
$5,000
$2,500
$2,500
$50,000+
$50,000+
$50,000+
$20,000+
* Expected to be commercially available by the end of 199S
Netscape Client Software
The Netscape Navigator product line is client software that allows users to easily exchange information
and conduct commerce on the Internet. Netscape Navigator features a point-and-click graphical user
interface and hyperlink capability that enable users to navigate the Internet's vast array of networked
resources. Netscape Navigator integrates all major Internet functions, including Web browsing, file transfers,
news group communications and e-mail, under one simple, easy-to-leam and use interface.
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Netscape Navigator features several improvements over other HTTP-compatible browsers:
Speed, The Company's client software is engineered for rapid retrieval and display of information,
even at the relatively low 14.4 kbps dial-up transmission speeds employed t>y many users. Performance
gains are substantially greater for users accessing the Internet over higher capacity lines. The Company's
client software also employs technologies such as document and image caching and the simultaneous
loading of multiple images to accelerate the presentation of information.
Simplicity. Netscape Navigator has been designed to make the Internet easy to learn and use.
Netscape Navigator includes intuitive user interface technologies such as a toolbar for frequently used
commands and bookmarks for quickly accessing Web sites. Additionally, Navigator works transparently
with other software such as search tools and personal productivity applications.
Open Standards. Netscape Navigator software communicates seamlessly with virtually all popular
Internet server protocols, including HTTP, file transfer protocol ("FTP") and simple mail transport
protocol ("SMTP") making it compatible with the existing installed base of Web servers from a variety
of vendors.
Security. Netscape Navigator is designed to provide enhanced security so communications with
servers across the Internet can be protected against third party access or interference. This security is
based on an encrypted data stream that will allow for future enhancements with new protocols.
Consistency Across Platforms. Netscape Navigator is available in functionally equivalent versions
for Microsoft Windows and Windows NT, Apple Macintosh and various Unix platforms. This common
look and feel is a major advantage in mixed computing environments, minimizing training and support.
Netscape has introduced its beta version of the Navigator for Microsoft Windows 95 and expects to ship
the commercial version by the end of 1995.
The Company currently offers two versions of its Navigator client software.
Netscape Navigator LAN Edition. Netscape Navigator LAN Edition is intended for users who already
have IP connections to the Internet or internal networks. It incorporates all of the features described above
and is available for Windows, Mac and various Unix platforms. It is compatible with all standard IP
implementations on these platforms.
Netscape Navigator Personal Edition. Netscape Navigator Personal Edition is intended for companies
and individuals without direct IP connections who want dial-up access to the Internet. It includes a fully
integrated TCP/IP stack, an implementation of the Point to Point Protocol ("PPP"), a dialer and an e-mail
application. All components are installed and configured through easy-to-use installation programs and feature
automatic access to a choice of Internet service providers through Netscape's seiver.
Netscape Server Software
Netscape server software provides the basic communication services, security, administration and other
capabilities necessary for implementing and operating Web server sites.
Multi-Platform Support. Netscape server software currently operates on Intel-compatible PCs and
on many of the leading Unix platforms, including those from Digital, HP, IBM, SGI and Sun. Netscape's
Communications and Commerce servers also operate on the Microsoft Windows NT operating system.
Open Standards. Netscape server products support the HTTP, HTML and SSL protocols and, as a
result, are compatible with the installed base of Web browsers. The Company also intends to support the
SHTTP security protocol.
High Performance and Scalability. Netscape server products are based on process models which
enable them to support a large number of users. Depending on the underlying platform, Netscape servers
use either multi-threaded processing or a proprietary process management algorithm to efficiently handle
peak demand. As a result, the Company believes its server software delivers documents faster than other
HTTP servers,
Ease of Use. Netscape servers include automated installation and configuration capabilities, and
improved user management and maintenance through use of intuitive, online forms.
27
Security. Netscape server products employ SSL server authentication and data encryption based on
technology licensed from RSA. Server authentication uses a certificate and a digital signature to verify
the legitimacy of the server. Data encryption protects the privacy of client/server communications by
encrypting the data stream between two entities.
The Netscape server software line currently includes three products: the Netscape Communications
Server, the Netscape Commerce Server, and the Netscape Proxy Server. The Company expects that the
Netscape News Server will be commercially available by the end of 1995.
Netscape Communications Server. The Netscape Communications Server enables organizations to
publish on the Internet and to reach new audiences online. In addition, corporations may conduct costeffective online marketing and customer support programs, and may facilitate internal communications and
collaborations among employees and workgroups.
Netscape Commerce Server. The Netscape Commerce Server provides all of the functionality of the
Communications Server, plus SSL-based security features for transactions conducted over the Internet. On
enterprise networks, the security features can be used to restrict access to information and applications.
Netscape Proxy Server. The Netscape Proxy Server is designed to improve the performance and security
of communications within a private IP network or between a private IP network and the Internet. Performance
is improved because the server stores frequently accessed pages locally. Security is enhanced because the
server provides encrypted communications through a firewall onto the Internet.
Netscape News Server. The Netscape News Server, which is expected to be commercially available by
the end of 199S, enables companies to create their own public and private discussion groups for information
exchange between employees, customers or any other audience. It is compatible with the Internet's Usenet
news hierarchy and incorporates the open SSL protocol, allowing users to create secure forums for confidential
or proprietary information exchange.
Integrated Applications
Netscape intends to offer comprehensive solutions that enable organizations to conduct full-scale
electronic commerce on the Internet. These applications are being designed to address different business
needs, including the presentation of multimedia formats, support for large numbers of merchants and
products, the need for real time data management, support for special communities of interest, and the
automation of high volumes of online transactions. All integrated applications are being designed to use the
Netscape Commerce Server, which provides enhanced security, including data encryption and server
authentication. These applications will be based on a modular architecture that enables integration between
applications and the addition of Internet applications as needed. The integrated applications are being
designed to provide the capability to manage large-scale commercial sites on the Internet.
All integrated applications are being designed to perform merchant authentication, credit authorization
and transaction settlement. Merchant authentication will be performed by a certification authority that
validates the server and gives it a signed digital signature that can be checked over the network. Credit card
authorization will occur online by checking records to ensure no abnormal activity has occurred and that the
transaction does not exceed the authorized credit limit. A merchant bank will perform transaction settlement
by transferring funds from the customer's account to the merchant's account.
The Netscape Merchant Server was commercially released by the Company in March 1995. The
Company expects to introduce the Netscape Publishing System, the Netscape Community Server and the
Netscape IStore by the end of 1995.
Netscape Merchant System. The Merchant System allows users to set up and manage virtual storefronts.
By storing product information in a relational database, it provides the flexibility to add and delete products,
change prices and import new graphics. Furthermore, display pages are automatically updated, which
simplifies the task of managing thousands of products.
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With the Merchant System, shoppers may browse or make multi-level queries and view automatically
generated pages displaying items that meet their stated criteria. An electronic shopping basket allows shoppers
to hold items and allows purchases of any one or many products at a time of a customer's choosing, even if the
basket contains items from several merchants in the mall. At the point of sale, the Merchant System
automatically forwards the shopping basket and payment information to credit card authorization and
processing partners.
Netscape Publishing System. The Publishing System, which is expected to be commercially available by
the end of 1995, is designed for fee-based electronic publishers. It is being designed to allow organizations to
display and update information dynamically and to provide the billing and management tools to make
electronic publishing on the Internet viable.
The Publishing System will manage critical data for a publisher content, files, pricing information, access
authorization, user demographic information and advertising response rates. It is being designed to display
context-sensitive advertising to subscribers based upon specified criteria, including available demographic
information, entry path and time. The Publishing System will archive past issues, link related stories and
create HTML pages on the fly in response to user queries by concept or keyword.
Netscape Community System. The Community System, which is expected to be commercially available
by the end of 1995, is being designed to give organizations the ability to create virtual communities based upon
shared interest. It will support such popular activities as e-mail, bulletin boards and news groups. These
applications will let electronic publishers or merchants communicate with their customers in new ways, by
explaining product features online and offering customer support.
Netscape IStore. Netscape IStore, which is expected to be commercially available by the end of 1995, is
being designed to provide the integrated data management, on-line credit card authorization, billing and orderprocessing capabilities required for a single merchant to build and manage a virtual storefront. It will feature
an embedded relational database for easy information tracking and management, pre-configured reports for
easy information retrieval and analysis, and easy forms-based set-up and administration.
Authoring Tools
The Netscape authoring tools are currently under development by the Company and are currently
scheduled for release in the first half of 1996. The Company is designing authoring tools to provide content
providers with a software solution for building an online presence. The authoring tools are intended to extend
beyond document creation and to leverage existing multimedia and document creation tools and formats.
Content providers are expected to be able to more productively create, edit and organize documents
specifically for the Internet to include hypermedia text with images, audio and video. By integrating and
organizing multiple content creation and management tools and standards, the authoring tools are expected to
provide a more compelling content creation environment for content providers. The Company believes that
these tools, once developed, will significantly enhance the ability of electronic merchants and publishers to
develop Web sites.
Security Risks
Despite the implementation into the Company's products of the SSL the Company's products may be
vulnerable to break-ins and similar disruptive problems caused by Internet users. Such computer break-ins
and other disruptions would jeopardize the security of information stored in and transmitted through the
computer systems of end users of the Company's products, which may result in significant liability to the
Company and may also deter potential customers. Persistent security problems continue to plague public and
private data networks. Recent break-ins reported in the press and otherwise occurred at GE, Sprint, and IBM,
as well as the computer systems of NETCOM and the San Diego Supercomputer Center, and have included
incidents involving hackers bypassing firewalls by posing as trusted computers and involving the theft of
confidential information. Alleviating problems caused by third parties may require significant expenditures of
capital and resources by the Company and may cause interruptions, delays, or cessation of service to the
Company's customers; such expenditures or interruptions could have a material adverse effect on the
29
Company's business, operating results and financial condition. Moreover, the security and privacy concerns of
existing and potential customers, as well as concerns related to computer viruses, may inhibit the growth of the
Internet marketplace generally, and the Company's customer base and revenues in particular. The Company
attempts to limit its liability to customers, including liability arising from a failure of the security feature
contained in the Company's products, through contractual provisions. However, there can be no assurance that
such limitations will be enforceable. The Company currently does not have product liability insurance to
protect against these risks and there can be no assurance that such insurance will be available to the Company
on commercially reasonable terms.
Services
Support Programs
The Company has made a commitment to provide timely, high quality technical support to meet the
diverse needs of its customers and partners and to facilitate the adoption and use of its products. The Company
offers several support products:
Netscape HelpDesk Support. The Company offers a full spectrum of sjinual support intended for
organizations who need to internally support large-scale deployment of Netscape Navigator software and
for authorized VARs and systems integrators providing direct support to their customers. This program
offers access to technical experts, support and training materials, support tools call histories, maintenance
releases and software updates.
Netscape Consultation Support. For individuals and for small groups using Netscape Navigator
software, the Company offers support through a toll-free telephone number on a time and materials
payment basis. This service provides online technical support and bug fixes or software releases as
required. Netscape Consultation Support is particularly economical for self-supporting departments who
consolidate questions through a department system administrator.
Netscape Server Licensee Support. The Company offers an annual support program targeted at
system administrators who have licensed Netscape servers. The program features are similar to those in
Netscape HelpDesk Support but are oriented toward the Netscape server software.
Netscape Advanced Support. The Company offers medium to large-sized organizations and
strategic partners 24 hour support, partner specific training and consulting, online access to support
information, and early access to new software releases.
Netscape Server Administration Training Course. The Company offers a two-day course intended
for Unix system administrators who are implementing an Internet HTTP presence with Netscape
software. The topics covered include server site preparation, configuration and installation, HTML
authoring, security, CGI scripts, hands-on labs and a discussion of the Company and the role of its
products on the Internet.
Consulting
The Company offers consulting services for particularly complex application design, integration and
installation. Consulting services are provided at negotiated rates, and typically include on-site support during
the installation process by Company engineers.
Training
Netscape offers hands-on training courses and materials to resellers and end users covering installation,
configuration and troubleshooting. In addition, courses and materials cover security and encryption, user
support, data loading and content creation, HTML user interface design, HTML template scripting and
integration with the data base.
30
'54
Advertising Space
For its most frequently visited Web pages, Netscape has created a program which enables advertisers to
display their logo or message on a hyperlinked button with access to their Web site. The Company charges a
monthly fee for the advertising spots which varies depending on the specific page location and the number of
visits to the page.
Marketing and Distribution
Target Markets
The Company's target markets are the Internet commerce, enterprise and individual PC user markets.
Internet Commerce Market. The Company believes that many major corporations will begin to publish
information on the Internet and to offer products and services for sale. Companies are expected to use the
Internet to publish corporate product and support information as "electronic brochures". Corporations likely
to offer products and services for sale include telecommunications companies, information service providers,
mail order and traditional retailers, publishers, and financial service providers.
Enterprise Market. Medium and large-sized organizations, particularly those with geographically disbursed employee bases, are expected to increasingly use the Internet in conjunction with private IP networks
to facilitate internal communications. Many Fortune 500 companies already maintain extensive private
communication networks today, which can be enhanced and extended through use of the Internet.
Individual PC Users. While the number of business desktop computer users accessing the Internet is
increasing rapidly, the Company believes that only a small fraction of business computer users currently use
the Internet. In addition, the popularity of online information services, such as Prodigy, CompuServe and
AOL, as well as home shopping services, such as QVC and Home Shopping Network, coupled with the
approximately 33 million home computers estimated by IDC to be in the United States today, suggest that the
home market for commercial applications on the Internet will be substantial. The accessibility and ease of use
of the Company's products are designed to address the demands of this marketplace.
The key targeted markets are illustrated below:
Target Markets
Channels
Netscape Products
Internet Commerce
Merchant System
Publishing System*
Community System*
IStore*
Systems Integrators
VARs
Direct Sales
Enterprise
Communications Server
Commerce Server
Proxy Server
News Server*
OEMs
Direct Sales
Systems Integrators
VARs
Telesales
Internet
Individual PC User
Navigator LAN Edition
Navigator Personal Edition
Retail
OEMs
Telesales
Internet
* Expected to be commercially available by the end of 1995.
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The market for the Company's software and services has only recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who have introduced or developed
products and services for communication and commerce over the Internet and private IP networks. As is
typical in the case of a new and rapidly evolving industry, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty. The industry is young and has few
proven products. Moreover, critical issues concerning the commercial use of the Internet (including security,
reliability, cost, ease of use and access, and quality of service) remain unresolved and may impact the growth
of Internet use. While the Company believes that its software products offer significant advantages for
commerce and communication over the Internet and private IP networks, there can be no assurance that
Internet Commerce and communication will become widespread, or that the Company's products for
commerce and communication over the Internet and private IP networks will become widely adopted for these
purposes.
Marketing
The Company uses a variety of marketing programs to stimulate demand for its products and services.
These programs are focused on the target markets mentioned above and are designed to leverage the Internet
itself as a powerful marketing vehicle. In addition, the Company has developed co-marketing programs with
channel partners designed to take advantage of their complementary marketing capabilities. The key elements
of the Company's marketing strategy include:
Marketing on the Internet. Netscape Navigator is designed to automatically access the Netscape home
page on the Company's Web server each time it starts up. The home page provides frequently updated help for
new users, news about the Company, directories to interesting sites on the Internet and a variety of product
and technical support information. The Company makes its products available for evaluation and purchase
through its home page. Customer information is collected electronically through an automated registration
process, creating the basis for ongoing marketing of upgrades, new products, add-on products and
merchandise.
Target marketing. The Company focuses direct marketing efforts on new electronic merchants,
companies now publishing on the Web and decision makers using the Internet for internal use in medium and
large-sized enterprises. The Company addresses these customers through a referral program for Netscape
Navigator users, outbound telemarketing, direct response advertising and seminar programs. The goal of these
efforts is to identify potential buyers of the Company's products, create awareness of the Company's product
offerings and generate leads for follow-on sales calls.
Marketing to PC users. Client products are marketed widely to PC users in loth the business and home
PC market segments. Retail distribution through national resellers, reseller agreements with Internet access
providers, and bundling arrangements with PC hardware and software OEMs are being used to make the
Company's client products rapidly available to a large number of potential customers. In order to stimulate
demand for its products, the Company also advertises in PC industry publications and engages in sales
promotions with distribution partners.
Distribution
The Company's objective is to become the de facto industry standard in part through rapid dissemination
of its products and services through multiple distribution channels worldwide. The Company has designed its
distribution strategy to address the particular requirements of its diverse institutional and individual target
customers. The Company's direct distribution efforts consist of a direct sales foice and telesales as well as
marketing directly via the Netscape home page on the Internet. The Company's products arc distributed
indirectly through OEMs, systems integrators, VARs and software retailers.
Direct Sales. The Company's direct sales force targets primarily medium to large-sized organizations,
including telecommunications companies, retailers, publishers and entertainment companies. The Company
believes that these organizations are most likely to become the electronic merchants and information
publishers for commerce on the Internet. In addition, these organizations have a substantial installed base of
32
private IP networks and are expected to employ Web servers for internal enterprise applications. In certain
instances, the Company's direct sales force works with complementary hardware OEMs, VARs and systems
integrators to deliver complete solutions for major customers.
Telesales. The Company's telesales organization, based in Mountain View, California, receives customer
orders as well as proactively contacts potential customers obtained from a variety of sources.
Internet Sales. The Company offers its products and services electronically via the Internet. Internet
sales and distribution is particularly well suited to address the large base of Internet users.
OEMs. The Company has established OEM relationships to leverage its sales efforts. For example, the
Company has agreements with Digital, SGI, Sun, Apple, Mitsubishi, Toshiba, NEC, Sony, Novell, MCI,
Pacific Bell, Delphi and others to bundle Netscape's server or client software with certain of their product
offerings.
VARs and Systems Integrators. VARs and systems integrators customize, configure and install the
Company's software products with complementary hardware, software and services. In combining these
products and services, these resellers are able to deliver more complete Netscapo-based solutions to address
specific customer needs. The Company may also help these VARs and systems integrators design customized
applications to meet the unique requirements of these customers. Since April 1, 1995, more than 150 VARs
have been qualified by the Company to resell its products.
Software Retailers. In June 199S, the Company introduced its Netscape Navigator Personal Edition
product for distribution through leading software retailers.
The Company has historically sold its products through direct sales and OEMs. The Company expects to
increasingly utilize OEMs and has only recently begun utilizing systems integrators, VARs and software
retailers (collectively, "Resellers"). The Company expects that any material increase in sales through
Resellers as a percentage of total revenues, especially in the percentage of sales through OEMs and VARs,
will adversely affect the Company's average selling prices and gross margins due to the lower unit prices that
are typically charged when selling through indirect channels. Moreover, there ct.n be no assurance that the
Company will be able to attract Resellers that will be able to market the Company's products effectively and
will be qualified to provide timely and cost-effective customer support and service. In addition, the Company's
agreements with Resellers typically do not restrict Resellers from distributing competing products, and in
many cases may be terminated by either party without cause. Further, in some cases the Company has granted
exclusive distribution rights which are limited by territory and in duration. Consequently, the Company may
be adversely affected should any Reseller fail to adequately penetrate its market segment. The inability to
recruit, or the loss of, important Resellers, or their inability to penetrate their respective market segments,
could materially adversely affect the Company's business, operating results or financial condition.
The Company plans to expand its field sales force and its telesales organization. There can be no
assurance that such internal expansion will be successfully completed, that the co^t of such expansion will not
exceed the revenues generated, or that the Company's sales and marketing organization will be able to
successfully compete against the significantly more extensive and well-funded sales and marketing operations
of many of the Company's current or potential competitors. The Company's inability to effectively manage its
internal expansion could have a material adverse effect on the Company's business, operating results or
financial condition.
In addition to expanding its direct sales channels, the Company will continue to distribute its products
electronically through the Internet. Distributing the Company's products through the Internet makes the
Company's software more susceptible than other software to unauthorized copying and use. The Company
currently allows potential customers to electronically download its client and server software for a free trial
period. There can be no assurance that, upon expiration of the evaluation period, the Company will be able to
collect payment from users that retain a copy of the Company's software. If, as a result of changing legal
interpretations of liability for unauthorized use of the Company's software or otherwise, users were to become
less sensitive to avoiding copyright infringement, the Company's business, operating results and financial
condition would be materially adversely affected.
33
y/
International
International revenues (sales outside of North America) were immaterial in the Inception Period and
accounted for approximately 10% of total revenues for the quarter ended March 31, 1995. However, the
Company believes that approximately 30% of all Internet servers are located outside the U.S. The Company
intends to translate and localize its products to address certain international markets.
The Company believes it is important to have a strong international presence. The Company intends to do
business in markets outside the U.S. through a combination of subsidiaries and distributors. The Company
intends to employ a mix of channels similar to the U.S. model, through the use of OEMs, systems integrators,
VARs and software retailers.
A Japanese subsidiary, Netscape Communications (Japan), Ltd. was established at the end of 1994. The
Company has established relationships with computer hardware manufacturers, system integrators, and
trading houses in Japan, including Information Services International - Dentsu, Itochu Techno-Science,
Mitsubishi, NEC, NTT PC Communications, Softbank Corp., Software Japan International, Sony and
Toshiba. The Company intends to establish a presence in European markets and other Pacific Rim countries
in the second half of 1995.
In particular, the Company intends to establish foreign subsidiaries in Europe by the end of 1995. If the
international revenues generated by these subsidiaries are not adequate to offset the expense of establishing
and maintaining these foreign operations, the Company's business, operating results or financial condition
could be materially adversely affected. To date, the Company has only limited experience in developing
localized versions of its products and marketing and distributing its products internationally. There can be no
assurance that the Company will be able to successfully market, sell and deliver its products in these markets.
In addition to the uncertainty as to the Company's ability to expand its international presence, there are
certain risks inherent in doing business on an international level, such as unexpected changes in regulatory
requirements, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, political instability, fluctuations in currency
exchange rates, seasonal reductions in business activity during the summer months in Europe and certain
other parts of the world and potentially adverse tax consequences, which could adversely impact the success of
the Company's international operations. There can be no assurance that one or more of such factors will not
have a material adverse effect on the Company's future international operations and, consequently, on the
Company's business, operating results and financial condition.
Due to the encryption technology contained in the Company's products, such products are subject to U.S.
export controls. There can be no assurance that such export controls, either in their current form or as may be
subsequently enacted, will not limit the Company's ability to distribute products outside of the United States
or electronically. While Netscape takes precautions against unlawful exportation, the global nature of the
Internet makes it virtually impossible to effectively control the distribution of the Company's products. In
addition, federal or state legislation or regulation may further limit levels of encryption or authentication
technology. Any such export restrictions or new legislation or regulation could have a material adverse impact
on the Company's business, operating results or financial condition.
Research and Development
The Company's current development efforts are focused on new products and adapting existing products
to new operating systems. Netscape's Community System, Publishing System and IStore integrated application products, Netscape News Server and the Netscape Navigator for Windows 95, are all currently being beta
tested. Community System, Publishing System, Netscape News Server, News Saver and IStore are expected
to be commercially available by the end of 1995. There can be no assurance, however, that these products will
be made commercially available as expected or otherwise on a timely and cost-effective basis, or that if
introduced, that these products will achieve market acceptance.
The Company believes that its software development team represents a significant competitive advantage
for the Company. The team includes key members of the engineering teams which developed the original
34
"<>>,
Mosaic Web client at NCSA, the original Web server software at CERN and NCSA, as well as leading
software security specialists. The Company's ability to attract and retain highly qualified employees will be the
principal determinant of its success in maintaining technological leadership. Netscape has a policy of using
equity-based compensation programs to reward and motivate significant contributors among its employees.
Research and development expenses were $2,032,000 and $1,981,000 for the Inception Period and for the
quarter ended March 31, 1995, respectively. To date, all software development c-jsts have been expensed as
incurred. The Company believes tbat significant investments in research and development are required to
remain competitive in tbe software business. As a consequence, the Company intends to increase the absolute
amount of its research and development expenditures in the future.
Substantially all of the Company's revenues have been derived, and substantially all of the Company's
future revenues are expected to be derived, from the license of its software and sale of its associated services.
Accordingly, broad acceptance of the Company's products and services by customers is critical to the
Company's future success, as is the Company's ability to design, develop, test and support new software
products and enhancements on a timely basis that meet changing customer needs and respond to technological
developments and emerging industry standards. There can be no assurance that the Company will he
successful in developing and marketing new software products and enhancements that meet changing
customer needs and respond to such technological changes or evolving industry standards. The Company's
current products are designed around certain standards, including, for example, security standards, and current
and future sales of the Company's products will be dependent, in part, on industry acceptance of such
standards. Other companies, like Microsoft and IBM are proposing alternative standards, the adoption of
which could have a material adverse effect on the Company's business, operating results or financial condition.
In addition, there can be no assurance that tbe Company will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of new products and enhancements, or that its
new products and enhancements will adequately meet the requirements of the marketplace and achieve
market acceptance. The Company will be substantially dependent in the near future upon its server and
integrated application software products that are still being developed or have been recently released. In
particular, the Company has not yet commercially released the Netscape Publishing System, the Netscape
Community System or the Netscape IStore integrated applications software products, the Netscape News
Server or the Netscape authoring tools. Further, because the Company has only recently commenced
shipment of its products, there can be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found in the Company's products, or, if discovered, successfully
corrected in a timely manner. If tbe Company is unable to develop on a timely basis new software products,
enhancements to existing products or error corrections, or if such new products or enhancements do not
achieve market acceptance, the Company's business, operating results and financial condition will be
materially adversely affected.
Competition
The market for Internet-based software and services is new, intensely competitive, rapidly evolving and
subject to rapid technological change. The Company expects competition to persist, intensify and increase in
the future. Almost alt of the Company's current and potential competitors have longer operating histories,
greater name recognition, larger installed customer bases and significantly greater financial, technical and
marketing resources than the Company. Tbe additional competition could materially adversely affect the
Company's business, operating results or financial condition. The Company's current and potential competitors can be divided into several groups: Microsoft, browser software vendors, Web server software and service
vendors, PC and Unix software vendors and online service providers.
Microsoft Corporation. Microsoft has licensed browser software from Spyglass and has announced its
intention to improve and bundle the browser with its Windows 95 operating system. Microsoft's browser will
access the Microsoft Network, its announced online service, and will also offer Internet access. While the
anticipated penetration of this software into Microsoft's installed base of PC users will increase the size and
usefulness of the Internet, it could also have a material adverse impact on Netscape's ability to sell client
software. In addition, Microsoft may choose to develop Web server software as a complement to its product
35
line and to support the Microsoft Network. This could have a materially adverse impact on Netscape's ability
to sell server software or integrated applications. Microsoft has a longer operating history, a much larger
installed base and number of employees, and dramatically greater financial, technical and marketing
resources, access to distribution channels and name recognition than the Company.
Browser Software Vendors. Several companies are currently offering client-based Web browser products, including Spry, Inc. (a subsidiary of CompuServe), Spyglass, Booklink Technologies, Inc. ("Booklink",
a subsidiary of AOL), NetManage Inc., Network Computing Devices, Inc. and Quarterdeck Office Systems,
Inc. In addition, the NCSA at the University of Illinois distributes its product, NCSA Mosaic, for free for
noncommercial use. Further, Spyglass has an exclusive license to NCSA Mosaic and is actively sublicensing it
to other commercial vendors. These sublicensees are expected to offer derivative products that will compete
with the Company's Netscape Navigator product line.
Server Software and Service Vendors. Some companies are offering Web sen-er software that they install
and operate on behalf of their customers, and other companies are offering services using Web servers.
Companies offering Web server software include Open Market, Inc. ("Open Market"), which has a Web
server for various Unix platforms. Process Software Corp. and O'Reilly & Associates, Inc., which have
Windows NT Web server products, Spyglass, which has announced a Web server for Windows NT and
various Unix platforms, and Terisa, which offers a toolkit for adding security functions to the existing NCSA
and CERN Web servers. Service companies include Open Market and Internet Media Services, which
publish content from third parties on their own Web servers. In the future, software companies which have
server products in other product categories may choose to enhance the functionality of existing products or
develop new products which are competitive with the Company's Web server and integrated application
products. These include Lotus (which IBM recently announced its intent to acquire), which may extend
Notes in this manner, and Novell, which may choose to provide add-ons to Netware for Web publishing. In
addition, the database vendors Oracle, Sybase and Informix may incorporate Web server functionality into
their products.
PC and Unix Software Vendors. The Company believes that PC software vendors may become
particularly formidable competitors. In addition to Microsoft, IBM has incorporated client software in its
OS/2 operating system, and the Company believes that other PC operating system vendors, including Apple,
will also eventually incorporate some Web client functionality into their opeiating systems as standard
features. This may also be true of Unix operating systems vendors, such as Sun, HP, IBM, Digital, SCO and
SGI. If these companies incorporate Web browser functionality into their software products, they could
subsequently offer this functionality at little or no additional cost to customers. Further, in the event that client
products incorporated into operating systems by Microsoft or other Unix or PC software vendors gain market
acceptance, these organizations will be better positioned than the Company to sell Web server and
applications software products.
Online Service Providers. Although the online services provided by companies such as Prodigy,
CompuServe and AOL are not Internet-based services, these services currently present an alternative medium
to content providers considering Internet-based publishing. In addition, due to the appeal of the Internet to
content publishers and end users, these companies are adapting their service offerings to provide Internet
access. At least two of these companies compete directly with the Company in the Internet-based software
and services market: AOL, which acquired Booklink, an Internet-based software company, and CompuServe,
which acquired Spry. The Compan/s client software products do not offer access to any online services,
including Microsoft Network, and could be at a competitive disadvantage versus browser products which offer
both access to the Internet and to an online service.
Additional competition could come from client/server applications and tools vendors, other database
companies, multimedia companies, document management companies, net woi king software companies,
network management companies and educational software companies.
Competitive factors in the Internet-based software and services market include core technology, breadth
of product features, product quality, marketing and distribution resources, and customer service and support.
The Company believes it presently competes favorably with respect to each of these factors. However, the
market and competition are still new and rapidly emerging, and there can be no assurance that the Company
36
will be able to compete successfully against current or future competitors, or that this competition will not
adversely affect its business, operating results and financial condition.
Government Regulation
The Company is not currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally, and there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet,
covering issues such as user privacy, pricing and characteristics and quality of products and services. For
example, the Exon Bill (which was recently approved by the Senate) would prohibit distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of any such laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand for the Company's products and
increase the Company's cost of doing business or otherwise have an adverse effect on the Company's business,
operating results or financial condition. Moreover, the applicability to the Internet of existing laws governing
issues such as property ownership, libel and personal privacy is uncertain.
Proprietary Rights
In December 1994, the Company entered into an agreement with the University of Illinois {the
"University") and Spyglass. Under the terms of the agreement, the University and Spyglass agreed not to
assert any claim of trademark infringement arising out of the Company's prior use of the word "Mosaic" or
other symbols or words used by the Company to market itself or its products. The University and Spyglass
further agreed not to assert against the Company any claim of copyright infringement, trade secret
misappropriation or related claims based on the Company's use of former University employees in the
development of the Company's present and future products. As consideration for these covenants not to assert
any such claims, the Company agreed to make certain payments to the University over a two-year period. If
the Company does not make these payments within the specified time periods, the University or Spyglass
could assert claims of intellectual property infringement against the Company. Such litigation could result in
substantial costs and diversion of resources even if ultimately decided in favor of the Company. Further,
although the Company believes that it has not infringed the intellectual property rights of the University or
Spyglass, any such litigation and tbe outcome of such litigation could have a material adverse effect on the
Company's business, operating results or financial condition.
The Company's success and ability to compete is dependent in part upon its proprietary technology.
While the Company relies on trademark, trade secret and copyright law to protect its technology, the
Company believes that factors such as the technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and reliable product maintenance are more
essential to establishing and maintaining a technology leadership position. The Company presently has no
patents or patent applications pending. There can be no assurance that others will not develop technologies
that are similar or superior to the Company's technology. The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's products or technology without
authorization, or to develop similar technology independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries, and the global nature of the Internet
makes it virtually impossible to control the ultimate destination of the Company's products. The Company
generally enters into confidentiality or license agreements with its employees, consultants and vendors, and
generally controls access to and distribution of its software, documentation and other proprietary information.
To license its products, the Company primarily relies on "shrink wrap" licenses thai are not signed by the enduser and, therefore, may be unenforceable under the laws of certain jurisdictions. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult. There can be no assurance that the steps taken by the Company will
prevent misappropriation of its technology or that such agreements will be enforceable. In addition, litigation
37
4i
may be necessary in the future to enforce the Company's intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims
of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating results or financial condition.
Unisys recently announced its intention to require the payment of royalties for the use of compression
technology associated with the Graphics Interchange Format ("GIF"), a popular file format based on
compression technology patented by Unisys. The Company's products have the ability to decompress files,
including files stored in GIF. While the Company has received notice of Unisys' intention to enforce such
patent, the Company believes its technology falls outside the scope of such patent. However, the Company
could incur additional costs and liability should its products be found to be within the scope of the Unisys
patent. The assertion of these patent rights by Unisys, if successful, could result in additional costs to the
Company or prevent the Company's products from enabling users to view files compressed in GIF. From time
to time the Company has, in addition to the notice from Unisys, received, and may receive in the future, notice
of claims of infringement of other parties' proprietary rights. Although the Company does not believe that its
products infringe the proprietary rights of any third parties, there can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any such assertions or prosecutions will not materially adversely affect
the Company's business, financial condition or results of operations. Irrespective of the validity or the
successful assertion of such claims, the Company would incur significant costs and diversion of resources with
respect to the defense thereof which could have a material adverse effect on the Company's business, financial
condition or results of operations. If any claims or actions are asserted against the Company, the Company
may seek to obtain a license under a third party's intellectual property rights. There can be no assurance,
however, that under such circumstances, a license would be available on reasonable terms or at all.
Employees
As of June 5, 1995, the Company had a total of 213 employees, 20S of whom were based in the United
States. Of the total, 80 were in research and development, 117 were engaged in salts, marketing and customer
support and 20 were in administration and finance. The Company's future success depends in significant part
upon the continued service of its key technical and senior management personnel and its continuing ability to
attract and retain highly qualified technical and managerial personnel. Competition for highly qualified
personnel is intense and there can be no assurance that the Company can retain its key managerial and
technical employees or that it will be able to attract or retain additional highly qualified technical and
managerial personnel in the future. None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations with its employees to be good.
The rapid execution necessary for the Company to fully exploit the market window for its products and
services requires an effective planning and management process. The Company's rapid growth has placed, and
is expected to continue to place, a significant strain on the Company's managerial, operational and financial
resources. The Company recently hired James L. Barksdale as its new President and Chief Executive Officer
in January 199S and Peter L.S. Cunie as its Vice President and Chief Financial Officer in April 1995. In
addition, most of the Company's development and engineering staff was only recently hired. To manage its
growth, the Company must continue to implement and improve its operational and financial systems and to
expand, train and manage its employee base. For example, the Company is currently in the process of building
its internal maintenance and support organization. Although the Company believes that it has made adequate
allowances for the costs and risks associated with this expansion, there can be no assurance that the
Company's systems, procedures or controls will be adequate to support the Company's operations or that
Company management will be able to achieve the rapid execution necessary to fully exploit the market
window for the Company's products and services. If the Company is unable to manage growth effectively, the
Company's business, operating results and financial condition will be materially adversely affected.
38
Facilities
The Company leases its principal facility, which occupies approximately 50,000 square feet of office
space, in Mountain View, California. This facility is leased through Decembei 31, 2001. The Company is
additionally committed to an adjacent building of approximately 50,000 square feet for future expansion. The
lease requires the Company to occupy and begin rental payments on the second building no later than
September 1, 1995. The lease on this building also expires on December 31, 2001. In addition, the Company
occupies a building of approximately 28,000 square feet of space adjacent to its existing facilities pursuant to a
lease which expires in September 1995. The Company believes that its existing facilities will be adequate until
the end of the year and that sufficient additional space will be available as needed thereafter.
The Company also leases approximately 11,000 square feet of office space: in a building in Mountain
View, California, which was its principal business location until January 6, 1995. This space is leased through
May 16, 1996. The Company has recently sublet this space to a subtenant which will rent that space through
the term of the Company's lease. The Company also has short-term operating leases for sales offices in several
states, Tokyo and Paris.
The Company maintains secure Web servers which contain confidential infoimation of the Company and
its customers. The Company's operations are dependent in part upon its ability to protect its network
infrastructure against damage from physical break-ins, natural disasters, operational disruptions and other
events. Any damage or failure that causes interruptions in the Company's operations could materially
adversely affect the Company's business, operating results or financial condition. In addition, physical breakins could result in the theft or loss of confidential or critical business information of the Company or its
customers.
39
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company, and their ages and positions as of May 31,1995, are
as follows:
Name
PMIIIOU(I)
James H. Clark
James L. Barksdale
Marc L. Andreessen
Peter L.S. Currie
Conway Rulon-Miller
Michael J. Homer
Roberta R. Katz
Richard M. Schell
James C.J. Sha
50
52
23
38
44
37
47
45
45
Kandis Malefyt
L. John Doerr(l)
JohnE. Wamock(l)
41
43
54
Chairman of the Board
President, Chief Executive Officer and Director
Vice President, Technology and Director
Vice President and Chief Financial Officer
Vice President, Sales and Field Operations
Vice President, Marketing
Vice President, General Counsel and Secretary
Vice President, Engineering
Vice President and General Manager, Integrated
Applications
Vice President, Human Resources
Director
Director
(1) Member of the Audit and Compensation Committees.
Dr. Clark co-founded the Company in April 1994 and serves as its Chairman of the Board. From
inception of the Company to December 1994, Dr. Clark served as the President and Chief Executive Officer of
the Company. From 1981 to 1994, Dr. Clark was Chairman of the Board of Directors of Silicon Graphics, Inc.
("SGI"), a computer systems company he founded in 1981. Dr. Clark also served as Chief Technical Officer
of SGI from 1981 to 1987. Prior to founding SGI, Dr. Clark was an associate professor at Stanford University.
Dr. Clark holds a Ph.D. from the University of Utah and an M.S. from Louisiana State University.
Mr. Barksdale joined the Company in January 1995 as President and Chief Executive Officer. He has
served as a director of the Company since October 8, 1994, From 1992 to 1994, Mr. Barksdale served as
President and Chief Operating Officer, and, as of September 1994, Chief Executive Officer of AT&T Wireless
Services {formerly, McCaw Cellular Communications, Inc. ("McCaw")). From 1983 to 1991, Mr. Barksdale
served as Executive Vice President and Chief Operating Officer of Federal Express Corporation. From 1979 to
1983, Mr. Barksdale served as Chief Information Officer of Federal Express. Mr. Barksdale also held various
management positions, including Chief Information Officer, with Cook Industries Inc. during the mid-1970s
and was employed by International Business Machines Corporation from 1965 to 1972. He holds a B.A. from
the University of Mississippi. Mr. Barksdale serves as a director of 3Com Corporation and The Promus
Companies, Incorporated.
Mr. Andreessen co-founded the Company in April 1994. He currently serves as Vice President,
Technology and has been a director of the Company since September 1994. He received a B.S. from the
University of Illinois in 1994 where he co-authored the original NCSA Mosaic Web browser.
Mr. Currie joined the Company as Vice President and Chief Financial Officer in April 1995. From
April 1989 to January 1995, Mr. Currie held various management positions at McCaw, including Executive
Vice President and Chief Financial Officer, and as of February 1993, Executive Vice President of Corporate
Development. From 1982 to 1989, he held various positions at Morgan Stanley & Co., Incorporated.
Mr. Currie holds an M.B.A. from Stanford University and a B.A. from Williams College. Mr. Currie serves as
a director of LIN Television Corporation.
Mr. Rulon-Miller joined the Company in October 1994 as Vice President, Sales and Field Operations of
the Company. From December 1992 to October 1994, Mr. Rulon-Miller was President and Chief Executive
Officer of Software Alliance Corp., a subsidiary of Teknekron Communications Systems Inc. From 1986 to
40
1992, he served as Vice President of North American Operations of NeXT Computer, Inc. Mr. Rulon-Miller
has previously held management positions at Tandem Computers, Inc., American Express Company and
IBM. Mr. Rulon-MUler holds a B.A. from Princeton University.
Mr. Homer joined the Company in October 1994 as Vice President, Marketing. From August 1993 to
October 1994, Mr. Homer served as Vice President, Engineering at EO Corporation and from July 1991 to
July 1993, Mr. Homer was Vice President, Marketing at GO Corporation. He had previously been Director of
Product Marketing at Apple Computer, Inc. where he had held various technical and marketing positions
from 1982 through 1991. Mr. Homer holds a B.S. from the University of California, Berkeley.
Ms. Katz joined the Company in May 1995 as Vice President, General Counsel and Secretary. From
March 1993 until joining the Company, Ms. Katz served as Senior Vice President and General Counsel of
McCaw. In addition, from March 1992 until joining the Company, Ms. Katz served as Senior Vice President
and General Counsel of LIN Broadcasting Corporation, a subsidiary of McCaw. Prior to March 1992,
Ms. Katz was in private legal practice, most recently as a partner in the law firm of Heller, Ehrman, White &
McAuliffe. Ms. Katz is a Fellow of the Discovery Institute and a member of the: Board of Directors of The
Washington Technology Center. Ms. Katz holds a J.D. from the University of Washington School of Law, a
Ph.D. from Columbia University and a B.A. from Stanford University.
Dr. Schell joined the Company in October 1994 as Vice President, Engineering. From January 1993 to
October 1994, Dr. Schelt was employed by Symantec Corporation, most recently as Vice President/General
Manager of the Central Point Division (formerly Central Point Software, Inc.). Fiom 1989 to 1992, he served
as Vice President, Languages and dBase at Borland International. Prior to that time, Dr. Schell held various
management positions at Sun Microsystems, Inc. and Intel Corporation. Dr. Schell holds a Ph.D., an M.S.
and a B.A. from the University of Illinois.
Mr. Sha joined the Company in August 1994 as Vice President and General Manager, Integrated
Applications. From 1990 to 1994, Mr. Sha served as Vice President, Unix Division at Oracle Corporation.
From 1986 to 1990, he served as Vice President/General Manager, Advanced Systems Division at Wyse
Technology, Inc. Mr. Sha holds an M.S.E.E. from the University of California, Berkeley, an M.B.A. from
Santa Clara University and a B.S.E.E. from National Taiwan University.
Ms. Malefyt joined the Company in December 1994 as Vice President, Human Resources. From 1988 to
1994, Ms. Malefyt served as a Director, Human Resources at Silicon Graphics, Inc. Prior to that time, she
served as Vice President, Human Resources at ISI. Ms. Malefyt holds an M.S. from Antioch University and a
B.A. from Harding University.
Mr. Doerr has been a director of the Company since September 1994. Mr. Doerr has been a general
partner of Kleiner, Perkins, Caufield & Byers, a venture capital firm, since 1980. Prior to joining Kleiner,
Perkins, Caufield & Byers, Mr. Door was employed by Intel Corporation for five years. He is a director of
Intuit Inc., Macromedia, Inc., Platinum, Shiva Corporation and Sun, as well as several private companies. He
holds an M.B.A. from the Harvard Business School and an M.E.E. and a B.S. from Rice University.
Dr. Warnock has been a director of the Company since April 1995. Dr. Wamock is a founder of Adobe
Systems Incorporated ("Adobe"), and has been its Chairman of the Board since 1989. He has served as
Adobe's President, Chief Executive Officer and a director since December 1982. Prior to founding Adobe, Dr.
Wamock was principal scientist of the Imaging Sciences Laboratory at Xerot Corporation's Palo Alto
Research Center. He is a director of Adobe, Evans & Sutherland Computer Corporation, Red Brick Systems
and the Tech Museum of Innovation. Dr. Warnock holds a Ph.D., an M.S. and a B.S. from the University of
Utah.
The Company currently has authorized five directors. In June 1995, the Board of Directors approved,
subject to stockholder approval, an amendment to the Company's Amended and Restated Certificate of
Incorporation to provide for a classified Board of Directors. In accordance with the terms of the proposed
amendment to the Amended and Restated Certificate of Incorporation, effective upon the closing of this
offering, the terms of office of the Board of Directors will be divided into three classes: Class I, Class II and
Class III. The terms of office of the respective classes of directors initially classified will be as follows: Class I
will expire at the annual meeting of stockholders to be held in 1996; Class II will expire at the annual meeting
of stockholders to be held in 1997; and Class III will expire at the annual meeting of stockholders to be held in
1998. At each annual meeting of stockholders after the aforementioned initial classification, the successors to
directors whose terms will then expire will be elected to serve from the time of election and qualification until
41
the third annual meeting following election and until successors will have been duly elected and will bave
qualified. Any additional directorships resulting from an increase in the number of directors will be distributed
among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
In connection with the Series B Preferred Stock financing, Mr. Docrr was elected to the Board of
Directors pursuant to the Company's Amended and Restated Certificate of Incorporation. In connection with
the Series C Preferred Stock financing, Dr. Warnock was elected to the Board of Directors pursuant to the
Company's Amended and Restated Certificate of Incorporation. These provisions will terminate upon the
closing of this offering.
Each officer serves at the discretion of the Board of Directors. There are no family relationships among
any of the directors or officers of the Company.
Director Compensation
The Company's directors are not compensated for any meetings that they attend nor are they reimbursed
for any expenses that are incurred in attending such meetings. However, in January 1995, in exchange for his
services as a director, James L. Barksdale was granted an option to purchase 200,000 shares of the Company's
Common Stock at an exercise price of $0.1125 per share under the Company's 1994 Stock Option Plan. The
Company has recently established a director stock option plan, which provides for automatic grants to nonemployee directors commencing upon the consummation of this offering. See "Stock Plans — 1994 Stock
Option Plan," "— 1995 Directors Option Plan."
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee was formed in June 1995 to review and approve the
compensation and benefits for the Company's executive officers, administer the Company's stock purchase
and stock option plans and make recommendations to the Board of Directors regarding such matters. The
committee is currently composed of Mr. Doerr and Dr. Warnock. No interlocking relationship exists between
the Company's Board of Directors or Compensation Committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship existed in the past.
Employment Agreements
The Company has an employment agreement with James L. Barksdale, the Company's President and
Chief Executive Officer, which is terminable at will by either the Company or Mr. Barksdale. In connection
with such agreement, Mr. Barksdale was granted an option to purchase 4,000,000 shares of the Company's
Common Stock at an exercise price of $0.1125 per share. The options were all immediately exercisable, with
2,000,000 shares vested immediately upon grant and an additional 40,000 shares vesting per month over
50 months. The Company retains the right to repurchase any unvested shares at $0.1125 upon the cessation of
Mr. Barksdale's service for any reason. Upon a change in control of the Company, the Company or its
successor entity shall be obligated to employ Mr. Barksdale until all shares subject to his option have vested in
full.
Limitation on Liability and Indemnification Matters
The Company's Certificate of Incorporation limits the liability of directors to the maximum extent
permitted by Delaware law. Delaware law provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a director for monetary damages for breach
of their fiduciary duties as directors, except for liability (i) for any breach of their 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) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors and may indemnify its
officers and employees to the fullest extent permitted by law. The Company believes that indemnification
under its Bylaws covers at least negligence and gross negligence on the part of indemnified parties.
42
-it)
The Company intends to enter into agreements to indemnify its directors and officers, in addition to the
indemnification provided for in the Company's Bylaws. These agreements, among other things, indemnify the
Company's directors and officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding, including any action by or in the
right of the Company, arising out of such person's services as a director or officer of the Company, any
subsidiary of the Company or any other company or enterprise to which the pei-son provides services at the
request of the Company. The Company believes that these provisions and agreements are necessary to attract
and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any director, officer, employee or agent
of the Company where indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such indemnification.
Executive Compensation
The following table sets forth information concerning the compensation paid by the Company during the
period from the Company's inception (April 1994) to December 31, 1994 to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive officers (collectively, the
"Named Officers");
Summary Compensation Table
Annual Compensation
Name and Principal Position
Salary
James H. Clark(l)
Chairman of the Board
James C.J. Sha(2)
Vice President and General Manager, Integrated
Applications
Marc L. Andreessen(3)
Vice President, Technology
Conway Rulon-Miller(4)
Vice President, Sales and Field Operations
Richard M. Schell(5)
Vice President, Engineering
$
Bonus
Compensation
Securities
Underlying
Options
All Other
Compensation
0
$0
—
$0
$69,230
$0
—
$0
$60,000
$0
280,000
$0
$53,850
$0
—
$0
$49,615
$0
400,000
$0
(1) Mr. Clark served as the President and Chief Executive Officer of the Company from its inception in
April 1994 until December 1994. Mr. Clark did not receive any compensation or stock options in 1994.
(2) Mr. Sha joined the Company in August 1994; his annualized base salary for 1994 was $200,000.
(3) Mr. Andreessen joined the Company in April 1994; his annualized base salary for 1994 was $80,000.
(4) Mr. Rulon-Miller joined the Company in October 1994; his annualized base salary for 1994 was
$225,000.
(5) Mr. Schell joined the Company in October 1994; his annualized base salary for 1994 was $215,000.
43
Option Grants During 1994
The following table sets forth, as to the Named Officers, information concerning stock options granted
during the period from inception (April 1994) to December 31, 1994:
ludlfMnal Grants
Potential Realizable
Number of
Percent of Total
AJ2M£!?£L|I
Name
Securities
Underlying
Option*
Gtanted(l)
Oottoas
Craated to
Employees in
1W(1)
Annual Kates of stock
/ r i r t JS p ?£!i!?m
for Option Term (3)
5%($)
10%ffl
James H.Clark
James C.J. Sha
Marc L. Andreessen
Conway Rulon-Miller
Richard M. Schell
—
—
280,000
—
400,000
Exercise
Price (3)
Expiration
Date (4)
—
—
—
—
—
—
—
—
9.6% $0.0375 07/14/04 $ 6,603
—
—
—
—
13.7% $0.1125 09/14/04 28,300
—
—
$16,734
—
71,718
(1) These options are incentive stock options granted pursuant to the 1994 Stock Option Plan and have ten
year terms. The options are immediately exercisable; however, the shares purchasable under such options
are subject to repurchase by the Company at the original exercise price paid per share upon the optionee's
cessation of service prior to the vesting of such shares. In this context, "vesting" means that the shares
subject to options are no longer subject to repurchase by the Company. Twenty percent of the options
vest upon completion of 10 months of service with the Company, and the remaining shares vest at the
rate of two percent over the next 40 months of service.
(2) In 1994, the Company granted options to purchase an aggregate of 2,921,203 shares.
(3) In determining the fair market value of the Company's Common Stock, the Board of Directors
considered various factors, including the Company's financial condition snd business prospects, its
operating results, the absence of a market for its Common Stock and the risks normally associated with
high technology companies. The exercise price may be paid in cash, check, promissory note, shares of the
Company's Common Stock, through a cashless exercise procedure invoMng same-day sale of the
purchased shares or any combination of such methods.
(4) Options may terminate before their expiration dates if the optionee's status as an employee or consultant
is terminated or upon the optionee's death.
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of
the Securities and Exchange Commission and do not represent the Company's estimate or projection of
the Company's future Common Stock prices.
Aggregate Option Exercises in 1994 and Year-End Option Values
The following table sets forth concerning options exercises and option holdings for the period from
inception (April 1994) to December 31, 1994 with respect to each of the Named Officers:
Number of
Shares
Name
Acquired
on
Exercise
Number of Securities
Value Realized
Underlying Unexerclsed
(Market Price at
Options at 12/31/94
Exercise Less
Exercise Price)
Exerdsabie Untx erasable
James H. Clark
James C.J. Sha
Marc L. Andreessen .
Conway Rulon-Miller
Richard M. Schell...
Value or Unexerdsed
in-tbe-Money Optloas at
12/31/94 (1)
Exercisable
Unexerci sable
280,000
0
$21,000
0
400,000
0
0
0
(1) Calculated by determining the difference between the fair market value of the securities underlying the
option at December 31, 1994 ($0.1125 per share as determined by the Board of Directors) and the
exercise price of the Named Officer's option. In determining the fair market value of the Company's
44
4 61
Common Stock, the Board of Directors considered various factors, including the Company's financial
condition and business prospects, its operating results, the absence of a market for its Common Stock and
the risks normally associated with high technology companies.
Stock Plans
1994 Stock Option Plan
The Company's 1994 Stock Option Plan (the "1994 Plan") provides for the grant to employees of
incentive stock options and the grant of nonstatutory stock options to employees and consultants of the
Company. As of May 31, 1995, an aggregate of 8,076,672 shares of Common Stock have been reserved for
issuance under the 1994 Plan, and options to purchase an aggregate of 4,384,800 shares of Common Stock
were outstanding under the 1994 Plan. The Board of Directors has determined that no further options will be
granted under the 1994 Plan after this offering.
1995 Stock Plan
The Company's 1995 Stock Plan (the "1995 Plan") was approved by the Board of Directors in
June 1995. The Plan provides for the granting to employees (including officers and employee directors) of
incentive stock options and for the granting to employees (including officers and employee directors) and
consultants of nonstatutory stock options, stock purchase rights ("SPRs"), and long-term performance
awards. A total of 4,500,000 shares of Common Stock have been reserved for issuance under the 1995 Plan,
which number shall be increased on the first day of each new fiscal year of the Company, beginning in 1997,
by a number of shares equal to four percent of the Company's outstanding Common Stock as of the last
business day of the immediate preceding fiscal year. However, the maximum number of shares of Common
Stock available for issuance pursuant to incentive stock option grants under the 1995 Plan is 4,500,000.
The 1995 Plan may be administered by the Board of Directors or a committee designated by the Board
(the "Committee"). Options, SPRs, and long-term performance awards granted under the 1995 Plan are not
generally transferable by the optionee except by will or by the laws of descent and distribution, and are
exercisable during the lifetime of the optionee only by such optionee. Options granted under the 1995 Plan
must be exercised within three months of the end of optionee's status as an employee or consultant of the
Company, or within twelve months after such optionee's termination by death oi disability, but in no event
later than the expiration of the option term. The exercise price of all incentive and nonstatutory stock options
granted under the 1995 Plan shall be determined by the Committee. With respect to any participant who owns
stock possessing more than ten percent of the voting power of all classes of the Company's outstanding capital
stock (a "10% Stockholder"), the exercise price of any incentive stock option granted must equal at least
110% of the fair market value on the grant date. The exercise price of incentive stock options for all other
employees shall be no less than 100% of the fair market value per share on the date of the grant. The
maximum term of an option granted under the 1995 Plan may not exceed ten years from the date of grant
(five years in the case of an incentive stock option granted to a 10% Stockholder). In the case of SPRs, unless
the Committee determines otherwise, the Company shall have a repurchase option exercisable upon the
voluntary or involuntary termination of the purchaser's employment with the Company for any reason
(including death or disability). Such repurchase option lapses at a rate determined by the Committee. The
purchase price for shares repurchased by the Company shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option
shall lapse at a rate determined by the Committee. Long-term performance awards are cash or stock bonus
awards, and may be granted alone or in conjunction with other awards under the 1995 Plan.
1995 Employee Stock Purchase Plan
The Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan") was adopted by the
Board of Directors in June 1995. The Company has reserved a total of 1,000,000 shares of Common Stock for
issuance under the 1995 Purchase Plan. The 1995 Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, permits eligible employees of the Company to
purchase Common Stock through payroll deductions of up to ten percent of their compensation (including
commissions, overtime, shift premium, and bonuses), up to a maximum of $21,250 for all purchase periods
45
ending within any calendar year. The price of Common Stock purchased under the 1995 Purchase Plan will be
85% of the lower of the fair market value of the Common Stock on the first or last day of each six month
purchase period. Employees may end their participation in the 1995 Purchase Plan at any time during an
offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon
termination of employment with the Company. Rights granted under the 1995 Purchase Plan are not
transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided
under the plan. The 1995 Purchase Plan will be implemented by an initial offering period of approximately
23 months commencing on the first trading day on or after the effective date of this offering and ending on the
last trading day in the period ending July 31, 1997. Subsequent offering periods will last 24 months and will
commence on the first trading day on or after February 1 and August 1 of each year during which the 1995
Purchase Plan is in effect, and will terminate on the last trading day in the periods ending 24 months later.
Each 24-month offering period will consist of four purchase periods of approximately six months duration. The
1995 Purchase Plan will be administered by the Board of Directors or by a committee appointed by the Board.
Employees are eligible to participate if they are customarily employed by the Company or any designated
subsidiary for at least 20 hours per week and for more than five months in any calendar year.
1995 Directors Option Plan
Non-employee directors are entitled to participate in the 1995 Director Option Plan (the "1995 Director
Plan"). The Director Plan was adopted by the Board of Directors in June 1995 but shall not become effective
until the effective date of this offering. A total of 100,000 shares of Common Stock have been reserved for
issuance under the Director Plan.
The Director Plan provides for an automatic grant of an option to purchase 8,000 shares of Common
Stock (the "First Option") to each non-employee director on the date on which the Director Plan becomes
effective or, if later, on the date on which the person first becomes a non-emplo)ee director. After the First
Option is granted to the non-employee director, he or she shall automatically be granted an option to purchase
2,000 shares (a "Subsequent Option") on January 1 of each subsequent year provided he or she is then a nonemployee director and, provided further, that on such date he or she has served on the Board for at least
six months. First Options and each Subsequent Option shall have a term of ten years. Twenty percent of the
shares subject to the First Option shall vest on the date ten months after the (rant of the option, and an
additional two percent of the shares subject to the First Option shall become exercisable each month
thereafter, provided that the optionee continues to serve as a director on such dates. One twenty-fourth of the
shares subject to a Subsequent Option shall become exercisable at the end of each month after the option
grant, provided that the optionee continues to serve as a director on such dates. The exercise prices of the First
Option and each Subsequent Option shall be 100% of the fair market value per share of the Company's
Common Stock on the date of the grant of the option.
46
CERTAIN TRANSACTIONS
Since the inception of the Company in April 1994, the Company has issued, in private placement
transactions, shares of Preferred Stock, as follows: 4,151,000 shares of Scries A Preferred Stock at $0.75 per
share; 2,857,222 shares of Series B Preferred Stock at $2.25 per share and 2,000,000 shares of Series C
Preferred Stock at $9.00 per share. All of such Preferred Stock will convert into an aggregate of 18,016,444
shares of Common Stock upon the closing of this offering. The holders of such converted shares of Common
Stock are entitled to certain registration rights with respect to the Common Stock issued or issuable upon
conversion thereof. See "Description of Capital Stock — Registration Rights." The following table summarizes the shares of Preferred Stock purchased by the Company's directors, executive officers, five percent
stockholders and their respective affiliates as of May 31, 1995:
Series A
Series B
Series C
Inestor
James H. Clark
James C.J. Sha
Entities affiliated with Kleiner Perkins Caufield & Byers(l)
Adobe Systems Incorporated (2)
Preferred
Stock
Preferred
Slock
4,000,000
25,000
500,000
75,000
2,200,000
Preferred
Stock
444,445
(1) Includes 1,881,000 shares, 209,000 shares and 110,000 shares held by Kleiner Perkins Caufield & Byers
VII, KPCB VII Founders Fund and KPCB Info Zaibatsu II, respectively. L. John Doerr is a general
partner of KPCB VII Associates, which is a general partner of Kleiner Perkins Caufield & Byers VII,
KPCB VII Founders Fund and KPCB Info Zaibatsu II. Mr. Doerr serves es the representative of the
Series B Preferred Stock holders on the Board of Directors pursuant to the Company's Amended and
Restated Certificate of Incorporation. Mr. Doerr disclaims beneficial ownership of such shares except for
his proportional interest therein.
(2) All shares are held by Adobe. Dr. Warnock was a founder of Adobe and currently serves as its President
and Chief Executive Officer and as a director. Dr. Wamock also serves as the representative of the
Series C Preferred Stock holders on the Board of Directors of the Company pursuant to the Company's
Amended and Restated Certificate of Incorporation. Dr. Wamock may therefore be deemed to share
voting and investment power with respect to such shares.
In May 1994, James H. Clark and Marc L. Andreessen, executive officers and directors of the Company,
each purchased 720,000 shares of Common Stock at $0.0005 per share (the then fair market value of the
Common Stock as determined by the Company's Board of Directors). The Company issued a total of
3,350,000 shares of Common Stock in this financing. In August 1994, James C.J. Sha, an executive officer of
the Company, purchased 400,000 shares of Common Stock at SO.O375 per share (the then fair market value of
the Common Stock as determined by the Company's Board of Directors). The Company has also agreed to
make a loan in the amount of $200,000 to Dr. Schell to assist in his relocation to the San Francisco Bay Area
and purchase of a home. Such loan may be forgiven by the Company when Dr. ScheU's options have vested in
full.
In January 1995, the Company entered into an employment agreement with James L. Barksdale. See
"Management — Employment Agreements." The Company intends to enter into indemnification agreements
with each of its executive officers and directors prior to the closing of this offering.
The Company believes that all of the transactions set forth above were made on terms no less favorable to
the Company then could have been obtained from unaffiliated third parties. All future transactions, including
loans, between the Company and its officers, directors and principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the independent and disinterested
outside directors of the Board of Directors, and will be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
47
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of the Common Stock as of
May 31, 1995 and as adjusted to reflect the sale of Common Stock offered hereby for (t) each person or entity who is
known by the Company to beneficially own more than 1.5% of the Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Officers, and (iv) all directors and executive officers of the Company as a group:
Shares
Beneficially
OM*O>
Number
Name or Croup of Beaefldtl Owaers
James H. Clark(2)
c/o Netscape Communications Corporation
501 East Middlefield Road
Mountain View, CA 94043
James L. Barksdale(3)
c/o Netscape Communications Corporation
501 East Middlefield Road
Mountain View, CA 94043
L. John Doerr(4)
Kleiner Perkins Caufield & Byers
4 Embarcadero Center, Suite 3520
San Francisco, CA 94111
Mare L. Andreessen (5)
John E. Wamock(6)
Adobe Systems Incorporated (6)
TCI Netscape Holdings, Inc
The Times Mirror Company
James C.J. Sha(7)
Knight-Ridder Investment Company
The Hearst Corporation
IDG Holdings, Inc
Conway Rulon-Miller(8)
Richard M. Schell(9)
All directors and executive officers as a group (12 persons)(10)
Percentage of Shares
BcMfidally
Owwd(l)
Before
After
Offering
Offering
9,720,000
36.0%
31.9%
4,200,000
15.6
13.8
4,400,000
16.3
14.4
1,000,000
888,890
888,890
888,890
888,890
600,000
444,446
444.446
444,438
400,000
400,000
22,708,890
3.7
3.3
3.3
3.3
3.3
2.2
1.6
1.6
1.6
1.5
1.5
77.8
3.2
2.9
2.9
2.9
2.9
2.0
1.5
1.5
1.5
1.3
1.3
69.5
* Less than )%.
(1) Assumes no exercise of the Underwriters' over-allotment option. Beneficial ownership is determined in accordance with the rules of the Securities
and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership or that person,
shares of Common Stock subject to options or warrants held by that person that are currently exercisabk or exercissible within 60 days of May 31,
1995 are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of each
other person. Except as indicated in the footnotes to this table and pursuant to applicable community property Taws, the stockholder named in the
table has sole voting and investment power with respect to the shares set forth opposite such stockholder's name.
(2) Includes 532.800 shares subject to a repurchase right of the Company upon cessation of his service to the Company. Such repurchase right lapses
at a rate of two percent per month.
(3) Includes 2,040,000 shares subject to a repurchase right of the Company upon cessation of his service to the Company. Such repurchase right
lapses at a rate of two percent per month.
(4) Includes 3,762,000 shares, 418.000 (hares and 220,000 shares held by Kleiner Perkins Caufield & Byers VII, KPCB VII Founders Fund and
KPCB Info Zaibatsu 11, respectively. Mr. Doerr is a general partner of KPCB VII Associates, which is a general partner of both Kleiner Perkins
Caufield & Byers VII, KPCB VII Founders Fund ana KPCB Info Zaibatsu 11. Mr. Doerr disclaims beneficial ownership of such shares except for
his proportional interest therein.
(5) Includes 280,000 shares issuable upon a currently exercisable option, of which 207,200 shares are subject to a repurchase right of the Company
upon cessation of his service to the Company. Also includes 532,800 shares subject to a repurchase right of the Company upon cessation of his
service to the Company. Such repurchase rights lapse at a rate of two percent per month.
(6) All such shares arc held by Adobe. Dr. Wamock was a founder of Adobe and currently serves as its President and Chief Executive Officer and as a
director. Dr. Wamock also serves as the representative of the Series C Preferred Stock holders on the Board of Directors of the Company pursuant
to the Company's Amended and Restated Certificate of Incorporation. Dr. Wamock may therefore be deemed to share voting and investment
power with respect to such shares.
(7) Includes 400,000 shares subject to a repurchase right of the Company upon cessation of his service to the Company. Such repurchase right lapses
u to 20% of the shares on June 29, 1995 and at a rate of two percent per month thereafter.
(8) Includes 400,000 shares issuable upon a currently exercisable option, all of which are subject to a repurchase right of the Company upon cessation
of his service to the Company. Such repurchase right lapses as to 20% of the (hares on September 14, 1995 and at a rate of 2% per month
thereafter.
(9) Includes 400,000 shares issuable upon a currently exercisable option, all of which are subject to a repurchase right of the Company upon cessation
of his service to the Company. Such repurchase right lapses as to 20% of the shares on August 12,1995 and at a rate of 2% per month thereafter.
(10) Includes (i) an aggregate of 2,180,000 shares issuable upon currently exercisable options, (ii) an aggregage of 4,984,000 shares subject to certain
repurchase rights of the Company upon cessation of the individual's service to the Company, whicn repurchase rights generally lapse at a rate of
two percent per month, and (iii) 5,288,890 shares owned by entities associated with Messrs. Doerr and Wamock.
48
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, $0.0001
par value, and 5,000,000 shares of undesignated Preferred Stock, $0.0001 par value.
The following summary of certain provisions of the Common Stock and Preferred Stock does not purport
to be complete and is subject to, and qualified in its entirety by, the provisions of the Company's Amended and
Restated Certificate of Incorporation which is included as an exhibit to the Registration Statement of which
this Prospectus is a part and by the provisions of applicable law.
Common Stock
As of May 31,1995, there were 27,002,244 shares of Common Stock outstanding that were held of record
by approximately 69 stockholders. There will be 30,502,244 shares of Common Stock outstanding (assuming
no exercise of the Underwriters' over-allotment option and no exercise of outstanding options) after giving
effect to the sale of Common Stock offered to the public hereby.
The holders of Common Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of
Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available for the payment of dividends. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation
preferences of any outstanding shares of Preferred Stock. Holders of Common Stock have no preemptive
rights or rights to convert their Common Stock into any other securities. There aie no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable, and the shares of Common Stock to be issued upon completion of this offering will be fully
paid and non-assessable.
Preferred Stock
Pursuant to the Company's Amended and Restated Certificate of Incorporation, the Board of Directors
has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of Preferred Stock
in one or more series and to fix the designations, powers, preferences, privileges, and relative participating,
optional or special rights and the qualifications, limitations or restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be
greater than the rights of the Common Stock. The Board of Directors, without stockholder approval, can issue
Preferred Stock with voting, conversion or other rights that could adversely affect the voting power and other
rights of the holders of Common Stock. Preferred Stock could thus be issued quickly with terms calculated to
delay or prevent a change in control of the Company or make removal of management more difficult.
Additionally, the issuance of Preferred Stock may have the effect of decreasing the market price of the
Common Stock, and may adversely affect the voting and other rights of the holders of Common Stock. At
present, there are no shares of Preferred Stock outstanding and the Company has no plans to issue any of the
Preferred Stock.
Antitakeover Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware Law
Certificate of Incorporation and Bylaws
Upon the initial sale of the Common Stock offered hereby, the Company's Amended and Restated
Certificate of Incorporation will provide that the Company's Board of Directors be staggered into three classes
of directors. See "Management — Executive Officers and Directors." It will also provide that all stockholder
action must be effected at a duly called meeting of stockholders and not by a consent in writing. In addition,
the Company's Amended and Restated Bylaws will not permit stockholders of the Company to call a special
meeting of stockholders; only the Company's Chief Executive Officer or a majority of the members of the
Company's Board of Directors may call a special meeting of stockholders. These provisions of the Amended
49
and Restated Certificate of Incorporation and Amended and Restated Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control of the Company. Such provisions also may
have the effect of preventing changes in the management of the Company. See "Risk Factors — Effect of
Certain Charter Provisions; Antitakeover Effects of Certificate of Incorporation, Bylaws and Delaware Law."
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation Law ("Section 203")
which, subject to certain 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: (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction which 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 (iii) 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
6636% of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines business combination to include; (i) any merger or consolidation involving the
corporation and the interested stockholder; (ii) any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the corporation; (iii) subject to certain exceptions, any
transaction which results in the issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder, (iv) any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation beneficially owned by the interested
stockholder; or (v) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In general. Section 203 defines an
interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock
of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
Registration Rights
Pursuant to an agreement between the Company and the holders (the "Holders") of approximately
18,016,444 shares of Common Stock (the "Registrable Securities"), the Holders are entitled to certain rights
with respect to the registration of such shares under the Securities Act. If the Company proposes to register
any of its securities under the Securities Act, either for its own account or for the account of other security
Holders, exercising registration rights, such Holders are entitled to notice of such registration and are entitled
to include shares of such Common Stock therein. Additionally, Holders of the Registrable Securities are also
entitled to certain demand registration rights pursuant to which they may require the Company to file a
registration statement under the Securities Act at the Company's expense with respect to their shares of
Common Stock, and the Company is required to use its best efforts to effect such registration. Further, the
holders of such demand rights may require the Company to file additional registration statements on Form S-3
at the Company's expense. All of these registration rights are subject to certain conditions and limitations,
among them the right of the underwriters of an offering to limit the number of shares included in such
registration and the right of the Company not to effect a requested registration wilhin nine months following
an offering of the Company's securities, including the offering made hereby.
50
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the Company. Future sales of
substantial amounts of Common Stock in the public market could adversely affect market prices prevailing
from time to time. Furthermore, since only a limited number of shares will be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale (as described below), sales of
substantial amounts of Common Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an aggregate of 30,502,244 shares
of Common Stock, assuming no exercise of the Underwriters' over-allotment option and no exercise of
outstanding options. Of these shares, the 3,500,000 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless such shares are purchased by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining
27,002,244 shares of Common Stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the
public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k)
or 701 promulgated under the Securities Act, which rules are summarized below. As a result of the
contractual restrictions described below and the provisions of Rules 144, 144 (k) and 701, additional shares
will be available for sale in the public market as follows: (i) no shares will be eligible for immediate sale on the
date of this Prospectus, (u) 5,276,800 shares will be eligible for sale upon expiration of the lock-up agreements
180 days after the date of this Prospectus and (iii) 21,725,444 shares will be eligible for sale upon expiration of
their respective two-year holding periods.
Upon completion of this offering, the holders of 18,016,444 shares of Common Stock, or their transferees,
will be entitled to certain rights with respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock — Registration Rights." Registration of such shares under the Securities Act
would result in such shares becoming freely tradeable without restriction under the Securities Act (except for
shares purchased by Affiliates) immediately upon the effectiveness of such registration.
All officers, directors, stockholders and option holders of the Company have agreed not to sell, make any
short sale of, grant any option for the purchase of, or otherwise transfer or dispose of, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for Common Stock for a period of
180 days after the date of this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated currently has no plans to release any portion of the
securities subject to lock-up agreements. When determining whether or not to release shares from the lock-up
agreements, Morgan Stanley & Co. Incorporated will consider, among other factors, the stockholder's reasons
for requesting the release, the number of shares for which the release is being requested and market conditions
at the time.
In general, under Rule 144 as currently in effect, beginning 90 days after the; date of this Prospectus, a
person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least two
years (including the holding period of any prior owner except an affiliate) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: (i) one percent of the number of
shares of Common Stock then outstanding (which will equal approximately 305,022 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding the riling of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least three years (including the holding period of any
prior owner except an affiliate), is entitled to sell such shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144; therefore, unless otherwise restricted,
"144(k) shares" may therefore be sold immediately upon the completion of this offering. In general, under
Rule 701 of the Securities Act as currently in effect, any employee, consultant or advisor of the Company who
51
purchases shares from the Company in connection with a compensatory stock or option plan or other written
agreement is eligible to resell such shares 90 days after the effective date of this offering in reliance on
Rule 144, but without compliance with certain restrictions, including the holding period, contained in
Rule 144.
The Company intends to file a registration statement under the Securities Act covering shares of
Common Stock reserved for issuance under the Company's 1994 Plan, 1995 Plan, Director Plan and 1995
Purchase Plan. Based on the number of options outstanding and options and shares reserved for issuance at
May 31,1995 under all such plans, such registration statement would cover approximately 11,795,872 shares.
See "Management — Stock Plans." Such registration statement is expected to be filed and become effective
as soon as practicable after the effective date of this offering. Accordingly, shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable to affiliates, be available for sale
in the open market, unless such shares art subject to vesting restrictions with the Company or the lock-up
agreements described above. As of May 31, 1995, options to purchase 4,384,800 shares of Common Stock
were issued and outstanding under the 1994 Plan, and no options to purchase shares had been granted under
the Company's 1995 Plan, Director Plan, and 1995 Purchase Plan. Sec "Management— Director Compensation" and "— Stock Plans."
52
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following discussion concerns the material United States federal income and estate tax consequences
of the ownership and disposition of shares of Common Stock applicable to Non-U.S. Holders of such shares of
Common Stock. In general, a "Non-U.S. Holder" is any holder other than (i) a citizen or resident of the
United States, (ii) a corporation or partnership created or organized in the United States or under the laws of
the United States or any State or (iii) an estate or trust whose income is includiblt; in gross income for United
States federal income tax purposes regardless of its source. The discussion is based on current law, which is
subject to change retroactively or prospectively, and is for general information only. The discussion does not
address all aspects of federal income and estate taxation and does not address any aspects of state, local or
foreign tax laws. The discussion does not consider any specific facts or circumstances that may apply to a
particular Non-U.S. Holder (including the fact that in the case of a Non-U.S. Holder that is a partnership,
the United States tax consequences of holding and disposing of shares of Common Stock may be affected by
certain determinations made at the partner level). Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S. income and other tax consequences
of holding and disposing of shares of Common Stock.
Dividends. Dividends, if any (see "Dividend Policy"), paid to a Non-U.S. Holder generally will be
subject to United States withholding tax at a 30% rate (or a lower rate as may be prescribed by an applicable
tax treaty) unless the dividends are effectively connected with a trade or business of the Non-U.S. Holder
within the United States. Dividends effectively connected with a trade or business will generally not be subject
to withholding (if the Non-U.S. Holder properly files an executed United States Internal Revenue Service
("IRS") Form 4224 with the payor of the dividend) and generally will be subject to United States federal
income tax on a net income basis at regular graduated rates. In the case of a Non-U.S. Holder which is a
corporation, such effectively connected income also may be subject to the branch profits tax (which is
generally imposed on a foreign corporation on the repatriation from the United States of effectively connected
earnings and profits). The branch profits tax may not apply if the recipient is a qualified resident of certain
countries with which the United States has an income tax treaty. To determine the applicability of a tax treaty
providing for a lower rate of withholding, dividends paid to a stockholder's address of record in a foreign
country are presumed, under the current IRS position, to be paid to a resident of that country, unless the payor
has knowledge that such presumption is not warranted or an applicable tax treaty (or United States Treasury
Regulations thereunder) requires some other method for determining a Noh-U.S. Holder's residence.
However, under proposed U.S. Treasury regulations, which have not yet been put info effect, to claim the
benefits of a tax treaty, a Non-U.S. Holder of Common Stock would be required to file certain forms
accompanied by a statement from a competent authority of the treaty country.
Sale of Common Stock. Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares of Common Stock unless (i) the
gain is effectively connected with a trade or business carried on by the Non-U.S. Holder with the United
States (in which case the branch profits tax may apply); (ii) the Non-U.S. Holder is an individual who holds
the shares of Common Stock as a capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition and to whom such gain is United States source; (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain former United States citizens or
residents; or (iv) the Company is or has been a "U.S. real property holding corporation" for federal income
tax purposes (which the Company does not believe that it is or is likely to become) at any time during the five
year period ending on the date of disposition (or such shorter period that such shares were held) and, subject
to certain exceptions, the Non-U.S. Holder held, directly or indirectly, more than 5% of the Common Stock.
Estate Tax. Shares of Common Stock owned or treated as owned by an individual who is not a citizen or
resident (as specifically defined for United States federal estate tax purposes) of the United States at the time
of death will be includible in the individual's gross estate for United States federal estate tax purposes, unless
an applicable tax treaty provides otherwise, and may be subject to United States federal estate tax.
53
J /
Backup Withholding and Information Reporting
Dividends. The Company must report annually to the IRS and to each Non-U.S. Holder the amount of
dividends paid to and the tax withheld, if any, with respect to such holder. These information reporting
requirements apply regardless of whether withholding was reduced by an applicable tax treaty. Copies of these
information returns may also be available under the provisions of a specific treaty or agreement with the tax
authorities in the country in which the Non-U.S. Holder resides. Dividends that are subject to United States
withholding tax at the 30% statutory rate or at a reduced tax treaty rate and dividends that are effectively
connected with the conduct of a trade or business in the Untied States (if certain certification and disclosure
requirements are met) are exempt from backup withholding of U.S. federal income tax. In general, backup
withholding at a rate of 31% and information reporting will apply to other dividends paid on shares of Common
Stock to holders that are not "exempt recipients" and fail to provide in the manner required certain identifying
information (such as the holder's name, address and taxpayer identification number). Generally, individuals
are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.
Disposition of Common Stock. The payment of the proceeds from the disposition of shares of Common
Stock through the United States office of a broker will be subject to information reporting and backup
withholding unless the holder, under penalties of perjury, certifies, among other things, its status as a NonU.S. Holder, or otherwise establishes an exemption. Generally, the payment of the proceeds from the
disposition of shares of Common Stock to or through a non-U.S. office of a bioker will not be subject to
backup withholding and will not be subject to information reporting. In the case of tbe payment of proceeds
from the disposition of shares of Common Stock through a non-U.S. office of a broker that is a U.S. person or
a "U.S.-related person," existing regulations require information reporting (but not backup withholding) on
the payment unless the broker receives a statement from the owner, signed under penalties of perjury,
certifying, among other things, its status as a Non-U.S. Holder, or the broker has documentary evidence in its
files that the owner is a Non-U.S. Holder and the broker has no actual knowledge to the contrary. For tax
purpose, a "U.S.-related person" is (i) a "controlled foreign corporation" for United States federal income tax
purposes of (ii) a foreign person 50% or more of whose gross income from all sources for the three year period
ending with the close of its taxable year preceding the payment (or for such part of the period that the broker
has been in existence) is derived form activities that are effectively connected with the conduct of a United
States trade or business.
Any amounts withheld from a payment to a Non-U.S. Holder under the backup withholding rules will be
allowed as a credit against such holder's United States federal income tax liability and may entitle such holder
to a refund, provided that the required information is furnished to the IRS. Non-U.S Holders should consult
their tax advisors regarding the application of these rules to their particular situations, the availability of an
exemption therefrom and the procedures for obtaining such an exemption, if available.
54
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting Agreement dated the date
hereof, the U.S. Underwriters named below, for whom Morgan Stanley & Co. Incorporated and Hambrecht &
Quist LLC are serving as U.S. Representatives, have severally agreed to purchase, and the Company has
agreed to sell 3,000,000 shares of the Company's Conunon Stock, and the International Underwriters named
below, for whom Morgan Stanley & Co. International Limited and Hambrecht & Quist LLC are serving as
International Representatives (collectively with the U.S. Representatives, the "Representatives"), have
severally agreed to purchase, and tbe Company has agreed to sell 500,000 shares of the Company's Common
Stock, which in the aggregate equals the number of shares set forth opposite the name of such Underwriters
below.
Number
of Shares
N»me
U.S. Underwriters:
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Subtotal
3,000,000
International Underwriters:
Morgan Stanley & Co. International Limited
Hambrecht & Quist LLC
Subtotal
500,000
Total
3,500,000
The U.S. Underwriters and the International Underwriters are collectively referred to as the "Underwriters." The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and
accept delivery of the shares of Common Stock offered hereby are subject to the approval of certain legal
matters by counsel and to certain other conditions, including the conditions that no stop order suspending the
effectiveness of tbe Registration Statement is in effect and no proceedings for such purpose are pending before
or threatened by the Securities and Exchange Commission and that there has been no material adverse change
or any development involving a prospective material adverse change in the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, from that set forth in the
Registration Statement. The Underwriters are obligated to take and pay for all of the shares of Common Stock
offered hereby (other than those covered by the over-allotment option described below) if any are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each U.S. Underwriter has
represented and agreed that, with certain exceptions set forth below, (a) it is not purchasing any U.S. Shares
(as defined below) for the account of anyone other than a United States or Canadian Person (as defined
below) and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any U.S. Shares or
distribute this Prospectus outside the United States or Canada or to anyone other than a United States or
Canadian Person. Pursuant to the Agreement Between U.S. and International Underwriters, each International Underwriter has represented and agreed that, with certain exceptions set forth below, (a) it is not
purchasing any International Shares (as defined below) for the account of any United States or Canadian
Person and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any International
Shares or distribute this Prospectus within the United States or Canada or to any United States or Canadian
Person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions
specified in the Agreement Between U.S. and International Underwriters. With respect to Hambrecht &
Quist LLC, the foregoing representations or agreements (i) made by it in its capacity as a U.S. Underwriter
shall apply only to shares of Common Stock purchased by it in its capacity as a U.S. Underwriter, (ii) made
by it in its capacity as an International Underwriter shall apply only to shares of Common Stock purchased by
55
it in its capacity as an International Underwriter and (iii) shall not restrict iis ability to distribute this
Prospectus to any person. As used herein, "United States or Canadian Person" means any national or resident
of the United States or Canada or any corporation, pension, profit-sharing or other trust or other entity
organized under the laws of the United States or Canada or of any political subdhision thereof (other than a
branch located outside of the United States and Canada of any United States or Canadian Person) and
includes any United States or Canadian branch of a person who is not otherwise a United States or Canadian
Person, and "United States" means the United States of America, its territories, its possessions and all areas
subject to its jurisdiction. All shares of Common Stock to be offered by the U.S. Underwriters and
International Underwriters under the Underwriting Agreement are referred to herein as the "U.S. Shares" and
the "International Shares," respectively.
Pursuant to the Agreement Between U.S. and International Underwriters, sales may be made between
the U.S. Underwriters and the International Underwriters of any number of shares of Common Stock to be
purchased pursuant to the Underwriting Agreement as may be mutually agreed. The per share price and
currency settlement of any shares of Common Stock so sold shall be the public offering price set forth on the
cover page hereof, in United States dollars, less an amount not greater than the per share amount of the
concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each U.S. Underwriter has
represented that it has not offered or sold, and has agreed not to offer or sell, any shares of Common Stock,
directly or indirectly, in Canada in contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of such shares in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer
is made. Each U.S. Underwriter has further agreed to send to any dealer who purchases from it any shares of
Common Stock a notice stating in substance that, by purchasing such shares, such dealer represents and
agrees that it has not offered or sold, and will not offer or sell, directly or indirectly, any of such shares in
Canada in contravention of the securities laws of Canada or any province or territory thereof and that any offer
of shares of Common Stock in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is made, and that such dealer will
deliver to any other dealer to whom it sells any of such shares a notice to the foiegoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each International Underwriter has represented that (i) it has not offered or sold and will not offer or sell any shares of Common Stock
in the United Kingdom by means of any document (other than to persons whose ordinary business it is to buy
and sell securities or debentures, whether as principal or agent, or in circumstances that do not constitute an
offer to the public within the meaning of the Companies Act 1985), (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to
such shares in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in connection with the issue of
such shares, other than any document which consists of or of part of listing particulars, supplementary listing
particulars or any other document required or permitted to be published by listing rules under Part IV of the
Financial Services Act 1986, to any person of a kind described in Article 9(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1988, or to any person to whom the document may
otherwise lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each International Underwriter has represented and agreed that it has not offered or sold, and will not offer or sell, directly or indirectly,
in Japan or to or for the account of any resident thereof, any shares of Common Stock acquired in connection
with this offering, except for offers or sales to Japanese International Underwriters or dealers and except
pursuant to any exemption from the registration requirements of the Securities and Exchange Law of Japan.
Each International Underwriter has further agreed to send to any dealer who purchases from it any of such
shares of Common Stock a notice stating in substance that such dealer may not offer or sell any of such shares,
directly or indirectly, in Japan or to or for the account of any resident thereof, except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law of Japan, and that such
dealer will send to any other dealer to whom it sells any of such shares a notice to the foregoing effect.
56
The Underwriters propose to offer part of the shares of Common Stock offered hereby directly to the
public at the public offering price set forth on the cover page hereof and part to certain dealers at a price which
represents a concession not in excess of $
per share under the public offering price. The Underwriters
may allow, and such dealers may re-allow, a concession not in excess of $
per share to other
Underwriters or to certain other dealers.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S. Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an additional 525,000 shares of
Common Stock at the public offering price set forth on the cover page hereof, less underwriting discounts and
commissions. The U.S. Underwriters may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Common Stock offered hereby. To the extent such
option is exercised, each U.S. Underwriter will become obligated, subject to ceitain conditions, to purchase
approximately the same percentage of such additional shares as the number set forth next to such U.S.
Underwriters1 name in the preceding table bears to the total number of shares of Common Stock offered
hereby to the U.S. Underwriters.
The Representatives have informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.
The Company and the Underwriters have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
See "Shares Eligible for Future Sale" for a description of certain arrangements by which all officers,
directors, stockholders and option holders of the Company have agreed not to sell or otherwise dispose of
Common Stock or convertible securities of tbe Company for up to 180 days after the date of this Prospectus
without the prior consent of Morgan Stanley & Co. Incorporated. The Company has agreed in the
Underwriting Agreement that it will not, without the prior written consent of Morgan Stanley & Co.
Incorporated, offer, sell, contract to sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable for Common Stock for a period of 180 days aftei the date of this Prospectus,
except under certain circumstances.
The Company and the Underwriters have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
Pricing of tbe Offering
Prior to this offering, there has been no public market for the Company's Common Stock. The initial
public offering price will be determined by negotiation between the Company and the Representatives. Among
the factors to be considered in determining the initial public offering price will be the future prospects of the
Company and its industry in general, sales, earnings and certain other financial and operating information of
the Company in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities similar to those of the
Company. The estimated initial public offering price range set forth on the cover page of this Preliminary
Prospectus is subject to change as a result of market conditions and other factors.
57
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road, Palo Alto, California 94304. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Morrison & Foerster, 755 Page Mill Road, Palo Alto, California 94304.
EXPERTS
The consolidated financial statements and schedule of the Company at December 31, 1994 and for the
period from April 4, 1994 (inception) to December 31, 1994 appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report
given upon the authority of such film as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Certain items are omitted in accordance with
the rules and regulations of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and the exhibits and
schedules filed therewith. Statements contained in this Prospectus as to the contents of any contract or any
other document referred to are not necessarily complete, and in each instance refeience is made to the copy of
such contract or other document filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional offices located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048, and copies of all or
any part of the Registration Statement may be obtained from such office upon the payment of the fees
prescribed by the Commission.
NETSCAPE COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-l
F-2
F-3
F-4
F-5
F-6
F-7
REPORT OF ERNST & YOUNG ULP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Netscape Communications Corporation
We have audiied the accompanying consolidated balance sheet of Netscape Communications Corporation as
of December 31, 1994 and the related consolidated statements of operations, stockholders' equity (deficit) and
cash flows for the period from inception (April 4, 1994) to December 31, 1994. 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 audit.
We conducted our audit 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 mismtement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Netscape Communications Corporation at December 31, 1994, and the
consolidated results of its operations and its cash flows for the period from inception (April 4, 1994) to
December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
February 22, 1995,
except for Note 10,
as to which the date is
June 19. 1995
The foregoing report is in the form that will be signed upon completion of the two-for-one stock split described
in Note 10 to the consolidated financial statements.
•_,
Palo Alto. California
June 22. 1995
(/
F-2
64
NETSCAPE COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1994
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful
accounts of $56,153 in 1995
Other current assets
Total current assets
Property and equipment, net
Deposits and other assets
$ 3,243,510
701,649
67,284
4,012,443
2,447,098
699,100
$ 7,158,641
March 31,
1995
(Uaaudlted)
$
4,851,848
2,751,478
41,207
7,644,533
3,857,639
810,351
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$ 855,068
$
735,571
Accrued compensation and related liabilities
527,340
622,176
Other accrued liabilities
667,503
430,548
Deferred revenues
2,575,145
7,244,626
Current portion of long-term obligations
,
725,000
725,000
Installment notes payable
—
473,675
Total current liabilities
5,350,056
10,231,396
Long-term obligations
725,000
725,000
Installment notes payable
—
1,627,411
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value; issuable in series;
7,608,222 shares authorized, 7,008,222 shares issued
and outstanding (aggregate liquidation preference of
$9,541,999) (5,000,000 shares authorized, none
issued and outstanding, pro forma)
701
701
Common stock, $0.0001 par value; 20,000,000 shares
authorized; 4,511,000 shares in 1994 and 8,759,800
shares in 1995 issued and outstanding (100,000,000
shares authorized, 22,776,244 shares issued and
outstanding, pro forma)
451
876
Additional paid-in capital
9,552,278
12,612,953
Deferred compensation
—
(1,717,146)
Accumulated deficit
(8,469,845)
(11,168,868)
Total stockholders' equity (deficit)
1,083,585
(271,484)
$ 7,158,641
See accompanying notes.
F-3
Pro Forma
Stockholders'
Equity
March 31,
IW5
(Unaudited)
$ 12,312,523
2,278
12,612,252
(1,717,146)
(11,168,868)
$ (271,484)
NETSCAPE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Inception
(April 4,1994) to
December 31,
1994
Three Months
Elded
March 31.
199$
(Unaudited)
Revenues:
Product revenues
Service revenues
Total revenues
Cost of revenues:
Cost of product
revenues
Cost of sendee revenues
Total cost of revenues
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Property rights agreement and related charges
Total operating expenses
Operating loss
Interest income
Interest expense
Net loss
Net loss per share
Shares used in computing net loss per share
See accompanying notes.
F-4
S
378,490
317,381
695,871
114,777
104,313
219,090
476,781
2,031,986
2813,689
1,669,193
2.486,688
9,001,556
(8,524,775)
55,238
(308)
$ (8,469,845)
$
(0.25)
33,481,438
$
4,496,031
241,560
4,737,591
273,169
61,732
334,901
4,402,690
1,981,292
2,897,915
1,740,524
500,000
7,119,731
(2,717,041)
45,074
(27,056)
$ (2,699,023)
$
(0.08)
34.255,882
NETSCAPE COMMUNICATIONS CORPORATION
CONSOUDATED STATEMENTS OF STOCKHOLDERS* EQUITY {DEFICIT)
Preferred Stock
Shares
Amoaat
Issuance of common stock to founders and
employees for cash
Issuance of Series A convertible preferred
ilock at $0.75 per share for cash and
technology
Issuance of Series B convertible preferred
stock at $2.25 per share for cash, net of
issuance costs of $33,933
Exercise of common stock options
Net loss
Balance at December 31, 1994
Issuance of common shares upon exercise of
Mock options, net of repurchases
(unaudited)
Deferred compensation related to grant of
stock options (unaudited)
Amortization of deferred compensation
(unaudited)
Net loss (unaudited)
Balance at March 31, 1995 (unaudited)
—
$ —
Common Slock
Shares
3,750,000
Additional
Paid-in
Ctplttl
$375
16.300
—
3.112,835
4,151,000
415
2,857,222
—
—
7,008,222
286
—
—
701
761,000
76
6.394,531
28,612
4,511,000
~45T
9.552,278
—
4,248,800
425
482,017
2.578.6J8
-
7,008,223
$701
8,759,800
$876
$12,612,953
Total
Stockholders'
Deferred
Compensation
S
Accumulated
Dtflclt
—
(Defidit)
$
16,675
3.113.250
—
—
~
(8,469,845)
(8,469.845)
6.394.817
28.688
(8.469.845)
1,083.585
-
482.442
(2,578,658)
861,512
5(1,717,146)
(2.699.023)
1(11,168,868)
See accompanying notes.
F-5
6/
NETSCAPE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Inception
(April 4, 1994) to
December 31,
1994
Cash flows from operating actirities
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Amortization of deferred compensation
Depreciation and amortization
Changes in assets and liabilities:
Accounts receivable
Other current assets
Accounts payable
Accrued compensation and related liabilities
Other accrued liabilities
Deferred revenues
Long-term obligations
Net cash (used in) provided by operating activities
Cash flows from investing activities
Capital expenditures
Increase in deposits and other assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issuance of installment notes payable
Proceeds from issuance of preferred stock, net
Proceeds from issuance of common stock, net
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
See accompanying notes.
F-6
$(8,469,845)
215,868
Three Months
Ended
Marcb 31,1995
(Unaudited)
$(2,699,023)
861,512
256,346
(701,649)
(67,284)
855,068
527,340
667,503
2,575,145
1,450,000
(2,947,854)
(2,049,829)
26,077
(119,497)
94,836
(236,955)
4,669,481
(2,662,966)
(654,100)
(3,317,066)
(1,666,887)
(111,251)
(1,778,138)
—
9,463,067
45,363
9,508,430
3,243,510
—
$ 3,243,510
802,948
2,101,086
482,442
2,583,528
1,608,338
3,243,510
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOUDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The Company
Netscape Communications Corporation ("Netscape" or the "Company") provides open client, server
and integrated applications software that enables information exchange and commerce over the Internet and
private Internet Protocol networks. The Company was formed in April 1994 and commenced shipment of its
initial products in December 1994.
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary. All significant intercompany balances and transactions have been eliminated.
Interim Financial Information
The financial information at March 31, 1995 and for the three months ended March 31, 1995 are
unaudited but include all adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position at such date and the operating results and
cash flows for those periods. The Company was formed in April 1994, thertibre, there is no financial
information prior to that date. Results of the three months ended March 31, 1995 are not necessarily
indicative of results for the entire year.
Revenue Recognition
The Company's product revenues are derived from product licensing fees, while service revenues are
derived from maintenance support, training and consulting. Product revenues are recognized upon delivery if
no significant vendor obligations remain and collection of the resulting receivable is deemed probable. Service
revenues from customer maintenance fees for ongoing customer support and product updates are recognized
ratably over the term of the maintenance period which is typically 12 months. Payments for maintenance fees
are generally made in advance and are nonrefundable. Service revenues from training and consulting are
recognized when the services are performed. Costs related to insignificant obligations, primarily telephone
support, are accrued upon shipment and included in cost of goods sold.
Cask and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to
be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market
investments.
The Company has adopted Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." At December 31, 1994 and March 31, 1995, the
Company had no investments in debt or equity securities.
Depreciation and Amortization
Depreciation is provided using the straight-line method over the estimated useful lives of the assets,
generally three to five years. Leasehold improvements are amortized over the lesser of the term of the lease or
the estimated useful life of the asset.
F-7
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers' financial condition and generally does
not require collateral. The Company maintains reserves for credit losses, and such losses have been within
management's expectations.
Research and Development
Research and development expenditures are charged to operations as incurred. Statement of Financial
Accounting Standard No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," requires capitalization of certain software development costs subsequent to the
establishment of technological feasibility.
Based on the Company's product development process, technological feasibility is established upon
completion of a working model. Costs incurred by the Company between completion of the working model
and the point at which the product is ready for general release have been insignificant. All research and
development costs have been expensed.
Per Share Amounts
Net loss per share is computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins and Staff Policy, such computations include all common and common equivalent shares
issued within 12 months of the filing date as if they were outstanding for all periods presented using the
treasury stock method. Common equivalent shares consist of the incremental common shares issuable upon
conversion of the convertible preferred stock (using the if-converted method) and shares issuable upon the
exercise of stock options (using the treasury stock method).
2, Property and Equipment
Property and equipment, at cost, consists of the following:
Computers and equipment
Furniture and fixtures
Leasehold improvements
Less accumulated depreciation
December 31,
1994
Much 31,
1995
(Uuudited)
$2,169,537
486,439
6,990
2,662,966
215,868
$2,447,098
$3,139,026
933,016
257,811
4,329,853
472,214
$3,857,639
F-8
70
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Leases
The Company leases its facilities and certain other equipment under operating lease agreements expiring
through December 31, 2001. Future minimum payments as of December 31, 1994 under these leases, net of
sublease payments, are as follows:
1995
1996
1997
1998
1999 and thereafter
S
815,750
1,480,860
1,480,860
1,588,720
4,864,227
$10,230,417
Rent expense for the period from inception (April 4, 1994) to December 31, 1994 was $59,287, net of
sublease payments.
4. Installment Notes Payable
On March 3, 1995, the Company entered into a senior loan agreement for total borrowings not to exceed
$2,200,000. Borrowings made under the agreement are secured by certain assets of the Company. The notes
are payable in 36 monthly installments. Maturities subsequent to March 31, 1995 are as follows: $384,408 in
1995; $575,301 in 1996; $682,982 in 1997 and $458,395 in 1998.
5. Property Rights Agreement
On December 20, 1994, the Company entered into an agreement with the University of Illinois (the
"University") and Spyglass, Inc. ("Spyglass"). Under the terms of the agreement, the University and
Spyglass agreed not to assert any claim of trademark infringement arising out of the Company's prior use of
the word "Mosaic" or other symbols or words used by the Company to market itself or its products. The
University and Spyglass further agreed not to assert against the Company any claim of copyright infringement,
trade secret misappropriation or related claims based on the Company's use of former University employees in
the development of the Company's present and future products. As consideration for these covenants not to
assert, the Company agreed to make certain payments to the University over & two year period. The full
amount of this agreement and associated costs, including fees for experts and professional services, as well as
trademark search and other costs, was expensed in 1994 and was included as "Property rights agreement and
related charges" on the consolidated statements of operations. Certain amounts become payable to the
University in 1995 and 1996, and have been recorded as long-term obligations.
If over the term of the agreement (two years from December 21, 1994) the Company enters into a
license, distribution, remarketing or sublicensing agreement with certain specific: companies, the Company
may pay up to $1.3 million to the University. During the three months ended March 31, 1995, the Company
made two such additional payments totaling $500,000. In addition, if over the terni of the agreement any of
these companies acquires a controlling interest in the Company, there is a per unit royalty paid to the
University over the remaining term.
F-9
/ i
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stockholders'Equity
Preferred Stock
Preferred stock as of December 31, 1994 and March 31, 1995 consists of the following convertible
preferred stock, par value $0.0001 per share:
Series A
Series B
Shares
Authorised
Shares Issued
»nd Outstanding
Liquidation
Preference
4,151,000
3,457,222
7,608,222
4,151,000
2,857,222
7,008,222
$3,113,250
6,428,749
$9,541,999
Each share of Series A and B preferred stock is convertible into common stoct at the option of the holder
on a two-for-one basis, subject to certain adjustments. Each series of preferred stock will automatically
convert upon the earliest of the closing date of an underwritten public offering tf the Company's common
stock with aggregate proceeds of more than $10,000,000 or the date of written consent of the holders of a
majority of the outstanding shares of the preferred stock. The Company has resei-ved a sufficient number of
shares of common stock to permit conversion of the preferred stock in accordance with its terms.
Holders of the preferred stock are entitled to one vote for each share of common stock into which such
shares may be converted. Each share of Series A and B preferred stock entitles the holder to receive
noncumulative dividends, if and when declared by the board of directors, prior to any dividend paid on the
common stock. Dividends, if any, on preferred stock shall be declared at an annual rate of $0.0675 per share
for Series A preferred stock and $0.20 per share for Series B preferred stock. As of December 31, 1994, no
dividends have been declared.
In the event of liquidation, the preferred stock has preference over the common stock in the amounts of
$0.75 and $2.25 per share for the Series A and B preferred stock, respectively, plus declared but unpaid
dividends.
Common Stock
All shares of common stock issued by the Company at December 31, 1994 were subject to stock
repurchase agreements whereby the Company has the option to repurchase the unvested shares upon
termination of employment for any reason, with or without cause, at the original price paid for the shares.
Generally, the stock vests over 50 months from the date of issuance.
In addition, the Company has the right of first refusal upon sale or transfer of shares of common stock.
This right will expire upon the Company's initial public offering.
1994 Stock Option Plan
During 1994, the Company adopted the 1994 Stock Option Plan under which incentive stock options or
nonqualified stock options to purchase common stock may be granted to employees and certain consultants or
independent contractors. Under the Plan, options to purchase common stock may be granted at prices not less
than 85% of the fair value on the date of grant (110% of fair value in certain instances), as determined by the
board of directors. Options granted are immediately exercisable and the resulting shares issued to employees
under the Plan are subject to repurchase by the Company, at the discretion of the Company, upon the
individual's cessation of service prior to vesting in the shares at the original purchase price. The right expires as
determined by the board of directors, generally over a 50-month period.
F-10
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of activity under the option portion of the Plan is as follows:
Available
for
Grant
Shares reserved
Options granted
Options cancelled
Options exercised
Balance at December 31, 1994
Shares reserved (unaudited)
Options granted (unaudited)
Options cancelled (unaudited)
Options exercised (unaudited)
Balance at March 31, 1995 (unaudited)
5,729,232
(2,921,200)
300.000
—
3,108,032
1,784,006
(2,598,600)
71,200
—
2,364,638
Optloas Outofndlng
Number of
Price Per
Shares
Shire
—
2,921,200
(300,000)
(761,000)
l,860,2(»
—
2,598,600
(71,200)
(591,800)
3,795,8(10
—
$0.03840.1125
$0,038
$0.038-$0.M25
$0.038-$0.1125
—
$0.1125
$O.038-$O.l 125
$0.038-$0.U25
$O.O38-$O.1125
In the quarter ended March 31, 199S, the Company granted an option to purchase 4,000,000 shares of
common stock outside of the Plan. The exercise price was $0.1125 per share. The options were all immediately
exercisable with 50% subject to repurchase at the option of the Company upon the individual's cessation of
service prior to vesting in the shares at the original purchase price. The stock vests over a 50-month period. In
the quarter ended March 31, 1995, the option to purchase 4,000,000 shares of common stock was exercised.
At December 31, 1994, no options were vested and 3,947,000 shares of common stock were subject to
repurchase at the option of the Company at the original purchase price. At March 31, 1995, options for
167,600 shares were vested and 5,904,000 shares were subject to repurchase. In the quarter ended March 31,
1995, the Company repurchased 343,000 shares of common stock at the original exercise price.
The Company has recorded deferred compensation expense of $2,578,658 for the difference between the
grant price and the deemed fair value of certain of the Company's common stock options granted in 199S. This
amount is being amortized over the vesting period of the individual options, generally a 50-month period.
Compensation expense recognized in the quarter ended March 31, 1995 totaled $861,512.
Unaudited Pro Forma Stockholders' Equity
Unaudited pro forma stockholders' equity at March 31, 1995 gives effect to & two-for-one conversion of
7,008,222 shares of preferred stock, into common stock upon the close of the Company's initial public offering
of shares of its common stock.
7. Income Taxes
As of December 31, 1994, the Company had federal net operating loss carryforwards of approximately
$7,000,000. The Company also had federal research and development tax credit carryforwards of approximately $90,000. The net operating loss and credit carryforwards will expire in 2009 if not utilized. The
Company also has state net operating loss carryforwards of approximately $5,000,000 whicb will expire in 2002
if not utilized.
Deferred income taxes reflect tbe net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting and the amount used for income tax purposes. As of
December 31, 1994, the Company had deferred tax assets of approximately $3,500,000 relating primarily to
net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance.
F-ll
NETSCAPE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to
the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions.
8. Benefit Plan
The Company maintains a 401 (k) retirement savings plan for its full time employees. Each participant in
the Plan may elect to contribute from 1% to 15% of his or her annual compensation to the Plan. The
Company, at its discretion, may make contributions to the Plan, however has made none through March 31,
1995.
9. Segment Information
The Company conducts its business within one industry segment. Two customers accounted for 45% and
36% of total revenues in the period from inception (April 4, 1994) through December 31, 1994. Two
customers accounted for 14% and 9% of total revenues in the quarter ended March 31, 1995.
Revenues from customers outside North America were less than 10% of total revenues in the period from
inception (April 4, 1994) through December 31, 1994 and were approximately 10% of total revenues in the
quarter ended March 31, 1995.
10. Subsequent Events
In April 1995, the Company issued 2,000,000 shares of Series C convertible preferred stock to investors
at $9.00 per share, resulting in net cash proceeds of approximately $17,300,000 to the Company. In
conjunction with the issuance, the Company increased the number of authorized preferred shares to
11,286,222 of which 2,278,000 have been designated Series C and 2,000,000 have been undesignated, and
increased the number of authorized common shares to 30,000,000. Holders of Scries C preferred stock are
entitled to noncumulative dividends of S0.81 per share if and when declared by the board of directors and in
advance of any distribution to Series A or B preferred stock or common stock. Each share of Series C
preferred stock is convertible into common stock at the option of the holder on a tv/o-for-one basis, subject to
certain adjustments. Each series of preferred stock will automatically convert upon the earliest of the closing
date of an underwritten public offering of the Company's common stock with aggregate proceeds of more than
$15,000,000 at a public offering price of not less than $6.00 per share until April 5, 1996 or $7.50 after April 5,
1996.
On June 19, 1995, the board of directors authorized management of the Company to file a Registration
Statement with the Securities and Exchange Commission permitting the Company to sell shares of its
common stock to the public. In addition, the Company's board of directors authorized an increase in the
number of authorized common and preferred shares to 100,000,000 and 5,000,000 shares, respectively. In
addition, the Company's board of directors, subject to stockholders' approval, initiated a two-for-one stock
split. Accordingly, all the common share and per share data has been adjusted to reflect this change. At the
same meeting, the Company's board of directors, subject to stockholders' approval, adopted the 1995
Employee Stock Purchase Plan (the "Purchase Plan") which authorizes the issuance of 1,000,000 shares of
common stock. Shares may be purchased under the Purchase Plan at 85% of the lesser of the fair market value
of the common stock on the grant or purchase date. In addition, the Company's board of directors, subject to
stockholders' approval, adopted the 1995 Stock Option Plan and Directors Stock Option Plan which
authorized the issuance of 4,500,000 shares and 100,000 shares of common stock, respectively.
F-12
/4
NETSCAPE
/5
[ALTERNATIVE PAGE FOR INTERNATIONAL
PROSPECTUS (Subject to Completion)
Issued June 23, 199S
PROSPECTUS]
3,500,000 Shares
NETSCAPE
COMMON STOCK
Of the 3,500,000 Shan* of Common Stock offered, 500,000 Share* are being offend ouulde of the United State* and Canada by the
International Underwriter* and 3,000,000 Share* an being offered in the United State* and Canada by the U.S. Underwriter*.
See "Underwriter*." All of the Shan* of Common Stock offered hereby are being mold by the Company. Prior to thU
offering, then hat been MO public market for the Common Stock of the Company, It U currently etilmoted AM
(he initial public offering price will be between $ and t per (fare. See "Underwriter*" for a
dUcuulon of thefiuslor*to be contldertd in determining the initial public offering price.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS'
COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE $
Price to
Public
A SHARE
Underwriting
Dacounutmd
Commi**ion*(l)
Proceed* to
Company(2)
s
Per Share
Total (3) .
(1) The Company has agreed to indemnify the International Underwriters and U.S. Underwriters against certain
liabilities, including liabilities under the Securities -Met of 1933, as amended.
(&) Before deducting expenses payable by the Company estimated at $760,000.
(3) The Company has granted the U.S. Underwriters an option, exereisable within 30 days of the date hereof, to
purchase up to an aggregate of 626,000 additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions and proceeds to Company will be /
,
$
and <$
, respectively. See "Underwriters."
The Shares are offered, subject to prior sale, when, as and if accepted by the Underwriters
named herein and subject to approval of certain legal matters by Morrison $ Foerster, counsel
for the Underwriters. It is expected that delivery of certificates for the Shares will be made on
or about
, 1996, at the office of Morgan Stanley § Co. Incorporated, New York, JV.Y.,
against payment therefor in New York funds.
MORGAN STANLEY & CO.
International
, 1995
HAMBRBCHT & QUIST
/6
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
No person is authorized In connection with any offering made hereby to give any information or to make
any representation other than as contained in this Prospectus, and, if given or made, such information or
representation must not be relied upon as baring been authorized by the Company or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to buy by any person in any
jurisdiction in which it is unlawful for such person to make such an offering or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any circumstances Imply that the
information contained herein Is correct as of any date subsequent to the date hereof.
No action has been or will be taken In any jurisdiction by the Company or by any Underwriter that
would permit a public offering of the Common Stock or possession or distribution of this Prospectus in any
jurisdiction where action for that purpose Is required, other than in the United States. Persons into whose
possession this Prospectus comes are required by the Company and the Underwriters to inform themselves
about, and to observe any restrictions as to, the offering of the Common Stock and the distribution of this
Prospectus.
Until
, 1995 (25 days after the commencement of this offering), all dealers effecting
transactions in the Common Stock, whether or not participating In this distribution, may be required to
deliver a Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS
Prospectus Summary
The Company
Risk Factors
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Business
Management
Certain Transactions
Principal Stockholders
Description of Capital Stock
_
Shares Eligible for Future Sale
Certain United States Federal Tax Considerations for Non-U.S. Holders of Common Stock
Underwriters
Legal Matters
Experts
Additional Information
Index to Consolidated Financial Statements
[
\
\
\'m
\\
[\[\
[[[
\\\\
3
4
5
13
13
14
15
16
17
22
40
47
48
49
51
53
55
58
58
58
F-l
The Company intends to furnish to its stockholders annual reports containing consolidated financial
statements audited by an independent public accounting firm and quarterly reports for the first three quarters
of each fiscal year containing interim unaudited financial information.
The Company has applied for registration of the following trademarks: Netscape, Netscape Navigator
and the Company's logo. This Prospectus also includes product names and other tiade names and trademarks
of the Company and of other organizations.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
Except as otherwise noted herein, all information in this Prospectus assumes (i) a two-for-one stock split
of the Common Stock. (U) the conversion of each outstanding share of Preferred Stock into two shares of
Common Stock, which will occur automatically upon the closing of the offering, (HI) an increase in the
authorized number of shares of Common Stock from 30,000,000 to 100.000,000, (iv) an increase in the
authorized number of shares of undesignated Preferred Stock from 2,000,000 to 5.000.000, and (iv) no
exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriters."
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions,
payable by the Registrant in connection with the sale of Common Stock being iegistered. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the Nasdaq National Market Listing Fee.
Amount
To Be
Paid
SEC registration fee
NASD filing fee
Nasdaq National Market listing fee
Printing and engraving expenses
Legal fees and expenses
Accounting fees and expenses
Blue Sky qualification fees and expenses
Transfer agent and registrar fees
Miscellaneous fees
....
Total
$ 19,431
6,135
25,125
*
*
*
*
*
*
$750,000
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, the Registrant's Certificate of
Incorporation includes a provision that eliminates the personal liability of its directors for monetary damages
for breach or alleged breach of their duty of care. In addition, as permitted by Section 145 of the Delaware
General Corporation Law, the Bylaws of the Registrant provide that: (i) the Registrant is required to
indemnify its directors and executive officers and persons serving in such capacities in other business
enterprises (including, for example, subsidiaries of the Registrant) at the Registrant's request, to the fullest
extent permitted by Delaware law, including in those circumstances in which indemnification would otherwise
be discretionary, (ii) the Registrant may, in its discretion, indemnify employees and agents in those
circumstances where indemnification is not required bylaw, (iii) the Registrant is required to advance
expenses, as incurred, to its directors and executive officers in connection with defending a proceeding (except
that it is not required to advance expenses to a person against whom the Registrant brings a claim for breach
of the duty of loyalty, failure to act in good faith, intentional misconduct, knowing violation of law or deriving
an improper personal benefit; (iv) the rights conferred in the Bylaws are not exclusive, and the Registrant is
authorized to enter into indemnification agreements with its directors, executive officers and employees; and
(v) the Registrant may not retroactively amend the Bylaw provisions in a way that it adverse to such directors,
executive officers and employees.
The Registrant's policy is to enter into indemnification agreements with each of its directors and
executive officers that provide the maximum indemnity allowed to directors and executive officers by
Section 145 of the Delaware General Corporation Law and the Bylaws, as well as certain additional procedural
protections. In addition, the indemnity agreement provide that directors and executive officers will be
indemnified to the fullest possible extent not prohibited by law against all expenses (including attorney's fees)
and settlement amounts paid or incurred by them in any action or proceeding, including any derivative action
by or in the right of the Registrant, on account of their services as directors or executive officers of the
Registrant or as directors or officers of any other company or enterprise when they are serving in such
capacities at the request of the Registrant. The Company will not be obligated pursuant to the indemnity
agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or claims
II-l
initiated by the indemnified party and not by way of defense, except with respect to proceedings specifically
authorized by the Board of Directors or brought to enforce a right to indemnification under the indemnity
agreement, the Company's Bylaws or any statute or law. Under tbe agreements, the Company is not obligated
to indemnify the indemnified party (i) for any expenses incurred by the indemnified party with respect to any
proceeding instituted by the indemnified party to enforce or interpret the agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the indemnified party in such proceeding
was not made in good faith or was frivolous; (ii) for any amounts paid in settlement of a proceeding unless the
Company consents to such settlement; (iii) with respect to any proceeding brought by the Company against
the indemnified party for willful misconduct, unless a court determines that each of such claims was not made
in good faith or was frivolous; (iv) on account of any suit in which judgment is rendered against the
indemnified party for an accounting of profits made from the purchase or sale by the indemnified party of
securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934
and related laws; (v) on account of the indemnified party's conduct which is finally adjudged to have been
knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct or a knowing violation of
the law; (vi) an account of any conduct from which the indemnified party derived an improper personal
benefit; (vii) on account of conduct the indemnified party believed to be contrary to the best interests of the
Company or its stockholders; (vii) on account of conduct that constituted a breach of the indemnified party's
duty of loyalty to the Company or its stockholders; or (ix) if a final decision by a court having jurisdiction in
the matter shall determine that such indemnification is not lawful.
The indemnification provision in the Amended and Restated Bylaws and the indemnification agreements
entered into between the Registrant and its directors and executive officers, may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities arising under the Securities Act.
Reference is made to the following documents filed as exhibits to this Registration Statement regarding
relevant indemnification provisions described above and elsewhere herein:
Exhibit
Number
Document
Form of Underwriting Agreement
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws
Second Amended and Restated Investors' Rights Agreement
Form of Indemnification Agreement entered into by the Registrant with each
of its directors and executive officers
1.1
3.1
3.2
4.2
10.1
Item 15. Recent Sales of Unregistered Securities
From the Registrant's inception through May 31, 1995, the Registrant has issued and sold the following
securities (as adjusted to give effect to the two-for-one stock split of the Company's Common Stock):
1. On various dates since inception, the Registrant has issued and sold an aggregate of 5,578,800 shares
of Common Stock to employees for an aggregate purchase price of $552,015 pursuant to exercises of
employee stock options.
2. In May 1994 and June 1994, the Registrant issued and sold an aggregate of 3,350,000 shares of
Common Stock to certain employees and officers at a purchase price of $0.0005 per share, for an
aggregate purchase price of $1,675 pursuant to restricted stock purchase agreements.
3. From June 1994 to August 1994, the Registrant issued and sold an aggregate of 4,151,000 shares of
Series A Preferred Stock (8,302,000 shares of Common Stock on an as-converted basis) to
accredited investors and certain officers at a purchase price of $0.75 per share for an aggregate
purchase price of $3,113,250.
4. In August 1994, the Registrant issued and sold 400,000 shares of Common Stock to an employee at a
purchase price of $0.0375 per share, for an aggregate purchase price of $15,000 pursuant to a
restricted stock purchase agreement.
II-2
5. From September 1994 to December 1994, the Registrant issued and sold an aggregate of 2,857,222
shares of Series B Preferred Stock (5,714,444 shares of Common Stock on an as-converted basis) to a
group of accredited investors at a purchase price of $2.25 per share for an aggregate purchase price of
$6,428,750.50.
6. In April 1995, the Registrant issued and sold an aggregate of 2,000,000 shares of Series C Preferred
Stock (4,000,000 shares of Common Stock on an as-converted basis) to a group of accredited
investors at a purchase price of $9.00 per share for an aggregate purchase price of $18,000,000.
The issuances described in Item 15(a)(l) were deemed exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated under the Securities Act. The issuances of the securities described
in Items 15(a) (2), through Item(a) (6) were deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of such Act as transactions by an issuer not involving any public offering. In
addition, the recipients of securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates issued in such transactions. All recipients had
adequate access, through their relationships with the Registrant, to information about the Registrant.
II-3
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
No.
1.1*
3.1*
3.2*
4.1*
4.2
5.1*
10.1*
10.2
10.3
10.4
10.5
10.6
10.7
10.8f
10.9f
lO.lOf
10.11
10.12
10.13*
10.14*
10.15*
11.1
21.1
23.1*
23.2
24.1
Description
Form of Underwriting Agreement.
Amended and Restated Certificate of Incorporation of Registrant.
Amended and Restated Bylaws of Registrant.
Form of Registrant's Common Stock Certificate.
Second Amended and Restated Investors' Rights Agreement dated April 5, 1995.
Opinion of Wilson Sonsini Goodrich & Rosati regarding legality of the securities being
issued.
Form of Indemnification Agreement entered into by Registrant with each of its
directors and executive officers.
Form of Restricted Stock Purchase Agreement.
1994 Stock Option Flan and related agreements.
1995 Stock Plan and related agreements.
1995 Employee Stock Purchase Plan and related agreements.
1995 Directors Option Plan and related agreements.
Employment Agreement between Registrant and James L. Barksdale dated January 4,
1995.
Software License Agreement between Registrant and MCI Telecommunications
Corporation dated February 28, 1995.
License and Series A Stock Purchase Agreement between Registrant and RSA Data
Security, Inc. dated August 19, 1994.
Settlement Agreement by and among the Registrant, the University of Illinois and
Spyglass, Inc. dated December 21, 1994.
Lease between Registrant and Ellis-Middlefield Business Park dated October 14, 1994.
Lease between Registrant and Ellis-Middlefield Business Park dated April 28, 1995.
Series A Preferred Stock Purchase Agreement dated June 10, 1994.
Series B Preferred Stock Purchase Agreement dated September 30, 1994.
Series C Preferred Stock Purchase Agreement dated April 5, 1995.
Statement of computation of earnings per share.
Subsidiaries of the Registrant.
Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
Consent of Ernst & Young LLP, Independent Auditors (see page II-7).
Power of Attorney (See page II-6).
• To be supplied by amendment.
t Confidential treatment has been requested for certain portions which have been blacked out in the copy of
the exhibit filed with the Securities and Exchange Commission. The omitted information has been filed
separately with the Securities and Exchange Commission pursuant to the application for confidential
treatment.
(b) Financial Statement Schedule
Schedule II — Valuation and Qualifying Accounts
S-l
Schedules not listed above have been omitted because the information required to be set forth therein is
not applicable or is shown in the financial statements or notes thereto.
11-4
Item 17. Undertakings
The undersigned hereby undertakes to provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the
"Securities 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 Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted
from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(l) or (4) or
497 (h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective
amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bonafide offering thereof.
II-5
•61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this
Registration Statement on Form S-l to be signed on its behalf by the undersigned, thereunto, duly authorized,
in the City of Mountain View, State of California, on thisi^day of June 1995.
NETSCAPE COMMUNICATIONS CORPORATION
By:.
Peter L.S. Currie
Vice President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints, jointly and severally, James. H. Clark, James L. Barksdale, Peter L.S. Currie, and
Roberta R. Katz and each one of them, as his true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection
therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or any of ihem, or bis or her or their
substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
Signatures
Peter L.S. Currie
Title
Dale
President and Chief Executive Officer
(Principal Executive Officer)
June**, 1995
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Junea-a-, 1995
Chairman of the Board
June as., 1995
Director
June*?, 1995
Director
L. John Doerr
June
, 1995
Director
June a*., 1995
Il-fi
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this
Registration Statement on Form S-l to be signed on its behatfby the undersigned, thereunto duly authorized,
in the City of Mountain View, State of California, on this 2X day of June 1995.
NETSCAPE COMMUNICATIONS CORPORATION
By:.
Peter L.S. Curric
Vice President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints, jointly and severally, James. H. Clark, James L. Barksdale, Peter L.S. Currie, and
Roberta R, Katz and each one of them, as his true and lawful attomeys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attomeys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection
therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorncys-in-fact and agents or any of them, or his or her or their
substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
Tkk
Dart
James L. Barksdale
President and Chief Executive Officer
(Principal Executive Officer)
June
, 1995
Peter L.S. Currie
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
June
, 1995
June
, 1995
June
, 1995
Chairman of the Board
James. H. Clark
Director
J> Mara L. Ai
Director
L. John Doerr
June « . , 1995
Director
John E. Wamock
June
, 1995
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" and to the use of our report dated
February 22, 1995 except for Note 10 as to which the date is June 19, 1995, in the Registration Statement on
Form S-1 and related Prospectus of Netscape Communicatiom Corporation for the registration of 3,500,000
shares of its common stock.
Our audit also included the financial statement schedule of Netscape CommuMcations Corporation listed
in Item 16(b) of this Registration Statement. This schedule is the responsibility of the Company's
management Our responsibility is to express an opinion based on our audit. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Palo Alto, California
June 22, 1995
The foregoing consent is in the form it will be signed upon completion of the two-for-one stock split
described in Note 10 to the consolidated financial statements.
Palo Alto, California
June 22, 1995
n-7
Schedule II
NETSCAPE COMMUNICATIONS CORPORATION
Valuation and Qualifying Accounts
Period from Inception (April 4, 1994) to December 31, 1994 and
Quarter ended March 31, 1995
Balance as of
sea
Charges to
cost and txpetats
Charf es to
other accounts
Deductions
Balance
as of end
of period
Allowance for Doubtful Accounts
Period from inception (April 4, 1994) to
December 31, 1994
Quarter ended March 31, 1995
$
—
—
S-I
$
—
56,153
$
—
$
—
$
—
56,153
EXECUTED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
to
Form S-l
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Netscape Communications Corporation
EXHIBIT INDEX
Exhibit
Nnmhtr
1.1*
3.1*
3.2*
4.1*
4.2
5.1*
10.1*
10.2
10.3
10.4
10.5
10.6
10.7
10.8f
10.9t
lO.lOf
10.11
Exhibit Dewrlptloi
Fonn of Underwriting Agreement
Amended and Restated Certificate of Incorporation of Registrant
Amended and Restated Bylaws of Registrant
Form of Registrant's Common Stock Certificate
Second Amended and Restated Investors' Rights Agreement dated April 5, 1995
Opinion of Wilson Sonsini Goodrich & Rosati regarding legality of the securities
being issued
Form of Indemnification Agreement entered into by Registrant with each of its
directors and executive officers
Form of Restricted Stock Purchase Agreement
1994 Stock Option Plan and related agreements
1995 Stock Plan and related agreements
1995 Employee Stock Purchase Plan and related agreements
1995 Directors Option Plan and related agreements
Employment Agreement between Registrant and James L. Barksdale dated
January 4, 1995
Software License Agreement between Registrant and MCI Telecommunications
Corporation dated February 28, 1995
License and Series A Stock Purchase Agreement between Registrant and
RSA Data Security, Inc. dated August 19, 1994
Settlement Agreement by and among the Registrant, the University of Illinois and
Spyglass, Inc. dated December 21, 1994
Lease between Registrant and Ellis-Middleficld Business Park dated October 14,
Sequentially
Nuwbmd P
<^ 0
,
' 'J
/ 7 /
)L L
c.
^
'^,
"0-*
2 3 ?
7 \-t I
' **
~\t H
J
3 3 »
~ -\
3
1994
10.12
10.13*
10.14*
10.15*
11.1
21.1
23.1*
23.2
24.1
Lease between Registrant and Ellis-Middlcfield Business Park dated April 28,
1995
Series A Preferred Stock Purchase Agreement dated June 10, 1994
Series B Preferred Stock Purchase Agreement dated September 30, 1994
Series C Preferred Stock Purchase Agreement dated April 5, 1995
Statement of computation of earnings per share
Subsidiaries of the Registrant
Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1)
Consent of Ernst & Young LLP, Independent Auditors (see page II-7)
Power of Attorney (See page II-6)
p •}
2%? J
* To be supplied by amendment.
t Confidential treatment has been requested for certain portions which have been blacked out in the copy of
the exhibit filed with the Securities and Exchange Commission. The omitted information has been filed
separately with the Securities and Exchange Commission pursuant to the application for confidential
treatment.
aa
EXHIBIT 4.2
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
NETSCAPE COMMUNICATIONS CORPORATION
April 5, 1995
9U
TABLE OF CONTENTS
Page
1.0
REGISTRATION RIGHTS
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
2.0
3.0
1
Definitions
Request for Registration
Company Registration
Obligations of the Company
Obligations of the Investors .Expenses of Demand Registration
Expenses of Company Registration
Underwriting Requirements
Withdrawal Rights and Reallocation
Delay of Registration
Indemnification
Reports Under the 1934 Act
Form S-3 Registration
Assignment of Registration Rights
"Market Stand-Off Agreement
Termination of the Company's Obligations
Limitations on Subsequent Registration Rights
1
2
3
3
5
5
5
5
6
6
7
9
10
11
11
12
12
COVENANTS
12
2.1
2.2
2.3
2.4
2.5
2.6
2.7
12
12
13
13
14
16
16
Delivery of Financial Statements
Additional Information Rights
Limitation on Information Rights
Inspection
Right of First Refusal
Voting Agreement with Respect to the Board of Directors
Termination of Covenants
MISCELLANEOUS
16
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
16
17
17
17
17
17
18
18
18
18
18
18
Governing Law
Successors and Assigns
Entire Agreement
Severability
Amendment and Waiver
Delays or Omissions
Notices, etc
Titles and Subtitles
Expenses
Counterparts
Aggregation of Stock
Prior Agreement
;
Schedule A - Schedule of Investors
9i
SECOND AMENDED AND RESTATED INVESTORS* RIGHTS AGREEMENT
This Second Amended and Restated Investors' Rights Agreement is entered into as of
April 5, 1995, by and between Netscape Communications Corporation, a Delaware corporation
(the "Company"), and the investors listed on Schedule A hereto (the "Investors").
WHEREAS, the Company and certain of the Investors (the "Prior Investors") are parties
to that certain Amended and Restated Investors* Rights Agreement dated December 9, 1994 (the
"Prior Agreement"), pursuant to which the Company granted to such Prior Investors certain
registration rights;
WHEREAS, certain of the Investors (the "New Investors") are purchasing from the
Company, and Company is selling to the New Investors, shares of the Company's Series C
Preferred Stock pursuant to the terms and conditions set forth in that certain Series C Preferred
Stock Purchase Agreement dated as of even date herewith (the "Series C Agreement");
WHEREAS, in order to induce the New Investors to invest funds in the Company
pursuant to the Series C Agreement, the Investors and the Company hereby agree to enter into
this Agreement; and
WHEREAS, the Company and a majority of the Prior Investors are hereby executing this
Agreement to amend and replace the Prior Agreement.
NOW, THEREFORE, in consideration of the premises, covenants, and conditions set
forth herein, the parties agree as follows:
1.0
REGISTRATION RIGHTS. The parties covenant and agree as follows:
1.1
Definitions. For purposes of this Section 1.0:
(a)
The term "register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in compliance with
the Securities Act of 1933, as amended (the "Act"), and the declaration or ordering of
effectiveness of such registration statement or document.
(b)
The term "Registrable Securities" means (i) the Company's Common Stock
issuable or issued upon conversion of the Series A, B and C Preferred Stock of the Company
(the "Conversion Stock") and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in replacement of, such
Series A, B or C Preferred Stock or Common Stock, excluding in all cases, however, (A) any
Registrable Securities sold by a person in a transaction in which such person's rights under this
Section 1.0 are not assigned or (B) shares of Conversion Stock or other securities that have been
sold to or through a broker or dealer or underwriter in a public distribution or a public securities
transaction.
(c)
The number of shares of "Registrable Securities then outstanding" shall be
equal to the sum of (i) the number of shares of Common Stock outstanding that are Registrable
Securities and (ii) the number of shares of Common Stock issuable pursuant to then exercisable
or convertible securities that are exercisable or convertible into Registrable Securities.
(d)
The term "Holder" means any person owning or having the right to acquire
Registrable Securities or any transferee or assignee thereof in accordance with Section 1.14
hereof.
(e)
The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the Securities and
Exchange Commission ("SEC") that permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.
1.2
Request for Registration.
(a)
If the Company shall receive at any time after the earlier of
(i) September 30, 1998, or (ii) nine months after the effective date of the first registration
statement for a public offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a SEC Rule 145 transaction), a written request from the
Holders of thirty percent (30%) of the Registrable Securities then outstanding that the Company
file a registration statement under the Act covering the registration of Registrable Securities with
an aggregate gross offering price of at least $5,000,000. then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), effect as soon as practicable, and in any event shall use
its best efforts to effect within ninety (90) days of the receipt of such request, the registration
under the Act of all Registrable Securities that the Holders request to be registered within twenty
(20) days of the mailing of such notice by the Company.
(b)
If the Holders initiating the registration request hereunder ("Initiating
Holders") intend to distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made pursuant to this
Section 1.2 and the Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter or underwriters will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. 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 (together with the Company as
provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any other provision
JFM30t.R4(5P3)
04/03/H
-2-
of this Section 1.2, if the underwriter or underwriters advise(s) the Initiating Holders in writing
that marketing factors require a limitation of the number of shares to t* underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof, including the Initiating
"Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the
Company owned by each Holder; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless all other securities,
including, without limitation, any shares offered by the Company, are first entirely excluded
from the underwriting.
(c)
The Company is obligated to effect only two (2) registrations pursuant to
this Section 1.2 (counting for this purpose only registrations that have been declared or ordered
effective and pursuant to which Registrable Securities have been sold and registrations that have
been withdrawn by the Holders as to which the Holders have not elected to bear the expenses of
such registration pursuant to Section 1.6 hereof and would, absent such election, have been
required to bear such expenses).
(d)
Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders for such
registration statement to be filed and that it is therefore essential to defer the filing of such
registration statement, 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 defer its obligations for this reason only once in any twelve-month period.
1 -3
Company Registration. If (but without any obligation to do so) the Company
proposes to register any of its Common Stock or other securities under the Act in connection
with a public offering of such securities solely for cash (including a registration effected by the
Company for stockholders other than the Holders but not including a registration relating solely
to the sale of securities to participants in a Company stock plan, or a registration on any form
that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the written request of
each Holder given within twenty (20) days after mailing of such notice by the Company, the
Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all
of the Registrable Securities that each such Holder has request to be registered.
14
Obligations of the Company. Whenever required pursuant to this Section 1 to
effect the registration of any Registrable Securities, the Company shall perform the following
obligations as expeditiously as reasonably possible:
JFMKH.IUOW)
otmm
-3-
(a)
The Company shall prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause such registration
statement to become effective and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, to keep such registration statement effective for up
j o one hundred twenty (120) days.
(b)
The Company shall 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 Act with respect
to the disposition of all securities covered by such registration statement.
(c)
The Company shall furnish to the Holders such numbers of copies of the
prospectus, including a prospectus subject to completion, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d)
The Company shall 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, the Company shall enter
into and perform its obligations under an underwriting agreement, in usual and customary form,
with the managing underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
(0
The Company shall notify each Holder of Registiable Securities covered by
such registration statement at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of wlu'ch the prospectus
included in such registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances then existing.
(g)
Notwithstanding the foregoing, the Company shall have no obligation with
respect to any registration requested pursuant to Sections 1.2 or 1.13 if the number of shares or
the anticipated aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated aggregate offering
price required to trigger the Company's obligation to initiate such registration as specified in
subsection 1.2(a) or subsection 1.13(b)(iii), as applicable.
JFM3M.R4(5PJ)
M/O3/9S
-4-
1.5
Obligations of the Investors.
(a)
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Section 1 with respect to the Registrable Securities of any selling
Holder that such Holder shall furnish to the Company such information regarding itself, the
"Registrable Securities held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's Registrable Securities.
*
(b)
In the event of any underwritten public offering, each Holder participating
in such underwriting shall enter into and perform its obligations under an underwriting
agreement in customary form with the managing underwriter of such offering.
1.6
Expenses of Demand Registration. All expenses other than underwriting discounts
and commissions incurred in connection with registrations, filings or qualifications pursuant to
Section 1.2, including (without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees
and disbursements of one counsel for the selling Holders not to exceed $25,000, shall be borne
by the Company; provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request
is subsequently withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating holders shall bear such expenses on a
pro rata basis), unless the Holders of at least a majority of the Registrable Securities then
outstanding agree to forfeit their right to one demand registration pursuant to Section 1.2;
provided further, however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the operating results, financial condition or business of the Company
from that known to the Holders at the time of the request and have withdrawn the request with
promptness following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their rights pursuant
to Section 1.2.
1.7
Expenses of Company Registration. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of Registrable Securities with
respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned
as provided in Section 1.14), including (without limitation) all registration, filing, and
qualification fees, fees and disbursements of Company counsel, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of one counsel for
the selling Holders not to exceed $25,000, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8
Underwriting Requirements.
(a)
In connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall not be required under Section 1.3 to include any of
JFMMJ.R4WW)
0WJI9S
-5-
the Holders' securities in such underwriting unless they accept the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the underwriters determine
in their sole discretion will not, due to marketing factors, jeopardize the success of the offering
J>y the Company.
(b)
If the total amount of securities, including Registrable Securities, requested
by stockholders to be included in such offering exceeds the amount of securities sold other than
by the Company that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the offering only that
number of such securities, including Registrable Securities, which the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the Holders requesting inclusion in such registration according to
the total amount of securities entitled to be included therein owned by each such Holder on a pro
rata basis); provided, however, that any such limitation or "cut-back" shall be first applied to all
shares proposed to be sold in such offering, other than for the account of the Company, which
are not Registrable Securities.
(c)
Notwithstanding the foregoing provisions of this Section 1.8, in no event
shall the amount of securities of the selling Holders requested to be included in any offering
under Section 1.3 be reduced below thirty percent (30%) of the total amount of securities
included in such offering, unless such offering is the initial public offering of the Company's
equity securities, in which case the Holders may be excluded entirely if the underwriters make
the determination described above and if no other securities held by a stockholder of the
Company are included.
1-9
Withdrawal Rights a.nd Reallocation. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written notice to the
Company and the underwriters. If such Holder's shares are withdrawn from registration, or if
the number of shares of Registrable Securities was previously reduced due to marketing factors,
the Company shall offer to all Holders retaining the right to include securities in the registration
the right to include additional Registrable Securities in the registration, with such shares being
allocated on a pro rata basis among the Holders of Registrable Securities.
1 • 10 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 1.
JFMJOt R*<3P3)
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1.11 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 1:
(a)
To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors and general partners of each Holder, any
"underwriter (as defined in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the 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 Act, the 1934 Act or other federal or state law,
including any of the foregoing incurred in settlement of any litigation, commenced or threatened,
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 (each of which is
referred to herein as a "Violation"):
(i)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any prospectus subject to completion 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 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934
Act or any state securities laws. In addition, the Company will promptly reimburse each such
Holder, officer, director or general partner, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, on an as-incurred basis, in connection with
investigating or defending any such loss, claim, damage, liability, or action.
Notwithstanding the foregoing, the indemnity provisions contained in this Section 1.11 (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 written 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 that results from reliance upon written information furnished expressly for use in
connection with such registration by any such Holder, officer, director, general partner,
underwriter or controlling person.
(b)
To the extent permitted by law, each selling Holder shall 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
Act, any underwriter and any Holder selling securities in such registration statement or any of its
directors, officers or general partners or each person, if any, who controls such Holder, against
any losses, claims, damages, or liabilities (joint or several) to which the Company (or any
JFM3OI.R4«P3>
-7-
Jti
director, officer, controlling person), or underwriter (or controlling person), or Holder (or
director, officer, general partner or controlling person thereof) may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or action 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 results from idiance upon written
Information furnished by such Holder expressly for use in connection with such registration.
Each such Holder will promptly reimburse any legal or other expenses reasonably
incurred, on an as-incurred basis, by the Company (or any director, officer, controlling person),
underwriter (or controlling person), Holder (or any director, officer, general partner, or
controlling person thereof) in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agieement contained in this
Section l.ll(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 written consent of the Holder, which
consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the liability of each Holder under this Section 1.1 l(b)
shall be limited to an amount equal to the aggregate proceeds of the shares sold by such Holder
in the offering pursuant to which the Violation is claimed to have occurred, unless such liability
arises out of or is based on willful misconduct of such Holder.
(c)
Within a reasonable time after receipt by an indemnified patty of notice of
the commencement of any action (including any governmental action) under this Section 1.11,
such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 1.11, deliver to the indemnifying party a written notice of the
commencement thereof. Such indemnifying party shall have the right to participate in and
subject to the consent of the indemnified party, which consent shall not be unreasonably
withheld, the indemnifying parry shall have the right to enter into settlement of such action, and,
to the extent the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense of such action with counsel mutually satisfactory to the
parties; provided, however, that the indemnified party shall cooperate with the indemnifying
party, and that if representation of an indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such proceeding, such
indemnified party shall have the right to retain its own counsel, with the reasonable fees and
reasonable expenses to be paid by the indemnifying party.
The failure of an indemnified party to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if such failure is prejudicial
to the indemnifying party, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.11 to the extent such party is prejudiced. However, the
omission of the indemnified party to deliver such written notice to the indemnifying party will
JFM301.R4<SP3>
OtKO/95
-8-
not relieve such indemnifying party of any liability that it may have to any indemnified party
otherwise than under this Section 1.11.
(d)
If the indemnification provided for in this Section 1.11 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect to any loss,
Tlaim, damage, liability, or action referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand
and of the indemnified party on the other in connection with the statements or omissions that
resulted in such loss, claim, damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the violation of law or the untrue or
alleged untrue statement of a material fact or the omission to state a material fact relates to acts
of or information supplied by the indemnifying party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement or omission.
(e)
Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered into in
connection with the underwritten public offering are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall control.
(f)
The obligations of the Company and of the Holders under this Section 1.11
shall survive the conversion, if any, of the Series A, B or C Preferred Stock and the completion
of any offering of Registrable Securities in a registration statement under this Section 1 or
otherwise.
1.12 Reports Under the 1934 Act. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that
may at any time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees:
(a)
to make and keep public information available, as those terms are defined
under SEC Rule 144, at all times after ninety (90) days after the effective date of the first
registration statement filed by the Company for the offering of its securities to the general
public;
(b)
to take such action, including the voluntary registration of the Company's
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize
Form S-3, subject to Section 1.13 herein, for the sale of their Registrable Securities, such action
to be taken as soon as practicable after the end of the fiscal year in which the first registration
statement filed by the Company for the offering of its securities to the general public is declared
effective;
JFM301RWP3)
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100
(c)
to file with the SEC all reports and other documents required of the
Company under the Act and the 1934 Act in a timely manner; and
(d)
to furnish to any Holder, so long as such Holder owns Registrable
Securities, forthwith upon request (i) a written statement by the Company that it has complied
vvith the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the Act and the 1934 Act
(at any time after it has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies),
(ii) a copy of the Company's most recent annual or quarterly report and (in) such other
infonnation as may be reasonably requested by such Holder in order to avail itself of any rule or
regulation of the SEC that permits the selling of any such securities without registration or
pursuant to such Form S-3.
1.13 Form S-3 Registration. In case the Company shall receive from any Holder or
Holders holding in the aggregate at least twenty-five percent (25%) of the Registrable Securities,
a written request that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company shall comply with the following obligations:
(a)
The Company shall promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders. In the event the
registration is proposed to be part of a firm commitment underwritten public offering, the
substantive provisions of paragraph (b) of Section 1.2 hereof shall be applicable to each such
registration initiated under this Section 1.13.
(b)
As soon as practicable, the Company shall effect such registration and all
such qualifications and compliances as may be so requested and as would pennit or facilitate the
sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as
are specified in such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company. Notwithstanding the
foregoing, the Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.13 if: (i) Form S-3 is not available for such offering by
the Holders; (ii) the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than $1,000,000; (iii) the Company
furnishes to the Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be seriously detrimental
to the Company and its stockholders for such Form S-3 registration to be effected at such time,
in which event the Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 120 days after receipt of the request of the Holder or
Holders under this Section 1.13; (iv) the Company has, within the twelve (12) month period
JFM30UU«P3)
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10
preceding the date of such request, already effected a registration on Form S-3 for the Holders
pursuant to this Section 1.13; (v) 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 in a particular jurisdiction; or (vi) a registration statement respecting securities of the
Company has been declared effective within 180 days of such request.
(c)
Subject to the foregoing, the Company shall file a registration statement
covering the Registrable Securities so requested to -be registered as soon as practicable after
receipt of the request or requests of the Holders. All expenses incurred in connection with the
registrations requested pursuant to this Section 1.13, including (without limitation) all
registration, filing, qualification, printers' and accounting fees, reasonable fees and
disbursements of one counsel for the selling Holder or Holders and counsel for the Company,
but excluding any underwriters' discounts or commissions associated with Registrable Securities,
shall be borne by the Company. Registrations effected pursuant to this Section 1.13 shall not be
counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3,
respectively.
1.14 Assignment °f Registration Rights. The rights to cause the Company to register
Registrable Securities granted under this Section 1 may be assigned by a Holder to a transferee
or assignee who acquires (i) 100,000 shares (as adjusted for stock splits, combinations, dividends
and the like) of the Registrable Securities held by such Holder or, if less, (ii) all of the
Registrable Securities then held by such Holder, provided in either case, the Company is, within
a reasonable time prior to such transfer, furnished with written notice of the name and address of
such proposed transferee or assignee and the securities with respect to which such registration
rights are being assigned: provided further that such assignment shall be effective only if the
transferee enters into a written agreement providing that such transferee shall be bound by the
provisions of Section 1 of this Agreement. Notwithstanding the foregoing or any other provision
contained herein to the contrary, the right to cause the Company to register Registrable
Securities may be assigned by a Holder to any constituent partner of a partnership Holder and
any affiliate, subsidiary or parent of a corporate Holder provided that such transferee agrees in
writing to be bound by the terms and conditions of this Agreement.
1.15
"Market Stand-Off Agreement.
Each Investor hereby agrees that it shall not, to the extent specified by the Company and
an underwriter of Common Stock (or other securities) of the Company, sell, offer to sell,
contract to sell (including without limitation any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company (other than securities already registered) during a reasonable and
customary period of time not to exceed one hundred and eighty (180) days, as agreed to by the
Company and the underwriters, following the effective date of the initial registration statement of
the Company filed under the Act or any subsequent registration filed by the Company for a
JFMWUUtfPJ)
04/03/95
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period of two (2) years following the initial registration statement; provided, however, that all
officers and directors of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the securities of each Holder (and the shares or securities of every
"other person subject to the foregoing restriction) until the end of such one hundred and eighty
(180) day period.
1.16 Termination of the Company's Obligations. The rights to cause the Company to
register securities granted to Holders pursuant to Sections 1.2 and 1.3 shall terminate as to any
Holder, on the earlier of (i) three years following the consummation of the Company's initial
public offering or (ii) such time as the Holder can provide an opinion acceptable to counsel to
the Company that such Holder has the ability to sell all of the Registrable Securities owned by
such stockholder under SEC Rule 144 within a six-month period.
1.17 Limitations on Subsequent Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such holder or
prospective holder (i) to include such securities in any registration filed under Section 1.2 or 1.3
hereof, unless under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is included or (ii) to
make a demand registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection 1 -2(a) or within one
hundred twenty (120) days of the effective date of any registration effected pursuant to
Section 1.2.
2.0
COVENANTS.
2.1
Delivery of Financial Statements. The Company shall, as soon as practicable, but
in any event within ninety (90) days after the end of each fiscal year of the Company, furnish to
each Investor a consolidated profit and loss statement for such fiscal year, a consolidated balance
sheet of the Company and a consolidated statement of stockholders' equity as of the end of such
year, and a consolidated statement of cash flows for such year, such year-end financial reports to
be prepared in accordance with generally accepted accounting principles and audited and
certified by independent public accountants of nationally recognized standing selected by the
Company.
2.2
Additional Information Rights. The Company shall furnish each Investor holding
at least 100,000 shares of Series A, B or C Preferred Stock (including any shares of Common
Stock issued upon the conversion of such Series A, B or C Preferred Stock):
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04/03/95
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(a)
within thirty (30) days of the end of each month, an unaudited consolidated
profit and loss statement, consolidated statement of cash flows and consolidated balance sheet for
and as of the end of such month, and comparison to year-end results (if any) and projections (if
any), all in reasonable detail;
(b)
as soon as practicable, but in any event fifteen (15) days prior to the end of
each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly
basis, including balance sheets and statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(c)
such other information relating to the financial condition, business,
prospects or corporate affairs of the Company as an Investor or any assignee of an Investor may
from time to time request, provided, however, that (subject to any individual's right to
information by virtue of such individual's position as a director of the Company) the Company
shall not be obligated under this subsection (c) or any other subsection of this Section 2.2 to
provide information which it reasonably deems in good faith to be a trade secret or similar
confidential information; and
(d)
such written information and financial statements as may be required to
enable such Investor to resell any shares of the Company's stock under Rule 144A promulgated
under the Act, or any successor statute or regulation.
2.3
Limitation on Information Rights. The rights to receive financial information set
forth in Sections 2.1 and 2.2 above may be assigned by each Investoi to a subsequent transferee
or assignee of at least 100,000 shares (as adjusted for stock splits, combinations, dividends and
the like) of such Investor's Series A, B or C Preferred Stock (or Common Stock issued upon
conversion of such Series A, B or C Preferred Stock, or a combination thereof) or, if less, all of
such Investor's Series A, B or C Preferred Stock (including any shares of Common Stock issued
upon the conversion of such Series A, B or C Preferred Stock), provided that the transferee or
assignee of such rights is not deemed by the Board of Directors, in its reasonable judgment, to
be a current or potential competitor of the Company. Notwithstanding the foregoing or any
other provision contained herein to the contrary, the information rights contained in Section 2.1
and 2.2 above may be assigned by a Holder to any constituent partner of a partnership Holder or
any affiliate, subsidiary or parent of a corporate Holder provided that such transferee agrees in
writing to be bound by the terms and conditions of this Agreement.
2.4
Inspection. The Company shall permit each Investor, at such Investor's expense,
to visit and inspect the Company's properties, to examine its books of account and corporate
records and to discuss the Company's affairs, finances and accounts with its officers, alt at such
reasonable times as may be requested by the Investor; provided, however, that the Company
shall not be obligated pursuant to this Section 2.4 to provide access to any information which it
reasonably deems in good faith to be a trade secret or confidential information.
JFM3CH.R4(SP3)
OtKOfK
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2.5
Right of First Refusal. The Company hereby grants to each Holder who owns
any Series A, B or C Preferred Stock (the "Shares") or any shares of Common Stock issued
upon conversion of the Shares, the right of first refusal to purchase a pro rata share of New
Securities (as defined in this Section 2.4) which die Company may, from time to time, propose
to sell and issue. A Holder's pro rata share, for purposes of this right of first refusal, is the
Htio of the number of shares of Common Stock owned by such Holder immediately prior to the
issuance of New Securities, assuming full conversion of the Shares, to the total number of shares
of Common Stock outstanding immediately prior to the issuance of New Securities, assuming
full conversion of the Shares and exercise of all outstanding rights, options and warrants to
acquire Common Stock of the Company. This right of first refusal shall be subject to the
following provisions:
(a)
"New Securities" shall mean any capital stock (including Common Stock
and/or Preferred Stock) of the Company whether now authorized or not, and rights, options or
warrants to purchase such capital stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided that the term "New Securities" does not include
(i) Series A or B Preferred Stock; (ii) Series C Preferred Stock sold pursuant to the Series C
Agreement; (iii) securities issued upon conversion of the Shares; (iv) securities issued pursuant
to the acquisition of another business entity or business segment of any such entity by the
Company by merger, purchase of substantially all the assets or other reorganization whereby the
Company will own not less than fifty-one percent (51 %) of the voting power of such business
entity or business segment of any such entity; (v) any borrowing, direct or indirect, from
financial institutions or other persons by die Company, whether or not presently authorized,
including any type of loan or payment evidenced by any type of debt instrument, provided that
such borrowing does not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the Company; (vi) securities
issued to employees, consultants, officers or directors of the Company, other than James C.
Clark, James L. Barksdale or Marc L. Andreessen, pursuant to any stock option, stock purchase
or stock bonus plan, agreement or arrangement approved by the Board of Directors;
(vii) securities issued to James H. Clark, James L. Barksdale or Marc L. Andreessen, provided
such issuance is approved by a majority of the non-employee members of the Board of Directors
(excluding Messrs. Clark, Barksdale and Andreessen); (viii) securities issued in connection with
obtaining lease financing, whether issued to a lessor, guarantor or other person and is for
purposes other than equity financing of the Company; (ix) securities issued in a firm
commitment underwritten public offering pursuant to a registration under the Act, provided that
in connection therewith all of the outstanding shares of the Company's Preferred Stock are
automatically converted into Common Stock pursuant to either clause (A) or clause (B) of
paragraph (b) of Section 3 of Part B of Article IV of the Company's Restated Certificate of
Incorporation; (x) securities issued in connection with any stock split, stock dividend or
recapitalization of the Company so long as such issuance results in adjustments to the conversion
rate under the Restated Certificate of Incorporation of the Company with respect to the Preferred
Stock; and (xi) any right, option or warrant to acquire any security convertible into the securities
excluded from the definition of New Securities pursuant to subsections (i) through (x) above.
JFMWI.IWSM)
04/0305
-14-
(b)
In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Holder written notice of its intention, describing the type of New
Securities, and their price and the general terms upon which the Company proposes to issue the
same. Each Holder shall have twenty (20) days after any such notice is effective to agree to
purchase up to such Holder's pro rata share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
*
(c)
In the event the Holders fail to exercise the right of first refusal, in full or
in part, within said twenty <20)-day period, the Company shall have sixty (60) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within sixty (60) days from the date of said agreement) to sell the New
Securities respecting which the Holders* right of fust refusal option set forth in this Section 2.4
was not exercised, at a price and upon terms no more favorable to the purchasers thereof than
specified in the Company's notice to Holders pursuant to Section 2.4(b). In the event the
Company has not sold within said 60-day period or entered into an agreement to sell the New
Securities within said 60-day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities, without first again offering such securities to the
Holders in the manner provided in Section 2.4(b) above.
(d)
The right of first refusal granted under this Agreement shall expire upon,
and shall not be applicable to, the first sale of Common Stock of the Company to the public
effected pursuant to a registration statement filed with, and declared effective by, the SEC under
the Act; provided that in connection therewith all of the outstanding shares of die Company's
Preferred Stock are automatically converted into Common Stock pursuant to either clause (A) or
clause (B) of paragraph (b) of Section 3 of Part B of Article IV of the Company's Restated
Certificate of Incorporation.
(e)
The right of first refusal set forth in this Section 2.5 may be assigned by a
Holder to a transferee or assignee who acquires (i) 100,000 shares (as adjusted for stock splits,
combinations, dividends and the like) of the Series A, B or C Preferred Stock (or Common
Stock issued upon conversion of such Series A, B or C Preferred Stock, or a combination
thereof) held by such Holder or, if less, (ii) all of the Series A, B or C Preferred Stock (or
Common Stock issued upon conversion of such Series A, B or C Preferred Stock, or a
combination thereof) then held by such Holder, provided in either case, the Company is, within
a reasonable time prior to such transfer, furnished with written notice of the name and address of
such proposed transferee or assignee and the securities with respect to which such rights of first
refusal are being assigned; provided further that such assignment shall be effective only if the
transferee enters into a written agreement providing that such transferee shall be bound by the
provisions of Section 2.5 of this Agreement. Notwithstanding die foregoing or any other
provision contained herein to the contrary, the right of first refusal may be assigned by a Holder
to any constituent partner of a partnership Holder and any affiliate, subsidiary or parent of a
JFM3OI.R4<JP3)
04/03/95
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i 06
corporate Holder provided that such transferee agrees in writing to be bound by the terms and
conditions of this Agreement.
2.6
Voting Agreement with Respect to the Board of Directors.
~
(a)
Each holder of outstanding Series C Preferred Stock (a "Series C Stockholder")
agrees to vote, or cause to be voted, all of the shares of Series C Preferred Stock registered in
its name in favor of and in order to elect a nominee reasonably acceptable to the Company's
Board of Directors as the director which the holders of the Series C Preferred Stock are entitled
to elect to the Company's Board of Directors pursuant to paragraph (b) of Section 5 of Part B of
Article IV of the Company's Restated Certificate of Incorporation. Each Series C Stockholder
further agrees that the director elected to fill any vacancy created in respect of the director so
elected by the holders of the Series C Preferred Stock shall be reasonably acceptable to the
Company's Board of Directors.
(b)
All certificates representing any Series C Preferred Stock subject to the provisions
of this Agreement shall have endorsed thereon a legend to substantially the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO VOTING COVENANTS AS SET FORTH IN THAT
CERTAIN INVESTORS' RIGHTS AGREEMENT DATED APRIL 5, 1995, A
COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE CORPORATION."
2.7
Termination of Covenants. Unless terminated earlier, the covenants set forth in
these Sections 2.1, 2.2 and 2.4 shall terminate and be of no further force or effect upon the first
occurrence when the sale of securities, pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of its securities to
the general public, is consummated or when the Company first becomes subject to the periodic
reporting requirements of Section 13 of the 1934 Act, or five years from the date hereof.
3.0
MISCELLANEOUS.
3.1
Governing Law. This Agreement shall be governed by and construed under the
laws of the State of California as applied to agreements among California residents, made and to
be performed entirely within the State of California.
3.2
Successors and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors, and administrators of the parties hereto (including transferees of any shares of
JFM30I.R4<5f3)
OMB/W
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Series A. B or C Preferred Stock sold under their respective stock puichase agreements or any
Common Stock issued upon conversion thereof).
3.3
Entire Agreement. This Agreement constitutes the full and entire understanding
jind agreement among the parties with regard to the subject matter hereof, and no party shall be
liable or bound to any other party in any manner by any representations, warranties, covenants,
or agreements except as specifically set forth herein. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto and their respective
successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided herein.
3.4
Severabilitv. Any invalidity, illegality, or limitation of the enforceability with
respect to any Investor of any one or more of the provisions of this Agreement, or any part
thereof, whether arising by reason of the law of any such Investor's domicile or otherwise, shall
in no way affect or impair the validity, legality, or enforceability of this Agreement with respect
to any other Investor. In case any provision of this Agreement shall be invalid, illegal, or
unenforceable, it shall, to the extent practicable, be modified so as to make it valid, legal and
enforceable and to retain as nearly as practicable the intent of the parties, and the validity,
legality, and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
3.5
Amendment and Waiver. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or piospectively) only with the written consent of the Company
and the Holders of a majority of the Preferred Stock (or the Registrable Securities issued upon
conversion thereof) then outstanding voting together as a class on an as converted basis,
provided that the effect of such amendment or waiver is to treat all Holders equally. Any
amendment or waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities at the time outstanding (including securities exercisable for or
convertible into Registrable Securities), each future holder of all such securities, and the
Company.
3.6
Delays or Omissions. No delay or omission to exercise any right,'power, or
remedy accruing to any Investor or any permitted transferee upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right, power, or
remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance,
or any acquiescence therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or
character on the Investors' part of any breach, default or noncompliance under this Agreement
or any waiver on the Investors' part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in such writing, and that
all remedies, either under this Agreement, by law, or otherwise afforded to each Investor, shall
be cumulative and not alternative.
IFM301.R4(5P3>
04/03/95
-17-
3.7
Notices, etc. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given to the party to be so notified in writing and shall be deemed
effective upon personal delivery, upon delivery by confirmed facsimile or electronic transmission
(with duplicate original sent by United States mail), or three business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid and addressed to the
"party to be notified at the address indicated for such party on Schedule A hereto (or, if to the
Company, at the address of its principal executive offices), or at such other address as such
party may designate by ten (10) days' advance written notice to the other parties.
3.8
Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in construing this
Agreement.
3.9
Expenses. If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
expenses and necessary disbursements in addition to any other relief to which such party may be
entitled.
3.10 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall constitute one
instrument.
3.11 Aggregation of Stock. All shares of Preferred Stock held or acquired by affiliated
entities or persons shall be aggregated together for the purposes of determining the availability of
any right under this Agreement.
3.12 Prior Agreement. This Agreement supersedes and replaces the Amended and
Restated Investors' Rights Agreement between the Company and certain of the Investors dated as
of December 9, 1994.
JPM3H.M(SP)>
04/03/93
IN WITNESS WHEREOF, the parties have executed this Second Amended and Restated
Investors' Rights Agreement as of the date first above written.
COMPANY:
~
NETSCAPE COMMUNICATIONS CORPORATION
By:
James L. Barksdale, President and
Chief Executive Officer
Address:
JFM3O1.IW5M)
OWB/95
-19-
501 East Middle field Road
Mountain View, CA 94043
NETSCAPE COMMUNICATIONS CORPORATION
SIGNATURE PAGE
TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
The undersigned hereby executes and delivers the Second Amended and Restated Investors'
Rights Agreement (the "Agreement") to which this Signature Page is attached effective as of the
date of die Agreement, which Agreement and Signature Page, together with all counterparts of
said Agreement and Signature Pages of the other parties named in said Agreement, shall
constitute one and the same document in accordance with the terms of said Agreement.
Name of Stockholder
By:.
Print Name:
Tide:
JFM10MW5P3)
04/03/H
) !I
SCHEDULE A
Schedule of Investors
Number of Shares of Preferred Stock
Name and Address
Series A
Series B
1,980.000
Kleiner Perkins Caufield & Byers VII
4 Embarcadero Center, #3520
San Francisco, CA 94111
220,000
KPCB VII Founders Fund
4 Embarcadero Center, #3520
San Francisco, CA 94111
4,000,000
500,000
John Kohler
16033 Matilija Drive
Los Gatos, CA 95030
66,000
44,444
James Sha
18 Valley Oak
Portola Valley, CA 94028
25,000
75.000
RSA Data Security, Inc.
100 Marine Parkway, #500
Redwood City, CA 94065
60,000
James H. Clark
c/o Netscape Communications Corporation
501 East Middlefield Road
Mountain View, CA 94043
Paul Koontz
109 Los Charros Lane
Portola Valley, CA 94028
Robert V. Gunderson, Jr.
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
JFMXH.IUfJM)
04/03/95
Series C
11,111
4,445
I VI
Number of Shares of Preferred Stock
Name and Address
-Cliff Friedman
Bear, Stearns & Co.
245 Park Avenue, 12th Floor
New York, NY 10167
Scott Siegler
558 North Bristol Avenue
Los Angeles, CA 90049
Series A
Series B
Series C
11,111
11,111
TCI Netscape Holdings, Inc.
c/o TCI Technology Ventures
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: Charles Moldow
444,445
The Times Mirror Company
Times Mirror Square
220 W. First Street
Los Angeles, CA 90012
Attention: Scott Whiteside
Michael Liebhold
444,445
Adobe Systems Incorporated
1585 Charleston Road
Mountain View, CA 94039-7900
Attention: Bruce Nakao
Colleen Pouliot, Esq.
444,445
Knight-Rtdder Investment Company
c/o Knight-Ridder, Inc.
One Herald Plaza
Miami. FL 33132
Attention: Tony Ridder
222,223
The Hearst Corporation
959 8th Avenue
New York, NY 10019
Attention: Steve Horen
222,223
JFM3Cl.lt4CSn)
M/DS/H
EXHIBIT 10.2
NETSCAPE COMMUNICATIONS CORPORATION
PURCHASE AGREEMENT
AGREEMENT made as of this
day of
, 199_, by
and among Netscape Communications Corporation, a Delaware corporation (the
-"Corporation"),
, the holder of a stock option ("Optionee") under the
Corporation's 1994 Stock Option Plan (the "Plan"), and
, Optionee's
spouse.
All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix, unless otherwise indicated.
A.
EXERCISE OF OPTION
1.
Exercise. Optionee hereby purchases
shares of Common
Stock (the "Purchased Shares") pursuant to that certain option (the "Option") granted
Optionee on
(the "Grant Date") to purchase up to
shares of
Common Stock under the Plan at the exercise price of $
per share (the "Exercise
Price").
2.
Payment. Concurrently with the delivery of this Agreement to the
Corporate Secretary, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver whatever
additional documents may be required by the Option Agreement as a condition for exercise,
together with a duly-executed blank Assignment Separate from Certificate (in the form
attached hereto as Exhibit I) with respect to the Purchased Shares.
3.
Delivery of Certificates. The certificates representing the Purchased
Shares hereunder which are subject to the Repurchase Right shall be held in escrow by the
Corporate Secretary in accordance with the provisions of Article G.
4.
Stockholder Rights. Until such time as the Corporation actually
exercises its Repurchase Right, First Refusal Right or Special Purchase Right under this
Agreement, Optionee (or any successor in interest) shall have all the rights of a stockholder
(including voting, dividend and liquidation rights) with respect to the Purchased Shares,
including the Purchased Shares held in escrow under Article G, subject, however, to the
transfer restrictions of Article D.
B.
SECURITIES LAW COMPLIANCE
1.
Exemption from Registration. The Purchased Shares have not been
registered under the 1933 Act and are accordingly being issued to Optionee in reliance upon
the exemption from such registration provided by Rule 701 of the SEC for stock issuances
under compensatory benefit plans such as the Plan. Optionee hereby acknowledges receipt
of a*copy of the Plan in the form of Exhibit C to the Grant Notice.
BPHf»AnSEL\OOM076.02
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] t
' '
2.
Restricted Securities.
(a)
Optionee hereby confirms that Optionee has been informed that
the Purchased Shares are restricted securities under the 1933 Act and may not be resold or
transferred unless the Purchased Shares are first registered under the Federal securities laws
or unless an exemption from such registration is available. Accordingly, Optionee hereby
^acknowledges that Optionee is prepared to hold the Purchased Shares for an indefinite
period and that Optionee is aware that Rule 144 of the SEC issued under the 1933 Act is
not presently available to exempt the resale of the Purchased Shares from the registration
requirements of the 1933 Act.
(b)
Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the reporting
requirements of the Exchange Act, the Purchased Shares, to the extent vested under
Article £, may be sold (without registration) pursuant to the applicable requirements of
Rule 144. If Optionee is at the time of such sale an affiliate of the Corporation for
purposes of Rule 144 or was such an affiliate during the preceding three (3) months, then
the sale must comply with all the requirements of Rule 144 (including the volume limitation
on the number of shares sold, the broker/market-maker sale requirement and the requisite
notice to the SEC); however, the two (2)-year holding period requirement of Rule 144 will
not be applicable. If Optionee is not at the time of the sale an affiliate of the Corporation
nor was such an affiliate during the preceding three (3) months, then none of the
requirements of Rule 144 (other than the broker/market-maker sale requirement for
Purchased Shares held for less than three (3) years following payment in cash of the
Exercise Price therefor) will be applicable to the sale.
(c)
Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he or she is not at the time
an affiliate of the Corporation (nor was such an affiliate during the preceding three (3)
months), sell the Purchased Shares (without registration) pursuant to paragraph (k) of
Rule 144 after the Purchased Shares have been held for a period of three (3) years
following the payment of the Exercise Price for such shares.
3.
Disposition of Shares. Optionee hereby agrees that Optionee shall
make no disposition of the Purchased Shares (other than a permitted transfer under
paragraph D.I) unless and until there is compliance with all of the following requirements:
(i)
Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed disposition,
(ii)
Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
BPHPJUVSEIA0064076.02
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* O
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the Corporation, that
(a) the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule 144)
has been taken.
(iv) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the Corporation, that
the proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions of
the Rules of the California Corporations Commissioner identified in
paragraph B.5.
The Corporation shall .not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the provisions of this
Agreement S2L (ii) to treat as the owner of the Purchased Shares, or otherwise to accord
voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have
been transferred in contravention of this Agreement.
4.
Restrictive Legends. In order to reflect the restrictions imposed by this
Agreement upon the disposition of the Purchased Shares, the stock certificates for the
Purchased Shares shall be endorsed with restrictive legends, including one or more of the
following legends:
(i)
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares ma)' not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action* letter of the Securities and
Exchange Commission with respect to such sale or offer or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii)
"It is unlawful to consummate a sale or transfer of this
security, or any interest therein, or to receive any consideration therefor,
without the prior written consent of the Commissioner of Corporations of the
State of California, except as permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are unvested
and accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written
BPKPM \SEL\0064076.02
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1/
., 199_ between the Corporation and the
agreement dated
registered holder of the shares (or the predecessor in interest to the shares).
Such agreement grams certain repurchase rights and rights of first refusal to
the Corporation (or its assignees) upon the sale, assignment, transfer,
encumbrance or other disposition of the shares or upon termination of service
with the Corporation. A copy of such agreement is maintained at the
Corporation's principal corporate offices."
5.
Receipt of Commissioner Rules. Optionee hereby acknowledges receipt
of a copy of Section 260.141.11 of the Rules of the California Corporations Commissioner,
a copy of which is attached as Exhibit II to this Agreement.
C.
SPECIAL TAX ELECTION
1.
Section 83fb) Election For Exercise of Non-Stafutorv Stock Option.
If the Purchased Shares are acquired hereunder pursuant to the exercise of a Non-Statutory
Option, as specified in the Grant Notice, then Optionee understands that under Code
Section 83, the excess of the Fair Market Value of the Purchased Shares on the date any
forfeiture restrictions applicable to such shares lapse over the Exercise Price paid for such
shares will be reportable as ordinary income on the lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase the Purchased
Shares pursuant to the Repurchase Right provided under Article E. Optionee understands
that he/she may elect under Code Section 83(b) to be taxed at the time the Purchased
Shares are acquired hereunder, rather than when and as such Purchased Shares cease to be
subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue
Service within thirty (30) days after the date of this Agreement. Even if the Fair Market
Value of the Purchased Shares on the date of this Agreement equals the Exercise Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax consequences
in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT
HI HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE,
2.
Conditional Section 83(b) Ejection For Exercise of Incentive Option.
If the Purchased Shares are acquired hereunder pursuant to the exercise of an Incentive
Option under the Federal tax laws, as specified in the Grant Notice, then the following tax
principles shall be applicable to the Purchased Shares:
(i)
For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
BPHPJH \SEL\0064076.02
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4.
(ii)
The excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on the date
any forfeiture restrictions applicable to the Purchased Shares lapse over (b)
the Exercise Price paid for the Purchased Shares will be includible in
Optionee's taxable income for alternative minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the
Purchased Shares, then Optionee will recognize ordinary income in the year
of such disposition equal in amount to the excess of (a) the Fair Market
Value of the Purchased Shares on the date the Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (b) the Exercise Price paid for the Purchased Shares. Any
additional gain recognized upon the disqualifying disposition will be either
short-term or long-term capital gain depending upon the period for which the
Purchased Shares are held prior to the disposition.
(iv) For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right under Article E. The
term "disqualifying disposition" means any sale or other disposition & of the
Purchased Shares within two (2) years after the Grant Date or within one (1)
year after the exercise date of the Option.
(v)
In the absence of final Treasury Regulations relating to
Incentive Options, it is not certain whether Optionee may, in connection with
the exercise of the Option for any Purchased Shares at the time subject to
forfeiture restrictions, file a protective election under Code Section 83(b)
which would limit (a) Optionee's alternative minimum taxable income upon
exercise and (b) Optionee's ordinary income upon a disqualifying disposition
to the excess of the Fair Market Value of the Purchased Shares on the date
the Option is exercised over the Exercise Price paid for the Purchased Shares.
The appropriate form for making such a protective election is attached as
Exhibit i n to this Agreement and must be filed with the Internal Revenue
Service within thirty (30) days after the date of this Agreement. However,
i/
Generally, a disposition of shares purchased under an Incentive Option includes any
transfer of legal title, including a transfer by sale, exchange or gift, but does not
include a transfer to the Optionee's spouse, a transfer into joint ownership with right
of survivorship if Optionee remains one of the joint owners, a pledge, a transfer by
bequest or inheritance or certain tax free exchanges permitted under the Code.
BPHPJn\SEl\0064076.02
12/16/94
5.
such election if properly filed will only be allowed to the extent the final
Treasury Regulations permit such a protective election.
3.
FILING RESPONSIBILITY. OPTIONEE ACKNOWLEDGES THAT
IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO
FILE A TIMELY ELECTION UNDER SECTION 83<b), EVEN IF OPTIONEE REQUESTS
-THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS
OR HER BEHALF.
D.
TRANSFER RESTRICTIONS
1.
Restriction on Transfer. Optionee shall not transfer, assign, encumber
or otherwise dispose of any of the Purchased Shares which are subject to the Repurchase
Right under Article E. In addition, Purchased Shares which are released from the
Repurchase Right shall not be transferred, assigned, encumbered or otherwise made the
subject of disposition in contravention of the First Refusal Right under Article F or the
market stand-off provisions of paragraph D.3. Such restrictions on transfer, however, shall
iioj be applicable to (i) a gratuitous transfer of the Purchased Shares, provided and only if
Optionee obtains the Corporation's prior written consent to such transfer, (ii) a transfer of
title to the Purchased Shares effected pursuant to Optionee's will or the laws of intestate
succession or (iii) a transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by Optionee in connection with the acquisition of the Purchased
Shares.
2.
Transferee Obligations. Each person (other than the Corporation) to
whom the Purchased Shares are transferred by means of one of the permitted transfers
specified in paragraph D.I must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Corporation that such person is bound by the provisions of
this Agreement and that the transferred shares are subject to (i) both the Repurchase Right
and the First Refusal Right granted hereunder and (ii) the market stand-off provisions of
paragraph D.3, to the same extent such shares would be so subject if retained by Optionee.
3.
Market Stand-OfT.
(a)
In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration statement filed
under the 1933 Act, including the Corporation's initial public offering, Owner shall not sell,
make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such period of time
from and after the effective date of the final prospectus for the offering as may be requested
BPHPJtl \SEL\0064076.M
12/16/94
6.
by the Corporation or such underwriters; provided, however, that in no event shall such
period exceed one hundred eighty (180) days. The limitations of this paragraph D.3 shall
in all events terminate two (2) years after the effective date of the Corporation's initial
public offering.
(b)
Owner shall be subject to the market stand-off provisions of this
.paragraph D.3 provided and only if the officers and directors of the Corporation are also
subject to similar arrangements.
(c)
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the Corporation's
outstanding Common Stock effected as a class without the Corporation's receipt of
consideration, then any new, substituted or additional securities distributed with respect to
the Purchased Shares shall be immediately subject to the provisions of this paragraph D.3,
to the same extent the Purchased Shares are at such time covered by such provisions.
(d)
In order to enforce the limitations of this paragraph D.3, the
Corporation may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
E.
REPURCHASE RIGHT
1.
Grant. Hie Corporation is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the sixty (60)-day period following the date Optionee
ceases for any reason to remain in Service or (if later) during the; sixty (60)-day period
following the execution date of this Agreement, to repurchase at the Exercise Price all or
(at the discretion of the Corporation and with the consent of Optionee) any portion of the
Purchased Shares in which Optionee is not, at the time of his or her cessation of Service,
vested in accordance with the vesting provisions of paragraph E.3 (such shares to be
hereinafter called the "Unvested Shares").
2.
Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares prior to the
expiration of the applicable sixty (60)-day period specified in paragraph E.I. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on which the
repurchase is to be effected, such date to be not more than thirty (30) days after the date
of notice. To the extent one or more certificates representing Unvested Shares may have
been previously delivered out of escrow to Owner, Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Corporate Secretary the
certificates representing the Unvested Shares to be repurchased, each certificate to be
properly endorsed for transfer. The Corporation shall, concurrently with the receipt of such
stock certificates (either from escrow in accordance with paragraph G3 or from Owner as
BPHPtfi \SEL\0064076.02
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7.
)Z\
herein provided), pay to Owner in cash or cash equivalents (including the cancellation of
any purcbase-money indebtedness), an amount equal to the Exercise Price previously paid
for the Unvested Shares which are to be repurchased from Owner.
3.
Termination of the Repurchase Right. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely exercised under
^jaragraph E.2. In addition, the Repurchase Right shall terminate, and cease to be
exercisable, with respect to any and all Purchased Shares in wliich Optionee vests in
accordance with the vesting schedule specified in the Grant Notice. All Purchased Shares
as to which the Repurchase Right lapses shall, however, continue to be subject to (i) the
First Refusal Right of the Corporation and its assignees under Article F, (ii) the market
stand-off provisions of paragraph D.3 and (iii) the Special Purchase Right under Article H.
4.
Aggregate Vesting Limitation. If the Option is exercised in more than
one increment so that Optionee is a party to one or more other Stock Purchase Agreements
("Prior Purchase Agreements") which are executed prior to the date of this Agreement, then
the total number of Purchased Shares as to which Optionee shall be deemed to have a fullyvested interest under this Agreement and all Prior Purchase Agreements shall not exceed
in the aggregate the number of Purchased Shares in which Optionee would otherwise at the
time be vested, in accordance with the vesting provisions of paragraph E.3, had all the
Purchased Shares been acquired exclusively under this Agreement.
5.
Fractional Shares. No fractional shares shall be repurchased by the
Corporation. Accordingly, should the Repurchase Right extend to a fractional share (in
accordance with the vesting provisions of paragraph E.3) at the time Optionee ceases
Service, then such fractional share shall be added to any fractional share in which Optionee
is at such time vested in order to make one whole vested share no longer subject to the
Repurchase Right.
6.
Additional Shares or Substituted Securities. In the event of any stock
split, stock dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class effected without the
Corporation's receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is by reason
of any such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Repurchase Right, but only to the extent the Purchased Shares
are at the time covered by such right. Appropriate adjustments to reflect the distribution
of such securities or property shall be made to the number and/or class of Purchased Shares
subject to this Agreement and to the price per share to be paid upon the exercise of the
Repurchase Right in order to reflect the effect of any such transaction upon the
Corporation's capital structure: provided, however, that the aggregate price shall remain the
same.
WHP*1 \SEL\OOM076.D2
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7.
Corporate Transaction.
(a)
Immediately prior to the consummation of a Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety, except to the
extent the Repurchase Right is to be assigned to the successor corporation (or its parent
company) in connection with such Corporate Transaction.
(b)
To the extent the Repurchase Right remains in effect following
a Corporate Transaction, the right shall apply to the new capital stock or other property
(including cash paid other than as a regular cash dividend) received in exchange for the
Purchased Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments shall be
made to the price per share payable upon exercise of the Repurchase Right to reflect the
effect of the Corporate Transaction upon the Corporation's capital structure; provided.
however, that the aggregate price shall remain the same.
F.
RIGHT OF FIRST REFUSAL
1.
Grant. The Corporation is hereby granted the right of first refusal (the
"First Refusal Right"), exercisable in connection with any proposed transfer of the Purchased
Shares in which Optionee has vested in accordance with the vesting provisions of Article E.
For purposes of this Article F, the term "transfer" shall include any sale, assignment, pledge,
encumbrance or other disposition of the Purchased Shares intended to be made by Owner,
but shall not include any of the permitted transfers under paragraph D.I.
2.
Notice Qf Intended Disposition. In the event any Owner of the
Purchased Shares desires to accept a bona fide third-party offer foi the transfer of any or
all of such shares (the Purchased Shares subject to such offer to be hereinafter called the
'Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary written notice
(the "Disposition Notice") of the terms and conditions of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in contravention
of the provisions set forth in Articles B and D.
3.
Exercise of Right. The Corporation (or its assignees) shall, for a period
of twenty-five (25) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares subject to the Disposition Notice upon the same
terms and conditions as those specified therein or upon such other terms and conditions (not
materially different from those specified in the Disposition Notice) to which Owner
consents. Such right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the twenty-five (25)-day exercise period. If such right
is exercised with respect to all the Target Shares, then the Corporation (or its assignees)
BPHPiH \SEL\0OMO76.02
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shall effect the repurchase of such shares, including payment of the purchase price, not more
than five (5) business days after delivery of the Exercise Notice; and at such time Owner
shall deliver to the Corporation the certificates representing the Target Shares to be
repurchased, each certificate to be properly endorsed for transfer. 1b the extent any of the
Target Shares are at the time held in escrow under Article G, the certificates for such shares
shall automatically be released from escrow and delivered to the Corporation for purchase.
Should the purchase price specified in the Disposition Notice be payable in
property other than cash or evidences of indebtedness, the Corporation (or its assignees)
shall have the right to pay the purchase price in-the form of cash equal in amount to the
value of such property. If Owner and the Corporation (or its assignees) cannot agree on
such cash value within ten (10) days after the Corporation's receipt of the Disposition
Notice, the valuation shall be made by an appraiser of recognized standing selected by
Owner and the Corporation (or its assignees) or, if they cannot agree on an appraiser within
twenty (20) days after the Corporation's receipt of the Disposition Notice, each shall select
an appraiser of recognized standing and the two (2) appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by Owner and the Corporation. The closing
shall then be held on the later of (i) the fifth business day following delivery of the Exercise
Notice or (ii) the fifth business day after such cash valuation shall have been made.
4.
Non-Exercise of Right. In the event the Exercise Notice is not given
to Owner within twenty-five (25) days following the date of the Corporation's receipt of the
Disposition Notice, Owner shall have a period of thirty (30) days thereafter in which to sell
or otherwise dispose of the Target Shares to the third-party offeror identified in the
Disposition Notice upon terms and conditions (including the purchase price) no more
favorable to such third-party offeror than those specified in the Disposition Notice: provided.
however, that any such sale or disposition must not be effected in contravention of the
provisions of Article B. To the extent any of the Target Shares aie at the time held in
escrow under Article G, the certificates for such shares shall automatically be released from
escrow and surrendered to Owner. The third-parry offeror shall acquire the Target Shares
free and clear of the Repurchase Right under Article E and the First Refusal Right
hereunder, but the acquired shares shall remain subject to (i) the securities law restrictions
of paragraph B.2(a) and (ii) the market stand-off provisions of paragraph D.3. In the event
Owner does not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the First Refusal Right shall continue to be applicable to any
subsequent disposition of the Target Shares by Owner until such right lapses in accordance
with paragraph F.7.
5.
Partial Exercise of Right. In the event the Corporation (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a portion, but
not all, of the Target Shares specified in the Disposition Notice, Owner shall have the
BPHPJmSEl\00*M>76.02
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10.
option, exercisable by written notice to the Corporation delivered within five (5) days after
Owner's receipt of the Exercise Notice, to effect the sale of the Target Shares pursuant to
either of the following alternatives:
(i)
sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of paragraph F.4, as if the Corporation did not exercise
the First Refusal Right hereunder; or
(ii)
sale to the Corporation (or its assignees) of the portion
of the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the provisions
of paragraph F.3.
Failure of Owner to deliver timely notification to the Corporation under this
paragraph F.S shall be deemed to be an election by Owner to sell the Target Shares
pursuant to alternative (i) above.
6.
Recapitalization/Reorganization.
(a)
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other transaction affecting the outstanding
Common Stock as a class effected without the Corporation's receipt of consideration, any
new, substituted or additional securities or other property which is by reason of such
transaction distributed with respect to the Purchased Shares shall be immediately subject
to the First Refusal Right hereunder, but only to the extent the Purchased Shares are at the
time covered by such right.
(b)
In the event of a Reorganization, the First Refusal Right shall
remain in full force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the Reorganization, but
only to the extent the Purchased Shares are at the time covered by such right.
7.
Lafi££. The First Refusal Right under this Article F shall lapse and
cease to have effect upon the earliest to occur of (i) the first date on which shares of the
Common Stock are held of record by more than five hundred (500) persons, (ii) a
determination is made by the Board that a public market exists for the outstanding shares
of Common Stock or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least ten million dollars ($10,000,000).
However, the market stand-off provisions of paragraph D.3 shall continue to remain in full
force and effect following the lapse of the First Refusal Right hereunder.
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11.
G.
ESCROW
1.
Deposit. Upon issuance, the certificates for the Purchased Shares shall
be deposited in escrow with the Corporate Secretary to be held in accordance with the
provisions of this Article G. Each deposited certificate shall be accompanied by a dulyexecuted Assignment Separate from Certificate in the form of Exhibit I. The deposited
-certificates, together with any other assets or securities from time to time deposited with the
Corporate Secretary pursuant to the requirements of this Agreement, shall remain in escrow
until such time or times as the certificates (or other assets and securities) are to be released
or otherwise surrendered for cancellation in accordance with paragraph G.3. Upon delivery
of the certificates (or other assets and securities) to the Corporate Secretary, Owner shall
be issued an instrument of deposit acknowledging the number of Purchased Shares (or other
assets and securities) delivered in escrow.
2.
Recapitalization. In the event of any stock: split, stock dividend,
recapitalization, combination of shares, exchange of shares, or other change affecting the
Corporation's outstanding Common Stock as a class effected without the Corporation's
receipt of consideration or in the event of a Corporate Transaction or Reorganization, any
new, substituted or additional securities or other property which is by reason of such
transaction distributed with respect to the Purchased Shares shall be immediately delivered
to the Corporate Secretary to be held in escrow under this Article G, but only to the extent
the Purchased Shares are at the time subject to the escrow requirements of paragraph G.I.
However, all regular cash dividends on the Purchased Shares (or other securities at the time
held in escrow) shall be paid directly to Owner and shall not be held in escrow.
3.
Release/Surrender. The Purchased Shares, together with any other
assets or securities held in escrow nereunder, shall be subject to the following terms and
conditions relating to their release from escrow or their surrender to the Corporation for
repurchase and cancellation:
(i)
Should the Corporation (or its assignees) elect to exercise
the Repurchase Right with respect to any Purchased Shares, then the
escrowed certificates for such Purchased Shares (together with any other
assets or securities attributable thereto) shall be delivered to the Corporation
concurrently with the payment to Owner, in cash or cash equivalent (including
the cancellation of any purchase-money indebtedness), of an amount equal to
the aggregate Exercise Price for such Purchased Shares, and Owner shall
cease to have any further rights or claims with respect to such Purchased
Shares (or other assets or securities attributable to such Purchased Shares).
(ii)
Should the Corporation (or its assignees) elect to exercise
its First Refusal Right with respect to any vested Target Shares held at the
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12.
time in escrow hereunder, then the escrowed certificates for such Target
Shares (together with any other assets or securities attributable thereto) shall,
concurrently with the payment of the paragraph F.3 purchase price for such
Target Shares to Owner, be surrendered to the Corporation, and Owner shall
cease to have any further rights or claims with respect to such Target Shares
(or other assets or securities attributable thereto).
(iii) Should the Corporation (or its assignees) elect noj to
exercise its First Refusal Right with respect to any Target Shares held at the
time in escrow hereunder, then the escrowed certificates for such Target
Shares (together with any other assets or securities attributable thereto) shall
be surrendered to Owner for disposition in accordance with provisions of
paragraph F.4.
(iv) As the interest of Optionee in the Purchased Shares (or
any other assets or securities attributable thereto) vests in accordance with the
provisions of Article E, the certificates for such vested shares (as well as all
other vested assets and securities) shall be released from escrow upon
Owner's request, but not more frequently than once every six (6) months.
(v)
All purchased shares in which Optionee is vested (and
any other vested assets and securities attributable thereto) shall be released
within thirty (30) days after the earliest to occur of (a) Optionee's cessation
of Service, (b) the termination of the Repurchase Right in accordance with
the applicable provisions of Article E or (c) the termination of the First
Refusal Right in accordance with paragraph F.7.
(vi) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph (iv)
or (v) above shall nevertheless remain subject to (a) the First Refusal Right,
to the extent such right has not otherwise lapsed pursuant to paragraph F.7,
(b) the market stand-off provisions of paragraph D.3 until such provisions
terminate in accordance therewith and (c) the Special Purchase Right, to the
extent such right has not otherwise lapsed pursuant to paragraph H.4.
H.
1.
Grant. In connection with the dissolution of Optionee's marriage or
the legal separation of Optionee and Optionee's spouse, the Corporation shall have the right
(the "Special Purchase Right"), exercisable at any time during the thirty (30)-day period
following the Corporation's receipt of the required Dissolution Notice under paragraph H.2,
to purchase from Optionee's spouse, in accordance with the provisions of paragraph H.3,
BPHPjn\SEL\0064074.02
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all or any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights such spouse
may have in such shares.
2.
Notice of Decree or Agreement. Optionee shall promptly provide the
Corporate Secretary with written notice (the "Dissolution Notice") of (i) the entry of any
-judicial decree or order resolving the property rights of Optionee and Optionee's spouse in
connection with their marital dissolution or legal separation or (ii) the execution of any
contract or agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of dissolution or
settlement agreement between Optionee and Optionee's spouse which provides for the
award to the spouse of one or more Purchased Shares in settlement of any community
property or other marital property rights such spouse may have in such shares.
3.
Exercise of Special Purchase Right. The Special'Purchase Right shall
be exercisable by delivery of written notice (the "Purchase Notice") to Optionee and
Optionee's spouse within thirty (30) days after the Corporation's receipt of the Dissolution
Notice. The Purchase Notice shall indicate the number of shares to be purchased by the
Corporation, the date such purchase is to be effected (such date to be not less than five (S)
business days, nor more than ten (10) business days, after the date cif the Purchase Notice)
and the Fair Market Value to be paid for such Purchased Shares. Optionee (or Optionee's
spouse, to the extent such spouse has physical possession of the Purchased Shares) shall,
prior to the close of business on the date specified for the purchase, deliver to the
Corporate Secretary the certificates representing the shares to be purchased, each certificate
to be properly endorsed for transfer. To the extent any of the shares to be purchased by
the Corporation are at the time held in escrow under Article G, the certificates for such
shares shall be promptly delivered out of escrow to the Corporation. The Corporation shall,
concurrently with the receipt of the stock certificates, pay to Optionee's spouse (in cash or
cash equivalents) an amount equal to the Fair Market Value specified for such shares in the
Purchase Notice.
If Optionee's spouse does not agree with the Fair Market Value specified for
the shares in the Purchase Notice, then the spouse shall promptly notify the Corporation in
writing of such disagreement and the fair market value of such shares shall thereupon be
determined by an appraiser of recognized standing selected by the Corporation and the
spouse. If they cannot agree on an appraiser within twenty (20) days after the date of the
Purchase Notice, each shall select an appraiser of recognized standing, and the two (2)
appraisers shall designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally by the
Corporation and Optionee's spouse. The closing shall then be held on the fifth business day
following the completion of such appraisal; provided, however, that if the appraised value
is more than twenty-five percent (25%) greater than the Fair Market Value specified for the
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14.
shares in the Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5) business-day period, to rescind the exercise of the Special
Purchase Right and thereby revoke its election to purchase the shares awarded to the
spouse.
4.
Lap$e. The Special Purchase Right under this Article H shall lapse and
-cease to have effect upon the earlier to occur of (i) the first date on which the First Refusal
Right lapses or (ii) the expiration of the thirty (30)-day exercise period specified in
paragraph H 3 , to the extent the Special Purchase Right is not timely exercised in
accordance with such paragraph.
I.
GENERAL PROVISIONS
1.
Assignment. The Corporation may assign its Repurchase Right, its First
Refusal Right and/or its Special Purchase Right to any person or entity selected by the
Board, including (without limitation) one or more stockholders of Ihe Corporation.
If the assignee of the Repurchase Right is other than (i) a wholly owned
subsidiary of the Corporation or (ii) the parent corporation owning one hundred percent
(100%) of the Corporation's outstanding capital stock, then such assignee must make a cash
payment to the Corporation, upon the assignment of the Repurchase Right, in an amount
equal to the excess (if any) of (i) the Fair Market Value of the Purchased Shares at the time
subject to the assigned Repurchase Right over (ii) the aggregate repurchase price payable
for the Purchased Shares thereunder.
2.
No Employment or Service Contract. Nothing in this Agreement or in
the Plan shall confer upon Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary) or Optionee, which rights are hereby expressly
reserved by each, to terminate Optionee's Service at any time for any reason whatsoever,
with or without cause.
3.
Notice}. Any notice required in connection with (i) the Repurchase
Right, the Special Purchase Right or the First Refusal Right or (ii) the disposition of any
Purchased Shares covered thereby shall be given in writing and shall be deemed effective
upon personal delivery or upon deposit in the United States mail, registered or certified,
postage prepaid and addressed to the party entitled to such notice at the address indicated
below such party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice under this paragraph 1.3 to all other
parties to this Agreement.
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15.
4.
No Waiver. The failure of the Corporation (or its assignees) in any
instance to exercise the Repurchase Right, or the failure of ihe Corporation (or its
assignees) in any instance to exercise the First Refusal Right, or the failure of the
Corporation (or its assignees) in any instance to exercise the Special Purchase Right shall
not constitute a waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement between
-the Corporation and Optionee or Optionee's spouse. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
5.
Cancellation of Shares. If the Corporation (or its assignees) shall make
available, at the time and place and in the amount and form provided in this Agreement,
the consideration .for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from whom such
shares are to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed purchased in accordance with the applicable
provisions hereof, and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been delivered as
required by this Agreement.
J.
MISCELLANEOUS PROVISIONS
1.
Optionee Undertaking. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may deem
necessary or advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on either Optionee or the Purchased Shares pursuant to the express
provisions of this Agreement.
2.
Agreement is Entire Contract.
contract between the parties hereto with regard
Agreement is made pursuant to the provisions of
construed in conformity with the express terms and
This Agreement constitutes the entire
to the subject matter hereof. This
the Plan and shall in all respects be
provisions of the Plan.
3.
Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without resort to that State's conflictof-laws rules.
4.
Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall constitute one
and the same instrument.
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16.
5.
Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Corporation and its successors and assigns and
Optionee and Optionee's legal representatives, heirs, legatees, distributees, assigns and
transferees by operation of law, whether or not any such person shall have become a party
to this Agreement and have agreed in writing to join herein and be bound by the terms and
conditions hereof.
6.
Power of Attorney. Optionee's spouse hereby appoints Optionee his or
her true and lawful attorney in fact, for him or her and in his or her name, place and stead,
and for his or her use and benefit, to agree to any amendment or modification of this
Agreement and to execute such further instruments and take such further actions as may
reasonably be necessary to carry out the intent of this Agreement. Optionee's spouse
further gives and grants unto Optionee as his or her attorney in fact full power and authority
to do and perform every act necessary and proper to be done in the exercise of any of the
foregoing powers as fully as he or she might or could do if personally present, with full
power of substitution and revocation, hereby ratifying and confirming all that Optionee shall
lawfully do and cause to be done by virtue of this power of attorney.
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17.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
NETSCAPE COMMUNICATIONS CORPORATION
By:
Title:
Address:
OPTIONEE
Address:
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's granting
Optionee the right to acquire the Purchased Shares in accordance with the terms of such
Agreement, the undersigned hereby agrees to be irrevocably bound by all the terms and
provisions of such Agreement, including (specifically) the right of the Corporation (or its
assignees) to purchase any and all interest or right the undersigned may otherwise have in
such shares pursuant to community property laws or other marital property rights.
OPTIONEE'S SPOUSE
Address:
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18.
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED,
hereby sell(s),
assign(s) and transfer(s) unto Netscape Communications Corporation (the "Corporation"),
(
) shares of the Common Stock of the Corporation
standing in his or her name on the books of the Corporation represented by Certificate No.
herewith, and does hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated:
Signature
Instruction: Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate. The purpose
of this assignment is to enable the Corporation to exercise its Repurchase Right set forth
in the Agreement without requiring additional signatures on the patt of Optionee.
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EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer, (a) The issuer of any security upon which
_a restriction on transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or
260.534 shall cause a copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b)
It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written consent of the
Commissioner (until this condition is removed pursuant to Section 260.141.12 of these rules),
except:
(1)
to the issuer;
(2)
pursuant to the order or process of any court;
(3)
to any person described in Subdivision (i) of Section 25102 of the Code
or Section 260.105.14 of these rules;
(4)
to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's ancestors, descendants, or
spouse; or to a transferee by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5)
to holders of securities of the same class of the same issuer;
(6)
by way of gift or donation inter vivos or on death;
(7)
by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country who is neither
domiciled in this state to the knowledge of the broker-dealer, nor actually present in this
state if the sale of such securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8)
to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling group;
(9)
if the interest sold or transferred is a pledge or other lien given by the
purchaser to the seller upon a sale of the security for which the (Commissioner's written
consent is obtained or under this rule not required;
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II-l
(10) byway of a sale qualified under Sections 25111,25112,25113 or 25121
of the Code, of the securities to be transferred, provided that no order under Section 25140
or Subdivision (a) of Section 25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
_
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or Subdivision (a) of Section 25143
is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or (15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in either such case, such
person (i) discloses to potential purchasers at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of the Code but
exempt from that qualification requirement by subdivision (f) of Section .25102; provided
that any such transfer is on the condition that any certificate evidencing the security issued
to such transferee shall contain the legend required by this section.
(c)
The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear
on their face a legend, prominently stamped or printed thereon in capital letters of not less
than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR. WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
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H-2
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant
to Treas. Reg. Section 1.83-2.
(1)
The taxpayer who performed the services is:
~~
Name:
Address:
Taxpayer Ident. No.:
(2)
The property with respect to which the election is being made is _
of the common stock of Netscape Communications Corporation.
(3)
The property was issued on
(4)
The taxable year in which the election is being made is the calendar year 199_.
(5)
The property is subject to a repurchase right pursuant to which the issuer has the
right to acquire the property at the original purchase price if for any reason
taxpayer's employment with the issuer is terminated. The Issuer's repurchase right
lapses in a series of monthly installments over a 50 month period ending on
(6)
The fair market value at the time of transfer (determined without regard to any
restriction other than a restriction which by its terms will never lapse) is $
per share.
(7)
The amount paid for such property is $_
(8)
A copy of this statement was furnished to Netscape Communications Corporation for
whom taxpayer rendered the services underlying the transfer of property.
(9)
This statement is executed on
Spouse (if any)
shares
, 199 .
per share.
_, 199_.
Taxpayer
This election must be filed with the Internal Revenue Service Center with which taxpayer files
his or her Federal income tax returns and must be made within thirty (30) days after the
execution date of the Stock Purchase Agreement. This filing should be made by registered or
certified mail, return receipt requested. Optionee must retain two (2) copies of the completed
form for filing with his or her Federal and state tax returns for the current tax year and an
additional copy for his or her records.
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<
The property described in the above Section 83(b) election is comprised of shares of
common stock acquired pursuant to the exercise of an incentive stock option under Section
422 of the Internal Revenue Code (the "Code"). Accordingly, it is the intent of the Taxpayer
to utilize this election to achieve the following tax results:
1.
The purpose of this election is to have the alternative minimum taxable
income attributable to the purchased shares measured by the amount by which the fair
jnarket value of such shares at the time of their transfer to the Taxpayer exceeds the
purchase price paid for the shares. In the absence of this election, such alternative
minimum taxable income would be measured by the spread between the fair market value
of the purchased shares and the purchase price which exists on the various lapse dates in
effect for the forfeiture restrictions applicable to such shares. The election is to be effective
to the full extent permitted under the Code.
2.
Section 421(a)(l) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for such
shares. Accordingly, this election is also intended to be effective in the event there is a
"disqualifying disposition" of the shares, within the meaning of Section 421(b) of the Code,
which would otherwise render the provisions of Section 83(a) of the Code applicable at that
time. Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the purchased shares
on the date of transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section 83(b) election,
no taxable income is actually recognized for regular tax purposes at this time, and no
income taxes are payable, by the Taxpayer as a result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN
CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER
THE FEDERAL TAX LAWS.
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III-2
APPENDIX
DEFINITIONS
A.
Board shall mean the Corporation's Board of Directors.
B.
Code shall mean the Internal Revenue Code of 1986, as amended.
C
Common Stock shall mean the Corporation's common stock.
D.
Corporate Transaction shall mean one or more of the following stockholderapproved transactions:
(i)
a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or
(ii)
the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
E.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
F.
Fair Market Value of a share of Common Stock on any relevant date, prior
to the initial public offering of the Common Stock, shall be determined by the Plan
Administrator after taking into account such factors as it shall deem appropriate.
G.
Grant Notice shall mean the notice of grant of stock option pursuant to which
Optionee has been informed of the basic termsy of the Option.
H.
Incentive Opttpn shall mean a stock option granted under the Plan which
satisfies the requirements of Code Section 422.
I.
1933 Act shall mean the Securities Act of 1933, as amended.
J.
Non-Statutory Option shall mean an option not intended to meet the
requirements of Code Section 422.
K.
Option Agreement shall mean the agreement between the Corporation and
Optionee evidencing the Option.
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L,
Owner shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a permitted transfer from Optionee in
accordance with paragraph D.I.
M.
£ar£Dl shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
N.
Reorganization shall mean any of the following transactions:
(i)
a merger or consolidation in which the Corporation is not the
surviving entity,
(ii)
a sale, transfer or other disposition of all or substantially all of
the Corporation's assets,
(iii)
a reverse merger in which the Corporation is this surviving entity
but in which the Corporation's outstanding voting securities are transferred
in whole or in part to a person or persons other than those who held such
securities immediately prior to the merger, or
(iv)
any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
O.
SEC shall mean the Securities and Exchange Commission.
P.
Service shall mean the provision of services to the Corporation or any Parent
or Subsidiary by an individual in the capacity of an employee, subject to the control and
direction of the employer entity as to both the work to be performed and the manner and
method of performance, a non-employee member of the board of directors or a consultant.
Q.
Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
BPHPA1\SEL\0064076.02
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A-2
EXHIBIT 10.3
NETSCAPE COMMUNICATIONS CORPORATION
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH JANUARY 20, 1995)
.—
I.
PURPOSES OF THE PLAN
This 1994 Stock Option Plan is intended to promote the interests of Netscape
Communications Corporation, a Delaware corporation, by providing a method whereby
eligible individuals who provide valuable services to the Corporation (or any Parent or
Subsidiary) may be offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the Corporation and
continue to render services to the Corporation (or any Parent or Subsidiary).
II.
DEFINITIONS
For the purposes of this Plan, the following definitions shall be in effect:
A.
Board shall mean the Corporation's Board of Directors.
B.
Cffde shall mean the Internal Revenue Code of 1986, as amended.
C.
Committee shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under the Plan.
D.
Common Stock shall mean the Corporation's common stock.
H.
Corporate Transaction shall mean either of the following stockholderapproved transactions to which the Corporation is a parry:
(i)
a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a pet son or persons
different from the persons holding those who held those securities
immediately prior to such transaction, or
(ii)
the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F.
Corporation shall mean Netscape Communications Corporation, a
Delaware corporation.
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4i
G.
Disability shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or mental
impairment and shall be determined by the Plan Administrator on the basis of such medical
evidence as the Plan Administrator deems warranted under the circumstances. Disability
shall be deemed to constitute Permanent Disability in the event that such Disability is
expected to result in death or has lasted or can be expected to last for a continuous period
-of not less than twelve (12) months.
H.
Emplpyee shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.
I.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
J.
Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K.
Fair Market Value per share of Common Stock on any relevant date
under the Plan shall be the value determined in accordance with the following provisions:
(i)
If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(ii)
If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the FanMarket Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii)
If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the Nasdaq
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2.
National Market, then such Fair Market Value shall be determined by the
Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
L.
Incentive Option shall mean a stock option which satisfies the
requirements of Code Section 422.
M.
Non-Statutory Option shall mean a stock option not intended to meet
the requirements of Code Section 422.
N.
Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
O.
in this document.
Plt^n shall mean the Corporation's 1994 Stock Option Plan, as set forth
P.
Plan Administrator shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of the Plan in
accordance with Article in.
Q.
Service shall mean the provision of services to the Corporation or any
Parent or Subsidiary by an individual in the capacity of an Employee, a non-employee
member of the board of directors or a consultant.
R.
Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
S.
Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
T.
109£> Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing ten percent (10%) or more of the total combined voting
power of all classes of stock of the Corporation or any Parent or Subsidiary.
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III.
ADMINISTRATION OF THE PLAN
A.
The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to the
Committee. Members of the Committee shall serve for such period of time as the Board
may determine and shall be subject to removal by the Board at any time. The Board may
-also at any time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.
B.
The Plan Administrator shall have full power and authority (subject to
the provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Plan and to make such determinations under,
and issue such interpretations of, the Plan and any outstanding options as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option.
IV.
ELIGIBILITY FOR OPTION GRANTS
A.
The persons eligible to receive option grants under the Plan are as
follows:
(0
Employees,
(ii)
non-employee members of the Board or the nonemployee members of the board of directors of any Parent or Subsidiary,
and
(iii)
consultants who provide valuable services to the
Corporation (or any Parent or Subsidiary).
B.
The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the number of shares to be
covered by each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become exercisable,
the vesting schedule (if any) applicable to the option shares and the maximum term for
which the option is to remain outstanding.
V.
STOCK SUBJECT TO THE PLAN
A.
The stock issuable under the Plan shall be shares of the Corporation's
authorized but unissued or reacquired Common Stock. The maximum number of shares
BPHPJti \SEL\0064D66.04
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'i
1
which may be issued over the term of the Plan shall not exceed4,038,336^ shares, subjea
to adjustment from time to time in accordance with the provisions of this Article V.
B.
Shares subject to outstanding options shall be available for subsequent
option grants under the Plan to the extent (i) the options expire or terminate for any reason
prior to exercise in full or (ii) the options are cancelled in accordance with the cancellationregrant provisions of Article IX of the Plan. All shares issued under the Plan, whether or
not those shares are subsequently repurchased by the Corporation pursuant to its repurchase
rights under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent option grants.
C
In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments shall be made
to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the
number and/or class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments determined by the Plan Administrator shall be final, binding and
conclusive. In no event shall any adjustments be made for the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of the Common Stock.
VL
TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of the Plan
Administrator and may, at the Plan Administrator's discretion, be either Incentive Options
or Non-Statutory Options. Each granted option shall be evidenced by one or more
instruments in the form approved by the Plan Administrator, provided, however, that each
such instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subjea to the applicable
provisions of Article VII.
The
price per share shall be fixed by the Plan
Administrator. In no event, however, shall the exercise price per share be less than eightyfive percent (85%) of the Fair Market Value per share of Common Stock on the date of the
option grant
i/
Includes the 892,003-share Increase approved by Che Hoard on January 30, 1995 and
the 281,717-share increase approved by the Board on May 10, 1995, subject to
stockholder approval within twelve (12) months of th&c date.
aPHM1\SEIAOOM06&.0&
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2.
If the individual to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one hundred ten
percent (110%) of the Fair Market Value per share of Common Stock on the grant date.
3.
The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Article X and the agreement evidencing
-the grant, be payable in cash or check made payable to the Corporation. Should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the Exchange
Act at the time the option is exercised, then the exercise price may also be paid as follows:
(i)
in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii)
through a special sale and remittance procedure
pursuant to which the optionee shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such purchase and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment
of the exercise price for the purchased shares must be made on the Exercise Date.
B.
Term and Exercise of Options. Each option gt anted under the Plan
shall be exercisable at such time or times, during such period and for .such number of shares
as shall be determined by the Plan Administrator and set forth in the stock option
agreement. However, no option shall have a term in excess of ten (10) years measured from
the grant date. The option shall be exercisable during the optionee's lifetime only by the
optionee and shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the optionee's death.
C.
Effect of Termination of Service.
1.
Except to the extent otherwise provided pursuant to subsection
C.2 below, the following provisions shall govern the exercise period applicable to any options
held by the optionee at the time of cessation of Service or death:
BPHPA1 \SEL\0064066.M
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(i)
Should the optionee cease to remain in Service for any
reason other than death or Disability, then the period during which each
outstanding option held by such optionee is to remain exerdsable shall be
limited to the three (3)-month period following the date of such cessation
of Service.
(ii)
Should such Service terminate by reason of Disability,
then the period during which each outstanding option held by the optionee
is to remain exercisable shall be limited to the six (6)-month period
following the date of such cessation of Service. However, should such
Disability be deemed to constitute Permanent Disability, then the period
during which each outstanding option held by the optionee is to remain
exercisable shall be extended by an additional six (6) months so that the
exercise period shall be limited to the twelve (12)-month period following
the date of the optionee's cessation of Service by reason of such Permanent
Disability.
(iii)
Should the optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the optionee's death. During such limited period, the
option may be exercised by the personal representative of the optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the optionee's will or in accordance with the laws of descent
and distribution.
(iv)
Under no circumstances, however, shall any such option
be exercisable after the specified expiration date of the option term.
(v)
During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable for any vested shares for
which the option has not been exercised. However, the option shall,
immediately upon the optionee's cessation of Service, terminate and cease
to be outstanding with respect to any option shares for which the option is
not at that time exercisable or in which the optionee is not otherwise at
that time vested.
2.
The Plan Administrator shall have full power and authority to
extend the period of time for which the option is to remain exercisable following the
optionee's cessation of Service or death from the limited period in effect under subsection
BPM>ft\SEL\0QM066.04
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„
7.
I -'I /
C.1 of this Article VI to such greater period of time as the Plan Administrator shall deem
appropriate; provided, that in no event shall such option be exercisable after the specified
expiration date of the option term.
D.
Stockholder Rights. An optionee shall have no stockholder rights with
respect to the shares subject to the option until such individual shall have exercised the
-option and paid the exercise price.
E.
Unvested Shares. The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock undei the Plan. Should the
optionee cease Service while holding such unvested shares, the Corporation shall have the
right to repurchase, at the exercise price paid per share, all or (at the discretion of the
Corporation and with the consent of die optionee) any of those unvested shares. The terms
and conditions upon which such repurchase right shall be exercisable (including the period
and procedure for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the agreement evidencing
such repurchase right. In no event, however, may the Plan Administrator impose a vesting
schedule upon any option granted under the Plan or any shares of Common Stock subject
to the option which is more restrictive than twenty percent (20%) per year vesting,
beginning one (1) year after the grant date. All outstanding repurchase rights under the
Plan shall terminate automatically upon the occurrence of any Corporate Transaction,
except to the extent the repurchase rights are expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction.
F.
First Refusal Rights. Until such time as the Corporation's outstanding
shares of Common Stock are first registered under Section 12(g) of the Exchange Act, the
Corporation shall have the right of first refusal with respect to any proposed sale or other
disposition by the optionee (or any successor in interest by reason of purchase, gift or other
transfer) of any shares of Common Stock issued under the Plan. Such right of first refusal
shall be exercisable in accordance with the terms and conditions established by the Plan
Administrator and set forth in the agreement evidencing such right.
VII.
INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all Incentive
Options granted under the Plan. Except as modified by the provisions of this Article VII,
all the provisions of the Plan shall be applicable to Incentive Options. Incentive Options
may only be granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory shall noi be subject to such terms and conditions.
A.
Exercise Price. The exercise price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value per share of Common Stock on the date of grant.
6PHPAHSEU0OMO66.W
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8.
B.
Dollar Limitation. The aggregate Fair Market Value of the Common
Stock (determined as of the respective date or dates of grant) for which one (1) or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become exercisable as
Incentive Options during any one (1) calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
-such options which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted. Should the applicable
One Hundred Thousand Dollar ($100,000) limitation in fact be exceeded in any calendar
year, then the option shall nevertheless become exercisable for the excess number of shares
in such calendar year as a Non-Statutory Option.
C.
10% Stockholder. If any individual to whom an Incentive Option is
granted is a 10% Stockholder, then the option term shall not exceed five (5) years measured
from the grant date.
VIII.
CORPORATE TRANSACTION
A.
Upon the occurrence of a Corporate Transaction, each option at the
time outstanding under the Plan shall terminate and cease to be exercisable, except to the
extent assumed by the successor corporation or parent thereof.
B.
Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to remain outstanding shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number and class
of securities which would have been issuable to the optionee in the consummation of such
Corporate Transaction, had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the class and number of
securities available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share, provided the aggregate
exercise price payable for such securities shall remain the same.
C.
The grant of options under this Plan shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IX.
CANCELLATION AND REG RANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under the Plan and to grant in substitution therefor new options
under the Plan covering the same or different numbers of shares of Common Stock but with
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9.
14 i
an exercise price per share not less than (i) one hundred percent (100%) of the Fair Market
Value per share of Common Stock on the new grant date in the case of a grant of an
Incentive Option, (ii) one hundred ten percent (110%) of such Fair Market Value in the
case of an option grant to a 10% Stockholder or (Hi) eighty-five percent (85%) of such Fair
Market Value in the case of all other grants.
X.
LOANS
A.
The Plan Administrator may assist any optionee, other than a nonemployee director, in the exercise of one or more options granted to the optionee by:
(i)
authorizing the extension of a loan from the
Corporation to the optionee, or
(ii)
permitting the optionee to pay the exercise price in
installments over a period of years.
B.
The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be established by the Plan Administrator in its
sole discretion. Loans or installment payments may be authorized with or without security
or collateral. The maximum credit available to each optionee may not exceed the sum of
(i) the aggregate exercise price payable for the purchased shares (less the par value of such
shares) plus (ii) any Federal, state and local income and employment tax liability incurred
by the optionee in connection with such exercise.
C.
The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this Article X shall be subject to forgiveness by the
Corporation in whole or in part upon such terms and conditions as the Plan Administrator
may in its discretion deem appropriate.
XI.
NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary) or of the optionee, which rights
are hereby expressly reserved by each, to terminate the optionee's Service at any time for
any reason, with or without cause.
XII.
AMENDMENT OF THE PLAN
A,
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However, no such amendment
or modification shall, without the consent of the holders, adversely affect their rights and
obligations under their outstanding options. In addition, the Board shall not, without the
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10.
approval of the Corporation's stockholders, (i) increase the maximum number of shares
issuable under the Plan, except for permissible adjustments under Article V, (ii) materially
modify the eligibility requirements for option grants or (iii) otherwise materially increase
the benefits accruing to option holders.
B.
Options may be granted under this Plan to purchase shares of Common
-Stock in excess of the number of shares then available for issuance under the Plan, provided
an amendment sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan is approved by the Corporation's stockholders within twelve (12)
months after the date the excess grants are first made.
XIII.
EFFECTIVE DATE AND TERM OF PLAN
A.
The Plan became effective when adopted by the Board on June 17,
1994 and was approved by the Corporation's stockholders on July 1, 1994. On January 5,
1995, the Board adopted and approved an increase in the maximum aggregate number of
shares issuable over the term of the Plan from 1,702,500 to 2,864,616 shares, subject to
stockholder approval of the 1,162,116-share increase within twelve (12) months of the date
of approval by the Board. Options may be granted in reliance on the 1,162,116-share
increase prior to approval of such increase by the Corporation's stockholders, but no option
granted in reliance on such increase shall become exercisable, in whole or in part, unless
and until the increase shall have been approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the date of the Board's
adoption of the increase, then all options previously granted in reliance on such increase
shall terminate and no further options shall be granted. Subject to such limitation, the Plan
Administrator may grant options under the Plan at any time after the effective date and
before the date fixed herein for termination of the Plan.
B.
The Plan shall terminate upon the earliest of (i) the expiration of the
ten (10) year period measured from the date the Plan is adopted by the Board, (ii) the date
on which all shares available for issuance under the Plan shall have been issued or (iii) the
termination of all outstanding options under Article VIII. Upon such Plan termination, each
option and unvested share issuance outstanding under the Plan shall continue to have full
force and effect in accordance with the provisions of the agreements evidencing that option
or share issuance.
XIV.
USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general corporate purposes.
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11.
1 Jl
XV.
WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of any options
granted under the Plan shall be subject to the satisfaction by the optionee of all applicable
Federal, state and local income and employment tax withholding requirements.
XVI.
REGULATORY APPROVALS
Trie implementation of the Plan, the granting of any option hereunder and the
issuance of Common Stock upon the exercise of any option shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the Common Stock issued
pursuant to it.
XVII.
FINANCIAL REPORTS
The Corporation shall deliver at least annually to each individual holding an
outstanding option under the Plan financial statements concerning the Corporation, unless
the optionee is a key employee whose duties in connection with the Corporation assure such
individual access to equivalent information.
12.
NETSCAPE COMMUNICATOR CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A.
The Board has adopted the Plan for the purpose of attracting and retaining
the services of selected Employees (including officers and directors), non-employee members
of the Board and consultants who contribute to 'the financial success of the Corporation or
any Parent or Subsidiary.
B.
Optionee is an individual who is to render valuable services to the Corporation
or any Parent or Subsidiary, and this Agreement is executed pursuant to, and is intended
to carry out the purposes of, the Plan in connection with the Corporation's grant of a stock
option to Optionee.
C.
All capitalized terms in this Agreement shall have the meaning assigned to
them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1.
Grant of Option. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the Grant Date,
a stock option to purchase up to the number of Option Shares specified in the Grant Notice.
The Option Shares shall be purchasable from time to time during the option term at the
Exercise Price.
2.
Option Term. This option shall have a maximum term often (10) years
measured from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3.
Limited Transferabllltv. This option shall be neither transferable nor
assignable by Optionee other than by will or by the taws of descent and distribution
following Optionee's death and may be exercised, during Optionee's lifetime, only by
Optionee.
4.
Dates of Exercise. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice. As the option becomes
exercisable for one or more such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the Expiration Date
or sooner termination of the option term under Paragraph 5 or 6.
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5.
Cessation of Service. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the Expiration Date should
any of the following provisions become applicable:
(a)
Should Optionee cease to remain in Service for any reason
(other than death or Disability) while this option is outstanding, then the period for
-exercising this option shall be reduced to a three (3)-month period commencing with the
date of such cessation of Service, but in no event shall this option be exercisable at any time
after the Expiration Date. Upon the expiration of such three (3)-month period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be outstanding.
(b)
Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right shall lapse and this
option shall cease to be exercisable upon the earlier of (i) the expiration of the twelve (12)month period measured from the date of Optionee's death or (ii) the Expiration Date.
Upon the expiration of such twelve (12)-month period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding.
(c)
Should Optionee cease Service by reason of Disability while this
option is outstanding, then Optionee shall have a period of six (6) months (commencing with
the date of such cessation of Service) during which to exercise this option. However, should
such Disability be deemed to constitute Permanent Disability, then the period during which
this option is to remain exercisable shall be extended by an additional six (6) months so that
the exercise period shall be limited to the twelve (12)-month period following the date of
Optionee's cessation of Service by reason of such Permanent Disability. In no event shall
this option be exercisable at any time after the Expiration Date. Upon the expiration of the
applicable six (6) or twelve (12)-month period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding.
Note: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of favorable Incentive Option treatment, unless
such Disability constitutes Permanent Disability. In the event
that Incentive Option treatment is not available, this option will
be treated as a Non-Statutory Option.
(d)
During the limited period of post-Service exercisability
applicable under subparagraph (a), (b) or (c) above, this option may not be exercised in the
aggregate for more than the lesser of (i) the number of Option Shares for which the option
is, at the time of Optionee's cessation of Service, exercisable in accordance with the exercise
schedule specified in the Grant Notice or (ii) the number of Option Shares in which
Optionee is, at the time of his/her cessation of Service, vested in accordance with the
BPHPjn\SEL\00M074.OZ
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vesting schedule specified in the Grant Notice. To the extent Optionee is not vested in the
Option Shares at the time of his/her cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares:.
6.
Special Termination of Option.
(a)
Upon the occurrence of a Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the successor
corporation or parent thereof.
(b)
This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
7.
Ad lust men t In Potion Shares.
(a)
In the event any change is made to the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments shall be made
to (1) the total number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
(b)
If this option is to be assumed in connection with a Corporate
Transaction or is otherwise to remain outstanding, then this option shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issuable to Optionee in the consummation of
such Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the Exercise
Price payable per share, provided the aggregate Exercise Price payable hereunder shall
remain the same.
8.
Privilege of Stock Ownership. The holder of tliis option shall not have
any stockholder rights with respect to the Option Shares until such individual shall have
exercised the option and paid the Exercise Price.
9.
Manner of Exercising Option.
(a)
In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee (or in the
case of exercise after Optionee's death, Optionee's executor, administrator, heir or legatee,
as the case may be) must take the following actions:
W>HPift\SEl\O06M>74.02
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(i)
Execute and deliver to the Secretary of the
Corporation a stock purchase agreement (the "Purchase Agreement") in
substantially the form of Exhibit B to the Grant Notice.
(ii)
Pay the aggregate Exercise Price for the
purchased shares in one or more of the following alternative forms:
(A)
to the Corporation; or
full payment in cash or check made payable
(B) any other form which the Plan
Administrator may, in its discretion, approve at the time of exercise in
accordance with the provisions of Paragraph IS.1'
Should the outstanding Common Stock be registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended, at
the time the option is exercised, then the Exercise Pi ice may also be
paid as follows:
(C) in shares of Common Stock held by
Optionee for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance procedure
pursuant to which Optionee shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the
purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.
i/
Authorization of a loan or installment payment method under such provisions may,
under currently proposed Treasury Regulations, result in the loss of incentive stock option
treatment under the Federal tax laws.
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4.
J6
(iii)
Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
Except to the extent the sale and remittance procedure is utilized in
connection with the exercise of the option, payment of the Exercise Price must accompany
-the Purchase Agreement delivered to the Corporation.
(b)
As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to or on behalf of Optionee (or the other person or persons exercising
this option) a certificate or certificates representing the shares purchased under this
Agreement, with the appropriate legends affixed thereto.
(c)
In no event may this option be exercised for any fractional
shares.
10.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE
SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO
REPURCHASE SUCH SHARES IN ACCORDANCE WITH THE TERMS AND
CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT.
11.
Compliance with Laws and Regulations.
(a)
The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Coiporation and Optionee
with all applicable requirements of law relating thereto and with all applicable regulations
of any stock exchange on which the Common Stock may be listed at the time of such
exercise and issuance.
(b)
In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be requested
by the Corporation in order for it to comply with the applicable requirements of Federal
and state securities laws.
12.
Successors and Assigns Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal representatives and assigns of
Optionee and the successors and assigns of the Corporation.
13.
Liability of Corporation- The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or sale of the
BPHf>jn\SEL\0064074.02
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5.
Common Stock as to which such approval shall not have been obtained. The Corporation,
however, shall use its best efforts to obtain all such approvals.
14.
Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed to the
Corporation in care of the Corporate Secretary at its principal corporate offices. Any notice
-required to be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice. All notices
shall be deemed to have been given or delivered upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be notified.
15.
Loans. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist Optionee in the exercise of this option by (i)
authorizing the extension of a loan to Optionee from the Corporation or (ii) permitting
Optionee to pay the Exercise Price for the purchased Option Shares in installments over a
period of years. The terms of any such loan or installment method of payment (including
the interest rate, the requirements for collateral and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion.
16.
Construction- This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and subject to the
express terms and provisions of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall be conclusive
and binding on all persons having an interest in this option.
17.
Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without resort to
that State's conflict-of-laws rules.
18.
Stockholder Approval. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock issuable under the Plan is obtained in accordance
with the provisions of Article XII of the Plan.
19.
Additional Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option in the Grant Notice, the following terms and
conditions shall also apply to the grant:
(a)
This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one or more Option
Shares: (i) more than three (3) months after the date Optionee ceases to be an Employee
for any reason other than death or Permanent Disability or (ii) more than twelve (12)
BPHPI1\SEL\0064074.02
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,
O-
months after the date Optionee ceases to be an Employee by reason of Permanent
Disability.
(b)
Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar year in
which granted if (and to the extent) the aggregate Fair Market Value (determined at the
-Grant Date) of the Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate value (determined as
of the respective date or dates of grant) of the Common Stock and any other securities for
which one or more other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. To the extent the excrcisability of this option
is deferred by reason of the foregoing limitation, the deferred portion will become
exercisable in the first calendar year or years thereafter in wtiich the One Hundred
Thousand Dollar ($100,000) limitation of this Paragraph 19(b) would not be contravened,
but such deferral shall in all events end immediately prior to the effective date of a
Corporate Transaction in which this option is not to be assumed, whereupon the option shall
become exercisable as a Non-Statutory Option for the balance of the Option Shares.
(c)
Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or monthly)
shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for
which such installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of any earlier
installments of the Common Stock and any other securities for which this option or any
other Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000)
limitation be exceeded in any calendar year, this option shall nevertheless become
exercisable for the excess shares in such calendar year as a Non-Statutory Option.
(d)
Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first time in the
same calendar year as this option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in which such options
are granted.
20.
Withholding Taxes. Optionee hereby agrees to make appropriate
arrangements with the Corporation or Parent or Subsidiary employing Optionee for the
satisfaction of all Federal, state and local income and employment tax withholding
requirements applicable to the exercise of this option.
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7.
APPENDIX
DEFINITIONS
A.
Board shall mean the Corporation's Board of Directors.
B.
Code shall mean the Internal Revenue Code of 1986, as amended.
C.
Cpmfnon gfpck shall mean the Corporation's common stock.
D.
Corporate Transaction shall mean either of the following stockholderapproved transactions to which the Corporation is a party:
(i)
a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or
(ii)
the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
E.
Corporation shall mean Netscape Communications Corporation, a Delaware
corporation.
F.
Disability shall mean the inability of Optionee to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment and
shall be determined by the Plan Administrator on the basis of such medical evidence as the
Plan Administrator deems warranted under the circumstances. Disability shall be deemed
to constitute Permanent Disability in the event that such Disability is expected to result in
death or has lasted or can be expected to last for a continuous period of not less than twelve
(12) months.
G.
Employee shall mean an individual who is in the employ of the Corporation
or any Parent or Subsidiary, subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of performance.
H.
Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of this Stock Option Agreement.
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j -.I)
I.
Exercise Price shall mean the exercise price per share as specified in the
Grant Notice.
J.
Expiration Date shall mean the date on which the option expires as set forth
in the Grant Notice.
K.
Fair Market Value per share of Common Stock on any relevant date shall be
the value determined in accordance with the following provisions:
(i)
If the Common Stock is ndt at the time listed or admitted to
trading on any Stock Exchange but is traded on the Nasdaq National Market,
the Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question, as the price is reported by the National
Association of Securities Dealers through the Nasdaq National Market or any
successor system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii)
If the Common Stock is at the time listed or admitted to trading
on any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.
(iii)
If the Common Stock is at the time neither listed nor admitted
to trading on any Stock Exchange nor traded on the Nasdaq National Market,
then such Fair Market Value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall deem
appropriate.
L.
Grant Date shall mean the date of grant of the stock option as set forth in the
Grant Notice.
M.
Grant Notice, shall mean the notice of grant of stock option accompanying this
Agreement, pursuant to which Optionee has been informed of the basic terms of the option
evidenced hereby.
N.
Incentive Option shall mean a stock option which satisfies the requirements
of Code Section 422.
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161
O.
Non-Statutory Option shall mean a stock option not intended to meet the
requirements of Code Section 422.
P.
the option.
Option Shares shall mean the number of shares of Common Stock subject to
—
Q.
Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
R.
Plan shall mean the Corporation's 1994 Stock Option Plan.
S.
Plan Administrator shall mean either the Board or a committee of Board
members, to the extent the committee is at the time responsible for the administration of
the Plan in accordance with Article III of the Plan.
T.
Seyvfce shall mean the provision of services to the Corporation or any Parent
or Subsidiary by an individual in the capacity of an Employee, a non-employee member of
the board of directors or a consultant.
U.
Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
V.
Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
BPHPjn \SEU006t0K .02
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A-3
NETSCAPE COMMUNICATIONS CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the "Option") to
-purchase shares of the Common Stock of Netscape Communications Corporation (the
"Corporation"):
Optionee: 1 ~
Grant Date: 2 Vesting Commencement Date: 3 ~
Exercise Price: $ 4 - per share
Number of Option Shares: 5~ shares
Expiration Date: 6~
Type of Option:
Incentive Stock Option
Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall be unvested and subject to
repurchase by the Corporation at the Exercise Price paid per share. Optionee
shall acquire a vested interest in, and the Corporation's Repurchase Right will
accordingly lapse with respect to, (i) twenty percent (20%) of the Option
Shares upon completion of ten (10) months of Service (as defined in the
attached Stock Purchase Agreement) measured from the Vesting
Commencement Date and (ii) the balance of the Option Shares in equal
successive monthly installments upon completion of each of the next forty (40)
months of Service measured from and after the ten month anniversary of the
Vesting Commencement Date. In no event shall any additional Option Shares
vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to and in
accordance with the express terms and conditions of the Netscape Communications
Corporation 1994 Stock Option Plan (the "Plan"). Optionee further agrees to be bound by
the terms and conditions of the Plan and the terms and conditions of the Option as set forth
in the Stock Option Agreement attached hereto as Exhibit A. Optionee understands that
any Option Shares purchased under the Option will be subject to the terms and conditions
set forth in the Stock Purchase Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE
SUBJECT TO CERTAIN REPURCHASE RIGHTS AND RIGHTS OF FIRST REFUSAL
-EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS UPON ANY PROPOSED
SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF
THE OPTION SHARES OR UPON TERMINATION OF SERVICE WITH THE
CORPORATION.
THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE
SPECIFIED IN THE ATTACHED STOCK PURCHASE AGREEMENT.
No Employment or Service Contract. Nothing in this Agreement or in the
Plan shall confer upon Optionee any right to continue in the Service of the Corporation for
any period of specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation or Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason whatsoever, with or without cause.
Date:
j
199
NETSCAPE COMMUNICATIONS CORPORATION
By:
Title:
OPTIONEE
Address:
ATTACHMENTS
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1994 Stock Option Plan
BPHPA1\SEL\0064069.02
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EXHIBIT 10.4
16b
NETSCAPE COMMUNICATIONS CORPORATION
1995 STOCK PLAN
1.
Purposes of the Plan. The purposes of this Stock Plan are:
•
to attract and retain the best available personnel for positions of substantial
responsibility,
•
to provide additional incentive to Employees and Consultants, and
•
to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options,
as determined by the Administrator at the time of grant. Stock Purchase Rights and Long-Term
Performance Awards may also be granted under the Plan.
2.
Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the administration
of stock option plans under state corporate and securities law, the Code, and the applicable laws
of any foreign jurisdiction or country where Options or Rights will be granted under the Plan.
(c)
"Board" means the Board of Directors of the Company.
(d)
"Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in accordance with
Section 4 of the Plan.
(f)
"Common Stock" means the Common Stock of the Company.
(g)
"Company" means Netscape Communications Corporation, a Delaware
corporation.
(h) "Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for such services.
The term "Consultant" shall not include Directors who are paid only a director's fee by the
Company or who are not compensated by the Company for their services as Directors.
(i)
"Continuous Status as an Employee or Consultant" means that the employment
or consulting relationship with the Company, any Parent, or Subsidiary, is not interrupted or
terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted
I u6
in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.
A leave of absence approved by the Company shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration
of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such
leave any Incentive Stock Option held by the Optionee shall cease to bs treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
(j)
(k)
of the Code.
"Director" means a member of the Board.
"Disability" means total and permanent disability as defined in Section 22(e)(3)
(1)
"Employee" means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(m)
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair
Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sates were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in Common Stock) on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on the
Nasdaq National Market thereof) or is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the
mean between the high bid and low asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.
06/15/95
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16/
(o) "Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
(p) "Long-Term Performance Award" means an award under Section 12 below.
A Ix)ng-Term Performance Award shall permit the recipient to receive a cash or stock bonus (as
determined by the Administrator) in accordance with the terms of the recipient's individual
grant. Long-Term Performance Awards may be based upon (i) the value of the Common Stock,
(ii) the components of such value, (iii) the achievement of Company, Subsidiary and/or
individual performance factors, or (iv) upon such other criteria as the Administrator may deem
appropriate.
(q) "Long-Term Performance Award Agreement" means a written agreement
between the Company and an Optionee evidencing the terms and conditions of an individual
Long-Term Performance Award grant. The Long-Term Performance Award Agreement is
subject to the terms and conditions of the Plan.
(r)
"Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
(s)
"Notice of Grant" means a written notice evidencing certain terms and
conditions of an individual Option or Right grant. The Notice of Grant is part of the Option
Agreement.
(t)
"Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(u)
"Option" means a stock option granted pursuant to the Plan.
(v) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The Option
Agreement is subject to the terms and conditions of the Plan.
(w) "Option Exchange Program" means a program whereby outstanding options
are surrendered in exchange for options with a lower exercise price.
(x)
"Optioned Stock" means the Common Stock subject to an Option or Right.
(y) "Optionee" means an Employee or Consultant who holds an outstanding
Option or Right.
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(z)
"Parent" means a "parent corporation", whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(aa)
"Plan" means this 1995 Stock Plan.
(ab) "Restricted Stock" means shares of Common Stock acquired pursuant to a
grant of Rights under Section 11 below.
(ac) "Restricted Stock Purchase Agreement" means a written agreement between
the Company and the Optionee evidencing the terms and restrictions applying to stock purchased
under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms
and conditions of the Plan and the Notice of Grant.
(ad) "Right" means and includes Long-Term Performance Awards and Stock
Purchase Rights granted pursuant to the Plan.
(ae) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.
(af)
"Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934,
as amended.
(ag) "Share" means a share of the Common Stock, as adjusted in accordance with
Section 14 of the Plan.
(ah) "Stock Purchase Ripht" means the right to purchase Common Stock pursuant
to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ai) "Subsidiary" means a "subsidiary corporation", whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3.
Stock Subject to the Plan. Subject to Section 14 of the Plan, the total number of
Shares reserved and available for issuance under the Plan is 2,250,000 Shares, increased on the
first day of each new fiscal year of the Company from and including the 1997 fiscal year by a
number of Shares equal to 4% of the number of Shares outstanding as of the last business day
preceding each such first day of each new fiscal year. However, the maximum number of
Shares reserved and available for issuance pursuant to Incentive Stock Options is 2,250,000
Shares.
If an Option or Right expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated); provided, however, that Shares that have actually been issued
TtiliOfil RI(5I-3)
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-4-
under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan
and shall not become available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase price, and the
original purchaser of such Shares did not receive any benefits of ownership of such Shares, such
Shares shall become available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4.
Administration of the Plan,
(a)
Procedure.
(i)
Multiple Administrative Bodies. If permitted by Rule 16b-3, the Plan
may be administered by different bodies with respect to Directors, Officers who are not
Directors, and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers Subject to Section
16(b). With respect to Option or Right grants made to Employees who are also Officers or
Directors subject to Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in a manner complying with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans under which Section
16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a
committee designated by the Board to administer the Plan, which committee shall be constituted
to comply with the rules under Rule 16b-3 relating to the disinterested administration of
employee benefit plans under which Section 16(b) exempt discretionary grants and awards of
equity securities are to be made. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however caused), and remove all
members of the Committee and thereafter directly administer the Plan, all to the extent permitted
by the rules under Rule 16b-3 relating to the disinterested administration of employee benefit
plans under which Section 16(b) exempt discretionary grants and awards of equity securities are
to be made.
(iii) Administration With Respect to Other Persons. With respect to Option
or Right grants made to Employees or Consultants who are neither Directors nor Officers of the
Company, the Plan shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once appointed, such
Committee shall serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members, remove members
(with or without cause) and substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly administer the Plan, all to the
extent permitted by Applicable Laws.
TGBO61.R1(SP3)
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(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee,
the Administrator shall have the authority, in its discretion:
(i)
to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options and Rights
may be granted hereunder;
(iii) to determine whether and to what extent Options and Rights or any
combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered by
each Option and Right granted hereunder;
(v)
to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Right or the shares of
Common Stock relating thereto, based in each case on such factors as the Administrator, in its
sole discretion, shall determine;
(vii) to reduce the exercise price of any Option or Right to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or
Right shall have declined since the date the Option or Right was granted;
(viii) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the purpose of
qualifying for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option or Right (subject to Section 16(c) of the
Plan), including the discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan;
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(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Right previously granted by the
Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to Options and Rights
and any Restricted Stock; and
(xiv) to make all other determinations deemed necessary or advisable for
administering the Plan(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees and any other
holders of Options or Rights.
5.
Eligibility. Nonstatutory Stock Options and Rights may be granted to Employees
and Consultants. Incentive Stock Options may be granted only to Employees. If otherwise
eligible, an Employee or Consultant who has been granted an Option or Right may be granted
additional Options or Rights.
6.
Limitations.
(a) Each Option shall be designated in the written option agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by the Optionee during any
calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they were granted.
The Fair Market Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(b) Neither the Plan nor any Option or Right shall confer upon an Optionee any
right with respect to continuing the Optionee's employment or consulting relationship with the
Company, nor shall they interfere in any way with the Optionee's right or the Company's right
to terminate such employment or consulting relationship at any time, with or without cause.
(c)
The following limitations shall apply to grants of Options and Rights to
Employees:
(i)
No Employee shall be granted, in any fiscal year of the Company,
Options and Rights to purchase more than 300,000 Shares and, with respect to Rights which
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consist of cash, no Employee shall be granted in any fiscal year of the Company Rights for more
than twice such Employee's annual salary or $1,000,000, whichever h less.
(ii) In connection with his or her initial employment, an Employee may be
granted Options and Rights to purchase up to an additional 300,000 Shares and, with respect to
Rights which consist of cash, may be granted Rights for up to an additional $1,000,000, which
amounts shall not count against the limits set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in connection
with any change in the Company's capitalization as described in Section 14.
(iv) If an Option or Right is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction described in
Section 14), the cancelled Option or Right will be counted against the limit set forth in
subsection (i) above. For this purpose, if the exercise price of an Option or Right is reduced,
the transaction will be treated as a cancellation of the Option or Right and the grant of a new
Option or Right.
7.
Term of Plan. Subject to Section 20 of the Plan, the Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 20 of the Plan. It shall continue in effect for a term of ten
(10) years unless terminated earlier under Section 16 of the Plan.
8.
Term of Option. The term of each Option shall be stated in the Notice of Grant;
provided, however, that in the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the Notice of Grant.
Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may
be provided in the Notice of Grant.
9.
Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator, subject to the
following:
(i)
In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting power of all
TGR061.RK5P3)
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classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall
be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price
shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and shall determine
any conditions which must be satisfied before the Option may be exercised. In so doing, the
Administrator may specify that an Option may not be exercised until the completion of a service
period.
(c) Form of Consideration. The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of payment. In the case of
an Incentive Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may consist entirely of:
(i)
cash;
(ii)
check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise of
an option, have been owned by the Optionee for more than six months on the date of surrender,
and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised;
(v) delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay
the exercise price;
(vi) a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any Company-sponsored
deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
TGB061.R](5ra)
06/15/93
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(viii) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws.
10.
Exercise of Option.
(a) Procedure for Exercise: Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such times and under
such conditions as determined by the Administrator and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
notice of exercise (in accordance with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment authorized by
the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon
exercise of an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock certificate
evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the Option, by the number
of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon termination of
an Optionee's Continuous Status as an Employee or Consultant, other tlian upon the Optionee's
death or Disability, the Optionee may exercise his or her Option, but only within such period of
time as is specified in the Notice of Grant, and only to the extent that the Optionee was entitled
to exercise it at the date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant). In the absence of a specified time in the Notice
of Grant, the Option shall remain exercisable for three (3) months following the Optionee's
termination. In the case of an Incentive Stock Option, such period of time for exercise shall not
exceed three (3) months from the date of termination. If, on the date of termination, the
Optionee is not entitled to exercise the Optionee's entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
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1/
Notwithstanding the above, in the event of an Optionee's change in status from
Consultant to Employee or Employee to Consultant, an Optionee's Continuous Status as an
Employee or Consultant shall not automatically terminate solely as a result of such change in
status. However, in such event, an Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option three months and one day following such change of status.
(c) Disability of Optionee. In the event that an Optionee's Continuous Status as
an Employee or Consultant terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option at any time within twelve (12) months from the date of such
termination, but only to the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such Option as set forth in
the Notice of Grant). If, at the date of termination, the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion (if the Option shall revert
to the Plan. If, after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the Option may
be exercised at any time within twelve (12) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to exercise his or her entire
Option, the Shares covered by the unexercisable portion of the Option shall immediately revert
to the Plan. If, after death, the Optionee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall revert to the
Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section 16 of the
Exchange Act ("Insiders") must comply with the applicable provisions of Rule 16b-3 and shall
contain such additional conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.
11.
Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree
TGB06I.RKSP3)
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1/6
must accept such offer, which shall in no event exceed six (6) months from the date upon which
the Administrator made the determination to grant the Stock Purchase Right. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator,
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable
upon the voluntary or involuntary termination of the purchaser's employment with the Company
for any reason (including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and Shares purchased
by Insiders in connection with Stock Purchase Rights, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b-3. An Insider may only purchase Shares
pursuant to the grant of a Stock Purchase Right, and may only sell Shares purchased pursuant to
the grant of a Stock Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as may be determined
by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock
Purchase Agreements need not be the same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder
when his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment will be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 14 of the
Plan.
12.
Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are cash or stock bonus
awards that may be granted either alone or in addition to other awards granted under the Plan.
The Administrator shall determine the nature, length and starting date of any performance period
(the "Performance Period") for each Long-Term Performance Award, and shall determine the
performance or employment factors, if any, to be used in the determination of Long-Term
Performance Awards and the extent to which such Long-Term Performance Awards are valued
or have been earned. Long-Term Performance Awards may vary from participant to participant
and between groups of participants and may be based upon (i) the value of the Common Stock,
(ii) the components of such value, (iii) the achievement of Company, Subsidiary, Parent and/or
individual performance factors, or (iv) upon such other criteria as the Administrator may deem
TGBO61.R1(JP3)
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1 //
appropriate. Performance Periods may overlap and participants may participate simultaneously
with respect to Long-Term Performance Awards that are subject to different Performance
Periods and different performance factors and criteria. Long-Term Performance Awards shall be
confirmed by, and be subject to the terms of, a Long-Term Performance Award agreement. The
terms of such awards need not be the same with respect to each participant.
At the beginning of each Performance Period, the Administrator may
determine for each Long-Term Performance Award subject to such Performance Period the
range of dollar values or number of shares of Common Stock to be awarded to the participant at
the end of the Performance Period if and to the extent that the relevam measures of performance
for such Long-Term Performance Award are met. Such dollar values or number of shares of
Common Stock may be fixed or may vary in accordance with such performance or other criteria
as may be determined by the Administrator.
(b) Adjustment of Awards. The Administrator may adjust the performance factors
applicable to the l^ong-Term Performance Awards to take into account changes in legat,
accounting and tax rules and to make such adjustments as the Administrator deems necessary or
appropriate to reflect the inclusion or exclusion of the impact of extraordinary or unusual items,
events or circumstances in order to avoid windfalls or hardships.
13. Non-Transferability of Options and Rights. An Option or Right may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee,
only by the Optionee.
14.
Adjustments Upon Changes in Capitalization. Dissolution. Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each outstanding Option
and Right, and the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Right, as well as the price
per share of Common Stock covered by each such outstanding Option or Right, shall be
proportionately adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason
TGBO61.RH5K3)
06/15/95
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1/tt
thereof shall be made with respect to, the number or price of shares of Common Stock subject to
an Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option or Right has not been previously
exercised, it will terminate immediately prior to the consummation of such proposed action. The
Board may, in the exercise of its sole discretion in such instances, declare that any Option or
Right shall terminate as of a date fixed by the Board and give each Optionee the right to exercise
his or her Option or Right as to all or any part of the Optioned Stock, including Shares as to
which the Option or Right would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Right shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the Option or Right, the
Administrator shall, in lieu of such assumption or substitution, provide for the Optionee to have
the right to exercise the Option or Right as to all or a portion of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable; provided, however, that in the case of
a Long-Term Performance Award which is to consist, in whole or in part, of cash, the
Administrator shall provide, in lieu of assumption or substitution, for such Long-Term
Performance Award, or such portion thereof which is to consist of cash, to be payable in full to
the Optionee. If the Administrator makes an Option or Right exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administtator shall notify the
Optionee that the Option or Right shall be fully exeicisable for a period of fifteen (IS) days from
the date of such notice, and the Option or Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Right immediately prior to
the merger or sale of assets, the consideration (whether stock, cash, ot other securities or
property) received in the merger or sale of assets by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or sale of assets
was not solely common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to be received upon
the exercise of the Option or Right, for each Share of Optioned Stock subject to the Option or
Right, to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the merger or sale
of assets.
15. Date of Grant. The date of grant of an Option or Right shall be, for all purposes,
the date on which the Administrator makes the determination granting such Option or Right, or
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J/y
such other later date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
16.
Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder approval of any
Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section
422 of the Code (or any successor rule or statute or other applicable law, rule or regulation,
including the requirements of any exchange or quotation system on which the Common Stock is
listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner
and to such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension
or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed
otherwise between the Optionee and the Administrator, which agreement must be in writing and
signed by the Optionee and the Company.
17.
Conditions Upon Issuance of Shares.
(a) Lepal Compliance. Shares shall not be issued pursuant to the exercise of an
Option or Right unless the exercise of such Option or Right and the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, Applicable Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option or
Right, the Company may require the person exercising such Option or Right to represent and
warrant at the time of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the opinion of counsel
for the Company, such a representation is required.
18.
Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sate of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as
to which such requisite authority shall not have been obtained.
TGBO61.R1(JP3)
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1 -30
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an
Option or Right exceeds, as of the date of grant, the number of Shares which may be issued
under the Plan without additional shareholder approval, such Option or Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in accordance with Section
16(b)of the Plan.
19. Reservation of Shares. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. Shareholder Approval. Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the degree required
under applicable federal and state law.
TOB061.RH5PJ)
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-16-
NETSCAPE COMMUNICATIONS CORPORATION
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined
meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company, subject to
the terms and conditions of the Plan and this Option Agreement, as follows:
Grant Number
Date of Grant
Vesting Commencement Date
Exercise Price per Share
$
Total Number of Shares Granted
Total Exercise Price
$
Type of Option:
Incentive Stock Option
Nonstatutory Stock Option
Term/Expiration Date:
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the following
schedule:
[20% of the Shares subject to the Option shall vest ten months after the Vesting
Commencement Date, and 2% of the Shares subject to the Option shall vest each month
thereafter].
Termination Period:
This Option may be exercised for 90 days after termination of the Optionee's employment
or consulting relationship with the Company. Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan. In the event of the
Optionee's change in status from Employee to Consultant or Consultant to Employee, this
Option Agreement shall remain in effect. In no event shall this Option be exercised later than
the Term/Expiration Date as provided above.
II. AGREEMENT
1.
Grant of Option. The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee"), an
option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at
the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the
terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section
16(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Option Agreement, the terms and conditions of the Plan shall
prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this
Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code.
However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds
the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
2.
Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the
Plan and this Option Agreement. In the event of Optionee's death, Disability or other
termination of Optionee's employment or consulting relationship, the exercisability of the Option
is governed by the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an exercise
notice, in the form attached as Exhibit A (the "Exercise Notice"), which shall state the election
to exercise the Option, the number of Shares in respect of which the Option is being exercised
(the "Exercised Shares"), and such other representations and agreement as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of
such fully executed Exercise Notice accompanied by such aggregate Exercise Price.
TGI)061.R1(5P3)
Ofi/U/95
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No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with all relevant provisions of law and the requirements of any
stock exchange or quotation service upon which the Shares are then listed. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered transferred to the
Optionee on the date the Option is exercised with respect to such Exercised Shares.
3.
Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a)
cash; or
(b)
check; or
(c) delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay
the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares; or
(e) delivery of Optionee's promissory note (the "Note") in the form attached
hereto as Exhibit C, in the amount of the aggregate Exercise Price of the Exercised Shares
together with the execution and delivery by the Optionee of the Security Agreement attached
hereto as Exhibit B. The Note shall bear interest at a rate no less than the "applicable federal
rate" prescribed under the Code and its regulations at time of purchase, and shall be secured by
a pledge of the Shares purchased by the Note pursuant to the Security Agreement.
4Non-Transferabilitv of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement
shall be binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.
5.
Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and
the terms of this Option Agreement.
6
Tax Consequences. Some of the federal and state tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
TGB061.RKJP3)
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SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a)
Exercising the Option.
(i)
Nonstatutorv Stock Option. The Optionee may incur regular federal
income tax and state income tax liability upon exercise of a NSO. The Optionee will be treated
as having received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over
their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the
Company will be required to withhold from his or her compensation or collect from Optionee
and pay to the applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO, the Optionee
will have no regular federal income tax or state income tax liability upon its exercise, although
the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over
their aggregate Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative minimum tax in the
year of exercise. In the event that the Optionee undergoes a change of status from Employee to
Consultant, any Incentive Stock Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonsratutory Stock
Option on the ninety-first (91st) day following such change of status.
(b)
Disposition of Shares.
0)
NSQ. If the Optionee holds NSO Shares for at least one year, any gain
realized on disposition of the Shares will be treated as long-term capital gain for federal income
tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year after
exercise and two years after the grant date, any gain realized on disposition of the Shares wilt
be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of
ISO Shares within one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value
of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the
difference between the sale price of such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of
(i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall
TGB061.RICSF3)
06/15/95
-4-
immediately notify the Company in writing of such disposition. The Optionee agrees that he or
she may be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out of the current
earnings paid to the Optionee.
7.
Entire Agreement: Governing Law. The Plan is incorporated herein by reference.
The Plan and this Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undeitakings and agreements of
the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by Delaware law except for that body of law pertaining
to conflict of laws.
By your signature and the signature of the Company's representative below, you and the
Company agree that this Option is granted under and governed by the terms and conditions of
the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement
in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this
Option Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee
further agrees to notify the Company upon any change in the residence address indicated below.
OPTIONEE:
NETSCAPE COMMUNICATIONS
CORPORATION
By:_
Signature
Title:
Print Name
Residence Address
TGBO61.Rt(JP3)
06/15/95
-5-
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms and
conditions of the Plan and this Option Agreement. In consideration of the Company's granting
his or her spouse the right to purchase Shares as set forth in the Plan and this Option
Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions
of the Plan and this Option Agreement and further agrees that any community property interest
shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorneyin-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or
this Option Agreement.
Spouse of Optionee
TGB061.BKSP3)
06/15/9S
-6-
13/
EXHIBIT A
NETSCAPE COMMUNICATIONS CORPORATION
EXERCISE NOTICE
Netscape Communications Corporation
501 East Mtddlefield Road
Mountain View, California 94043
Attention: Secretary
1.
Exercise of Option. Effective as of today,
199 , the
undersigned ("Purchaser") hereby elects to purchase
shares (the "Shares") of
the Common Stock of Netscape Communications Corporation (the "Company") under and
pursuant to the 1995 Stock Plan (the "Plan") and the Stock Option Agreement dated
,
19
(the "Option Agreement"). The purchase price for the Shares shall be
$
, as required by the Option Agreement.
2.
Delivery of Payment. Purchaser herewith delivers to the Company the full purchase
price for the Shares.
3.
Representations of Purchaser. Purchaser acknowledges that Purchaser has received,
read and understood the Plan and the Option Agreement and agrees to abide by and be bound by
their terms and conditions.
4.
Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock certificate is issued, except
as provided in Section 14 of the Plan.
5.
Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares. Purchaser
represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.
6.
Entire Agreement: Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in
their entirety all prior undertakings and agreements of the Company and Purchaser with respect
to the subject matter hereof, and may not be modified adversely to the Purchaser's interest
except by means of a writing signed by the Company and Purchaser. This agreement is
governed by Delaware law except for that body of law pertaining to amflict of laws.
Submitted by:
Accepted by:
PURCHASER:
NETSCAPE COMMUNICATIONS CORPORATION
By:
Signature
Its:
Print Name
Address:
Address:
501 East Mlddlefleld Road
Mountain View, California 94043
TGB061.RKSP3)
06/15/95
-2-
EXHIBIT B
SECURITY AGREEMENT
19
between Netscape
This Security Agreement is made as of
Communications Corporation, a Delaware corporation ("Pledgee"), and
("Pledger").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option Agreement dated
(the "Option"), between Pledgor and Pledgee under Pledgee's 1995 Stock Plan, and
Pledgor's election under the terms of the Option to pay for such shares with his promissory note
(the "Note"), Pledgor has purchased
shares of Pledgee's Common Stock (the
"Shares") at a price of $
per share, for a total purchase price of $
. The
Note and the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1Creation and Description of Security Interest. In consideration of the transfer of the
Shares to Pledgor under the Option Agreement, Pledgor, pursuant to the Delaware Commercial
Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number
, duly endorsed in blank or with executed stock
powers, and herewith delivers said certificate to the Secretary of Pledgte ("Pledgeholder"), who
shall hold said certificate subject to the terms and conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use in
transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this
Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note,
and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the
Option, and the Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2.
Pledpor's Representations and Covenants. To induce Pledgee to enter into this
Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as
follows:
a.
Payment of Indebtedness. Pledgor will pay the principal sum of the Note
secured hereby, together with interest thereon, at the time and in the manner provided in the
Note.
1M
b.
Encumbrances. The Shares are free of all other encumbrances, defenses and
liens, and Pledgor will not further encumber the Shares without the prior written consent of
Pledgee.
c.
Margin Regulations. In the event that Pledgee's Common Stock is now or
later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender"
within the meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgt* in making any
amendments to the Note or providing any additional collateral as may be necessary to comply
with such regulations.
3.
Voting Rights. During the term of this pledge and so long as all payments of
principal and interest are made as they become due under the terms of the Note, Pledgor shall
have the right to vote all of the Shares pledged hereunder.
4.
Stock Adjustments. In the event that during the term of the pledge any stock
dividend, reclassification, readjustment or other changes are declared or made in the capital
structure of Pledgee, all new, substituted and additional shares or other securities issued by
reason of any such change shall be delivered to and held by the Pledgee under the terms of this
Security Agreement in the same manner as the Shares originally pledged hereunder. In the event
of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute
such documents as are reasonable so as to provide for the substitution of such Collateral and,
upon such substitution, references to "Shares" in this Security Agreement shall include the
substituted shares of capital stock of Pledgor as a result thereof.
5.
Options and Rights. In the event that, during the term of this pledge, subscription
Options or other rights or options shall be issued in connection with the pledged Shares, such
rights, Options and options shall be the property of Pledgor and, if exercised by Pledgor, all
new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of
this Security Agreement in the same manner as the Shares pledged.
6.
Default, Pledgor shall be deemed to be in default of the Note and of this Security
Agreement in the event:
a.
Payment of principal or interest on the Note shall be delinquent for a period of
10 days or more; or
b.
Pledgor fails to perform any of the covenants set forth in the Option or
contained in this Security Agreement for a period of 10 days after written notice thereof from
Pledgee.
TGBO61.RK5P3)
06/15/95
-2-
J i
In the case of an event of Default, as set forth above, Pledgee sliall have the right to
accelerate payment of the Note upon notice to Pledgor, and Pledgee shall thereafter be entitled to
pursue its remedies under the Delaware Commercial Code.
7. Release of Collateral. Subject to any applicable contrary mles under Regulation G,
there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder
hereunder upon payments of the principal of the Note. The number of the pledged Shares which
shall be released shall be that number of full Shares which bears the SPme proportion to the
initial number of Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, withdraw, pledge,
substitute or otherwise dispose of all or any part of the Collateral without the prior written
consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of all
indebtedness secured hereby, at which time the remaining pledged stock shall be promptly
delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as
provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency proceeding is
instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor
makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall
become immediately due and payable, and Pledgee may proceed as provided in the case of
default.
11. Pledgeholder Liability. In the absence of willful or gross negligence, Pledgeholder
shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the enforceability
or invalidity of any provision or provisions of this Security Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of this
Security Agreement shall be binding on their respective successors and assigns, and that the term
"Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes,
the respective designees, successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and governed under
the laws of the State of Delaware.
TGB061 R1(5P3)
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1J l
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
By:
"PLEDGOR'
Print Name
Address:
"PLEDGEE"
Netscape Communications Corporation,
a Delaware corporation
By:
Title:
"PLEDGEHOLDER"
Secretary of
Netscape Communications Corporation
TGBO61.R1(5P3)
06/15/SH
I •)$
EXHIBIT C
NOTE
$
[City, State]
19
FOR VALUE RECEIVED,
promises to pay to Netscape
Communications Corporation, a Delaware corporation (the "Company"), or order, the principal
sum of
($
), together with interest on the unpaid
principal hereof from the date hereof at the rate of _
[•ercent (
%) per
annum, compounded semiannually.
Principal and interest shall be due and payable on
Should the
19
undersigned fail to make full payment of principal or interest for a period of 10 days or more
after the due date thereof, the whole unpaid balance on this Note of principal and interest shall
become immediately due at the option of the holder of this Note. Payments of principal and
interest shall be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal or interest
owing hereunder.
This Note is subject to the terms of the Option, dated as of
. This
Note is secured in part by a pledge of the Company's Common Stock under the terms of a
Security Agreement of even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned, and shall not be
required to proceed against the collateral securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant of the Company
for any reason, this Note shall, at the option of the Company, be accelerated, and the whole
unpaid balance on this Note of principal and accrued interest shall be immediately due and
payable.
Should any action be instituted for the collection of this Note, the reasonable costs and
attorneys' fees therein of the holder shall be paid by the undersigned.
TGBO61.R1CSR3)
06/15/95
1995 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined
meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company, subject to
the Company's repurchase option and your ongoing Continuous Status as an Employee or
Consultant (as described in the Plan and the attached Restricted Stock Purchase Agreement), as
follows:
Grant Number
Date of Grant
Price Per Share
Total Number of Shares Subject
to This Stock Purchase Right
Expiration Date:
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE
EXPIRATION DATE OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER
RIGHT TO PURCHASE THE SHARES. By your signature and the signature of the Company's
representative below, you and the Company agree that this Stock Purchase Right is granted
under and governed by the terms and conditions of the 1995 Stock Plan and the Restricted Stock
Purchase Agreement, all of which are attached and made a part of this document. You further
agree to execute the attached Restricted Stock Purchase Agreement as a condition to purchasing
any shares under this Stock Purchase Right.
GRANTEE:
NETSCAPE COMMUNICATIONS CORPORATION
By:
Signature
Title:
Prim Name
TGBO61.R1<5F3)
06/15/95
EXHIBIT A-l
1995 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined
meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an employee
or consultant of the Company, and the Purchaser's continued participation is considered by the
Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity interest in
the Company as an incentive for the Purchaser to participate in the affairs of the Company, the
Administrator has granted to the Purchaser stock purchase rights subject to the terms and
conditions of the Plan and the Notice of Grant, which are incorporated herein by reference, and
pursuant to this restricted stock purchase agreement (the "Agreement").
THEREFORE, the parties agree as follows:
1.
Sale of Stock. The Company hereby agrees to sell to the Purchaser and the
Purchaser hereby agrees to purchase shares of the Company's Common Stock (the "Shares"), at
the per share purchase price and as otherwise described in the Notice of Grant.
2.
Payment of Purchase Price. The purchase price for the Shares may be paid by
delivery to the Company at the time of execution of this Agreement of cash, a check, or some
combination thereof.
3.
Repurchase Option.
(a) In the event the Purchaser's Continuous Status as an Employee or Consultant
terminates for any or no reason (including death or disability) before all of the Shares are
released from the Company's repurchase option (see Section 4), the Company shall, upon the
date of such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of sixty (60) days from such date to repurchase up to
that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). Said option shall be exercised by the
Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy
to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the
Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by the
Company canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals such aggregate Repurchase Price. Upon
delivery of such notice and the payment of the aggregate Repurchase Price in any of the ways
described above, the Company shall become the legal and beneficial owner of the Shares being
I >6
repurchased and all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Shares l>eing repurchased by the
Company.
(b) Whenever the Company shall have the right to repurchase Shares hereunder,
the Company may designate and assign one or more employees, officers, directors or
shareholders of the Company or other persons or organizations to exercise all or a part of the
Company's purchase rights under this Agreement and purchase all or 8 part of such Shares;
provided that if the Fair Market Value of the Shares to be repurchased on the date of such
designation or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of
such Shares, then each such designee or assignee shall pay the Company cash equal to the
difference between the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4.
Release of Shares From Repurchase Option.
(a) [Twenty percent (20%) of the Shares shall be released from the
Company's repurchase option twelve months after the date of grant of this Stock Purchase
Right, and two percent (2%) of such Shares shall be released each month thereafter,
provided in each case that the Purchaser's Continuous Status as an Employee or Consultant
has not terminated prior to the date of any such release.]
(b) Any of the Shares which have not yet been released from the Company's
repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's repurchase option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5.
Restriction on Transfer. Except for the escrow described in Section 6 or transfer of
the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares
or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in
any way until the release of such Shares from the Company's repurchase option in accordance
with the provisions of this Agreement, other than by will or the laws of descent and distribution.
6.
Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's Unreleased Shares
upon repurchase by the Company pursuant to the Company's repurchase option under Section 3
above, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share certificates
representing the Unreleased Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held by
the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser
attached as Exhibit A-3 hereto, until such time as the Company's repurchase option expires. As
TGBO61.R1(JP3)
06/13/95
-2-
a further condition to the Company's obligations under this Agreement, the spouse of Purchaser,
if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as
Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or omit to do with
respect to holding the Unreleased Shares in escrow and while acting in good faith and in the
exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option hereunder, the
Escrow Holder, upon receipt of written notice of such option exercise from the proposed
transferee, shall take all steps necessary to accomplish such transfer.
(d) When the repurchase option has been exercised or expires unexercised or a
portion of the Shares has been released from such repurchase option, upon Purchaser's request
the Escrow Holder shall promptly cause a new certificate to be issued for such released Shares
and shall deliver such certificate to the Company or the Purchaser, as ihe case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the rights of a
shareholder with respect to such Shares while they are held in escrow, including without
limitation, the right to vote the Shares and receive any cash dividends declared thereon. If, from
time to time during the term of the Company's repurchase option, there is (i) any stock
dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and all new, substituted
or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership
of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the Company's repurchase
option.
7.
legends. The share certificate evidencing the Shares issued hereunder shall be
endorsed with the following legend (in addition to any legend required under applicable state
securities laws);
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET
FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
8.
Adjustment for Stock Split. All references to the number of Shares and the purchase
price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split,
stock dividend or other change in the Shares which may be made by the Company after the date
of this Agreement.
TGB061.R!(5re)
06/15/95
-3-
9.
Tax Consequences. The Purchaser has reviewed with the Purchaser's own tax
advisors the federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. The Purchaser is relying solely on such advisors
and not on any statements or representations of the Company or any of its agents. The
Purchaser understands that the Purchaser (and not the Company) shall be responsible for the
Purchaser's own tax liability that may arise as a result of this investment or the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference
between the purchase price for the Shares and the Fair Market Value of the Shares as of the date
any restrictions on the Shares lapse. In this context, "restriction" includes the right of the
Company to buy back the Shares pursuant to its repurchase option. The Purchaser understands
that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when
and as the Company's repurchase option expires by filing an election under Section 83(b) of the
Code with the I.R.S. within 30 days from the date of purchase. The form for making this
election is attached as Exhibit A-S hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION
UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10.
General Provisions.
(a) This Agreement shall be governed by the laws of the State of Delaware. This
Agreement, subject to the terms and conditions of the Plan and the Notice of Grant, represents
the entire agreement between the parties with respect to the purchase of Common Stock by the
Purchaser. Subject to Section 16(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions
of the Plan shall prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by either the
Company or the Purchaser pursuant to the terms of mis Agreement shall be in writing and shall
be deemed given when delivered personally or deposited in the U.S. mail, First Class with
postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end
of this Agreement or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address with a copy
to the other party not sending the notice.
(c) The rights and benefits of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and agreements hereunder
shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The
TGBO6].K1(SP3J
-4-
rights and obligations of the Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(d) Either party's failure to enforce any provision or provisions of this Agreement
shall not in any way be construed as a waiver of any such provision or provisions, nor prevent
that party from thereafter enforcing each and every other provision of this Agreement. The
rights granted both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this Agreement.
(0
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING
OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR
CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT
ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is familiar with the
terms and provisions of the Plan, and hereby accepts this Agreement subject to all of the terms
and provisions thereof. Purchaser has reviewed the Plan and this Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this Agreement and
fully understands all provisions of this Agreement. Purchaser agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon any questions
arising under the Plan or this Agreement. Purchaser further agrees to notify the Company upon
any change in the residence indicated in the Notice of Grant.
PURCHASER:
NETSCAPE COMMUNICATIONS CORI»ORATION
By:.
Signature
Title:
Print Name
TGBO61.R1(SP3)
06/15/95
-5-
2 00
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I,
, hereby sell, assign and
transfer unto
(
) shares of the Common Stock of Netscape Communications Corporation standing in
my name of the books of said corporation represented by Certificate No.
herewith and do
hereby irrevocably constitute and appoint
to transfer the
said stock on the books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase
Agreement between
and the undersigned dated
,
19 .
Dated:
Signature:
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose
of this assignment is to enable the Company to exercise its "repurchase option," as set forth in
the Agreement, without requiring additional signatures on the part of the Purchaser.
TGB061.RK5P3)
06/1V9)
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
Corporate Secretary
Netscape Communications Corporation
501 East Middlefield Road
Mountain View, California 94043
Dear
As Escrow Agent for both Netscape Communications Corporation, a Delaware corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"),
you are hereby authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement ("Agreement") between the Company
and the undersigned, in accordance with the following instructions:
1.
In the event the Company and/or any assignee of the Comjiany (referred to
collectively for convenience herein as the "Company") exercises the Company's repurchase
option set forth in the Agreement, the Company shall give to Purchaser and you a written notice
specifying the number of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2.
At the closing, you are directed (a) to date the stock assignments necessary for the
transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver
same, together with the certificate evidencing the shares of stock to be transferred, to the
Company or its assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock being purchased
pursuant to the exercise of the Company's repurchase option.
3.
Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares of stock to be held by you hereunder and any additions and substitutions to
said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and
appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all documents necessary or appropriate to make such securities
negotiable and to complete any transaction herein contemplated, including but not limited to the
filing with any applicable state blue sky authority of any required applications for consent to, or
notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser
shall exercise all rights and privileges of a shareholder of the Company while the stock is held
by you.
4.
Upon written request of the Purchaser, but no more than once per calendar year,
unless the Company's repurchase option has been exercised, you will deliver to Purchaser a
certificate or certificates representing so many shares of stock as are not then subject to the
Company's repurchase option. Within 90 days after cessation of Purchaser's continuous
employment by or services to the Company, or any parent or subsidiaiy of the Company, you
will deliver to Purchaser a certificate or certificates representing the aggregate number of shares
held or issued pursuant to the Agreement and not purchased by the Company or its assignees
pursuant to exercise of the Company's repurchase option.
5.
If at the time of termination of this escrow you should have in your possession any
documents, securities, or other property belonging to Purchaser, you shall deliver all of the same
to Purchaser and shall be discharged of all further obligations hereunder.
6.
Your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7.
You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and
any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8.
You are hereby expressly authorized to disregard any and all warnings given by any
of the parties hereto or by any other person or corporation, excepting only orders or process of
courts of law and are hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or corporation by
reason of such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
9.
You shall not be liable in any respect on account of the identity, authorities or rights
of the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the Statute of
Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
TGB061.RK5P3)
06/15/95
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11. You shall be entitled to employ such legal counsel and other experts as you may
deem necessary properly to advise you in connection with your obligations hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to
be an officer or agent of the Company or if you shall resign by written notice to each party. In
the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are
authorized and directed to retain in your possession without liability to anyone all or any part of
said securities until such disputes shall have been settled either by mutual written agreement of
the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed to each of the
other parties thereunto entitled at the following addresses or at such other addresses as a party
may designate by ten days' advance written notice to each of the other parties hereto.
COMPANY:
Netscape Communications Corporation
SOI East Middlefield Road
Mountain View, California 94043
PURCHASER:
ESCROW AGENT:
TGBO61.R1(SP3)
06/15/93
Corporate Secretary
Netscape Communications Corporation
501 East Middlefield Road
Mountain View, California 94043
-3-
16. By signing these Joint Escrow Instructions, you become a party hereto only for the
purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
Very truly yours,
NETSCAPE COMMUNICATIONS CORPORATION
By:
Title:
PURCHASER:
(Signature)
(Typed or Printed Name)
ESCROW AGENT:
Corporate Secretary
TGBO6J.K1(SP3)
06/13/95
EXHIBIT A-4
CONSENT OF SPOUSE
I,
, spouse of
, have read and approve the
foregoing Agreement. In consideration of granting of the right to my spouse to purchase shares
of Netscape Communications Corporation, as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and
agree to be bound by the provisions of the Agreement insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property laws or similar
laws relating to marital property in effect in the state of our residence as of the date of the
signing of the foregoing Agreement.
Dated:
TGB061.Rl(SP3)
06/15/95
, 19
EXHIBIT A-5
ELECTION UNDER SECTION 83fb)
OF THE INTERNAL REVENUE CODE OF 19S6
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal Tax Code, to include in
taxpayer's gross income for the current taxable year, the amount of any compensation taxable to taxpayer in
connection with his receipt of the property described below:
1.
The name, address, taxpayer identification number and taxable year of die undersigned are as follows:
NAME
:
ADDRESS:
:
IDENTIFICATION NO.
:
TAXPAYER:
SPOUSE:
TAXPAYER:
SPOUSE:
TAXABLE YEAR:
2.
The property with respect to which the election is made is described as
follows:
shares (the
"Shares") of the Common Stock of Netscape Communications Corporation (the "Company").
3.
The date on winch the property was transferred is:
4.
The property is subject to the following restrictions:
..19
The Shares may be repurchased by the Company, or its assignee, on certain events. This right lapses with
regard to a portion of the Shares based on the continued performance of services by the taxpayer over time.
5.
The fair market value at the time of transfer, determined without regard to ai<y restriction other than a
restriction which by its terms will never lapse, of such property is:
$
.
6.
The amount (if any) paid for such property is:
$.
•
The undersigned has submitted a copy of this statement to the person for whom the services were performed in
connection with the undersigned's receipt of the above-described property. The transferee of such property is the
person performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the
Commissioner.
Dated:
. 19
_, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:
, 19_
Spouse of Taxpayer
TGJM6I.KUSJ3)
06/15/9S
EXHIBIT 10.5
NETSCAPE COMMUNICATIONS CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1995 Employee Stock Purchase Plan of
Netscape Communications Corporation
1.
Purpose.
The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company
through accumulated payroll deductions. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code
of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of that section of the
Code.
2.
Definitions.
(a)
"Board" shall mean the Board of Directors of the Company.
(b)
"Code" shall mean the Internal Revenue Code of 1986, as amended.
(c)
"Common Stock" shall mean the Common Stock of the Company.
(d)
"Company" shall mean Netscape Communications Corporation, a Delaware
corporation and any Designated Subsidiary of the Company.
(e)
"Compensation" shall mean all base straight time gross earnings, including
commissions, overtime, shift premium, and bonuses, but excluding other compensation.
(0
"Designated Subsidiaries" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to participate in the
Plan.
(g)
"Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For purposes of the
Plan, the employment relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company. Where ihe period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or
by contract, the employment relationship will be deemed to have terminated on the 91st day of
such leave.
(h)
"Enrollment Date" shall mean the first day of each Offering Period.
(i)
"Exercise Date" shall mean the last day of each Purchase Period.
(j)
"Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1)
If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National Market of the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its
Fair Market Value shall be the closing sale price for the Common Stock (or the mean of the
closing bid and asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the date of such
determination, as reported in The Wall Street Journal or such other souice as the Board deems
reliable, or;
(2)
If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid
and asked prices for the Common Stock on the date of such determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable;
(3)
In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board, or;
(4)
For the purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value of the Common Stock shall be the price to public
as set forth in the final prospectus included within the Registration Statement on Form S-l filed
with the Securities and Exchange Commission for the initial public offering of the Common
Stock.
(k)
"Offering Period" shall mean the period of approximately twenty-four (24)
months during which an option granted pursuant to the Plan may be exercised, commencing on
the first Trading Day on or after February 1 and August 1 of each year and terminating on the
last Trading Day in the periods ending twenty-four months later; provided, however, that the
first Offering Period shall be the period of approximately twenty-three (23) months commencing
with the first Trading Day on or after the date on which the Company's registration statement on
Form S-l (or any successor form thereof) is declared effective by the Securities and Exchange
Commission and terminating on the last Trading Day in the period ending July 31, 1997. The
duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.
(1)
TGB05Z.RK5F3)
06/14/93
"Plan" shall mean this Employee Stock Purchase Plan.
-2-
2;u
(m)
"Purchase Price" shall mean an amount equal to 85 % of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower.
(n)
"Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date, except that the
first Purchase Period of any Offering Period shall commence on the Enrollment Date and end
with the next Exercise Date; provided, however, that the first Purchase Period of the first
Offering Period under the Plan shall be the period of approximately five (S) months and two
weeks commencing with the first Trading Day on or after the date on which the Company's
registration statement on Form S-l (or any successor thereof) is declared effective by the
Securities and Exchange Commission and terminating on the last Trading Day in the period
ending January 31, 1996.
(o)
"Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but not yet placed under
option.
(p)
"Subsidiary" shall mean a corporation, domestic or foreign, of which not
less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not
such corporation now exists or is hereafter organized or acquired by the Company or a
Subsidiary.
(q)
"Trading Day" shall mean a day on which national stock exchanges and the
Nasdaq System are open for trading.
3.
Eligibility.
(a)
Any Employee (as defined in Section 2(g)), who shall be employed by the
Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b)
Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or
any other person whose stock would be attributed to such Employee pursuant to Section 424(d)
of the Code) would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) which
permits his or her rights to purchase stock under all employee stock purchase plans of the
Company and its subsidiaries to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock (determined at the fair market value of the shares at the time such
option is granted) for each calendar year in which such option is outstanding at any time.
TGDOSZ-RKSPS)
06/14/95
-3-
2:
4.
Offering Periods. The Plan shall be implemented by consecutive, overlapping
Offering Periods with a new Offering Period commencing on the first Trading Day on or after
February 1 and August 1 each year, or on such other date as the Board shall determine, and
continuing thereafter until terminated in accordance with Section 19 hereof; provided, however,
that the first Offering Period shall be the period of approximately 23 months commencing with
the first Trading Day on or after the date on which the Company's registration statement on
Form S-l (or any successor form thereof) is declared effective by the Securities and Exchange
Commission and terminating on the last Trading Day in the period ending July 31, 1997. The
Board shall have the power to change the duration of Offering Periods (including the
commencement dates thereof) with respect to future offerings without shareholder approval if
such change is announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5.
Participation.
(a)
An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and
filing it with the Company's payroll office prior to the applicable Enrollment Date.
(b)
Payroll deductions for a participant shall commence on the first payroll
following the Enrollment Date and shall end on the last payroll in the Offering Period to which
such authorization is applicable, unless sooner terminated by the participant as provided in
Section 10 hereof.
6.
Payroll Deductions.
(a)
At the time a participant files his or her subscription agreement, he or she
shall elect to have payroll deductions made on each pay day during the Offering Period in an
amount not exceeding ten percent (10%) of the Compensation which he or she receives on each
pay day during the Offering Period, and the aggregate of such payroll deductions during the
Offering Period shall not exceed ten percent (10%) of the participant's Compensation during said
Offering Period.
(b)
All payroll deductions made for a participant shall be credited to his or her
account under the Plan and will be withheld in whole percentages only. A participant may not
make any additional payments into such account.
(c)
A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll
deductions during the Offering Period by completing or filing with the Company a new
subscription agreement authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering Period. The
change in rate shall be effective with the first full payroll period following five (S) business days
TGBOJZ.RKJK)
06/14/95
-4-
after the Company's receipt of the new subscription agreement unless the Company elects to
process a given change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as provided in Section 10
hereof.
(d)
Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be
decreased to 0% at such time during any Purchase Period which is scheduled to end during the
current calendar year (the "Current Purchase Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior Purchase Period which
ended during that calendar year plus all payroll deductions accumulated with respect to the
Current Purchase Period equal $21,250. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e)
At the time the option is exercised, in whole or in part, or at the time
some or all of the Company's Common Stock issued under the Plan is disposed of, the
participant must make adequate provision for the Company's federal, stete, or other tax
withholding obligations, if any, which arise upon the exercise of the option or the disposition of
the Common Stock. At any time, the Company may, but will not be obligated to, withhold from
the participant's compensation the amount necessary for the Company to meet applicable
withholding obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of Common Stock by the
Employee.
7.
Grant of Option. On the Enrollment Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to purchase on each
Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of
shares of the Company's Common Stock determined by dividing such Employee's payroll
deductions accumulated prior to such Exercise Date and retained in the Participant's account as
of the Exercise Date by the applicable Purchase Price; provided that in no event shall an
Employee be permitted to purchase during each Purchase Period more than a number of Shares
determined by dividing $12,500 by the Fair Market Value of a share of the Company's Common
Stock on the Enrollment Date; provided, however, that in the case of the first Offering Period
under the Plan and notwithstanding the limit of $12,500 in the preceding clause, in no event
shall an Employee be permitted to purchase during each Purchase Period under the first Offering
Period more than a number of Shares determined by dividing $25,000 by the Fair Market Value
of a share of the Company's Common Stock on the Enrollment Date; and provided further, that
such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof, and shall expire on the last day of the Offering Period.
TGBOSZ.R1(SP3)
06/14/95
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8.
Exercise of Option. Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares will be exercised automatically on
the Exercise Date, and the maximum number of full shares subject to option shall be purchased
for such participant at the applicable Purchase Price with the accumulated payroll deductions in
his or her account. No fractional shares will be purchased; any payroll deductions accumulated
in a participant's account which are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Purchase Period or Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the participant. During a
participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by
him or her.
9.
Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of his or her option.
10.
Withdrawal: Termination of Employment.
(a)
A participant may withdraw alt but not less than all the payroll deductions
credited to his or her account and not yet used to exercise his or her option under the Plan at
any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of
the participant's payroll deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for the purchase of
shares will be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions will not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
(b)
Upon a participant's ceasing to be an Employee (as defined in Section 2(g)
hereof), for any reason, he or she will be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the Offering Period but not
yet used to exercise the option will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and such participant's
option will be automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per week of
employment during the period in which the participant is subject to such payment in lieu of
notice.
11.
Interest. No interest shall accrue on the payroll deductions of a participant in the
Plan.
TCBO5Z.RI(5P3)
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2. 4
L-.
12.
Stock.
(a)
The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 500,000, subject to adjustment upon
changes in capitalization of the Company as provided in Section 18 hereof. If, on a given
Exercise Date, the number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b)
The participant will have no interest or voting right in shares covered by
his option until such option has been exercised.
(c)
Shares to be delivered to a participant under the Plan will be registered in
the name of the participant or in the name of the participant and his or her spouse.
13.
Administration.
(a) Administrative Body. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its committee shall
have full and exclusive discretionary authority to construe, interpret and apply the terms of the
Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every
finding, decision and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b)
Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection (a)
of this Section 13, in the event that Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any successor provision ("Rule 16b-3") provides
specific requirements for the administrators of plans of this type, the Plan shall be only
administered by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion concerning decisions
regarding the Plan shall be afforded to any committee or person that is not "disinterested" as that
term is used in Rule 16b-3.
14.
Designation of Beneficiary.
(a)
A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the Plan in the event of
such participant's death subsequent to an Exercise Date on which the option is exercised but
prior to delivery to such participant of such shares and cash. In addition, a participant may file
a written designation of a beneficiary who is to receive any cash from the participant's account
under the Plan in the event of such participant's death prior to exercise of the option. If a
TGB0SZ.RK5P3)
06/14/95
-7-
participant is married and the designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective.
(b)
Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the participant, or if no
spouse, dependent or relative is known to the Company, then to such other person as the
Company may designate.
15.
Transferabilitv. Neither payroll deductions credited to a participant's account nor
any rights with regard to the exercise of an option or to receive shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws
of descent and distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without effect, except that
the Company may treat such act as an election to withdraw funds from an Offering Period in
accordance with Section 10 hereof.
16.
Use of Funds. AH payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
17.
Reports. Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given to participating Employees at least annually, which
statements will set forth the amounts of payroll deductions, the Purchase Price, the number of
shares purchased and the remaining cash balance, if any.
18.
Asset Sale.
Adjustments Upon Changes in Capitalization. Dissolution. Liquidation. Merger or
(a)
Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or ^classification of the
Common Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been "effected without
receipt of consideration''. Such adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as expressly provided herein, no
TG8O5Z.RK5P3)
06/14/93
-8*- • 6
issuance by the Company of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an option.
(b)
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Periods will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board.
(c)
Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Periods then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering Periods then in
progress in lieu of assumption or substitution in the event of a merger or sale of assets, the
Board shall notify each participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for his option has been changed to the New Exercise Date
and that his option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to purchase, for each share of
option stock subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in the sale of assets
or merger by holders of Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets or merger was not
solely common stock of the successor corporation or its parent (as defined in Section 424(e) of
the Code), the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share consideration
received by holders of Common Stock and the sale of assets or merger.
19.
Amendment or Termination.
(a)
The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan, Except as provided in Section 18 hereof, no such
termination can affect options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 18 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent necessary to comply
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06/14/95
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2\
with Rule 16b-3 or under Section 423 of the Code (or any successor rule or provision or any
other applicable law or regulation), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b)
Without shareholder consent and without regard to whether any participant
rights may be considered to have been "adversely affected," the Board (or its committee) shall
be entitled to change the Offering Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond with amounts
withheld from the participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable which are consistent
with the Plan.
20.
Notices. All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given when received in
the form specified by the Company at the location, or by the person, designated by the Company
for the receipt thereof.
21.
Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, the rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise that the shares
are being purchased only for investment and without any present intention to sell or distribute
such shares if, in the opinion of counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
22.
Term of Plan. The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the shareholders of the Company. It shall
continue in effect for a term of ten (10) years unless sooner terminated under Section 19 hereof.
23.
Automatic Transfer to Low Price Offering Period. To the extent permitted by
Rule 16b-3 of the Exchange Act, if the Fair Market Value of the Common Stock on any
Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock
TOBOS7..R1(5P3)
06/14/95
-10-
ZliS
on the Enrollment Date of such Offering Period, then all participants in such Offering Period
shall be automatically withdrawn from such Offering Period immediately after the exercise of
their option on such Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
TGBOJZ.RK5P3)
06/14/95
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2\ y
EXHIBIT A
NETSCAPE COMMUNICATIONS CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application
Change in Payroll Deduction Rate
Change of Beneficiary(ies)
Enrollment Date:
hereby elects to participate in the Netscape
Communications Corporation 1995 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock Purchase Plan.
I hereby authorize payroll deductions from each paycheck in the amount of
% of my
Compensation on each payday (1-10%) during the Offering Period in accordance with the
Employee Stock Purchase Plan. (Please note that no fractional percentages are
permitted.)
I understand that said payroll deductions shall be accumulated for the purchase of shares
of Common Stock at the applicable Purchase Price determined in accordance with the
Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering
Period, any accumulated payroll deductions will be used to automatically exercise my
option.
I have received a copy of the complete "Netscape Communications Corporation 1995
Employee Stock Purchase Plan." I understand that my participation in the Employee
Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that
my ability to exercise the option under this Subscription Agreement is subject to obtaining
shareholder approval of the Employee Stock Purchase Plan.
Shares purchased for me under the Employee Stock Purchase Plan should be issued in the
name(s) of (Employee or Employee and spouse only):
6.
1 understand that if I dispose of any shares received by me pursuant to the Plan within 2
years after the Enrollment Date (the first day of the Offering Period during which I
purchased such shares) or one year after the Exercise Date, I will be treated for federal
income tax purposes as having received ordinary income at the time of such disposition in
i— ^
an amount equal to the excess of the fair market value of the shares at the time such
shares were purchased over the price which I paid for the shares. I hereby agree to
notify the Company in writine within 30 days after the date of anv disposition of my
shares and I will make adequate provision for Federal, state or other tax withholding
obligations, if anv. which arise upon the disposition of the Common Stock. The
Company may, but will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any withholding
necessary to make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand that I will be
treated for federal income tax purposes as having received income only at the time of
such disposition, and that such income will be taxed as ordinary income only to the extent
of an amount equal to the lesser of (1) the excess of the fair market value of the shares at
the time of such disposition over the purchase price which I paid for the shares, or (2)
15% of the fair market value of the snares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be taxed as capital
gain.
I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Employee Stock Purchase Plan.
8.
In the event of my death, I hereby designate the following as my beneficiary(ies) to
receive all payments and shares due me under the Employee Stock Purchase Plan:
NAME: (Please print)_
(First)
(Middle)
Relationship
(Address)
TGBO.SZ.RKSPJ}
06/14/95
-2-
(Last)
Employee's Social
Security Number:
Employee's Address:
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN
EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY
ME.
Dated:
Signature of Employee
Spouse's Signature (If beneficiary other than spouse)
TGB03Z.RH5P3)
06/14/9S
-3-
EXHIBIT B
NETSCAPE COMMUNICATIONS CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Netscape Communications
Corporation 1995 Employee Stock Purchase Plan which began on
, 19
(the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the
Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly
as practicable all the payroll deductions credited to his or her account with respect to such
Offering Period. The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current Offering Period and the
undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to
the Company a new Subscription Agreement.
Name and Address of Participant:
Signature:
Date:
06/14/9J
EXHIBIT 10.6
NETSCAPE COMMUNICATIONS CORPORATION
1995 DIRECTOR OPTION PLAN
1.
Purposes of the Plan. The purposes of this 1995 Director Option Plan are to
attract and retain the best available personnel for service as Outside Directors (as defined herein)
of the Company, to provide additional incentive to the Outside Directors of the Company to
serve as Directors, and to encourage their continued service on the Boaid.
All options granted hereunder shall be nonstatutory stock options.
2.
Definitions. As used herein, the following definitions shall apply:
(a)
"Board" means the Board of Directors of the Company.
(b)
"Code" means the Internal Revenue Code of 1986, as amended.
(c)
"Common Stock" means the Common Stock of the Company.
(d)
"Company" means Netscape Communications Corporation, a Delaware
corporation.
(e)
"Continuous Status as a Director" means the absence of any interruption or
termination of service as a Director.
(0
"Director" means a member of the Board.
(g)
"Employee" means any person, including officers and Directors, employed
by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee
by the Company shall not be sufficient in and of itself to constitute "employment" by the
Company.
(h)
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(0
"Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National Market of the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the
Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common Stock on the date of determination,
as reported in The Wall Street Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common Stock, the
I-air Market Value thereof shall be determined in good faith by the Board; or
(tv) For purposes of the effective date of this Plan, Fair Market Value
shall be the price to public as set forth in the final prospectus included within the Registration
Statement on Form S-l (or any successor form thereof) filed with the Securities an Exchange
Commission for the initial public offering of the Common Stock.
(j)
"Inside Director" means a Director who is also either an Employee or
Consultant.
(k)
lion" means a stock option granted pursuant to the Plan.
(1)
"Optioned Stock" means the Common Stock subject to an Option.
(m)
"Optionee" means an Outside Director who receives an Option.
(n)
"Outside Director" means a Director who is not an Employee.
(o)
"Parent" means a "parent corporation," whether now or hereafter existing,
as defined in Section 424(e) of the Code.
(p)
"Han" means this 1995 Director Option Plan.
(q)
"Share" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.
(r)
"Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Internal Revenue Code of 1986.
3.
Stock Subject to the Plan. Subject to the provisions of Section 10 of the Plan, the
maximum aggregate number of Shares which may be optioned and sold under the Plan is 50,000
Shares of Common Stock (the "Pool"). The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised in full, the
unpurchased Shares which were subject thereto shall become available for future grant or sale
TG8O6O.R1(5P3)
06/18/95
-2-
under the Plan (unless the Plan has terminated); provided, however, that Shares that have
actually been issued under the Plan shall not be returned to the Plan and shall not become
available for future distribution under the Plan.
4.
Administration and Grants of Options under the Plan.
(a)
Procedure for Grants. The provisions set forth in this Section 4(a) shall
not be amended more than once every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. All grants of Options to Outside Directors under this Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be covered by
Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option to
purchase 10,000 Shares (the "First Option") on the date on which the later of the following
events occurs: (A) the effective date of this Plan, as determined in accordance with Section 6
hereof, or (B) the date on which such person first becomes an Outside Director, whether through
election by the shareholders of the Company or appointment by the Board to fill a vacancy, or
through such Inside Director ceasing to be an Inside Director but remaining a Director.
(iii) After the First Option has been granted to an Outside Director, such
Outside Director shall thereafter be automatically granted an Option to purchase 2,500 Shares (a
"Subsequent Option") on January 1 of each year provided he or she is then an Outside Director
and if on such date, he or she shall have served on the Board for at least six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof,
any exercise of an Option made before the Company has obtained shareholder approval of the
Plan in accordance with Section 16 hereof shall be conditioned upon obtaining such shareholder
approval of the Plan in accordance with Section 16 hereof.
(v)
The terms of a First Option granted hereunder shall be as follows:
(A)
the term of the First Option shall be ten (10) years.
(B)
the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof.
(C)
the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the First Option. In the event that the date of grant of
the First Option is not a trading day, the exercise price per Share shall be the Fair Market Value
on the next trading day immediately following the date of grant of the First Option.
TGB060.Itl(3P3)
06/18/95
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a
(D)
the First Option shall become exercisable as to twenty
percent (20%) of the Shares subject to the First Option on the date ten (10) months after its date
of grant, and shall become exercisable as to an additional two percent (2%) of the Shares subject
to the First Option each month thereafter; provided, however, that the Optionee continues to
serve as a Director on such dates.
(vi)
The terms of a Subsequent Option granted hereunder shall be as
follows:
(A)
the term of the Subsequent Option shall be ten (10) years.
(B)
the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10
hereof.
(C)
the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Subsequent Option. In the event that the date of
grant of the Subsequent Option is not a trading day, the exercise price per Share shall be the
Fair Market Value on the next trading day immediately following the date of grant of the
Subsequent Option.
(D)
the Subsequent Option shall become exercisable as to onetwenty-fourth (1/24) of the Shares subject to the Subsequent Option at the end of each month
after its date of grant, provided that the Optionee continues to serve as ft Director on such dates.
(vii) In the event that any Option granted under the Flan would cause the
number of Shares subject to outstanding Options plus the number of Shares previously purchased
under Options to exceed the Pool, then the remaining Shares available for Option grant shall be
granted under Options to the Outside Directors on a pro rata basis. No further grants shall be
made until such time, if any, as additional Shares become available for grant under the Plan
through action of the Board or the shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options previously granted
hereunder.
5.
Eligibility. Options may be granted only to Outside Directors. All Options shall
be automatically granted in accordance with the terms set forth in Section 4 hereof. An Outside
Director who has been granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to continuation of
service as a Director or nomination to serve as a Director, nor shall it interfere in any way with
any rights which the Director or the Company may have to terminate his or her directorship at
any time.
TGB060.R1(JP3)
06/18/95
-4-
6.
Term of Plan. The Plan shall become effective upon the date on which the
Company*s registration statement on Form S-l (or any successor form thereof) is declared
effective by the Securities and Exchange Commission. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 11 of the Plan.
7.
Form of Consideration. The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall consist of (i) cash,
(ii) check, (iii) other shares which (x) in the case of Shares acquired upon exercise of an Option,
have been owned by the Optionee for more than six (6) months on the date of surrender, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) delivery of a properly executed
exercise notice together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price, or (v) any combination of the foregoing
methods of payment.
8.
Exercise of Option.
(a)
Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4 hereof; provided,
however, that no Options shall be exercisable until shareholder approval of the Plan in
accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment may consist of any consideration and method
of payment allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 10 of trie Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Snares
which thereafter may be available, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the Option is exercised.
TGB060.RKJP3)
O6/1B/95
-5-
(b)
Rule 16b-3. Options granted to Outside Directors must comply with the
applicable provisions of Rule 16b-3 promulgated under the Exchange Act or any successor
thereto and shall contain such additional conditions or restrictions as may be required thereunder
to qualify Plan transactions, and other transactions by Outside Directors that otherwise could be
matched with Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.
(c)
Termination of Continuous Status as a Director. Subject to Section 10
hereof, in the event an Optionee's Continuous Status as a Director terminates (other than upon
the Optionee's death or total and permanent disability (as defined in Section 22(e)(3) of the
Code)), the Optionee may exercise his or her Option, but only within three (3) months following
the date of such termination, and only to the extent that the Optionee was entitled to exercise it
on the date of such termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall terminate.
(d)
Disability of Optionee. In the event Optionee's Continuous Status as a
Director terminates as a result of total and permanent disability (as defined in Section 22(e)(3) of
the Code), the Optionee may exercise his or her Option, but only within twelve (12) months
following the date of such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the expiration of its ten
(10) year term). To the extent that the Optionee was not entitled to exercise an Option on the
date of termination, or if he or she does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
(e)
Death of Optionee. In the event of an Optionee's death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or inheritance may
exercise the Option, but only within twelve (12) months following the date of death, and only to
the extent that the Optionee was entitled to exercise it on the date of death (but in no event later
than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of death, and to the extent that the Optionee's estate or a person
who acquired the right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall terminate.
9.
Non-Transferabilitv of Options. The Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Optionee, only by the
Optionee.
TGB060.RKSP3)
06/JS/95
10.
Adjustments Upon Changes in Capitalization. Dissolution. Merger. Asset Sale or
Change of Control.
(a)
Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding Option, the
number of Shares which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share covered by each such outstanding Option,
and the number of Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of issued Shares
resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected without receipt
of consideration." Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b)
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option has not been pteviously exercised, it
shall terminate immediately prior to the consummation of such proposed action.
(c)
Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall become fully vested and exercisable, including as to Shares as to which
it would not otherwise be exercisabte. If an Option becomes fully vested and exercisable in the
event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice, and the Option
shall terminate upon the expiration of such period.
11.
Amendment and Termination of the Plan.
(a)
Amendment and Termination. Except as set forth in Section 4, the Board
may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or any other
applicable law or regulation), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
TGB060.HKSP3)
06/18/95
-7-
(b)
Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated.
12.
Time of Granting Options. The date of grant of an Option shall, for all purposes,
be the date determined in accordance with Section 4 hereof.
13.
Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to sell or distribute
such Shares, if, in the opinion of counsel for the Company, such a representation is required by
any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority shall not have been
obtained.
14.
Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
15.
Option Agreement. Options shall be evidenced by written option agreements in
such form as the Board shall approve.
16.
Shareholder Approval. Continuance of the Plan shall be subject to approval by
the shareholders of the Company at or prior to the first annual meeting of shareholders held
subsequent to the granting of an Option hereunder. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
06/18/95
-8-
NETSCAPE COMMUNICATIONS CORPORATION
DIRECTOR OPTION AGREEMENT
Netscape Communications Corporation, a Delaware corporation (the "Company"), has
granted to
(the "Optionee"), an option to purchase
a total of [
(
)] shares of the Company's Common Stock (the
"Optioned Stock"), at the price determined as provided herein, and in all respects subject to the
terms, definitions and provisions of the Company's 1995 Director Option Plan (the "Plan")
adopted by the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1.
Nature of the Option. This Option is a nonstatutory option and is not intended to
qualify for any special tax benefits to the Optionee.
2.
Exercise Price. The exercise price is $
for each share of Common Stock.
3.
Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
(a)
Right to Exercise.
(i) This Option shall become exercisable in installments cumulatively
with respect to twenty percent (20%) of the Optioned Stock ten months after the date of grant,
and as to an additional two percent (2%) of the Optioned Stock at the end of each month
thereafter, so that one hundred percent (100%) of the Optioned Stock shall be exercisable 50
months after the date of grant; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(ii)
This Option may not be exercised for a fraction of a share.
(iii) In the event of Optionee's death, disability or other termination of
service as a Director, the exercisability of the Option is governed by Section 8 of the Plan.
(b)
Method of Exercise. This Option shall be exercisable by written notice
which shall state the election to exercise the Option and the number of Shares in respect of
which the Option is being exercised. Such written notice, in the form attached hereto as
Exhibit A, shall be signed by the Optionee and shall be delivered in person or by certified mail
to the Secretary of the Company. The written notice shall be accompanied by payment of the
exercise price.
TGB060.RI(5P3)
06/18/93
4.
Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a)
cash;
(b)
check; or
(c)
surrender of other shares which (x) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be exercised; or
(d)
delivery of a properly executed exercise notice together with such other
documentation as the Company and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required to pay the
exercise price.
5.
Restrictions on Exercise. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other law or regulations, or
if such issuance would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the Company may
require Optionee to make any representation and warranty to the Company as may be required
by any applicable law or regulation.
6.
Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
7.
Term of Option. This Option may not be exercised more than ten (10) years from
the date of grant of this Option, and may be exercised during such period only in accordance
with the Plan and the terms of this Option.
8.
Taxation Upon Exercise of Option. Optionee understands that, upon exercise of
this Option, he or she will recognize income for tax purposes in an amount equal to the excess
of the then Fair Market Value of the Shares purchased over the exercise price paid for such
Shares. Since the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934,
as amended, under certain limited circumstances the measurement and timing of such income
(and the commencement of any capital gain holding period) may be deferred, and the Optionee is
advised to contact a tax advisor concerning the application of Section 83 in general and the
availability a Section 83(b) election in particular in connection with the exercise of the Option.
Upon a resale of such Shares by the Optionee, any difference between the sale price and the Fair
TGBO6O.RI(5P3)
06/18/95
-2-
Market Value of the Shares on the date of exercise of the Option, to the extent not included in
income as described above, will be treated as capital gain or loss.
DATE OF GRANT:
NETSCAPE COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto,
and represents that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Plan.
Dated:
Optionee
TGBO6O.R1(5P3)
06/1B/95
-3-
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
NETSCAPE COMMUNICATIONS CORPORATION
SOI East Middlefield Road
Mountain View, California 94043
Attention: Corporate Secretary
1.
Exercise of Option. The undersigned ("Optionee") hereby elects to exercise
Optionee's option to purchase
shares of the Common Stock (the "Shares") of Netscape
Communications Corporation (the "Company") under and pursuant to ths Company's 1995
Director Option Plan and the Director Option Agreement dated
(the
"Agreement").
2.
Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Agreement.
3.
Federal Restrictions on Transfer. Optionee understands tltat the Shares must be
held indefinitely unless they are registered under the Securities Act of 1933, as amended (the
"1933 Act"), or unless an exemption from such registration is available, and that the
certificate^) representing the Shares may bear a legend to that effect. Optionee understands that
the Company is under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the times proposed
by Optionee.
4.
Tax Consequences. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee's purchase or disposition of the Shares. Optionee
represents that Optionee has consulted with any tax consultant(s) Optionee deems advisable in
connection with die purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
5.
Delivery of Payment. Optionee herewith delivers to the Company the aggregate
purchase price for the Shares that Optionee has elected to purchase and has made provision for
the payment of any federal or state withholding taxes required to be paid or withheld by the
Company.
6.
Entire Agreement. The Agreement is incorporated herein by reference. This
Exercise Notice and the Agreement constitute the entire agreement of the parties and supersede
in their entirety all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof. This Exercise Notice and the Agreement ate governed by Delaware
law except for that body of law pertaining to conflict of laws.
Submitted by:
Accepted by:
OPTIONEE:
NETSCAPE COMMUNICATIONS
CORPORATIONS
By:.
Its:
Address:
Dated:
TG»O6O.RI{3P3)
06/18/93
Dated:
-2-
EXHIBIT 10.7
KT
THIS AORSXMBNT, effective the
day
_ of
.1995, 1 B
fclons Corporation (the
entered 11
into by Hetscape communications
"company ) and James L. Barksdale (the "Executive")
i.i Duties. The Company will employ Executive as
President and Chief Kxeoutive officer. Executive will have
suah authority, subject to the Company's Artiolae of
Incorporation and Bylaws, u nay be granted treat tine to
tine by -the Board of Directors. Executive will perform the
duties customarily performed by the President and Chief
executive Officer of a corporation and such other duties as
nay be assigned fro* tine to tine by the Company's Board of
Directors.
1*2
iM
Executive shall continue to serve
as a member of the Board of Directors, and shall be
compensated for suoh esrvioe pursuant to the t e r m of a
latter agreenent between the parties dated September 16,
1994.
Qmiraan
f. tb
his
Qhmi an of
tb» Board. Executive nayy elect,, at hi
discretion, to servo as Chairman of
f the
th Board
Bd
off Directors.
i
The Company will use its bast sfforts to have Executive
elected, end re-elected, to suoh position throughout his
»loynent with the Company.
a.
awwrrxo* AMD maset
Executive will devote his productive tine, ability,
attention and best efforts to the Company's business, it is
agreed that Executive nay devote reasonable periods of tine to
(a) engaging in personal investment activities, (b) serving on
boards of direotors or other aorporatlons if approved in advanoa
by the Company'a Chairman (or Board or Direotors, if Executive is
Chairman) and (o) engaging in charitable or community service
activities, as long as none of the foregoing additional
activities materially interfere with Executive's duties under
this Agreenent. The Company hereby approves Executive continuing
to serve on the boards of direetoi
' Proms
>rs of 3Com and' The
Corporation.
3.
intN O» MKPXOYMXMT
3.1 ^n—BTlfl»nent Pats. Kxaoutive shall conmenoe full tine
enploynent as soon as reasonably practical, but not later
than January 31, 1995, unless the Company otherwise agrees
with a requested extension of Executive's current
employment*
3.2 BBS _
JUJJL- Executive's employment
_
with the
Company is not for a specific term and oan be terminated at
«ny time toy either the company or Executive, with or without
cause, by giving written notioe to the other party.
4.
COHRXSAVZOM
During tha tern of employment, the Company agrees to
compensate Executive as follows:
4.1 B««e a UOE.
_
The company shall pay Executive a baae
aalary equivalent to on* Hundred Thousand Dollars
(9100,000.00) per year, before all Quaternary payroll
deductions, payable at the same intervale as other officers
of the Company are paid. The base salary may be adjusted in
future ysara by the Board of Directors.
4.3 Asms,. In addition to base salary, Executive shall b *
entitled to participate in any bonus plan established by the
Conpany.
k options
ana stnok Teatlng. on the date Executive
t
4.3
c
h company shall
l
commences employment
with the Company, the
grant Executive an option to purchase Two Million
(2,000,000) shares of the Company's aoaaton stooX (the "StooX
Option*1). The stock option shall be immediately oxeroisabl*
for all of the option shares and shall have an exercise
prloe per share determined as follow** (i) if Executive
commences eaploynant prior to February 24* 199S, the
exercise price per share will ba 2a,6 oents (vhion the
Company has determined is the current fair market value of
tne atook) and (11) if sxeoutiva commences employment on or
after rebruary 24, 1906, the exercise prioa per share will
ba one tenth of the price paid per share of the Company's
preferred stock in the company's most recently completed
preferred stack financing, computed as of the date Executive
commences employment. One Million (1,000,000) of the option
shares anall vest immediately, and the remaining one Million
(1,000,000) shares shall vest at ths rats of Twenty Thousand
(20,000) shares par month upon the Executive's completion of
each month of service with the Company (as either an
employee or Independent consultant) over the fifty (50)
month period Measured from the eoMnenoemant date or him
employment. The company shall nave the right to repurchase
any unvested shares, at the exereia* price paid per share
(plus interest compounded at lot per annum), at the time of
Executive'a termination of serviae. Except as Otherwise:
modified by this Agreement, the Stock Option shall be
governed by and subject to the provisions of the company's
24U
standard form Non-Qualified stook Option Agreement, and the
option shares shall be purchased pursuant to the terms of
the company's standard form stook Purchase Agreement for
common shareholders.
•
4.4 gas; protect inn, should the Executive exercise his Two
Million (3,000,000) share option for one or more shares, and
the Internal Revenue Service subsequently detarminee that
the fair market value per share of the Company's common
stock on the grant date was greater than the option exeroiee
price paid far each such purchased share, with the result
that such differential becomes taxable as ordinary income
rather than long-term capital gain, then the Company shall
reimburse Executive for the incremental tax liability (based
on the excess of the ordinary income rate over the capital
gain rate) incurred by Executive by reason of suoh ordinary
income taxation plus any penalties attributable to that tax
liability.
a n e w * ntovxBzoHB
9.1 gfcfftffe ^n. Caatroi. upon the occurrence of a Change in
Control, the company or any successor entity shall be
obligated to continue executive's service over the remainder
of the vesting period in effect for the shares purchased or
purchasable under the stock Option so that executive shall
have the opportunity to vast in ail those shares. Executive
shall, however, have complete discretion in determining
whether he is to render such service, and if so, whether it
shall be performed as a full time employee, part time
employee or Independent aoneultant. The remaining terms of
executive'* service during such vesting period, including
any cash compensation payable for such service, shall be
negotiated in good faith by the company or successor entity
and Executive at the time of the Change in Control. This
section 5.1 shall only become applicable in th« event of a
change in Control, and in the absence of such Change in
Control, Executive's employment shall remain **at will" in
accordance with the provisions of Section 3.2 c*f this
Agreement.
For purposes of this Agreement, a Change In Control
shall be deemed to occur in the event of any at the
following transactions: (A) a transaction or aeries of
related transactions over a twelve (12) month period
(excluding an initial public offering) in which securities
constituting fifty percent (50%) or more of the Company's
outatanding voting power are transferred to a person or
persons otber than the persons holding those securities
immediately prior to such transaction or series of related
transactions, (B) the acquisition of all or substantially
all of the Company's assets, (C) the liquidation or
dissolution of the Company or (D) any other event reasonably
determined by the aoard of Directors to constitute a change
in control for purposes of this Agreement.
IMT Ptw>li Paafeh n f
Xf Executive
or becomes disabled so that it is
, for
.„ him
„_. to
ry
w
step down from his position as President and chief Executive
offloer of the company, than Executive shall immediately
vest in twenty-five percent (25%) of all remaining unvested
shares purchased or purchasable under the atook option.
5.2
dies
norsonoi
6.
All equity holdings of Executive, whether in the form of
etook or stock options, will be protected against any and all
forms of dilution to the same extent aa the greatest such
protection afforded either Xlsiner, Perkins, Caulfield C Bysrs,
or James H.Clark.
7.
axniEs or
SHARK*
The company hereby consents to any gift of vested stock made
by Executive to his spouse or any other member of his immediate
family, provided the donee agrees to be bound by all the
provisions of the Stock Purchase IAgreement governing Executive'*
purchase of those •hares.
^r~
" ^ ~
~
—
a.
v
^
^
^B-
^^H
->^^-
^
^
^^r
- ^ ^ - ^ ^
- ^ ^ ^ - ^
- ^ ^
-^^p-
^^-
-^r
^ ^ - ^
^
^v
i
•amnrxva
Executive ehall be entitled to participate in all health
oare, insurance and other employee benefit plans generally
available to executives of the Company. Executive shall also be
entitled to vacation, holidays, and other fringe benefits
provided to executives of the Company. To the extent the Company
does not have a particular fringe benefit or benefit plan.
Executive may arrange for the Company to purchase or provide it/
so long •• the overall level of benefits is reasonably consistent
with those enjoyed by similarly situated executives in the
industry.
9. maXOOATXOV B E V B K H *
The Company will pay and/or provide executive with the
following relocation benefits* a.) the reasonable cost of
relocating Executive and his family and their household goods
from the Seattle, Washington area to the Mountain View.
California areaf b.) if Executive ie unable to sell his family
house In Seattle within a reasonable time period, the Company
snail arrange with a relocation service to purchase his house
using a mutually acceptable methodology to establish the purchase
printr and e.) the Company will Hmkm Executive whole for any
difference between the actual sales price and the fair market
value of hi* house in Seattle. Tills payment shall Include any
additional income taxes owed by Executive as a raault of any of
the abov* payments. For purpoaes of the Company's obligation*
under thia Article, to* fair market v«lu« of Executive's
residence in Seattle shall be deemed equal to the average of two
independent appraisals of the value of euoh residence, provided
the appraised values are within tan percent (10%) of eaoh other.
otherwise, a third independent appraisal will be obtained and the
fair aarxet value shall be determined by averaging the three
appraised valuea. The Company shall pay for the appraisals.
10.
m
Kxeoutlve will execute the Company's Proprietary Information
end inventions Agreement.
11 >
XKDKKMXYXCATXOlf
Company ehall defend, indemnify and hold Executive harmless
from any and all liabilities, obligations, oiaims or expenses
which arls* in connection with or mm * result of executive's
service as an officer, employee, or director of Company, to the
fullest extent allowed by law, provided, however, that no such
indemnification shall be provided Executive for any willful and
intentional misconduct on his part.
13.
MBxTRMXOM
Any dispute involving the interpretation or application of
this Agreement shall be submitted to final and binding
arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association than in effect, conducted
by one arbitrator either mutually agreed upon by the parties or
selected in aoaordanoa with the A M Rules. The arbitration shall
be conducted in Banta Clara county, California under the
jurisdiction of the American Arbitration Association. The
arbitrator shall have authority only to interpret and apply
provisions of this Agreement, and shall have no authority to add
to, subtract from, OT modify terms of this Agreement. Any demand
for arbitration must be made within sixty (SO) days of the
event(s) giving riae to the olaia that the Agreement has been
breached. In the event Executive is successful in pursuing any
olalai arising out of this Agreement, the Company shall psy ell of
the executive's attorneys' faas and costs, including the
compensation and expenses of the arbitrator. In all other oases,
the Executive and Company shall each bear their own costs and
attorney fees, except that tho Company shall pay the coats of any
arbitrator appointed hereunder.
13.
Thia Agreement anall in «ll raapeota, inoludlng all aattera
of oonstruetion, validity and perfonunae, ba oonatruaa in
aoaordanec with the lava of tha state of California.
14.
nmutun
If any portion of thia Agreeaent la held to b« invalid or
unenforceable, tha remaining oovenante and restrictions or
portion thereof shall remain in full force and affect.
IB.
All naaoinaa uaed in thia Agraamant a m for oonvaniaooa only
and anall not in any way affact tna intarpratatlon of thia
AgraaMnt.
16.
Vbla AgraaBant oonatitataa tha antira agrwaaant batwaan tha
parties with raapaet to tha aubjaot awttar eovarad havain* All
prior undazstandinga and acrraaaanta batwaan tha partiaa with
reapaot to aueh •u&jaot aattar, woathar oral or vrittan, ara
haraby aup«r«adad and nullified, unlaaa otharwiaa rafaranoad in
thia Xgracaant. Thia Agraamant »ay only ba avandad in writing*
apaolfioaiiy idantifying thia Agraaaant and tha pmviBion(a) to
IH nxTNBSS wnoBov, tha partlaa hava axaoutad and antarad
into tola AgraaMnt affactiva on tha data aat forth abova.
Hataoapa OOHMUiloal
J a M » H. Clark/
and qbiaf
Corporation
aidant
va Offloar
ll\aK\MK-DW.HM
2 44
EXHIBIT 10.8
c )b
2/15/95
SOFTWARE LICENSE AGREEMENT
This Software license Agreement (ftie'Agreement*) effective this
day of February,
1995 (fiie "Effective Pate'"), is made between Netscape Communications Corporation ("Netscape"'), with
a business address at SOI East Middlefield Road, Mountain View, California 94043, and MCt
Telecommunications Corporation ("Md*), with a business address at 113319m Street N.W., Washington,
DC 20036.
BACKKROUND
1.
Netscape develops, markets, licenses and distributes client and server software for use in
the Internet environment;
2.
MCI desires to develop an electronic shopping mall (including the provision of
transaction processing services to merchants and information content providers and the
provision of access to and browsing capabilities on me mall for MCI customers), and also
to provide MCI customers with access to and browsing capabilities wim respect to the
World Wide Web and me Internet generally;
3.
Netscape desires to grant MCL and M Q desires to accept anon-exclusive license to use
Netscape's client and server software on the terms and conditions set form herein in
connection with such electronic shopping mall and to provide access to and browsing
capabilities on me World Wide Web and me Internet
The parlies hereby agree as follows:
1.
Definitions
a,
"Acceptance" shall have the meaning assigned to it on Attadttnent B.
b.
shall mean, with respect to either parry, a corporal ion, partnership, joint
venture or other entity or person controlling, controlled by oi under common control
wim such party. For purposes of mis definition, the term "control* shall mean me direct
or indii^benefirial ownership of mote than 5(% of i h e v ^
the right to vote for the election of directors or other managing authority) in an entity.
"Documentation* shall mean the documentation associated with the Software Products
which may be in electronic and/or hard copy form as further described on Attachment A
hereto.
y
{)
y
Netscape Client distributed by MCI, (b) has been automatically and transparently
identified by the Netscape Transaction Server, and (c) has been issued a unique identifier
byauchBerver. Trteterm*EstablishcdUser"shaUalsoindudeuserswhoaccesstheMC[
Mall by means of a Netscape Client distributed by Netscape ctr a third party ("Netscape
U B O O , but only to the extent such Netscape Users effect transactions on me MCI MalL
Additionally, for each Netscape User who effects a transaction on the MCI Mall
Netscape and MCI shall consider four additional Netscape Uifcrs to be "Established
Users* for the purposes of mis Agreement up to me total number of Netscape Users on
the MCI Mall.
CONFIDENTIAL
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2/15/95
shall mean any update to the Software Products mat involves the
addition of substantial functionality, and is created by Netscape and designated by
Netscape as a change in the number to the left of the decimal point of the number
appearing after the product name. Major Updates exclude software releases that are
designated by Netscape as new products/ in accordance with generally aooepted industry
practices. Major Updates also exclude any customization wonYperformed by Netscape
for MCX which M d funds, as provided below in Section 12.
f.
*MQ Mull* «h»ll m a n ttiA twin* npwated by M d whirh «•»« Hw Snftnnr.
ftnH.^
and through which MG customers and others possessing the Netscape Client and
Netscape-compatible clients may access various merchants' cabdogs, storefronts and
other product descriptions as well as information provided by t ontent providers and
may effect transactions with such merchants and content providers.
T p f r
shall I H M B th» Mrigmpo Client Httfinurf nn AW»r*wn*mt A
fewl..^^
Updates thereto provided by Netscape to MCI under this Agreement
h.
"Netscape Merchant Server* shall mean the Netscape Merchant Server drfhw-d n«
Attachment A* including Updates thereto provided by Netscape to MCI under this
Agreement
"Netscape Transaction Server* shall mean the Nrfiwp- Tnmwtinn Swwwrfgfimwl«n
Attachment A, including Updates thereto provided by Netscape to MCI under this
Agreement
"Netscape Servm" shall mean the Netscape Merchant Server, the Netacape Transaction
Server and the Netscape Staging Server collectively.
k.
"Minor Update' shall mw>n iiprfaw tn rti» Rnftunm. p^wfr^ frat do not involve ttic
addition of substantial functionality, and are designated by Netscape as a change in the
number to the right of the decimal point of the number appearing after the product
name. Minor Updates exclude any customization work performed by Netscape for M Q
which MCI funds, as provided below in Section 12.
^ftwareFrodllcbrshaU
cbrshaU mean the Netscape Client and the Netscape Servers
i t i l platforms
ltf
ffor th
f
P d
collectively. Additional
the S
Software
Products
may be added from time to
time pursuant to trie mutual written agreement of the parties.
m.
"Source Code" shall mean programming statements or instrucfams written and
expressed in any language from which statements or instructions are translated by an
appropriate language processor into executable machine code.
zt
^Specificattnnfi'thjul mean the specifications for version 1 A , » ; of flie Netscape Client
and Netscape Servers attached hereto as Attachment A- The parties agree that foUowine
execution and delivery of this Agreement they will work diligently to describe in more
detail the basic functionality currently set forth m Attachment A and that upon Uie
parties' agreement such additional descriptions shall be incorporated in Attachment A
hereto and shall be included within the term "Specifications."'
o.
shall mean Major Updates and Minor Updates collectively.
P-
pd
shall mean the last Update delivered to MCI as of the Acceptance
Anniversary Date.
e"
OONHPENTTAL
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CONFIDENTIAL TREATMENT REQUESTED
"Production Acceptance Date" chall mean the date of MQ't Acceptance of Version l.B of
the Netscape Merchant Server, Netscape Transaction Server, Netscape Staging Server
and the Netscape Client
* sh»H mwn *hp first anniveifiaiy of me Production
X,
Acceptance Date.
6.
"Prepayment Amount* *HwH mam
in Section 6<a)(iXA).
t
"Prepattj
* shall mean Established Uters whose license fees are
p
l
included in the Prepayment Amount
U.
"Netscape Staging Server" shall mean the Netscape Staging Server defined mi
Attachment A, including Updates thereto provided by Netscape to MQ under this
Agreement
2.
licenses
2.1
Snftw«TH» ] j{yn*f. fiiityrf to nil nf *ht> forme «nH nrm/Htirmc gf rtiic A p w u w i ^ MjhErt.pt. g™ff;
the following licenses:
a.
Netecap* Client Subjecttosection 2.1(c), Netscape hereby grantstoM Q a non-exclusive,
non-transferable (except as set form m Section 20 (c) below), wot ldwide right and license
to use, make copies, and distribute through sublicensing to end users the Netscape
Client only in object code farm (subjecttoSections 21(e) and 3 below), through MCTs
normal channels of distributionforthe MCI Mall, including AffiJlfetes and joint ventures
marketing MCI-branded products. Upon Md's payment of the fees set form below in
Section 6 wifli respect to each Bstablished User and only for so long as me use of the
Netscape Client is in conformance with me terms of mis Agreement and me license
agreement accompanying such Netscape Client (as set form in Section 22), (a) the
sublioense granted by MCItosuch Established User shall be fully-paid, perpetual and
irrevocable, and (b) M d ' s righttouse the Netscape Client internally (including through
its Affiliates) wim respect to supporting such Bstablished User si tall be fully-paid,
perpetual and irrevocable. MCTs righttocopy and distribute the Netscape Client shall
remain in effectforthe term of mis Agreement and shall survive;terminationof this
Agreement in the circumstances described in Section 10 (d) below.
Nets
License Netscape grants to M a and its Affiliates (provided that they agree, in
writing,tobe bound in writing by the terms and conditions of trds Agreement) a
non-exclusive, non-transferable (except as set forlhiiiSftJifmTOMhelow), and
non-subltcensable worldwide right and license
HHflHHHK
t i i pi g ( j e ^ R R u f f i R i R o r t h i n
Sections 2.1(bXU) below) and useforthe purposes set forth in Section 21-(c)
below (but not to sublicensee «U, or otherwise distribute) the Netscape Servers
Upon MQ's payment of the fees setformbelow in Section 6 with respect to each
Established User and onlyforso long as the use of the N etscape Servers is in
conformance with the terms of this Agreement MCI's tteht to usefeeNetaram.
Servers with respect to such Established User shall b e H M B p e r p e t u a l and
irrevocable.
• • •
CONFIDENTIAL
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3
a
CONFIDENTIAL TREATMENT REQUESTED
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DntnVMUg Software
(A)
Database Accessors. MCI acknowledges and agrees that the Netscape
Client accesses the database software portion of the Netscape Sennets
through an intermediary software module etunmoruy referred to as an
"Accessor*. MCI agrees mat the pricing of He Netscape Servers is based
upon the assumption that the ratio of me number of Accessors to the
number of Established Users i ^ ^ ^ ^ ^ ^ ^
Established Users. Therefore, if M a d e s W f e Increase access capacity
to the database software through more thanM^ccessors, MCI will be
required to pay Netscape additional charges as set forth m Section 6.
h Accessors ma; ' be located on more man cue physical machine,
The
of Accetsors per machine
provided that
(B)
Additional {icerme Conditiong.-MCI further acknowledges and agrees
that the database software will be providedfc>MCI only as runtime
MCI is prohibited from publishing any results of benchmark
test run on the database software. MCI may not use me database
software for timesharing or rental purposes. Within thirty (30) days after
me end of each month, MCI will provide Netscape a report of new
copies of the database software installed by MCI during such month and
the serial numbers of MQ's computer systems on which such copies of
the database software run. M Q will not cop} the database portion of the
Netscape Servers. When MCI desires anew copy of the Netscape
Servers for the purposes permitted m Section 2.1(b)fl) above, MCI will
notify Netscape and Netscape will promptly jaovide MCI with a new
copy of the database portion.
Use of Software Products. MCI may use the Software Products in connection with
developing and operating the MCI Mall as contemplated hereunder and providing access
to and browsing capabilities on World Wide Web and the Internet; provided that MQ
will not sell service on the MCI Mall to any third party merchnnt or information provider
on the basis of i
unless such mini party merchant or information providertas^cqulred a separate Server
license from Netscape. MCI may also allow a mird party access to the Software Products
as MO's agent solely in order to operate the MCI Mall on behalf of MO, subject to all
the terms herein.
No Right to Modify. Except as specifically set forth m Section 3 below orm this Section
2.1(d), Netscape grants to MCI no right to modify or create derivative works of the
Software Products hereunder. MCI may add application code to the Netscape Server
software, provided mat the Netscape Client interacts with such new code through the
CGI interface to the Netstte Servers. (rkirpurposesofmisSedioa"NetsiteServer" shall
mean the layer of software within the Netscape Servers which is known as Netscape's
Netsite Commerce server and which functions as the layer between the Netscape Client
sndtheMerchaiuServer,TrarisafAionServerandStag^Server.) The new code may not
modify the database supplied by Netscape as part of the Netscape Servers without using
the Netscape supported interfaces. M Q is explkitfy permitted to create its own
databases and other applications provide they do not interfere with me Netscape
software. Netscape shall not be required to support any additional code and shall have
no rights .or interest in or to any such additional code.
CONFIDENTIAL
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Code. Netscape hereby grants to MCI a license to use the Source Code and
i documentation for
f the
h Software
Sft
Pd
ll upon flie
fe occurrence of
accompanying
Products
solely
the events, and in accordance with the terms and conditions, net forth in Section 3 below.
11
Sublicensing. The Software Products are licensed and are not sold and may not be distributed,
used or otherwise exploited except if and as expressly permitted hereunder. AH sublicensee of
the Netscape Client to end useis by M a wfflcmtam the tennsan^
protective of proprietary rights of Netscape and its licensors as move vet forth on Attachment C
hereto. Netscape may amend such terms on written notice to MQ, and M Q will use such
amended terms within forty-five (45>) days for electronic versions of nfclioense granted by MQ,
and on M a ' s next printing for printed versions. In the event the Software Products are
distributed by MQ in an electronic form as contemplated in Section 5.1 below, suhlicense
agreements may also be provided to end users in an electronic form accompanying such
electronic copies of the Software Products, and such electronic stiMicfeisin^ if tt contains the
terms and conditions provided by Netscape relating to electronic siibliicensing will satisfy MQ's
obligations under mis §2.2.
23
Documentation license. Netscape will deliver to MQ a master copy of the Documentation for all
Software Products (botii a hard copy and an electronic on-line copy). Subject to all of the terms
aiul conditions of this Agreement Netscape hereby grants to MQ a nc<n^xclusive and n ^
transferable worldwide right and license to use, nuke copies, and modify the Documentation to
include M O materials and to distribute such Documentation with the Netscape Client
24
Proprietary lights. Netscape owns and continues to own all right title and interest, including
without limitation world-wide copyrights, patent rights, trade secret rights, and any other
intellectual property rights, in and to the Software Products.
3.
Escrow frf Source Code for Software Products
3.1
EfiCBatAgafimeat.
eat. Within ten (10) calendar days following delivery to MCI of the Software
Products and each
h Update
Ud
off each
h Software
Sft
Product
Pd
Netscape
N
shall
hll deposit
d
with
ih Data Securities
International, Inc. (TOST) a complete copy of the Source Code developed by Netscape for the
relevant Software Products or Update, together with a complete copy of all existing
Documentation relating thereto, and complete instructions for compiling and linking every part
of such Source Code into executable code, for purposes of enabling verification that the Source
Code delivered hereunder is complete, all pursuant to the terms of an Escrow Agreement (me
"Escrow Agregment*). by and mrnrmg Nrt«r»p»_ MPT »«d DCT tn ...W-^H^fr ft^ ftrnn ,ttflfhcd
hereto as Attachment D. To the extent that the Releasefevents in this Agreement differ from
those m Attachment Dor Attachment F, this Agreemmt and Attachment Fwffl govern. The
parties will negotiate the remaining terms in good faith. Netscape shall give MQ prompt written
notice of each deposit hereunder. MCI acknowledges that Netscape cannot offer MCI source
code rights to components of the Software Products owned by third parties who restrict
Netscape's ability to provide such source code access, including wimajt limitation tite database
software.
3.2
Escrow Fetfr All fees and expenses charged by DS1 in connection with the Escrow Agreement
will be borne by Netscape, and M a shall have no liability therefor.
Release Cnndi^pmt All materials deposited with D 3 hereunder shall be released to MCI solely
upon the occurrence of one or more of the following events (each a "Release Event"'):
a.
if Netscape has Financial Difficulties, as defined in Subsection 10i>Jii below;
CONFIDENTIAL
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2/15/95
CONFfDENTIAL TREATMENT
b.
if Netscape experiences a Change of Control (as defined m Section 10-b(iv) below) and
Netscape has received from MCI the Source Buyout Amount defined in Section 3A
below; 01
c
as provided in Attachment F.
3.4
Source Use. Upon a release of deposited Source Code material
MCLsubiect to all of the temis and conditions of this/
Source Code internally solely for purposes i
for purposes described in g2.1(c) above t J
Mall as contemplated herein. M Q has no right to tise the SOUKK Code for any omer purposes. In
particular, without limiting the foregoing, MCI has no right to use me Source Code to develop
any product which might compete with Netscape's products. M a will have no right to
sublicense, distribute or otherwise transfer me Source Code to any thin* party. Notwithstanding
the preceding sentence, if MO has authorized a third party to operate the M a MaU as permitted
under Section 2.1(c) above, MO may provide such third party with a copy of the source code,
provided that such third parry is bound by confidentiaUty obligations at least as protective of the
source code as MO is bound by herein, and mat MCI shall be Uable to Netscape for any
disclosure of the source code by such third party. MCI will protect the confidentiality of all
Source Code released hereunder and its accompanying Dcwonentaticnm accordance wimfhe
provisions of Section 15 below.
_
_
33
Release fr/wn fVrt»in Qfrligatinnif- Upon a release of deposited Source Cede pursuant to the
terms of this Section, men for the released Source Code, Netscape shall be released from its
obligations under Sections 4,7,9, ll(a), 12, and 13, provided that the warranties of gllfbXi) will
appry to actions prior to date of release, and the warranties of §U(b)(li), (ill) and (iv) will apply to
Software Products as they exist on the date of release, and M a wit be i cleaned from its
obligation to pay any Maintenance Fee to Netscape with respect to the released source code. In
addition, if sour«codeisieleas^^mderSection33(bVMQwillalso be released from its
obligation t<^HH^^^^^^^^^^^^^HHHB|^^^|^^^^^^Bift*x the date Netscape
receives rroinMattttSouroeBuyou^mount^edfiedmSection3.6. If source code is required
to be returned, this §33 will be of no further effecL
3.6
Source Buyout Amount. The Source Buyout Amount will be d<>h»rmfei»d mt frMtnac Each party
will appoint its own appraiser and the parties will agree on a third appraiser. Bach of the
appraisers will determine a buyout price for the source code taking into account, among other
things, the use mat M O may make of me source code and the value MQ would derive from the
source code, etc the Source Buyout Amount will be the average of the three prices determined
by the appraisers.
4.
Deliveryr Installation, Testing and Acceptance
4.1
Netscape will deliver golden masters of the Software Products to locations designated by M a
pursuant to the schedule Bet forth on Attachment A hereto.
42
Following delivery of each Software Product, MO may install such Software Product in such
locations as MO shall deem desirable for the MO MalL At MO's request, Netscape shall assist
MO in installing each version of me Server Software Products in exchsnge for consulting fees as
set forth below in Section 12. Ikdlowingir^taUauc«v the acceptance tesui^ set former
Attachment B hereto shall occur, and acceptance shaU occur as provided on Attachment B. The
parties acknowledge mat assistance provided by Netscape for the mifol installation now m
progress has been or will be performed free of charge.
CONrTOEfflTAL
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5.
Distribution unrf X Ire of the Software Products
5.1
Distribution. The parties will use their cominercially reasonable efforts to jointly develop a plan
for electronic distribution of copies of the Netscape Client to MCI customers. MCI will be solely
responsible for and will bear all expenses related to any electronic or navelectronic forms of
distribution of the Netscape Oient mat it undertakes.
S3.
Restrictions on Use and Proprietary Nptice. In addition, except a
provided herein and as conditions of MO's rights and licenses h
warrants and agrees:
dur, MO
a.
Not to modify or create any derivative work of the Software Prc<lucts or any portion
thereof except (i) after release from escrow and pursuant to the terms and conditions set
forth in Section 3 above; or (U) to the extent permitted by Section 2.1(d).
b.
Not to delete, alter, add to or fail to reproduce in and on any Software Product, media,
documentation, master or package materials Netscape's copyright or other proprietary
t appearing in materials provided to MCI by Netscape. This section shall not apply
to trademarks and logos, which shall be governed by Section 5 i .
c
Not to reverse assemble, decompile, or otherwise attempt to detive Source Code4^or the
underlying ideas, algorithms, structure or organization) from the Software Products or
from any other information, provided that the foregoing shall not apply-where and to the
extent it is expressly prohibited by la w.
d.
To, in addition to and without in any way limiting MCI's other obligations hereunder,
use all reasonable methods to protect Netscape's rights with respect tome Software
Products and Proprietary Information to the same extent it protects its own software,
confidential information or rights.
Trademark anrl FfplTidinC
6.
a.
Trademark use and branding practices for the Netscape Client and me Netscape Servers
shall be as set forth on Attachment E. MQ agrees not to register or translate Netscape's
trademarks without Netscape's prior written consent MO need not use Netscape
trademarks and/or trade names in any county in which their connotation is offensive or
illegal and will work with Netscape to develop a mutually agreeable alternative.
b.
Netscape Review of M O Materials. Brom time to time during the term of this
Agreement; Netscape may request M O to provide it with reasonable samples of
Documentation, packaging, advertising and other materials developed and used by MO
in its distribution of the Netscape Client Upon such reasonable request, MO shall
deliver to Netscape reasonable samples of such materials, and Netscape may review such
materials solely for the purpose of verifying the accuracy of such materials wim respect
to the Software Products and the appropriate usage of Netscape's trademarks and
proprietary notices (ir^uding without limitation tra^^
m
me event Netscape notifies M Q in writing mat any such usage is inaccurate or incorrect,
MO shall correct all errors identified by Netscape for future distributions of such
materials.
Pricing and Pavnwnt
CONFIDENTIAL
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2/15/95
CONFIDENTIAL TREATMENT REQUESTED
(i)
Nftsgape Software. MG3 shall pay Netscape the prices set forth In this Section 6
for usage of fiie Netscape Servers by Established Usen. Although for
convenience this usage is measured below by the number of Established Users
accessing such Servers/ the parties recognize and agree that no separate or
additional amounts shall be payable with respect to the; Netscape Client software
used or distributed by MQ, except as set forth in aubsc ction 6(a)0KB} below.
(A)
The parties agree that M d will pay to Netscape the following prices for
: Server usage by Established Users up to a total amount of
^ ^ p a y m e n t Amount"), and for Netscape Server usage
1 Users thereafter until the patties renegotiate alternate
prices in accordance with Section 8 below. Tht prices below will remain
applicable to Prepaid Established Users as described in subsection
6(a)(Q(D) below.
Volumes Based on Established
Users of fiie Software Products
Price per
Established User
(B)
In addition, for each Established User whose Netscape Client software
was distributed by M Q in a transaction in which M a was paid for such
client software, MCI shall pay Netscape an a d t U U o n a j B ^ p
(C)
Such prices and any adjusted prices established pursuant to Section 8
below do not include TCP/IP, dialer and registration software or any
other software which Netscape or MCI may license from third parties.
MCI understands that if MCI makes a decision regarding the inclusion of
sudi software, or a decision regarding hardware configurations, fiut
results in additional expense to Netscape, then MC3 shall be bear the cost
of such expense. Costs for the Grade database shall be as described in
Section 2.1b(ii) and Section 6{a)(ii) of Oils Agreement
(D)
If a price renegotiation under Section 8 changes the applicable prices,
then such price renegotiation shall not affect any Prepaid Users who
become Established Users prior to the Acceptance Anniversary Date.
Following fiie Acceptance Anniversary Date, MCI may choose to provide
new Prepaid Established Users with (x) the Cutoff Release, in which case
the amounts accrued against MCTs prepayment shall be the amounts set
forth in fids Section 6(a)CQ(A) and (B) if applicable; or (y) Updates
subsequent to the Cutoff Update, in which case the amounts accrued
against M a ' s prepayment shall be the renegotiated prices under Section
8 or fiie otherwise then current price for such Update.
Database Software. In •rtttirtnm to tfw pri~c •p-^fi.*! *n c - ^ ^ fffrjff) a^vc,
M O shall reimburse Netscape for additional Accessor fees actually incurred by
Netscape if the numb^pf the Accessors through which the database software is
accessed <
b.
Payment
CONHDEMTIAL
B
2/15/95
CONFIDENTIAL TREATMENT REQUESTED
(i)
frtehwape Software. MO agrees to prepay Netscape Uctsnse fees equal to the
Prepayment Amount at the rates Bet forth M Section 6{a). The Prepayment
Amount will be due and payable to Netscape mnonrefundable installments as
follows:
Amount
Dug Date
September 23,1994 (receipt of which is hereby
acknowledged by Netscape)
MQ's acceptance of the Initial Specification (MCI
acknowledges acceptance of such Initial Specification
and Netscape hereby acknowledges receipt of the
foregoing amount)
Upon the later of January 1,1995 or MCTs Acceptance of
Version 1 .A of the Netscape Client and Version 1 A of
the Netscape Servers.
QntheProduction^coeptanceDate.
-,
Following the establishment of all Established Users whose license fees are
included in the Prepayment Amount, MCI will pay Netscape monthly (at me
applicable rates set forth m subsection 6(a) above orttw:price negotiated
pursuant to Section 8 below, whichever is applicable) for all the Established
Users mat become established during a given month. Such payments will be due
within thirty (30) days after me end of each such calendar month. MCI will
maintain accurate records reflecting me number of Established Users of the
Software Products and Netscape will have the right to cause such records to be
audited in accordance with Section 13 below.
(ii)
Database Software. When the total number of the Acceaore through which the
database software is accessed e x c e e d f ^ ^ any£ivenmonm,MCP
reimburse Netscape for additional Accessor i
for increased database capacity within thirty (30) days after the end of each i
month. MawiUlce^andtnauYtamaocuraterecordsieuectir^menumberof
Accessors mat reside in the Netscape Servers and Netscape will have the right to
cause such records to be audited in accordance with Section 13 below.
Taxes.
MCI shall be responsible for and shall pay all taxes (except for taxes based upon
Netscape's income, revenues or gross receipts), duties and other governmental
assessments or levies arising in connection with the licenses granted or services
performed under mis Agreement All payments under mis Agreement shall be made in
US. dollars in the United States. All payments more man ninety (90) days late will be
assessed a service fee of one percent (1%) per month, to the extent allowed by law.
7.
M*inten»nff pnA Minor Updates
7.1
Maintenance and Minor Updates- In exchange for Netscape's annual maintenance as provided
below, MCI agrees to pay to Netscape an annual maintenance fee (the 'Annual Maintenance
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CONFIDENTIAL TREATMENT REQUESTED
„ _ ' ) described in subsections 7.1{a) and 7.1(b) below. The xnamtenanc* provided by Netscape
shall consist of second line telephone technical support of me Software Itoducts, as well as Minor
Updates and bug fixes to the Software Products, all m accordance with AttachmeivtF {"Support")
hereto, hereby incorporated herein. Subject to the foregoing, MQ will be solely responsible for
providing maintenance and support to its customers. The Annual Maintenance Fee will be
payable quarterly with the first quarter beginning immediately after the expiration of the ninety
(90) day warranty period described in Section 11 below. To detennine quarterly amounts due,
MCI will take the cumulative number of Established Users licensed at tf* beginning of a given
quarter and the cumulative number licensed at me end of that same qusrter and will divide by
two, arriving at an average number of Software Product Established Users, M Q will then
multiply such average by an amount equal to twenty-five percent (2B%) of the then-current
Annual Maintenance Fee per Established User to arrive at the amount due for such quarter. All
payments will be made within thirty (30) days following the end of each such quarter. Major
Updates distributed by Netscape during the term of mis Agreement will be made available to
MCI pursuant to the pricing terms set forth in Section 9 below.
the initial Annual Maintenance Fee shall
b.
Established User.
Prior to the AcceptanceAnrtfversary Date, me parties
mutually acceptabl«^^^or pricing support based or
MalL The parties agree to renegotiate support pricing «s
8(d).
72.
Equipment Loan. MCI has purchased certain equipment and delivered it to Netscape for its use
in developing and maintaining the MCI Mall under this Agreement. A list of such equipment is
provided in Attachment A-2. In addition, from time to time, MCI wfll purchase and deliver to
Netscape such additional equipment as is mutually agreed to be necessary for Netscape to
continue such development and maintenance. Netscape may not use such equipment for
development of its core products. All such equipment will be owned by MQ, will be used by
Netscape solely for MCI in connection wim this Agreement and will be maintained by MCL
Netscape will bear the risk of loss of or damage to the equipment, except for normal wear and
tear, and will provide insurance coverage therefor. Netscape will return all equipment to one or
more locations designated by MCI upon termination or expiration of this Agreement for any
reason. IfuieieisapartialreleaseofSouroeCDdepunuantto§33,meiiMCIinayrequeste
return of equipment related solely to support of the released Source Code.
8.
Reneeotiated Aereement Guidelines
Upon each anniversary of the Production Acceptance Date, either party will have the right to
request a renegotiation of mepricmg terms set form in this Agreement In me event of such
renegotiation, if the parties do not agree in writing to a different result MCI shall receive ttte
following pricing:
a.
Upon the Anniversary Acceptance Date j
Acceptance Date) the lower*
price, as appropriate for each group of users referenced in Section 6(a
Section efaVorNetscape'sthenament
Most Favored Customer Pricing for the Software
Mo5t
4H[B|HII^B
tovottd Customer Pricing shall mean the lowest
price at which Netscape licenses the Software Products to any other Netscape customer
purchasing similar quantities of Software Product licenses with a similar Netscape
Servers/Accessors ratio, on similar terms and conditions, taking into account all the
principal elements of the transaction, provided mat me prices charged to any customer
which Netscape can demonstrate to MCI has made an initial equity investment in
CONFIDENTIAL
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CONFIDENTIAL TREATMENT REQUESTED
Netscape or paid prepaid license fees of more t
will not be taken into account to determine fee
Upon each of the i
Date, the lower) "
time period, or Ne
t the seventh arm*
fee Software Products
Pricing.
of me Production Acceptance
In the event Netscape changes its licensing or pricing model in me future (Le,,
Implements for other customers a licensing or prjdng model rurt based on fee number of
users accessing the licensed servers), then M G shall have the right to license Software
Products hereunder based on such alternative licensing or pricing model then in use by
Netscape, on a Most Favored Customer Pricing basis, as defined above. If additional or
revised terms and conditions are necessary to cany out the intent of these Most Favored
Customer Pricing provisions, the parties shall negotiate such hdditional terms and
conditions in good faith.
to support
agreed
9.
me metric described m Section 7.1(b) above, or,
amount determined in accordance with Section
M^or Update Pridng
Until fee Acceptance Anniversary Date, M Q w i u r e c e i v e | | ^ H ^ } p d a t e s o f the Software
Products, if any, for all Established Users whose license feeswereincluded in me Prepayment
Amount For all other MQ Established Users of me Software Products mat become established
prior to fee Acceptance Anniversary Date, and wilh respect to whomMdhasp "*" *
"
applicable license fees pursuant to Section 6(b) above, the fee eha—<»*-«/•»«.
new version to update such Established Users shall be not morel
price paid for the Version 1.B Software Products, as determined j
10.
Term of the. AEIUffH'fTftt; Termination
a.
Term
The term of this Agreement shall commence on fee Effective Date and shall continue in
effect for eight (8) years from fee Production Acceptance Date; provided, however, mat
both parties will have me opportunity to renegotiate pricing on each anniversary of fee
Production Acceptance Date, in accordance wife fee guidelines set forth in Section 8
above.
b.
Tflrnill)*tiQm few fmmg
In addition, this Agreement may be terminated by either party for cause immediately
upon fee occurrence of any of me following events:
i
If fee other parry completely ceases to do business relating to fee subject
matter herein, or otherwise terminates its business operations relating to
fee subject matter herein.
ii
If fee other party materially breaches any material provision of this
Agreement and fails to cure such breach within sixty (60) days (or
immediately in fee case of a breach of Section 13 (Confidentiality)) of
CONFIDENTIAL
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CONFIDENTIAL TREATMENT REQUESTED
2/15/95
noticed* ribb the breach, or, if such breach is not curable within such
time, the breaching party fails to undertake and pursue diligently efforts
to cure such breach.
iii.
If the other party is mvolvedm Financial Difficulties as evidenced:
A
by its commencement of a voluntary c*se under any applicable
bankruptcy code or statute, or by its authorizing by appropriate
proceedings (he commencement of such a voluntary case;
B.
by its failure to achieve dismissal of any involuntary case under
any applicable bankruptcy code or statute within sixty (60)
calendar days after initiation of such case;
C
by its seeking relief as a debtor under any applicable law of any
jurisdiction relating to the liquidation or reorganization of
debtors, or by 'consenting to or aoquief<dng in such relief;
D.
bytheentryofanorderbyacourtofcompetenthttisdiction
finding it to be bankrupt or insolvent, or ordering or approving
its liquidation, reorganization or assuming custody of, or
appointing a receiver or otner custodittn for, all or a substantial
part of its property or assets; or
E.
by its making an assignment for the benefit of, or entering into a
composition with its creditors, or appointing or consenting to the
appointment of a receiver or other custodian for all or a
substantial part of its property.
Notwithstanding the foregoing, me parties expressly agree that in the
event of a Netscape Financial Difficulty as described above, all licenses
granted under this Agreement shall survive and shall be governed by
Section 365(n) of the VS. Bankruptcy Code or any successor statute. The
parties further agree mat the Escrow Agreement attached hereto as
Attachment D shall be deemed to be a "supplementary agreement* as
contemplated under Section 365(n) of the VS. Bankruptcy Code.
iv.
If a Change of Control (as defined below) occurs with respect to (he other
party and if: (a) die acquinneorsurvivmgei^tv is a direct competitor of
the unaffected p a r h j H H H H ^ ^ ^ ^ H | ^ M k ) i r (b) following written
request by the u n a f f S c K a ^ w y ^ n f l S q ^ u m ^ r surviving entity falls to
provide, within ten (10) calendar days after receipt of request from the
unaffected party, a written statement to the unaffected party confirming
mat it will cause mis Agreement to be performed as if the Change of
Control had not occurred. For purposes of tiite Section, "Change of
Control" with respect to a party shall mean: (A) the acquisition by any
p e n a n or entity other than an Affiliate of the party of more than fifty
percent (50%) of the outstanding voting securities of (he party (whether
dii«uy,iiidirectiy,bertefirialh'orofreccml);
of the parry, or the merger or consolidation of the party with or into
another person or entity, if immediately after such merger, consolidation
or reorganization, securities having fifty percent (50%) or more of the
total voting power of all securities of the surviving entity in such merger,
CONFIDENTIAL
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CONFIDENTIAL TREATMENT REQUESTED
consolidation or reorganization are not owned in the aggregate by the
party, the shareholders who were shareholders of the party immediately
prior to such merger, consolidation orreorganization,and/or any person
that was an Affiliate of the party immediately prior to Rich merger,
consolidation or reorganization. Notwithstanding the foregoing, in no
event will an initial public offering or an subsequent public offering be
deemed to be a Change of Control.
Additional Right to Terminate
In addition, MCI may terminate this Agreement if any of the Software Products
are found by a court of competent jurisdiction to infringe intellectual property
rights of any third party.
d.
fffgft of Termination
i
fhinrival erf licenses if Source Code Released. In the event MC3
terminates this Agreement for cause lor a reason which is also specified
as a Release Event and source code is released under terms of Section 33,
all licenses andjjgfrtejSBDtefUjp M Q under Section 2 of this Agreement
| In such event and wUh respect tome
[agrees to continue to be bound by its
obligations under Section 3J4, 35, 5, 6 (if source code is released under
Section 33(a) or 3£(c), but not if such release is under Section 3.3{b)),
10(d), 14,15,17,19, and 20(cXn) and 20(d).
ii.
Survival nf Sublicenses. In the event mis A&i cement expires or is
terminated for whatever cause, the licenses to all Software Products
distributed prior to such termination or expiration shall survive.
iii.
rfrimiiiatinr Ranfid iff? Neither termination nor the survival of licenses
as provided above shall be the sole remedy under mis Agreement and,
whether or not such provisions apply, all other remedies will remain
available.
iv.
Nonrefundability of License Pee&. All prepaid royiilties and royalties
mat have been paid by MCI to Netscape prior to the termination or
expiration of this Agreement are and will remain nonrefimdable.
v.
Iifoflifod Right to Distribute. Unless
MCTs right to distribute the Netscape Client
die termination date.
vL
11.
terminate on
Survival Provisions. The following sections of this Agreement in
addition to other provisions specified elsewhere in this Agreement, will
survive the termination or expiration of this Agreement: Sections 2.4,
5J2,10 (d), ll(bKii),(iiiMiv) provided mat such warranties will apply only
to the date of termination, 12{g) and the second and third sentences of
120), 15,16,17,19, and 20 (cKU) and 20(d).
Warranties
CONFIDENTIAL
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2/1S/95
For the period of ninety (90) days from MQ't Acceptance of Version 1 A of each of the
c^ftvrf« P-vliirK. wirii FKwp^rt to KUA verrinms (flw "Warranly Period*!,, Netscape
warrants mat auch Software Products onnfonn and will confonn mall material respects
to the Specifications. The foregoing warranty will be void if ttw Software Pnxlucts are
used in me hardware/software environment not specified in the Specifications or
otherwise approved, authorized or expressly permitted by Netscape. During the
Warranty Period, Netscape shall provide M a at no charge with telephone technical
support and bug fixes and the other services provided on Attachment F hereto.
Following me Warranty Period, Netscape shall provide MC3 with support for the
Software Products in accordance with Section 7 above and Attachment F referenced
therein. Netscape's warranty obligation under this Section extends only to MO, but not
to MQ't customers.
Netscape further warrants to M Q that (i) it has not and will not during the term hereof
enter into agreements or commitments inconsistent with the rights and licenses granted
• to MCI in Section 2 above; (ii) Netscape owns or has licensed the Software Products and
all intellectual property rights therein, and has the full power and authority to license
and deliver copies of me Software Products to M Q as contemplated hereunder; (iiQthe
Software Products do not infringe any intellectual property or trade secret rights of third
parties; and (iv) Netscape has not incorporated in the Software Products, and, to
Netscape's knowledge, the Software Products do not contain any "time bombs,"_
"worms," "viruses, "locks," "drop-dead devices" or other routines or components to
permit unauthorized access, disable the software or data, harm the system on which the
software is run, or perform any other actions which would impair the value or operation
of me Software Products.
EXCEPT FOR THEWARRANTTESEXPRESSLYMADE IN THBSBCnONll,
NETSCAPE MAKES NO WARRANTIES TO ANY PERSON OR ENTITY WITH
RESPECT TO THE SOFTWARE PRODUCTS OR ANY SERVK ES OR LICENSES AND
DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION
WARRANTIES OP MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
12.
Consulting Services
a.
General
MCI will have the option of requesting consulting services from Netscape on an houriyphis-expenses basis. Such consulting services will not involve me development of
Netscape's core products. The development by Netscape of the Software Products,
described above shall be considered development of Netscape's core products. Upon
receipt of such requests from MCL Netscape agrees promptly to submit a proposal to
MCI setting forth ttie rates of me individuals required for the nervices,&swellasa
nonbinding, good faith estimate of the total costs of the proposed services. If MCI
Accepts such proposal, Netscape shall work diligently to complete the desired services,
and MCI will cooperate with Netscape, all pursuant to mutually agreed upon terms,
conditions and pricing.
Project' M
Netscape shall provide MCI with a dedicated Project Manage)* for the Consulting
Services.The Project Manager for the Initial Consulting Services shall be appointed, and
Netscape will notify MCI of his name promptly after the Effective Date and MCI shall
CONFIDENTIAL
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CONFIDENTS TREATMENT REQUESTED
have thereasonable eight to approve such Project Manager. The Project Manager shall be
dedicated to M a projects hereunder, but shall remain an employee of Netscape and shall
notbeconfitrued as an eir^loyeeofMafor any purpose. Netscape shall not charge M O
for the management services of the Project Manager. However, any non-managerial
consulting services provided by Hie Project Manager will be charged toMO. Netscape
may change the Project Manager from time to lime with MQ'« consent
Hourlv Rates
in effect
Depending on me seniority of the consultants required forj
for the one year period following the Effective Date will 1
^
per hour, as described in Attachment H. Thereafter, the rales in errectsnau tie no greater
than the standard rates then charged by Netscape to third parlies for similar services.
Revised Estimates
The Netscape Project Manager will alert me M Q project manager as soon as practicable,
in the event that budget or resources have not been correctly estimated. Netscape will use
its best efforts to provide enough advanced notice to enable MCI to evaluate whether or
not to proceed with the project based on the revised estimates.
e.
ting Services P<*hiln<»r
Netscape acknowledges receipt of an initial, non'
from MCI. The parties agree that Netscape may reta
consulting expenses for consulting services to be
provided that upon termination of the Agreement for any reason, all unused portions of
such retainer shall be promptly returned to MCL
Weekly status reports will be generated by Netscape and bi-weekly project status
meetings or conference calls will occur between the parties.
Ownership n{ Materjfoiff
Subject to Subparagraph i, below, all materials produced by Netscape or by M Q in
connection with Netscape's performance of me Consulting Services shall be the sole and
exclusive property of MO, and MQ shall own the intellectual property rights therein.
Pmduft Quitflmi7'JtHon Ptpjectei Ownership
The parties acknowledge that as part of the consulting service
may request Netscape to develop certain customized software for MCL If Netscape
accepts such request and notifies MCI that Netscape reasonably believes mat such
customized software may be incorporated as or become one or part of its core products,
and M Q does not fund such developments, Netscape will own such developments and
M Q shall have no right or interest in such development except as licensed hereunder or
otherwise. U Netscape accepts such request and notifies MCI that such customized
software will not be incorporated as part of its core product, a nd if MO pays for all of
Netscape's nonrecoverable engineering expenses associated with such development. M a
will be the sole and exclusive owner of such customised, MQ-spivifjr- spftwy ^ md Pf wn
copyright and other intellectual property rights therein. In the event Netscape does not
CONFIDENTIAL
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CONFIDENTIAL TREATMENT REQUESTED
accept MCI'6 request, MCI may proceed to develop such customized software either
itself or through* third parry and will be the sole and exclusive owner of all software
produced. The parties hereby agree that MO may perform either directly or through one
or more subcontractors customization with respect to me integration of TCP/IP, dialer
and registration software into the Software Products. MQ will be solely responsible for
such integration and Netscape will have no responsibility for supporting any part of such
integrated Software Products mat is not provided by Netscape under mis Agreement
MCI or its subcontractors will own all new software developed
p in connection wlm such
k
i
l ly reasonable efforts to
tiftn activity/
y/ and Netscape
p shall make commercially
h customization
iti
i
cooperate wtth MCI and its subcontractors) with respect to such
activity.
13.
Training.
In connection wim the license to MCI of the Netscape Client, Netscape shall provide to
MO, at places and times requested by MQ, a reasonable number of training courses for
MCI customer service representatives who will be providing first level support for
Netscape Client end users. Baditramingcxnirseshallbeone(l)dayinduration,and
shall permit up to the number of MCI attendees mat can reasonably be accommodated
in the available facilities.
In connection wim the license to MCI of the Netscape Servers, Netscape shall provide to
MO, at places and times requested by MQ, a reasonable number of training courses for
personnel who will be operating the Netscape Servers. Each training course shall be three
(3) days induration, and shall permit up to the number of MCt attendees mat can
reasonably be accommodated m the available facilities.
Netscape s h a I l ^ H H H | H f o r the development of any couree set forth above in
Subparagraph aTorbformedevelopmentof
training material*
associatedhtherewith;
MCI
or
t Netsca
provided, mat Netscape may assess
^MHHil^flV
flH^B *
pe
can demonstrate to MCI arose from developmentotMCHpeclfic components of me
training course or materials. Netscape may charge MCI for the Netscape trainers'time in
connection wim the presentation of the training courses listed above, at the rates set forth
in Attachment H hereto. M a will also pay Netscape for the copies of training materials
distributed at such training courses and will reimburse Netscape for reasonable and
documented travel expenses incurred in connection wim the presentation of the training
course, so long as such expenses are incurred in accordance wim MQ company travel
policies.
Mt» pjmit Training
At MO's request from time to time, Netscape shall provide training or assist M O in
providing training to merchants on me MCI MalL Ifsuch training or assistance is
requested by MCt M O shall pay Netscape for such training or assistance at the
consulting rates set form on Attachment H hereto.
CONFIDENTIAL
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14.
Books and Records
Each party shall keep complete and accurate books and records of its activities hereunder fora
period of seven (7) years after the date when such activities took place Specifically, MCX shall
keep books and records relating to its sublicensing of the Netscape d k n t software. Established
Users, and other customers and end users of die Software Products which MCI h i s the capability
to track and does routinely track. Netscape shall keep books and records documenting Ihe hours
spent and personnel Involved in the performance of all Consulting Services hereunder and
documenting additional fees due to Oracle by reason of MCTs use of the database software
hereunder. Each parry shall have the right (at its expense, upon seven (7) business days written
notice and during the other parry's normal business hours) to have an independent certified
public accountant inspect and audit the books and records of the other party described above for
the purpose of verifying any reports, information or payments provided or due hereunder. All
underpayments, if any, revealed by such audit shall be paid to Netscape within thirty (30) days of
the audit results. If such audit reveals an underpayment to Netscape in excess of five percent
(5%), or if such audit reveals an overcharge to MCI for Consulting Services, then the party
making the error shall bear one-half the cost of the audit Each party may exercise its right to
audit no more than once per year.
15.
Confidentiality
As used in this Agreement, the term "Confidential Information" shall mean any information
disclosed by one party to the other pursuant to this Agreement which is in written, graphic,
machine readable or other tangible form and is marked "Confidential1', "Proprietary* or in tome
other manner to indicate its confidential nature. Confidential Information may also include oral
information disclosed by one party to the other pursuant to this Agreement, provided that such
information ic fit^tigTiaWl us r«nHdynt"0 Wt th? ^ m ^**^ *^**r^tlPt1H> linrt *fdllPpd tOB Written
summary by the disclosing party, within thirty (30) days after its oral disclosure, which is marked
in a manner to indicate its confidential nature and delivered to the receiving party. M d ' s
"Confidential Information" shall also include third parry information about speculc financial
transactions, including without limitation, credit card numbers and ciutomer names ("Financial
Transaction Information"), residing on or processed through the Netscape Server software
licensed to MCI hereunder.
Each party recognizes the importance to the other party of rnformation identified by the other
party (the "Disclosing Party") as Proprietary Information. Accordingly, each party agrees as
follows:
a.
The party reoeivmg (or wim respect to Fmaraial Transacts
to) Confidential Information of the other party (the "Receiving Parly*) agww* (!) tn hrild
the Disclosing Party's Confidential Information in confidence us a fiduciary and to take
all reasonable precautions to protect such Confidential mfonnntion (including without
limitation all precautions the Receiving Party employs with repecttottsown
confidential materials), 01) not to divulge (except pursuant to e sublicense agreement as
permitted hereunder which contains confidentiality obligations that are no less restrictive
than those contained Attachment C) any such Confidential Information or any
information derived therefrom to any third person except contractors under a
confidentiality obligation to such Party (which is no less restrictive than those contained
herein), and fill) not to make any use whatsoever at any time of s u A Cnnfid<»nHfl1
Information except as expressly authorized in this Agreement Any employee or
contractor given access to any such Confidential Information must have a legitimate
"need to Jknow" and shall be similarly bound in writing. Without granting any right or
license, the Disclosing Party agrees that the foregoing shall not apply with respect to.
CONFIDENTIAL
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2/15/95
information the Receiving Party can document (i) is in or {through no improper action or
inaction by the Receiving Party or any Affiliate, agent or employee thereof) enters the
public domain, or (ii) was in Us possession or known by it prior to receipt from the
Disclosing Parly, or (ill) was rightfully disclosed to it by another person without
restriction, or (iv) was independently developed by it without use of me Confidential
Information.
b.
ly
the Receiving Party will turn over to
y «p«n
p torminaHnnirf thte Agreement,
g
l
fid
I
f
i
D i l i
P r t and
d all
ll
the Disclosing Party all Confidential Information off me Disclosing
Party
documents or media containing any such Confidential Information and any and all
copies or extracts thereof; provided, mat mis Bubpan^raphBriaU not require the return of
any of the Software Products, including Source Code and documentation, which MCI has
a right to continue using following termination in accordance with the terms of this
Agreement.
The Receiving Party acknowledges and agrees that due to the unique nature of the
Disclosing Party's Confidential Information, there can be no adequate remedy at law for
any breach of its obligations hereunder, mat any such breach may allow the Receiving
Party or third parties to unfairly compete with the Disclosing Parry resulting in
irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any
threat thereof, the Disclosing Party shall be entittedto appropriate equitable relief in
addition to whatever remedies it might have at law and under this Agreement
d.
16.
If either party receives Source Code of me other party, men the following the Receiving
Party shall keep the Source Code in a secure environment with restricted access.
Patent. Copyright and TrftHpmurk Infringement
Netscape shall hold MO and its Affiliates, and their respective directors, officers, agents,
employees and representatives harmless from all liability resulting front infringement by, or
alleged infringement by, the Software Products of any US. trademark, any patent issued as of the
Effective Date or any copyright or misappropriation of any trade secret MCI agrees mat it shall
notify Netscape of all threats, claims and proceedings related to any such suit within a reasonable
time after such threat, claim or proceeding comes to the attention of MCX Netscape shall have
sole control of the defense and/or settlement of any such suit, and MCI shall furnish to Netscape,
upon request, information available to MCI for such defense, and shall provide Netscape with
reasonable assistance.
If Md's use of any Software Products under the terms of this Agreement is, or in Netscape's
opinion is likely to be, enjoined due to the type of infringement speciBed above, then Netscape
may, at its sole option and expense, either (i) procure for MCI me right to continue using such
Software Products under the terms of this Agreement; or (ii) replace or modify such Software
Products so that they are noninfringing and substantially equivalent in function to (he enjoined
Software Products.
Trie foregoing obligation of Netscape does not apply with respect to any Software Products or
portions or components thereof: (a) which are not supplied by Netscape; (b) which are modified
after shipment, if the alleged infringement relates to such modification, and if such modification
was not authorized, expressly permitted or performed by Netscape; (c) which are combined wim
other products, processes or materials, if the alleged mfringement relatts to such combination
and if Netscape did not authorize or expressly permit the combination; or (d) where MCTs use of
the Software Products is incident to an mfringement not resulting primarily from the Software
Products or is not in accordance wim me license granted under this Agreement
CONFIDENTIAL
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2/15/85
THE FOREGOING IS MCTS SOLE AND EXCLUSIVE REMEDY WITH RESPECTTO ANY
WARRANTIES OF NONINFRINGEMENT.
liability
17.
NOTWIXHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER
PARTY NOR ITS LICENSORS) WILL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO
ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN
EXCESS OF THE AGGREGATE OF THE FEES PAID TO NETSCAPE HBREUNDBR DURING
THE ONE YEAR PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE, OR (II) FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST DATA OR (ID) FOR COST OF
PROOJREMEtn-OFSUBSTTIUTBGOODS,TBCHNCajOGYORSBR\lCES. THE
INFRINGEMENT INDEMNITY PROVIDED BY NETSCAPE IN SECTION 16 ABOVE SHALL BE
EXCLUDED FROM THE LIMITATION ON LIABILITY PROVIDED IN THIS SECTION 17. If
Netscape exercises its option in §16(1) or (ii) above to procure or replace the Software Products,
this Section 17 shall not be interpreted to require M Q to p*y any portion of resulting fees.
18.
Insurance
During the term of this Agreement, Netscape shall maintain the following insurance:
a.
Comprehensive or Commercial General liability Insurance naming Netscape and its
Affiliates as the named insuredB, and naming MCI and its Affiliates as additional
insureds, covering among other things blanket contractual liabiliiy coverage, with limits
of not less man S2JO0OJ0OO combined single limit for personal injury and property
damage; and
b.
Workers' Compensation Insurance as required by applicable law; and
c
Umbrella coverage of SljOOOJOOO per occurrence.
Netscape shall furnish to MCI certificates of insurance with respect to ti« above-referenced
coverage naming MCI and its Affiliates as additional insureds with rest «ect to general liability.
19.
Export Control. MCI agrees to use its commercially reasonable efforts fa. comply with all expntf
laws, restrictions and regulations of the Department of Commerce aiulolher United States or foreign
agency or authority in its distribution of the Software Products. MCI shall obtain and bear all expenses
relating to any necessary licenses and/or exemptions with respect to its own export from the US. and
reexport of the Software Products. If the VS. Government or any competent agency thereof notifies
Netscape Out MCTs export or reexport of any such materials or products violates any such restriction,
law or regulations, then Netscape shall promptly notify MCI of such violation, «nd MCI shall promptly
either bring the exporting activity into compliance with such restrictions, law and regulations or cease the
exporting activity.
20.
General
a.
Announcements
Netscape and MCI will jointly develop press releases/other announcements and will
agree upon the appropriate timing and venue for such releases/ announcements.
CONFIDENTIAL
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2/15/95
Joint Marketing
ially reasonable efforts to maintain a vendor-neutral
Netscape will use its corm
position with respect to referring content providers to MQ or to other Netscape
customers.
The rights and obligations of the parties under this Agreement may not be assigned or
transferred except (i) rights to receipt of money may be assigned; (u) MCI may assign this
Agreement to any Affiliate of MCfcand (iti) Netscape may subcontract work with regard
to the consulting services or other development and support obligations hereunder,
provided mat MCI must approve in writing in advance all such subcontracting. Any
attempted assignment without the requisite consent shall be null and void.
Governing Law/Dispute Resolution
this Agreement and all disputes hereunder shall be governed by the substantive law of
the State of California, without regard to me conflicts of law provisions therein. All
disputes hereunder which cannot be amicably resolved by the parties, except those solely
concerned with Netscape's intellectual property rights in the Software Products, shall be
settled exclusively by binding arbitration in accordance with flie Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be held in Bethesda,
MaryWwlandshallbecmiductedbyasmgteaibilxatorv^osriaUbeabwyerfaiiuIiar
with computer software development and license agreements. The decision of the
arbitrator shall be final and binding upon the parties and may be enforced by either party
many court of competent jurisdiction. Bach party shall bear the cost of preparing and
presenting its case. The costs of the arbitration, including me rises and expenses of the
arbitrator, will be shared equally by me parties unless the award otherwise provides.
This provision shall not be construed to prohibit either party fi om seeking preliminary or
permanent injunctive relief in any court of competent jurisdicb on.
Waiver
Except as otherwise expressly provided herein, any provision of this Agreement may be
amended and the observance of any provision of mis Agreement may be waived {either
generally or in any particular instance and eitherretroactivelyor prospectively) only
with the written consent of the parties. However, it is the intention of the parties that this
Agreement be controlling over additional or different terms of any purchase order,
confirmation, invoke or similar document, even if accepted in writing by both parties,
and mat waivers and amendments shall be effective only if me de by non-pre-printed
agreements clearly understood by bom parties to be an amendment or waiver.
f.
Headings
Headings and captions are for convenience only and are not to be used in the
interpretation of this Agreement
g
The Attachments referred to in mis Agreement are incorporated herein by reference.
Notices '
CONFIDENTIAL
20
2/15/K
CONFIDENTIAL TREATMENT REQUESTED
Notices under this Agreement shall be sufficient only if personally delivered, delivered
by a major commercial rapid delivery courier service, sent by facsimile, or mailed by VS.
mail to a parry at its address first set forth herein or as amended by notice pursuant to
this Subsection. If not received sooner, notice by mail shall be deemed received five (5>)
days after deposit in the US. mails. Notice sent by courier shall be deemed received one
day after it is sent; notice sent by facsimile shall be deemed received on flie day it is sent
This Agreement including all Attachments hereto, supersedes all proposals, oral or
written, all prior and contemporaneous agreement negotiations, conversations, or
discussions between or among the parties relating to the subject matter of this Agreement
and all past dealing or industry custom.
Sevenibility
If any provision of mis Agreement is held to be illegal or unenforceable, that provision
chaji tw limited nr eliminated to the minimum extent necessary so that this Agreement
shall otherwise remain in hill force and effect and enforceable.
ftquity Participation by MCI
""
If any of theHH|^|^IHm^^^^Hli^^lHJHM c > ff e I S to make
an equity investment in Netscape and such offer is accepted by Netscape (the
Investment Offer*), Netscape will immediately notify MCI of me Investment Offer and
provide an opportunity to MCI to purchase additional shares of such equity under the
same terms and conditions, and up to the maximum number, as the offer made by any
Listed Company. MCI must respond to such notice within thirty (30) days after receipt
thereof. If MQ does not respond within the thirty day period. M a will be deemed to
have made the decision not to make such investment in Netscape. This Section 20(k) shall
terminate and be of no further effect and MCI shall have no fur ther right to participate in
any future equity investments in Netscape upon the first to occur of the following: (i) a
failure by MCI to participate in an amount equal to fifty percent (50%) of the full extent
permitted in an Investment; (ii) a public offering of voting equity securities of Netscape;
or (iii) the consummation of a Change of Control transaction of Netscape In addition,
this Section 20(k) shall not apply to any transaction contemplated by clauses (U) or (tii)
above.
Non-Solicitation of Netscape Kmni
MCI agrees not to solicit directly or indirectly, employees of Netscape for employment
or as consultants or contractors during the term of this Agreement Nothing in this
provision is intended to limit the ability of MCI to hire employees of Netscape as
employees, consultants or contractors where such hiring opportunity was publicly
advertised. The Parties acknowledge mat certain Netscape employees will be dedicated
to supporting and performing customization services for MCI ltereunder.
m.
Counterparts
This Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and which shall together be considered the same document
CONFIDENTIAL
Zl
*' o o
2/15/95
IN WITNESS WHEREOF, the parties have caused their authorized representatives-to execute this
Agreement as of the Effective Date.
CATIONS CORPORATION
MCI TELECOMMUNICATIONS CORPORATION
J. Robert Harcharik
Its:.
Date:
Date:.
CONFIDENTIAL
os
2/15/95
presentiitve to execute &it
H0N5 CORPORATION K
tltte.
• *
*»•» i
2/15/95
ATTACHMENTS
A
Software Products; Specifications
A-l
Additional Requirements Document (for Specification)
A-2
Equipment Loaned by MCI
B
Acceptance Procedures
C
Sublicense Terms and Conditions
D
Escrow Agreement
E
Trademark Use and Branding
F
Support
G
Competitors
H
Consulting Rates
CONFIDENTIAL
2 3
— •_
ATTACHMENT A
SPECIFICATION
Baseline Specifications for markctplaceMa Version 1A
Introduction
This document is based on meetings and email exchanges between MCI and Netscape
Communications. Two major deliverables are anticipated, one in Febiuary, 1995 and one
in May, 1995. There are several major components to the Netscape system used to
implement marketplaceMCI:
Client
Merchant Server
Transaction Server
Staging Server
MED (on Merchant Enabling Device)
It should be noted that these systems, particularly those in the server category have evolved
considerably with experience in testing and use, so that even these specifications must be
considered approximate. The Merchant, Transaction and Staging Servers are all based on
the Netsite product, tailored for specific functional requirements.
A note on nomenclature: most Netscape deliverables come with version numbers such as
1.0.5,1.1. To avoid confusion, this document refers to 1.A and 1 3 as the base
deliverables for the February and May time frames. The 1 j \ baseline is derived from 1.0.5
which has been refined with testing.
Overall Client Specifications - version l.A
1. Basic functionality, equivalent to NCSA Mosaic Cross-platform Consistent GUI
2. Standard Netscape Navigator menus, icons, directory content ( MCI Branding done on a
T&E basis)
3. "Kiosk mode" based on MCI/NCOM negotiations.
4. Multiple docs on screen.
5. Bookmarks
6. History
7. Use of standard HTML and HTTP.
8. Clear indications to user of what is happening, in particular progress indication on
current up/download.
21 0
February 16, 1995
9. High degree of concurrency (multiple connections)[it has subsequently been noted that
concurrency is not always conducive to high performance and needs to be controllable
which Netscape has done by making configurable the maximum numter of simultaneous
TCP connections]
10. JPEG and GIF handling inline
11. Easy to use (by casual, non-Internet-expert, users) install process after network
download.
12. Support for multiple (10) Client Cookies to handle shopping carts/discrete one time online info delivery, etc.
13. Secure mode of operation for on-line transactions between the Client and Transaction
Server. Initially using HTTPS and SSL.
14. The MCI logo shall be located at the far right of the "Directory Buttons".
15. The Netscape logo shall be (a) located on the tool bar, and (b) a bit-map, rather than a
functional button.
16. Feature number 1.18 in the document titled "MCI Requirements for Netscape" dated 8
February, 1995 and attached hereto as Attachment A-l (the "Additional Requirements
Document") shall be included in the Netscape Client functionality for version 1 .A.
Overall Client Specifications - Version 1.B
1. Security enhancements, including client-requested secure sessions. (SHTTP
compatibility wilt be included as soon as practical, but not necessarily as part of the 1 3
deliverable.)
2. Profile selection and editing capability (multiple profiles on same machine). Profile
handling by per-user directories and command-line arguments to Netscape. Viewing stored
profile as part of a generalized per-user object store.
3. Contents of profile/ object store to include Credit card numbers, Private keys, Shipping
address, Profile password, shopping preferences: clothing sizes, Order and transaction
history for user.
4. Recognition of electronic receipts and automatic incorporation of them into profile/object
store.
5. Support for the following platforms - Windows 3.1, Macintosh, X-Version (Sun
Solaris, IBM, HP, SGI, DEC OSF/1)
6. The color palette to be available in die client is attached hereto as Attachment A-l .1. If
all the images share the specified 216 color palette, dithering is not required. A stronger
solution (such as a color map management strategy) may become available in the release
following Version I.B.
Overall Merchant Server Specifications - Version 1.A
2/ .
February 16, 1995
J. Functional equivalent of NCSA httpd (HTTP server) 1.3 for the Netsite portion
2. Installation of Netsite to be similar to the MCOM standard Netsite Product Ability to
define port, various directory structures, system administrator name and password, access
control, log directory etc.
3. Secure communications between Netsite and Netscape over HTTPS (Secure HTTP)
developed by NCOM, using RSA based security mechanism (Public, Private Key pairs),
additional security features such as Session Keys, Nonoe as provided by NCOM. Nonsecure Communication over HTTP.
4. Meta HTML Interface for use by Merchants to develop HTML Pages (Includes Meta
HTML Parser and documentation)
5. Netsite to Relational Database interface.
6. Dynamic generation/re-generation of HTML pages based on data changes in the
database.
7. Shopping Cart Mechanism, Automatic transparent identification of client.
8. Database Schemas for supporting the Merchant Server, White and Yellow pages.
9. Generic Product Order form, Review Shopping Cart Page.
10. Tools to load data into the Relational database based on the Name/Value Pair format
and the EDHike format.
11. Reporting Toot to determine the number of hits on pages.
12. Merchant Server data reports per MCI Billing Requirements doc d&ed 12/23.
13. Documentation on Netsite as well as procedural documentation on the Merchant Server.
14. Installer for non-Netsite components of the Merchant Server
15. Available only on the SPARC Solaris Platform
Merchant Server Specification - Version 1.B
1. Ability to architecturally support multiple homogeneous and/or heterogeneous Merchant
Servers for High Availability.
2. Ability to handle one time discrete on-line delivery of information
3. Dynamic gencration/re-generation of HTML pages based on data changes in the relevant
template as described in point 1.215 of Attachment A-l.
4. Provide cross Jinks from the bud page as described in point 1.12 of attachment A-l.
5. The ability to delete a merchant from the database as described in point 1.16 of
attachment A-l.
__
February 16. 1995^ ' l-
6. Shipping options will be applicable in per product basis, as described in point 1.17 of
attachment A-l.
7. Netscape and MCI will work together to find a resolution to MCI's desire to have
multiple prices per bud page as described in point 1.20 of attachment A-l.
8. A bud page will be generated after an ADD PRODUCT, ADD SKU operation as
described in point 1.21 of attachment A-l.
9. Support yellow and white pages queries as described in points 2.11 and 2.12 of
attachment A-l
10. SHTTP compatibility will be included as soon as practical, but not necessarily as part
of the l.B deliverable.
11. "No action" areas in mapped images, as described in point 1.9 from Attachment A-1
will be provided.
Transaction Server Specification - Version 1.A
1. Features similar to the Netsite Features described in the Merchant Server Section.
2. Security Components such as HTTPS, Public Private Keys, Session Keys, Nonce
3. Netsite to Relational Database Interface
4. Interface to Merchant Server for Price Checks.
5. Transaction Logs
6. Standard Forms for "Check Order", "Invoices, "Receipts"
7. SPARC Solaris Release
8. Installer for non-Nctsite components
9. Transaction Server Database Schema
10. HTML Forms for Customer Service Queries
11. Transaction Server to Merchant Premise Name/Value Pair, PEM encoder and SMTP
based mailer. Transaction server to generate purchase orders signed under the Transaction
Server secret key and encrypted with a session key generated for confidentiality and applied
using the RC4 algorithm. The purchase orders, after signing and encrypting, will be sent
via PEM/SMTP to die merchant premises MED system. MCI will obtain the PEM encoder
pumsant to an agreement to be entered into between MCI and Trusted Information
Systems, Inc.
12. MCI will have access to all the raw data collected by die Transaction Server for the
purpose of monitoring and billing, on a read-only basis through the appropriate Netscapesupplied interface(s).
_...
•
February 1 6 . 1 9 9 5
13. Documentation on Netsite as well as procedural documentation on the Transaction
Server.
Transaction Server Specification - version 1.B
1. Architectural support for High Availability. (This means multiple servers)
2. Operation on separate shadowed servers without side effects visible to merchants or
customers
3. Pricing information available at order time and adjustable for location-dependent prices,
per-customer price schedules, taxation variations, and shipping charges.
4. EDI format translator for Merchant fulfillment.
5. Transaction Server to Credit Card Authorization API. Multiple credit card service
interfaces available, including FDC/Envoy and others to be determined and agreed by
Netscape and MCI. This will include points 2.1 through 2.8 and points 2.13 and 2.14 all
from attachment A-l.
_
Staging Server Specification - Version 1.A
1. Database similar to Merchant Server Database
2. Transport of data from Merchant Premise to Staging Server in Secure form using
PEM/SMTP transport.
3. Loading and parsing of Merchant data based on the Name/Value Pair format
4. Approval Process of Staging Server data based on viewing SS data via Netscape (via an
ACL) and approval of data by HTML form.
5. Queuing transactions to be loaded at time requested by Merchant [a particular item can
only be "in one queue" for update at a time. Until the update has happened, the item cannot
be marked for price or other change].
6. Transfer of Data from Staging Server to Merchant Server.
7. Documentation on Netsite as well as procedural documentation on the Staging Server.
Staging Server Specification - Version 1.B
1. Ability to load multiple homogeneous/heterogeneous Merchant servers
2. Support for Pseudo-EDI input format.
3. Approved changes in the staging server database will be schedulable on a per change
basis. Multiple changes to the same database entry will be possible with different effective
times.
February 16. 1995
MED Specification - Version 1.A
The "MED" (Merchant Enabling Device) is a Solaris/Sparc-based workstation on the
merchant premises and is intended to be the recipient of purchase orders generated by
customers in the marketplaceMCI system and also to be a conduit for nansmitting new
product graphic and database content from the merchant to the staging server. All
transactions between the MED and marketplaceMCI are secured using Privacy-Enhanced
Mail (PEM) transported using the Internet Standard Simple Mail Transport Protocol
(SMTP), enhanced with the Multipurpose Internet Mail Extension (MIME) capability.
MCI will obtain the PEM software purusant to an agreement to be entened into between
MCI and Trusted Information Systems, Inc.
1. MED will accept PEM/SMTP purchase orders, validate them, and forward them in
accordance with Merchant requirements. MCI is responsible for handling the purchase
orders once they have been received and validated/decrypted. The procedures will include
provision for failure recovery (handshaking protocols). Netscape will provide access to the
Netscape MED source code to satisfy MCI and customer security requirements. Enough
documentation will be provided to enable MCI or its customers to implement the merchant
side of the purchase order receipt system.
MED Specification Version 1.B
"*
1. MED will generate PEM/SMTP staging server database updates and forward them to the
staging server. MED will be equipped with required software to serve as a content
development tool.
Additional Server Requirements
In addition to the above, the parties have agreed that certain of the features included in the
Additional Requirements Document (attachment A-l) shall be included in Version 1.A of
the Netscape Servers a follows:
1.0 Page Layout* (see note below)
1.1 Enlarge Description Fields
1.2 PO Memo field
1.3 Bud page comment
1.4 MS reload
1.5 TS log eveiything
1.7 Blank database field (SKU field will be alphanumeric) 1.8 Additional MLE
documentation
1.11 SKU attributes in PO
1.13 Increase SKU attribute size
1.14 N:V pair database dump
1.15 Email address in PO
1.24 Product attribute token
•NOTE: 1.0 page layout was to be provided in the 2/22 delivery of Version 1A of the
Netscape Severs provided that final specifications were delivered by MCI to Netscape by
Saturday 2/11/95. Netscape has not yet received final specifications. Netscape will
therefore try to incorporate the final specifications when received from MCI but cannot
guarantee such inclusion.
February 16. 1995
2/15/95
ATTACHMENT A-l
ADOT1ONAL REQUIRHMBNTS DOCUMENT
(FOR THE SPECIFICATION)
CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL
••' 6
ATTACHMENT A-l.l
Overall Client Specifications, Version 1 3 , Item 6
Netscape uses 20 system colors for all its graphics and UI. The remaining
colors are used for rendering of images in the page. In the MCI case, this
is reduced by one color for the orange logo color. Support for JPEG images
in an 8-bit colorspace requires either a two pass color sequence or a colctr
cube. Use of a two-pass color reduction could offset the performance
improvements of using jpeg. Our current implementation uses a color cube.
The colors in this cube are attached below.
One benefit of this is you can place several images (gifs or otherwise) on
the same page and they will all be rendered in reasonable colors, possibly
dithered. If we allocated colors for GIFs as they arrived, pages with
multiple images could easily find only the 1st image rendered in anything
resembling correct color, with the rest in apparently random technicolor.
—216 entry color cube for dithering in 8-bit Windows Netscapeindex 0 r 0 g 0 b 0
index 1 rOgObSl
index 2 r 0 g 0 b 102
index3r0g0bl53
index 4 r 0 g 0 b 204
index 5 r 0 g 0 b 255
index 6 r 0 g 51 bO
index7r0g51b51
index8r0gSlbl02
index9rOg51bl53
index lOrOg51 b204
indexllr0g51b255
index 12 rOg 102 bO
index 13-rOg 102 b 51
index 1 4 r 0 g 102 b 102
index 15rOglO2-b 153
index 1 6 r 0 g 102 b 204
index 17 rOg 102 b255
index 18 rOg 153 bO
index 1 9 r 0 g 153 b51
index 2 0 r 0 g 153 b 102
index 21 rOg 153 b 153
index 22 rOg 153 b 204
index 23 r 0 g 153 b 255
index 24 rOg 204 bO
index 25 rOg 204b 51
index26r0g204bl02
index 27 rOg 204 b 153
index 28 r 0 g 204 b 204
index 29 rOg 204 b 255
index 30 rOg 255 bO
February 21, 1995
d / /
index31rOg255b51
index 32 rOg 255 b 102
index 33 rOg 255b 153
index34r0g 255b 204
index 35 rOg 255 b 255
index 36 r 51 g Ob 0
index37r51g0b51
index 38 r 51 gOb 102
index 39 rSlgOb 153
index 40r51gOb 204
index41r51g0b255
index42r51g51bO
index 43 r 51 g 51b 51
index44r51g51blO2
index 45 r 51 g 51b 153
index 46151 g 51b 204
index 47 r 51 g 51b 255
index 48 r 51 g 102 bO
index49r51glO2b51
index50r51g 102b 102
index51r51g 102 b 153
index 52r51g 102b 204
index 53r51g 102b 255
index 54 r 51 g 153 bO
index 55 r 51 g 153 b 51
index 56 r 51 g 153 b 102
index 57 r 51 g 153 b 153
index 58 r 51 g 153 b 204
index 59 r 51 g 153 b 255
index 60 r 51 g 204 bO
index 61 r 51 g 204b 51
index 62 r 51 g 204 b 102
index 63 r 51 g 204b 153
index 64 r 51 g 204b 204
index 65 r 51 g 204 b 255
index 66j 51 g 255 bO
index 67 r 51 g 255 b 51
index 68 r 51 g 255b 102
index 69r51 g255b 153
index 70 r 51 g 255 b 204
index71r51g25Sb255
index 72 r 102 g 0 b 0
index 73 r 102 g Ob 51
index 74 r 102 gOb 102
index75rl02g0bl53
index 76 r 102 gOb 204
index 77 r 102 gOb 255
index 781102 g 51 bO
index 79 r 102 g 51b 51
index 80 r 102 g 51b 102
index 81 r 102 g 51b 153
index 82 r 102 g 51b 204
index 83 r 102 g 51b 255
index 84 r 102 g 102 b 0
Februaiy21, 1995
2/
index 85 r 102 g 102b 51
index 86 r 102 g 102b 102
index 87 r 102 g 102b 153
index 88 r 102 g 102 b 204
index 89 r 102 g 102 b 255
index 90 r 102 g 153 bO
index 91 r 102 g 153b 51
index 92 r 102 g 153b 102
index 93 r 102 g 153 b 153
index 94 r 102 g 153 b 204
index 95 r 102 g 153 b 255
index 96 r 102 g 204 bO
index 97 r 102 g 2Mb 51
index 98 r 102 g 204 b 102
index 99 r 102 g 204b 153
index 100 r 102 g 204b 204
index 101 r 102 g 204 b 255
index 102 r 102 g 255 bO
index 103 r 102 g 255b 51
index 104 r 102 g 255 b 102
index 105 r 102 g 255b 153
index 106 r 102 g 255b 204
index 107 r 102 g 255 b 255
index 108 r 153 g Ob 0
index 109 r 153 gOb 51
index 110 r 153 g Ob 102
indexlllrl53g0bl53
index 112 r 153 gOb 204
index 113 r 153 g Ob 255
indexU4rl53g51bO
index 115 r 153 g 51b 51
index 116 r 153 g 51b 102
index 117 r 153 g 51b 153
index 118 r 153 g 51b 204
index 119 r 153 g 51b 255
index 1201153 g 102 bO
index 121 r 153 g 102 b 51
index 122 r 153 g 102 b 102
index 123 r l S 3 g 102 b 153
index 124 r 153 g 102 b 204
index 125 r 153 g 102 b 255
index 126 r 153 g 153 bO
index 127 r 153 g 153 b 51
index 128 r 153 g 153 b 102
index 129 r 153 g 153 b 153
index 130 r 153 g 153 b 204
index 131 r 153 g 153 b 255
index 132 r 153 g 204 bO
index 133 r 153 g 204b 51
index 134 r 153 g 204b 102
index 135 r 153 g 204 b 153
index 136 r 153 g 204b 204
index 137 r 153 g 204 b 255
index 138 r 153 g 255 bO
February 21, 1995
_
index 139 r 153 g 255 b 51
index 140 r 153 g 255 b 102
index 141 r 153 g 255 b 153
index 142 r 153 g 255 b 204
index 143 r 153 g 255 b 255
index 144 r 204 g Ob 0
index 145 r2O4gOb 51
index 146 r 204 g Ob 102
index 147 r 204 g Ob 153
index 148 r 2 0 4 g 0 b 2 0 4
index 149 r 204 g Ob 255
index 150 r 204 g 51 bO
index 151 r 204 g 51b 51
index 152 r 204 g 51b 102
index 153 r 204 g 51b 153
index 154 r 204 g 51b 204
index 155 r 204 g 51b 255
index 156 r 204 g 102 bO
index 157 r 204 g 102 b 51
index 158 r 204 g 102 b 102
index 159 r 204 g 102 b 153
index 160 r 204 g 102 b 204
index 161 r 204 g 102 b 255
index 162 r 204 g 153 bO
index 163 r 204 g 153 b 51
index 164 r 204 g 153 b 102
index 165 r 204 g 153 b 153
index 166 r 204 g 153 b 204
index 167 r 204 g 153 b 255
index 168 r 204 g 204 b 0
index 169 r 204 g 204 b 51
index 170 r 204 g 204 b 102
index 171 r 204 g 204 b 153
index 172 r 204 g 204 b 204
index 173 r 204 g 204 b 255
index 174 r 204 g 255 bO
index 175> 204 g 255 b 51
index 176 r 204 g 255 b 102
index 177 r 204 g 255 b 153
index 178 r 204 g 255 b 204
index 179 r 204 g 255 b 255
index 180 r 255 g Ob 0
index 181 r 255 g Ob 51
index 182r255gOb 102
index 183 r255g Ob 153
index 184 r255 gOb204
index 185 r255gOb255
index 186 r 255 g 51 bO
index 187 r 255 g 51b 51
index 188 r 255 g 51b 102
index 189 r255g 51b 153
index 190 r 255 g 51 b 204
index 191 r 255 g 51b 255
index 192 r 255 g 102 bO
February 21, 1995
index 193 r 255 g 102 b 51
index 194 r 255 g 102 b 102
index 195 r 255 g 102 b 153
index 196 r 255 g 102 b 204
index 197 r 255 g 102 b 255
index 198 r 255 g 153 b O
index 199 r 255 g 153 b 51
index 200 r 255 g 153 b 102
index 201 r 255 g 153 b 153
index 202 r 255 g 153 b 204
index 203 r 255 g 153 b 255
index 204 r 255 g 204 b O
index 205 r 255 g 204 b 51
index 206 r 255 g 204 b 102
index 207 r 255 g 204 b 153
index 208 r 255 g 204 b 204
index 209 r 255 g 204 b 255
index 210 r 255 g 255 b O
index211r255g255b51
index 212 r 255 g 255 b 102
index 213 r 255 g 255 b 153
index 214 r 255 g 255 b 204
index 215 r 255 g 255 b 255
February 21, 1995
2/15/95
ATTACHMENT A-2
EQUIPMENT LOANED BY MCI TO NETSCAPE
One Spaicstation 1000; 12 Gigs ol Disk and cd-rom drive
CONFIDENTIAL
OflSQE
Tom
The Rutitt acknowledge that Vt
tbel
and Vcoicm 1*A of
B ("Vcssiai L A Acocpa
of the
with. Ifao du>eiupiuflnt of Vt
Netscape CBeot and Netscape Sonrca, MCX will doveipp w
criteria, acceptance tests and a schedule
1 3 , which, additional
d d b far
f testing
i i VVeaion
i
criteria, testa and schedule wffl be sobject to Netscape's irasfmtWft approval
("Vexsfan 1.B Acceptance Crfteafraiid Acceptance Tests'). Tbe paflies agose that
VezsioD 1 3 ataD be; (I) ntested according
testi
and Acxqrtance Tests; and (2) tested tc
this Paragraph- Vcnion 1.A and Vendon LB Acceptance Criteria, and Acceptance
Ttestt ate collectivoly lefiened to as the "Accepunce-Ctterit" aad V
Tests."
*-TJI^
Verrinn l.A
MQ wfll complete tbo testing of V c n t a LA of the Software Prodncti ming
the Vendoa 1 ^ . Acceptance Criteriz and Acceptance Tests as comas
pncticable after the Pebmary
y 20 and 22 dettraro of tto VamonlJV
ft
d » Venlon 11 ^ ft
ij ddbrewd to MCI by tbc
software.
PnrrfdW tlot d
1. A of tbe Softwaxe
above dates, M Q win. dfiher accept or leject V
Frodncts by Match l ( l g g j in accortapee wWh the oTfhnra set forth tn
M\ J|M i JJ i i|ih Zx below.
At soon, u pxuttcable after deUvwy of Vetwoo 1 Jt of tbe Software Products,
i 6 t o d fpd P
shall coodnct the Veciioo 1 3 Acceptance Tdtt to *Wwmhrt wfaafaar Vecaion
3LB of the Softwnc Product* meets its Acceptance Criteria, m «ccotdancc with
the pfDOBdmcs set forth in subpznfnpl) 2 x belowi
duectljr orindinxdy
Products, pnnided that
M a wffl be Banefarany breach of men fidentialhybyitt
tott
WWWIU1WW » •
•**0*m*mjrw~9 f m i i ' l
— — — —.—
,,
»-
On March 1,1995 wait aspect to the Verston 1.A software, sad within
two « * tarfn«t dawfifflmrinccMnoletion of the te«tottaa«ardance
g
p
LB ttfima, MCE shaft ekher ft
me
writing, if me Vi
CAcccptance*); or (b), reject the
notice of rejection which provides a debited descrijption of tliefidhiie(s)
of the VctaiontomeettoAcccptantt Criteria. MCIagrDM thttitwiD
not sBJect any Version on me basis of a n&metomeet its Acceptao
Cdteda ff ndL &QmB it insubstantial in light of me MCI Mall lervice
IT lid properly xejeeta any Vetsion <s set forth above. Netscape win
— —
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When Netscape believes it has made me oeueuuy cofTrmfinm,
pfooedme set ftamii in mis Euagxaph, 2 tball be xEappfid until me
Venkm meets its Acceptance Criteria, and b accepted by MCE;
lioweve^ mat vpon.
xejectioo,
p me mini or any sobtegoent
g
i
i
b
i
i
(30)days
d
eftber party may terminate mis Agreement by ginag (sidy (30)
u^UESS ^DB VCOlOu IV VCO6PECO Odk^kujE ^EH? uDnCC V6dOQ
dp
provided that the p
pattiee agree
g toexorcise fbdbr nasooable
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far
orHisllimr. Acceptance, cveatfno wrjttca Acceptance iigrwat to
Netscape under SobpangiaplL2.c0) above. MCI may
y mfixnn Netscape
tbatttcas neMier accept
j «ny V
r
i
f
Verrinn of merfJ d
itnfrtwiriftwl p
pjrfrrf. tfMf (A) anj SQCfa notice
•ban. state that the aoftwaxD dmer nQedtopctfannoreoiildnotbe
adoqoately tested dnetoone or more unidentified paoUona; <B)
fallowing men. notice, bom parties shall use all raajoojftfe efforts to
ideotny the p^nM**^ and/ottoprovide wadoxonnds to pwmh- the
sofrwaiD to be tested; and (C) If Netscape notifies M d tbatitbeucves
tnesodEhrarobftcccpodilea^tnattiienmdemified
doetoany faDoic of me Netscape;
accept the aofiware on that bBsbt wimfa t n (lift wodrfng days
fonowmg anrh nnrtfiration,J
"
'
xcMtectaL of MQ: shall
tb
detennme
ATTACHMENT B-l
ACCEPTANCE TESTS
Set forth below are M d ' s acceptance tests for the MCI Matt. Those- tests which by their nature
are not applicable to parts of the MCI Mall provided by Netscape win not apply to the
acceptance procedures for Netscape products set forth in Attachments.
NDC Marketplace MIC Test Flan
Description of Test Item
POC
Due Dt
Status
% Today?
On track
0
Testing the Netscape Client
NDC 31-Dec
Need Software 0
Installation
NDC 15-Dec
Need Software 100 yes
Standard Netscape install
NDC 15-Dec
15-Dec
Need Software 100 yes
Netscape Software Download
NDC
Need
Software
0 yes
Bundled TCP/IP, Netscape install NDC
15-Dec
Done
100
Internet Functionality
NDC 7-Dec
•Done
100
Browsing the WWW
NDC 30-Nov
FTP
NDC 30-Nov
Done
100
Internet E-mail
NDC 7-Dec
Done
100
News Groups
NDC
7-Dec
Done
100
Browsing and Shopping in the Mall NDC 15-Dec
100 yes
On track
Develop Flowchart for Mall Access Bruce 3-Nov
Done
100
Browsing and Shopping w/Netscape NDC 15-Dec
Qa track
0
Window Shopping
NDC 15-Dec
On track
50
Browse Merchants' Wears
NDC 15-Dec
On track
50
Add Items to Cart
NDC
15-Dec
On track
50
Review Cart Contents
NDC
15-Dec
On track
50
Change Product Quantity
NDC
15-Dec
On track
50
Check Out
NDC
15-Dec
On track
50
Try to Buy Negative Item Count NDC 15-Dec
Not started
0
Leave the Mall w/out Check Out NDC 15-Dec
Not started
0
Yellow Pages
NDC
15-Dec
On tract:
0
Browse Merchants
NDC
15-Dec
On track
25
Search for Merchants
NDC
15-Dec
On track
25
Jump to Mall Merchants
NDC 15-Dec
On trad:
25
Try to Jump to non-mall MerchantsNDC 15-Dec
On track
25
White Pages
NDC
15-Dec
On track
0
Search for US Residents
NDC
15-Dec
On track
50
Measure Speed of Searches
NDC 15-Dec
On track
50
Environment Testing
NDC
31-Dec
On track
0
Different TCP/IP Stacks
NDC
31-Dec
On track
0
MCI FTP stack
NDC
31-Dec
On track
75 yes
Regular FTP stack.
NDC
31-Dec
On track
0
Chameleon
NDC
31-Dec
On track
50 yes
IBM TCP/IP
NDC
31-Dec
On track
75 yes
75 yes
Novell LAN Workplace for DOS NDC
31-Dec On track
100
yes
On
track
31-Dec
Microsoft TCP/IP
NDC
0
On track
31-Dec
Internet in a Box stack
NDC
0
On track
30-Jan
Different Operating Systems
NDC
50
On track
15-Jan
yes
OS/2 2.1
NDC
50
On
track
yes
15-Jan
OS/2 Waip 3.0
NDC
25
Not
started
15-Jan
Windows NT 3.1
NDC
25
On track
15-Jan
Windows NT 3.5
NDC
NeedSoffwar
25 yes
30-Jan
Windows 95
NDC
On track
0 yes
15-Jan
Performance Testing
NDC
On
track
25
yes
15-Jan
Performance from LANs
NDC
On
track
0
Performance via direct PPP
NDC 15-Jan
On track
0
Performance via Dial-up PPP
NDC 15-Jan
On
track
25
yes
9600(no guarantee at this speed)NDC 15-Jan
On track
25 yes
15-Jan
14.4
NDC
On
track
25 yes
15-Jan
19.2
NDC
On track
25 yes
15-Jan
28.8
NDC
On
track
0
15-Dec
Testing the Marketplace MCI Mall
Not
started
0
30-Jan
Installation
Not started
0
30-Jan
Solaris Installation
TBD
Not
started
0
30-Jan
Oracle Installation
TBD
Not started
0
30-Jan
Netsite Installation
TBD
On
track
0
15-Jan
- Complete Integration Test
On track
50
Setup Merchants
NDC
15-Jan
On track
50
Browse, Shop, and Purchase
NDC 15-Jan
15-Jan
Not started
Perform/Verify Credit Check
TBD
0
15-Jan
Verify Purchase Transactions
TBD
Not started
15-Jan
0
Verify Merchant Fulfillment Info TBD
Not started
Browsability by non-Netscape ClienNDC 15-Jan
On track
0
Mosaic
NDC
On track
100
15-Jan
On track
Cello
NDC
15-Jan
100
On track
Air Mosaic
NDC
15-Jan
100
On
track
15-Jan
Inability to Purchase
NDC
100 yes
Not started 100 yes
Download of Netscape Client
NDC 15-Jan
On track
Detailed Mercant Support
22-Jan
0
On track
Setup Merchant
7-Jan
0
On track
HTML Setup
7-Jan
0
On
track
7-Jan
Three Level Structure
NDC
50
On track
Static Pages
NDC
7-Jan
50
On track
Dynamic Pages
NDC
7-Jan
50
On track
MLB Template
NDC
7-Jan
50
On track
Oracle Setup
7-Jan
0
On track
Products
NDC
7-Jan
50
On track
SKUs
NDC
7-Jan
50
On track
Supported Credit Cards
NDC
7-Jan
50
On track
Maintain Merchant
15-Jan
0
On track
0
Modify Storefront HTML
15-Jan
On
track
50
Add/delete/modify Pages
NDC 15-Jan
On track
50
Modify Graphical Elements
NDC 15-Jan
Verify Immediate Update by
On track
50
Daemon NDC
15-Jan
On track
50
Modify Product list
NDC
15-Jan
50
On track
Modify SKUs
NDC
15-Jan
0
On
track
Modify Credit Caids Supported NDC 15-Jan
0
Not started
Staging of Merchant Data
TOD
22-Jan
0
Not started
Save Data on Staging Server
TBD 22-Jan
0
Not started
Verify Appropriate Migration TBD 22-Jan
from Staging Server to
Merchant Server
On track
0
Detailed Transaction Verification
15-Dec
On
track
0
Verify Purchase Transactions
15-Dec
Not started
0
Generate Report from Database NDC 22-Jan
Not
started
0
Verify Report
NDC
22-Jan
On
track
0
Verify Merchant Fulfillment Info
15-Dec
Not started
0
Generate Report from Database NDC 22-Jan
Not
started
0
Verify Report
NDC
22-Jan
Not started
0
Verify M Q Cust Service FulfUImeTBD 22-Jan
Not started
0
Verify Billing Feeds
TBD
22-Jan
Not
started
0
Page hit records
TBD
22-Jan
Not started
0
Purchase transaction records TBD
Not started
0
Verify Standard Generated ReportsTBD 22-Jan
Not
started
0
Consistency of Mall Data
22-Jan
15-Jan
Not started
Storefront Data: HTML and QracleTBD
Not started
0
Merchant Data: Staging and MS TBD 22-Jan
On track
0
Race Conditions (Parallel Proc Conflicts 15-Jan
Not Yet Imp
0
Viewing Storefronts Being UpdatedNDC 15-Jan
Buying Products w/Changing PricesNDC
15-Jan
On track
Buying Deleted Products
NDC
15-Jan
On track
0
Seeing Newly Added Products
NDC 15-Jan
On track
0
Viewing Added/deleted/modify StorNDC
15-Jan
On track
Performance and Volume Testing
22-Nov
MCOMTBD
0
Ability to Handle Large Volumes
22-Nov
MCOM TBD
0
Get New Data Entry Tool from MCOTBD
22-Nov
On track
Numerous Merchants
TBD 22-Jan
Not started
0
Numerous Products
TBD
22-Jan
Not started
0
Numerous SKUs
TBD
22-Jan
Not started
0
Numerous Transactions
TBD
22-Jan
Not started
0
Numerous Merchant Profile UpdateTBD
22-Jan
Not started
Performance Testing
22-Jan
Not started
0
Develop Reasonable Performance Goals 15-Jan
Not started
0
Measure Ability to Achieve Goals with 22-Jan
Not started
0
Large Volumes
TBD
22-Jan
Not started
0
0
0
0
0
0
Heavy Traffic
TBD
22-Jan
Bate Analysis and Testing
30-Jan
Merchant Setups per Unit Time TBD 30-Jan
Merchant Updates per Unit Time TBD 30-Jan
Transactions per Unit Time
TBD
30-Jan
Performance Monitoring
TBD
Measure I/O
TBD
Disk I/O
TBD
Access to Each Physical Drive TBD
Distribution of I/O Across DrivTBD
Memory I/O
TBD
CPU Utilization
TBD
Measure Oracle Cache Hit Kates TBD
Data Dictionary Cache
TBD
Data Cache
TBD
Identification of Bottlenecks TBD
General Architecture Testing
TBD
Consistency of Merc Data Across TBD
Functioning of Backup Mechanisms TBD
Verifying Data Consistency
TBD
Identify Valid Data Conditions, TBD
Propose Ways to Fix Invalid DataTBD
Implement Test/Fix Strategy
TBD
Merchant Database
TBD
Transaction Database
TBD
Staging Database
TBD
Other Databases
TBD
Security Testing
7-Jan
Guarding Access to the Mall Servers
7-Jan
Access from Outside MCI
NDC 7-Jan
Access from Inside MCI
NDC 7-Jan
Guarding Merchant Data
TBD
Is Data Erased from Staging ServeTBD
Guarding Client Data
TBD
Is All Client Data Encrypted WhenTBD
Guarding Against Hacking
NDC 7-Jan
Can Price be Changed via HTML? NDC
Behavior of Secure Netstte and NetTBD
Operations Plan Testing
TBD
Routine Maintenance
TBD
Backup and Recovery
TBD
Disaster Recovery
TBD
Not started
0
Not started
0
Not started
0
Not started
0
Not started
0
Need DB Acce 0
NcedDBAccc
0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Not started
0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
TBD
0
TBD
0
TBD
0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Need DB Acce 0
Discuss w/MC 0
On track
0
On track
0
On track
0
Discuss w/MC 0
Discuss w/MC 0
Discuss w/MC 0
Discuss w/MC 0
Not started
0
7-Jan
Not started
Not started
0
Need Plan
0
Need Plan
0
Need Plan
0
Need Plan
0
0
*- o o
2/15/95
ATTACHMENT C
END USER UCENSE AGREEMENT
CONFIDENTT1AL
BEFORE YOU OPEN THE PACKAGE CONTAINING THE MEDIA OR CUOC ON THE -ACCEFT"
BUTTON AT THE END OF THIS DOCUMENT, CAREFULLY READ THE TKRMS ANDCONDinONS
OF THIS AGREEMENT. BY OPENING THE PACKAGB OR CLICKING ON THE -ACCEPT" BUTTON,
YOU ARE CONSENTING TO BE BOUND BY AND AREBBCOMING APAKTYTOTHIS
AGREEMENT. IF YOU DO NOT AGREE TO ALL OP THE TERMS OF THIS AGREEMENT, CLICK
THE -DO NOT ACCEPT" BUTTON OR RETURN THIS PRODUCT TO THE PLACE OF PURCHASE
FOR A FULL REFUND.
END USER LICENSE AGREEMENT
GRANT. Subject to the provisions contained herein and payment of applicable license fees, Netscape
Communications Corporation (-Netscape") hereby grants to you a non-exclusive license to use its
accompanying proprietary software product (-Software*) for your own use. Such Software is protected
by the copyright laws of the United States and international copyright treaties.
SOFTWARE AND DOCUMENTATION. Netscape shall furnish the Softwaie to you electronically or
on media in machine-readable object code form. K you receive your firstcopy of the Software
electronically, and a second copy on media, the second copy may be used forbackup and archive
purposes only.This license does not grant you any right to any enhancement M update to the Software
and Documentation. Enhancements and updates, if available, may be obtain* d by you at Netscape's
then-current standard pricing, terms, and conditions.
RESTRICTED USE. You may not copy the software, except for backup or archival purposes. Any such
copy made by you shall be subject to mis Agreement and shall contain all of Netscape's notices
regarding copyrights, trademarks and other proprietary rights as contained in the Software originally
provided to you. You may not Iert4 rent, lease or otherwise transfer the Software.
TITLE. Title, ownership rights, and intellectual property rights in and to the Software and
Documentation shall remain in Netscape and/or its suppliers. This Agreement does not include the
right to Bublicense me Software and is personal to you and therefore may not be assigned (by operation
of law or otherwise) or transferred without the prior written consent of Netscape. You acknowledge
that the Software in source code form remains a confidential trade secret of Netscape and/or its
suppliers and therefore you agree not to attempt to decipher, decompile, disassemble or reverse
engineer the Software or allow others to do so, except to the extent applicable laws specifically
prohibit such restriction. You further agree not to modify or create derivative works of the Software.
CONTENT. Title, ownership rights, and intellectual property rights in and to the content accessed
through the Software is the property of the applicable content owner and may be protected by
applicable copyright or other law. This License gives you no rights to such content
LIMITED WARRANTY. Netscape warrants that for a period of ninety (90) days from the date of
acquisition, the Software, if operated as directed, will substantially achieve the functionality
described in the Documentation. Netscape does not warrant, however, mat your use of the Software
will be uninterrupted or that me operation of the Software will be error-free or secure. In addition, the
security mechanism implemented by the Software has inherent limitations, and you must determine
that the Software sufficiently meets your requirements. Netscape also warrants mat the media
containing the Software, if provided by Netscape, is free from defects in material and workmanship
and will so remain for ninety (90) days from the date you acquired the Software. Netscape's sole
liability for any breach of this warranty shall be, in Netscape's sole discretion: (i) to replace your
defective media; or (ii) to advise you how to achieve substantially the same functionality with the
Software as described in the Documentation through a procedure different from that set forth in the
Documentation; or (Ui) if the above remedies are impracticable, to refund the license feej^ou paid for
the Software. Repaired, corrected, or replaced Software and Documentation shall be covered by this
"Client Navigator
lof3
2/14/95
limited wananty for the period remaining under the warrant/ that covered Ihe original Software, or if
longer, for thirty (30) days after Ihe date (a) of shipment to you of the repaired or replaced Software,
or (b) Netscape advised you how to operate fiie Software so as to achieve the functionality described in
the Documentation. Only if you inform Netscape of your problem with the Software during Ihe
applicable warranty period and provide evidence of the date you acquired fiie Software will Netscape
be obligated to honor (his warranty. Netscape wUl use reasonable commercial efforts to repair, replace,
advise or refund pursuant to fiie foregoing warranty within 30 days of beingno notified.
NETSCAPE MAKES NO OTHER EXPRESS WARRANTY AND NO WARRANTY OP
NONINPRINGBMENT OF THIRD PARTIES' RIGHTS. THE DURATION OP IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND OF FITNESS FOR A PARTICULAR PURPOSE, IS LIMITED TO THE ABOVE LIMITED
WARRANTY PERIOD; SOME STATES DO NOT ALLOW LIMITATIONS ON HOW LONG AN
IMPLIED WARRANTY LASTS, SO LIMITATIONS MAY NOT APPLY TO YOU. NO NETSCAPE
DEALER, AGENT, OR EMPLOYEE IS AUTHORIZED TO MAKE ANY MODIFICATIONS,
EXTENSIONS, OR ADDITIONS TO THIS WARRANTY. If any modifications are made to the
Software by you during the wananty period; if Ihe media is subjected to accident, abuse, or improper
use; or if you violate the terms of this Agreement, then mis warranty shall immediately be
terminated. This warranty shall not apply if the Software is used on or in conjunction with hardware or
programs other man the unmodified version of hardware and programs with which the Software was
designed to be used as described in the Documentation.
THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE OTHER LEGAL
RIGHTS THAT VARY FROM STATE TO STATE OR BY JURISDICTION.
LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES AND UNDIIR NO LEGAL THEORY,
TORT, CONTRACT, OR OTHERWISE, SHALL NETSCAPE OR US SUPPLIERS OR RESELLERS BE
LIABLE TO YOU OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WI1HOUT LIMITATION,
DAMAGES FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR
MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL DAMAGES OR LOSSES, OR FOR ANY
DAMAGES IN EXCESS OF NETSCAPE'S LIST PRICE FOR A LICENSE TO THE SOFTWARE AND
DOCUMENTATION, EVEN IF NETSCAPE SHALL HAVE BEEN INFORMED OF THE POSSIBILITY
OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. THIS LIMITATION OF
LIABILITY SHALL NOT APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY TO THE
EXTENT APPLICABLE LAW PROHIBITS SUCH LIMITATION. FURTHERMORE, SOME STATES DO
NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL
DAMAGES, SO THIS LIMITATION AND EXCLUSION MAY NOT APPLY TO YOU.
EXPORT CONTROLS.
You may not download or otherwise export or reexport the Software or any underlying information or
technology except in full compliance with all United States and other applicable laws and regulations.
In particular, but without limitation, none of the Software or underlying information or technology may
be downloaded or otherwise exported or reexported (i) into (or to a national or resident of) Cuba, Haiti,
Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any other country to which the US. has
embargoed goods; or (it) to anyone on the \J£. Treasury Department's list of Specially Designated
Nationals or the US. Commerce Department's Table of Deny Orders. By downloading or using fiie
Software, you are agreeing to the foregoing and you are representing and warranting that you are not
located in, under fiie control of, or a national or resident of any such country or on any such list.
TERMINATION. Either-party may terminate this Agreement immediately in the event of default by
the other party. Upon any termination of fids Agreement, or upon receipt of a refund hereunder, you
shall immediately discontinue the use of the Software and shall within ten (10) days return to
'Client Navigator
2 of 3
2/M/95
Netscape all copies of the Software and Documentation. You may also terminate this Agreement at any
time by destroying the Software and Documentation and all copies thereof. Your obligations to pay
accrued charges and lees shall survive any termination of this Agreement
MISCELLANEOUS. This Agreement represents the complete and exclusive statement of me agreements
concerning mis license between the parties and supersedes all prior agreements and representations
between them. It may be amended only by a writing executed by both parties. THE ACCEPTANCE OF
ANY PURCHASE ORDER PLACED BY YOU IS EXPRESSLY MADE CONDITIONAL ON YOUR
ASSENT TO THE TERMS SET FORTH HEREIN, AND NETSCAPE AGREES TO FURNISH THE
SOFTWARE AND DOCUMENTATION ONLY UPON THESE TERMS AND NOT THOSE
CONTAINED IN YOUR PURCHASE ORDER. If any provision of ttus Agreement is held to be
unenforceable for any reason, such provision shall be reformed only to the extent necessary to make it
enforceable, and such decision shall not affect the enfoiceabOity (i) of such provision under other
circumstances or (ii) of the remaining provisions hereof under all drcumstances. Headings shall not be
considered in interpreting this Agreement This Agreement shall be governed by and construed under
California law as such law applies to agreements between California residents entered into and to be
performed entirely within California, except as governed by Federal law. This Agreement will not be
governed by the United Nations Convention of Contracts for the International Sale of Goods, the
application of which is hereby expressly excluded.
US. Government Restricted Rights
.
•
Use, duplication or disclosure by the Government is subject to restrictions set forth in subparagxaphs (a)
through (d) of the Commercial Computer-Restricted Rights clause at FAR 52227-19 when applicable,
or in subpangraph <c)(l)(il) of the Rights in Technical Data and Compute)- Software clause at DFARS
252327-7013, and in similar clauses in the NASA FAR Supplement Contractor/manufacturer is
Netscape Communications Corporation, 501 East Mlddlefield Road, Mountain View, CA 94043.
= • Client Nivig«tor
3 of 3
2/H/95
ATTACHMENT D
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number
This Preferred Registration Technology Escrow Agreement including all Exhibits attached hereto (this
"Escrow Agreement"), is made effective as of this
day of
1995, by and among (i) Data
Securities International, tic. (*TJ${"). a Delaware corporation; (ii) Netscape Communications
Corporation ("Depositor"), a Delaware corporation; and (iii) MQ Telecommunications, ("Preferred
Registrants wim reference to the following:
RECITALS
WHEREAS, Depositor has entered into (hat certain Software and License Agreement with Preferred
Registrant regarding certain proprietary technology and other materials to which this Escrow
Agreement is attached ("Software Licertftp
"^
WHEREAS, Depositor and Preferred Registrant desire this Escrow Agreement to be supplementary to
the Software License Agreement pursuant to 11 United States Code Section 365 (n); and
WHEREAS, Depositor will deposit with DSI proprietary data as described in Exhibit A hereto (the
"Deposit Material") to provide for retention, administration and controlled access for Preferred
Registrant under the conditions specified herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt of which Is hereby
acknowledged, and in consideration of the promises, mutual covenants and conditions contained herein,
the parties hereto agree as follows:
1.
Deposit Account. Promptly following the delivery of this Escrow Agreement to DSI by
Depositor and Preferred Registrant ((he "Delivery Date"), DSI shall open • deposit account f'pepostt
Account") for Depositor- The opening of the Deposit Account means that DSI shall establish an account
ledger in the name of Depositor, assign a deposit account number ("Deposit AT 0 ""* N""*bertfl- calendar
renewal notices to be sent to Depositor and Preferred Registrant and request the initial deposit ("Initial
D i
Material") from Depositor.
2.
Preferred. Beg-fotran'on Atrount. Promptly following the Delivery Date;, D5I shall open a
registration account ("Registration Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an account ledger with a unique
registration number ("Registration Ntimh»r*^ in the name of Preferred Registrant, calendar renewal
notices to be sent to Preferred Registrant and request the Initial Deposit from Depositor. DSI shall
promptly notify the Preferred Registrant in writing upon receipt of Initial Dq>osit Material.
3.
Exhlbjt B. Nntjcq; ajd Communications. Notices and invoices to Depositor, Preferred
Registrant or DSI should be sent to the parties at ihe addresses identified in Exhibit B attached
hereto. Documents, payment of fees, deposits of material, and any written communication should be
sent to the DSI offices as identified in the Exhibit B, All notices hereunder of any type of nature,,
including payment, shall be written and deemed given upon receipt if sent by (a) personal delivery; (b)
VS. Certified Mail, Return Receipt requested; or (c) a private nationally prominent express carrier.
Depositor and Preferred Registrant each agree to name their respective designated contact promptly
MCI Escrow Agreement
loflO
3/15/95
after the Delivery Date ^Designated Contact") to receive notice* from DSI «nd to act on their behalf
in the performance of their obligations as set forth in this Escrow Agreement. Depositor and Preferred
Registrant agree to notify DSI immediately in the event of a change of their Designated Contact in the
manner stipulated in Exhibit B.
4. ferfiibit C and Deposit Material. Depositor shall provide the Initial Deposit Material to DSI
for retention and administration in the Deposit Account promptly after the ]>elivery Date. The Initial
Deposit Material shall be submitted together with a completed document called a "Description of
Deposit Material", hereinafter referred to as Exhibit C. Each Exhibit C mustbe signed by Depositor
prior to submission to DSI and shall be signed by DSJ upon completion of the Deposit Material
inspection.
5.
peposit Material Inspection. Upon receipt of an Exhibit C and Deposit Material, DSI shall be
responsible only for reasonably matching the labeling of the materials to the Item descriptions listed
on the Exhibit C and validating the count of the materials to the quantity lisi ed on the Exhibit C . DSI
shall not be responsible for any other claims made by the Depositor on the Exldbit C. Acceptance shall
occur when DSI concludes that the Deposit Material inspection is complete. Upon acceptance, DSI
shall sign the Exhibit C and assign it fte next Exhibit C number. DSI shall issue a copy of the Exjjjbii
£ to Depositor and Preferred Registrant in writing within ten (10) days of receipt, provided that if DSI
does not accept it shall immediately inform Depositor and Preferred Registrant of that and the reason
for nonacceptance. DSI shall than promptly redeposit and the procedures shall continue until accepted.
6.
Deposit Change*. Depositor may update the Deposit Account with supplemental or
replacement Deposit Material of technology releases. Supplemental Deposit Material ("Supplemental
Material") Is Deposit Material which is to be added to the Deposit Account. Replacement Deposit
("Replacement Peposit Material^ is Deposit Material which shall replace existing Deposit Material
as identified by any one or more Exhibits D in the Deposit Account. Replacement Deposit Material
shall be destroyed or returned to Depositor. The existing deposit ("Deposit") means all Exhibits and
their associated Deposit Material currently in DSI's possession. Destroyed or returned Deposit
Material is not part of the Deposit; however, DSI shall keep records of the destruction or return of
Deposit Material.
7.
Use of Relea«e<| Material fry Preferred Registrant If any Deposit Material is released to
Preferred Registrant hereunder, Preferred Registrant shall have the rights to use die released Deposit
Material as set form in Section 3.4 of the Software License Agreement and the second paragraph of
Section 5.2 of Attachment F (Maintenance and Support) to the Software license Agreement
8Storage Unit. DSI shall store the Deposit in defined unit* of space, called storage units. The
cost of the first storage unit shall be included in the annual Deposit Account fee,
9.
DSI'a Obligations of Confidentiality. DSI agrees to establish a locked receptacle in which it
shall place the Deposit and shall put the receptacle under the administration of one or more of its
officers, selected by DSI, whose identify shall be available to Depositor at all times- DSI shall
exercise a professional level of care in carrying out the terms of this Escrow Agreement. DSI
acknowledges Depositor's assertion that the Deposit shall contain proprietary data and that DSI has
an obligaHon to preserve and protect the confidentiality of the Deposit. Except as provided for in this
Escrow Agreement DSI agrees that it shall not divulge, disclose, make available to third parties, or
make any use whatsoever of the Deposit
10Audit Rights. DSI agrees to keep records of the activities undertaken and materials prepared
pursuant to this Escrow Agreement. DSI shall issue to Depositor and Preferred Registrant a semiannual report profiling the Deposit Account Such report shall identify the Depositor, Preferred
Registrant, the current Designated Contacts, selected special services, and the Exhibit C history,
which includes Deposit Material acceptance and destruction or return dates. Ujxm reasonable notice,
during normal business hours and during the term of this Escrow Agreement, DejKffiitor and/or Preferred
MO Escrow Agreement
2 of HP
3/15/95
Registrant shall be entitled to inspect the records of DSI pertaining to this Escrow Agreement, and
accompanied by an employee of DSI,, inspect the physical status and condition of the Deposit. The
Deposit may not be changed during the audit.
11.
Term of Escrow Agreement. The term of this Escrow Agreement Is coterminous with that of the
Software License Agreement, and may only be terminated earlier as follows!
a.
by mutual written agreement of Depositor and Preferred Registrant and delivery of such
agreement to DSL
b.
in the event of me nonpayment of fees owed to DSI, DSI shall provide written notice of
delinquency to all parties. Any party to this Escrow Agreement shall have ttie right to make the
payment to DSI to cure the default. If the past-due payment is not received in full by DSI within one
(1) month of the date of such notice, then DSI shall have the right to terminate this Escrow Agreement
any time thereafter by sending written notice of termination to all parties. DSI shall have no
obligation to deliver tiie Deposit or to take any other action under this Escrow Agreement so long as any
payment which is due to DSI remains unpaid; or
c.
upon termination of the Software License Agreement subject to survival as appropriate
under terms of the Software License Agreement
12.
Expiration or Termination. If this Escrow Agreement expires or terminates, all duties and
obligations of DSI to Depositor and Preferred Registrant shall terminate, except mat DSI's obligation
to return the Deposit to Depositor shall survive the termination and expiration of this Escrow
Agreement, after the payment of all costs, fees and expenses due DSI.
13-
Contents of Deposit
a-
The Deposit Material delivered to DSI consists of the following as further described in
Exhibit A: source code deposited on computer magnetic medif. and related technical
documentation.
b.
The Deposit will be set form more specifically in Exhibit C.
14.
Indemnification- DSI shall be responsible to perform its obligations under this Escrow
Agreement and to act in a reasonable and prudent manner in all respects with regard to mis escrow
arrangement Except for the duties stated in the preceding sentence, Depositor and Preferred Registrant
each agree to indemnify, defend and hold harmless DSI from any claims, actions, damages, costs,
attorney's fees and other liabilities incurred by DSI relating in any way to this escrow arrangement,
except insofar as such liabilities arise by reason of DSI's gross negligence or willful misconduct.
15.
eferred Registrant Upon notice to DSI by Preferred
Registrant of the occurrence of a release condition as described in Section 18 ("Notice of Release") and
payment of the release request fee, DSI shall notify Depositor by certified mail or commercial express
mail service with a copy of me notice from Preferred Registrant If Depositor provides DSI with
Contrary Instruction (as defined in Section 16) within ten (10) days of receipt of a Notice of Release,
DSI shall not deliver the Deposit Material to Preferred Registrant.
16.
Contrary Instruction. "Contrary Instruction" is the filing of an instruction with DSI by
Depositor stating that a Contrary Instruction is m effect Such Contrary Instruction means an officer of
Depositor warrants that a release condition has not occurred or has been cured. DSI shall send a copy of
the instruction by certified mail or commercial express mail service to Preferred Registrant. DSI shall
notify both Depositor and Preferred Registrant mat there is a dispute to be resolved pursuant to Section
19. Upon receipt of Contrary Instruction, DSI shall continue to store the Deposit pending Depositor and
MCI Escrow Agreement
3 of ID
3/15/95
£
~ y D
Preferred Registrant joint instruction, resolution pursuant to Section 19, order l*y a court of competent
jurisdiction, or termination by non-renewal of this Escrow Agreement
17.
Release of Deposit to Preferred Registrant- If DSI does not receive Cc«trtry Instruction from
Depositor in accordance with the procedure set forth in Section 16, DSI is authorized to release the
Deposit to the Preferred Registrant filing for release following receipt of any fees due to DSI including
delivery feesIBRelease Condition* of Deposit to Preferred Rqf^trant. The conditions for release of the Deposit
are set forth in Section 3.3 of the Software License Agreement and the second paragraph of Section 5.2 of
Attachment F (Support and Maintenance) of die Software License Agreement
19.
Dispute. Depositor and Preferred Registrant agree that if Contrary Instructions are timely
given by Depositor pursuant to Section 16 hereof, then Depositor and Preferred Registrant shall submit
their dispute regarding Preferred Registrant's Notice of Release to arbitration by a single arbitrator
who is a member of the American Arbitration Association, according to its rules and regulations then in
effect, at its offices in San Francisco, California. The decision of the arbitrator shall be final and
binding upon the parties and enforceable in any court of competent jurisdiction, and a copy of such
decision shall be delivered immediately to Depositor, Preferred Registrant and DSL The parties shall
use theii best efforts to commence the arbitration proceeding promptly after delivery of the Contrary
Instructions. Trie sole question to be determined by the arbitrator shall be whether or not there existed
a valid release condition at the fane Preferred Registrant delivered the Notice of Release to DSI
pursuant to Section IS. If the arbitrator finds that a release condition was properly met and the Notice
of Release was properly given by Preferred Registrant, DSI shall promptly deliver the Deposit to
Preferred Registrant AH fees and charges by the American Arbitration Association and the reasonable
attorneys' fees and costs incurred by the prevailing party in Ihe arbitration shall be paid by the nonprevailing party in the arbitration.
20
Equitable Relief- Each party agrees the other shall be entitled to seek equitable relief to
enforce its rights thereunder, in addition to such party's other remedies.
21.
General- DSI may act in good faith reliance upon any instruction, instalment, or signature
believed in good faith to be genuine and may rely in good faith on the fact any employee giving any
written notice, request, advice or instruction in connection with or relating to this Escrow Agreement has
been duly authorized to do so. DSI may provide copies of thi* Escrow Agreement or account history
information to any Designated Contact of Depositor or Preferred Registrant upen their request. For
purposes of termination or replacement, the Deposit shall be returned only to Depositor's Designated
Contact, unless otherwise instructed by Depositor's Designated Contact. DSI is not responsible for
failure to fulfill its obligations under this Escrow Agreement due to causes beyond DSI's control. This
Escrow Agreement is to be governed by and construed in accordance with the laws of the State of
California without any reference to the conflicts of law rules. Subject to the provisions of the Software
License Agreement mis Escrow Agreement constitutes the entire agreement amoig the parries concerning
the subject matter hereof, and supersedes all previous communications,representations,understandings,
and agreements, either oral or written, among the parties. This Escrow Agreement may be amended
only in a writing signed by the parties. If any provision of the Escrow Agreement is held by any court to
be invalid or unenforceable, that provision will be severed from the Escrow Agreement and any
remaining provisions will continue in full force.
21.
Efigg. Fees are due upon receipt of signed contract receipt of Deposit Material, or when service
Is requested, whichever is earliest. Depositor shall pay DSI all fees due under this Escrow Agreement.
All service fees and renewal fees will be those specified in DSI's Fee and Services Schedule in effect at
the time of renewal or request for service, except as otherwise agreed. DSI's current Fee Schedule is
attached as Exhibit P- For any increase in DSI* standard fees, DSI shall notify Depositor and
Preferred Registrant at least ninety (90) days prior to the renewal of the Escrow Agreement For any
MCI Escrow Agreement
4 of 10
3/15/95
service not listed on the Fee and Services Schedule, DSI ihall provide a quote prior to rendering such
scrviceIN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be executed by their
respective authorized representatives.
NETSCAPE COMMUNICATIONS CORPORATION
By:
Name;
Title: .
Date:
MCI TELECOMMUNICATIONS CORPORATION
By:
Name:
Title: „
Date: _
DATA SECURITIES INTERNATIONAL, INC
Name:
Title: _
Date;
'£jf
MCI Escrow Agreement
5 of 10
EXHIBIT A
General Description of Materials
To Be Deposited
Source Code foi the "Netscape Client" and "Netscape Servers" as thoseterm*;are defined in the
Software License Agreement, and related Documentation.
M a Escrow Agreement
6 of 10
3/K/S5
DESIGNATED CONTACT
Account Number
Notices, Deposit Material returns and
communication, including delinquencies to
Depositor should be addressed to:
Invoices to Depositor should be addressed to:
Company Name:
Address:
Designated
Contact:
Telephone:
Facsimiles.
Invoice Contact:.
State of Incorporation:..
Notices and communication, including
delinquencies to Preferred Registrant should
be addressed to:
Invoices to Preferred Registrant should be
addressed to:
Company Name^_
Address:
Designated
Contact
Telephone:
Facsimile:
Invoice
Contact:
Requests from Depositor or Preferred Registrant to change the Designated Contact should be given in
writing by the Designated Contact or an authorized employee of Depositor oi Preferred Registrant.
/
MQ Escrow Agreement
7 of 10
3/15/W
)
Contracts, Deposit Material and notices to DSI
should be addressed to:
Invoice inquiries and fee remittances to DSI
should be addressed to:
DSI
Attn:
DSI
Attn: Accounts Receivable
49 Stevenson Street
Suite 550
SanFrandsco,CA 94105
Contract Administration
9555 Chesapeake Drive
Suite 200
San Diego, CA 92123
Telephone:
Facsimile:
(619) 694-1900
(619) 694-1919
Telephone:
Facsimile:
(415) 541-9013
(415) 541-9424
Date-
UU
MQ EKTOW Agreement
BoflD
3/15/K
EXHIBIT C
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number.
Depositor Company Name.
DEPOSIT TYPE:
If Replacement__
Initial
.Destroy Deposit
ENVIRONMENT:
Host System CPU/OS_
Source System CFU/OS_
Special Instructions:
_Backup__
.Compiler.
_Version_
Version.
DEPOSIT MATERIAL:
Exhibit B Name
Item label description:
^Replacement
.Supplemental.
Return Deposit
Version
Quantity:
Media;
For Depositor, I certify that the above described
Deposit Material was sent to DSI:
For DSI, I received the above described Deposit
Material subject to fhe tenns on the reverse side
of this Exhibit:
By-
By-
Print Name_
Print Name.
Date
Date of Acceptance
Copyright 1983,1994 DSI
ISE
MCI Escrow Agreement
9 of 10
EX. C#
3/15/95
EXHIBIT P
Fee Schedule
MCI Escrow Agratmiol
10 Of 10
3/15/W
ATTACHMENT E
Notes: References to MCOM refer to branding present in the .9 version of
the MGOM client.
1) Netscape Homepage will default to MCI. Users (customers) will not have
die option to change the home page.
2) Name of the product will change from internetMCI Browser to intemetMCI
Navigator. This will be part of the title bar. Example: intemetMCI
Navgator - [page name]
3) Netscape will receive brand recognition on MCTs retail packaging. The
recognition will appear on the back of MCFs box with logo and copy
recognition
4) Netscape will provide diskette copy of all docs to MCI for editing an
integration into MCI's manuals.
5) Netscape will provide MCI access to its logo and photolibrary for
branding and public relations purposes. Netscape will not be featured on
the Manual cover, but Netscape will receive copyright acknowledgement
6) Netscape will be part of the Directory's (aka Services) menu and will be
the last item. This menu will provide a URL to Netscape's homepage.
7) Directories menus will be renamed to "Services"
8) Netscape will receive About Box branding as requited for Copyright
purposes
9) Netscape will be part of MCI's splash screen as follows.
intemetMCI
using Netscape Navigator
"intemetMCI'1 will be the dominate font, "using Netscape Navigator"
will be standard
black and white.
MADELINE WONG TO PROVIDE BIT MAP
10) Windows title banner
intemetMCI Navigator - (page name]
11) Functional Menu
- Changes to "Directory" menu set - see below
- Changes to "Help" menu - see below
12) Tool bar - No changes
February 14, 1995
Icons
- The Netscape logo will be located on the toolbar. It will be a bit map
and not a button. The MQ logo will read "MCT1 and will be located
to the right of the directory buttons.
14) Power Buttons
- What's New = mapped to MCTs What's New Home Page
- Directories = mapped to MCTs Directories Home Page
- marketplaceMCI = mapped to MCTs Marketplace Home Page
- Infonnation Desk = mapped to MCTs Info Desk Home Page
- Newsgroups = mapped to a newsgroups
** ADDRESS TO BE PROVIDED BY KARL LEWIS
15) Status bar to change appropriately
- Status Bar at bottom of screen to change appropriate to function
* JUST TO CLARIFY THE BRANDING ON THE STATUS BARS WILL
REFLECT
^
intemetMO WHERE APPROPRIATE.
16) Services Menu (to replace Directory menu)
- What's New
-Directories
- maiketplaceMCI
-Info Desk
- Newsgroups
- Netscape Communications
A line should separate Information Desk from Newsgroups with another line
to separate Newsgroups from Nescape Communications.
ADDRESSES TO BE PROVIDED BY KARL LEWIS
17) Help Menu Changes
- MCOM "About" -> MO "About intemetMCT
- MCOM "Version Information" -> MCI "Version Information", render
as local file
- MCOM "Guided Tour" -> delete
- MCOM "Manual" -> MCI "Manual"
- MCOM "FAQs" -> Frequently Asked Questions
- MCOM "How to Give Feedback" -> delete
- MCOM "How to Get Support" -> delete
- New item for MCI: Help!
ADDRESSES TO BE PROVIDED BY KARL LEWIS
J
Febnwy 14. 1995
ATTACHMENT F
NETSCAPE COMMUNICATIONS CORPORATION
MAINTENANCE AND SUPPORT
1.0. Definitions. The rrj»**^^
terms used herein shall have the- mftsntngs set forth below.
1.1. "Agreement" means the Agreement dated as of Fcbnmy__, 1995 between MCI
Tdecommunications Corporation and Netscape Comnramcations Corporation to which this
Attachment F is attached and in which mis A***^"1*"* F is inccuporated by reference. All
capitalized terms in this AttarfmiMit F not defined herein shall have the meanings assigned to
them in the Agreement.
1.2. "Diagnostics" means software provided by Netscape Communications which provides
trouble-shooting, Error isolation, detection capability and assistance.
1.3. "Error" means any instance where a Netscape Conamnnirations Product or Update or
Upgrade Release does not substantially conform to its published features and specifications.
1.4. "Maintenance Release" means any version of Netscape Communications Products or
portions thereof, and associated documentation Of my) provided and made generally available
by Netscape Qmunumcations to its customers to correct Errors therein.
1.5. "Minor Update Release" means any version of Netscape Communications Product or
portions thereof, and associated <Vv*mwytntirai Of &ny) that is provided v*A "WfV-- generally
available by Netscape Communications to its mtfomnre which do not involve additions of
substantial functionality. Minor Updates are designated by a change to the right of Hie decimal
poim of the Release Niimber. Netscape Ctaraim
and designation of an update as a Major or Minor Update.
1.6. "MajorUpdate Release* means any version of the Netso^CkmunmiicatkMis Product, and
associated documentation, if any, that is provided and made generally available by Netscape
Communications to its customers which involve additions of substantial functionality. Major
Updates are designated by a change in the number to theleftof the decimal point of the Rekase
Number. Major Updates exclude software releases which are reasonably designated by Netscape
Communications in accordance with industry practice as new products or new Versions
containing such gubgtaatial new feature anif enpffrittttes as to require an update fee provided that
such update fees are part of the standard fees of such Releases.
c:\ali\1128
2/14/95
-1-
nicatians Product that Netscape
1.7.
means a version of Netscape
1.7. "Release"
e
p C
Communications has made generally available to its Hcensw, indoding Maintenance Releases,
Minor Update Releases and Major Update Releases.
1.8. "Kotow N"««lw* mgynKrt*>.immher that is used by
y Netscape! Communications to identify
ft hthe product
d
the version of a Release. Typically, the Release Number is shown after
name.
1.9. "MCI Contacts* means the individuals designated by MCI to communicate with Netscape
Communicationsrepresentativesat the Support Centers.
1.10. "Support Services11 means the technical support services described herein, and provided
by Netscape Communications to M d hereunder.
1.11. "Support Center*' means a Netscape Communications facility from which Support
Services are provided to MCI bereunder. Support Centers inopetation as of the Effective Date
are identified in Schedule 1, which Netscape Cornmimications may amend-in writing from time
to time.
1.12. "Workaround" means a method by which a user of a Software Product can, by
making a limited number of procedural or programming changes in a Software Product,
prevent the occurrence or re-occurrence of an Error. Programming changes include
adjustments to set-up and configurations files or other settings that do not require
recompUation.
2.0. Term of Fees. The fees for the Support Services hereunder shall be valid for the period
commencing on the Effective Date and continuing for the term provided for in the
3.0. ResponsftOitks of MCL
3.1. MCI Contacts. MQ shall designate not more than eight (H) MCI Support Contacts for
communication with Netscape Communications* representatives at the Support Centers. M d
Contacts shall have sufficient Ire*""^! expertise, training and/or eotperience, for MCI to
perform its obligations hereunder. MC3 shall designate, in writing to Netscape
Communications, its MCI Contacts within one (1) week after the Effective Date, and may
substitute contacts at any time by providing one (1) week's prior written notice thereof to
Netscape Communications.
3.2. Levels of Support. MO shall provide first and second level support for the Software
Products to its customers, including, but not limited to the: CO installation, support and
c:\ali\1128
2/14/95
-2-
CONFIDENTIAL TREATMENT REQUESTED
maintenance of MCI services incorporating die Software Products, and (H) distribution and
installation of Releases and Workarounds provided to MCI by Netscape Communications.
MCI shall also employ adequate snppoit tools, Diagnostics, software labs and processes as
M^ h
fe
rnrnnniniretinfiR few fiwt and second level fault
isolation End resolution for die Products.
3.3. Problem Determination. MCI shall asceitafa tiie nature of Bnoxs, aod the
circumstances under which such Boons occur. MCI shall use its reasonable commercial
efforts to provide Netscape Communications with information, software, traces, server
access, or documentation sufficient for Netscape Communication* to duplicate the
circumstances under which such Brans became apparent. Netscape Communications may
reclassify Errors if it reasonably believes that M d ' s classification is incorrect
3.4. Management. MCI shall designate- at least one manager and an altfTPHtf to be
111
Netscape
point
of contact for resolving
p Communications' primary
py
p
ngflfifl** ***Bnor reports or
any issues arising from the support of MCI under this Attachment. Netscape
Communications shall have the right to approve such dedicated manager in advance, which
approval shall not be unreasonably withheld.
4.0. Description of Support Services. For as long as MCI shall pay
fees
py the
f
t
h
i
h
A
N
C
i
set forth in the Agreement, Netscape Conuuinkations shall provide the Support Services
described below.
4.1. Remote Access to Technical Support.
• r-ommontcations shall provide to
MCTs— Contacts
remote
access
to
at
—
——— _ - — » . «
n
n_r
•
• § • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •[Netscape
• +. l v i i H ^ y w Communications
— — " - - " - — - - - \TI 1 I T r i SJr
technical support personnel at the primary Support QmteridentifiDd in Schedule 1. Support
Center personnel shall be available for telephone contact Monday - Friday (5:00 A.M. - 5:00
P.M.) Pacific time (i.e., 8:00 AJtf - 8:00 P.M. Eastern time) at the Support Center,
exclusive of Netscape Comrmmiranions* holidays (as specified in the Snppoit Implementation
Plan to be agreed by the parties). Netscape ConunwucationsshaU also provide after hours
contact phone or beeper numbers for at l e a s t f H H H H H B s u p p o x t person for the
reporting and initial Response (as defined oelowTofPnonty^inrJ 2 Errors (as defined
below). During the hours of support set forth above, Netscape technical support personal
will provide the following services:
(a)
Product TJ«e. Netscape Communications will answer questions and address problems
regarding the use of Products, fartmtiitg but not limited to: © Product installation,
ii) use of Netscape Communications* provided
configuration and documentation; and (ii)
application prof
c:\ali\1128
2/14/95
-3-
->u/
Neteemft
Cmiinmiiraitinins will assist m determining the
f
d
ildi
b
t liitd
cause of problems encountered by M Q in the use of Product, including, but not limited to:
(a) technical advice and recommendations regarding Bnors based on MQ't description of
such Brrore; and (b) instruction on the me of tools.
(b)
pnrHrni Pett
4.2 Off-Hours Error Reporting. Netscape Communications shall also make available, on a
24 hours per dayp 365 day par year basis, a means of repotting Errors, by electronic mail,
voice mail, fax, or telephonic recording capability at the Netscajte Communications Support
Centers) identified on Schedule 1 to tins Support Attachment
4.3 Releases. Netscape Communications wffl provide MCI one (1) copy of each
Maintenance Release and Minor Release issued during the tenn of this Support Attachment
as soon as it becomes available. Any Release to which MCI is entitled shall be provided to
M d on a single master tape or CD-ROM set, with applicable documentation and instructions
for installation, use and rtupHcatipp If Netscape Communications provides the documentation
and instmctions in electronic fonn, it win also provide one (1) }irinted copy thereof.. M O
shall also be provided witti support information, diagnostic took, HTML pages, or other
support information that Netscape Communications may develop from time to time.
4.4. Support for MCI-Escalated Sites. Upon an M d Contact's request to a Support
Center, Netscape Communications will use reasonable commercial efforts to provide
telephonic technical support directly to MCTs personnel at MCTs operations site for the
Product, when MCI reasonably
y rteterminns it necessaryy to "escalate" a tunhnfrai support
pp
problem. When making such request, the MCI Contact shall specify that such request is an
"escalation". Netscape Communications1 nsponse after such request is received will be in
accordance with Netscape Communications' escalation procedures as defined below.
4.5. Management. Netscape Communications shall designate at least one manager and an
alternate to be MCTs primary point of contact for Server Error reporting at the *»riim*«i
support hotline. MCT Khali haw thf. ifeht in appiyw. mrf*rf^tirafr^mOTnerr in advance,
which approval shall not be unreasonably withheld.
4.6. Release Support Policy. Netscape Communications Khali support each Release for
twelve (12) months after the issuance of such Release, or for six months after the issuance of
a subsequent Release. In addition, for the 12 month period following the release of any new
Major Upgrade, Release or Version of either the Servers, and for the 6 month period
following the release of any new Major Upgrade, Release or Version of the d i e m software,
Netscape Communications shall continue to provide Support Services for the immediately
preceding Release ("nffaTw*it^E m»int^wanft» releases).
c:\ali\1128
2/14/95
CONFIDENTIAL TREATMENT REQUESTED
4.7. Onstte Support. At MCTs request from time to time, Nettcape shall provide the
equivalent of two full-time Netscape employees at one or more designated MCI sites during
the 90 day period following the February 1995 delivery of Version 1. A of the Software
Products to MCI under the Agreement. The parties acknowledge mat "equivalent" may
mean more or less than two employees at any given time. All Netscape employees provided
hereunder shall have appropriate training, experience and expertine with respect to all
Software Products delivered to MCI by Netscape, in order to asnst MCI with the population
and operation of the Servers and continuation of Server testing.
4.8. Exclusions. Netscape Communications shall respond to all Errors notified by MCI in
accordance with this Support Schedule. However, Netscape shall not be under any obligation
to repair any errors which have been determined to arise from: (i) any Software Product
which has been modified without Netscape Communications* prior written approval; (ii)
operator error, data inconsistency (inch'^'ng without limjtatinn incorrect data entry; or (iii)
third party software. In addition, the Thrget Repair limes (and remedies resulting from
Netscape's failure to meet the Target Repair limes) shall .not apply to mc-iepair of Errors
resulting from: (a) the use of the Software Products in conjunction with software not
ieoommended, approved or permitted by Netscape Communications (provided that a list of
such recommendations is sent to MCI on a timely basis), (b) modifications made by MCI
pursuant to Section 2.1(d) of the Agreement, or (c) Errors of unknown origin.
4.9 Experience and Expertise of Netscape Personnel. AH personnel provided by Netscape
to MCI for the pcrfornmncc of the Support Services hereunder shall have sufficient twiniirqii
expertise, training and/or experience, to perform Netscape's obligations hereunder.
4.10 Netscape acknowledges that MCI may on occasion notify Netscape of a Priority 1 or
2 Error which is ultimately determined to fall within an exclusion set forth in the second
sentence of Section 4.8 above. However, if such erroneous ratification happens frequently,
then Netscape may escalate the issue to senior management within MCI and the parties win
work in good faith toward a resolution, jnnimiing without limitation amendment of the
Schedule as provided in Section 9 below.
5.0. Error Correction; Priority and Tuning
5.1. Support Requests. For Errors resulting
Netscape Communications, Netscape will, on
defined below) to and use its best efforts to o o i r e « o ^ r o v i ^ a W o 7 5 r o u n 5 t o ^ r i ^ r y 1
and Priority 2 Errors that MCI identifies, classifies and reports to Netscape Communications
and that Netscape Communications substaritiates; and reasoriable wmuiiercid
Respond to other Errors within the time frames set below. M a shall use its best efforts to
c:\ali\1128
2/14/95
CONFIDENTIAL TREATMENT REQUESTED
provide sufficient information for Netscape Comrmimcations to duplicate the Btrar bcfoie
Netscape Communications* Response obligations shall commence'. Netscape Commmkicatinnit
will not be tequiied to comet any Boor caused by MCI's failure to incoiporate any Release
previously provided by Netscape Communications which oorrnctn such Boor.
Priority
Bnor
Responsft
Time
Description
Target Repair
Time**
Fatal Error no useful
work can be done with
respect to any merchant,
or with respect to any
nms across all merchants
(e.g., a storefront is
closed or users cannot
rS "^ one or
more stoierrontB)
Sevcxe
which result in a
cause intennittent system
taihne (e.g., some hems
fell out of shopping cart)
Degraded Operations: etrons
causing malfunction of
non-critical functions
(e.g., no page fait reports)
TmpaTt:
attributes
p
and/or options to utility
programs do not operate
as stated
Request
c:\aUVU28
2/14/95
CONFIDENTIAL TREATMENT REQUESTED
*
**
**•
"Response'1 means and includes: taking and logging the Error call; and, in cases of
Priority 1 and 2 B o o n , making continuous eitorts to cure tte Error irntil the Error is
cured.
*«___
1
1
1
Tfcrget Repair Timf is rffrr *** ft"" «ntffifiatinn and sulwHmrmtion of Brror.
All days arecalendardaysunless noted otherwise.
If access to the M d Mall or other MCI systems required for a Response or Target Repair is
not available to Netscape, then fhe Response and Target Repair times shall be extended by
the length of time during which such access is unavailable to Netscape.
The parties recognize that fhe Errors set forth as examples in each category above are
illustrative only and are not intended to be exhaustive. As soon as practicable following
execution and delivery of the Agreement, M d and Netscape shall develop and agree upon a
Support Implementation Plan which, among other trdngs, shall Hfit in more detail and in
accordance with fhe principles and examples listed above additional types of Errors which, if
they were to occur, would fall within the Priority groupings listed above..
5.2. Failure to Respond or Repair. In fhe event Netscape Conmnmfcations fails to
Respond to a notification of, or to repair, any Brror within fhe time frames stated above,
M d may escalate the Brror to fhe dftrigmtw* Manager at Netscape Communications. If the
Brror is not repaired or there is no Response within twice fhe allotted time set forth above,
then M d may escalate the Brror to a designated Netscape Ommamications Senior Manager.
In the event the Brror is not repaired within three times fhe allotted time for any Priority 1 or
2 Error and M d has followed the wtnalatinn procedures described above, then M d may
request Netscape to i
shaU, .immediately upon
|best efforts to repair the Error,
obligation, then M d Shall receive a credit
fhe Maintenance Fee payable to Netscape
under the Agreement in the
Pee due each
which the Brror persists and
does
resolving the Brror.
In addition to the foregoing, in the event MCI believes that Netscape has substantially
to meet its obligations to use the efforts to repair Errors specified in Sections S.I and S.2
above with respect to any Priority 1 or 2 Error, and the events and time periods described in
the fust paragraph of this Section 5.2 have occurred, then, upon MGTs request, Netscape
shall provide MCI with access to the source code for the Software Product(s) involved in the
Priority 1 or 2 Brror at faculties selected by Netscape. Following such access, if MCI
believes Netscape is not using its best efforts to resolve such Priority 1 or 2 Error as
provided in Section 5.2 above, MCI may giro notice to DSI raider the Escrow Agreement
c:\aU\1128
2/14/95
-7-
CONFIDENTIAL TREATMENT REQUESTED
entered into among M O , Netscape and DSI flat the source code; for the Software Produces)
involved in the Priority 1 or 2 Error is to be released to M O , and snch source code shall be
released to MCI in accordance with the terms and cwulitioiis of the Esaow Agieeawat
unless Netscape gives DSI notice thai it disagrees with MCTs notice. In the event Netscape
gives such notice, then MCI shall continue to have access to the relevant source code at the
Netscape facility reading resolution of the dispute. Source code shall be released only if the
court, arbitrator or other ckctsionmakerdrtffTminw
effort specified in mis Section 5 to resolve Priority 1 or 2 Errors. After resolution of the
Error which tod to the release of the source code, MCI will return to Netscape all copies of
the source code, will remove all copies from its computer systems, and win so certify to
Netscape. MCI shall own all code, and all imriinntnal property and other proprietary rights
therein, developed by MCI to correct any Error, and MCE shall license such corrections in
source code form to Netscape on reasonable terms and conditions to enable Netscape to
continue to support the Software Products licensed to MCL
inovide MCI, within, thirty
Netscape
6.0. Support
and delivery of the Agreement, with a set of Operations
(30) days following
Procedures nrfr^iwi the steps for systems operators to Mflifaft each application function and
providing necessary support and jntenance tasks. Netscape Communications will also
provide to MCI one (1) copy of all generally available and support documentation (e.g.
service bulletins and technical tips) for Netscape Communications Products licensed by MCI
as Netscape Communications makes them generally available to its customers. MCI may
copy such materials for MCX's internal use, provided that 0) all such copies shall include all
trademarks, proprietary rights and copyright notices supplied by Netscape Communications,
and (ii) such copies shall be provided only to and used only by MCI employees for the
purpose of providing customer support. MCI agrees that it will not distribute such materials
or portions thereof, to third parties, or incorporate in any form any information included in
such materials or portions thereof, into any other materials which axe distributed or otherwise
provided to third parties.
7.0. Support,
shall
Meetings. In addition to the foregoing, Netscarx
appropriately experienced representatives to participate ^^^^^^
_ the first six month* following tbe'TimlaT<release
of the Software products,
support review meetings at sites to be designated
alternatively by Netscape Co
ms and MCI. Bach party shall use all reasonable
commercial efforts to correct any defici
in the Support Services and processes
identified by the other at any such support review meetii
8.0. Third Party Software. Notwithstanding the Response and Target Repair times set
forth above, MCI acknowledges mat Netscape cannot guarantee the timeframe within which
c:\ali\1128
2/14/95
third patties wfll icspond or repair Errors in components of die Softwaxe Products provided
by such third parties. Netscape will be deemed to have met its obligations under Section 5 if
Netscape has used its TMUKfffflMft commercial efforts to obtain timely support, at no charge
to MCI unless MCI requires direct support at MCX's request, froia all third parties
supporting mini party software mat to rrnitainwf m vr mmfp^nttA fatn software PmrinctK nr
third party interfaces accessed by me Software Products. MCI is nee to enter into
agreements with such third parties to obtain support directly to MCL
9.0. Amendments. This Support Attachment shall be reviewed by the Parties 90 days
following the initial release of the Software Products, and from tine to time thereafter as the
Parties may deem desirable. At each review, the patties shall evaluate me support
procedures set forth herein and may amend this Support Attachment as necessary or desirable
for the success of the Software Products.
10.0. Conflicts. In the event of a conflict between tins Attachment and the Agreement, this
Attachment shall gffvftni.
c:\ali\1128
2/14/95
CONFIDENTIAL TREATMENT REOUtiSTED
SCHEDULE 1
SUPPORT CENTERS
*1. Netscape Commnoicatioiis
Customer Sohiriows Contffr
SOI West MWirfrnM Road
Mountain View, California 94043
1-800-NETSITE
yii? suppoit^mcoiii.coin
nor repotting is available at this Support Center.
c:\ali\1128
2/14/95
-10-
•
•
/
ATTACHMENT G
COMPETITORS
AT&T, Sprint, HBOC*, GT^IDDS, WiltelIDB,BBN, AOL, Prodigy, Comp rvc Delphi, Netmm, IBM,
Microsoft, «nd top 20 independent telephone companies (SptintCoip v Southern New EngkndTeL,
ALLTEL Cmp* Puerto Rko Telephone Co* CindnnAti Bell Telephone Co, Cnthny Telephone
,hc v T*iephoM&D*tftS)rrteM,Inc^atbmiUtflitiesCo
v Iincolri
p
p
Telephone t Telegnph COL> C-TEC Ccnpv Anchotagc Telephone Utility, Puetto Rico Communications
Co, Telephone Utilities of WMhingtan, North Slate Telephone Co^Roaevilfe Telephone Co* Concord
Tckphone Co., nimoit Consolidated Telephone Co v Lufldn-Conroe Telephone Bxchmge).
CONnDENTlAL
TREATMENT REQUESTED
ATTACHMENT H
- -r-
These are the general quali
Netscape in connection wim the Consulting Services described in I
The following Personnel will bill a ^ ^ p w r hour.
Associate Consultant — B & or MS to computer scienw or related, field.
In most cases at least 1+year out of school experience with expertise in
in some or all of the following —
HTTP/ Web Server/ Httpd Setup and Admin
CGI script coding and generation.
httpd Access control
Mosaic Netsite admin and setup
Relational Databases, SQL, Precompilers.
Most consultants chosen will have had experienoe in settingJip some of all of the above components during laeir college years (for at least 2 to 4
years).
Graphics Artist
2-5 years of experience with graphics design, layout
Experience with computer multi-inedja applications and or prior internet
web pages experience
Educational background in Graphics design and visualization, etc.
Copywriter
2-5 years experience as a writer.
At least 6 months HTML experienoe
English or Arts Major.
JHHhour.
TiieToUowing Personnel will bill at
hour.
Staff Consultant
Above qualifications for Associate Consultant plus some or all of the
following —
3 to 5 years industry experience in a related field hi the Computer Industry
Database Administrator, Expertise in DB setup, Backups, Perforniance Tuning etc.
C, PERL, CGI experience
DB Schema Designer.
System Administrator - Background in basic UNIX System Administration.
Applications Developer, Knowledege of Front-end tools such as Oracle
Forms, Triggers, Stored Procedures.
Kpert, DNS, TCP/IP, Firewalls. Proxy Servers, Encryption, etc.
Graphics Consultant /Copy Editor
6
CONFIDENTIAL TREATMENT
7+ years experience in Graphics Design, layout.
Prior experience- in handling l"ge «ote design project* nyypcilttcd with
the Internet
Expertise in developing Web Server Pages.
Copy Editor witb a English/Arts background with prior experience in
handling HTML projects far the internet
Instructor
2-5 years Prior experience in delivering classes, presentations etc.
Product Manager from MOOM whh knowledge about MCOM Products
Course Curriculum Developer
Documentation Writer
5+ years as a technical writer in the computer industry.
OUT
; Personnel will bill
Sr. Consultants, MCOM Managers, Sr. Managers, MCOM Application Architects
Sr. Consultants will have the following skills.
Skills for a Staff, consultant plus
Experience in managing and working on large consulting projects.
7-10 years in the industry.
Prior experience in BPR.
EXHIBIT 10.9
•> •
O
LICENSE AND SERIES A PREFERREO
STOCK PURCHASE AGREEMENT
This Agreement is made as of August [±% 1994, by and between Mosaic
Communications Corporation, having its principal place of business at £50 Castro Street,
Suite 500, Mountain View, California. 94041 CMCOM") and RSA Data Security, Inc.,
having in principal place of business at 100 Marine Parkway, Suitr 500, Redwood City,
California 94065 (-RSA").
THE PARTIES HEREBY AGREE AS FOLLOWS:
L DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1
BUNDLED PRODUCT means one or more software products or
services developed by MCOM that incorporate the RSA OBJECT CODE. A BUNDLED^
PRODUCT must represent a significant functional and value enhancement to the LICENSED
SOFTWARE such that the primary reason for a customer to license such BUNDLED
PRODUCT is other than the right to receive a license to the LICENSED SOFTWARE
included in the BUNDLED PRODUCT. The RSA security facilities provided by the
LICENSED SOFTWARE shall only be accessible within the BUNDLED PRODUCT;
therefore, MCOM will not provide in the BUNDLED PRODUCT any application
programming interface (API) which would, if exposed, permit a third party application to
pull out RSA security primitives from the BUNDLED PRODUCT to be used in the
appli
1.2
LICENSED SOFTWARE means any current or future RSA proprietary
security software, including but not limited to software known as BSAFE and TIPEM as
described in the user manuals associated therewith, including both source and object code,
requested by MCOM. LICENSED SOFTWARE shall also include all modifications and
enhancements to such programs (including all NEW RELEASES and NEW VERSIONS as
hereafter defined).
1.3
NEW RELEASE means a version of the LICENSED SOFTWARE that
shall generally bertrtignaTfriby a new version number that has changed from the prior
number only to the right of the decimal point (e.g., Version 2.2 to 2.3).
1.4
NEW VERSION means a version of the LICENSED SOFTWARE thai
shall generally be designated by a new version number that has changed from the prior
number to the left of the decimal point (e.gM Version 2.3 to 3.0).
s\ y
1.5
RSA OBJECT CODE means the
readable, compiled object code form.
SOFTWARE in machine-
1.6
RSA SOURCE CODE means the mnemonic, tijh level statement
versions of the LICENSED SOFTWARE written in source language used by programmers.
1.7
TRADEMARKS means RSA's trademarks as identified in writing by
RSA to MCOM from time to time.
Q. LICENSE; TRANSFER OF LICENSED SO1TWARE
2.1
Subject to the terms and conditions of this Agreement, RSA hereby
grants to MCOM a non-exclusive, royalty-free, fully paid, worldwide, perpetual license to:
(a),
prepare derivative works of and otherwise modify, adapt, or
improve the LICENSED SOFTWARE to create ports, interfaces and related code necessary
to implemeftt any existing functionality of or add additional functionality to the LICENSED
SOFTWARE in BUNDLED PRODUCTS in any environment (collectivdy "INTERFACE
MODIFICATIONS"); and
(b)
prepare, manufacture, reproduce, perform, display, publish,
use, license, or distribute, provide and/or otherwise exploit BUNDI.ED PRODUCTS. Such
right includes the right to sublioense to customers all of the rights wt forth in 2.1(b) above
and the right for such customers to further sublicense such rights to their customers. In no
event, however, shall MCOM license or distribute in any way RSA SOURCE CODE.
2.2
Subject to the terms and conditions of this Agreement, RSA hereby
agrees to provide MCOM any new LICENSED SOFTWARE and any and ill NEW
RELEASES and NEW VERSIONS, upon the first availability of same through and as a
participant in RSA's alpha and/or beta program for such new LICENSED SOFTWARE and
NEW RELEASES and NEW VERSIONS, and upon final release of such new LICENSED
SOFTWARE and NEW RELEASES and NEW VERSIONS, during, the term of this
Agreement.
2.3
Nothing contained herein shall be construed as granting MCOM • its
licensees the right to use, sell, rent, license, sublicense or otherwise distribute the
LICENSED SOFTWARE as a stand-alone product.
2.4
Subject to compliance with the terms of this Agreement, nothing
contained herein shall be construed as precluding MCOM from independently developing,
acquiring, licensing or marketing computer software packages that perform the same or
similar functions as those packages provided hereunder by RSA.
2J
If a license to the LICENSED SOFTWARE is required by a licensee of
MCOM (e.g. as a stand-alone product rather than as incorporated in BUNDLED
PRODUCTS), RSA hereby covenant* to use its best efforts to provide such licensee of
MCOM with a license to the LICENSED SOFTWARE pursuant to terms and conditions that
are at least as favorable as the most favorable terms and conditions that RSA has or may
gtant from time to time to any third party. In determining whether the terms and conditions
offered to such MCOM licensee are at least as favorable as those gamed to a third party,
(i) all terms and conditions win be considered as a whole and (U) only the value and
consideration attributable to the LICENSED SOFTWARE win be taken into account
2.6
Subject to MCOM's confidentiality obligations in Article IV below,
RSA will disclose and provide to MCOM upon execution of this Agreement, two copies of
the LICENSED SOFTWARE and the current versions of the user documentation therefor.
2.7
MCOM acknowledges and agrees that RSA and its licensor! retain all
title to and, except as expressly and unambiguously licensed herein, all rights to (a) the
LICENSED SOFTWARE, all copies and derivative works thereof created by RSA and all
related documentation and materials, (b) the TRADEMARKS and all of their service marks,
trade names or any other designations, and (c) all copyrights, patent rights, trade secret
rights and other proprietary rights in all of the foregoing. Except as to the LICENSED
SOFTWARE, RSA acknowledges and agrees that MCOM shall retain all title and rights to
(a) derivative works of the LICENSED SOFTWARE and INTERFACE MODIFICATIONS
created by MCOM, which will be exercised coextensvely with MCOM's rights in the
LICENSED SOFTWARE pursuant to Sections 2.1.a. and 2.1.b. of this Agreement, (b) the
BUNDLED PRODUCTS, all copies and derivative works thereof and all related
documentation and materials, (c) any and all trademarks and all service marks, trade names
or any other designations used by MCOM, and (d) all copyrights, patent rights, trade secret
rights and other proprietary rights in all of the foregoing.
2.S
MCOM shall be responsible for providing customer support for aU
BUNDLED PRODUCTS to it* customers, including, without limitation, training them in the
use of the LICENSED SOFTWARE contained in BUNDLED PRODUCTS. During the term
of this Agreement, RSA shall be responsible only for providing support for the LICENSED
SOFTWARE solely to MCOM. if MCOM has elected to purchase annual maintenance for
the applicable period, such support to be provided in accordance with the provisions of
Article DC.
2.9
Any wblicenie of a BUNDLED PRODUCT acquired from MCOM
under a United States government contract shall be subject to resbictions as set forth in
subparagraph (c)(l)(ii) of Defense Federal Acquisition Regulations Supplement (DFARs)
Section 252.227-7013 for the Department of Defense contracts as set forth in Federal
Acquisition Regulations (FARs) Section 52.227-I9(c) for civilian agency contracts or any
successor regulations. MCOM agrees that any such sublicense agreement shall set forth all
of such restrictions for the BUNDLED PRODUCT and any documentation delivered with the
•
:
\
CONFIDENTIAL TREATMENT REQUESTED
BUNDLED PRODUCT shall cont&in &restrictedrights legend conforming to the
requirements of the current, applicable DFARs and FAR*.
TRANSFER OF STOCK AS CONSIDERATION
MCQM hereby
togetherwilh
3.1
agrees to issue to US
the common stock issuabie upon
of this Agreement, MCOM shall deUver to RSA a certificate represatuv * e Share* that
RSA is purchasing hereby, against delivery by RSA of the items referenced i s Section 2.6.
IV. CONnDENTIAIITY
4.1 Each party agrees not to use (other than for purposes expressed by this
Agreement), and will not disclose to third parties, any of the other party** confidential
information that is identified u confidential at the time of disclosure and is provided m
tangible form marked "confidential" or "proprietary" (or is reduce* to such form within
thirty (30) days after disclosure). The RSA OBJECT CODE distributed u a stand-alone
product and the RSA SOURCE CODE are hereby identified and narked as RSA'>
confidential information, and MCOM so acknowledges. The recipient party's wmfirtcntiality
obligation hereunder shall not apply to information that:
(a) is already in the recipient party's possftwion at the time of
disclosure thereof (except that this exception does not apply to the RSA OBJECT CODE
distributed as a stand-alone product and the RSA SOURCE CODE or any portion thereof);
(b) is or later becomes part of die public domain through no frail of
the recipient party;
(c) is received from a third parry having no obligations of
confidentiality to the disclosing party, provided that the recipient party complies with any
restrictions imposed by the third party;
(d) is required by law or regulation to be disclosed (including, without
limitation, in connection with SEC filings), provided thai the recipient party uses reasonable
efforts to restrict disclosure and to obtain confidential treatment therefor; or
similar restrictions.
(e) is made available by the disclosing party to a third party without
4.2 RSA acknowledges that MCOM may, at itt option, incorporata
of RSA's end user documentation in the documentation provided to MCOM's customers with
the BUNDLED PRODUCTS. MCOM agrees not to retnova or destroy any proprietary,
trademark or copyright markings or confidentiality legends placed upon or contained within
the RSA SOURCE CODE, RSA OBJECT CODE, any manuals provided by RSA, or ray
related materials or documentation. MCOM further agrees to insett and maintain: (I) within
every BUNDLED PRODUCT and any related materials or documentation, a copyright notice
in the name of RSA; and (U) within the splash screens, user documentation, printed product
collateral, product packaging and advertisements for the BUNDLES PRODUCT, the
appropriate RSA 'licensee Seal* substantially in the form set form in Exhibit B hereto and a
statement that the BUNDLED PRODUCT contains the LICENSED SOFTWARE. MCOM
shall not take any action which might adversely affect the validity of RSA's proprietary,
trademark or copyright markings or ownership by RSA thereof, and shall cease to oat the
markings, or any similar markings, In any manner upon the termination of the license rights
granted pursuant to Article It hereof pursuant to Section S.3(a) below..
4.3 MCOM agrees, in addition to complying with the requirements of
Sections 4.1 and 4.2 as they relate to the RSA SOURCE CODE, to (1) inform any employee
that is granted access to all or any portion of the RSA SOURCE CODE of the importance of
preserving the confidentiality and trade secret stams of the RSA SOURCE CODE; and (H)
maintain a controlled, secure environment for the storage and use of the RSA SOURCE
CODE or any pan thereof, except for a reasonable number of copies to be used solely at
MCOM'S facility for the purposes expressly set forth herein.
4.4 MCOM shall cause to be delivered to each of Us customers a license
agreement that shall contain, at a minimum, substantially all of the provisions set fora in
Exhibit A to this Agreement and shall prohibit such customers from modifying, reverse
engineering, decompiling or disassembling the RSA OBJECT CODE or any part thereof.
MCOM shall use commercially reasonable efforts to enforce such provisions.
4.2
Except u specifically provided herein, MCOM shall not modify,
reverse engineer, decompile or disassemble the RSA OBJECT CODE or any put thereof.
4.6 Each party acknowledges that the confidential information of the
disclosing patty constitutes valuable trade secrets of the disclosing patty and thit the
unauthorized disclosure or use of such confidential information by the recipient party wQl
cause the disclosing party irreparable harm for which the disclosing party's remedies at law
will be inadequate. Accordingly, each party agrees that the other party shall have the right,
in addition to any other remedies, to obtain appropriate injimctive relief against the recipient
party in the event the recipient party breaches the confidentiality obligations set forth in this
Agreement.
V. MCOM REPRESENTATIONS AND WARRANTIES
5.1
MCOM is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate power and
authority to cany on its business as now conducted, and is duly qualified to transact business
and is in good standing in the State of California. MCOM has furnished RSA copies of Us
Certificate of Incorporation and Bylaws, which copies are true, correct and complete and
contain all amendments through the date of this Agreement.
5.2
All corporate action on the part of MCOM. its officers, directors and
stockholders necessary for the authorization, execution, and delivery of this Agreement, the
performance of all obligations of MCOM hereunder and the authorization, issuance (or
reservation for Issuance), sale and delivery of the Shires sold hereunder and the Common
Stock issuable upon conversion of the Shares has been taken or will be taken prior to the
Closing. This Agreement constitutes i valid and legally binding obligation of MCOM,
enforceable in accordance with its terms, except a) u limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable rcmediea, and (iii) to the extent
the indemnified'*! provisions contained in this Agreement may be limited by applicable
federal or state securities laws.
*
5.3
The authorized capital stock of MCOM consists of ten million
(10,000,000) shares of Common Stock of which one million six hundred seventy-five
thousand (1,675,000) shares are issued and outstanding and five million (5,000,000) shares
of Preferred Stock, all of which have been designated Series A Preferred Stock, and of
which up to four million ninety-one thousand (4,091,000) shares will be issued and
outstanding pursuant to existing agreements. There are no preemptive rights, rights of first
refusal, options, warrants, conversion privileges or rights presently outstanding to purchase
any of the authorized but unissued stock of MCOM, other man (i) the rights created by this
Agreement, (ii) rights created by MCOM's Certificate of Incorporation and (iii) nine hundred
ninety-seven thousand (997,000) options to purchase Common Stock issuable to certain
employees of MCOM pursuant to MCOM's 1994 Stock Option/Stcck Issuance Plan. The
Shares to be transferred to RSA (and the Common Stock issuable upon conversion thereof),
when issued, sold and delivered in accordance with the terms of this Agreement for (he
consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable
and, based in pan upon the representations of RSA contained in this Agreement, will be
issued in compliance with all applicable federal and state securities laws, as presently in
effect.
5.4
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or local governmental
authority on the pan of MCOM is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to Section
25102(0 of the California Corporate Securities Law of 1968, as amended, and the rule*
thereunder, which filing will be effected within 15 days of the execution of thii Agreement.
5.5
MCOM has fully provided RSA with all information that RSA has
requested for deciding whether to purchase the Shares and all infeamation that MCOM
believes is reasonably necessary to enable RSA to nuke such decision. Neither this
Agreement, nor any other statement! made or delivered in connecticio herewith eontaini any
untrue statement of a material fact or omits to state a material fact necessary to nuke the
tutements herein or therein not misleading.
VL RSA REPRESENTATIONS AND WARRANTIES
6.1
RSA is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate power and
authority to carry on Us business as now conducted, and is duly qualified to transact business
and ii in good sanding in the State of California. •
6.2
All corporate action on the pan of RSA, its officers, directors and
stockholders necessary for the authorization, execution, and delivery of this Agreement, the
performance of ill obligations of RSA hereunder has been taken a will be taken prior to the
execution of this Agreement. This Agreement constitutes a valid and legally binding
obligation of RSA, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, fii) as limited by laws
relating to the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in this Agreement
may be limited by applicable federal or state securities laws.
6.3
RSA hereby confirms that the Shares acquired hereby will be acquired
for investment for RSA'i own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and RSA has no present intention of idling,
panting any participation in, or otherwise distributing the same. By executing this
Agreement, RSA further represents that it does not have any contact, undertaking,
agreement or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
6.4
RSA believes it has received all the infanrnnon it considers necessary
or appropriate for deciding whether to purchase the Shares. RSA further represents that it
has had an opportunity to ask questions and receive answers from MCOM regarding the
Shares and the business, properties, prospects and financial condition of MCOM.
6.5
RSA acknowledges that it is able to fend for itself, can bear die
economic risk of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the menu and risks of the investment in this
Shares. RSA is an "accredited investor* within the meaning of Securities and Exchange
Commission ("SEC") Rule 501 of Regulation D, as presently in effect.
6.6
RSA understands mat the Shares are characterized as "restricted
securities" under the federal securities laws inasmuch as they art: being acquired from
MCOM in a transaction not involving a public offering and that under such laws and
7.
applicable regulations such securities may be resold without registration under the Act, only
in certain limited circumstances. In addition. RSA represents mat it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed thereby and
by the Act.
VIL TECHNOLOGY WARRANTY AND INDEMNIFICATION
7.1
For a period of ninety (90) days following die delivery of any
LICENSED SOFTWARE to MCOM pursuant to the terms of thit Agreement, RSA warrants
that such LICENSED SOFTWARE will operate in material confbrmance to RSA's published
specifications therefor. RSA does not warrant that the LICENSED SOFTWARE or any
portion thereof is error-free. RSA warrants that it has sufficient rights to the LICENSED
SOFTWARE to provide the license grants set forth herein.
7.2
RSA wul defend at its expense, and will indemnify and hold harmless,
MCOM and its officers, directors, agents or employees against any damages, settlements,
attorneys' fees and expenses arising out of any claim by a third parry against MCOM
asserting that the LICENSED SOFTWARE infringes any patent, or copyright, trade secret,
trademark, or service mark and any other proprietary right, whether or not the LICENSED
SOFTWARE has been sublicensed to third parties, and whether or not the claim is
successful, provided that (a) RSA is notified in writing by MCOM within a rrasonible time
after MCOM1! receipt of written notice of a claim, action or allegations of infringement; (b)
RSA is provided all reasonable information available to MCOM and MCOM's aiiimnce in
settling or defending the action; and (c) RSA is granted control of defense or settlement of
the action subject to MCOM's reasonable approval with respect to any settlement RSA will
not be responsible for any settlement it does not approve in writing. The foregoing
obligation of RSA does not apply with respect to LICENSED SOFTWARE or portions or
components thereof (i) not supplied by RSA, 01) which are modified by MCOM after
shipment by RSA to the extent that the alleged infringement relates to such modification, (tti)
combined with other products, processes or materials by MCOM to the extent that the
alleged infringement is caused by such combination, and Civ) where MCOM contif
allegedly infringing activity after being notified thereof in writing or after being informed of
and provided with modifications that would have avoided the alleged infringement; MCOM
will defend at its expenie and indemnify RSA and its officers, directors, agents and
employees from all damages, settlements, attorneys' fees and expenses related to a claim of
infringement or misappropriation excluded from RSA's indemnity obligation by this
7.3
If an injunction or order is obtained against RSA regarding the use or
resale of the LICENSED SOFTWARE or a product incorporating the LICENSED
SOFTWARE or if RSA determines that its products are likely to become the subject of a
claim of infringement or violation of a patent, copyright, trade sectet or other proprietary
right of a third party and requests that MCOM's rights of use or distribution be modified,
RSA agrees to use diligent efforts to: (a) procure for MCOM the right to continue using the
LICENSED SOFTWARE and reselling the BUNDLED PRODUCTS and for MCOM's
customers the right to continue using and distributing the BUNDLED PRODUCTS; or (b)
replace or modify the same JO that it becomes noninfringing provided such modification or
replacement does not adversely affect the specification! for or the useor operation of the
LICENSED SOFTWARE by MCOM or the BUNDLED PRODUCTS by MCOM's
customers.
7A
EXCEPT AS SET FORTH ABOVE, RSA MAKES NO
WARRANTIES. EXPRESS OR IMPLIED, TO MCOM OR TO ANY OTHER PERSON OR
ENTITY WTIH RESPECT TO THE LICENSED SOFTWARE, THE TRADEMARKS. OU
ANY SERVICES OR LICENSES AND DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING. WITHOUT LIMITATION. WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT. THE
REMEDIES SET FORTH IN THIS ARTICLE VQ CONSTITUTE THE ENTIRE
OBLIGATIONS AND REMEDIES OF THE RESPECTIVE PARTIES CONCERNING
PROPRIETARY RIGHTS INFRINGEMENT.
7.5
EXCEPT FOR (1) EITHER PARTY'S UABUJTY FOR
INFRINGEMENT AS SET FORTH IN THIS ARTICLE VH, (ii) MCOM'S BREACH OF
SECTIONS 2.9 AND 4.3 OR (iii) A BREACH BY EITHER PARTY OF ARTICLE IV, IN
NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY (OR TO ANY
PERSON CLAIMING RIGHTS DERIVED FROM SUCH PARTY) FOR INDIRECT,
INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES ARISING
OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED UNDER THIS
AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST PROFITS, BUSINESS
INTERRUPTION OR LOSS OF BUSINESS INFORMATION, EVEN IF A PARTY HAS
BEEN INFORMED OF THE POSSIBILITY OF SUCK DAMAGES.
VIXL TERM AND TERMINATION
8.1
This Agreement and all licenses granted hercitndcr shall be and remain
effective from the date hereof until terminated in accordance with this Article VTII.
8.2
This Agreement will terminate:
(a)
upon sixty (60) days prior written notice if either party shall be
materially in breach or default of any material obligation under this Agreement; provided,
however, the breaching party may avoid such termination if, before the end of such sixty
(60) day period, the breaching party cures such breach; and
(b)
In the event either party (i) ceases to do business (other than a
lion of business due to an acquisition of substantially all of such party's aswta or
business wherein the rights and obligation! of this Agreement are assigned to a nccesxn
entity pursuant to paragraph 10.1 hereof), or (U) seeks protection under any bankruptcy,
CONFIDENTIAL TREATMENT REQUESTED
receivership, creditors arrangement or comparable prormfing (without diimisstl within sixty
(60) days), then the other party can terminate upon thirty (30) days notice.
8.3
Upon termination of this Agreement:
(a)
all licenses granted in Article H hemmder shall survive unless
such termination b due to tb»MCOM*s unctmd breach or default of a material obligation
hereunder, as provided in Section 8.2(a) above; provided however, that in any event of
termination, all sublicenses to MCOM castomen shall remain in full force and effect If this
Agreement Is terminated pursuant to Section 8.2(a) because of MCOM'S unctmd breach,
MCOM shall cease modifying, making copies of, using or licensing the LICENSED
SOFTWARE and all information and documentation provided by RSA to MCOM, other than
copies of the RSA OBJECT CODE needed to fulfill commitment! to MCOM customers a» of
the effective date of termination and such copies of the RSA OBJECT CODE, the associated
user manuals and the BUNDLED PRODUCTS as ate necessary to enable MCOM to pecfcinn
its continuing support obligations to its customers.
(b)
Sections 2.7, 8.3 and Ankles IV and VII shall survive the
termination of this Agreement; and
(c)
nothing herein shall be construed to release any party from any
liability for any obligation incurred through the effective date of tenninaticm (for example,
without limitation, confidentiality) or for any breach of this Agreement prior to the effective
^*fl» of such termination.
8.4 Neither perry shall incur any liability whatsoever for any damage, low
or cacpeniei of any kind suffered or incurred by the other petty (or tor any compensation to
the other party) arising tram or incident to any termination of thii Agreement by such party
that complies with the terms of this Agreement, whether or not such party is aware of any
such damage, loss or expenses.
8.5 Termination U not the sole remedy under this Agreement and, whether
or not termination is effected, all other remedies will remain available.
IX. MAINTENANCE
9.1 For each year commencing after the date of this Agreement. MCOM
may elect to purchase an annual maintenance contact covering support to MCOM for the
LICENSED SOFTWARE as put of theJXJNDLED PRODUCTS distributed by MCOM at
the one-time per year charge equal t o H B o f the comparable annual maintenance fee
charged to its customers (excluding suentmotmts attributable to the provision of NEW
VERSIONS, which are included in the LICENSED SOFTWARE pursuant to this
Agreement). RSA may cease to offer maintenance for all or portions of the LICENSED
10.
CONRDiNTJAL TREATMENT
SOFTWARE for future maintenance terms by notice delivered to MCOM ninety (90) dtyi or
more before the end of the then-current maintenance term; provided that such maintenance
shall no longer be offered by RSA to any of its customers. RSA shall cease providing
maintenance to MCOM at the end of the maimrnance term during which this Agreement
Ktfti.
9.2 Daring the first year following the execution of this Agreement and for
periods for which MCOM has paid an annual mammaac* fee RSA wul provide MCOM
with the following services:
(a)
RSA will provide telephone support to MCOM during RSA'i
normal businesi hours. RSA may provide on-site support reasonably determined to be
necessary by the parties at MCOM's designated location. RSA shall provide the support
specified in this Section 9.2(a) to three (3) MCOM employees, as designated from time to
time by MCOM, responsible for developing BUNDLED PRODUCTS, maintaining
BUNDLED PRODUCTS, and providing support to all of MCOM's customers. For the
purpose of clarification, RSA shall provide maintenance service* dtnscUy to MCOM, as a
single customer of RSA.
(b)
In the event MCOM discovers an error in the LICENSED
SOFTWARE that causes the LICENSED SOFTWARE not to operate in material
confonnance to RSA's published specifications therefor or any tpptiflaMf user or
programming documentation, MCOM shall submit to RSA a written report describing such
error in sufficient detail to permit RSA to reproduce such error. Upon receipt of any such
written report, the parties will use their reasonable business judgment to classify a reported
error as either: CO *• "Level 1 Severity" error, meaning an error that causes the LICENSED
SOFTWARE to fail to operate in a material manner or to produce materially incorrect results
and for which there is no workaround or only a difficult workaround; or (il) a "Level 2
Seventy' error meaning an error that produces a situation in which the LICENSED
SOFTWARE is usable but does not function in the most convenient or expeditious manner,
and the use or value of the LICENSED SOFTWARE suffers no material impact. RSA will
acknowledge receipt of in error report within two (2) business day and (A) will use its
continuing best efforts to provide % correction for any Level 1 Severity error to MCOM u
early as practicable; and (B) will use its reasonable best efforts to include a correction for
any Level 2 Severity error in the next release of the LICENSED SOFTWARE.
11.
J-.V
X. GENERAL
10.1 Neither party may assign this Agreement or ill rights or obligations
heteunder without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided however, that either party may assign this Agreement to any
entity that acquires substantially all of its assets or business, or to a parent, subsidiary or
successor entity tn the event of a corporate icorganiation whereby the assigning party or the
existing holders of itock of such party hold a majority of the stock of such parent, subsidiary
or successor assignee.
10.2 This Agreement (and all Exhibits hereto) caistitutes the entire tad only
agreement between the parties relating to the subject matter hereof, and all other prior
negotiations, representations, understandings and agreement* are scpetseded hereby. No
agreements altering or supplementing the terms hertof shaU te efftrtiw exce^ by mans of
a written document signed by the duly authorized representatives of both parties.
10.3 MCOM agrees to comply with an export laws, restrictions and
regulations of the Department of Commerce or ether United States or foreign agency or
authority, and not to export, or allow the export or reexport of, any LICENSED
SOFTWARE or confidential information of RSA in violation of any such laws, restriction or
regulations.
10.4 All notices, consents or approval! required by this Agreement shaU be
in writing and shall be deemed given five (5) days after being sent by certified or registered
air mail, postage prepaid, or when received after being sent by facsimile (confirmed by such
certified or registered mail) or by commercial overnight courier service with tracking
a ph i n^ ^ to the pparties
a e s at
at thee following
followig addresses
addresses or
or such
such other
other addresses
addresses as
as may
may be
be
d
i
i
i
b
h
i
i
h
f
hi
ti
i
designated in writing by the respective parties pursuant to the tcxnn of this notice provision:
To MCOM:
Mosaic Communications Corporation
650 Castro Street, Suite 500
Mountain View, California 94041
Attention: James H. Clark, President
To RSA:
S5A Data Security, Inc.
100 Marine Parkway, Suite 500
Redwood City, California 94065
Attention: James Bidzos, President
•MMI urawnau.«
12.
j> J
10.5 This Agreement shall be governed by and construed in accordance
with, and any controversy or claim arising out of or relating; to thii Agreement shall be
resolved in accordance with, the lawt of the State of California and the United States,
without regard to the conflicts of laws provisions thereof.
10.6 The failure of a party to enforce i light under this Agreement shall not
act as a waivef of that right or the ability to assert that right relative to the particular
situation involved. The waiver by either party of a breach of any provisions contained in
this Agreement shall be effective only if set forth in a writing signed by both parties and
than in no way be construed as a waiver of any succeeding breach of such provision or the
waiver of the provision itself.
10.7 Headings included herein axe for convenience only and shall not be
used to interpret or construe this Agreement.
10.8 If any provision of this Agreement shall be held void, invalid, Illegal or
forceable, that provision shall be limited or eliminated to the minimum extent
so that this Agreement shall otherwise remain in full force and effect and enforceable.
10.9 The rights and remedies of a party set forth herein with respect to
failure of the other party to comply with the terms of this Agreement (including, without
limitation, rights of termination of this Agreement) are not exclusive, the exercise thereof
shall not constitute an election of remedies and the aggrieved party shall in all events be
entitled to seek whatever additional remedies may be available in U.w or in equity (including,
without limitation, appropriate injunctive relief).
10.10 Each party hereto agrees to execute, acknowledge and deliver such
further instruments and to do all such other acts, u may be necessary or appropriate in order
to carry out the purposes and intent of this Agreement.
10.11 Each parry recognizes and agrees that the warranty disclaimers and
liability and remedy limitations in this Agreement are material bargained for bases of this
Agreement and that they have been taken into account and reflected in determining tfae
consiaennon to be given by each party under mis Agreement and in the decision by each
parry to enter into this Agreement.
10.12 Should suit be brought to enforce or interpret any pan of mis
Agreement, the prevailing party shall be entitled to recover, as an element of the costs of suit
and not as damages, reasonable attorneys' fees to be fixed by the court (including without
limitation, costs, expenses and fees on any appeal).
10.13 The parties agree that terms and condition* of this Agreement,
specifically including the consideration provided heretmder, is confidential and any disclosure
related thereto is prohibited. The parties further agree that any press releases,
announcements or other disclosure relating to the existence of this agreement, the relationship
of the parties or any other matter related to this Agreement must be mutually agreed upon by
the parties in writing prior to such disclosure, which agreement f*t»" not be unreasonably
withheld.
13.
J i
Agreement
m WITNESS WHEREOF, the parties have ctuied thdr * J y ™ ™ ~
to execute 4U License and Stock Puicfaaaa Afreement as of the date fint act
p. Jam
g
XffTF T ' r *
All license agreement! for the license of object code for
Bundled Products shall include substentially the following
restrictions:
1. The licensee shell receive no g r e e n r rights with
respect to the Bundled Products than those permitted in Section
3 . K b ) of Che Agreement.
2.
The licensee shall agree not to remove or destroy any
proprietary, trademark or copyright narking' « confidentiality
legends placed upon or contained within the Bundled Products or
acy related materials or documentation.
3.
If applicable, the licensee shall ayree that any
sub license of the Bundled Products co the United States
Government ot an agency thereof will state ths.t such software Is
subject to limited rights in technical data Mid restricted
rights applicable to commercial computer software developed
entirely at private expense and that any documentation for the
Bundled Products vi.ll include a restricted rights legend
conforming to Che Federal Acquisition fcegulations (PAR*) or the
Department o£ Defense federal Acquisition Supplement (DVARs), as
applicable, then in effect that apply to software developed
entirely at private expense.
4. The licensee shall agree not to expurc or reexport any
Bundled Products or information pertaining thereto to any country
cor which a, U.S. government agency requires an export license or
other governmental approval without first obtaining such license
or approval.
5. The licensee shall agree that, except for the limited
licenses granted under the license agreement, HCCM and its
licensors shall retain full and exclusive right, title and
ownership interest in and to the Bundled Products and in any and
all related patents, cradenarfce, copyrights or proprietary or
trade secret rights.
6. MCOW shall have the right to tennia&ce the license for
licensee's breach of a material term. The licensee shall agree
that, upon termination of she license, the licensee shall return
to 34CQM all copies ot the object code and documentation for the
Bundled Products or cercify to MOON that the licenses has
destroyed all such copies.
7. The licensee shall agree not to reverse engineer, reverse
compile, disassemble or modify the Bundled product.
-1 J 5
Trademark Sheet
RSA
-!SVSTEH
RSA
RSA
ic? r.VM"i tmIC SHOCK CIPHf H
jRSA
PUBLIC KBY CIIYM0SV8TIU
_RSA
net tvuMtTwic •LOCK e i r a u
RSA
HC4 8YMMETWIC •WlJWi « W I »
lUmomtMtr in obtam wrntEii perm)
RSA
RSA
RSA
RSA
•TU
RSA Digital Signature™, RSA Digital Envelope"1
RC2™ Symmetric Block Cipher. RC4™ Symmetric Stream Cipher
BSAFE™. TIPEM™
Certificate Issuing System™, Co-Issuex Tool*"
RSA Sign™, RSA Check."
Because some things ar* better leit unread.*
The keys to privacy and authentication.4
RSA Public Key CxyptusyUem*"
MD1",
MD21".
V
W
EXHIBIT 10.10
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT, is entered into as of the
twenty-first day of December, 1994, by and between the Board of
Trustees of the University of Illinois, a body politic and
corporate of the State of Illinois with principal offices at 354
Henry Administration Building, 506 Wright Street, Urbana,
Illinois 61801 ("University"); Spyglass, Inc., an Illinois
corporation with a principal place of business at 1800 Woodfield
Drive, Savoy, Illinois, 61874 (Spyglass*1); and Netscape
Communications Corporation, f/k/a Mosaic Communications
Corporation, a Delaware corporation, with a principal place of
business at 650 CaBtro Street, Suite 500, Mountain View,
California 94041 {"Netscape").
WHEREAS, University, through its National Center for
Supercomputing Applications ("NCSA"), has developed and claims
ownership of all copyrights and other proprietary rights in
certain software and related documentation, which software
enables a user of a client computer to browee and retrieve
information from servers on the Internet" adhering to "World Wide
Web" standards and protocols;
WHEREAS, University has adopted and is using the
trademarks MOSAIC1" and NCSA MOSAIC" to identify itself as the
source of web browsing software developed by NCSA or by others
under the authority of the University;
WHEREAS, Spyglass and University have entered into the
NCSA MOSAIC*1 Software License Agreement, whereby Spyglass
obtained certain exclusive rightB to use the NCSA MOSAIC1"
software, to make derivative works based on this software, and to
commercially distribute such software and products based on those
derivative works;
WHEREAS, Netscape was organized in April, 1994 by Mr.
James Clark, the founder and former Chairman of the Board of
Silicon Graphics, and Mr. Marc Andreessen, a graduate of the
University who, among other things, was employed by NCSA and was
one of the persons responsible for the basic design of the
MOSAIC1" web browsing software and the development of the X
Windows version of the NCSA MOSAIC1" product ;
WHEREAS, Netscape recruited and hired several software
developers who worked on the NCSA MOSAIC1" development project;
WHEREAS, Netscape developed and recently began to
distribute web browsing software under the trademarks NETSCAPE**,
NETSCAPE NAVIGATOR and "Mosaic NETSCAPE";
WHEREAS, Netscape has claimed that its software is
superior
in
features and performance when compared to the NCSA
MOSAIC*1 software, and Netscape's NETSCAPE*1 software competes with
commercial products marketed by Spyglass and licensees of
University and Spyglass;
WHEREAS, Spyglass offered Netscape a. license under the
Spyglass licensing program, and Netscape rejected such offers and
refused to enter into the licensing arrangement offered by
Spyglass;
WHEREAS, University has claimed that Netscape has
misused the trademarks and infringed and misappropriated the
intellectual property of University, and therefore University has
demanded, absent a license from Spyglass, that Netscape cease:
(i) distributing the NETSCAPE" software; <ii> using the MOSAIC"
trademark in its corporate and product names and in other
communications; (iii) using other logos, words and names to
falsely associate Netscape with University;
WHEREAS, Netscape and its employees have denied that
the NETSCAPE" software infringes or misappropriates any
intellectual property rights of University, and University has
not completed its investigations or pursued formal discovery into
the facts relevant to the alleged infringement or
mi sappropriat ion;
WHEREAS, Netscape has offered to have its software
reviewed and compared to the University software and the
University has declined this offer;
WHEREAS, on November 2, 1994, Netscape filed a lawsuit
in the Northern District of California, under Netscape's former
name Mosaic Communications Corporation, against University and
Spyglass (the "Netscape Lawsuit"), seeking a declaratory judgment
that Netscape has not infringed copyrights or misappropriated
trade secrets of University or Spyglass, alleging intentional
interference with prospective business relationships and unfair
competition by University and SpyglaBS, and alleging that
University has engaged in trade libel; and
WHEREAS, University, Spyglass and Netscape have
resolved all matters in dispute under the terms contained herein.
NOW, THEREFORE, in consideration of the foregoing and
of terms and conditions contained herein, the parties hereby
agree as follows:
Section 1.
Trade Name and Trademarks.
(a) Netscape will cease using the word "Mosaic" in its
corporate name. Netscape represents and warrants that it changed
its legal corporate name from Mosaic Communications Corporation
to Netscape Communications Corporation and that this change
became effective and was announced publicly on November 14, 1994.
-2-
This new name is acceptable to University. Hereafter, Netscape
will not change its name to include any word that is confusingly
similar to the word "Mosaic" or otherwise likely to create the
false impression that Netscape is sponsored by, affiliated with
or otherwise endorsed by University or NCSA.
(b) Netscape will cease using the mark "Mosaic
NETSCAPE"1" or the word "Mosaic" to identify or otherwise refer to
its products or services. Nothing herein shall be interpreted to
preclude Netscape from using the mark NETSCAPE" either alone or
in conjunction with other words or symbols that are not
confusingly similar to the word "mosaic" or otherwise likely to
create the false impression that Netscape is sponsored by,
affiliated with or otherwise endorsed by University, NCSA or
Spyglass.
(c) Netscape will cease using the logo which contains
the letter M in a circle superimposed over a depiction of six
square or rectangular tiles of differing colors. When animated
during use of the NETSCAPE"1 software, each tile in the logo
rotates on its vertical axis. Any new logo adopted by Netscape
shall not be confusingly similar to the"NCSA spinning globe logo,
or otherwise contain any words, symbols or elements that create
the false impression that Netscape is sponsored by, affiliated
with or otherwise endorsed by University, NCfSA or Spyglass.
(d) Netscape will implement the changes required under
Sections l(a), K b ) and 1 (c) in accordance with the following
schedule:
(1) No later than fifteen (15) days following the
effective date of this Settlement Agreement,
appropriate changes shall be made to references
contained in information (other than computer software)
maintained in electronic files under Netscape's control
made available to the public through network servers or
other means.
(2) No later than thirty (30) days following the
effective date of this Settlement Agreement,
appropriate changes shall be made to all computer
software under Netscape's control that contains or
causes a computer to display any material required to
be changed.
(3) No later than sixty (60) days following the
effective date of this Settlement Agreement,
appropriate changes shall be made to all printed
materials hereafter used or distributed by Netscape.
(e) If within ninety (90) days following the effective
date of this Settlement Agreement, University becomes aware of
-3-
JJti
any use by Netscape of any name, mark, logo or word that should
have been changed under the terms of Sections l(a), 1 <b) or l(c)
within the time limits set forth in Section 1(d), University
shall notify Netscape in writing, describing the alleged
unauthorized use in detail. Except as provided below, all such
unauthorized uses shall be corrected within thirty (30) days of
such notice. If the unauthorized use involveB information on
Netscape's web server or information revealed by the use of
Netscape computer software, the notice shall contain information
concerning any browsing or software operating conditions that
revealed the use to University. If the browsing or operating
conditions can be replicated by Netscape, Netscape shall correct
the use within thirty (30) days of the notice. University will
consult with Netscape, as needed, in order to assist Netscape in
replicating the condition. If University does not provide
written notice pursuant to this Section l{e) within ninety (90)
days, or if Netscape timely corrects any replicated or, in the
case of printed materials, other unauthorized use described in
such notice, Netscape shall be deemed to have complied with
Section ltd). Nothing in this Section l(e) shall be interpreted
as relieving Netscape from any of its obligations to use its best
efforts to comply with the provisions of Sections l(a), K b ) ,
l{c) or l(d) .
(f) For a period of three (3) monthn following the
effective date of this Settlement Agreement, iind notwithstanding
the provisions of Sections l(a), ltd) and l(e), Netscape shall be
entitled to use the phrase: "Formerly Mosaic Communications
Corporation" in conjunction with its new corporate name on the
home page of its web server provided such phrase is accompanied
by the following disclaimer:
Netscape Communications Corporation is not sponsored
by, affiliated with or endorsed by the University of
Illinois, the National Center for Supercomputing
Applications, or Spyglass.
This disclaimer shall be shall be conspicuous and appear in close
proximity to the corporate name and " Formerly Mosaic
Communications Corporation" phrase.
(g) Netscape shall not use the trademarks MOSAIC™,
NCSA MOSAIC" or the NCSA spinning globe logo in any advertising
or promotional material or other information disseminated to the
public except: (i) for the purpose of referring to the software
of University, Spyglass or a licensee of either, or for the
purpose of making comparisons between such products and the
products of Netscape; (ii)
to document links used by others that
contain the word "mosaic*1; or (iii) to refer or use the term
"mosaic* as a third party's trademark or in a manner beyond the
scope of the University's trademark rights in the term. Any
references or comparisons shall not be false or misleading, and
shall be in full compliance with all applicable laws and
-4-
regulations. Any use of University trademarks for the purposes
stated in Section 1(g)(i) shall include the uymbol " in
superscript immediately following the mark, and be accompanied by
an appropriate credit line euch as:
MOSAIC™, NCSA MOSAIC" and the NCSA spinning
globe logo are trademarks of the University
of Illinois
This statement need not include a reference t:o any trademark of
University that is not used in the communication. When a federal
registration is issued for a University trademark, the symbol
used with that trademark shall, within a reasonable time, be
changed to ® and the credit line shall be modified to reflect the
registration status of that mark. University shall notify
Netscape upon receipt of any such registration.
(h) University and Spyglass shall not use the
trademarks NETSCAPE"", NETSCAPE NAVIGATOR, NETSITE, or the name
"Netscape Communications" in any advertising or promotional
material except for the purpose of referring to the software of
Netscape or its licensees, or for the purpose; of making
comparisons between such products and the products of University,
Spyglass, or the licensees of either. Any such references or
comparisons shall be not false or misleading, and shall be in
full compliance with all applicable laws and regulations. Any
such use of Netscape trademarks shall include the symbol * in
superscript immediately following the mark, and be accompanied by
an appropriate credit line such as:
NETSCAPE1", NETSCAPE NAVIGATOR, AND NETSITE are
trademarks of Netscape Communications Corporation
This statement need not include a reference to any trademark of
Netscape that is not used in the communication. When a federal
registration is issued for a Netscape trademark, the symbol used
with that trademark shall, within a reasonable time, be changed
to ® and the credit line shall be modified to reflect the
registration status of that mark. Netscape fihall notify
University and Spyglass upon receipt of any cuch registration.
(i) University will give Netscape specific notice of
any use by Netscape of the MOSAIC" or NCSA MOSAIC1" trademarks
that are not authorized under this Settlement Agreement when and
as any such use becomes known to University following the period
set forth in Section 1 (d) . Except as provided below, all such
unauthorized uses shall be corrected within thirty (30) days of
such notice. If the unauthorized use is in information on
Netscape's web server or in software of Netscape, the notice
shall include information concerning the browsing or software
operating conditions that revealed the use to the University. If
the browsing or operating conditions can be replicated by
Netscape, Netscape shall correct the use within thirty (30) days
-5-
of the notice. University will consult with Netscape, as needed,
in order to assist Netscape in replicating the condition.
Nothing in this Section l(i) shall be interpreted as relieving
Netscape from any of its obligations to use its best efforts to
comply with the provisions of Sections 1(a), 1(b), l (c), 1 (d) or
()
(j) University will give Netscape notice of any
browsing or software operating condition under which the
simultaneous use of or reference to MOSAIC" and NETSCAPE*
products disables the use of the MOSAIC1" product. Such notice
shall be given when and as any such'situation becomes known to
University. The notice shall include information concerning the
browsing or software operating conditions that revealed the
situation to the University. If the browsing or operating
conditions can be replicated by Netscape, Netscape shall correct
its electronic files or software to eliminate the situation
within thirty (30) days following receipt of the notice.
University will consult with Netscape, as needed, in order to
assist Netscape in replicating the condition.
(k) Notwithstanding Netscape's satisfaction of Its
obligations under Sections 1 (d) or M e ) , the covenants under
Sections l (a), K b ) , l (c), K g ) , 1 (h), l(i) and l(j) shall
continue and survive any expiration or termination of this
Settlement Agreement.
Section 2.
Covenant Not To Assert.
(a) So long as Netscape (or any successor of Netscape)
satisfies those obligations referred to in Sections l(d) or l(e)
and Sections l(f) and 6 when and as performance thereunder
becomes due, and all payment obligations under Section 3 within
the time limits set forth in Section 6 (b) , University will not
assert against Netscape, its divisions, subsidiaries, affiliates,
officers, directors, shareholders, employees, agents,
distributors, direct or indirect customers, successors, assigns,
or any other persons, firms or corporations who are or might be
liable, any claim for trademark infringement, false association,
false advertising, unfair competition, tortious interference with
contract or other legal claim arising out of t.he solicitation or
hiring by Netscape of NCSA employees, the promotion, marketing
and distribution of any Netscape products,, or the use by Netscape
of the word MOSAIC* or other symbols or wordB heretofore used by
Netscape to market itself and its products to the public. The
foregoing covenant applies only to claims arising out of acts,
events, occurrences or the conduct of Netscape; and its officers,
directors, employees, distributors, customers or agents, which
took place prior to the effective date of thin Settlement
Agreement, or which may take place following the effective date
within the time limits set forth in Sections 1(d) o r l ( e ) , and
Section l (f). Subject to the performance by Netscape (or any
-6-
CONFIDENTIAL TREATMENT REQUESTED
written notice to Netscape, to conduct an audit on Netscape's
premises of Netscape's files, records, data and other information
(whether in print or electronic form) for evidence of Netscape's
compliance with or breach of its covenant under the second
sentence of this Section 2(c). Any such audit shall be conducted
at University's expense by an independent exj>ert with a
professional background and training in the design and
development of computer software, who shall be employed by one of
the "Big Six" accounting firms or their consulting practices. No
more than two (2) such audits shall be conducted during the Term
of this Settlement Agreement. If at any time following such an
audit, the auditor concludes in writing that Netscape has
breached its covenant, University shall first: notify Netscape of
its concerns and thereafter the parties shall attempt to resolve
the matter through good faith negotiations. If the matter can
not be resolved to University's satisfaction. University may,
notwithstanding the provisions of Section 2(b), pursue the matter
through binding arbitration before the American Arbitration
Association. Such arbitration shall be heard before a single
arbitrator selected by mutual agreement of the parties, or if
such an agreement can not be reached, by an individual selected
by the American Arbitration Association: The arbitrator tfhall be
a person with a professional background and training in the
design and development of computer software. The issue to be
tried before the arbitrator shall be limited to whether Netscape
breached its covenant in the second sentence of this Section
2 (c) . If the arbitrator determines that there is clear and
convincing evidence that the covenant has been breached, the
remedy will be limited to an order to delete any code that is
found to have been copied into the Netscape product at issue. If
it is determined that Netscape did not breach the covenant.
University shall pay for the cost of the arbitration and the
costs and expenses, including reasonable attorneys fees, incurred
by Netscape in defending the matter. If it is determined that
Netscape breached the covenant, Netscape shall pay for the cost
of the arbitration and the costs and expenses, including
reasonable attorneys fees, incurred by University in pursuing the
matter. The arbitrator shall have no authority or jurisdiction
to grant any remedy or relief except as specifically provided for
in this paragraph. All proceedings under this Section 2 (c) shall
be maintained in confidence by the parties, the auditor and the
arbitrator. If University or Spyglass discloses publicly that
University is proceeding under this Section 2 (c) , then University
shall thereafter lose its right to proceed hereunder
Section 3.
Consideration.
(a) In consideration for the covenants and releases
contained herein, Netscape shall pay UniversityJ
^M^^^M__
in the following three
installments:
^^^^
-8-
CONFIDENTIAL TREATMENT REQUESTED
Within five (5) days following the
date of this Settlement Ac
*•
Stive
Within one (1) year following the effective
_d*te_pf this
Within two (2) years following the effective
date of this Settlement Ac
"^^™""*"
(b) If during the term of this Settlement Agreement,
Netscape enters into: <i) a license agreement with one or more of
the companies indicated below for the distribution of NETSCAPE
NAVIGATOR Software by such company or companies; or (ii) any
other form of agreement (other than an agreement covered by
Section 3 (c)) with one or more of those'companies which would
permit the distribution, remarketing or sublicensing to third
parties of NETSCAPE NAVIGATOR Software by any of them, Netscape
shall pay the amount indicated upon the execution of the
agreement with the applicable company:
The foregoing obligation shall apply to any agreement with an
entity other than a company indicated above if a specific purpose
and effect of such agreement is to circumvent the provisions of
this Section 3(b) through a remarketing, sublicensing or other
agreement that would otherwise provide the same benefits to one
of those companies, or if the agreement is made with an entity
which is the successor in interest to one of those companies,
whether by change of control, purchase of assets or by operation
of law.
(c) If during the term of this Settlement Agreement:
(i) a controlling interest in Netscape is acquired by one of the
companies identified in Section 3(b) and such interest iB
sufficient to elect a majority of its Board of Directors; or (ii)
if Netscape sells, assigns, conveys or otherwise transfers thev
underlying full and exclusive owner,£h£p rights in the NETSCAPE
NAVIGATOR Software to one of those companieSjNetBcaDeshall rpay
or cause the acquiring company to p a ^ ^ H H H f l l ^ ^ H H w P*
-9-
copy of NETSCAPE NAVIGATOR Software licensed, jtold^r otherwise
distributed by Netscape (in the case ,of ft transfer;of control in
Netscape) or by the acquiring company (in the case of a transfer
of the underlying ownership rights) for the balance of the term
of this Settlement Agreement after the closing of the
transaction. In the case of a transfer of such underlying
ownership rights in the NETSCAPE NAVIGATOR Software, Netscape
shall guarantee any payments to be made by an acquiring company
under the preceding sentence, up to the amount received by
Netscape for the ownership rights. The obligations of this
Section 3(c) shall apply to any transaction with a company that
is owned or controlled by one of the companies identified in
Section 3{b).
(d) For the purposes of this Section 3, "NETSCAPE
NAVIGATOR Software" shall be deemed to be any web browsing
software that is marketed by Netscape under the trademarks
NETSCAPE or NETSCAPE NAVIGATOR, or other web browsing software
developed by or for Netscape and marketed under another
trademark, where "web browsing software" is computer software
which enables a user of a client computer to browse and retrieve
information from servers on the Internet adhering to World Wide
Web standards and protocols. NETSCAPE NAVIGATOR Software shall
not include any web browsing software: (i) acquired from a third
party which did not have access to the MOSAIC™ or NCSA MOSAIC™
software (other than the source code of an X Windows version of
the NCSA MOSAIC?" software that University permitted individuals
to develop on the Internet and licensed to individuals on a
personal, non-commercial use basis); or (ii) to web browsing
software developed for Netscape by a third party, where such
developed software was designed and developed in a "clean room"
environment by persons who have had no accese to MOSAIC" or NCSA
MOSAIC1" software and who have never been employed by University
or otherwise participated in the design, development, maintenance
or support of MOSAIC™ or NCSA MOSAIC™ software.
Section 4.
Consent of Spyglass.
(a) Spyglass hereby consents to the terms of this
Settlement Agreement pursuant to Section 6(D)(1) of the NCSA
MOSAIC™ Software License Agreement. As between itself and
University, and as a further inducement to Netscape to enter into
this Settlement Agreement, and for Netscape'r benefit and
reliance. Spyglass hereby waives any right to pursue against
Netscape on behalf of University any intellectual property
infringement claim covered by Section 2 that Spyglass could
otherwise pursue under Sections 6(D){2) or 6(D)(3) of that
agreement or otherwise.
(b) University warrants that, except for the Spyglass
agreement refereed to hereinabove, it^jjas not entered inijp any
agreement granting any other party the right to enforce
-10-
University's intellectual property rights that are the subject of
this Agreement.
(c> Spyglass warrants that it has not entered into any
agreement granting any other party the right to enforce
University's intellectual property rights that are the subject of
this Agreement.
(d) The provisions of this Section 4 shall survive
expiration or termination of this Settlement Agreement.
Section 5.
Publicity.
(a) Except as may be expressly peimitted in this
Section 5, the parties shall maintain this Settlement Agreement
in confidence and shall not, without the prior written consent of
the other parties, provide a copy or otherwise disclose the terms
and conditions of this Settlement Agreement to a third party;
provided such consent shall not be required for any such
disclosure to the parties' respective employees, officers,
insurers, investors, potential investors, directors, trustees,
employees, professional advisors, or the potential acguirore of
Netscape or Spyglass or the ownership rights in their respective
products, provided that any such person to whom this Settlement Agreement is disclosed agrees to maintain it in confidence. Such
consent shall not be required with respect to disclosure of the
terms of Sections 2 (a), 2 (b), 4, 6{d), 7 and 8 of this Settlement
Agreement by Netscape, Spyglass or University to licensees,
prospective licensees, joint venturers, partners, or other
companies with which one of them is engaged in good faith
negotiations for a business relationship, provided any such
entity shall agree to maintain those terms in confidence. Such
consent shall not be required with respect to any disclosure that
may be compelled by an order of a court, government agency or
otherwise pursuant to other legal process or regulation
(including without limitation any orders, rules or regulations of
the Securities and Exchange Commission); provided (except for
disclosures made pursuant to any orders, rules, or regulations of
the Securities and Exchange Commission) the party being required
to make any such disclosure shall notify the other parties prior
to making the disclosure so that a party affected by a compelled
disclosure can seek to challenge the disclosure or to have
certain information treated as confidential notwithstanding such
disclosure; and provided further that, in the case of disclosure
made pursuant to any orders, rules, or regulations of the
Securities and Exchange Commission the disclosing party shall
request confidential treatment of all dollar amounts specified in
the Settlement Agreement. Netscape may include in any document
filed with the Securities and Exchange Commission a statement
substantially in the form of the statement attached hereto as
Exhibit A.
-11-
(b) Immediately following the final execution of this
Settlement Agreement, the parties will issue the joint press
release attached hereto as Exhibit B. Thereafter, except as
provided in Section 5(c) or Section 5(d) f the parties shall limit
their comments to the press concerning the terms of the
Settlement Agreement, whether in response to specific inquiries
from the press or otherwise, to the statements set forth in the
press release.
(c) Nothing in this settlement Agreement shall prevent
Netscape from disclosing publicly: (i) that Netscape is of the
opinion and belief that it has not infringed University's
copyrights; (ii) that Netscape is of the opinion and belief that
it has not misappropriated University's trade secrets; (iii) that
Netscape has settled this dispute and has the right to market and
distribute Netscape's products without interference from
University or Spyglass; or (iv) accurate historical and
biographical facts related to the dispute leading to this
Settlement Agreement. Notwithstanding the foregoing, Netscape
shall not state or imply to any person or entity not a party to
this Agreement that University or Spyglass has acknowledged that
Netscape has not infringed University's copyrights or
misappropriated University's trademarks.
(d) Nothing in this Settlement Agreement shall prevent
University or Spyglass from disclosing publicly: (i) University
has protected its intellectual property rights in the MOSAIC™
software by entering into this Settlement Agreement; (ii) that
University and Spyglass have protected the MOSAIC1" licensing
program; (iii) that MOSAIC", NCSA MOSAIC" and "Enhanced" NCSA
MOSAIC™ are trademarks of University that are used by Spyglass
and other licensees; or (iv) accurate historical and biographical
facts related to the dispute leading to this Settlement
Agreement. Notwithstanding the foregoing, University and
Spyglass shall not state or imply to any person or entity not a
party to this Agreement: (i) that Netscape has infringed
University's copyrights or misappropriated University's trade
secrets by virtue of the conduct of Netscape (or its directors,
officers, employees or agents) which is the subject of this
Settlement Agreement; or (ii) that Netscape does not have the
right to market and distribute Netscape's products.
(e) Nothing contained in the presci release or other
statements permitted to be made under the -terms of this
Settlement Agreement shall be: (i) deemed to be an admission on
the part of any party as to the truth or accuracy of any factual
statement or legal position contained therein; or (ii) otherwise
used by a party in subsequent proceedings involving the parties
in any manner adverse to the interest of the other parties, it
being expressly understood that the language of the press release
and other statements has been the subject of good faith
negotiations between the parties in the spirit of compromise and
resolution of the disputes between the partins.
-12-i
(f) The obligations under this Section 5 shall survive
any expiration or termination of this Settlement Agreement.
Section 6.
Term, Termination and Breach
(a) The term of this Settlement Agreement shall be for
two years from the effective date. This Settlement Agreement may
be terminated prior to expiration only pursuant to Section 6 (b)
or Section 6(e).
(b) If Netscape fails to "make any payment when due
hereunder, and such payment remains outstanding for more than
thirty (30) days after its due date. University may terminate
this Settlement Agreement by giving written notice to Netscape,
unless Netscape makeB such payment within then (10) days of such
written notice.
(c) Any breach by a party shall not affect the rights
hereunder of the non-breaching parties. Any breach or alleged
breach by University or Spyglass other than a breach of Section 2
or Section 4 shall not affect Netscape's obligations to pay the
amounts under Section 3 when and as they become due and shall not
affect Netscape's obligations under Section 8. Subject to any
limitations on remedies contained elsewhere in this Agreement, a
non-breaching party may pursue all other available legal or
equitable remedies (excluding termination, recision or the like)
against the breaching party, including an injunction against
further breach of the parties' obligations under Section 5.
(d) The expiration or termination of this Settlement
Agreement shall not affect the rights of any licensees or other
direct or indirect customers of Netscape (or of any successor or
assignee of Netscape) under licenses or other agreements entered
into prior to the expiration or termination, except that-, (i) a
license or other agreement which is the subject of Section 3(b)
may be terminated if this Settlement Agreement is terminated
pursuant to Section 6(b) for failure to make the applicable
payment due under Section 3 (b) ,• and (ii) a license or other
agreement which is entered into after the closing of a
transaction which is the subject of Section 3(c) may be
terminated if this Settlement Agreement is terminated pursuant to
Section 6 (b) for failure to make the applicable payment due under
Section 3(c). Nothing in this Section 6(d) or elsewhere in this
Settlement Agreement shall be construed to limit the rights of
any licensees or other direct or indirect customers of Netscape
(or any successors or assigns of Netscape) under licenses or
other agreements entered into after any expiration or termination
of this Settlement Agreement unless the Settlement Agreement is
terminated for non-payment under Section 6 (b) .
(e)
Netscape shall have the right to terminate this
-13-
O
Settlement Agreement by giving written notice to University after
complying with all of Netscape's obligations under Sections ltd)
or l(e) and Sections l ( f ) , 3 and 8; provided however, that
Netscape's obligations under Sections 3{b) and Sections 3<e)
shall survive any such termination and remain in effect for two
(2) years from the effective date of this Settlement Agreement.
Section 7.
Releases.
(a) Upon the full and complete performance by Netscape
(or any successor of Netscape) of t'he obligations under Sections
l{d) or M e ) , and Sections l(f) and 6 when and as performance
thereunder becomes due, and receipt by University of all sums due
under Section 3 within the time limits of Section 6 (b),
University shall release and discharge Netscape, its divisions,
subsidiaries, affiliates, officers, directors, shareholders,
employees, agents, distributors, direct or iiwiirect customers,
successors and assigns, and all other persons, firms or
corporations who are or might be liable {"Released Parties"),
from any and all claims, demands, damages, actions, causes of
action, or suits, whether known or unknown, which University
might now have, or ever had, or might but for this release in
full have in the future, against the Released Parties based on
any matter which is the subject of University's covenant under
Section 2(a). Upon the granting of such release. University will
acknowledge full settlement and satisfaction of all such claims
which University might have against the Released Parties.
(b) Upon the receipt by University of all sums due
under Section 3 within the time limits of Sec:tion 6 (b) , and full
and complete performance by Netscape of the obligations under
Section B, University shall release and discharge Netscape, its
divisions, subsidiaries, affiliates, officer«, directors,
shareholders, employees, agents, distributors, direct or indirect
customers, successors and assigns, and all other persons, firms
or corporations who are or might be liable ("Released Parties"),
from any and all claims, demands, damages, actions, causes of
action, or suits, whether known or unknown, which University
might now have, or ever had, or might but for this release in
full have in the future, against the Released Parties based on
any matter which is the subject of University's covenant under
Section 2 (b) . Upon the granting of such release, University will
acknowledge full settlement and satisfaction of all such claims
which University might have against the Released Parties.
(c) Spyglass hereby releases and discharges Netscape,
its divisions, subsidiaries, affiliates, officers, directors,
shareholders, employees, agents, distributors, direct or indirect
cuBtomers, successors and assigns, and all other persons, firms
or corporations who are or might be liable ("Released Parties"),
from any and all claims, demands, damages, actions, causes of
action, or suits, whether known or unknown, which Spyglass might
-14-
o -i
now have, or ever had, or might but for this release in full have
in the future, against the Released Parties based on any matter
referred to in Section 2 (a) or 2 (b), including any such matter
arising after the effective date of this Settlement Agreement.
Spyglass hereby acknowledges full settlement and satisfaction of
all such claims which Spyglass may have against the Released
Parties.
(d) Netscape hereby releases and discharges: <i)
University, its trustees, officers, employees, agents, successors
and assigns; (ii) Spyglass, its divisions, subsidiaries,
affiliates, officers, directors, shareholders, employees, agents,
distributors, direct or indirect customers, successors and
assigns; and <iii) all other persons, firms or corporations who
are or might be liable ("Released Parties"), from any and all
claims, demands, damages, actions, causes of action, or suits,
whether known or unknown, which Netscape might now have, or ever
had, or might but for this release in full have in the future,
against the Released Parties based on the assertion by University
and/or Spyglass of the claims referred to in Section 2(a) or
Section 2(b) prior to the effective date of this Settlement
Agreement and any claims asserted by Netscape in the Netscape
Lawsuit, Netscape hereby acknowledges full settlement and
satisfaction of all such claims which Netscape may have against
the Released Parties.
(e) The parties specifically waive the provisions of
Section 1542 of the Civil Code of California, and any similar
provisions of applicable law of any other jurisdiction. The
provisions of Section 1542 of the Civil Code of California read
as follows:
A general release does not extend to claims which the
creditor does not know of or suspect to exist in his
favor at the time of executing the release which, if
known by him must have materially affected his
settlement with the debtor.
(f) It is further understood and agreed that nothing
in this Settlement Agreement shall be construed as an admission
of liability on the part of the other parties, or any other
persons, and any such liability by them is hereby expressly
denied.
Section 8.
Dismissal of Netscape Lawsuit With Prejudice.
Within two (2) days following the execution of this
Settlement Agreement, Netscape shall cause to be Ciled with the
court a motion to dismiss the Netscape Lawsuit in its entirety
with prejudice.
-15-
9.
Notices and Payments.
(a) Any notice given under this Settlement Agreement
will be in writing, will reference this Settlement Agreement, and
will be deemed given: (i) when delivered personally; <ii) when
sent by confirmed telex or facsimile; (iii) five {5) days after
having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (l) day after deposit
with a commercial overnight carrier, with written verification of
receipt. All communications will be sent to the addresses 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 9(a):
With a copy to:
If to University:
Office of the
University Counsel
Attn: Ms. Marcia Rotunda
University of Illinois
25B Henry Administration
" Bldg.
506 South Wright Street
Urbana, 11. 61B21
Office of the
Vice Chancellor for
Research
Attn: Licensing
University of Illinois
601 East John Street
Champaign, IL 61820
Fax: (217) 244-2370
Fax: (217) 244-3716
With a copy to:
If to Spyglass
Michael J. Bevilacqua
Hale and Dorr
60 State Street
Boston, MA 02109
Spyglass, Inc.
1B00 Woodfield Drive
Savoy, IL 61874
Attn: Douglas P. Colbeth
President & CEO
Fax: (617) 526-5000
Fax: (217) 355-8925
With a copy to:
If to Netscape:
Netscape Communications
650 Castro Street
Suite 500
Mountain View, CA 94041
Attn: James H. Clark
Chairman & CEO
Mr. Robert Barr
Brobeck, Phleger &
Hazrison
Two Embarcadero Place
2200 Qeng Road
Palo Alto, CA 94303
Fax: (415) 254-2601
Fax: (415) 496-2736
-16-
(b) All payments due hereunder shall be made payable
to University and mailed to the office cf the: Vice Chancellor for
Research at the address indicated above.
Section 10-
Governing Law.
This Settlement Agreement is to be governed by and
construed in accordance with the laws of the State of Illinois.
Section 11. Amendment.
This Settlement Agreement shall be amended only by the
mutual written agreement of the parties.
Section 12. Assignment.
Any party shall have the right to assign this
Settlement Agreement without the consent of the other parties.
This Settlement Agreement shall be binding upon and inure to the
benefit of the successors and assigns of a party.
Section 13.
Entire Agreement.
This Settlement Agreement embodies the entire agreement
and understanding of the parties with respect to the subject
matter hereof, and shall supersede all previous communications
and understandings, either verbal or written, between the parties
relating to this Settlement Agreement. The appendices attached
hereto are hereby incorporated by reference as if set out in
full.
Section 14.
Counterparts.
This Settlement Agreement may be executed in two or
more counterparts, all of which taken together shall constitute a
single, legally binding contract.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this
Settlement Agreement to be duly executed on the date set forth
under their signatures below, and effective as of the date of the
last party to sign.
THE BOARD OF TRUSTEES OF
THE UNIVERSITY OF ILLINOIS
SPYGLASS/?
ClOMHUNICATIOHE
ATTEST: YfosJ^J. ftl.
Name:
Title:
APP;
AL RECOMMENDED
Name:
Title:
tichard C. Alkire
Vice Chancellor/for Research
Date:
/ / / f
\|P \
Date:
is R. Bottom,
Deputy Dirgqtoij,
rector^. NCSA
Date: ft
FORM APPROVED:
Marcia A. Rot da,
Universi
ersijy//Legal Counsel
Date : //P C / Z / Ityf
Jjj
-
EXHIBIT A
on December 20, 1994, the Company entered into a
Settlement Agreement with the University of Illinois and
Spyglass. Under the terms of the Agreement, the University and
Spyglass agreed not to assert any claim of trademark infringement
arising out of the Company's prior use of the word "Mosaic" or
other symbols or words used by the Company to market itself or
its products. The university and Spyglass further agreed not to
assert against the Company any claim of copyright infringement,
trade secret misappropriation or related claims based on the
Company's use of former University of Illinois employees in the
development of the Company's present and future products. As
consideration for these covenants not to assert, the Company
agreed to make certain payments to the University of Illinois
over a two year period. If the Company does not make these
payments within the specified time periods, the University or
Spyglass could assert claims of intellectual property
infringement against the Company. Although the Company believes
that it has not infringed the intellectual property rights of the
University of Spyglass, such litigation could have a material
adverse effect on the Company, and there* can be no assurances
that such litigation will be resolved in the Company's favor.
-19-
EXHIBIT B
CHAMPAIGN, 111, December 21, 1994 - the University of Illinois at
Urbana-Champaign and Netscape Communications (formerly known as
Mosaic Communications) have reached an agreement that leaves
Netscape free to market its products without interference. Also
confirmed in the agreement was Netscape's decision to change its
corporate name and not use the names MOSAIC or HCSA MOSAIC, which
are trademarks of the university.
The MOSAIC web browser software was * developed at the university's
National Center for Supercomputing Applications. Marc Andreessen
and several other founders of Netscape Communications were
members of the NCSA development team that developed this
software, which quickly became the standard among graphical web
browsers. On May 19, 1994, the university entered into a master
commercial licensing agreement for HCSA MOSAIC with Spyglass,
Inc., of Naperville, Illinois, a company also founded by
university alumni.
Under the terms of the December 21 agreement, Netscape is 'free to
market its software without a license from the university or
Spyglass and Netscape will not use the MOSAIC trademark or logo
to identify its products. The university is not asserting any
wrongdoing on the part of Netscape. Other details of the
agreement were not disclosed.
"Everyone is a winner in our agreement with Netscape, " said
Michael Aiken, chancellor of the university. "We have protected
our intellectual property and our licensees. Netscape is free to
compete actively in a dynamic marketplace, and we are able to
point with pride to the fact that several alumni of the
university are principals of these vigorous companies.n
"We are pleased that the university is not interfering with the
marketing of our independently developed products and that their
alumni are not being accused of doing something wrong," said Jim
Clark, chairman and CEO of Netscape Communications.
-20Jjj
EXHIHIT 10.11
J
1. PARTIES: THIS LEASE, is entered into on this n ^ h y of October, 1994,
between Ellis-Middlefield Business Park, a California Limited Partnership, whose
address is 10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and Mosaic
Communications Corporation, a Delaware Corporation, whose address is 501 East
Middlefield Road, Mountain View, CA 94043, hereinafter called respectively Landlord
and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
Mountain View, County of Santa Clara, State of California, and more particularly
described as follows, to-wit: that certain real property commonly known and
designated as 487 and 501 East Middlefield Road {"Building 1" and "Building 2"
respectively) consisting of two 2-story office/R&D buildings of 49,362 square feet each
and totaling 98,724 rentable square feet ("Buildings") including 375 parking stalls as
outlined on Exhibit "A".
3. USE: Tenant shall use the Premises only for the following purposes and
shall not change the use of the Premises without the prior written consent of Landlord:
Office, research and development, marketing, light manufacturing, storage and other
incidental uses. Landlord makes no representation or warranty that any specific use of
the Premises desired by Tenant is permitted pursuant to any Laws.
4. TERM AND RENTAL: The term ("Lease Term") shall be for eighty-four
(84) months, commencing, on Substantial Completion of the Tenant Improvements (as
those terms are defined in paragraph 7) for Building 2, ("Commencement Date"), and
ending on that date eighty-four calendar months after the Commencement Date (the
"Expiration Date"), unless the lease is sooner terminated in accordance with its terms.
"The Building 1 Rent Commencement Date" shall mean the earlier to occur of (i)
December 1,1995, or (ii) Substantial Completion of the Tenant Improvements for
Building 1 and acceptance of Building 1 by Tenant. In addition to all other sums
payable by Tenant under this Lease, Tenant shall pay as base monthly rent ("Base
Monthly Rent") for the Premises the following amounts:
Month 1 through Building 1 Rent Commencement Date:
$61,702.00 per month
Building 1 Rent Commencement Date through Month 42: $123,405.00 per month
Month 43 through Month 84:
$138,213.60 per month
Base Monthly Rent shall be due on or before the first day of each calendar month during
the Lease Term. AH sums payable by Tenant under this Lease shall be paid in lawful
money of the United States of America, without offset or deduction (except as
specifically set forth herein), and shall be paid to Landlord at the address specified in
paragraph 1 of this Lease or at such place or places as may be designated in writing
from time to time by Landlord. Base Monthly Rent for any period less than a calendar
month shall be a pro rata portion of the monthly installment.
5.
SECURITY DEPOSIT:
A. Upon execution of this Lease, Tenant shall deliver to Landlord a standby
letter of credit in the face amount of Four Hundred Thousand and No/100 Dollars
($400,000.00) and in form reasonably acceptable to Landlord, as security for Tenant's
performance of its obligations hereunder. Tenant shall renew or replace such letter of
credit as necessary during the term of this Lease so as to maintain in ef/ect a letter of
credit during the entire term of this Lease, as the same may be extended, plus a period
of thirty (30) days (herein referred to as the "Letter of Credit"), subject to the provisions
of subparagraph D below. At least thirty (30) days prior to expiration of any letter of
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credit, the term thereof shall be renewed or extended for a period of at least one (1) year.
Tenant's failure to so renew or extend the letter of credit shall be a material default of
this Lease by Tenant.
B. Landlord may make partial drawings under the Letter of Credit in an
amount sufficient to remedy a default by Tenant upon certification to the issuer that an
Event of Default (taking into account any applicable notice and cure periods) has
occurred under this Lease and Landlord is entitled under this paragraph to draw on the
Letter of Credit. Landlord shall be entitled to make complete drawings against the
Letter of Credit provided that and Event of Default has occurred under paragraph 22(A)
of this Lease, in that Tenant has defaulted in the payment of Base Monthly Rent and all
applicable notice and cure periods with respect to such default have run. In the event
that Landlord makes a complete drawing under the Letter of Credit, Landlord shall
hold the balance of any proceeds received as a cash security deposit pursuant to
subparagraph C.
C. The Letter of Credit, any cash received by Landlord after drawing on the
Letter of Credit and any cash deposited by Tenant with Landlord pursuant to
subparagraph D are referred to herein as the "Security Deposit." If Tenant fails to
perform its obligations under the Lease, Landlord may draw on all ot any part of the
Security Deposit for the payment of any Base Monthly Rent or other sum in default or
to remedy any other default of Tenant hereunder, to the extent permitted by law. If any
portion of the Security Deposit is drawn upon. Tenant, upon demand by Landlord, shall
promptly either restore the Security Deposit to the full original amount (as the same
may have been decreased pursuant to this paragraph) or obtain an increase in the Letter
of Credit which constitutes the Security Deposit so that the undrawn amount of the
Letter of Credit equals the required amount of the Security Deposit. Landlord shall
invest the any portion of the security deposit held by Landlord as a cash security
deposit in an interest bearing account, such interest to be paid to Tenant quarterly.
D. Notwithstanding the foregoing. Tenant shall be entitled (i) to reduce the
face value of the Letter of Credit to Three Hundred Thousand and No/100 Dollars
($300,000.00), in the event that Tenant achieves four (4) consecutive quarters of
profitability; and (ii) to replace the Letter of Credit with a cash security deposit in the
amount of one hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00) in the
event that Tenant's net worth exceeds Twenty-Five Million and No/100 Dollars
($25,000,000.00). Satisfaction of the foregoing criteria shall be determined based on
Tenant's most recent audited financial statements.
E. Cash deposits shall be returned to Tenant within ten (10) days after the
Expiration Date and surrender of the Premises to the Landlord, (i) less any amount
deducted by Landlord in accordance with this paragraph and Landlord's written notice
itemizing the amounts and purposes for such deduction, (ii) plus any interest payable to
Tenant pursuant to subparagraph C. In the event of termination of Landlord's interest
in this Lease, Landlord shall transfer said deposit to Landlord's successor in interest.
6.
LATE CHARGES: Tenant hereby acknowledges that late payment by
Tenant to Landlord of Base Monthly Rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of which will
be extremely difficult to ascertain. Such costs include, but are not limited to,
administrative, processing, accounting charges, and late charges, which may be
imposed on Landlord by the terms of any contract, revolving credit, mortgage or trust
deed covering the Premises. Accordingly, if any installment of Base Monthly Rent or
any other sum due from Tenant shall not be received by Landlord or Landlord's
designee when due, Tenant shall pay to Landlord a late charge equal to five (5%)
percent of such overdue amount which late charge shall be due and payable on the
same date that the overdue amount in question was due. Landlord agiees to waive said
late charge in the event alt amounts set forth in any notice served upon Tenant by
Landlord to pay rent or quit in connection with the overdue amount are paid in full
within ten (10) days after Landlord's service upon Tenant of such notice to quit or pay
rent. The parties hereby agree that such late charge represents a fair and reasonable
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estimate of the costs Landlord will incur by reason of late payment by Tenant.
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.
7.
CONSTRUCTION AND POSSESSION:
A. Landlord's Obligation to Construct: Tenant desire;; that certain
alterations/improvements be made to the Building 2 prior to the Commencement Date
and to Building 1 prior to Tenant's occupancy of Building 1 ("Tenant Improvements").
Landlord agrees that it will construct the Tenant Improvements. The Tenant
Improvements for Building 2 shall be constructed by Sobrato Construction, as general
contractor, in accordance with (i) working drawings and specifications prepared by Reel
Grobman Associates, to be attached as Exhibit "B" ("Building 2 Working Drawings")
and (ii) all existing applicable municipal, local, state and federal laws, statutes, rules,
regulations and ordinances. Tenant Improvements for Building 1 will be constructed in
accordance with (i) working drawings and specifications prepared by Tenant's
architects ("Building 1 Working Drawings") and (ii) all existing applicable municipal,
local, state and federal laws, statutes, rules, regulations and ordinances. Building 1
working Drawings and Building 2 Working Drawings are sometimes referred to herein
as the "Working Drawings."
B. Contribution to Tenant Improvement Costs: Landlord shall be
responsible for and shall pay the cost of the Tenant Improvements up to the amount of
Four Hundred Thousand Dollars ($400,000.00) ("Tenant Improvement Allowance") but
subject to the provisions of subparagraph 7(C) below. No more than half of the Tenant
Improvement Allowance shall be used by Tenant for Building 2. The cost of the Tenant
Improvements shall include a fee of (i) eight percent (8%) of all hard construction costs
actually incurred and paid by the general contractor to subcontractors for construction
of the Tenant Improvements for Sobrato Construction Corporation construction
overhead, supervision and profit, and (ii) up to 15? per square foot to be reimbursed to
Tenant for programming, space planning and design services provided by Keel
Grobman. Costs in excess of said Tenant Improvement Allowance, if any, shall be paid
for by Tenant in cash within fifteen (15) days following Substantial Completion of the
Tenant Improvements. All costs for Tenant Improvements shal! be reasonably
documented to and verified by Tenant.
Landlord shall make any modifications to the existing Premises required,
now or in the future, by the City of Mountain View or any other governmental
authority having jurisdiction over the Premises as a condition of Tenant's occupancy.of
the Premises with respect to applicable building codes and the Americans with
Disabilities Act. Such modifications shall not be deemed to constitute 'Tenant
Improvements" for purposes of this paragraph 7, and the cost of making such
modifications shall be paid by Landlord and shall not be deducted from the Tenant
Improvement Allowance. Landlord shall not be obligated, however, to make any
modifications to the existing improvements if such requirements result from the
installation of the Tenant Improvements or from Alterations.
C. Tenant Improvement Plans and Cost Estimate: Tenant, at Tenant's
expense, shall supply Landlord with completed workings drawings and specifications
("Working Drawings") for the Tenant Improvements for (i) Building 2 by November 1,
1994 and {ii) Building 1 by October 1,1995. Based on this information. Landlord shall
prepare a fixed price proposal including a reasonable contingency of five percent (5%)
for unexpected costs incurred by Landlord for the Tenant Improvement costs
("Budget") within ten (10) days of receipt of the Working Drawings. Ihe Budget shall
based on competitive bids from at least two (2) subcontractors approved by Landlord
and Tenant for each item of work consisting in excess of Ten Thousand and No/100
Dollars ($10,000.00). Tenant shall approve the Budget (or modify the Working
Drawings in which event Landlord shall revise its proposal accordingly) within five (5)
days thereafter. In the event the Proposal exceeds the Tenant Improvement Allowance,
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Landlord shall have the right to require Tenant to deposit cash with Landlord equal to
the difference between the Budget and the Tenant Improvement Allowance (Tenant's
TI Payment"). Landlord agrees that it will construct the Tenant Improvements in
accordance with the Working Drawings so that Building 2 is Substantially Complete no
later than December 15,1994 and Building 1 is Substantially Complete no later than
December 1,1995 (or on such other date as the parties may agree). If the cost to
complete the Tenant Improvements exceeds the Budget, Landlord shall be responsible
for such costs. If the cost to complete the Tenant Improvements is less than the Budget
and Tenant has provided a Tenant's TI Payment, Landlord shall refund to Tenant the
difference between the amount of the cost to complete the Tenant Improvements and
the Budget up to a maximum amount of Tenant's TI Payment. In tho event that
Substantial Completion of the Tenant Improvements for Building 2 or Building 1 is
delayed for any of the following reasons, the Commencement Date (in the case of a
delay affecting Substantial Completion of the Tenant Improvements for Building 2) or
the Building 1 Rent Commencement Date (in the case of a delay affection Substantial
Completion of the Tenant Improvements for building 1) shall be deemed to occur one
(1) calendar in advance of Substantial Completion for each day of delay: (i) Tenant fails
to provide the Working Drawings when required above, or (ii) Tenant fails to approve
the Budget within five (5) days as provided above, (iii) Tenant makes any changes to the
Working Drawings which cause Landlord's construction schedule to be delayed, or (iv)
Tenant or its employees, contractors, agents or invitees delay the construction and
completion of the Tenant Improvements in any other manner, the Commencement Date
shall occur one (1) day in advance of Substantial Completion as defined below for each
day of delay.
D. Substantial Completion: The terms "Substantial Completion" and
"Substantially Complete" shall mean that (i) construction of the Tenant Improvements
for the Building has been completed in accordance with the Working Drawings
approved by Tenant to an extent that would permit Tenant to use Building for its
intended purpose as certified by Tenant's architect; (ii) Building is in e- "broom clean"
finished condition; (iii) all utilities to be supplied to Building are available for Tenant's
use; (iv) the City of Mountain View has agreed to allow Tenant to occupy the Premises
as evidenced by a signed final inspection card or certificate of occupancy as applicable;
and (v) access to the Premises has been tendered by Landlord to Tenant. If Landlord,
for any reason whatsoever, other than a breach by Landlord of its obligations hereunder
cannot deliver possession of the said Premises to Tenant by the Commencement Date,
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 the Commencement Date, the
Building 1 Rent Commencement Date and Expiration Date of the Lease and all other
dates affected thereby shall be revised to conform to the date of Landlord's delivery of
possession. Notwithstanding the foregoing, in the event that Substantial Completion of
the Tenant Improvements for Building 2 has not occurred by February 15,1994, then
Tenant shall have the right to terminate this Lease by providing written notice to
Landlord of such election Tenant's its sole and exclusive remedy for Landlord's failure
to achieve Substantial Completion.
8. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
Landlord shall deliver the Premises to Tenant with all building systems (HVAC,
electrical, plumbing and the elevator), the roof membrane and parking lot in good
condition and repair. On the Commencement Date, landlord shall deliver the keys to
the Premises to Tenant and Tenant shall accept possession from Landlord subject to a
"punchlist" to be created by Tenant and completed by Landlord, at Landlord's expense,
of those items which Tenant reasonably believes were not in good condition and repair
as of the Commencement Date. Landlord agrees that all new construction shall carry a
one year warranty and that it will to pass through any construction ami equipment
warranty with respect to the new Tenant Improvements. Tenant further agrees on
Expiration Date, or on the sooner termination of this Lease, to surrender the Premises to
Landlord in the same condition as received, reasonable wear and tear excepted. "Good
condition" shall mean that the interior walls, floors, suspended ceilings, and carpeting
within the Premises will be cleaned to the same condition as existed at the
commencement of the Lease, normal wear and tear excepted. Tenant agrees, at its sole
Page 4
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cost, to remove all phone and data cabling from the suspended ceiling and repair or
replace broken ceiling tiles, and relevel the ceiling if required. Tenant on or before the
Expiration Date or sooner termination of this Lease, shall remove all its personal
property and trade fixtures from the Premises, and all property and fixtures not so
removed shall be deemed to be abandoned by Tenant. Tenant shall remove, at Tenant's
sole cost and expense, any Alterations which Landlord indicated at the time of its
consent it would require be removed prior to the Expiration Date pursuant to
paragraph 10 below. Such repair and restoration shall include causing the Premises to
be brought into compliance with all applicable building codes and lav/s in effect at the
time of the removal to extent such compliance is necessitated by the repair and
restoration work. If the Premises are not surrendered at the Expiration Date in the
condition required by this paragraph, Tenant shall indemnify, defend, and hold
harmless Landlord against actual loss or liability resulting from delay by Tenant in so
surrendering the Premises.
9. USES PROHIBITED; Tenant shall not commit, or suffer to be committed,
any waste upon the said Premises, or any nuisa'nee, or other act or thing which may
disturb the quiet enjoyment of any other tenant in or around the Premises or allow any
sale by auction upon the Premises, or allow the Premises to be used for any unlawful
purpose, or place any loads upon the floor, walls, or ceiling which endanger the
structure, or use any machinery or apparatus which will vibrate or shake the Premises
to such an extent as to cause material damage, or in violation of any laws, discharge or
release any, or place any hazardous materials in the drainage system of, or upon or in
the soils surrounding-the Building. No materials, supplies, equipment, finished
products or semi-finished products, raw materials or articles of any nature or any waste
materials, refuse, scrap or debris (other than vehicles parked in marked parking areas,
deliveries in the ordinary course of tenant's business and trash placed in containers or
areas designated by landlord for such purpose) shall be stored upon 01 permitted to
remain on any portion of the Premises outside of the Building proper without
Landlord's prior approval, which approval may be withheld in its sole discretion.
10. ALTERATIONS AND ADDITIONS: Tenant shall be entitled without
obtaining Landlord's consent, to make any alteration or addition to the Premises
("Alterations") which <i) does not affect the structure of the Building, {ii) cost does not
exceed $15,000per alteration nor an aggregate of $25,000 in any twelve (12) month
period. All other Alterations shall require Landlord's consent, which consent shall not
be unreasonably withheld. In order to obtain consent. Tenant shall deliver to Landlord
the proposed architectural and structural plans for all such Alterations. Landlord shall
indicate to Tenant in writing within ten (10) business days following receipt of Tenant's
request, whether or not Landlord will require Tenant to remove such Alteration at the
Expiration Date. After having obtained Landlord's consent, Tenant agrees that it sha.ll
not proceed to make such Alterations until Tenant has obtained all required
governmental approvals and permits. Tenant further agrees to provide Landlord (i)
written notice of the anticipated start date and actual start date of the work, and (ii) a
complete set of half-size (15" X 21") vellum as-built drawings if available. All
Alterations shall be constructed in compliance with applicable buildings codes and
laws. Any Alterations, except movable furniture and trade fixtures, shall become at
once a part of the realty and belong to Landlord, but shall nevertheless be subject to
removal by Tenant as provided herein. All Alterations shall be maintained, replaced or
repaired by Tenant at Tenant's sole cost and expense.
11.
MAINTENANCE OF PREMISES:
A. Landlord's Maintenance: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when necessary, the
foundation, exterior load bearing walls and roof structure of the Buildings.
B. Tenant's Maintenance: Tenant shall, at its sole cost, keep and
maintain, repair and replace, all other portions of the Premises and appurtenances and
every part hereof, including but not limited to, roof membrane, glazing, sidewalks,
parking areas, elevator, telephone, plumbing, electrical and HVAC systems, and the
PageS
Tenant Improvements in good and sanitary order, condition, and repair. Tenant shall
provide Landlord with a copy of a service contract between Tenant and (i) a licensed
air-conditioning and heating contractor which contract shall provide for periodic
maintenance in conformance with the manufacturer's recommendations of all air
conditioning and heating equipment at the Premises; and (ii) a licensed elevator
maintenance contractor which contract shall provide for periodic maintenance in
conformance with the manufacturer's recommendations of all elevator related systems.
Tenant shall pay the cost of all air-conditioning heating, and elevator equipment repairs
or replacements which are either excluded from such service contract or any existing
equipment warranties. All wall surfaces and floor tile are to be maintained in an as
good a condition as when Tenant took possession free of holes, gouges, or defacements.
Tenant shall also be responsible, at its sole cost and expense for the preventive
maintenance of the membrane of the roof, which responsibility shall be deemed
properly discharged if (i) Tenant contracts with a licensed roof contractor who is
reasonably satisfactory to both Tenant and Landlord, at Tenant's sole cost, to inspect the
roof membrane at least every six (6) months, with the first inspection due the sixth (6th)
month after the Commencement Date, and (ii) Tenant performs, at Tenant's sole cost,
all preventive maintenance recommendations made by such contractor within a
reasonable time after such recommendations are made. Such preventive maintenance
might include acts such as clearing storm gutters and drains, removing debris from the
roof membrane, trimming trees overhanging the roof membrane, applying coating
materials to seal roof penetrations, repairing blisters, and other routine measures.
Tenant agrees, at its expense, to water, maintain and replace, when necessary, any
shrubbery and landscaping. The foregoing notwithstanding. Tenant shall have no
obligation to maintain Building 1 prior to the Building 1 Rent Commencement Date.
C. Capital Repairs: In the event Tenant's maintenance or repair
obligations hereunder would require Tenant to pay for a capital repair or replacement
costing in excess of Five Thousand and No/100 Dollars ($5,000.00), <i) Tenant shall be
required to pay that portion of the cost equal to the product of such total cost multiplied
by a fraction, the numerator of which is the number of years remaining in the Lease
Term, the denominator of which is the useful life (in years) of the replacement; and (ii)
Landlord shall pay the balance of such cost.
12.
HAZARD INSURANCE:
A. Tenant's Use: Tenant shall not use, or permit said Premises, or any
part thereof, to be used, for any purpose other than that for which the said Premises are
hereby leased; and no use shall be made or permitted to be made of the said Premises,
nor acts done, which will cause an increase in premiums or a cancellation of any
insurance policy covering said Premises, or any part thereof, nor shall Tenant sell or
permit to be kept, used or sold, in or about said Premises, any article which may be
prohibited by the standard form of fire insurance policies. Tenant shall, at its sole cost
and expense, comply with any and all requirements, pertaining to said Premises, of any
insurance organization or company, necessary for the maintenance of reasonable fire
and public liability insurance, covering said Premises and appurtenances.
B. Landlord's Insurance: Landlord agrees to purchase and keep in force
fire, extended coverage, earthquake (if commercially available and canied by other
owners of industrial buildings in Santa Clara County), owner's liability, and 12 month
rental loss insurance. The amount of the said insurance shall not exceed the
replacement cost of the Building (not including any Tenant Improvements or
Alterations paid for by Tenant) as determined by Landlord's insurance company's
appraisers. The Tenant agrees to pay to the Landlord as additional rent, on demand
made as and when such cost is incurred, the full cost of said insurance as evidenced by
insurance billings to the Landlord, and in the event of damage covered by said
insurance, the amount of any deductible under such policy. Payment shall be due to
Landlord within ten (10) days after written invoice to Tenant. Notwithstanding the
foregoing. Tenant's obligation to pay for the cost of any earthquake insurance
premiums shall be limited to an amount equal to or less than four (4) times the cost of
Page 6
the fire and extended coverage premiums. It is understood and agreed that Tenant's
obligation under this paragraph will be prorated to reflect the commencement and
termination dates of this Lease. The foregoing notwithstanding. Tenant shall have no
obligation to reimburse Landlord for casualty insurance for Building t prior to the
Building 1 Rent Commencement Date.
C
Tenant's Insurance: Tenant, at its sole cost, agrees to insure any
Tenant Improvements paid for by Tenant, and Alterations for their full replacement
value (without depreciation) and to obtain public liability and property damage
insurance for occurrences within the Premises with combined limits for bodily injury
and property damage of not less than $1,000,000.00 per occurrence and a general
aggregate limit of not less than $5,000,000.00. Tenant shall name Landlord and
Landlord's lender as an additional insured, shall deliver a copy of the policies and
renewal certificates to Landlord. Alt such policies shall provide for thirty (30) days'
prior written notice to Landlord of any cancellation, termination, or reduction in
coverage.
D. Waiver: Landlord and Tenant hereby waive any and all rights each
may have against the other on account of any loss or damage occasioned to the
Landlord or the Tenant as the case may be, or to the Premises or its contents, and which
may arise from any risk covered by their respective insurance policies (or which would
have been covered had such insurance policies been maintained in accordance with this
Lease), as set forth above. The parties shall use their reasonable efforts to obtain from
th&ir respective insurance companies a waiver of any right of subrogation which said
insurance company may have against the Landlord or the Tenant, as the case may be.
13. TAXES: Tenant shall be liable for, and shall pay prior to delinquency, all
taxes and assessments levied against personal property and trade or business fixtures
located in the Premises, and agrees to pay, as additional rental, all real estate taxes and
assessment installments (special or general) or other impositions or charges which may
be levied on the Premises, upon the occupancy of the Premises and including any
substitute or additional charges which may be imposed during, or applicable to the
Lease Term (including real estate tax increases due to a sale or other transfer of the
Premises subject to the limitation contained herein), as they appear on the City and
County tax bills during the Lease Term, and as they become due. Notwithstanding the
foregoing, if property taxes increase during the Lease Term as a result of a reassessment
due to a voluntary change of ownership. Tenant's shall be responsible (or payment of
the resulting property tax increase as follows: during the first twelve month period
following the transfer, Tenant shall be responsible for payment of thirty three percent
(33%) of the tax increase; during the second twelve month period, Tenant shall be
responsible for payment of sixty seven percent (67%) of the tax increase, thereafter
Tenant shall be responsible for payment of the entire tax increase. It is understood and
agreed that Tenant's obligation under this paragraph will be prorated to reflect the
Commencement and Expiration Dates and that, notwithstanding anything to the
contrary contained or implied above, under no circumstances will Tenant be
responsible for any taxes (whether resulting upon reassessment or otherwise) relating to
the period of time prior to the Commencement Date or subsequent to the Expiration
Date. If, at any time during the Lease Term a tax, excise on rents, business license tax,
or any other tax, however described, is levied or assessed against Landlord, as a
substitute or addition in whole or in part for taxes assessed or imposed on the Premises,
Tenant shall pay and discharge his pro rata share of such tax or excise on rents or other
tax before it becomes delinquent, except that this provision is not intended to cover net
income taxes, inheritance, gift or estate tax imposed upon the Landlord If by virtue of
any application or proceeding brought by or on behalf of Landlord, there results a
reduction in the assessed value of the Building during the Lease Term, Tenant agrees to
reimburse Landlord its out of pocket costs incurred by Landlord in connection with
such application or proceeding applicable to the Premises and provided further such
costs do not exceed the amount of the first years' savings. Notwithstanding the
foregoing, Tenant shall not be required to reimburse Landlord for taxes- allocable to
Building 1 prior to the Building 1 Rent Commencement Date.
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14. UTILITIES: Tenant shall pay directly to the providing utility all water, gas,
heat, light, power, telephone and other utilities supplied to the Premises. Landlord
shall not be liable for a loss of or injury to property, however occurring (but not
including losses or injury resulting from the negligence or willful mif conduct of
Landlord), through or in connection with or incidental to furnishing or failure to furnish
any utilities to the Premises and Tenant shall not be entitled to abatement or reduction
of any portion of the Base Monthly Rent so long as any failure to provide and furnish
the utilities to the Premises is due to a cause beyond the Landlord's reasonable control.
15. This paragraph intentionally left blank
16. FREE FROM LIENS: Tenant shall keep the Premises free from any liens
arising out of any work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for I'enant and shall hold Landlord harmless
from any costs and expense related to such liens including attorney's fees. In the event
of any lien arising from worked performed for Tenant, Tenant shall have the right to
contest such liens if Tenant obtains a bond equal to 150% of the amount of such lien to
prevent enforcement of the lien during such contest or otherwise makes adequate
provision to prevent enforcement of the lien during such contest.
17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Except as
provided in paragraph 7 and subject to the provisions below. Tenant shall, at its sole
cost and expense, comply with all of the requirements of all Municipal, State and
Federal authorities now in force, or which may hereafter be in force, pertaining to the
said Premises, and shall faithfully observe in the use of the Premises all Municipal
ordinances and State and Federal statutes now in force or which may hereafter be in
force. The judgment of any court of competent jurisdiction, or the admission of Tenant
in any action or proceeding against Tenant, whether Landlord be a party thereto or not,
that Tenant has violated any such ordinance or statute in the use of the Premises, shall
be conclusive of that fact as between Landlord and Tenant. In the eveat Tenant's
obligations hereunder would require Tenant to pay for a capital repair or replacement
costing in excess of Five Thousand and No/100 Dollars ($5,000.00) and such obligation
does not arise from Tenant's specific use of the Premises, (i) Tenant shall be required to
pay that portion of the cost equal to the product of such total cost multiplied by a
fraction, the numerator of which is the number of years remaining in the Lease Term,
the denominator of which is the useful life (in years) of the replacement; and (ii)
Landlord shall pay the balance of such cost.
18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. Tenant's Responsibility: Without the prior written consent of
Landlord, Tenant shall not bring, use, or permit upon the Premises, or generate, create,
release, emit, or dispose (nor permit any of the same) from the Premises any toxic or
hazardous gaseous, liquid or solid materials or waste, including without limitation,
material or substance having characteristics of ignitability, corrosivity, reactivity, or
toxicity or substances or materials which are listed on any of the Environmental
Protection Agency's lists of hazardous wastes or which are identified in Sections 66680
through 66685 of Title 22 of the California Administrative Code as the tame may be
amended from time to time ("Hazardous Materials") except in full compliance with all
applicable laws. Notwithstanding the foregoing, it is understood and agreed that the
onsite migration from adjacent properties of materials which is not caused by Tenant
does not constitute "permission" by Tenant of such materials on the Premises. In order
to obtain consent. Tenant shall deliver to Landlord its written proposal describing the
toxic material to be brought onto the Premises, measures to be taken for storage and
disposal thereof, safety measures to be employed to prevent pollution of the air,
ground, surface and ground water. Landlord's approval may be withheld in its
reasonable judgment. In the event Landlord consents to Tenant's use of Hazardous
Materials on the Premises, Tenant represents and warrants that Tenant will (i) adhere to
all reporting and inspection requirements imposed by Federal, State, County or
Municipal laws, ordinances or regulations and will provide Landlord a copy of any
such reports or agency inspections, (ii) obtain and provide Landlord copies of all
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necessary permits required for the use and handling Hazardous Materials on the
Premises, (iii) enforce Hazardous Materials handling and disposal practices consistent
with industry standards, (iv) surrender the Premises free from any Hazardous Materials
arising from Tenant's bringing, using, permitting, generating, emitting or disposing of
Hazardous Materials, and (v) properly close the facility with regard to Hazardous
Materials including the removal or decontamination of any process piping, mechanical
ducting, storage tanks, containers, or trenches which have come into contact with
Hazardous Materials and obtain a closure certificate from the local administering
agency prior to the Expiration Date if required by law.
B. Tenant's Indemnity Regarding Hazardous Materials: Tenant shall
comply, at its sole cost, with all laws pertaining to, and shall indemnify and hold
landlord harmless from any claims, liabilities, costs or expenses incurred or suffered by
Landlord arising from any such bringing, using, permitting, generating, emitting or
disposing of Hazardous Materials on, under or about the Premises by Tenant. Tenant's
indemnification and hold harmless obligations .include, without limitation, (i) claims,
liability, costs or expenses resulting from or based upon administrative, judicial (civil or
criminal) or other action, legal or equitable, brought by any private or public person
under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal law,
ordinance or regulation, (ii) claims, liabilities, costs or expenses pertaining to the
identification, monitoring, cleanup, containment, or removal of Hazardous Materials
from soils, riverbeds or aquifers including the provision of an alternative public
drinking water source, and (iii) all costs of defending such claims.
C
Actual Release by Tenant: Tenant agrees to notify Landlord of any
lawsuits which relate to, or orders which relate to the remedying of, the actual release
by Tenant of Hazardous Materials on or into the soils or groundwater at or under the
Premises. Tenant shall also provide to Landlord all notices required by Section
25359.7{b) of the Health and Safety Code and all other notices required by law to be
given to Landlord in connection with Hazardous Materials. Without limiting the
foregoing. Tenant shall also deliver to Landlord, within twenty (20) days after receipt
thereof, any written notices from any governmental agency alleging ?. material violation
of, or material failure to comply with, any federal, state or local laws, regulations,
ordinances or orders, the violation of which of failure to comply with, poses a
foreseeable and material risk of contamination of the groundwater or injury to humans
(other than injury solely to Tenant, its agents and employees within the Improvements
on the Property).
In the event of any release on or into the Premises or into the soil or
groundwater under the Premises of any Hazardous Materials used. Heated, stored or
disposed of by Tenant, Tenant agrees to comply, at its sole cost and expense, with all
laws, regulations, ordinances and orders of any federal, state or local agency relating to
the monitoring or remediation of such Hazardous Materials. In the event of any such
release of Hazardous Materials, Tenant agrees to meet and confer with Landlord and its
Lender to attempt to eliminate and mitigate any financial exposure to such Lender and
resultant exposure to Landlord under California Code of Civil Proced ure section 736{b)
as a result of such release and promptly to take reasonable monitoring, cleanup and
remedial steps given, inter alia, the historical uses to which the Property has and
continues to be used, the risks to public health posed by the release, the then available
technology and the costs of remediation, cleanup and monitoring, consistent with
acceptable customary practices for the type and severity of such contamination and all
applicable laws. Nothing in the preceding sentence shall eliminate, modify or reducethe obligation of Tenant under paragraph 20(B) of this Lease to indemnify and hold
Landlord harmless from any claims liabilities, costs or expenses incuired or suffered by
Landlord as provided in paragraph 20(B) of this Lease. Tenant shall provide Landlord
prompt written notice of Tenant's monitoring, cleanup and remedial steps.
In the absence of an order of any federal, state or local governmental or quasigovernmental agency relating to the cleanup, remediation or other response action
Page 9
required by applicable law, any dispute arising between Landlord and Tenant
concerning Tenant's obligation to Landlord under this Paragraph C concerning the
Level, method, and manner of cleanup, remediation or response action required in
connection with such a release of Hazardous Materials shall be resolved by mediation
and/or arbitration pursuant to the provisions of paragraph 44 of this Lease.
D. Landlord's Indemnity Regarding Hazardous Materials: Landlord
shall indemnify and hold Tenant harmless from any claims, liabilities, costs or expenses
incurred or suffered by Tenant related to the removal, investigation, monitoring or
remediation of Hazardous Materials which are present or which come to be present on
the Premises except to the extent the presence of such Hazardous Materials is caused by
Tenant or by Tenant's failure to prevent a third party from dumping Hazardous
Materials through the surface of the Premises. Landlord's indemnification and hold
harmless obligations include, without limitation, (i) claims, liability, costs or expenses
resulting from or based upon administrative, judicial (civil or criminal) or other action,
legal or equitable, brought by any private or public person under common law or under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Resource Conservation and Recovery Act of 1980 ("KCRA") or any
other Federal, State, County or Municipal law, ordinance or regulation, (ii) claims,
liabilities, costs or expenses pertaining to the identification, monitoring, cleanup,
containment, or removal of Hazardous Materials from soils, riverbeds or aquifers
including the provision of an alternative public drinking water source, and <iii) all costs
of defending such claims.
The forgoing indemnity by Landlord to Tenant shall not apply to any mortgagee or its
assignee which takes title to the Premises pursuant to a deed in lieu of foreclosure,
foreclosure or otherwise. Landlord's indemnity pursuant to this paragraph 16.D shall
survive the transfer of Landlord's interest in the Lease to any mortgagee or its assignee
taking title to the Premises pursuant to a deed in lieu of foreclosure or otherwise, as
welt as the expiration or other termination of this Lease.
E. Environmental Monitoring: At its cost, subject to the rights of
indemnity contained in subparagraph B above. Landlord and its agents shall have the
right to inspect, investigate, sample and/or monitor the Premises, including any air,
soil, water, groundwater or other sampling or any other testing, digging, drilling or
analysis to determine whether Tenant is complying with the terms of this paragraph 18.
19. INDEMNITY: As a material part of the consideration to 1% rendered to
Landlord, Tenant hereby waives all claims against Landlord for damages to goods,
wares and merchandise, and all other personal property in, upon or about said Premises
and for injuries to persons in or about said Premises, from any cause arising at any time
to the fullest extent permitted by law, and Tenant shall indemnify and hold Landlord
exempt and harmless from any damage or injury to any person, or to the goods, wares
and merchandise and all other personal property of any person, arising from the use of
the Premises, Building, and/or Project by Tenant, its employees, contractors, agents and
invitees or from the failure of Tenant to keep the Premises in good condition and repair,
as herein provided including Landlord's costs and expenses and reasonable attorney's
fees incurred in defending such claims, except to the extent due to the negligence or
willful misconduct of Landlord.
20. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the said Premises any signs not approved by the city or other
governing authority. The Tenant will not place, or permit to be placed, upon the
Premises, any signs, advertisements or notices without the written consent of the
Landlord as to type, size, design, lettering, coloring and location, and such consent will
not be unreasonably withheld. Any sign so placed on the Premises shall be removed by
Tenant, at its expense, prior to the Expiration Date or promptly following the earlier
termination of the lease and Tenant shall repair, at its sole cost and expense, any
damage or injury to the Premises caused thereby, and if not so removed by Tenant then
Landlord may have same so removed at Tenant's expense.
Page 10
21. ATTORNEY'S FEES: In case a suit or alternative form of dispute resolution
should be brought to interpret this Lease, to enforce any obligation under this Lease, for
the possession of the Premises, for the recovery of any sum due hereunder, or because
of the breach of any other covenant herein, the losing party shall pay to the prevailing
party a reasonable attorney's fee as part of its costs which shall be deemed to have
accrued on the commencement of such action. In addition, the prevailing party shall be
entitled to recover all costs and expenses including reasonable attorney's fees incurred
by the prevailing party in enforcing any judgment or award against the other party.
The foregoing provision relating to post-judgment costs is intended to be severable
from all other provisions of this Lease.
22. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant {an "livent of Default"):
a) Any failure by Tenant to pay any rent under this Lease on or before the date such
rent is due under this Lease, which failure continues for five (5) days following notice to
Tenant; b) A failure by Tenant to observe and perform any other provision of this Lease
to be observed or performed by Tenant, where such failure continues for thirty (30)
days after written notice thereof by Landlord to Tenant; provided, however, that if the
nature of such default is such that the same cannot reasonably be curtsd within such
thirty (30) day period Tenant shall not be deemed to be in default if Tenant shall within
such period commence such cure and thereafter diligently prosecute the same to
completion; c) The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have Tenant adjudged a
bankrupt or of a petition for reorganization or arrangement under any law relating to
bankruptcy {unless, in the case of a petition filed against Tenant, the Mime is dismissed
within ninety (90) days after the filing); the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within ninety (90)
days; or the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this I .ease, where such
seizure is not discharged within ninety (90) days. The notice requirements set forth
herein are in lieu of and not in addition to the notices required by California Code of
Civil Procedure Section 1161. Any notice given by Landlord to Tenant pursuant to
California Civil Code 1161 with respect to any failure by Tenant to pay rent under this
Lease on or before the date the rent is due shall provide Tenant with a period of no less
than ten (10) days to pay such rent or quit.
A. Remedies: (n the event an Event of Default by Tenant, then in addition
to any other remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder by giving
written notice of such intention lo terminate. In the event that Landlord shall elect tp so
terminate this Lease then Landlord may recover from Tenant: a) the worth at the time
of award of any unpaid rent which had been earned at the time of such termination;
plus b) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the amount
of such rental loss for the same period that Tenant proves could have been reasonably
avoided; plus c) the worth at the time of award of the amount by which the unpaid rent
for the balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; plus d) any other amount
necessary to compensate Landlord for all the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, and e) at Landlord's election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from time to time
by applicable California law. The term "rent", as used herein, shall lie deemed to be
and to mean the minimum monthly installments of Base Monthly Rent and all other
sums required to be paid by Tenant pursuant to the terms of this Le&se, all other such
sums being deemed to be additional rent due hereunder. As used in (a) and (b) above,
the "worth at the time of award" is to be computed by allowing interest at the rate of
the discouni rate of the Federal Reserve Bank of San Francisco plus five (5%) percent per
annum. As used in (c) above, the "worth at the time of award" is to be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
jo
Page 11
Francisco at the time of award plus one (1%) percent.
B. Right to Re-enter: In the event of any such default by Tenant,
Landlord shall also have the right, after terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant and disposed of by Landlord in any manner permitted by law.
C
Abandonment: If Landlord does not elect to terminate this Lease as
provided in paragraph 22(A) above, then the provisions of California Civil Code Section
1951.4, (Landlord may continue the lease in effect after Tenant's breach and
abandonment and recover rent as it becomes due, if Tenant has a right to sublet and
assign, subject only to reasonable limitations) as amended from time to time, shall apply
and Landlord may from time to time, without terminating this Lease, either recover all
rental as it becomes due or relet the Premises or any part thereof for such term or terms
and at such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make alterations and repairs to
the Premises. In the event that Landlord shall elect to so relet, then rentals received by
Landlord from such reletting shall be applied: first, to the payment of any indebtedness
other than Base Monthly Rent due hereunder from Tenant to Landlord; second, to the
payment of any reasonable cost of such reletting; third, to the payment of Base Monthly
Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future Base Monthly Rent as the same may become due and
payable hereunder. Landlord shall have no obligation to releMhe Premises following a
default if Landlord has other available space within the Building or Project. Should that
portion of such rentals received from such reletting during any month, which is applied
by the payment of rent hereunder, be less than the rent payable during that month by
Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon
demand therefor by Landlord. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as ascertained, any reasonable costs and
expenses incurred by Landlord in such reletting.
D. No Termination: No re-entry or taking possession of the Premises by
Landlord pursuant to 22(B) or 22(C) of this Article 22 shall be construed as an election to
terminate this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any default
by Tenant, Landlord may at any time after such reletting elect to terminate this Lease
for any such default.
23. SURRENDER OF LEASE: The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not automatically effect a merger of
the Lease with Landlord's ownership of the Premises. Instead, at the option of
Landlord and subject to the provisions of paragraph 29, Tenant's surrender may
terminate all or any existing sublease or subtenancies, or may operate as an assignment
to Landlord of any or all such subleases or subtenancies, thereby creating a direct
Landlord-Tenant relationship between Landlord and any subtenants.
24. This paragraph intentionally left blank
25. LANDLORD'S DEFAULT: In the event of Landlord's failure to perform
any of its covenants or agreements under this Lease, Tenant shall give Landlord written
notice of such failure and shall give Landlord thirty (30) days or such other reasonable
opportunity to cure or to commence to cure such failure prior to any daim for breach or
for damages resulting from such failure. In addition, upon any such failure by
Landlord, Tenant shall give notice by registered or certified mail to any person or entity
with a security interest in the Premises ("Mortgagee") that has provided Tenant with
and address and notice of its interest in the Premises, and shall provide such Mortgagee
a reasonable opportunity to cure such failure. Tenant agrees that each of the
Mortgagees to whom this Lease has been assigned is an expressed third party
beneficiary hereof. Tenant shall not make any prepayment of rent more than one (1)
Page 12
month in advance without the prior written consent of such Mortgagee.
26. NOTICES: All notices, demands, requests, or consents required to be given
under this Lease shall be sent in writing by U.S. certified mail, return receipt requested,
or by personal delivery or confirmed facsimile transmission addressed to the party to be
notified at the address for such party specified in paragraph 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at least fifteen
(15) days prior notice to the notifying party.
27. ENTRY BY LANDLORD: Tenant shall permit Landlord and his agents
upon prior notice to Tenant (except in the case of emergency) to entei into and upon
said Premises at all reasonable times subject to any security regulations or requirements
of Tenant for the purpose of inspecting the same or for the purpose of maintaining the
Premises or for the purpose of making repairs, alterations or additions to any other
portion of said Premises or for the purpose of erecting additional building(s) and
improvements on the land where the Premises are situated, or on adjacent land owned
by Landlord as permitted under this Lease. Tenant shall permit Landlord and his
agents, at any time within one hundred eighty (180) days prior to the Expiration Date
to place upon the Premises "For Lease" signs and exhibit the Premises to real estate
brokers and prospective tenants at reasonable hours.
28. DESTRUCTION OF PREMISES:
A. Destruction by an Insured Casualty: In the event of a partial
destruction of the Premises (i) by a casualty of a type required to be insured against by
Landlord under the terms of this Lease and (ii) for which Landlord h.is not been
required by Landlord's lender holding an encumbrance on the Premises to utilize
substantially all of the insurance proceeds to pay down the loan secured by the
Premises, Landlord shall forthwith repair the same provided such repairs can be made
within one hundred eighty (180) days from the date of destruction, and such partial
destruction shall in no way annul or void this Lease, except that Tenant shall be entitled
to a proportionate reduction of Base Monthly Rent while such repairs, are being made,
such proportionate reduction to be based upon the extent to which damage or
destruction or the making of such repairs shall interfere with the business carried on by
Tenant in the Premises. For purposes of this paragraph "partial desttuction" shall mean
destruction of no greater than one-third (1/3) of the replacement cost of the Premises,
including the replacement cost of the Tenant Improvements paid for by Landlord. In
the event (i) the Premises are more than partially destroyed, (ii) the repairs cannot be
made in one hundred eighty (ISO) days. Landlord or Tenant may elect to terminate this
Lease within fifteen (15) days of determination by Landlord of the foregoing. Landlord
shall not be required to restore Alterations or replace Tenant's fixtures or personal
property. In respect to any partial destruction which Landlord is obligated to repair or
may elect to repair under the terms of this paragraph, the provision of Section 1932,
Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of the State of
California and any other similarly enacted statute are waived by Ten.int and the
provisions of this paragraph 28 shall govern in the case of such destruction.
B. Destruction by an Uninsured Casualty: In the event of a total or
partial destruction of the Premises (i) by a casualty of a type not required to be insured
against by Landlord under the terms of this Lease or (ii) for which Landlord has been
required by Landlord's lender holding an encumbrance on the Premises to utilize
substantially all of the insurance proceeds to pay down the loan secured by the
Premises which exceeds five percent (5%) of the replacement cost of the Building, the
Lease shall automatically terminate, unless (i) Landlord elects to rebuild, and (ii) the
damage can be repaired within one hundred eighty (180) days. If Landlord elects to
contribute to payment for an uninsured loss, such contributed amount shall be
amortized over the useful life of the improvements and such amortization shall be
reimbursed by Tenant to Landlord as additional rent together with interest at the prime
rate of Union Bank plus two percent (2%).
29. ASSIGNMENT OR SUBLEASE:
Page 13
A. Consent by Landlord: In the event Tenant desires to assign this Lease
or any interest therein including, without limitation, a pledge, mortgage or other
hypothecation, or sublet the Premises or any part thereof. Tenant shall deliver to
Landlord executed counterparts of any such agreement and of all ancillary agreements
with the proposed assignee or subtenant financial statements, and any additional
information as reasonably required by Landlord to determine whether it will consent to
the proposed assignment or sublease. The notice shall give the name and current
address of the proposed assignee/subtenant, proposed use of the Premises, rental rate
and current financial statement; and upon request to Tenant, Landlord shall be given
additional infonnation as reasonably required by Landlord to determine whether it will
consent to the proposed assignment or sublease. Landlord shall then have a period of
ten (10) business days following receipt of the foregoing agreement, statements and
additional information within which to notify Tenant in writing that Landlord elects (i)
to terminate this Lease as to the space so affected as of the date so specified by Tenant in
which event Tenant will be relieved of all further obligations here under as to such
space, (ii) to permit Tenant to assign or sublet such space to the named
assignee/subtenant on the terms and conditions set forth in the notice, or (iii) to refuse
consent. If Landlord should fail to notify Tenant in writing of such election within said
ten (10) business day period. Landlord shall be deemed to have elected option (ii)
above. If Landlord exercises its option to terminate this Lease in part in the event
Tenant desires to sublet or assign part of the Premises, then (i) this Lease shall end and
expire, with respect to such part of the Premises, on the date upon which the proposed
sublease was to commence, and (ii) from and after such date, the Base Monthly Rent
and Tenant's allocable share of all other costs and charges shall be adjusted, based upon
the proportion that the rentable area of the Premises remaining bears to the total
rentable area of the Premises. If Landlord does not exercise its option to terminate this
Lease, Landlord's consent (which must be in writing and in form reasonably
satisfactory to Landlord) to the proposed assignment or sublease shall not be
unreasonably withheld, provided and upon condition that: <i) the use of the Premises
by the proposed assignee or subtenant is limited to the use expressly permitted under
this Lease; (ii) the proposed assignee or subtenant is a company with sufficient financial
worth and management ability to undertake the financial obligation of this Lease, and
Landlord has been furnished with reasonable proof thereof; (iii) the proposed
assignment or sublease shall be in form reasonably satisfactory to landlord; (iv) Tenant
shall reimburse Landlord on demand for any costs that may be incurred by Landlord in
connection with said assignment or sublease, including the costs of making
investigations as to the acceptability of the proposed assignee or subtenant and legal
costs incurred in connection with the granting of any requested consent up to a
maximum amount of Five Thousand and No/100 Dollars ($5,000.00); and (vi) Tenant
shall not have advertised or publicized in any way the availability of the Premises
without prior notice to Landlord. In the event all or any one of the foregoing conditions
are not satisfied, Landlord may, in its sole discretion, withhold its consent to the
proposed assignment or sublease.
B. Assignment or Subletting Consideration: Any rent or other economic
consideration realized by Tenant under any such sublease and assignment in excess of
the rent payable hereunder, after the net unamortized cost of the Tenant Improvements
for which Tenant has itself paid, and reasonable subletting and assignment costs, shall
be divided and paid fifty percent (50%) to Landlord and fifty percent (50%) to Tenant.
Tenant's obligation to pay over Landlord's portion of the consideration shall constitute
an obligation for additional rent hereunder. The above provisions relating to
Landlord's right to terminate the Lease and relating to the allocation of bonus rent are
independently negotiated terms of the Lease, constitute a material inducement for the
Landlord to enter into the Lease, and are agreed as between the parties to be
commercially reasonable. No assignment or subletting by Tenant shall relieve Tenant of
any obligation under this Lease except as specifically provided herein. Any assignment
or subletting which conflicts with the provisions hereof shall be void.
C
No Release: Any assignment or sublease shall be made only if and
shall not be effective until the assignee or subtenant shall execute and deliver to
J/U
Page 14
further liability in reference thereto.
32. SUBORDINATION: In the event Landlord notifies Tenant in writing, this
Lease shall be subordinate to any ground Lease, deed of trust, or othi>r hypothecation
for security now or hereafter placed upon the real property of which the Premises are a
part and to any and all advances made on the security thereof and to renewals,
modifications, replacements and extensions thereof. Tenant agrees to promptly execute
and deliver any documents which may be required to effectuate such subordination. As
a condition precedent to such subordination the ground lessor of any ground lease,
tntstor under any deed of trustor holder of any interest to be made superior to the
interest of tenant under shall agree in writing that Tenant's right to quiet possession of
the Premises shall not be disturbed so long as Tenant no Event of Default has occurred
and so long as Tenant shall pay the rent and observe and perform all of the provisions
of this Lease. Landlord shall use reasonable efforts to cause the existing lender,
Principal Financial Group, to furnish to Tenant, within thirty (30) days of the date of
both parties' execution of this Lease, with a written agreement providing for (i)
recognition by the lender of all of the terms and conditions of this Leese, excepting
paragraphs 18(D), and 39.
33. WAIVER: The waiver by Landlord of any breach of any term, covenant or
condition, herein contained shall not be deemed to be a waiver of such term, covenant
or condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by Landlord
shall not be deemed to be a-waiver of any preceding breach by Tenani of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay the particular
rental so accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent. No payment by Tenant or receipt by Landlord of a
lesser amount than any installment of rent due shall be deemed to be other than
payment on account of the amount due. No delay or omission in the exercise of any
right or remedy by Landlord shall impair such right or remedy or be construed as a
waiver thereof by Landlord. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute acceptance of the
surrender of the Premises by Tenant before the Expiration Date (only written notice
from Landlord to Tenant of acceptance shall constitute such acceptance of surrender of
the Premises). Landlord's consent to or approval of any act by Tenant which require
Landlord's consent or approvals shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.
34. HOLDING OVER: Any holding over after the termination or Expiration
Date, shall be construed to be a tenancy from month to month, terminable on thirty (30)
days written notice from either party, and Tenant shall pay Base Monthly Rent to
Landlord at a rate equal to one hundred fifty percent (150%) of the Base Monthly Rent
due in the month preceding the termination or Expiration Date plus all other amounts
payable by Tenant under this Lease. Any holding over shall otherwise be on the terms
and conditions herein specified, except those provisions relating to the Lease Term and
any options to extend or renew, which provisions shall be of no further force and effect
following the expiration of the applicable exercise period. Tenant shall indemnify,
defend, and hold Landlord harmless from any actual loss or liability (including, without
limitation, any loss or liability resulted from any claim against Landlord made by any
succeeding tenant) resulting from Tenant's failure to timely surrender the Premises to
Landlord.
35. SUCCESSORS AND ASSIGNS: The covenants and conditions herein
contained shall, subject to the provisions of paragraph 29, apply to and bind the heirs,
successors, executors, administrators and assigns of all the parties hereto; and all of the
parties hereto shall be jointly and severally liable hereunder.
36. ESTOPPEL CERTIFICATES: Tenant shall at any time during the Lease
Term, within ten (10) days following written notice from Landlord, execute and deliver
to Landlord a statement in writing certifying, if true, (i) that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such modification); (ii)
Page 16
the date to which the rent and other charges are paid in advance, if any; and (iii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the
part of Landlord hereunder or specifying such defaults if they are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises. Tenant's failure to deliver such statement within such
time shall be conclusive upon the Tenant that: (i) this Lease is in full force and effect,
without modification except as may be represented by Landlord; <ii) there are not
uncured defaults in Landlord's performance. Tenant also agrees to provide the most
current three (3) years of audited financial statements (if available) within five (5) days
of a request by Landlord for Landlord's use in financing the Premises with commercial
lenders. Landlord covenants to hold all financial information so provided to Tenant in
strict confidence and not reveal it to any other party other than a commercial lender for
purposes of securing financing covering the Premises.
37.
OPTION TO EXTEND THE LEASE TERM:
A. Grant and Exercise of Option:' Landlord hereby grants to Tenant,
upon and subject to the terms and conditions set forth in this paragraph, an option
{"Option") to extend the Lease Term for an additional term (the "Option Term"). The
Option Term shall be for a period of 60 months. The Option shall be exercised, if at all,
by written notice to Landlord no earlier than the date that is eighteen (18) months prior
to the Expiration Date but no later than the date that is nine (9) months prior to the
Expiration Date. If Tenant exercises the Option, each of the terms, covenants and
conditions of this Lease except this paragraph shall apply during the Option Term as
though the expiration date of the Option Term was the date originally set forth herein as
the Expiration Date, provided that the Base Monthly Rent to be paid by Tenant during
the Option Term shall be equal to 95% of the Pair Market Rental, as hereinafter defined,
for the Premises for the Option Term. The appraisers shall be instructed that the
foregoing five percent (5%) discount is intended to reduce comparable rents which
include (i) brokerage commissions, (ii) tenant improvement allowance, and (iii)
vacancy costs, to account for the fact that Landlord will not suffer such costs in the
event Tenant exercises its Option.
Anything contained herein to the contrary notwithstanding, if there exists any material
Event of Default either at the time Tenant exercises the Option or at any time thereafter
prior to the commencement date of the Option Term, Landlord shall have, in addition to
all of Landlord's other rights and remedies provided in this Lease, the right to terminate
the Option upon notice to Tenant, in which event the expiration date cif this Lease shall
be and remain the Expiration Date. As used herein, the term "Fair Market Rental" for
the Premises shall mean the rental and all other monetary payments including any
escalations and adjustments thereto (including without limitation Consumer Price
Indexing) then being obtained for new leases of space comparable in age and quality to
the Premises in the locality of the Building that landlord could obtain during the
Option Term from a third party desiring to lease the Premises for the Option Term
based upon the current use and other potential uses of the Premises.
B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send to Tenant a notice setting forth the Pair Market Rental for the
Premises for the Option Term, on or before the date that is twelve (12) months prior to
the Expiration Date. If Tenant disputes Landlord's determination of the Fair Market
Rental for the Option Term, Tenant shall, within thirty (30) days after the date of
Landlord's notice setting forth the Fair Market Rental for the Option Term, send to
Landlord a notice stating that Tenant either (i) elects to terminate its exercise of the
Option, in which event the Option shall lapse and this Lease shall terminate on the
Expiration Date, or (ii) disagrees with Landlord's determination of Fair Market Rental
for the Option Term and elects to resolve the disagreement as provided in paragraph
37(C) below. If Tenant does not send to Landlord a notice as provided in the previous
sentence. Landlord's determination of the Fair Market Rental shall be the basts for
determining the Base Monthly Rent to be paid by Tenant hereunder during the Option
Term. If Tenant elects to resolve the disagreement as provided in paragraph 37{C)
below and such procedures shall not have been concluded prior to the commencement
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J / J
date of the Option Term, Tenant shall pay as Base Monthly Rent to Landlord a Base
Monthly Rental equal to the average of the Fair Market Rental as determined by
Landlord and the Fair Market Rental as determined by Tenant in the manner provided
above. If the amount of Fair Market Rental as finally determined pursuant to paragraph
37(C) below is greater than such amount, Tenant shall pay to Landlord the difference
between the amount paid by Tenant and the Fair Market Rental as so determined in
paragraph 37(C) below within thirty (30) days after the determination. If the Fair
Market Rental as finally determined in paragraph 37(C) below is less than such amount,
the difference between the amount paid by Tenant and the Fair Market Rental as so
determined in paragraph 37(C) below shall be refunded to Tenant within thirty (30)
days after the determination.
C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding the Fair Market Rental shall be resolved as follows:
1. Within thirty (30) days after Tenant's response to Landlord's notice
to Tenant of the Fair Market Rental, Landlord and Tenant shall meet no less than two (2)
times, at a mutually agreeable time and place, to attempt to resolve any such
disagreement.
2. If within the thirty (30) day period referred to in (i) above. Landlord
and Tenant can not reach agreement as to the Fair Market Rental, they shall each select
one appraiser to determine the Fair Market Rental. Each such appraiser shall arrive at a
determination of the Fair Market Rental and submit their conclusions to Landlord and
Tenant within thirty (30) days after the expiration of the thirty (30) day consultation
period described in (i) above.
3. If only one appraisal is submitted within the requisite time period,
it shall be deemed to be the Fair Market Rental. If both appraisals are submitted within
such time period, and if the two appraisals so submitted differ by less than ten percent
(10%) of the higher of the two, the average of the two shall be the Fair Market Rental. If
the two appraisals differ by more than ten percent (10%) of the higher of the two, then
the two appraisers shall immediately select a third appraiser who shall within thirty
(30) days after his or her selection make a determination of the Fair Market Rental and
submit such determination to Landlord and Tenant. This third appraisal will then be
averaged with the closer of the two previous appraisals and the result shall be the Fair
Market Rental.
4. All appraisers specified pursuant to this paragraph shall have not
less than ten (10) years experience appraising office and industrial properties in the
Santa Clara Valley. Each party shall pay the cost of the appraiser selected by such party
and one-half of the cost of the third appraiser.
38. OPTIONS: The rights of first offering to lease provided Tenant in
paragraph 39 are personal and granted to Tenant and are not exercisable by any third
party should Tenant assign or sublet all or a portion of its rights under this Lease,
unless Landlord consents to permit exercise of any option by any assignee or subtenant,
in Landlord's sole discretion. In the event that Tenant hereunder has any multiple
options to extend this Lease, a later option to extend the Lease cannot he exercised
unless the prior option has been so exercised.
39. RIGHT OF FIRST OFFERING TO LEASE: Landlord hereby grants Tenant a
right of first offering to lease the adjacent buildings of approximately 28,800 square feet
located at 455 East Middlefield Road and 32,S00 square feet located at l~>75 East
Middlefield Road or any newly constructed or build-to-suit buildings built or proposed
in such locations ("Option Buildings"). Prior to Landlord offering to lease the Option
Building(s) to a third party. Landlord shall give Tenant written notice of such desire and
the terms and other information under which Landlord intends to least; the Option
Buildingfs). Provided at the time of exercise, (i) there exists no material Event of
Default on the part of Tenant hereunder and (ii) the Building 1 Rent Commencement
Date has occurred. Tenant shall have the option, which must be exercised, if at all, by
j / 4
Page 18
written notice to Landlord within ten (10) business days after Tenant's receipt of
Landlord's notice, to lease the Option Building(s) at the rent and terms of lease specified
in the notice. In the event Tenant timely exercises such option to lease the Option
Build tng(s), Landlord shall lease the Option Building(s) to Tenant and Tenant shall
lease the Option Building(s) from Landlord in accordance with the rent and terms
specified in Landlord's notice. Landlord and Tenant shall, in good faith, attempt to
reach agreement on the terms of a mutually acceptable lease agreement consistent with
the terms set forth in Landlord's notice within thirty (30) days of Landlord's notice. In
the event (i) Landlord and Tenant are unable to reach agreement on a mutually
acceptable lease within such thirty (30) day period or (ii) Tenant fails to exercise
Tenant's option within said ten (10) business day period, Landlord shall have one
hundred eighty (180) days thereafter to lease the Option Building(s) at no less than
ninety five percent (95%) of the rental rate and upon the same or substantially the same
other terms of lease as specified in the notice to Tenant. In the event Landlord fails to
lease the Option Buitding(s) within said one hundred eighty (180) day period or in the
event Landlord proposes to lease the Option Building(s) at less than ninety five percent
(95%) of the rental rate or on other material terms which are more favorable to the
prospective tenant than that proposed to Tenant, Landlord shall be required to resubmit
such offer to Tenant in accordance with this Right of First Offering.
Notwithstanding the foregoing, this Right of First Offering shall terminate, (i)
automatically upon the expiration or sooner termination of the Lease, or (ii) in the event
that Landlord transfers its interest in the Premises or in the Option Building(s) after the
end of the seventh (7th) year of the-Lease Term.
40. QUIET ENJOYMENT: Upon Tenant's faithful and timely performance of
all the terms and covenants of the Lease and except as otherwise provided in this Lease,
Tenant shall quietly have and hold the Premises for the Lease Term and any extensions
thereof.
41. BROKERS: Tenant represents it has not utilized or contacted a real estate
broker or finder with respect to this Lease other than Cornish & Carey Commercial and
its agents (Cornish & Carey") which the parties acknowledge represents both Landlord
and Tenant and Tenant agrees to indemnify and hold Landlord harmless against any
claim, cost, liability or cause of action asserted by any other broker or finder claiming
through Tenant. Landlord agrees that it will be responsible for all fees payable to
Cornish & Carey, and that it will indemnify and hold Tenant harmless against any
claim, cost, liability or cause of action asserted by Cornish & Carey and by any other
broker or finder claiming through Landlord.
42. CONSTRUCTION ON ADJACENT LAND: Tenant acknowledges
Landlord's right to and hereby consents to construction of new buiiding(s) in place of
the existing Option Buildings on condition that Tenant's rights to use and enjoyment of
the Premises are not adversely affected thereby. In the event that Landlord constructs
such building(s). Tenant consents to the construction of a parking structure in the area
shown on Exhibit "P" attached hereto and to the adjustment of the parcel comprising
the Premises' lot line to accommodate such structure. In no event shall Tenant's
parking be less than 375 stalls during the construction or after completion of the parking
structure. In the event after completion of the parking structure, a portion of Tenant's
parking is located within the parking structure, Landlord and Tenant shall enter into a
common area agreement relative to the use and maintenance of the parking structure on
reasonable and customary terms. rfrWvn *U rt 1U-*t^ -M-i-t-U A A V i x i r v i ^ $ U
IMfi rL^ix^^t
T U x ^ t A - t to'jVt-M £L(t-(J~L.<tL£Y\ «-< - P c i t if"**- pft^
43. EARLY OCCUPANCY OF BUILDING It Notwithstanding anything to the
contrary in this Lease, Tenant shall have the right to occupy Building 1 at no cost (other
than the payment of utilities) beginning on the date of execution of this Lease and
continuing until the Commencement Date. The indemnity provisions of paragraph 19
and the liability insurance requirements of paragraph 12 of this Lease thall apply to
such early occupancy of Building 1. Tenant may also occupy Building 1 after the
Commencement Date and prior to the scheduled Building 1 Rent Commencement Date.
In such event, the Building 1 Rent Conunencement Date shall be advanced to the date of
Page 19
Q' *
j / J
Tenant first occupies any portion of Building 1 after the Commencement Date.
44. AUTHORITY OF PARTIES: Tenant represents and wairants that it is duly
formed and in good standing and is duly authorized to execute and deliver this Lease
on behalf of said corporation, in accordance with a duly adopted resolution of the Board
of Directors of said corporation or in accordance with the by-laws of said corporation,
and that this Lease is binding upon said corporation in accordance with its terms. At
Landlord's request, Tenant shall provide Landlord with corporate resolutions or other
proof in a form acceptable to Landlord, authorizing the execution of the Lease.
45. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a
government agency or municipality require landlord to institute TDM (Transportation
Demand Management) facilities and/or program. Tenant hereby agrees that the cost of
TDM imposed facilities required on the Premises, including but not limited to employee
showers, lockers, cafeteria, or lunchroom facilities, shall be included as Tenant
Improvement Costs and any ongoing costs or expenses associated with a TDM
program, such as an on-site TDM coordinator,"which are required for the Premises and
not provided by Tenant shall be provided by Landlord with such costs being included
as additional rent and reimbursed to Landlord by Tenant.
46. DISPUTE RESOLUTION: Except for the failure by Tenant to timely pay
the Base Monthly Rent, any controversy, dispute, or claim of whatever nature arising
out of, in connection with, or in relation to the interpretation, performance or breach of
-this agreement, including any claim based on contract, tort, or statute, shall be resolved
at the request of any party to this agreement through a two-step dispute resolution
process administered by JAMS or another judicial and mediation service mutually
acceptable to the parties involving first mediation, followed, if necessary, by final and
binding arbitration administered by and in accordance with the then existing rules and
practice of the judicial and mediation service selected, and judgment upon any award
rendered by the arbitrator(s) may be entered by any State or Federal Court having
jurisdiction thereof.
47. MISCELLANEOUS PROVISIONS:
A. Rent: All monetary sums due from Tenant to Landlord under this
Lease, including, without limitation those referred to as "additional r<?nt", shall be
deemed to be rent.
B.
This subparagraph intentionally left blank
C. Performance by Landlord: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation. Landlord in its sole
discretion may without notice and without releasing Tenant from its obligations
hereunder or waiving any rights or remedies, perform such obligation, in which event
Tenant shall pay Landlord as additional rent all sums paid by Landlord in connection
with such substitute performance including interest as provided in paragraph 46(D)
below within ten (10) days following Landlord's written notice for such payment.
D. Interest; All rent due hereunder, if not paid when due, shall bear
interest at the lesser of the prime rate charged by Bank of America plus three percent
(3%) or the maximum rate permitted under California law accruing from the date due
until the date paid to Landlord.
E. Rights and Remedies: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law and are in addition to all
other rights and remedies in law and in equity.
F. Survival of Indemnities: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive the
expiration or sooner termination of the Lease.
Page 20
3/6
G. Severability: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of the
Lease shall not be invalidated thereby but shall be enforceable in accordance with its
terms, omitting the invalid or unenforceable term.
R Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Venue shall be Santa Clara County.
I.
Time: Time is of the essence hereunder.
J.
Entire Agreement: This instrument contains all of the agreements and
conditions made between the parties hereto and may not be modified orally or in any
other manner other than by an agreement in writing signed by all of the parties hereto
or their respective successors in interest.
K. Representations: Tenant acknowledges that neither Landlord nor any
of its employees or agents have made any agreements, representations, warranties or
promises with respect to the demised Premises or with respect to present or future
rents, expenses, operations, tenancies or any other matter. Except as herein expressly
set forth herein. Tenant relied on no statement of Landlord or its employees or agents
for that purpose.
L Headings: The headings or titles to the paragraphs of this Lease are
not a part of this Lease-and shall have no effect upon the construction or interpretation
of any part thereof.
M. Exhibits: All exhibits referred to are attached to this l.ease and
incorporated by reference.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day
and year first above written.
Landlord: Ellis-Middlefield Business Park,
a California Limited Partnership
Tenant: Mosaic Communications,
a Delaware Corporation
Page 21
EXHIBIT ' A * - Premisei
Page 22
EXHIBIT 10.12
1. PARTIES: THIS LEASE, is entered into on this 28th day of April, 1995,
between EUis-Mlddlefield Business Park, a California Limited Partnership, whose
address is 10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and
Netscape Communications Corporation, a Delaware Corporation, whose address is 501
East Middlefield Road, Mountain View, CA 91043, hereinafter called respectively
Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
Mountain View, County of Santa Clara, State of California, and more particularly
described as follows, to-wit: that certain real property commonly known and
designated as 575 East Middlefield Road (the "Building") consisting of single story
office/R&D building of 26,800 square feet including 100 parking stalls as outlined on
Exhibit "A".
3. TERM AND RENTAL; The term ("Lease Term") shall be for five (5)
months, commencing on the 28th day of April, 1995 ("Commencement Date"), and
ending on the 27th day of September, 1995, ("Expiration Date"). In addition to all other
sums payable by Tenant under mis Lease, Tenant shall pay as base monthly Tent {"Base
Monthly Rent") for the Premises the amount of Twenty Thousand One Hundred Sixty
and No/100 Dollars ($20,160.00). Base Monthly Rent shall be due on or before the first
day of each calendar month during the Lease Term. All sums payable by Tenant under
this Lease shall be paid In lawful money of the United States of America, without offset
or deduction (except as specifically set forth herein), and shall be paid to Landlord at
the address specified in paragraph 1 of this Lease or at such place or places as may be
designated in writing from time to time by Landlord. Base Monthly Rent for any period
less than a calendar month shall be a pro rate portion of the monthly installment.
4.
SECURITY DEPOSIT: None required.
5. POSSESSION: Landlord shall deliver possession of the Premiseti to Tenant
on the Commencement Date. Tenant agrees to accept possession of the Premises in its
existing "as is" condition except that Landlord shall, at Landlord's expense, (i) make
any repairs necessary to the building HVAC, electrical and plumbing systems to ensure
the systems are in good operating condition and repair within fourteen (14) days
following the Commencement Date and (ii) provide Tenant a cash allowance of Five
Thousand and No/100 Dollars ($5,000.00) to be utilized by Tenant for miscellaneous
cosmetic work within the Building such as for the touch-up of the interior paint.
6. OTHER LEASE PROVISIONS: Paragraphs 3,6,8,9,10,11,12,13,14,16,
17,18,19,20,21,22,23,25,26,27,28,29,30,31,32,33,34,35,36,40,41,44,45,46, and 47
of the lease between the parties dated October 14,1994 for 467-501 East Middlefield
Road are made a part of this Lease and are incorporated herein by reference.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease or. the day
and year first above written.
Tenant: Netscape Communications,
a Delaware Corporation
Landlord: Ellis-Middlefield Business Park,
I Partnership
By.
Its:
EXHIBIT "A" • Pninises
MDDLEFEUtRD
F«ge2
J o i
EXHIBIT 11.1
0
EXHIBIT 11.1
NETSCAPE COMMUNICATIONS CORPORATION
Statement of Computation of Earnings Per Share
Inception
(April 4,1994)
to December 3 1
1994
Primary:
Weighted average common stock outstanding 1)
Convertible preferred stock(l)
Stock related to SAB No. 64 and 83
Quarter Ended
March 31,
1995
2,605,556
—
30,875,882
Total weighted average common and common equivalent shares
outstanding
3,380,000
30,875,882
33,481,438
Net loss
Net loss per share
$
Fully Diluted:
Weighted average common stock outstanding(l)
Convertible preferred stock(l)
Stock related to SAB No. 64 and 83
(0.2S)
2,605,556
—
30.875,882
3,380,000
30,875,882
Total weighted average common and common equivalent shares
outstanding
33,481,438
Net loss
$(8,469,845)
Net loss per share
$
_34,255,882
$J2,699,023)
$
(0.08)
(1) Shares issued within 12 months of the filing date have been included in the line item entitled "Stock
related to SAB 64 and 83". See Note 1 to the financial statement.
EXHIBIT 2 1 . 1
3d 4
EXHIBIT 21,1
Subsidiary ofJheReeistrant
Netscape Communications (Japan), Ltd.
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