As filed with the Securities and Exchange Commission on February 20, 1997
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NETSPEAK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Florida 7373 65-0627616
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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John W. Staten
Chief Financial Officer
NetSpeak Corporation
902 Clint Moore Road 902 Clint Moore Road
Suite 104 Suite 104
Boca Raton, Florida 33487 Boca Raton, Florida 33487
(561) 997-4001 (561) 997-4001
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(Address, including zip code, and (Name, Address, including zip code,
telephone number including area code, of and telephone number including area
registrant's principal executive offices) code, of agent for service)
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COPIES OF COMMUNICATIONS TO:
A. Jeffry Robinson, P.A.
Dale S. Bergman, P.A. Lawrence B. Fisher, Esq.
Broad and Cassel Orrick, Herrington & Sutcliffe LLP
201 South Biscayne Boulevard 666 Fifth Avenue
Miami, Florida 33131 New York, New York 10103
Telephone: (305) 373-9454 Telephone: (212) 506-5000
Telecopier: (305) 373-9443 Telecopier: (212) 506-5151
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]
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 number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING REGISTRATION FEE
PRICE(1)
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Common Stock, $.01 par value
per share.......................... 2,300,000(2) $10.00 $23,000,000 $6,970
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Advisor's Warrants to Purchase
Common Stock....................... 200,000 -- -- (3)
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Common Stock underlying the
Advisor's Warrants (4)............. 200,000 $12.00 2,400,000 $727
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Total Registration Fee............. $7,697
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Includes 300,000 shares of Common Stock that may be issued upon
exercise of a 30-day option granted to the Underwriters solely to cover
over-allotments, if any.
(3) No fee required pursuant to Rule 457(g) under the Securities Act.
(4) Pursuant to Rule 416 under the Securities Act, this Registration
Statement also covers such additional shares as may become issuable as
a result of the anti-dilution provisions contained in the Advisor's
Warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A), OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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NETSPEAK CORPORATION
(CROSS REFERENCE SHEET)
Furnished Pursuant to Item 501(b) of Regulation S-K
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement and Facing Page of the Registration Statement; Cross
Outside Front Cover Page of Prospectus. Reference Sheet and Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page and Outside Back Cover
of Prospectus. Page
3. Summary Information, Risk Factors and Prospectus Summary; Risk Factors
Ratio of Earnings to Fixed Charges.
4. Use of Proceeds. Use of Proceeds
5. Determination of Offering Price. Outside Front Cover Page; Risk Factors;
Underwriting
6. Dilution. Dilution
7. Selling Security Holders. *
8. Plan of Distribution. Underwriting
9. Description of Securities to be Registered. Description of Capital Stock
10. Interests of Named Experts and Counsel. Certain Transactions; Legal Matters
11. Information with Respect to the Registrant
(a) Description of Business Prospectus Summary; Risk Factors; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business
(b) Description of Property Business
(c) Legal Proceedings *
(d) Market Price of and Dividends on the Outside Front Cover Page; Prospectus Summary;
Registrant's Common Equity and Dividend Policy; Shares Eligible for Future Sale;
Related Stockholder Matters Risk Factors
(e) Financial Statements Index to Consolidated Financial Statements
(f) Selected Financial Data Selected Consolidated Financial Data
(g) Supplementary Financial Information *
(h) Management's Discussion and Analysis Management's Discussion and Analysis of Financial
of Financial Condition and Results of Condition and Results of Operations
Operations
(i) Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure
(j) Directors and Executive Officers Management
(k) Executive Compensation Management
(l) Security Ownership of Certain Beneficial Principal Shareholders
Owners and Management
(m) Certain Relationships and Related Certain Transactions
Transactions
12. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
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* Not applicable or answer thereto is negative
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY 20, 1997
PROSPECTUS
2,000,000 SHARES
[NETSPEAK LOGO]
COMMON STOCK
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NetSpeak Corporation ("NetSpeak" or the "Company") hereby offers 2,000,000
shares of common stock, par value $.01 per share (the "Common Stock"). Prior to
this offering (the "Offering"), there has been no public market for the Common
Stock and there can be no assurance that such a market will develop after
completion of this Offering, or if developed, that it will be sustained. It is
presently anticipated that the initial public offering price of the Common Stock
will be between $8.00 and $10.00 per share. For information regarding the
factors considered in determining the initial public offering price of the
Common Stock, see "Risk Factors" and "Underwriting." The Company has applied to
approve the Common Stock on the ____________ under the symbol "______."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE ___, AND "DILUTION."
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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.
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UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNTS(1) COMPANY(2)
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Per Share.................... $ $ $
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Total(3)..................... $ $ $
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(1) Does not include compensation payable to the representative of the
several underwriters (the "Representative") in the form of a
non-accountable expense allowance. In addition, see "Underwriting" for
information concerning indemnification and contribution arrangements with
and other compensation payable to the Representative.
(2) Before deducting expenses estimated to be $750,000, including the
Representative's non-accountable expense allowance.
(3) The Company has granted to the Underwriters an option (the "Over-Allotment
Option"), exercisable for a period of 30 days after the date of this
Prospectus to purchase up to 300,000 additional shares of Common Stock
upon the same terms and conditions set forth above, solely to cover
over-allotments, if any. If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $_______________, $_____________ and $______________,
respectively. See "Underwriting."
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The Common Stock is being offered by the Underwriters subject to prior sale
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
this Offering and to reject any order in whole or in part. It is expected that
delivery of the shares of Common Stock offered hereby will be made against
payment on or about ____________, 1997 at the offices of Josephthal Lyon & Ross
Incorporated, New York, New York.
JOSEPHTHAL LYON & ROSS
The date of this Prospectus is ____________, 1997
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[PHOTOGRAPHS OR ARTWORK]
WebPhone/Registered trademark/ is a registered trademark of the
Company.
The Company intends to furnish registered holders with annual reports
containing financial statements audited by its independent accounting firm and
quarterly reports for the first three quarters of each fiscal year containing
unaudited interim financial information.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." EXCEPT AS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE
OVER-ALLOTMENT OPTION; (II) ASSUMES NO EXERCISE OF THE WARRANTS TO BE ISSUED BY
THE COMPANY TO THE REPRESENTATIVE TO PURCHASE UP TO 200,000 SHARES OF COMMON
STOCK (THE "ADVISOR'S WARRANTS"); (III) DOES NOT GIVE EFFECT TO 660,534 SHARES
OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF OUTSTANDING WARRANTS; AND (IV)
DOES NOT GIVE EFFECT TO 2,246,000 SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF OUTSTANDING STOCK OPTIONS GRANTED UNDER THE COMPANY'S 1995 STOCK
OPTION PLAN (THE "1995 PLAN").
THE COMPANY
NetSpeak develops, markets, licenses, and supports a suite of
intelligent software modules which enable real-time, concurrent interactive
voice, video and data transmission over packetized data networks such as the
Internet and local-area and wide-area networks ("LANs" and "WANs",
respectively). The Company believes that its technology is strategically
positioned to capitalize on the rudimentary shift in corporate
telecommunications philosophy as businesses seek to expand the functionality of
their communication systems as well as optimize their use of packetized data
networks, thereby eventually eliminating the redundancy inherent in maintaining
a traditional voice network simultaneously with a packetized data network.
Netspeak is currently marketing a user-friendly core communications technology
which enables, in a cost-effective manner, corporations and other users to
enhance the role of their packetized data networks to support concurrent voice,
video and data transmission. NetSpeak believes that as potential users become
increasingly educated as to the benefits of integrating the two networks,
significant revenue opportunities for the Company will be generated.
The Company's software uses its proprietary intelligent virtual circuit
switching technology to provide gateways between packetized data networks and
traditional voice transmission networks. The technology also allows users to
integrate into packetized data networks a variety of features and functions
commonly found in traditional voice transmission networks, including automatic
call distribution ("ACD"), multi-point conferencing, interactive voice response
services, messaging services, and least cost routing, as well as to expand
functionality by offering additional features such as concurrent voice and data
transmission and video conferencing. The Company's virtual circuit switching
technology provides intelligent call routing to enable users to transparently
communicate with each other on a point-to-point basis. The Company believes that
its products and systems are designed to allow customers to integrate NetSpeak's
technology into their existing network infrastructures without the need for
significant upgrading, and can ultimately provide a complete software-based
solution for the delivery of concurrent real-time interactive voice, video and
data communications over packetized data networks.
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In order to facilitate and accelerate the acceptance of NetSpeak's
technology as well as enhance the marketing and distribution of its products and
systems, the Company has established a number of strategic alliances with
various telecommunications and computer industry leaders. Under these
agreements, either the Company's technology is integrated into products which
are marketed by its strategic partners or the Company's products and systems are
marketed and distributed by its strategic partners through various distribution
channels. The Company believes that these strategic alliances also offer access
to its partners' leading edge technologies, as well as insights into market
trends and product development.
In August 1996, the Company established a strategic alliance with
Motorola, Inc. ("Motorola"), pursuant to which Motorola made a minority
investment in the Company and the Company granted Motorola a right of first
negotiation on licenses of the Company's technology as it applies to the
cellular and cable communications industries. Motorola is also conducting a
number of end-user test trials of systems that combine the Company's technology,
products and systems with those of Motorola.
Beginning in June 1996, the Company entered into a strategic alliance
with Creative Technology, Ltd. ("Creative"), a world leader in the manufacture
and distribution of audio cards and multimedia computer peripherals. Pursuant to
such alliance, Creative made a minority investment in the Company. NetSpeak
granted Creative a world-wide license to market, distribute and bundle
NetSpeak's WebPhone client (or end-user) software under the Creative brand name
in the retail distribution channel and the Company and Creative are jointly
developing various other Internet-related software applications which use both
the Company's and Creative's proprietary technologies, in such areas as radio
broadcast.
In August 1996, the Company established a strategic alliance with the
Switching Systems Division of Rockwell International Corporation ("Rockwell"),
an industry leader in medium to high end ACD systems. As part of this alliance,
the Company's gateway products and ACD systems are being integrated into
Rockwell's ACD systems. Beginning in November 1996, the Company entered into a
strategic alliance with Infonet Services Corporation ("Infonet"), one of the
largest commercial data network carriers in the world. Pursuant to such
alliance, the Company will integrate its technology with Infonet's existing
global data network, to enhance concurrent voice and data transmission over the
network. The Company intends to seek to establish additional strategic
alliances.
In addition to marketing its technology, products and systems with its
strategic partners, NetSpeak has begun to market its products directly to
end-users, including telephone companies, cable companies, and other common
carriers, large business enterprises, ACD manufacturers and other equipment
manufacturers ("OEMs"), governmental and educational entities, as well as to
distributors, such as systems integrators ("SIs") and value added resellers
("VARs"). To date, such marketing efforts primarily have been limited to direct
contacts with a number of these customers. In addition, NetSpeak is marketing
its WebPhone client software products over the Internet, by advertising in
computer periodicals and through distribution agreements with over 700 Internet
service providers ("ISPs") worldwide. The Company is currently developing an
in-house marketing and sales infrastructure.
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<PAGE>
The Company's strategy is to become an industry leader in providing
business solutions for concurrent real-time interactive voice, video and data
transmission over packetized data networks. The Company intends to achieve its
goal by (i) establishing strategic alliances to facilitate technological
acceptance and enhance the marketing and distribution of its products and
systems; (ii) expanding its internal marketing and sales efforts; and (iii)
continuing research and development to enhance existing product applications, as
well as develop new applications.
NetSpeak was incorporated in the State of Florida on December 8, 1995
under the name "Comnet Corporation." The Company began using the mark "NetSpeak"
on December 14, 1995 and formally assumed its present name on December 18, 1995,
when it acquired Internet Telephone Company ("ITC"), which had begun development
of the Company's technology in May 1995. Unless the context otherwise requires,
references herein to "NetSpeak" or the "Company" are to NetSpeak and ITC, its
subsidiary and Predecessor. The Company's executive offices are located at 902
Clint Moore Road, Suite 104, Boca Raton, Florida 33487, and Company's telephone
number is (561) 997-4001.
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<PAGE>
THE OFFERING
Common Stock offered by
the Company.................... 2,000,000 shares.
Common Stock outstanding before
the Offering(1)................ 7,698,532 shares.
Common Stock to be outstanding
after the Offering(1).......... 9,698,532 shares.
Use of proceeds.................. Expansion of sales and marketing efforts,
additional research and development expendi-
tures, capital expenditures and working
capital and other general corporate purposes.
See "Use of Proceeds."
Risk Factors..................... The securities offered hereby involve a high
degree of risk and immediate and substantial
dilution. See "Risk Factors" and "Dilution."
Proposed _______ symbol.......... "______".
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(1) Does not give effect to the exercise of (i) the Over-Allotment Option;
(ii) the Advisor's Warrants to purchase 200,000 shares of Common Stock,
exercisable at 120% of the public offering price per share; (iii)
outstanding warrants to purchase 660,534 shares of Common Stock
exercisable at prices ranging from $5.05 to $5.50 per share; and (iv)
stock options to purchase 2,246,000 shares of Common Stock granted under
the 1995 Plan at exercise prices ranging from $1.00 to $7.00 per share.
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SUMMARY CONSOLIDATED FINANCIAL DATA
PREDECESSOR(1) SUCCESSOR(1)
MAY 15, 1995 DECEMBER 8, 1995 YEAR ENDED
TO DECEMBER 18, TO DECEMBER 31, DECEMBER 31,
1995 1995 1996
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STATEMENT OF OPERATIONS DATA:
Net revenues $ - $ - $ 867,117
Total operating expenses 180,682 642,483 3,861,917
Operating loss (180,682) (642,483) (2,994,800)
Net loss (180,682) (642,483) (2,865,704)
Net loss per share (.35)
Shares used in computing
net loss per share(2) 8,215,485
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DECEMBER 31, 1996
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ACTUAL AS ADJUSTED(3)
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Balance Sheet Data:
Cash and cash equivalents $ 6,294,697 $22,284,697
Working capital 4,303,825 20,293,825
Total assets 8,277,615 24,267,615
Shareholders' equity 5,678,903 21,668,903
<FN>
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(1) NetSpeak acquired ITC by issuing 2,500,000 shares of common stock, valued
at $500,000, in exchange for all of the outstanding shares of ITC. The
acquisition was accounted for as a purchase, and the purchase price was
allocated to the assets acquired, including purchased research and
development in process, and liabilities assumed based upon their fair
value on the date of acquisition. The financial information identified
herein as for the Predecessor is for ITC for the period May 15, 1995
(inception) to December 18, 1995, the date of its acquisition by
NetSpeak. The financial information identified herein as for the
Successor is for NetSpeak (including ITC on a consolidated basis from the
date of acquisition) as of December 31, 1995 and 1996 and for the period
from December 8, 1995 (inception) to December 31, 1995 and for the year
ended December 31, 1996.
(2) See Note 1 of "Notes to Consolidated Financial Statements" for an
explanation of the determination of the number of shares and share
equivalents used in computing the per share amounts. Does not give effect
to the exercise of (i) the Over-Allotment Option; (ii) the
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Advisor's Warrants to purchase 200,000 shares of Common Stock,
exercisable at 120% of the public offering price per share; (iii)
outstanding warrants to purchase 660,534 shares of Common Stock
exercisable at prices ranging from $5.05 to $5.50 per share; and (iv)
stock options to purchase 1,710,000 shares of Common Stock granted under
the 1995 Plan prior to February 1, 1996, which are not included because
such options were issued prior to the 12 months immediately preceding the
Offering and the effect on net loss per share would be anti-dilutive.
(3) As adjusted to give effect to the sale by the Company of 2,000,000 shares
of Common Stock at an assumed offering price of $9.00 per share and the
application of the estimated net proceeds therefrom. See "Use of
Proceeds."
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY IS
SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS,
IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; EARLY STAGE OF
DEVELOPMENT. The Company commenced initial research and development efforts in
May 1995, released its initial products in February 1996 and has only recently
emerged from the development stage. Accordingly, the Company has only a limited
operating history upon which an evaluation of the Company and its prospects can
be based. As of December 31, 1996, the Company had an accumulated deficit of
$3,508,187. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in an early stage
of development, particularly companies in new and rapidly evolving industries.
To address these risks and achieve profitability and increased sales levels, the
Company must, among other things, establish and increase market acceptance of
its technology, products and systems, respond effectively to competitive
pressures, introduce on a timely basis products and systems incorporating its
technology and enhancements to its product applications and successfully market
and support its products and systems. There can be no assurance that the Company
will achieve or sustain significant sales or profitability in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNCERTAINTY OF PRODUCT ACCEPTANCE IN DEVELOPING MARKETS; NEW PRODUCT
DEVELOPMENT RISKS. The markets for the Company's technology, products and
systems have only recently begun to develop and are rapidly evolving. In
addition, the Company's products and systems are new and based on emerging
technologies. As is typical in the case of new and rapidly evolving industries,
demand and market acceptance for recently introduced technology and products are
subject to a high level of uncertainty. Broad acceptance of the Company's
technology, products and systems is critical to the Company's success and
ability to generate revenues. Acceptance of the Company's technology, products
and systems will be highly dependent on the functionality and performance of the
products and systems and particularly on the success of the initial
implementation of its products and systems. There can be no assurance that the
Company will be successful in obtaining market acceptance of its technology,
products and systems. In addition, the Company's products and systems must be
adapted in certain instances to meet the specific requirements of the customer
hardware or software in which it is to be integrated. The adaptation process can
be time consuming and costly to both the Company and its customers and the
acceptance of the product or system may depend, to a substantial extent, on the
success of the adaptation.
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<PAGE>
Furthermore, products and systems offered by the Company may contain
undetected errors or defects when first introduced or as new versions are
released. Introduction by the Company of products and systems with reliability,
quality or compatibility problems could result in reduced revenues,
uncollectible accounts receivable, delays in collecting accounts receivable and
additional costs. There can be no assurance that, despite testing by the Company
or by its customers, errors will not be found in the Company's products and
systems after commencement of commercial deployment, resulting in product
redevelopment costs and loss of, or delay in, market acceptance. In addition,
there can be no assurance that the Company will not experience significant
product returns in the future. Any such event could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business-Products" and "-Research and Development."
NEED FOR CONTINUOUS PRODUCT DEVELOPMENT; RISKS OF RAPID TECHNOLOGICAL
CHANGE. The markets for the Company's products and systems are characterized by
rapidly changing technology. The introduction of products and systems which
offer applications incorporating new technologies could render the Company's
products obsolete and unmarketable and could exert price pressures on existing
products. Further, the markets for the Company's products and systems, including
the market for voice transmission over packetized data networks, are
characterized by evolving industry standards and specifications. As new
standards or specifications are adopted, the Company may be required to devote
substantial time and expense in order to adapt its technology, products and
systems. The Company's ability to anticipate changes in technology and industry
standards and successfully develop and introduce enhanced product applications
as well as new applications, in each case in a cost effective and timely manner,
will be a critical factor in the Company's ability to grow and be competitive.
There can be no assurance that the Company will successfully develop enhanced or
new product applications, that any enhanced or new product application will
achieve market acceptance, that the Company will be able to adapt its products
or systems to comply with new standards or specifications, or that the
introduction of new products or technologies by others will not render the
Company's technology, products and systems obsolete. See "Business-Products and
Systems" and "-Research and Development."
LIMITED MARKETING EFFORTS; RELIANCE ON STRATEGIC PARTNERS. To date, the
Company's marketing efforts primarily have been limited to establishing
strategic alliances and, to a lesser extent, commencement of in-house marketing
efforts to end-users and distributors. The Company believes that it will be
dependent in the near term upon its strategic alliances, in particular those
with Rockwell and Creative, to generate revenues from the sales of products and
systems incorporating the Company's technology or products. Creative accounted
for approximately 44% of the Company's net revenues during the year ended
December 31, 1996. There can be no assurance that Rockwell or Creative will
actively distribute the Company's technology, products and systems or that, if
they do so, that their efforts will be successful or generate significant
revenues for the Company. Although the Company is currently developing an
in-house marketing and sales infrastructure to focus on direct sales to
potential end-users and distributors, there can be no assurance that the Company
will have the necessary resources to do so, or that any such efforts undertaken
will be successful. See "Business-Strategic Alliances" and "-Marketing and
Sales."
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<PAGE>
HIGHLY COMPETITIVE INDUSTRY. The Company is unaware of any other
company which competes directly with the entire spectrum of products and systems
it offers. The Company does, however, face competition for each of the
individual products and systems. The Company competes with companies such as
Vienna Systems Corporation ("Vienna Systems"), Lucent Technologies, Inc.
("Lucent") and VocalTec, Ltd. ("VocalTec") with respect to its gateway products.
Principal competitors for NetSpeak's software-based business systems include
companies such as Lucent. In the market for client software products, the
Company competes with VocalTec, Microsoft Corporation ("Microsoft") and Intel
Corporation ("Intel"), among others. The Company expects competition to persist,
intensify and increase in the future. Many of the Company's current and
potential competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than the Company. In addition, the Company competes with
manufacturers of hardware-based business systems. Certain of these competitors
may be existing or potential strategic partners. There can be no assurance that
the Company will be able to compete effectively against its competitors. See
"Business-Competition."
DEPENDENCE ON KEY PERSONNEL. The Company's performance is substantially
dependent on the performance of its executive officers, particularly Stephen R.
Cohen, the Company's Chairman of the Board and Chief Executive Officer; Robert
Kennedy, President and Chief Operating Officer and Shane D. Mattaway, Executive
Vice President and Chief Technical Officer. Given the Company's early stage of
development, it is dependent on its ability to retain and motivate high quality
personnel, especially management and skilled development teams. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's future success also depends on its
continuing ability to attract and retain additional highly qualified technical
personnel. Competition for qualified personnel is intense and there can be no
assurance that the Company will be able to attract, assimilate or retain
qualified personnel in the future. The inability to attract and retain the
necessary technical and other personnel could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Business-Research and Product Development" and "-Employees" and "Management."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's
success will depend in part on its ability to obtain patent protection for its
products, preserve its trade secrets and operate without infringing upon the
proprietary rights of other parties. There can be no assurance that patent
applications to which the Company holds rights will result in the issuance of
patents, or that any issued patents will provide commercially significant
protection to the Company's technology. In addition, there can be no assurance
that others will not independently develop substantially equivalent proprietary
information not covered by patents to which the Company owns rights or obtain
access to the Company's know-how, or that others will not claim to have or will
not be issued patents which may prevent the sale of one or more of the Company's
products. In particular, Elk Industries, Inc. ("Elk Industries") has asserted in
a letter to NetSpeak just prior to the expiration of U.S. Patent No. 4,124,773
owned by Elk Industries, that the Company's WebPhone client software product
infringed the now expired patent. The Company sought advice of counsel relating
to the infringement allegations, which Elk Industries has asserted
-11-
<PAGE>
against other software concerns, and believes, based upon an opinion of counsel,
the Company's WebPhone client software product does not infringe the asserted
patent.
Litigation, which could be costly and time consuming, may be necessary
to determine the scope and validity of others' proprietary rights, or to enforce
any patents issued to the Company, in either case, in judicial or administrative
proceedings. An adverse outcome could subject the Company to significant
liabilities to third parties, require the Company to obtain licenses from third
parties or require the Company to cease product sale and possibly alter the
design of the products. There can be no assurance that any licenses required
under any other third-party patents or proprietary rights would be made
available on acceptable terms, if at all. In addition, the laws of certain
countries may not protect the Company's intellectual property.
The software market has traditionally experienced widespread
unauthorized reproduction of products in violation of manufacturers'
intellectual property rights. Such activity is difficult to detect and legal
proceedings to enforce manufacturers' intellectual property rights are often
burdensome and involve a high degree of uncertainty and costs. The Company's
success is also dependent upon unpatented trade secrets which are difficult to
protect. To help protect its rights, the Company currently requires employees,
consultants and strategic partners to enter into confidentiality agreements that
prohibit disclosure of the Company's proprietary information. The Company also
currently requires employees and consultants to assign to the Company their
ideas, developments, discoveries and inventions. There can be no assurance that
these agreements will provide adequate protection for the Company's trade
secrets, know-how, or other proprietary information in the event of any
unauthorized use or disclosures. See "Business-Patents and Proprietary Rights."
RISKS OF INTERNET DISTRIBUTION. The Company distributes certain of its
client software products through, among other channels, the Internet.
Distributing the Company's products through the Internet makes the Company's
software products more susceptible to unauthorized copying and use than
distribution through conventional means. The Company has allowed, and currently
intends to continue to allow, potential customers to electronically download
from the Internet basic versions of its software for free to evaluate the
Company's products and subsequently order enhanced and other existing or future
products. There can be no assurance that, upon receiving orders for its enhanced
products, the Company will be able to collect payment from users that retain a
copy of the Company's enhanced and other existing or future products.
GOVERNMENT REGULATION. At present, there are few laws or regulations
that specifically address access to or commerce on the Internet. The increasing
popularity and use of the Internet, however, enhance the risk that the
governments of the United States and other countries in which the Company sells
or expects to sell its products and systems will seek to regulate computer
telephony and the Internet with respect to, among other things, user privacy,
pricing, and the characteristics and quality of products and services. The
Company is unable to predict the impact, if any, that future legislation, legal
decisions or regulations concerning the Internet may have on its business,
financial condition or results of operations.
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<PAGE>
In March 1996, the America's Carriers Telecommunication Association
(the "ACTA"), a group of telecommunications common carriers, filed a petition
(the "ACTA Petition") with the Federal Communications Commission (the "FCC")
arguing that providers (such as the Company) of computer software products that
enable voice transmission over the Internet (Internet "telephone" services) are
operating as common carriers without complying with various regulatory
requirements and without paying certain charges required by law. The ACTA
Petition argues that the FCC has the authority to regulate both the Internet and
the providers of Internet "telephone" services and requests that the FCC declare
its authority over interstate and international telecommunications services
using the Internet, initiate rule-making proceedings to consider rules governing
the use of the Internet for the provision of telecommunications services, and
order providers of Internet "telephone" software to immediately cease the sale
of such software. The FCC has thus far not granted relief sought under the ACTA
Petition, however, any action taken by the FCC to grant the relief sought by
ACTA or otherwise to regulate use of the Internet as a medium of communication,
including any action to permit local exchange carriers to impose additional
charges for connections used for Internet access, could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business-Government Regulation."
ABILITY TO MANAGE GROWTH. The Company has been rapidly expanding and
expects to continue to expand its management, research and development, testing,
quality control, marketing, sales and customer service and support operations,
as well as its financial and accounting controls, all of which has placed and is
expected to continue to place a significant strain on the Company. The Company
has grown from a development staff of six persons at December 31, 1995 to 56
employees at December 31, 1996. Failure to integrate new personnel on a timely
basis could have an adverse effect on the Company's operations. Furthermore, the
expenses associated with expanding the Company's management team and hiring new
employees have been and are being incurred prior to the generation of any
significant revenues. If the Company's management is unable to manage growth
effectively, the quality of the Company's products, its ability to retain key
personnel and its business, financial condition and results of operations could
be materially adversely affected.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. Significant annual and
quarterly fluctuations in the Company's results of operations may be caused by,
among other factors, the volume of revenues generated by the Company's strategic
partners from sales of products and systems incorporating the Company's
technology or products, the mix of distribution channels used by the Company,
the timing of new product announcements and releases by the Company and its
competitors and general economic conditions. There can be no assurance that the
level of revenues and profits, if any, achieved by the Company in any particular
fiscal period will not be significantly lower than in other, including
comparable, fiscal periods. The Company's expense levels are based, in part, on
its expectations as to future revenues. As a result, if future revenues are
below expectations, net income or loss may be disproportionately affected by a
reduction in revenues as any corresponding reduction in expenses may not be
proportionate to the reduction in revenues. As a result, the Company believes
that period-to-period comparisons of its results of operations may not
necessarily be meaningful and should not be relied upon as
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<PAGE>
indications of future performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
POSSIBLE NEED FOR ADDITIONAL CAPITAL. The Company anticipates that,
based on its present plans and assumptions, the net proceeds of this Offering,
when combined with the Company's existing capital resources and anticipated cash
flow from operations, will be sufficient to enable it to maintain its current
and planned operations for a period of at least 12 months after consummation of
this Offering. If the Company's estimates or assumptions prove to be incorrect,
the Company may require additional capital. Additional funding, whether obtained
through public or private debt or equity financings, or from strategic
alliances, may not be available when needed or may not be available on terms
acceptable to the Company, if at all. Additional financings may result in
dilution to existing shareholders. Failure to secure needed additional
financing, if and when needed, may have a material adverse effect on the
Company's business, financial condition, and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
CONCENTRATION OF COMMON STOCK OWNERSHIP. Upon completion of this
Offering, the directors and executive officers of the Company and Motorola will
beneficially own approximately 46.6% and 12.0% of the Common Stock, respectively
(assuming the exercise of stock options and warrants held by such parties).
There are no agreements between management and Motorola with respect to voting
their respective shares of Common Stock. However, both management and Motorola
will have the ability to influence significantly the Company's affairs and
operations following completion of this Offering and, voting together, could
elect the Board of Directors and otherwise control the Company. See "Principal
Shareholders."
DILUTION. Purchasers of shares of Common Stock in the Offering will
experience immediate and substantial dilution in net tangible book value per
share from the initial public offering price. Such dilution at December 31, 1996
would have been equal to $6.77 per share (or 75%) at an assumed initial public
offering price of $9.00 per share.
LACK OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE.
Prior to this Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained. The initial public offering price for the Common Stock to be sold in
this Offering will be arbitrarily determined by negotiation between the Company
and the Representative, and does not necessarily bear any relationship to the
Company's asset value, net worth or other established criteria of value, and
should not be considered indicative of the actual value of the Common Stock and
may bear no relationship to the price at which the Common Stock will trade after
completion of this Offering. 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, losses of significant
customers, announcements of technological innovations or new products by the
Company and its competitors, changes in financial estimates by securities
analysts, or other events or factors, including the risk factors described
herein. 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
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<PAGE>
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. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this Offering, the
Company will have 9,698,532 shares of Common Stock outstanding. Of these shares,
the 2,000,000 shares of Common Stock sold in this Offering will be freely
tradeable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except any such shares which may be acquired by an
"affiliate" of the Company. The holders of the currently outstanding 7,698,532
shares of Common Stock have agreed not to offer, sell or otherwise dispose of
such shares for nine months after the date of this Prospectus without the prior
written consent of the Representative. After this period, 5,428,000 of the
shares subject to this restriction will be eligible for sale in the public
market pursuant to Rule 144 under the Securities Act, subject to the volume
limitations and other restrictions contained in Rule 144. The remaining
2,270,532 of such shares will become eligible for sale subject to the
restrictions of Rule 144 at varying times from January 1998 to January 1999.
As of the date of this Prospectus, options to purchase 2,246,000 shares
of common stock and warrants to purchase 660,534 shares of Common Stock are
issued and outstanding. In addition, the Company has granted to Motorola and
Creative certain demand and piggy-back registration rights under the Securities
Act with respect to the shares of Common Stock beneficially owned by them.
Future sales of the shares of Common Stock held by existing shareholders, or the
perception that such sales may occur, could have an adverse effect on the price
of the Common Stock. See "Certain Transactions" and "Shares Eligible for Future
Sale."
ANTI-TAKEOVER PROVISIONS. The Company's Board of Directors has the
authority to issue up to 1,000,000 shares of "blank-check" preferred stock
("Preferred Stock"). Accordingly, shares of the Company's Preferred Stock may be
issued in the future without shareholder approval and upon such terms and
conditions, and having such rights, privileges and preferences as the Board of
Directors may determine. Such rights, privileges and preferences could include
preferential voting rights, dividend rights in excess of those provided to
holders of Common Stock, and conversion rights, redemption privileges or
liquidation preferences not available to holders of Common Stock. The rights of
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
Although the Company has no present intention to issue shares of Preferred
Stock, any issuance of Preferred Stock, while potentially 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.
In addition, Florida has enacted legislation that may deter or
frustrate takeovers of Florida corporations. The Florida Control Share Act
generally provides that shares acquired in a "control share acquisition" will
not possess any voting rights unless such voting rights are approved by a
majority of the corporation's disinterested shareholders. A "control share
acquisition" is an
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<PAGE>
acquisition, directly or indirectly, by any person of ownership of, or the power
to direct the exercise of voting power with respect to, issued and outstanding
"control shares" of a publicly held Florida corporation. "Control shares" are
shares, which, except for the Florida Control Share Act, would have voting power
that, when added to all other shares owned by a person or in respect to which
such person may exercise or direct the exercise of voting power, would entitle
such person, immediately after acquisition of such shares, directly or
indirectly, alone or as a part of a group, to exercise or direct the exercise of
voting power in the election of directors within any of the following ranges:
(a) at least 20% but less than 33-1/3% of all voting power, (b) at least 33-1/3%
but less than a majority of all voting power; or (c) a majority or more of all
voting power. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested shareholders of certain specified
transactions between a public corporation and holders of more than 10% of the
outstanding voting shares of the corporation (or their affiliates). See
"Description of Capital Stock."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS. This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future operations,
including plans and objectives relating to the development of the Company's
business. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based on a successful execution of the Company's business
strategy and assumptions that the Company will be profitable, that the market
for packetized voice transmission will not change materially or adversely, and
that there will be no unanticipated material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
NO DIVIDENDS. The Company has not paid any dividends on its Common
Stock and anticipates for the foreseeable future that all earnings, if any, will
be retained for the operation and expansion of the Company's business. See
"Dividend Policy."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of
2,000,000 shares of Common Stock offered hereby at an assumed public offering
price of $9.00 per share are estimated to be approximately $15,990,000
($18,501,000 if the Underwriters' over-allotment option is exercised in full),
after deducting the underwriting discount, the non-accountable expense allowance
and other estimated expenses of the Offering payable by the Company.
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<PAGE>
The Company anticipates that approximately $5,100,000 of the net
proceeds will be used for increased marketing and sales efforts, approximately
$6,800,000 will be used for additional research and development efforts and
approximately $2,000,000 for capital expenditures. The balance of the net
proceeds will be used for working capital and other general corporate purposes.
Pending such uses, the Company intends to invest the net proceeds of this
Offering in short-term, investment-grade, interest-bearing securities.
The Company believes that the net proceeds of this Offering, together
with its existing capital resources and anticipated cash flow from operations,
will be sufficient to enable it to maintain its current and planned operations
for a period of at least 12 months after consummation of the Offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
intend to pay dividends for the foreseeable future. The Company intends to
retain earnings, if any, to finance the development and expansion of its
business. Payment of dividends in the future will depend upon, among other
things, the Company's ability to generate earnings, need for capital and overall
financial condition.
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<PAGE>
DILUTION
As of December 31, 1996, the net tangible book value of the Company was
$5,678,903 or $0.74 per share. Net tangible book value represents the amount of
total assets, less any intangible assets and total liabilities. After giving
effect to the sale of the 2,000,000 shares of Common Stock offered hereby (at an
assumed initial public offering price of $9.00 per share, and after deducting
the underwriting discount, the non-accountable expense allowance and other
estimated expenses of this Offering), the pro forma net tangible book value as
of December 31, 1996 would have been $21,668,903 or $2.23 per share. This
represents an immediate increase in net tangible book value of $1.49 per share
to existing shareholders and an immediate dilution of $6.77 per share to
investors in the Offering. The following table illustrates this per share
dilution:
Assumed initial public offering price............................. $9.00
Net tangible book value per share at December 31, 1996(1)....... $0.74
Increase attributable to new investors.......................... 1.49
----
Pro forma net tangible book value per share after the offering.... 2.23
----
Dilution to new investors(1)...................................... $6.77
====
If the Over-Allotment Option is exercised in full, the pro forma net
tangible book value per share of Common Stock after the Offering would be $2.42,
which would result in dilution to new investors in this Offering of $6.58 per
share of Common Stock.
The following table shows, at December 31, 1996, a comparison of the
total number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share by existing shareholders
and to be paid by investors who purchase shares of Common Stock in the Offering
(at an assumed initial public offering price of $9.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ----------------------
AVERAGE PRICE
NUMBER PERCENT DOLLARS PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders(1).... 7,698,532 79% $ 8,708,704 33% $1.13
New Investors............... 2,000,000 21% $18,000,000 67% $9.00
--- ---
Total(1)........... 100% 100%
=== ===
<FN>
- ----------
(1) Does not give effect to the exercise of (i) the Over-Allotment Option;
(ii) the Advisor's Warrants to purchase 200,000 shares of Common Stock,
exercisable at 120% of the public offering price per share; (iii)
outstanding warrants to purchase 660,534 shares of Common Stock
exercisable at prices ranging from $5.05 to $5.50 per share; and (iv)
stock options to purchase 2,246,000 shares of Common Stock granted under
the 1995 Plan at exercise prices ranging from $1.00 to $7.00 per share.
</FN>
</TABLE>
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CAPITALIZATION
The following table sets forth as of December 31, 1996, the actual
capitalization of the Company and the capitalization as adjusted to give effect
to the sale of 2,000,000 shares of Common Stock offered by the Company (at an
assumed initial public offering price of $9.00 per share and after deducting the
underwriting discount, the non-accountable expense allowance and other estimated
expenses of the Offering) and the receipt of the net proceeds therefrom. The
table should be read in conjunction with the consolidated financial statements
and the related notes appearing elsewhere in this Prospectus.
DECEMBER 31, 1996
----------------------------
ACTUAL AS ADJUSTED
----------- ------------
Stockholders' equity:
Preferred Stock, $.01 par value,
1,000,000 shares authorized; none
outstanding, actual, and as adjusted..... $ --- $ ---
Common Stock, $.01 par value,
25,000,000 shares authorized;
7,698,532 shares (actual);
9,698,532 shares (as adjusted)
issued and outstanding(1)................ 76,985 96,985
Additional paid-in capital................... 9,110,105 25,080,105
Accumulated deficit.......................... (3,508,187) (3,508,187)
---------- -----------
Total stockholders' equity...................... $5,678,903 $21,668,903
========== ===========
- ----------
(1) Does not give effect to the exercise of (i) the Over-Allotment Option;
(ii) the Advisor's Warrants to purchase 200,000 shares of Common Stock,
exercisable at 120% of the public offering price per share; (iii)
outstanding warrants to purchase 660,534 shares of Common Stock
exercisable at prices ranging from $5.05 to $5.50 per share; and (iv)
stock options to purchase 2,246,000 shares of Common Stock granted under
the 1995 Plan at exercise prices ranging from $1.00 to $7.00 per share.
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected statement of operations data for the Predecessor for the
period from May 15, 1995 (Predecessor's inception) to December 18, 1995, and for
the Successor for the period from December 8, 1995 (inception) to December 31,
1995 and the year ended December 31, 1996 and the selected balance sheet data of
the Successor as of December 31, 1995 and 1996 set forth below have been derived
from the consolidated financial statements of the Predecessor and the Company,
which have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is included elsewhere in this Prospectus. The
selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) SUCCESSOR(1)
MAY 15, 1995 DECEMBER 8, 1995 YEAR ENDED
TO DECEMBER TO DECEMBER 31, DECEMBER 31,
18, 1995 1995 1996
-------------- ---------------- ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................... $ -- $ -- $ 867,117
Operating expenses:
Cost of revenues...................... -- 47,129
Research and development.............. 175,038 28,301 2,255,644
Sales and marketing................... -- 722,353
General and administrative............ 5,644 57,200 836,791
Purchased research and
development(2)........................ 556,982
--------- --------- -----------
Total operating expenses..... 180,682 642,483 3,861,917
Loss from operations................... (180,682) (642,483) (2,994,800)
Interest and other income.............. -- -- 172,096
--------- --------- -----------
Loss before income taxes............... (180,682) (642,483) (2,822,704)
Income taxes........................... -- -- 43,000
--------- --------- -----------
Net loss............................... $(180,682) $(642,483) $(2,865,704)
========= ========= ===========
Net loss per share..................... $ (0.35)
===========
Shares used in computing net loss
per share(3)........................... 8,215,485
===========
<CAPTION>
DECEMBER 31,
---------------------------------
BALANCE SHEET DATA: 1995 1996
<S> <C> <C>
Cash and cash equivalents $ 483,084 $ 6,294,697
Working capital 390,868 4,303,825
Total assets 555,566 8,277,615
Shareholders' equity 447,517 5,678,903
<FN>
- -------------------------
(1) NetSpeak acquired ITC by issuing 2,500,000 shares of common stock, valued
at $500,000, in exchange for all of the outstanding shares of ITC. The
acquisition was accounted for as a purchase, and the purchase price was
allocated to the assets acquired, including purchased research and
development in process, and liabilities assumed based upon their fair
value on the date of acquisition. The financial information identified
herein as for the Predecessor is for ITC for the period May 15, 1995
(inception) to December 18, 1995, the date of its acquisition by
NetSpeak. The financial information identified herein as for the
Successor is for NetSpeak (including ITC on a consolidated basis from the
date of acquisition) as of December 31, 1995 and 1996 and for the period
from December 8, 1995 (inception) to December 31, 1995 and for the year
ended December 31, 1996.
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<PAGE>
(2) In connection with the acquisition of ITC purchased research and
development of $556,982 was charged to expense.
(3) See Note 1 of "Notes to Consolidated Financial Statements" for an
explanation of the determination of the number of shares and share
equivalents used in computing the per share amounts. Does not give effect
to the exercise of (i) the Over-Allotment Option; (ii) the Advisor's
Warrants to purchase 200,000 shares of Common Stock, exercisable at 120%
of the public offering price per share; (iii) outstanding warrants to
purchase 660,534 shares of Common Stock exercisable at prices ranging
from $5.05 to $5.50 per share; (iv) stock options to purchase 1,710,000
shares of Common Stock granted under the 1995 Plan prior to February 1,
1996, which are not included because such options were issued prior to
the 12 months immediately preceding the Offering and the effect on net
loss per share would be anti-dilutive.
</FN>
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company was incorporated on December 8, 1995 and acquired ITC on
December 18, 1995 by issuing 2,500,000 shares of Common Stock valued at
$500,000. ITC was incorporated on May 15, 1995 and, prior to its acquisition,
ITC's activities consisted of research and development of telephony
communications software for use on the Internet and LANs and WANs. From December
8, 1995 to December 31, 1995 the Company's operating activities related
primarily to raising initial capital and continuing ITC's research and
development. The Company released its first product in February 1996 and, for
accounting purposes, emerged from the development stage during 1996. Since
inception, the Company has raised an aggregate of $8,652,090, net of offering
costs, through private offerings of its equity securities. See "Liquidity and
Capital Resources."
The Company generates revenues from products, licenses and fees for
services provided. The Company's products are licensed primarily to telephone
companies, network service providers, corporate customers and directly to
individual client software end-users. Service revenues consist of customer
support and engineering fees.
Product and license revenues are generally recognized upon shipment,
provided that there are no significant post-delivery obligations and that
payment is due within one year. If customer acceptance is required, revenues are
recognized upon customer acceptance. Customer support revenues are recognized
over the term of the support period, which is typically one year. Engineering
fees are recognized upon customer acceptance or over the period in which
services are provided if customer acceptance is not required. All research and
development costs to date have been expensed as incurred.
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. As of December 31,
1996, the Company had an accumulated deficit of $3,508,187. The limited
operating history of the Company makes its future results of operations
difficult to predict. In addition, the Company's operating results may fluctuate
significantly in the future as a result of a variety of factors such as the
introduction of new products or services by the Company or its competitors, the
amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, the budgeting cycles of potential
customers, technical difficulties with respect to the use of products developed
by the Company and general economic conditions. See "Risk Factors."
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<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996, AS COMPARED TO THE PERIOD FROM DECEMBER
8, 1995 (INCEPTION) TO DECEMBER 31, 1995 COMBINED WITH THE PREDECESSOR FOR THE
PERIOD FROM MAY 15, 1995 (PREDECESSOR'S INCEPTION) TO DECEMBER 18, 1995. UNLESS
OTHERWISE INDICATED THE DISCUSSION OF THE COMBINED AMOUNTS IS REFERRED TO AS
"1995" HEREIN.
Net revenues for the year ended December 31, 1996 were $867,117. The
Company had no revenues during 1995 when the Company's initial products were in
the process of development. Net revenues during 1996 were primarily generated
from license fees paid by individual client software end-users and license fees
received from Creative, a strategic partner of the Company, for providing it
with the right to distribute certain products using the Company's WebPhone
client software. Creative, the Company's largest customer, accounted for 44% of
total net revenues in the year ended December 31, 1996 and is expected to
continue to be a principal customer of the Company in the near future. See
"Business - Strategic Alliances".
The Company's operating expenses have increased significantly since
inception. This trend reflects the costs associated with the development of the
organization's infrastructure, rapid growth and increased efforts to
commercialize the Company's systems and products. The Company believes that
continued expansion of its operations is essential to continue the enhancement
of its existing products and to facilitate the development of new technologies,
in addition to expanding sales and marketing efforts in order to gain product
acceptance in the targeted markets. As a consequence, the Company intends to
continue to increase expenditures in all operating areas.
Cost of revenues primarily consists of direct product costs, costs of
engineering services and certain costs associated with providing customer
support. Cost of revenues were $47,129 in the year ended December 31, 1996. The
Company had no cost of revenues during 1995.
Research and development expenses primarily consist of employee
compensation, computer hardware and software utilized in product development,
and equipment depreciation. Research and development expenses were $2,255,644
for the year ended December 31, 1996 and $203,339 during 1995. The increase in
research and development expenses was primarily due to increased costs
associated with developing, enhancing and expanding upon the Company's products
and systems and the expansion of the research development staff to 23 employees
at December 31, 1996. All research and development costs have been expensed as
incurred. Although research and development for the Company's initial products
and systems was substantially completed during 1996, the Company intends to
significantly increase research and development expenses in future periods to
perform product enhancements and new product development to establish and
maintain a competitive advantage. In connection with the acquisition of ITC,
$556,982 of purchased research and development was charged to expense. See Note
2 to the consolidated financial statements.
Marketing and sales expenses primarily consist of employee
compensation, travel expenses, trade shows and costs of promotional materials.
Marketing and sales expenses were
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$722,353 for the year ended December 31, 1996. The Company had no marketing and
sales expenses during 1995. Marketing and sales expenses during 1996 were the
result of the creation and expansion of the Company's marketing, sales and
customer support infrastructure, which included 23 employees at December 31,
1996 and increased expenses associated with the promotion and marketing of the
Company's products and systems. The Company intends to continue to intensify and
expand its marketing and sales effort and, as a result, intends to significantly
increase marketing and sales expenses in future periods.
General and administrative expenses primarily consist of employee
compensation, professional services, rent and office expenses. General and
administrative expenses were $836,791 for the year ended December 31, 1996 and
$62,844 during 1995. The Company intends to increase general and administrative
expenses in future periods in order to expand the organization's infrastructure,
including the addition of finance and administrative personnel.
Income taxes for the year ended December 31, 1996 totaled $43,000. Such
taxes were attributable to income taxes paid to the Singapore government related
to license fees received pursuant to the agreement with Creative. The Company
paid no income taxes during 1995.
As of December 31, 1996, the Company had approximately $3,254,000 of
federal and state net operating loss carryforwards which, if not utilized, will
begin to expire in 2009. Under the Tax Reform Act of 1986, the amounts of and
the benefits from net operating loss carryforwards may be impaired in certain
circumstances. Events which may cause such limitations in the amount of net
operating losses that the Company may utilize in any one year include, but are
not limited to, a cumulative ownership change of more than 50% over a three year
period. The effect of any limitation, if imposed, is not expected to be
material. As of December 31, 1996, the Company has provided a valuation
allowance for the full amount of the deferred tax asset resulting from the net
operating loss carryforwards due to the uncertainty as to the utilization of the
net operating loss carryforwards, primarily as a result of considering such
factors as the Company's limited operating history and the operating losses
incurred to date. See Note 7 to the consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had $6,294,697 in cash and cash
equivalents. Since inception, the Company has financed its operations through
the sale of equity securities in private transactions as described below.
Net cash of $1,033,643 was used in operating activities during the year
ended December 31, 1996 and was primarily attributable to research and
development and building the corporate infrastructure, partially offset by
unearned revenue of $2,242,011 resulting from fees paid in advance for licensed
goods and engineering services not yet shipped and performed, respectively. Net
cash used in investing activities during the year ended December 31, 1996 was
$1,216,834 and primarily related to purchases of computer equipment.
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Net cash provided by financing activities for the year ended December
31, 1996 was $8,062,090 and was attributable to private offerings of equity
securities.
In January 1996, the Company sold 1,204,000 shares of Common Stock at
$2.50 per share in a private offering raising $2,992,028, net of offering costs.
In January 1996, the Company issued stock options under the 1995 Plan to
purchase 250,000 shares of Common Stock for $2.50 per share to a consulting
firm, which assisted the Company with its private offering.
In June 1996, the Company issued 207,679 shares of Common Stock to
Creative at a price of $5.05 per share raising $943,698, net of offering costs.
The Company also issued Creative an eighteen-month warrant to purchase up to an
additional 207,679 shares of Common Stock at a price of $5.05 per share, which
warrant is only exercisable if Creative distributes, during a specified period,
a predetermined quantity of the Company's Internet telephone client software
product licensed to Creative.
In August 1996, the Company issued 769,853 shares of Common Stock at a
price of $5.50 per share and a warrant to purchase up to an additional 452,855
shares of Common Stock at a price of $5.50 per share for a six year period
expiring in August 2002 (the "Motorola Warrant") to Motorola raising $3,993,864,
net of offering costs. In the event the Company consummates the Offering or any
other underwritten public offering of its Common Stock at a price of at least
$7.00 per share resulting in the receipt by the Company of net proceeds of not
less than $10,000,000, the Company, at its option, upon not less than 20
business days notice given prior to the planned closing date of such public
offering, may require Motorola to exercise the Motorola Warrant, provided,
however, that within 15 business days of receipt of the Company's notice,
Motorola may elect to cancel the Motorola Warrant unexercised.
The Company has no material commitments other than those under office
and equipment leases. The Company anticipates that, based on its present plans
and assumptions, the net proceeds of the Offering combined with the Company's
existing capital resources and anticipated cash flows from operations will be
sufficient to enable it to maintain its current and planned operations for a
period of at least 12 months after consummation of the Offering. If the
Company's estimates or assumptions prove to be incorrect, the Company may
require additional capital. Additional funding, whether obtained through public
or private debt or equity financing, or from strategic alliances, may not be
available when needed or may not be available on terms acceptable to the
Company. Additional financings may result in dilution to existing shareholders.
Failure to secure needed additional financing, if and when needed, may have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors - Possible Need for Additional
Capital."
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BUSINESS
OVERVIEW
NetSpeak develops, markets, licenses, and supports a suite of
intelligent software modules which enable real-time, concurrent interactive
voice, video and data transmission over a packetized data network such as the
Internet, LANs and WANs. The Company believes that its technology is
strategically positioned to capitalize on the rudimentary shift in corporate
telecommunications philosophy as businesses seek to expand the functionality of
their communication systems as well as optimize their use of packetized data
networks, thereby eventually eliminating the redundancy inherent in maintaining
a traditional voice network simultaneously with a packetized data network.
Netspeak is currently marketing a user-friendly core communications technology
which enables, in a cost-effective manner, corporations and other users to
enhance the role of their packetized data networks to support concurrent voice,
video and data transmission. NetSpeak believes that as potential users become
increasingly educated as to the benefits of integrating the two networks,
significant revenue opportunities for the Company will be generated.
The Company's software uses proprietary intelligent virtual circuit
switching technology to provide gateways between packetized data networks and
traditional voice transmission networks. The technology allows users to
integrate into packetized data networks a variety of features and functions
commonly found in traditional voice transmission networks, including ACD,
multi-point conferencing, interactive voice response services, messaging
services and least cost routing, as well as to expand network functionality by
offering additional features such as concurrent voice and data transmission and
video conferencing. The Company's virtual circuit switching technology provides
intelligent call routing to enable users to transparently communicate with each
other on a point-to-point basis. The Company believes that its products and
systems are designed to allow customers to integrate NetSpeak's technology into
their existing network infrastructures without the need for significant
upgrading, and can ultimately provide a complete software-based solution for the
delivery of concurrent real-time interactive voice, video and data
communications over packetized data networks.
In order to facilitate and accelerate the acceptance of NetSpeak's
technology as well as enhance the marketing and distribution of its products and
systems, the Company has established a number of strategic alliances with
various telecommunications and computer industry leaders. Under these
agreements, either the Company's technology is integrated into products which
are marketed by its strategic partners or the Company's products and systems are
marketed and distributed by its strategic partners through the various
distribution channels. The Company believes that these strategic alliances also
offer access to its strategic partners' leading edge technologies, as well as
insights into market trends and product development.
In August 1996, the Company established a strategic alliance with
Motorola pursuant to which Motorola made a minority investment in the Company
and the Company granted Motorola a right of first negotiation on licenses of the
Company's technology as it applies to the cellular and cable communications
industries. Motorola is also conducting a number of end-user test trials
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of systems which combine the Company's technology, products and systems with
those of Motorola.
Beginning in June 1996, the Company also entered into a strategic
alliance with Creative, a world leader in the manufacture and distribution of
audio cards and multimedia computer peripherals. Pursuant to such alliance,
Creative made a minority investment in the Company. NetSpeak granted Creative a
world-wide license to market, distribute and bundle NetSpeak's WebPhone client
(or end-user) software under the Creative brand name in the retail distribution
channel and the Company and Creative are jointly developing various other
Internet-related software applications which use the Company's and Creative's
proprietary technologies, in such areas as radio broadcast.
In August, 1996, the Company established a strategic alliance with
Rockwell, an industry leader in medium and high-end ACD systems. As part of this
alliance, the Company's gateway products and ACD systems are being integrated
into Rockwell's ACD systems. Beginning in November 1996, the Company entered
into a strategic alliance with Infonet, one of the largest commercial data
network carriers in the world. Pursuant to such alliance, the Company will
integrate its technology with Infonet's existing global data network, in order
to enhance Infonet's packetized data network for voice transmission. The Company
intends to seek to establish additional strategic alliances.
In addition to marketing its technology products and systems with its
strategic partners, NetSpeak has begun to market its products directly to
end-users, including telephone companies, cable companies, and other common
carriers, large business enterprises, ACD manufacturers and other OEMs,
governmental and educational entities, as well as to distributors, such as SIs
and VARs. To date, such marketing efforts have been limited to direct contacts
with a number of these customers. NetSpeak is also marketing its WebPhone client
software products over the Internet, by advertising in computer periodicals and
through distribution agreements with over 700 ISPs worldwide. The Company is
currently developing an in-house marketing and sales infrastructure.
The Company's strategy is to become an industry leader in providing
business solutions for concurrent real-time interactive voice, video and data
transmission over packetized data networks. The Company intends to achieve its
goal by (i) establishing strategic alliances to facilitate technological
acceptance and enhance the marketing and distribution of its products and
systems; (ii) expanding its internal marketing and sales efforts; and (iii)
continuing research and development to enhance existing product applications and
develop new applications.
INDUSTRY BACKGROUND
Two fundamentally different switching technologies exist that enable
digital communications: circuit switching and packet switching. Since the
differing performance requirements for voice transmission and data transmission
impose different design priorities, historical development of voice
communication systems such as the telephone, and its related business systems,
such as a corporate business telephone system ("PBX") and ACD, has centered on
circuit switching
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technology, while that of data communications systems such as LANs and WANs and
the Internet have primarily relied upon packet switching technology. As a
result, separate cultures and networking fabrics have evolved for the design,
development, application, and support for real-time voice communications
(circuit switched networks) and non real-time data transmission (packetized data
networks).
High quality, real-time interactive voice communications must emulate a
reasonable approximation of a face to face conversation between two
geographically separated people. To accomplish this, the modulated signal
representing the spoken words must (i) have enough information to re-create a
recognizable voice by using a fixed bandwidth, (ii) be delivered with minimum
delay by using a dedicated path in order not to impede interactive
communications, (iii) be delivered at a constant rate in order to avoid
distortion to the ear of the listener and (iv) not be subject to significant
loss of information en route. These capabilities are inherent in circuit
switched networks such as the public switching telephone network (the "PSTN")
but must be created when using packetized data networks for voice transmission.
The design of private Intranets such as LANs and WANs, and that of the
Internet generally is fundamentally different from the architecture of
conventional voice transmission networks. Each of these packetized data networks
breaks down data into a series of small, discrete packets for transmission. Each
packet of data travels independently through the network to the destination
address where application software reassembles the packets to recreate the
original data set. As currently designed, packetized data networks handle
congestion by discarding or delaying packets or by sending packets from the same
source along different pathways, which can result in packets which were sent in
sequence arriving out of order. If the transmitted data packet represents
real-time voice, the listener may perceive a gap or "choppiness" as a result of
missing, late-arriving or out-of-sequence packets.
As the work environment increasingly demands faster access to greater
volumes of information from multiple sources, the individual capabilities of
separate circuit switched and packetized data networks are being seriously
challenged. The response from circuit switch manufacturers has been the
development of new switching system architectures that make it easier for
separate, application-specific software to control the circuit switching
function, and to seek to maintain the market value of circuit switched systems
by increasingly using voice applications processes to offer additional services
such as voice mail, interactive voice response and ACD. The intensity of
technical activity involved in further integrating the interaction of specific
application processes and information delivery systems has given computer
telephony integration the status of a technology in its own right.
A growing number of businesses and other organizations have recognized
the Internet as a network which enables an enhanced form of public
communication. In order to create conditions amenable to satisfactory commerce
and business communications on the Internet, the same kinds of services offered
in communicating with customers via traditional voice transmission networks such
as the PSTN must be available when communicating with customers via the
Internet.
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The Internet represents primarily an access to potential markets that
cannot be efficiently exploited if a separate, parallel infrastructure is
required for its service. Its evolution, however, has supported the development
of technologies such as those of NetSpeak that have made feasible the
integration of the two different architectures of circuit switched and
packetized data networks in such a way that communications between the two are
meaningful, and such that each can selectively take advantage of the special
capabilities of the other.
There are many applications currently utilizing traditional telephony
that could benefit from various of the capabilities available from data
communications networks such as contemporaneous transmission of data and voice
over a single system. The general difficulty in adapting some of these
capabilities to the circuit switching environment lies in the limited expertise
of those in the traditional telephony environment in developing and applying the
desired adaptations on the one hand, and the limited systems and application
expertise necessary for those in the packetized data network environment to
recognize the problems, understand the opportunities, or design appropriate
solutions on the other.
The introduction and rapid development of Internet Protocol ("IP")
technology revolutionized the deployment and use of data communications networks
such as the Internet. Even though this technology is in its infancy, it is
already creating a growing demand for the integration of features and functions
available in traditional voice communications networks into the packetized data
network environment.
NETSPEAK'S CORE COMMUNICATIONS TECHNOLOGY
NetSpeak has developed a core communications technology which addresses
the challenges associated with real-time interactive voice transmission over
packetized data networks. NetSpeak's technology surmounts the difficulties
inherent in real-time interactive voice transmissions in the packetized data
network environment and permits the integration into this environment of
features commonly found in traditional voice transmission networks, as well as
enabling the concurrent voice, video and data transmission over packetized data
networks, thereby expanding the functionality of packetized data networks. For
example, NetSpeak's core communications technology will permit a call placed
over the Internet to the service department of a customer to be transferred from
the Internet to the customer's LAN, route the call to the next available service
agent, provide the service agent with information regarding the call and
transfer the call to the customer's PBX for answer by the service agent.
NetSpeak's technology also facilitates the concurrent transmission of voice and
data over a packetized data network. NetSpeak's core communications technology
is the platform utilized in all of NetSpeak's products and systems. Among other
features and functions, NetSpeak's core communications technology:
/bullet/ permits encrypted, two-way voice transmission. NetSpeak's
software manages different types of information streams, using
different priorities, to optimize use of available bandwidth
capacity, while providing the most sensitive applications such
as voice transmission with first priority to that capacity,
thereby minimizing the choppiness typically associated with
voice transmission over packetized data
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networks. Encryption allows for secure communications even
over packetized data networks, such as the Internet;
/bullet/ allows users to connect to other users in a point-to-point
fashion, rather than through an intermediate routing
mechanism. NetSpeak's intelligent virtual switching technology
implements a patent-pending technique for address resolution
which translates circuit switching addresses to IP network
addresses, thereby eliminating the need to know an end-user's
packetized network address;
/bullet/ provides dynamic and fixed IP address mixing which can create
networks that carry traffic from both fixed-address networks
such as a LAN and dynamically-assigned address networks such
as the Internet to form a seamless communications network (a
"network of networks") infrastructure. This infrastructure can
operate over any physical network that support the IP
protocol;
/bullet/ uses a common object-oriented code base that allows the
technology to be integrated into other Netspeak and third
party products;
/bullet/ operates on multiple operating systems and can be ported to
various operating platforms; and
/bullet/ can be embedded in firmware, including portable and handheld
devices.
NetSpeak is conducting ongoing research and development to further
enhance its core technology, such as developing the plug-and-play processes that
allow for the addition of new software components such as voice and video
codecs, encryption "engines", animation controllers, user interfaces and
communications protocols, and providing dynamic swapping of these components.
NETSPEAK'S STRATEGY
The Company's goal is to use its core communications technology to
become an industry leader in providing business solutions for concurrent
real-time interactive voice transmission over packetized data networks while
seemlessly integrating the features and functions of existing voice transmission
networks into the packetized data networking environment. The Company's strategy
includes the following key elements:
ESTABLISH STRATEGIC ALLIANCES TO FACILITATE TECHNOLOGICAL ACCEPTANCE
In order to facilitate and accelerate the acceptance of NetSpeak's
technology, as well as enhance marketing and distribution of its products and
systems, the Company has established a number of strategic alliances with
various telecommunications and computer industry leaders. Pursuant to these
agreements, either the Company's technology is integrated into products which
are marketed by its strategic partners or the Company' s products and systems
are marketed and distributed by its strategic partners through various
distribution channels. The Company believes
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that these strategic alliances also offer access to its partners' leading edge
technologies. To date, the Company has established strategic alliances with
Motorola, Creative, Rockwell and Infonet and intends to seek to establish
additional strategic alliances.
EXPAND INTERNAL MARKETING AND SALES EFFORTS
The Company has recently hired a Vice President of Marketing to develop
an infrastructure to facilitate distribution of the Company's technology,
products and services. The Company is presently developing an in-house sales
force and expanding its direct marketing and sales efforts to end-users,
including telephone companies, cable companies and other common carriers, large
business enterprises, ACD manufacturers and other OEMs, and governmental and
educational entities, as well as to SIs, VARs and other distributors.
EDUCATE THE MARKETPLACE
Given the historical use of different infrastructures for voice and
data transmission, NetSpeak believes that it needs to educate its potential
customer base on how its core communications technology can facilitate the
consolidation of these infrastructures by integrating capabilities and features
commonly found in traditional voice transmission networks into the packetized
data network environment. The Company intends to expand the number of marketing
programs it conducts in this regard, including advertising in trade journals and
similar media, attendance at industry trade shows and direct mail campaigns. In
addition, the Company has been and continues to be involved in industry wide
standard setting bodies, such as the Massachusetts Institute of Technology's
("MIT") ITC (Internet Telephony Interoperability Consortium) consortium, VoIP
(Voice on IP) forum, IMTC (Interoperable Multimedia Teleconference), and VON
(Voice on the Net) Coalition.
CONTINUE RESEARCH AND DEVELOPMENT
The Company intends to extend the functionality and uses of its core
communications technology by continuing to invest in research and development.
The Company believes that it can further improve its technology which will allow
it to enhance its existing product applications as well as develop new
applications.
PRODUCTS AND SYSTEMS
NetSpeak's products and systems consist of four principal groups:
gateway products, business systems, server software and client (or end-user)
software products. NetSpeak's products and systems combine its various
intelligent software modules to provide applications that furnish each
particular product's desired features and functions.
GATEWAY PRODUCTS
Gateway products are designed as transition points between two
different network types, such as between the PSTN and the Internet. Gateway
products convert regular voice transmission
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to or from the compressed data packets that travel over packetized data
networks. Gateway products can be used to bring packetized voice transmission
into existing voice transmission networks such as a PBX or translate voice from
the voice transmission network to a user's Intranet.
WebPhone Gateway eXchange ("WGX") is NetSpeak's initial gateway
product. NetSpeak has developed two versions of the WGX, which differ primarily
in the types of interfaces they provide to the PSTN, the manner in which voice
compression is performed, and the maximum number of simultaneously supported
connection ports. The initial version of the WGX, the WGX-M, is PC-based,
provides standard analog interfaces to the PSTN network and is offered in sizes
up to 16 voice channels (ports). A second version, the WGX-MD, is PC-based,
provides digital T1 interface to the PSTN network, and is offered in sizes up to
24 ports. NetSpeak is also developing the WGX-L series. This series is based on
a NetSpeak proprietary hardware design which will provide digital T1 interfaces
to the voice network and will be offered in sizes up to 96 ports. The WGX-L
series will be designed to meet stringent central office requirements for
telephone company networks and offer a number of other systems management and
remote operations, administration and maintenance features.
BUSINESS SYSTEMS
NetSpeak's business systems consist of two product subgroups: call
center systems and PBX systems.
CALL CENTER SYSTEMS. Call center systems are generally used by customer
service departments within corporations for a wide variety of communications
functions, such as sales, service and technical support between such companies
and their customers. Call center systems route calls to individual customer
service agents based on factors such as agent skills or agent call volume, and
provide the agents with information about incoming calls in order to facilitate
customer interaction. In NetSpeak's call center systems, agents answer calls by
using NetSpeak's Agent WebPhone client software products that are running in
their individual PCs. Call center systems are high-visibility, traffic intensive
application environments, and therefore are usually much higher in cost than
simple business telephone systems. NetSpeak's call center systems can be
integrated with existing ACDs to provide voice transmission over a customer's
existing packetized data network without the need for significant upgrading of
the network infrastructure and ultimately can provide a customer with a
software-based solution to its call center requirements.
NetSpeak's call center systems consist of:
The WebPhone Automatic Call Distributor - Internet Attachment is the
basic component of this system and allows a user to integrate Internet-based
telephony with its existing circuit switched ACD. This system enables a call
center agent to know to which incoming-line on the existing ACD a specific
Internet voice call has been directed and forwards certain information to the
next available agent. With this information, the agent can use the NetSpeak's
WebPhone client software product running in its local PC to retrieve additional
information about the
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incoming caller. This capability provides more information about the caller than
existing circuit switched ACDs.
The WebPhone Virtual ACD allows a customer to construct a call center
entirely in a packetized data network environment utilizing only a PC as the
call center agent's user interface. The system allows for transmission of voice
and video based calls.
The WebPhone Enterprise ACD is a tool for facilitating the development
of the next generation of call centers. It integrates the capabilities of the
WebPhone Virtual-ACD with the power of WGX for translating calls from the PSTN
and converting them to packetized voice for distribution to an agent's PC. As a
result, all caller traffic arrives at the agent's desktop as packetized voice,
whether originated over the Internet, the user's Intranet or the PSTN, and all
caller information is presented to the agent in a uniform format.
In addition, the Company is developing the WebPhone ACD-CTx. This
system will offer customized computer telephony interfaces between NetSpeak's
WGX and the customer's existing circuit switched ACD. ACDs, including most
telephone company Centrex-based ACD service offerings, require a specialized CTx
interface to integrate a NetSpeak system. The WebPhone ACD-CTx will preserve the
existing integral skills-based routing and other ACD vendor-specific value-added
functions, while integrating IP-delivered calls with regular PSTN calls.
PBX SYSTEMS. PBX Systems are the basic business telephone systems which
service multiple users in an organization where employees need to communicate
with each other, as well as with persons outside the organization. NetSpeak's
PBX systems provide existing circuit switch PBX systems the ability to
communicate with NetSpeak WebPhone client software anywhere on a packetized data
network by bringing voice traffic from the PSTN into a NetSpeak PBX-based
system, and carrying all voice, video and data communication to every user in a
common packetized digital format.
NetSpeak's PBX systems currently consist of:
The WebPhone Virtual PBX allows a business to construct an in-house
voice network which delivers packetized voice to every PC. All calls between
users are carried over the packetized data network and there is no need to
install and maintain separate voice network wiring or separate databases of
information relative to individual users and their locations.
The WebPhone Enterprise PBX combines the WebPhone Virtual PBX and WGX
to create an integrated system that allows voice traffic coming from the PSTN,
as well as voice traffic coming from packetized data networks, to be integrated
and delivered over the customer's existing network infrastructure to individual
end-users logged on to NetSpeak's WebPhone client software products.
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SERVER SOFTWARE
All key NetSpeak software (i) controls the connection process between
users, (ii) manages network operations, (iii) coordinates billing, (iv) provides
value-added features and functions to the users and (v) is designed to run on
PCs or larger workstation-type systems utilizing the Microsoft Windows NT
operating system. Since many networks need high levels of reliability, such as
common carrier networks, NetSpeak has incorporated certain contingency features
into its software such as enabling its server software to permit multiple copies
to run concurrently on the same network.
NetSpeak's various software modules can be combined to construct
various types of voice transmission networks. These software modules include the
Global Information Server, which is responsible for finding the destination
party and coordinating the connection between users; the Control Center module,
which is the management control software for all of NetSpeak's products; the
DataBase Services module, which acts as an "event management utility" for
distributing activity messages relating to billing and other operations events;
and the ACD Server module, which is the key to NetSpeak's call center systems. A
variety of other support modules are under development, including the Credit
Processing Server, that is used for real-time collection and customer account
management and an Interactive Voice Response Server module which will guide a
caller through a series of information steps.
CLIENT SOFTWARE PRODUCTS
NetSpeak's client or end-user software products include the standard
NetSpeak WebPhone, NetSpeak's Internet telephone software product, which was the
first NetSpeak client product on the market. WebPhone, winner of PC Magazines'
Editor's Choice (October 8, 1996) award, is the basis of all other NetSpeak
client software products including the Business WebPhone and the Agent WebPhone,
which are key components of NetSpeak's PBX and call center systems. NetSpeak's
other client software products include the Mini-WebPhone, a minimum-function
telephone which can be quickly downloaded by the end-users of a NetSpeak ACD
system and the Virtual WebPhone, which is integrated into the NetSpeak WGX and
is responsible for maintaining the connection with other WebPhones. In order to
maximize the amount of caller information provided to agents, the Company is
developing additional agent software which is designed to be used in conjunction
with NetSpeak's call center systems.
STRATEGIC ALLIANCES
In order to facilitate and accelerate the acceptance of NetSpeak
technology as well as enhance the marketing and distribution of its products and
systems, the Company has established a number of strategic alliances with
various telecommunications and computer industry leaders. Under these
agreements, either the Company's technology is integrated into products which
are marketed by its strategic partners or the Company's products and systems are
marketed and distributed by its strategic partners through the various
distribution channels currently utilized by such partners. The Company believes
that these strategic alliances also offer access to its partners' leading edge
technologies, as well as insights into market trends and product
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development. The Company intends to seek additional strategic alliances.
Companies with which NetSpeak is currently participating in a strategic alliance
include:
MOTOROLA
In August 1996, the Company established a strategic alliance with
Motorola, as part of which Motorola made a minority investment in the Company.
In connection with the investment by Motorola, the Company granted to Motorola a
right of first negotiation on licenses of NetSpeak's technology as it applies to
the cellular and cable communications industries. A designee of Motorola serves
on the Company's Board of Directors. See "Management-Directors and Executive
Officers" and "Certain Transactions".
Motorola has become a customer of the Company and is conducting a
number of end-user test trials of systems that combine the Company's technology,
products and systems with those of Motorola.
CREATIVE
Beginning in June 1996, the Company entered into a strategic alliance
with Creative, producer of the Sound Blaster family of products and one of the
world's leaders in the manufacture and distribution of audio cards and
multimedia computer peripherals. Pursuant to the agreements between NetSpeak and
Creative, Creative made a minority investment in the Company and the Company
granted Creative a worldwide license to market, distribute and bundle an
Internet telephone based on the Company's WebPhone client software product under
the Creative brand name in the retail distribution channel. The Company received
a fixed license fee upon execution of the agreement and will receive a fixed
royalty for each copy of the full version Internet telephone software products
sold at retail by Creative. NetSpeak and Creative subsequently expanded their
relationship to include a license granted on a royalty-free basis by Creative to
NetSpeak for Creative's video codec technology for a period to be coterminous
with the WebPhone technology license which was granted to Creative by the
Company. NetSpeak and Creative are also jointly developing other
Internet-related applications which use both the Company's and Creative's
proprietary technology in such areas as radio broadcast.
ROCKWELL
In August 1996, the Company established a strategic alliance with
Rockwell, an industry leader in medium to high end ACD systems. As part of this
alliance, the Company's gateway products and ACD systems are being integrated
into Rockwell ACD systems. The integration of NetSpeak's technology into
Rockwell ACD systems will enable call center agents to receive real-time voice
and data information transmitted from customers' voice-enabled web pages.
NetSpeak and Rockwell are cooperating on the marketing of these systems and both
companies have agreed to explore the joint development of a software solution
for the low-end ACD market.
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<PAGE>
INFONET
Beginning in November 1996, the Company entered into a strategic
alliance with Infonet, one of the largest commercial data network carriers in
the world. Pursuant to such alliance, the Company will integrate its technology
with Infonet's existing global data network to enhance concurrent voice and data
transmission over the network. In addition, Infonet has and is expected to
continue to purchase the Company's products in connection with the ongoing
operation of its voice enabled data network.
MARKETING AND SALES
The principal target market for NetSpeak's products and systems
encompasses a wide variety of end-users, such as telephone companies, cable
companies and other common carriers, large business entities, ACD manufacturers
and other OEMS, and governmental and educational entities, as well as SIs, VARs
and other distributors.
In addition to marketing its products and systems with its strategic
partners, NetSpeak has begun to market its products directly to end-users and
distributors. To date, such marketing efforts primarily have been limited to
direct contacts with a number of these customers. NetSpeak is also marketing its
WebPhone client software products over the Internet, by advertising in computer
periodicals, and through distribution agreements with over 700 ISPs worldwide.
The Company has recently hired a Vice President of Marketing to develop
an infrastructure to facilitate distribution of the Company's technology,
products and production systems. NetSpeak is developing an in-house sales force
in order to focus its sales efforts on direct sales to end-users and
distributors. NetSpeak intends to divide its in-house sales force into groups,
each of which will focus on one or more categories of potential customers. In
addition to direct contact with potential customers, in-house marketing and
sales efforts will include direct mail, advertising, and other marketing
campaigns and attendance at industry trade shows, which in addition to
generating sales, are intended to educate potential customers as to the
features, functionality, cost effectiveness and other benefits of NetSpeak's
technology, products and systems. In addition, the Company's site on the World
Wide Web will permit prospective customers to obtain information about its
products and services, download software for evaluation and order certain
products. The Company intends to continue to intensify and expand its marketing
and sales efforts and, as a result, intends to significantly increase marketing
and sales expenses in future periods.
CUSTOMER SERVICE AND SUPPORT
NetSpeak is committed to maintaining customer satisfaction and loyalty.
As of December 31, 1996, NetSpeak employed 18 technical representatives to
support and service its customer base. The Company intends to hire additional
technical customer representatives to support the expected increase in its
installed base for its business products, such as gateway products and
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business systems. The Company also provides back-up support with respect to
NetSpeak technology, products and systems marketed by its strategic partners.
The Company maintains a technical support hotline to answer customer
inquiries and provides an on-line database of technical product information. The
Company's support staff also responds to e-mail inquiries and monitors several
e-mail mailing lists. Customer support specialists diagnose and solve technical
problems related not only to the Company's products and systems but also to
other hardware and software with which the Company's products and systems may be
integrated. The Company tracks all support requests, through a series of
customer databases, including current status reports and historical customer
interaction logs. The Company uses customer feedback as a source of ideas for
product application improvements and enhancements.
The Company intends to provide maintenance for all of its business
systems through a program of periodic technical upgrades. The price of a
NetSpeak business system includes 90 days of maintenance service. For a fee, the
Company will provide extended maintenance services to its business systems
customers and to certain volume purchasers of its client software products.
RESEARCH AND DEVELOPMENT
The market for the Company's products is characterized by rapidly
changing technology, evolving industry standards, and frequent new product
introductions. Management believes that the Company's future success depends in
large part upon its ability to continue to enhance the functionality and uses of
its core technology. The Company believes that it can further improve its
technology which will allow it to enhance its existing products applications as
well as develop new applications.
The Company intends to be involved in the review and establishment of
industry standards by actively participating in standard setting bodies such as
MIT's ITC (Internet Telephony Interoperability Consortium) consortium, VoIP
(Voice on IP) Forum, IMTC (Interoperable Multimedia Teleconference) and VON
(Voice on the Net) Coalition.
The Company currently conducts the majority of its product development
efforts in-house. The Company also employs independent contractors, to a limited
degree, to assist with certain product development and testing activities and
intends to work with its strategic partners with a view to enhancing its
products. The Company has aggressively expanded its Research and Development
group from six software engineers as of December 31, 1995 to 23 software
engineers and support staff as of December 31, 1996. In 1996 and 1995 the
Company's research and development expenditures were approximately $2.3 million
and $200,000 respectively. All of the Company's research and development costs
have been expensed as incurred, including purchased research and development of
$566,982 in connection with the acquisition of ITC. The Company intends to
significantly increase research and development expenses in future periods to
perform product enhancements and new product development in order to seek to
establish and maintain a competitive advantage.
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<PAGE>
COMPETITION
The Company is unaware of any other company which competes directly
with the entire spectrum of products and systems it offers. The Company does,
however, face competition for each of its individual products and systems. The
Company competes with companies such as Vienna Systems, Lucent and VocalTec with
respect to its gateway products. Principal competitors for NetSpeak's
software-based business systems include companies such as Lucent. In the market
for client software products, the Company competes with VocalTec, Microsoft and
Intel, among others.
The Company believes that the principal competitive factors affecting
its potential success include development; time-to-market; product features,
such as flexibility, scalability, interoperability, functionality and ease of
use; as well as product/vendor reputation, quality, performance, price, customer
service and support, and the overall effectiveness of its sales and marketing
efforts.
The Company may also face further competition in all market segments
from companies in the telecommunications and computer industries which decide to
develop and market competitive technology, products or systems. Many of the
Company's current and potential competitors have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. In addition, the
Company competes with manufacturers of hardware-based business systems. Certain
of these competitors may be existing or potential strategic partners.
GOVERNMENT REGULATION
At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhance the risk that the governments of the United States
and other countries in which the Company sells or expects to sell its products
will seek to regulate computer telephony and the Internet with respect to, among
other things, user privacy, pricing, and the characteristics and quality of
products and services. The Company is unable to predict the impact, if any, that
future legislation, legal decisions or regulations may have on its business,
financial condition or results of operations.
In March 1996, the ACTA, a group of telecommunications common carriers,
filed the ACTA Petition with the FCC arguing that providers (such as the
Company) of computer software products that enable voice transmission over the
Internet (Internet "telephone" services) are operating as common carriers
without complying with various regulatory requirements and without paying
certain charges required by law. The ACTA Petition argues that the FCC has the
authority to regulate both the Internet and the providers of Internet
"telephone" services and requests that the FCC declare its authority over
interstate and international telecommunications services using the Internet,
initiate rule-making proceedings to consider rules governing the use of the
Internet for the provision of telecommunications services, and order providers
of Internet "telephone" software to immediately cease the sale of such software.
Any action by the FCC
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to grant the relief sough by ACTA or otherwise to regulate use of the Internet
as a medium of communication, including any action to permit local exchange
carriers to impose additional charges for connections used for Internet access,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
PATENTS AND PROPRIETARY RIGHTS
The Company generally relies upon patent, copyright, trademark and
trade secret laws to protect and maintain its proprietary rights for its
technology and products. The Company has filed nine U.S. utility patent
applications, seven U.S. provisional patent applications and one Patent
Cooperation Treaty patent application relating to various aspects of its
technology. Several additional patent applications are currently being prepared.
The Company expects to routinely file patent applications, as deemed appropriate
to protect its technology and products.
Elk Industries has asserted, in a letter to NetSpeak, just prior to the
November 1996 expiration of U.S. Patent No. 4,128,773, owned by Elk Industries,
that the Company's WebPhone client software product infringed the now expired
patent. The Company sought advice of counsel relating to the infringement
allegations, which Elk Industries has asserted against other software concerns,
and believes, based upon an opinion of counsel, the Company's WebPhone client
software product does not infringe the asserted patent.
Litigation, which could be costly and time consuming, may be necessary
to determine the scope and validity of others' proprietary rights, or to enforce
any patents issued to the Company, in either case, in judicial or administrative
proceedings. An adverse outcome could subject the Company to significant
liabilities to third parties, require the Company to obtain licenses from
third-parties, or require the Company to cease product sales and possibly alter
the design of the products. There can be no assurance that any licenses required
under any third-party patents or proprietary rights would be made available on
acceptable terms, if at all. In addition, the laws of certain countries may not
protect the Company's intellectual property.
To help protect its rights, the Company currently requires employees,
consultants and strategic partners to enter into confidentiality agreements that
prohibit disclosure of the Company's proprietary information. The Company also
currently requires employees and consultants to assign to it their ideas,
developments, discoveries and inventions.
NetSpeak has entered into an agreement with one customer requiring the
Company to place its source code in escrow. This agreement provides that the
customer will have a limited, non-exclusive right to use such code in the event
that there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business or if the Company fails to meet its support obligations.
The Company may enter into similar agreements in the future which may increase
the likelihood of misappropriation by third parties.
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<PAGE>
EMPLOYEES
As of December 31, 1996, the Company employed 56 persons, including 41
in engineering and support and 15 in sales, marketing and administration. The
Company considers its relations with its employees to be satisfactory.
Competition for technical personnel in the Company's industry is
intense. The Company believes that it has been successful in recruiting
qualified employees, but there is no assurance that it will continue to be as
successful in the future. The Company believes that its future success depends
in part on its continued ability to hire, assimilate and retain qualified
personnel.
FACILITIES
The Company occupies approximately 10,000 square feet of space in Boca
Raton, Florida, which it leases at an annual rental of $132,565. The initial
term of the lease for the Company's facility expires on January 30, 2000. The
Company believes that existing facilities are adequate for its needs through at
least the end of 1997. Should the Company require additional space at that time
or prior thereto, it believes that such space can be secured on commercially
reasonable terms and without undue operational disruption.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the directors and
executive officers of the Company:
NAME AGE POSITION
---- --- --------
Stephen R. Cohen 54 Chairman of the Board and
Chief Executive Officer
Robert Kennedy 48 President, Chief Operating Officer and Director
Shane D. Mattaway 40 Executive Vice President,
Chief Technical Officer and Director
John W. Staten 30 Chief Financial Officer and Assistant Secretary
Steven F. Mills 42 Vice President of Marketing
Harvey Kaufman 65 Executive Vice President, Secretary and Treasurer
Steven D. Leeke 35 Director
L. Richard Mattaway 50 Director
A. Jeffry Robinson 54 Director
STEPHEN R. COHEN has served as Chairman of the Board and Chief
Executive Officer of the Company since December 1995. From 1975 until January
1995, Mr. Cohen served as Chairman of the Board of TPI Enterprises, Inc.,
formerly Telecom Plus International, Inc. ("TPI"). Under Mr. Cohen's
stewardship, TPI grew from a small, local telephone interconnect company with
approximately $1,000,000 in revenue in 1975 to become the largest independent
supplier of telecommunications equipment in the United States, with over $300
million in revenue in 1987. Mr. Cohen also oversaw the expansion of TPI's
operations into other segments of the telecommunications industry, including
cellular operations, radio common carrier paging and telecommunications software
development. In 1987, TPI sold its core telecommunications business to Siemens
AG ("Siemens"), who had been TPI's joint venture partner since 1984. Following
the sale to Siemens, Mr. Cohen oversaw the redeployment of TPI's assets into new
businesses including restaurants and movie theaters. Mr. Cohen retired from TPI
in January 1995.
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<PAGE>
ROBERT KENNEDY has served as a director of the Company since December
1995 and became its President and Chief Operating Officer in March 1996. Mr.
Kennedy has over 20 years experience in the telecommunications industry. From
1976 until joining NetSpeak, Mr. Kennedy served in a number of executive
positions at TPI, including Vice President of Sales and Marketing from 1976 to
1985 and as Executive Vice President since 1985. In the latter capacity, Mr.
Kennedy was responsible for sales, marketing, strategic planning, product
development and overall profit responsibility for a number of TPI's operating
subsidiaries. Mr. Kennedy also served as a member of TPI's Board of Directors
from 1984 to 1993 and as its Executive Vice President to March 1996.
SHANE D. MATTAWAY co-founded ITC in May 1995 and became the Company's
Executive Vice President, Chief Technical Officer and a director upon the
Company's acquisition of ITC in December 1995. For approximately 10 years prior
to founding ITC, Mr. Mattaway was the founder and President of Boca Development,
a computer consulting and software development firm. Mr. Mattaway has also
served as an Adjunct Professor in Computer Science at the University of Miami,
Florida International University and Florida Atlantic University.
JOHN W. STATEN joined NetSpeak as its Chief Financial Officer and
Assistant Secretary in February 1996. From 1990 to January 1996, Mr. Staten was
employed by Deloitte & Touche LLP, a public accounting firm, most recently as
Manager focusing on the retail and technology sectors.
STEVEN F. MILLS joined NetSpeak as Vice President of Marketing in
October 1996. From April 1995 to October 1996, Mr. Mills was employed by Boca
Research, Inc., a developer and manufacturer of modems, most recently as Vice
President of Business Development. From January 1994 to April 1995, Mr. Mills
was employed by General DataCom Services, as Assistant Vice President of
Transmission Products. Prior to General DataCom, Mr. Mills was employed by
Primary Access Corp. from 1991 to January 1994 serving in various capacities.
HARVEY KAUFMAN has served as Executive Vice President, Secretary and
Treasurer of NetSpeak since December 1995. Mr. Kaufman has over 25 years of
expertise in the telecommunications industry. He joined TPI in 1979 as Vice
President of Strategic Planning with additional responsibilities for
Applications Engineering and Product Management. Upon the sale of TPI's core
telecommunications business to Siemens in 1987, Mr. Kaufman joined Siemens as
Executive Director of Marketing for Siemens Information Systems and subsequently
served as Vice President of Product Management and Applications Engineering and
Director for Advanced Systems and Applications. Mr. Kaufman retired from Siemens
in October 1995.
STEVEN D. LEEKE was appointed to the Company's Board of Directors in
November 1996 as the designee of Motorola. Mr. Leeke is currently the Director
and General Manager of Internet Content and Service Businesses within Motorola
New Enterprises. He joined Motorola in March 1995 as Director of Strategy for
New Enterprises. In 1988 he joined Texas Instruments: first as a member of their
Corporate Research Development & Engineering Department; then as Branch Manager,
Production Management Decision Systems; and finally
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as Manager of Strategic Development, Semiconductor Group Research & Development,
reporting to the Chief Technical Officer. See "Certain Transactions."
L. RICHARD MATTAWAY co-founded ITC in May 1995 and has served as a
director of the Company since the acquisition of ITC in December 1995. For
approximately the past 15 years Mr. Mattaway has been engaged in real estate
development in South Florida. Prior thereto, Mr. Mattaway was a practicing
attorney in Miami, Florida.
A. JEFFRY ROBINSON has served as a director of NetSpeak since December
1995. Since April 1996, Mr. Robinson has been a partner in the Miami law firm of
Broad & Cassel, the Company's counsel, specializing in corporate and securities
matters. From March 1992 until April 1996, Mr. Robinson was a shareholder in the
Miami law firm of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
Shane D. Mattaway and L. Richard Mattaway are brothers. There are no
other family relationships among the Company's directors and executive officers.
Directors of the Company hold their offices until the next annual
meeting of the Company's shareholders and until their successors have been duly
elected and qualified or their earlier resignation, removal from office or
death. There are no committees of the Board of Directors. Upon consummation of
this Offering, the Company intends to establish an audit and compensation
committee, consisting of a majority of independent directors.
Officers of the Company serve at the pleasure of the Board of Directors
and until the first meeting of the Board of Directors following the next annual
meeting of the Company's shareholders and until their successors have been
chosen and qualified.
DIRECTOR COMPENSATION
The Company currently does not pay cash compensation to non-employee
directors. Following consummation of this Offering, the Company intends to pay
non-employee directors a fee of $1,000 per meeting of the Board of Directors or
committee thereof attended and to provide non-employee directors with annual
grants of stock options under the 1995 Plan to purchase 5,000 shares of Common
Stock. Directors are reimbursed for travel and lodging expenses in connection
with their attendance at meetings. In January 1996, each of L. Richard Mattaway
and A. Jeffry Robinson were granted ten-year options under the 1995 Plan to
purchase 75,000 shares of Common Stock at a price of $2.50 per share.
INDEMNIFICATION AGREEMENTS
The Company has entered into an indemnification agreement with each of
its directors and executive officers. Each indemnification agreement provides
that the Company will indemnify such person against certain liabilities
(including settlements) and expenses actually and by him or her in connection
with any threatened or pending legal action, proceeding or investigation (other
than actions brought by or in the right of the Company) to which he or she
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is, or is threatened to be, made a party by reason of his or her status as a
director, officer or agent of the Company, provided that such director or
executive officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company and, with
respect to any criminal proceedings, had no reasonable cause to believe his or
her conduct was unlawful. With respect to any action brought by or in the right
of the Company, a director or executive officer will also be indemnified, to the
extent not prohibited by applicable law, against expenses and amounts paid in
settlement, and certain liabilities if so determined by a court of competent
jurisdiction, actually and reasonably incurred by him or her in connection with
such action if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for
1996 received by the Chief Executive Officer (the "CEO") and the only other
executive officer whose annual salary and bonus exceeded $100,000 during 1996
(collectively with the CEO, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER ANNUAL SECURITIES
SALARY BONUS COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) OPTIONS (#)(2)
- --------------------------- ---- --- --- ------ --------------
<S> <C> <C> <C> <C> <C>
Stephen R. Cohen 1996 43,080 -- 1,662 300,000
Chairman of the Board and CEO
Shane D. Mattaway 1996 109,171 -- 1,662 100,000
Executive Vice President
and Chief Technical Officer
<FN>
- -------------------------
(1) Represents a car allowance of $600 per month.
(2) Represents options to purchase Common Stock granted to the Named Executive
Officer under the 1995 Plan.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
Effective October 1996, the Company entered into employment agreements
with Stephen R. Cohen, the Company's Chairman and Chief Executive Officer,
Robert Kennedy, the Company's President and Chief Operating Officer, Shane D.
Mattaway, the Company's Executive Vice President and Chief Technical Officer,
John W. Staten, the Company's Chief Financial Officer and Harvey Kaufman, the
Company's Executive Vice President and Secretary. The employment agreements have
"rolling" two year terms, so that at all times the remaining term of the
agreement is two years. The employment agreements provide for annual salaries
initially set at $175,000, $150,000, $125,000, $90,000 and $75,000 for Messrs.
Cohen, Kennedy, Mattaway, Staten and Kaufman respectively.
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<PAGE>
Each employment agreement provides that the executive officer who is a
party thereto (the "Executive Officer") will continue to receive his salary for
a period of two years after termination of employment, if his employment is
terminated by the Company for any reason other than death, disability or Cause
(as defined in the employment agreement), or for a period of 12 months after
termination of the agreement as a result of the Executive Officer's disability,
and the Executive Officer's estate will receive a lump sum payment equal to one
year's salary plus a pro rata portion of any bonus to which the Executive
Officer is entitled upon termination of the employment agreement by reason of
the Executive Officer's death. Each employment agreement also prohibits the
Executive Officer from directly or indirectly competing with the Company for one
year after termination for any reason except a termination without Cause. If a
Change of Control (as defined in the employment agreement) occurs, the
employment agreement provides for the continued employment of the Executive
Officer for a period of two years following the Change of Control. In addition,
following the Change of Control, if the Executive Officer's employment is
terminated by the Company other than for Cause or by reason of the Executive
Officer's death or disability, or by the Executive Officer for certain specified
reasons (such as a reduction of compensation or a diminution of duties), the
Executive Officer will receive a lump sum cash payment equal to 200% of the cash
compensation received by the Executive Officer during the 12 calendar months
prior to such termination.
The Company is also party to a two year employment agreement with
Steven F. Mills expiring in October 1998. The term of Mr. Mills' employment
agreement will automatically be extended for successive one-year terms unless
the Company or Mr. Mills gives written notice of its or his, respectively,
intent not to extend such agreement to the other party at least 60 days prior to
the then scheduled expiration date. Mr. Mills' annual salary is initially set at
$120,000. Mr. Mills employment agreement contains confidentiality and
non-competition provisions.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during 1996 to any of the Named Executive Officers.
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<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
NUMBER OF SHARES % OF TOTAL OPTIONS EXERCISE OR OPTION TERMS($)(1)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
GRANTED (#)(1) IN FISCAL YEAR ($/SH) DATE 5% 10%
-------------- -------------- ------ ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Stephen R. Cohen 300,000 18.5 $2.50 1/24/06 $472,000 $1,195,000
Shane D. Mattaway 100,000 6.2 2.50 1/24/06 157,000 398,000
<FN>
- -------------------------
(1) Based upon the exercise price, which was equal to the fair market on the
date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represented
hypothetical gains that could be achieved for the options if exercised at
the end of the term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission (the "Commission") and do not represent the
Company's estimate or projection of the future stock price. Actual gains,
if any, are contingent upon the continued employment of the Named
Executive Officer through the expiration date, as well as being dependent
upon the general performance of the Common Stock. The potential
realizable values have not taken into account amounts required to be paid
for federal income taxes.
</FN>
</TABLE>
STOCK OPTIONS HELD AT END OF 1996
The following table indicates the total number and value of exercisable
and unexercisable stock options held by each of the Named Executive Officers as
of December 31, 1996. No options were exercised by any of the Named Executive
Officers during 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)
EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Stephen R. Cohen................ 300,000 0 $1,950,000 0
Shane D. Mattaway............... 250,000 0 1,850,000 0
<FN>
- -------------------------
(1) Based upon the assumed initial public offering price of $9.00 per share, less the applicable
exercise price.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee and all decisions
regarding executive compensation have been made by the Board of Directors as a
whole. See "Certain Transactions" with respect to the payment of legal fees to a
law firm of which A. Jeffry Robinson is a partner.
1995 STOCK OPTION PLAN
Under the 1995 Plan, as amended, an aggregate of 2,700,000 shares of
Common Stock are reserved for issuance upon exercise of options ("1995 Plan
Options"). 1995 Plan Options
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<PAGE>
are designed to serve as incentives for retaining qualified and competent
directors, employees, consultants and independent contractors of the Company.
The Company's Board of Directors, or a committee thereof, administers
and interprets the 1995 Plan and is authorized to grant 1995 Plan Options
thereunder to all eligible employees of the Company, including directors and
executive officers (whether or not employees) of the Company, as well as
consultants and independent contractors hired by the Company. The 1995 Plan
provides for the granting of both "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended) and nonstatutory
stock options. Incentive stock options may only be granted, however, to
employees. 1995 Plan Options can be granted on such terms and at such prices as
determined by the Board, or a committee thereof, except that the per share
exercise price of incentive 1995 Plan Options will not be less than the fair
market value of the Common Stock on the date of grant and, in the case of an
incentive 1995 Plan Option granted to a 10% shareholder, the per share exercise
price will not be less than 110% of such fair market value as defined in the
1995 Plan.
In accordance with the Internal Revenue Service Code, options granted
under the 1995 Plan that would otherwise qualify as incentive stock options will
not be treated as incentive stock options to the extent that the aggregate fair
market value of the shares covered by the incentive stock options which are
exercisable for the first time by any individual during any calendar year
exceeds $100,000.
1995 Plan Options will be exercisable after the period or periods
specified in the option agreement, provided, however, that incentive 1995 Plan
Options vest in three annual installments commencing one year from the date of
grant. 1995 Plan Options granted are not exercisable after the expiration of ten
years from the date of grant and are not transferable other than by will or by
the laws of descent and distribution. Adjustments in the number of shares
subject to 1995 Plan Options can be made by the Board of Directors or the
appropriate committee in the event of a stock dividend or recapitalization
resulting in a stock split-up, combination or exchange of shares. Under the 1995
Plan, options may become immediately exercisable in the event of a change in
control or approval by stockholders of the Company of a merger, reorganization,
liquidation, dissolution or disposition of all or substantially all of the
assets of the Company. The 1995 Plan also authorizes the Company to make loans
to optionees to enable them to exercise their options.
Non-statutory options to purchase an aggregate of 53,000 shares of
Common Stock previously granted under the 1995 Plan to various employees have
been exercised. As of the date of this Prospectus, the Company has 1995 Plan
Options outstanding to purchase an aggregate of 2,246,000 shares of Common Stock
at exercise prices ranging from $1.00 to $7.00. Of such options, 886,000 are
incentive stock options and 1,360,000 are non-statutory stock options.
-47-
<PAGE>
CERTAIN TRANSACTIONS
Upon incorporation of the Company in December 1995, the Company sold an
aggregate of 2,950,000 shares of Common Stock to various executive officers,
directors and advisors for an aggregate of $590,000, including 1,750,000 shares
to Stephen R. Cohen, 500,000 shares to Robert Kennedy, 250,000 shares to Harvey
Kaufman and 100,000 shares to each of L. Richard Mattaway and A. Jeffry
Robinson.
In December 1995, the Company acquired all of the issued and
outstanding capital stock of ITC by merger of ITC with a wholly-owned subsidiary
of the Company. As consideration for such, the Company issued an aggregate of
2,500,000 shares of Common Stock to the shareholders of ITC in exchange for all
of their ITC shares, including 1,000,000 shares to an affiliate of L. Richard
Mattaway and 850,000 shares to Shane D. Mattaway.
In connection with the establishment of a strategic alliance, in August
1996, Motorola made a minority investment in the Company pursuant to which it
purchased 769,853 shares of Common Stock and a warrant to purchase up to an
additional 452,855 shares of Common Stock at a price of $5.50 per share for a
six year period expiring in August 2002 for an aggregate of $4,234,191. In the
event the Company consummates the Offering or any other underwritten public
offering of its Common Stock at a price of at least $7.00 per share resulting in
the receipt by the Company of net proceeds of not less than $10,000,000, the
Company, at its option, upon not less than 20 business days' notice given prior
to the planned closing date of such public offering, may require Motorola to
exercise the Motorola warrant, provided, however, that within 15 business days
of receipt of the Company's notice, Motorola may elect to cancel the Motorola
Warrant unexercised. In addition, Motorola was granted the right to designate
one member of the Company's Board of Directors so long as Motorola and its
affiliates beneficially own 5% or more of the Company's outstanding Common
Stock.
A. Jeffry Robinson is a partner of the Miami, Florida law firm of Broad
and Cassel, which serves as counsel to the Company. The Company has paid legal
fees to Broad and Cassel for services rendered.
The Company has adopted a policy that any transactions between the
Company and its executive officers, directors, principal shareholders or their
affiliates take place on an arms-length basis and require the approval of a
majority of the independent directors of the Company.
-48-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the date of this Prospectus and
as adjusted after this Offering by (i) each of the shareholders of the Company
owning more than 5% of the outstanding shares of Common Stock; (ii) each
director of the Company; (iii) each of the Named Executive Officers; and (iv)
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER OF GROUP (1) BENEFICIALLY OWNED (2) PERCENTAGE OF CLASS
- ----------------------------- ---------------------- -------------------
BEFORE AFTER
OFFERING OFFERING
-------- --------
<S> <C> <C> <C>
Stephen R. Cohen(3) 2,000,000 25.0% 20.0%
Robert Kennedy(4) 760,000 9.5 7.6
Shane D. Mattaway(5) 1,078,000 13.6 10.8
Steven D. Leeke(6) -0- -0- -0-
L. Richard Mattaway(7) 675,000 8.7 6.9
A. Jeffry Robinson(8) 175,000 2.3 1.8
All directors and executive
officers as a group (nine persons)(9) 4,994,667 57.3 46.6
5% OR GREATER HOLDERS
Motorola, Inc.
1303 E. Algonquin Road
Schaumburg, Illinois 60196(10) 1,222,708 15.0 12.0
Garmarin Investments, Ltd. 500,000 6.5 5.2
c/o CIBC Bank and Trust
Company (Cayman) Limited
P.O. Box 694GT
Edward Street
Grand Cayman, Cayman Islands
Glenn Hutton 500,000 6.5 5.2
9725 Hammock Boulevard
Suite 206
Miami, Florida 33196
<FN>
- -------------------------
(1) Except as indicated, the address of each person named in the table is c/o
NetSpeak, 902 Clint Moore Road, Suite 104, Boca Raton, Florida 33487.
(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed, which include shares of Common Stock that such persons have the
right to acquire a beneficial interest within 60 days from the date of
this Prospectus.
-49-
<PAGE>
(3) Includes 300,000 shares of Common Stock issuable upon the exercise of
stock options.
(4) Includes 250,000 shares of Common Stock issuable upon the exercise of
stock options and 10,000 shares of Common Stock issuable upon the
exercise of stock options held by Mr. Kennedy's spouse.
(5) Includes 250,000 shares of Common Stock issuable upon the exercise of
stock options.
(6) Does not include the shares of Common Stock beneficially owned by
Motorola, in which shares Mr. Leeke disclaims beneficial ownership.
(7) Includes 400,000 shares of Common Stock held in a family limited
partnership, 100,000 shares of Common Stock held by an affiliated
corporation and 75,000 shares of Common Stock issuable upon the exercise
of stock options.
(8) Includes 75,000 shares of Common Stock issuable upon the exercise of
stock options.
(9) Includes (i) the shares of Common Stock described in notes (3) through
(8), (ii) 40,000 shares of Common Stock issuable upon the exercise of
stock options held by John W. Staten, and (iii) 250,000 shares of Common
Stock held by Harvey Kaufman and 16,667 shares of Common Stock issuable
upon the exercise of stock options held by Mr. Kaufman.
(10) Includes 452,855 shares of Common Stock issuable upon the exercise of the
Motorola Warrant.
</FN>
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 25,000,000
shares of Common Stock, par value $.01 per share, 9,698,532 shares of which will
be outstanding upon consummation of this Offering and (ii) 1,000,000 shares of
Preferred Stock, par value $.001 per share (the "Preferred Stock"), none of
which will be outstanding upon consummation of this Offering. As of the date of
this Prospectus, there were 100 holders of record of the Common Stock.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock that may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of shareholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. All outstanding shares of Common Stock are, and the shares of Common
Stock issuable upon exercise of the Investor Warrants, the Agent's Option and
the Agent's Warrants will be, when issued, fully paid and nonassessable.
-50-
<PAGE>
PREFERRED STOCK
The Company's Board of Directors has the authority to issue 1,000,000
shares of Preferred Stock in one or more series and to fix, by resolution,
conditional, full, limited or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights, if
any, and the qualifications, limitations or restrictions thereof, if any,
including the number of shares in such series (which the Board may increase or
decrease as permitted by Florida law), liquidation preferences, dividend rates,
conversion or exchange rights, redemption provisions of the shares constituting
any series and such other special rights and protective provisions with respect
to any class or series as the Board may deem advisable without any further vote
or action by the shareholders. Any shares of Preferred Stock so issued would
have priority over the Common Stock with respect to dividend or liquidation
rights or both and could have voting and other rights of shareholders. The
Company has no present plans to issue shares of Preferred Stock.
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in a "control share acquisition" will not possess any voting
rights unless such voting rights are approved by a majority of the corporation's
disinterested shareholders. A "control share acquisition" is an acquisition,
directly or indirectly, by any person of ownership of, or the power to direct
the exercise of voting power with respect to, issued and outstanding "control
shares" of a publicly held Florida corporation. "Control shares" are shares,
which, except for the Florida Control Share Act, would have voting power that,
when added to all other shares owned by a person or in respect to which such
person may exercise or direct the exercise of voting power, would entitle such
person, immediately after acquisition of such shares, directly or indirectly,
alone or as a part of a group, to exercise or direct the exercise of voting
power in the election of directors within any of the following ranges: (i) at
least 20% but less than 33-1/3% of all voting power; (ii) at least 33-1/3% but
less than a majority of all voting power; or (iii) a majority or more of all
voting power. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested shareholders of certain specified
transactions between a public corporation and holders of more than 10% of the
outstanding voting shares of the corporation (or their affiliates). Florida law
and the Company's Articles and Bylaws also authorize the Company to indemnify
the Company's directors, officers, employees and agents. In addition, the
Company's Articles and Florida law presently limit the personal liability of
corporate directors for monetary damages, except where the directors (i) breach
their fiduciary duties, and (ii) such breach constitutes or includes certain
violations of criminal law, a transaction from which the directors derived an
improper personal benefit, certain unlawful distributions or certain other
reckless, wanton or willful acts or misconduct.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer &
Trust Company, New York, New York.
-51-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 9,698,532
shares of Common Stock outstanding. Of these shares, the 2,000,000 shares of
Common Stock sold in this offering will be freely tradeable without restriction
under the Securities Act, except for any such shares which may be acquired by an
"affiliate" of the Company as that term is defined in Rule 144 under the
Securities Act (an "Affiliate"), which shares generally may be sold publicly
without registration under the Securities Act only in compliance with Rule 144.
In general, under Rule 144 as currently in effect, if a period of at
least two years has elapsed since the later of the date the "restricted shares"
(as that phrase is defined in Rule 144) were acquired from the Company and the
date they were acquired from an Affiliate, then the holder of such restricted
shares (including an Affiliate) is entitled to sell a number of shares within
any three-month period that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock or the average weekly reported volume of
trading of the Common Stock on the ________________________ during the four
calendar weeks preceding such sale. The holder may only sell such shares through
unsolicited brokers' transactions or directly to market makers. Sales under Rule
144 are also subject to certain requirements pertaining to the manner of such
sales, notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
shares in accordance with the foregoing volume limitations and other
requirements but without regard to the two-year holding period.
Under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted shares were acquired from the Company
and the date they were acquired from an Affiliate, as applicable, a holder of
such restricted shares who is not an Affiliate at the time of the sale and has
not been an Affiliate for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume limitations
and other conditions described above. The Securities and Exchange Commission
(the "Commission") has proposed reducing the holding periods under Rule 144 and
Rule 144(k) to one year and two years, respectively. There can be no assurance
as to when, if ever, such proposal will be adopted by the Commission.
The Company's executive officers and directors, and certain
shareholders who collectively own an aggregate of 7,698,532 shares of Common
Stock have agreed that they will not directly or indirectly, sell, offer,
contract to sell, make a short sale, pledge or otherwise dispose of any shares
of Common Stock (or any securities convertible into or exchangeable or
exercisable for any other rights to purchase or acquire Common Stock other than
shares of Common Stock issuable upon exercise of outstanding options) owned by
them, for a period of nine months after the date of this Prospectus, without the
prior written consent of Josephthal.
After the nine month period, 5,428,000 of the shares subject to the
sale restriction will be eligible for sale in the public market pursuant to Rule
144 under the Securities Act, subject to the volume limitations and other
restrictions contained in Rule 144. The remaining 2,270,532
-52-
<PAGE>
of such shares will become eligible for sale subject to the restrictions of Rule
144 at varying times from January 1998 to January 1999.
The Company has granted to Motorola and Creative certain demand and
piggy-back registration rights under the Securities Act, with respect to the
shares of Common Stock beneficially owned by them.
Prior to this Offering, there has been no market for the Common Stock
of the Company. The Company can make no predictions as to the effect, if any,
that sales of shares of Common Stock or the availability of shares of Common
Stock for sale will have on the market price prevailing from time to time.
Nevertheless, sales of significant amounts of shares of Common Stock in the
public market, or the perception that such sales may occur, could adversely
affect prevailing market prices.
-53-
<PAGE>
UNDERWRITING
The Underwriters named below, (the"Underwriters"), for whom Josephthal
Lyon & Ross Incorporated is acting as the Representative, have severally agreed,
subject to the terms and conditions of the Underwriting Agreement
(the"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of shares of Common Stock set forth below opposite their names:
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
Josephthal Lyon & Ross Incorporated......................
---------
Total........................................... 2,000,000
=========
The Underwriters are committed to purchase all the shares of Common
Stock offered hereby, if any of such shares are purchased. The Underwriting
Agreement provides that the obligations of the several Underwriters are subject
to the conditions precedent specified therein.
The Company has been advised by the Representative that the
Underwriters initially propose to offer the Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less concessions of not in excess of $______
per share of Common Stock. Such dealers may re-allow a concession not in excess
of $______ per share of Common Stock to other dealers. After the commencement of
the Offering, the public offering price, concession and reallowance may be
changed.
The Representative has advised the Company that they do not anticipate
sales to discretionary accounts by the Underwriters to exceed five percent of
the securities offered by the Company hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay the Representative an expense allowance on a non-accountable
basis equal to one and one-half percent of the gross proceeds of this Offering,
of which $35,000 has been paid to date.
The Underwriters have been granted an option by the Company,
exercisable within 30 days of the date of this Prospectus, to purchase up to an
additional 300,000 shares of Common Stock at the initial public offering price
per share of Common Stock offered hereby, less underwriting discounts and the
non-accountable expense allowance. Such option may be exercised solely for the
purpose of covering over-allotments, if any, incurred in the sale of the shares
offered hereby. To the extent such option is exercised, in whole or in part,
each
-54-
<PAGE>
Underwriter will have a firm commitment, subject to certain conditions, to
purchase the number of the additional shares of Common Stock proportionate to
its initial commitment.
Holders of 7,698,532 shares of the Company's Common Stock, including
each officer, director and principal stockholder of the Company, have executed
agreements pursuant to which they have agreed not to sell or otherwise dispose
of their shares for a period of nine months from the date of this Prospectus
without the prior written consent of Josephthal. An appropriate legend shall be
marked on the face of the certificates representing all of such securities.
Prior to the Offering, Josephthal was retained to provide financial
advisory services to the Company, such as the development of its business plan
to be used in anticipation of an offering of securities. In consideration for
such services, the Company has agreed to sell to Josephthal, for nominal
consideration, the Advisor's Warrants to purchase from the Company 200,000
shares of Common Stock. The Advisor's Warrants are initially exercisable at a
price per share equal to 120% of the initial public offering price for a period
of four years commencing one year after the date of this Prospectus and are
restricted from sale, transfer, assignment or hypothecation for a period of
twelve months from the date hereof, except to officers of Josephthal. The
Advisor's Warrants also provide for adjustment in the number of shares of Common
Stock issuable upon the exercise thereof as a result of certain subdivisions and
combinations of the Common Stock. The Advisor's Warrants grant to the holders
thereof certain rights of registration for the securities issuable upon exercise
of the Advisor's Warrants.
Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering for the Common Stock has been
determined by negotiations between the Company and the Representative and is
not necessarily related to the Company's asset value, net worth or other
established criteria of value. The factors considered in such negotiations, in
addition to prevailing market conditions, included the history of and prospects
for the industry in which the Company competes, an assessment of the Company's
management, the prospects of the Company, its capital structure and certain
other factors as were deemed relevant.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Broad and Cassel, a partnership including
professional associations, Miami, Florida. A. Jeffry Robinson, a partner of
Broad and Cassel is a director of the Company and owns 100,000 shares of Common
Stock and options to purchase 75,000 shares of Common Stock. Orrick, Herrington
& Sutcliffe LLP, New York, New York, has acted as counsel to the Underwriters in
connection with this Offering.
-55-
<PAGE>
EXPERTS
The consolidated financial statements included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part and which term shall encompass any amendments
thereto) on Form S-1 pursuant to the Securities Act with respect to the Common
Stock being offered in this offering. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which are omitted as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to any such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by reference to the
Registration Statement and to the financial statements, schedules and exhibits
filed as a part thereof.
This Registration Statement and all other information filed by the
Company with the Commission may be inspected without charge at the principal
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and at 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of all or any
part thereof may be obtained upon payment of fees prescribed by the Commission
from the Public Reference Section of the Commission at its principal office in
Washington, D.C. set forth above. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
-56-
<PAGE>
<TABLE>
<CAPTION>
NETSPEAK CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
<S> <C>
Independent Auditors' Report....................................................................................F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996....................................................F-3
Consolidated Statements of Operations for the Predecessor for the period May 15,
1995 (date of inception) to December 18, 1995 and for the Successor for the
period December 8, 1995 (date of inception) to December 31, 1995 and the year
ended December 31, 1996.........................................................................................F-4
Consolidated Statements of Shareholders' Equity for the Predecessor for the
period May 15, 1995 (date of inception) to December 18, 1995 and for the
Successor for the period December 8, 1995 (date of inception) to December 31,
1995 and the year ended December 31, 1996.......................................................................F-5
Consolidated Statements of Cash Flows for the Predecessor for the
period May 15, 1995 (date of inception) to December 18, 1995 and for the
Successor for the period December 8, 1995 (date of inception) to December 31,
1995 and the year ended December 31, 1996.......................................................................F-6
Notes to Consolidated Financial Statements..................................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of NetSpeak Corporation:
We have audited the accompanying consolidated balance sheets of NetSpeak
Corporation and subsidiary (the "Company") as of December 31, 1995 and 1996, and
the related consolidated statements of operations, shareholders' equity and cash
flows of Internet Telephone Company (the "Predecessor") for the period from May
15, 1995 (date of inception) to December 18, 1995, and of the Company for the
period December 8, 1995 (date of inception) to December 31, 1995 and for the
year ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1995
and 1996, and the results of operations and cash flows of the Predecessor for
the period from May 15, 1995 (date of inception) to December 18, 1995, and of
the Company for the period December 8, 1995 (date of inception) to December 31,
1995 and the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
- ----------------------------
DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida
January 24, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
NETSPEAK CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------
1995 1996
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 483,084 $ 6,294,697
Accounts receivable -- 340,000
Prepaid and other current assets 15,833 85,840
Deferred tax asset -- 182,000
----------- -----------
Total current assets 498,917 6,902,537
Property and equipment, net 31,290 1,049,952
Other assets 25,359 325,126
----------- -----------
$ 555,566 $ 8,277,615
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 80,045 $ 92,192
Accrued expenses 28,004 264,509
Unearned revenue -- 2,242,011
----------- -----------
Total current liabilities 108,049 2,598,712
----------- -----------
Commitments and contingencies (Note 6) -- --
Shareholders' equity:
Preferred stock: 1,000,000 shares of $.01 par value
authorized; no shares issued or outstanding
Common stock: 25,000,000 shares of $.01 par value
authorized; 5,450,000 and 7,698,532 shares issued and
outstanding at December 31, 1995 and 1996, respectively 54,500 76,985
Additional paid-in capital 1,035,500 9,110,105
Accumulated deficit (642,483) (3,508,187)
----------- -----------
Total shareholders' equity 447,517 5,678,903
----------- -----------
$ 555,566 $ 8,277,615
=========== ===========
</TABLE>
See accompanying notes to consolidated finacial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
NETSPEAK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
PREDECESSOR SUCCESSOR
MAY 15, 1995 DECEMBER 8, 1995 YEAR ENDED
TO DECEMBER 18, TO DECEMBER 31, DECEMBER 31,
1995 1995 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Net revenues $ -- $ -- $ 867,117
Operating expenses:
Cost of revenues -- -- 47,129
Research and development 175,038 28,301 2,255,644
Sales and marketing -- -- 722,353
General and administrative 5,644 57,200 836,791
Purchased research and development -- 556,982 --
----------- ---------- ----------
Total operating expenses 180,682 642,483 3,861,917
Loss from operations (180,682) (642,483) (2,944,800)
Interest and other income -- -- 172,096
----------- ---------- ------------
Loss before income taxes (180,682) (642,483) (2,822,704)
Income taxes -- -- 43,000
----------- ---------- ------------
Net loss $ (180,682) $ (642,483) $ (2,865,704)
=========== =========== ============
Net loss per share $ (0.35)
============
Shares used in computing net loss per share 8,215,485
============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
NetSpeak Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK
----------------------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT PAID-IN CAPITAL DEFICIT Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Predecessor
Balance at May 15, 1995 -- $ -- $ -- $ -- $ --
Sale of common stock 1,000 1,000 -- -- 1,000
Capital paid in -- -- 128,200 -- 128,200
Net loss -- -- -- (180,682) (180,682)
----------- ----------- ----------- ----------- -----------
Balance at December 18, 1995 1,000 $ 1,000 $ 128,200 $ (180,682) $ (51,482)
=========== =========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------
Successor
Balance at December 8, 1995 -- $ -- $ -- $ -- $ --
Sale of common stock 2,950,000 29,500 560,500 -- 590,000
Issuance of common stock in
acquisition 2,500,000 25,000 475,000 -- 500,000
Net loss -- -- -- (642,483) (642,483)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 5,450,000 54,500 1,035,500 (642,483) 447,517
Issuance of common stock
and warrants 2,195,532 21,955 7,942,635 -- 7,964,590
Exercises of stock options 53,000 530 131,970 -- 132,500
Net loss -- -- -- (2,865,704) (2,865,704)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 7,698,532 $ 76,985 $ 9,110,105 $(3,508,187) $ 5,678,903
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
NETSPEAK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
PREDECESSOR SUCCESSOR
MAY 15, 1995 TO DECEMBER 8, 1995 YEAR ENDED
DECEMBER 18, TO DECEMBER 31, DECEMBER 31,
1995 1995 1996
--------------- ---------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (180,682) $ (642,483) $(2,865,704)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 1,500 -- 198,172
Purchased research and development -- 556,982
Common stock issued for services -- -- 35,000
Deferred taxes -- -- (182,000)
Changes in assets and liabities:
Accounts receivable -- -- (340,000)
Prepaid and other current assets -- (15,833) (70,007)
Other assets -- (25,359) (299,767)
Accounts payable 43,927 36,118 12,147
Accrued expenses -- 28,004 236,505
Unearned revenue -- -- 2,242,011
----------- ----------- -----------
Net cash used in operating activities (135,255) (62,571) (1,033,643)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,027) (6,763) (1,216,834)
Acquisition costs, including cash overdraft assumed -- (37,582) --
----------- ----------- -----------
Net cash used in investing activities (26,027) (44,345) (1,216,834)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants 129,200 590,000 8,062,090
Cash overdraft 32,082 --` --
----------- ----------- -----------
Net cash provided by financing activities 161,282 590,000 8,062,090
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS -- 483,084 5,811,613
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -- -- 483,084
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -- 483,084 6,294,697
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes -- -- $ 225,000
----------- ----------- -----------
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES-SEE NOTES 2 AND 3
See accompanying notes to consolidated financial statements
F-6
<PAGE>
NETSPEAK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS - NetSpeak Corporation and its subsidiary (the
"Company") develops, markets, licenses, and supports a suite of
intelligent software modules, which enable real-time, concurrent
interactive voice, video and data transmission over packetized data
networks such as the Internet and local-area and wide-area networks
("LANs" and "WANs", respectively).
The markets for the Company's products and systems have only recently
begun to develop and are rapidly evolving. In addition, the Company's
products and systems are new and based on emerging technologies. As is
typical in the case of new and rapidly evolving industries, demand and
market acceptance for recently introduced technology products are subject
to a high level of uncertainty. Broad acceptance of the Company's products
by customers and end users is critical to the Company's success and
ability to generate revenues. The Company has 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 the early stage of
development, particularly companies in new and rapidly evolving markets.
As of December 31, 1996, the Company had an accumulated deficit of
$3,508,187. Additionally, the Company's operating results may fluctuate
significantly in the future as a result of a variety of factors, many of
which are outside the Company's control. These factors include the volume
of revenues generated to the Company's strategic partners from sales of
products and systems incorporating the Company's technology or products,
the mix of distribution channels used by the Company, the timing of new
product announcements and release by the Company and its competitors, and
general economic conditions. However, the Company believes that adequate
capital resources are available to fund the Company's operations for a
period of at least twelve months.
The Company was incorporated on December 8, 1995 under the name "Comnet
Corporation" and assumed its present name on December 18, 1995. For
accounting purposes, the Company emerged from the development stage during
1996.
Effective December 18, 1995, NetSpeak acquired the Internet Telephone
Company ("ITC"). ITC was incorporated for the purpose of developing
telephony communication software for use on the Internet and LANs and
WANs. The accompanying financial statements identified as for the
Predecessor are for ITC for the period from May 15, 1995 (inception) to
the date of acquisition. The accompanying financial statements identified
as for the Successor are for NetSpeak Corporation, including ITC on a
consolidated basis from the date of its acquisition, as of December 31,
1995 and 1996 and for the period from December 8, 1995 (inception) to
December 31, 1995 and for the year ended December 31, 1996. See Note 2.
CONSOLIDATION - The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, ITC. Significant
intercompany transactions and balances have been eliminated in
consolidation.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect
F-7
<PAGE>
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NET LOSS PER SHARE - Net loss per share was calculated by dividing net
loss by the weighted average number of common shares outstanding during
1996 adjusted for the effect of common stock equivalents, consisting of
stock options and warrants, using the treasury stock method with an
estimated initial public offering price of $9.00 per share. Pursuant to
the requirements of the Securities and Exchange Commission, common stock
issued by the Company during the twelve months immediately preceding the
planned initial public offering, plus the number of common equivalent
shares pursuant to the grant of common stock options or warrants during
the same period, have been included in the calculation of the shares used
in computing net loss per share as if they were outstanding for all of
1996. The Company issued 1,710,000 stock options prior to February 1,
1996, which were not included in weighted average shares outstanding
because such options were issued prior to the twelve months immediately
preceding the proposed offering and the effect on net loss per share would
be anti-dilutive.
REVENUE RECOGNITION - The Company generates revenues from products,
licenses and fees for services. License revenue includes a combination of
fees for initial and annual license fees. Service revenues are derived
from fees for customer maintenance and support and engineering.
Product and license revenues are generally recognized upon product
shipment or delivery of permanent authorization codes. License fees which
cover a specified time period are amortized ratably over the term of the
license agreement.
Service revenues for customer maintenance and support are recognized
ratably over the term of the maintenance period which is typically twelve
months. Service revenues for engineering services are generally recognized
when the services are performed, except when customer acceptance is
required, then revenues are recognized when customer acceptance has been
received.
Costs related to insignificant obligations, primarily telephone support,
are accrued upon product shipment.
Advance payments of products, licenses and services are reported as
unearned revenue until all conditions for revenue recognition are met.
RESEARCH AND DEVELOPMENT - Research and development expenditures are
charged to operations as incurred. Statement of Financial Accounting
Standard ("SFAS") No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased or Otherwise Marketed," requires capitalization of
certain software development costs once technological feasibility has been
established.
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 as
incurred.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and
short-term investments purchased with a maturity of three months or less.
F-8
<PAGE>
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets. Estimated useful lives range from 3 to 5
years.
FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, "Disclosure about Fair
Value of Financial Instruments," require disclosure of the fair value of
financial instruments, both assets and liabilities, recognized and not
recognized in the Consolidated Balance Sheets of the Company, for which it
is practicable to estimate fair value. The estimated fair values of
financial instruments which are presented herein have been determined by
the Company using available market information. There were no significant
differences as of December 31, 1995 and 1996 in the carrying value and
fair value.
INCOME TAXES - Income taxes are provided based on the treatment prescribed
by SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
accounting for income taxes based on the liability method and,
accordingly, deferred income taxes are provided to reflect temporary
differences between financial and tax reporting bases of assets and
liabilities.
2. ACQUISITION OF ITC
Effective December 18, 1995, the Company acquired ITC by issuing 2,500,000
shares of the Company's common stock, valued at $500,000, in exchange for
all of the outstanding shares of ITC. The acquisition was accounted for as
a purchase. The purchase price was allocated to the assets acquired,
including purchased research and development in process, and liabilities
assumed based upon their fair value on the date of acquisition. ITC's only
activities from inception to the date of acquisition consisted of research
and development of telephony communication software, and as such operating
activities did not commence. As of the date of the acquisition,
technological feasibility of the telephony communication software in
process of development had not been established and there was no
alternative use; accordingly, the portion of the purchase price allocated
to purchased research and development was immediately expensed in
accordance with general accepted accounting principles. Pro forma
information giving effect to the acquisition is not presented because such
information would not be significantly different from that in the
historical statements of operations. The following summarizes the
acquisition:
Equipment acquired $ 24,527
Purchased research and development 556,982
Accounts payable assumed (43,927)
Acquisition costs, including cash overdraft assumed (37,582)
-----------
Common stock issued $ 500,000
===========
3. SHAREHOLDERS' EQUITY
The initial capitalization of the Company consisted of the issuance of
2,500,000 shares of common stock for $500,000.
ITC's capitalization since inception consisted of the issuance of 1,000
shares of common stock for $1,000 cash and additional capital
contributions of $128,200.
F-9
<PAGE>
During the period from December 8, 1995 to December 14, 1995, the Company
issued 450,000 shares of common stock for $90,000.
In the first quarter of 1996 the Company sold 1,204,000 shares of common
stock for $2.50 per share in a private placement raising $2,992,028, net
of offering costs. In January 1996, the Company issued an option to
purchase 250,000 shares of common stock for $2.50 per share to a
consulting firm, which assisted the Company with its private placement.
The fair value of this option, $271,339, was recorded as a cost of the
offering. The option is exercisable through January 2003.
In June 1996, the Company issued 207,679 shares of common stock to
Creative Technology Ltd. ("Creative") at a price of $5.05 per share
raising an aggregate of $943,698, net of offering costs. The Company also
issued Creative an eighteen-month warrant to purchase up to an additional
207,679 shares of common stock at a price of $5.05 per share, which
warrant is only exercisable if Creative distributes, during a specified
period, a predetermined quantity of the Company's Internet telephone
client software product licensed to Creative. The Company will record as
an expense the fair value, $66,217, of the warrant if the product
distribution requirement becomes likely to be met. At December 31, 1996 no
amounts have been recorded. The Company derived 44% of its revenues for
the year ended December 31, 1996 and at December 31, 1996, had $300,000 in
accounts receivable from Creative.
In August 1996, the Company issued 769,853 shares of common stock at a
price of $5.50 per share and a warrant to purchase up to an additional
452,855 shares of common stock at a price of $5.50 per share for a six
year period expiring in August 2002 to Motorola , Inc. ("Motorola")
raising $3,993,864, net of offering costs. In the event the Company
consummates an underwritten public offering of its common stock at a price
of at least $7.00 per share resulting in the receipt by the Company of net
proceeds of not less than $10,000,000, the Company, at its option, upon
not less than 20 business days notice given prior to the planned closing
date of such public offering, may require Motorola to exercise the
warrant, provided, however, that within 15 business days of receipt of the
Company's notice, Motorola may elect to cancel the warrant unexercised.
Employees exercised stock options to purchase 53,000 shares of common
stock for $132,500 during the year ended 1996.
The Company has authorized 1,000,000 shares of preferred stock, $.01 par
value. No shares of preferred stock have been issued.
Shareholders owning 5,100,000 shares of the Company's common stock have
entered into a Shareholders Agreement which, among other matters, provides
for restrictions on the sale or transfer of shares by such shareholders
and specifies procedures for the election of directors. The Shareholders
Agreement terminates upon the consummation of an initial public offering
by the Company.
F-10
<PAGE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
------------- ------------
<S> <C> <C>
Computer equipment $ 25,759 $ 1,029,808
Furniture, fixtures and office equipment 5,531 155,673
Leasehold improvements -- 62,643
--------- ------------
Property and equipment, cost 31,290 1,248,124
Accumulated depreciation -- (198,172)
--------- -----------
Property and equipment, net $ 31,290 $ 1,049,952
========= ============
</TABLE>
Depreciation expense during 1995 and 1996 was $0 and $198,172,
respectively.
5. STOCK BASED COMPENSATION
The Company may grant stock options under the 1995 Stock Option Plan (the
"Plan) to key employees, consultants, officers and directors for up to 2.7
million shares of common stock. Under the Plan, the exercise price of each
option must not be less than the fair market value of the Company's stock
on the date of grant and an option's maximum term is 10 years. Incentive
stock options vest equally over 3 years beginning on the first anniversary
date of the grant, while non-statutory options vest over various periods.
A summary of the status of the Plan as of December 31, 1995 and 1996, and
changes during the periods ended on those dates is presented below:
<TABLE>
<CAPTION>
DECEMBER 8, 1995 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1996
------------------------- ---------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period -- -- 550,000 $1.00
Granted 550,000 $1.00 1,620,500 3.24
Exercised -- -- 53,000 2.50
Canceled -- -- 132,000 1.36
------- ---------
Outstanding at end of year 550,000 $1.00 1,985,500 $2.76
======= =========
Options exercisable at year-end 150,000 1,149,997
Weighted-average fair value of
options granted during the year $ -- $0.83
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes information about employee stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Weighted-Average Weighted- Weighted-
Range of Remaining average Average
Exercise Price Outstanding Contractual Life (years) Exercise Price Exercisable Exercise Price
-------------- ----------- ------------------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.00 450,000 9.0 $1.00 249,997 $1.00
2.50 1,132,500 9.1 2.50 900,000 2.50
5.05 to 5.50 403,000 9.7 5.47 -- --
--------- ---------
$ 1.00 to 5.50 1,985,500 9.2 $2.76 1,149,997 $2.17
========= =========
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
measuring stock based compensation, including options. Accordingly, no
compensation expense has been recognized for options granted under the
Plan. Had compensation expense been determined based upon the fair value
at the grant date for awards under the Plan consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net loss ,on a
pro forma basis, for 1995 and 1996 would have been $292,183 or $0.04 per
share and $3,122,726 or $0.38 per share, respectively.
The fair value of each employee stock option grant has been estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions: dividend yield 0%, expected volatility 0%,
risk-free interest rates ranging between 5.39% and 6.77%, and an expected
life of 5 years.
6. COMMITMENTS AND CONTINGENCIES
The Company leases its office facility and certain equipment under
operating leases with remaining lease terms in excess of one year. Future
minimum lease payments as of December 31, 1996 are as follows:
Year ending December 31,
------------------------
1997 $ 138,025
1998 142,086
1999 137,734
2000 5,713
-----------
$ 423,558
===========
Rent expense for the periods ended December 31, 1995 and 1996 was $1,000
and $67,000, respectively.
In September 1996, the Company established a 401(k) deferred compensation
plan for all employees meeting certain service requirements. The Company
matches employee contributions to the Plan at its discretion. No matching
contributions were made during the year ended December 31, 1996. The
Company pays the administrative costs of the plan.
The Company has entered into employment agreements with six officers with
initial salaries aggregating $735,000 annually. The terms of these
agreements are for two years.
F-12
<PAGE>
The Company has entered into Indemnification Agreements with each of the
existing directors and officers, which provides for the maximum
indemnification permitted by law.
The Company may, from time to time, be involved in certain legal actions
arising in the ordinary course of business. In the opinion of management,
the outcome of such actions known to date will not have a material adverse
effect on the Company's financial position or results of operations.
Elk Industries has asserted, in a letter to the Company, just prior to the
November 1996 expiration of U.S. Patent No. 4,128,773, owned by Elk
Industries, that the Company's WebPhone client software product infringed
the now expired patent. The Company sought advice of counsel relating to
the infringement allegations, which Elk Industries has asserted against
other software concerns, and believes, based upon an opinion of counsel,
the Company's WebPhone client software product does not infringe the
asserted patent. Accordingly, the Company believes that this matter will
not have a material effect on its financial position and results of
operations.
At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use
of the Internet, however, enhance the risk that the governments of the
United States and other countries in which the Company sells or expects to
sell its products will seek to regulate computer telephony and the
Internet with respect to, among other things, user privacy, pricing and
the characteristics and quality of products and services . The Company is
unable to predict the impact, if any, that future legislation, legal
decisions or regulations may have on its business, financial condition or
results of operations.
7. INCOME TAXES
The Company's provision for income taxes consists of the following:
December 31,
1996
-----------
Current - Foreign $ 225,000
Deferred - Foreign (182,000)
-----------
$ 43,000
===========
Income taxes for the year ended December 31, 1996 were attributable to
income taxes paid to the Singapore government related to license fees
received pursuant to an agreement with Creative.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and their income tax bases. As of December 31, 1995 and
1996, the Company had deferred tax assets as follows:
F-13
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
------------- ------------
<S> <C> <C>
Deferred tax assets:
Unearned revenue - foreign $ -- $ 182,000
Net operating loss carryforwards 110,000 1,291,000
Valuation allowance (110,000) (1,291,000)
------------ ------------
Net deferred tax asset $ -- $ 182,000
============ ============
</TABLE>
The valuation allowance is based on the uncertainty as to the utilization
of the net operating loss carryforwards due to the Company's short
operating history and losses to date.
As of December 31, 1996, the Company had approximately $ 3,254,000 of
federal and state net operating loss carryforwards available to offset
future taxable income; such carryforwards begin to expire in 2009. Under
the Tax Reform Act of 1986, the amounts of and benefits from net operating
losses carried forward may be impaired or limited in certain
circumstances. Events which may cause limitations in the amount of net
operating losses that the Company may utilize in any one year include, but
are not limited to, a cumulative ownership change of more than 50% over a
three year period. As of December 31, 1996, the effect of such
limitations, if imposed, is not expected to be material.
F-14
<PAGE>
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR SINCE THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
----------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...........................................
Risk Factors.................................................
Use of Proceeds..............................................
Dividend Policy..............................................
Dilution.....................................................
Capitalization...............................................
Selected Consolidated Financial Data.........................
Management's Discussion and Analysis of
Financial Condition and Results of Operations..............
Business.....................................................
Management...................................................
Certain Transactions.........................................
Principal Shareholders.......................................
Description of Capital Stock.................................
Shares Eligible for Future Sale..............................
Underwriters.................................................
Legal Matters................................................
Experts......................................................
Additional Information.......................................
Index to Consolidated Financial Statements................... F-1
UNTIL 1997, (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[NETSPEAK CORPORATION
LOGO]
2,000,000 SHARES
OF
COMMON STOCK
----------
PROSPECTUS
----------
JOSEPHTHAL LYON & ROSS
INCORPORATED
_______________, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be
incurred in connection with the issuance and distribution of the securities
offered hereby (other than underwriting discounts and commissions). The
Registrant is responsible for the payment of all expenses in connection with the
Offering.
Securities and Exchange Commission registration fee.... $ 7,697
NASD filing fee........................................ $ 3,040
[Listing fees]......................................... $ *
Printing and engraving expenses........................ $ *
Legal fees and expenses................................ $ *
Accounting fees and expenses........................... $ *
Blue Sky fees.......................................... $ *
Transfer Agent's fees and expenses..................... $ *
Miscellaneous.......................................... $ *
-------
Total:........................................ $
=======
- ----------
* To be filed by amendment.
All amounts except the Securities and Exchange Commission
registration fee, the NASD filing fee and the ____________ listing fee are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the
Florida Business Corporation Act to indemnify its directors and officers to the
extent provided for in such statute. The Registrant's Amended and Restated
Articles of Incorporation and Bylaws provide that the Registrant may insure,
shall indemnify and shall advance expenses on behalf of its officers and
directors to the fullest extent not prohibited by law. The Company is also a
party to indemnification agreements with each of its directors and officers. The
form of Underwriting Agreement filed as Exhibit 1.1 hereto provides for the
indemnification of the Registrant and its directors and officers against certain
liabilities, including liabilities under the Securities Act.
<PAGE>
ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES.
The following sets forth the Registrant's sale of its
securities within the last three years, which securities were not registered
under the Securities Act:
1. Upon incorporation of the Company in December 1995, the
Company sold an aggregate of 2,950,000 shares of Common Stock to various
executive officers, directors and advisors for an aggregate of $590,000,
including 1,750,000 shares to Stephen R. Cohen, 500,000 shares to Robert
Kennedy, 250,000 shares to Harvey Kaufman, and 100,000 shares to each of L.
Richard Mattaway and A. Jeffry Robinson.
2. In December 1995, upon the acquisition by the Company of
all of issued and outstanding capital stock of Internet Telephone Company
("ITC") by merger of ITC with a wholly-owned subsidiary of the Company, in
connection therewith, the Company issued an aggregate of 2,500,000 shares of
Common Stock to the shareholders of ITC in exchange for their ITC shares,
including 1,000,000 shares to an affiliate of L. Richard Mattaway and 850,000
shares to Shane D. Mattaway.
3. From January to February 1996, the Company sold an
aggregate of 1,204,000 shares of Common Stock at a price of $2.50 per share to
53 persons in a private offering for an aggregate of $3,010,000. No commissions
were paid in connection with such private offering. In January 1996, the Company
issued stock options under the 1995 Plan to purchase 250,000 shares of Common
Stock for $2.50 per share to a consulting firm, which assisted the Company with
its private offering.
4. From January to April, 1996, the Company issued an
aggregate of 53,000 shares of Common Stock to six employees pursuant to the
exercise of stock options.
5. In January, 1996, the Company issued an aggregate of 14,000
shares of Common Stock to an investment banking firm which assisted the Company
in establishing certain of its strategic alliances.
6. In June 1996, the Company sold 207,679 shares of Common
Stock to Creative Technology, Ltd. ("Creative") for an aggregate of $1,048,779.
The Company also issued to Creative a warrant to purchase up to an additional
207,679 shares of Common Stock at a price of $5.05 per share, which warrant is
only exercisable if Creative distributes, during a specified period, a
predetermined quantity of the Company's Internet telephone client software
product licensed to Creative.
7. In August 1996, the Company sold 769,853 shares of Common
Stock and a warrant to purchase up to an additional 452,855 shares of Common
Stock at a price of $5.50 per share for a six-year period expiring in August
2002 (the "Motorola Warrant") to Motorola, Inc. ("Motorola") for an aggregate of
$4,234,191. In the event the Company consummates an underwritten public offering
of its Common Stock at a price of at least $7.00 per share resulting in the
receipt by the Company of net proceeds of not less than $10,000,000, the
Company, at
<PAGE>
its option, upon not less than 20 business days' notice given prior to the
planned closing date of such public offering, may require Motorola to exercise
the Motorola Warrant, provided, however, that within 15 business days of receipt
of the Company's notice, Motorola may elect to cancel the Motorola Warrant
unexercised.
The above securities were all issued without registration
under the Securities Act by reason of the exemption from registration afforded
by the provisions of Section 4(2) thereof, as transactions by an issuer not
involving a public offering, each recipient of securities having delivered
appropriate investment representations to Registrant with respect thereto and
having consented to the imposition of restrictive legends upon the certificates
evidencing such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement.(1)
3.1 Certificate of Incorporation, as amended.(1)
3.2 Bylaws.(1)
4.1 Specimen Certificate of Common Stock.(2)
4.2 Form of Advisor's Warrant Agreement including Form of
Advisor's Warrants.(1)
5.1 Opinion of Broad and Cassel.(2)
10.1 1995 Stock Option Plan, as amended.(1)*
10.2 Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers.(1)*
10.3 Employment Agreement between the Registrant and Stephen R.
Cohen.(1)*
10.4 Employment Agreement between the Registrant and Robert
Kennedy.(1)*
10.5 Employment Agreement between the Registrant and Shane D.
Mattaway.(1)*
10.6 Employment Agreement between the Registrant and John W.
Staten.(1)*
10.7 Employment Agreement between the Registrant and Harvey
Kaufman.(1)*
10.8 Employment Agreement between the Registrant and Steven F.
Mills.(1)*
<PAGE>
10.9 Leases relating to premises at 902 Clint Moore Road, Boca
Raton, Florida.(1)
10.10 Technology Development and Licensing Agreement between the
Registrant and Creative Laboratories, Inc., as amended.(2)
10.11 Distributor Agreement between Rockwell International
Corporation, Switching Systems Division, and NetSpeak dated
January 30, 1997(2)
10.12 Master Systems Development and Integration Agreement by and
between NetSpeak and Infonet Services Corporation, dated
November 22, 1996(2)
21.1 List of Subsidiaries of the Registrant.(1)
23.1 Consent of Broad and Cassel (filed as part of Exhibit 5.1)(2)
23.2 Consent of Deloitte & Touche LLP, independent auditors.(1)
24.1 Power of Attorney (included in the signature page hereof).(1)
- ----------
* Management compensation plan or arrangement
(1) Filed herewith.
(2) To be filed by Amendment.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed
<PAGE>
with the Commission pursuant to Rule 42(b) if, in the
aggregate, the changes in volumes and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(4) 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 underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under
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 or 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.
(6) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S-1 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Boca Raton, State of Florida on this 20th day of February, 1997.
NETSPEAK CORPORATION
By:/s/STEPHEN R. COHEN
---------------------------------------
Stephen R. Cohen, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen R. Cohen and Robert Kennedy, or any one of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for him and in his name, place and stead in any and all capacities to execute in
the name of each such person who is then an officer or director of the
Registrant any and all amendments (including post-effective amendments) to this
Registration Statement, and any registration statement relating to the offering
hereunder pursuant to Rule 462 under the Securities Act of 1933, as amended, and
to file the same with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them full power and authority to do and
perform each and every act and thing required or necessary to be done in and
about the premises as fully as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the date stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/STEPHEN R. COHEN Chairman of the Board February 20, 1997
- ----------------------------------- and Chief Executive Officer
Stephen R. Cohen (Principal Executive Officer)
/s/JOHN W. STATEN Chief Financial Officer February 20, 1997
- ----------------------------------- (Principal Financial and
John W. Staten Accounting Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ROBERT KENNEDY President, Chief Operating Officer February 20, 1997
- ----------------------------------- and Director
Robert Kennedy
/s/SHANE D. MATTAWAY Executive Vice President, February 20, 1997
- ----------------------------------- Chief Technical Officer
Shane D. Mattaway and Director
Director February 20, 1997
- -----------------------------------
Steven D. Leeke
/s/L. RICHARD MATTAWAY Director February 20, 1997
- -----------------------------------
L. Richard Mattaway
/s/A. JEFFRY ROBINSON Director February 20, 1997
- -----------------------------------
A. Jeffry Robinson
</TABLE>
<PAGE>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws.
4.2 Form of Advisor's Warrant Agreement including Form of
Advisor's Warrants.
10.1 1995 Stock Option Plan, as amended.
10.2 Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers.
10.3 Employment Agreement between the Registrant and Stephen R.
Cohen.
10.4 Employment Agreement between the Registrant and Robert
Kennedy.
10.5 Employment Agreement between the Registrant and Shane D.
Mattaway.
10.6 Employment Agreement between the Registrant and John W.
Staten.
10.7 Employment Agreement between the Registrant and Harvey
Kaufman.
10.8 Employment Agreement between the Registrant and Steven F.
Mills.
<PAGE>
10.9 Leases relating to premises at 902 Clint Moore Road, Boca
Raton, Florida.
21.1 List of Subsidiaries of the Registrant.
23.2 Consent of Deloitte & Touche LLP, independent auditors.
EXHIBIT 1.1
2,000,000 SHARES OF COMMON STOCK
NETSPEAK CORPORATION
UNDERWRITING AGREEMENT
New York, New York
______________, 1997
JOSEPHTHAL LYON & ROSS INCORPORATED
As Representative of the Several
Underwriters listed on Schedule A hereto
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24th Floor
New York, New York 10166
Ladies and Gentlemen:
NetSpeak Corporation, a Florida corporation (the "Company"),
confirms its agreement with Josephthal Lyon & Ross Incorporated ("Josephthal")
and each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in SECTION 11), for whom Josephthal is acting as
representative (the "Representative") with respect to the sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of the Company's common stock, $.01 par value per
share ("Common Stock"), set forth in Schedule A hereto. Such shares of Common
Stock are hereinafter referred to as the "Firm Shares."
Upon your request, as provided in SECTION 2(b) of this
Agreement, the Company shall also sell to the Underwriters, acting severally and
not jointly, up to an additional 300,000 shares of Common Stock for the purpose
of covering over-allotments, if any (the "Option Shares"). The Firm Shares and
the Option Shares are sometimes hereinafter referred to as the "Shares." The
Company also proposes to issue and sell to Josephthal warrants (the "Advisor's
Warrants") pursuant to the Advisor's Warrant Agreement (the "Advisor's Warrant
Agreement") for the purchase of an additional 200,000 shares of Common Stock.
The shares of Common Stock issuable upon exercise of the Advisor's Warrants are
hereinafter referred to as the "Advisor's Shares." The Firm Shares, the Option
Shares, the Advisor's Warrants and the
<PAGE>
Advisor's Shares (collectively, hereinafter referred to as the "Securities") are
more fully described in the Registration Statement and the Prospectus referred
to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-______), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Firm Shares and the Option Shares under the Securities Act of 1933, as
amended (the "Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the Commission under
the Act. The Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Underwriters, and will not
file any other amendment thereto to which the Underwriters shall have objected
in writing after having been furnished with a copy thereof. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein (including, but
not limited to those documents or information incorporated by reference therein)
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations)), is hereinafter called the
"Registration Statement", and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or to the Company's knowledge, threatened. Each of the
Preliminary Prospectus, Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, Registration Statement or
Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, PROVIDED, HOWEVER, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus.
- 2 -
<PAGE>
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing
Date, if any, and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, PROVIDED, HOWEVER, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter expressly for use in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing. The
Company has all requisite corporate power and authority, and the Company has
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state and local
laws, rules and regulations; and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state and local
laws, rules and regulations on the Company's business as currently conducted and
as contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Capital Stock" and will have the adjusted capitalization set
forth therein on the Closing Date and the Option Closing Date, if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Advisor's Warrant Agreement and as described in the
Prospectus. The Securities and all other securities issued or issuable by the
Company conform or, when issued and paid for, will
-3-
<PAGE>
conform, in all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Securities are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely by reason of being such
holders; all corporate action required to be taken for the authorization, issue
and sale of the Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities to be sold by the
Company hereunder, the Underwriters or the Representatives, as the case may be,
will acquire good and marketable title to such Securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements, including the related notes and
schedules thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position, income,
changes in cash flow, changes in stockholders' equity, and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply and the pro forma financial information included in the
Registration Statement and Prospectus presents fairly, on a basis consistent
with that of the audited financial statements included therein, what the
Company's pro forma capitalization would have been for the respective periods
and as of the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. There has
been no adverse change or development involving a material prospective change in
the condition, financial or otherwise, or in the earnings, position, prospects,
value, operation, properties, business, or results of operations of the Company
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus,
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Summary Consolidated
Financial Data," "Selected Consolidated Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein, have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(g) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable and for which payment is due, including,
but not limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986
-4-
<PAGE>
(the "Code"), and has furnished all information returns it is required to
furnish pursuant to the Code, (ii) has established adequate reserves for such
taxes which are not due and payable, and (iii) does not have any tax deficiency
or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriters of the
Securities to be sold by the Company hereunder and the purchase by Josephthal of
the Advisor's Warrants from the Company, (iii) the consummation by the Company
of any of its obligations under this Agreement or the Advisor's Warrant
Agreement, or (iv) resales of the Shares in connection with the distribution
contemplated hereby.
(i) The Company maintains insurance policies, including, but
not limited to, general liability, product liability and property insurance,
which insures the Company and its employees, against such losses and risks
generally insured against by comparable businesses. The Company (A) has not
failed to give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or employees,
under the insurance policy or surety bond in a due and timely manner, (B) does
not have any disputes or claims against any underwriter of such insurance
policies or surety bonds or has not failed to pay any premiums due and payable
thereunder, or (C) has not failed to comply with all conditions contained in
such insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or business of, the
Company which (i) questions the validity of the capital stock of the Company,
this Agreement or the Advisor's Warrant Agreement or of any action taken or to
be taken by the Company pursuant to or in connection with this Agreement or the
Advisor's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, corporate power and
authority to authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Advisor's Warrant Agreement and to consummate the transactions
provided for in such agreements; and this Agreement and the Advisor's Warrant
Agreement have each been duly and properly authorized, executed and delivered by
the Company. Each of this Agreement and the Advisor's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying
-5-
<PAGE>
such laws and (iii) that the remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings may be brought. None of the
Company's issue and sale of the Securities, execution or delivery of this
Agreement or the Advisor's Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company, (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of its
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required for the
issuance of the Shares pursuant to the Prospectus and the Registration
Statement, the issuance of the Advisor's Warrants, the performance of this
Agreement and the Advisor's Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any preemptive,
first refusal or other rights that any entity or person may have for the issue
and/or sale of any of the Shares or the Advisor's Warrants, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Shares, and the Advisor's Warrants to be sold by the Company hereunder
and under the Advisor's Warrant Agreement.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which any of its assets, properties or business may be subject have
been duly and validly authorized, executed and delivered by the Company, and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto on Form S-1, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are in
all material respects complete and correct copies of the documents of which they
purport to be copies.
-6-
<PAGE>
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of its capital stock of any class, and
there has not been any change in the capital stock, or any material change in
the debt (long or short term) or liabilities or material adverse change in or
affecting the general affairs, management, financial operations, stockholders'
equity or results of operations of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, partnership agreement, note, loan or credit agreement,
purchase order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which the property
or assets (tangible or intangible) of the Company is subject or affected.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. There are no pending investigations involving the Company by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or, is imminent.
(q) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in SECTIONS 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in SECTION 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of SECTION 406 of ERISA or SECTION
4975 of the Code, which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all reporting, disclosure and other requirements of
the Code and ERISA as they relate to any such ERISA Plan. Determination letters
have been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code SECTION 401(a), stating that such
ERISA
-7-
<PAGE>
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(r) Neither the Company nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of
the patents, patent applications, trademarks, service marks, service names,
trade names and copyrights, and none of the licenses and rights to the foregoing
presently owned or held by the Company are in dispute or are in any conflict
with the right of any other person or entity. The Company (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, patent applications, trademarks, service marks,
service names, trade names and copyrights, technology and licenses and rights
with respect to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, patent application, trademark, service mark, service name, trade
name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(t) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other proceeding,
domestic or foreign, pending or threatened (or circumstances that may give rise
to the same) against the Company which challenges the exclusive rights of the
Company with respect to any trademarks, trade names, service marks, service
names, copyrights, patents, patent applications or licenses or rights to the
foregoing used in the conduct of its business, or which challenge the right of
the Company to use any technology presently used or contemplated to be used in
the conduct of its business.
(u) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
technology, designs, processes, works of authorship, computer programs and
technical data and information (collectively herein "intellectual property")
that are material to the development, manufacture, operation and sale of all
products and services sold or proposed to be sold by the Company, free and clear
of and without violating any right, lien, or claim of others, including without
limitation, former employers of its employees; provided, however, that the
possibility exists that other persons or entities, completely independently of
the Company, or its employees or agents, could have developed trade secrets or
items of technical information similar or identical to those of the Company. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
-8-
<PAGE>
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus, to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus, taxes, lessor's interests and liens for taxes not yet due and
payable.
(w) Deloitte & Touche LLP ("Deloitte") whose report is filed
with the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(x) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which the holders of the Common Stock and
holders of securities exchangeable or exercisable for or convertible into
__________ shares of Common Stock agreed not to, directly or indirectly, offer
to sell, sell, grant any option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein for a period of not less than nine
(9) months following the effective date of the Registration Statement without
the prior written consent of Josephthal. During the nine (9) month period
commencing on the effective date of the Registration Statement, the Company
shall not, without the prior written consent of the Representative, sell,
contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any shares of Common Stock, except
up to 2,700,000 shares of Common Stock reserved for grants of options under the
Company's stock option plan as described in the Prospectus. The Company will
cause the Transfer Agent, as defined below, to mark an appropriate legend on the
face of stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(y) Except as described in the Prospectus under
"Underwriting," there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of its officers, directors, stockholders,
partners, employees or affiliates that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(z) The Common Stock has been approved for quotation on the
Nasdaq National Market ("Nasdaq") [or admitted to trading on the American Stock
Exchange].
(aa) Neither the Company nor any of its officers, employees,
agents, or any other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency (domestic or foreign) or
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<PAGE>
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which (a)
might subject the Company, or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (b) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company, or (c) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or transactions, between or
among the Company and any officer, director, or Principal Shareholder (as such
term is defined in the Prospectus) of the Company or any partner, affiliate or
associate of any of the foregoing persons or entities.
(cc) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(dd) The minute books of the Company have been made available
to the Underwriters and contains a complete summary of all meetings and actions
of the directors, stockholders, audit committee, compensation committee and any
other committee of the Board of Directors of the Company, respectively, since
the time of its incorporation, and reflects all transactions referred to in such
minutes accurately in all material respects.
(ee) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ff) The Company has as of the effective date of the
Registration Statement (i) entered into an employment agreement with Stephen R.
Cohen, Robert Kennedy, Shane D. Mattaway, John Staten, Harvey Kaufman and Steven
F. Mills, in the forms filed as Exhibit
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<PAGE>
10.3, 10.4, 10.5, 10.6, 10.7 and 10.8, respectively, to the Registration
Statement [and (ii) purchased term key-man insurance on the life of
____________________, in the amount of $__________, which policy names the
Company as the sole beneficiary of at least $1,000,000 thereof].
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND ADVISOR'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$______ per share of Common Stock, that number of Firm Shares set forth in
Schedule A opposite the name of such Underwriter, plus any additional number of
Firm Shares which such Underwriter may become obligated to purchase pursuant to
the provisions of SECTION 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares. The option granted hereby will expire 30 days after (i) the date
the Registration Statement becomes effective, if the Company has elected not to
rely on Rule 430A under the Rules and Regulations, or (ii) the date of this
Agreement if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Shares upon notice by the Representative
to the Company setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Shares. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Date, as hereinafter defined, unless otherwise
agreed upon by the Representative and the Company. Nothing herein contained
shall obligate the Underwriters to make any over-allotments. No Option Shares
shall be delivered unless the Firm Shares shall be simultaneously delivered or
shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of Josephthal
Lyon & Ross Incorporated at 200 Park Avenue, 24th Floor, New York, New York
10166, or at such other place as shall be agreed upon by the Representative and
the Company. Such delivery and payment shall be made at 10:00 a.m. (New York
City time) on _______________, 1997 or at such other time and date as shall be
agreed upon by the Representative and the Company, but not less than three (3)
nor more than seven (7) full business days after the effective date of the
Registration Statement (such time and date of payment and delivery being herein
called "Closing Date"). In addition, in the event that any or all of the Option
Shares are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Shares shall be made at the
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above mentioned office of the Representative or at such other place as shall be
agreed upon by the Representative and the Company on each Option Closing Date
as specified in the notice from the Representative to the Company. Delivery of
the certificates for the Firm Shares and the Option Shares, if any, shall be
made to the Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Shares and the Option Shares, if
any, to the order of the Company for the Firm Shares and the Option Shares, if
any, by New York Clearing House funds. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Shares then being purchased which the
number of Firm Shares set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Firm Shares, subject in each case to
such adjustments as the Representative in its discretion shall make to
eliminate any sales or purchases of fractional shares. Certificates for the Firm
Shares and the Option Shares, if any, shall be in definitive, fully registered
form, shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least two
(2) business days prior to the Closing Date or the relevant Option Closing Date,
as the case may be. The certificates for the Firm Shares and the Option Shares,
if any, shall be made available to the Representative at such office or such
other place as the Representative may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
Josephthal, Advisor's Warrants at a purchase price of $.0001 per warrant, which
warrants shall entitle the holders thereof to purchase an aggregate of 200,000
shares of Common Stock. The Advisor's Warrants shall be exercisable for a period
of four years commencing one year from the effective date of the Registration
Statement at a price equaling one hundred twenty percent (120%) of the initial
public offering price of the shares of Common Stock. The Advisor's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the Advisor's
Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES. As soon after the
Registration Statement becomes effective as the Representative deems advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representative may from time to time increase or
decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representative, in its discretion deems
advisable. The Underwriters may enter into one of more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
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<PAGE>
4. COVENANTS AND AGREEMENTS OF THE COMPANY.
(a) The Company covenants and agrees with each of the
Underwriters as follows:
i) The Company shall use its best efforts to
cause the Registration Statement and any amendments thereto to
become effective as promptly as practicable and will not at
any time, whether before or after the effective date of the
Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the
offering of the Shares by the Underwriters of which the
Representative shall not previously have been advised and
furnished with a copy, or to which the Representative shall
have objected or which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations.
ii) As soon as the Company is advised or
obtains knowledge thereof, the Company will advise the
Representative and confirm the notice in writing, (i) when
the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to
the Registration Statement becomes effective, (ii) of the
issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending
the effectiveness of the Registration Statement or any order
preventing or suspending the use of the Preliminary Prospectus
or the Prospectus, or any amendment or supplement thereto, or
the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of
any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state
securities commission authority shall enter a stop order or
suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
iii) The Company shall file the Prospectus
(in form and substance satisfactory to the Representative) or
transmit the Prospectus by a means reasonably calculated to
result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the
Representative, pursuant to Rule 424(b)(4)) not later than
the Commission's close of business on the earlier of (i) the
second business day following the execution and delivery of
this Agreement and (ii) the fifteenth business day after the
effective date of the Registration Statement.
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<PAGE>
iv) The Company will give the
Representative notice of its intention to file or prepare any
amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the
Company proposes for use by the Underwriters in connection
with the offering of the Securities which differs from the
corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not
such revised prospectus is required to be filed pursuant to
Rule 424(b) of the Rules and Regulations), and will furnish
the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such
prospectus to which the Representative or Orrick, Herrington
& Sutcliffe LLP ("Underwriters' Counsel"), shall object.
v) The Company shall endeavor in good faith,
in cooperation with the Representative, at or prior to the
time the Registration Statement becomes effective, to qualify
the Securities for offering and sale under the securities laws
of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as
long as may be necessary to complete the distribution, and
shall make such applications, file such documents and furnish
such information as may be required for such purpose;
PROVIDED, HOWEVER, the Company shall not be required to
qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In
each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports
at such times as are or may reasonably be required by the laws
of such jurisdiction to continue such qualification.
vi) During the time when a prospectus is
required to be delivered under the Act, the Company shall use
all reasonable efforts to comply with all requirements imposed
upon it by the Act and the Exchange Act, as now and hereafter
amended and by the Rules and Regulations, as from time to time
in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel,
the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with
the Act, the Company will notify the Representative promptly
and prepare and file with the Commission an appropriate
amendment or supplement in accordance with SECTION 10 of the
Act, each such amendment or supplement to be satisfactory to
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<PAGE>
Underwriters' Counsel, and the Company will furnish to the
Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may
request.
vii) As soon as practicable, but in any
event not later than 45 days after the end of the 12-month
period beginning on the day after the end of the fiscal
quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the
end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its
security holders, in the manner specified in Rule 158(b) of
the Rules and Regulations, and to the Representative, an
earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of SECTION
11(a) of the Act and Rule 158(a) of the Rules and Regulations,
which statement need not be audited unless required by the
Act, covering a period of at least 12 consecutive months after
the effective date of the Registration Statement.
viii) During a period of seven years after
the date hereof, the Company will furnish to its stockholders
annual reports (including financial statements audited by
independent public accountants) and will deliver to the
Representative:
(a) concurrently with furnishing
such quarterly reports to its stockholders,
statements of income of the Company for each quarter
in the form furnished to the Company's stockholders
and certified by the Company's principal financial or
accounting officer;
(b) concurrently with furnishing
such annual reports to its stockholders, a balance
sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company
for such fiscal year, accompanied by a copy of the
report thereon of independent certified public
accountants;
(c) as soon as they are
available, copies of all reports (financial or
other) mailed to stockholders;
(d) as soon as they are
available, copies of all reports and financial
statements furnished to or filed with the
Commission, the NASD or any securities exchange;
(e) every press release and every
material news item or article of interest to the
financial community in respect of the Company, or its
affairs which was released or prepared by or on
behalf of the Company; and
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<PAGE>
(f) any additional information
of a public nature concerning the Company (and any
future subsidiary) or its businesses which the
Representative may request.
During such five (5)-year period, if the
Company has an active subsidiary, the foregoing financial
statements will be on a consolidated basis to the extent that
the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial
statements for any significant subsidiary which is not so
consolidated.
ix) The Company will maintain a Transfer
Agent and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the
same entity as the Transfer Agent) for its Common Stock.
x) The Company will furnish to the
Representative or on the Representative's order, without
charge, at such place as the Representative may designate,
copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include
all financial statements and exhibits), the Prospectus, and
all amendments and supplements thereto, including any
prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and
in such quantities as the Representative may request.
xi) On or before the effective date of the
Registration Statement, the Company shall provide the
Representative with true copies of duly executed, legally
binding and enforceable agreements pursuant to which for a
period of not less than nine (9) months from the effective
date of the Registration Statement, holders of all shares of
Common Stock and holders of securities exchangeable or
exercisable for or convertible into shares of Common Stock,
will not directly or indirectly, issue, offer to sell, sell,
grant an option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either
pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein
without the prior written consent of Josephthal (collectively,
the "Lock-up Agreements"). On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate legends on the
certificates representing the securities subject to the
Lock-up Agreements and to place appropriate stop transfer
orders on the Company's ledgers. During the nine (9) month
period commencing with the effective date of the Registration
Statement, the Company shall not, without the prior written
consent of Josephthal, sell, contract or offer to sell, issue,
transfer, assign, pledge, hypothecate, distribute, or
otherwise dispose of, directly or indirectly, any shares of
Common Stock or any options, rights or warrants with respect
to any shares of Common Stock. During the nine (9) month
period commencing with the effective date of the Registration
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Statement, the Company shall not file any registration
statement with the Securities and Exchange Commission on Form
S-8 without the prior written consent of the Representative.
xii) Neither the Company, nor any of its
officers, directors, stockholders, nor any of their respective
affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any
securities of the Company.
xiii) The Company shall apply the net
proceeds from the sale of the Securities in the manner, and
subject to the conditions, set forth under "Use of Proceeds"
in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used, directly or
indirectly, to acquire any securities issued by the Company.
xiv) The Company shall timely file all such
reports, forms or other documents as may be required
(including, but not limited to, a Form SR as may be required
pursuant to Rule 463 under the Act) from time to time, under
the Act, the Exchange Act, and the Rules and Regulations, and
all such reports, forms and documents filed will comply as to
form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
xv) The Company shall furnish to the
Representative as early as practicable prior to each of the
date hereof, the Closing Date and each Option Closing Date, if
any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim
financial statements of the Company (which in no event shall
be as of a date more than thirty (30) days prior to the date
of the Registration Statement) which have been read by the
Company's independent public accountants, as stated in their
letter to be furnished pursuant to SECTION 6(j) hereof.
xvi) The Company shall cause the Common
Stock to be quoted on Nasdaq or a National Securities exchange
and for a period of seven (7) years from the date hereof, and
use its best efforts to maintain the Nasdaq quotation or
exchange listing of the Common Stock to the extent
outstanding.
xvii) For a period of five (5) years from
the Closing Date, the Company shall furnish to the
Representative at the Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets
relating to the Common Stock, (ii) the list of holders of all
of the Company's securities and (iii) a Blue Sky "Trading
Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
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xviii) As soon as practicable, (i) but in no
event more than 5 business days before the effective date of
the Registration Statement, file a Form 8-A with the
Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than 30
days from the effective date of the Registration Statement,
take all necessary and appropriate actions to be included in
Standard and Poor's Corporation Descriptions and Moody's OTC
Manual and to continue such inclusion for a period of not less
than seven (7) years.
xix) The Company hereby agrees that it will
not for a period of thirteen (13) months from the effective
date of the Registration Statement, adopt, propose to adopt or
otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement permitting the
grant, issue or sale of any shares of Common Stock or other
securities of the Company (i) in an amount greater than an
aggregate of 2,700,000 shares of Common Stock, (ii) at an
exercise or sale price per share less than the fair market
value of the Common Stock on the date of grant or sale, (iii)
to any direct or indirect beneficial holder on the date hereof
of more than 10% of the issued and outstanding shares of
Common Stock, (iv) with the payment for such securities with
any form of consideration other than cash, (v) upon payment of
less than the full purchase or exercise price for such shares
of Common Stock or other securities of the Company.
xx) Until the completion of the distribution
of the Shares, and for 25 days thereafter, the Company shall
not without the prior written consent of the Representative
and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press
conference with respect to the Company or its activities or
the offering contemplated hereby.
xxi) For a period equal to the lesser of (i)
seven (7) years from the date hereof, and (ii) the sale to the
public of the Advisor's Shares, the Company will not take any
action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Advisor's Shares.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Advisor's Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including
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the payment of postage with respect thereto) and delivery of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreements, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing, engraving,
issuance and delivery of the Securities including, but not limited to, (x) the
purchase by the Underwriters of the Shares and the purchase by Josephthal of the
Advisor's Warrants from the Company, (y) the consummation by the Company of any
of its obligations under this Agreement and the Advisor's Warrant Agreement, and
(z) resale of the Shares by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) costs and expenses in connection with
due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating of
the Securities by qualified rating agencies, (viii) the fees payable to the
Commission and the NASD, and (ix) the fees and expenses incurred in connection
with the quotation of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of SECTION 6 or SECTION 12, the Company shall
reimburse and indemnify the Representative for all of their actual
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel, less any amounts already paid pursuant to SECTION 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this SECTION 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to one
and one-half percent (1 1/2%) of the gross proceeds received by the Company from
the sale of the Firm Shares, $35,000 of which has been paid to date. In the
event the Representative elects to exercise the over-allotment option described
in Section 2(b) hereof, the Company agrees to pay to the Representative on the
Option Closing Date (by certified or bank cashier's check, or at the
Representative's election, by deduction from the proceeds of the Option Shares)
a non-accountable expense allowance equal to one and one-half percent (1 1/2%)
of the gross proceeds received by the Company from the sale of the Option
Shares.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any,
with respect to the Company as if it had been made on and as of the Closing Date
or each Option Closing Date, as the case may be; the accuracy on and as of the
Closing Date or Option Closing Date, if any, of the statements of the officers
of the
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Company made pursuant to the provisions hereof; and the performance by the
Company on and as of the Closing Date and each Option Closing Date, if any, of
their respective covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Advisor's Warrants, the Registration Statement, the Prospectus and other related
matters as the Representative requests and Underwriters' Counsel shall have
received such papers and information as they request to enable them to pass upon
such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of Broad and Cassel, counsel to the Company, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the
laws of its jurisdiction, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite
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corporate power and authority; and the Company has obtained
any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in
material compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all
federal, state and local laws, rules and regulations; the
Company has not received any notice of proceedings relating to
the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially
adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or
results of operations of the Company. The disclosures in the
Registration Statement concerning the effects of federal,
state and local laws, rules and regulations on the Company's
business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a
fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were
made;
ii) to the best of such counsel's knowledge, the
Company does not own an interest in any other corporation,
partnership, joint venture, trust or other business entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and
any amendment or supplement thereto, under "Capitalization"
and "Description of Capital Stock," and is not a party to or
bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the
Advisor's Warrant Agreement and as described in the
Prospectus. The Securities, and all other securities issued or
issuable by the Company conform in all material respects to
all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. The
Shares, the Advisor's Warrants and the Advisor's Shares to be
sold by the Company hereunder and under the Advisor's Warrant
Agreement are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such holders; all
corporate action
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<PAGE>
required to be taken for the authorization, issue and sale of
the Shares, the Advisor's Warrants and the Advisor's Shares
has been duly and validly taken, and the certificates
representing the Shares and the Advisor's Warrants are in due
and proper form. The Advisor's Warrants constitute valid and
binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement and the
Advisor's Warrant Agreement of the Shares and the Advisor's
Warrants, respectively, to be sold by the Company, the
Underwriters and the Representative, respectively, will
acquire good and marketable title to the Shares and the
Advisor's Warrants free and clear of any pledge, lien, charge,
claim, encumbrance, pledge, security interest, or other
restriction or equity of any kind whatsoever. No transfer tax
is payable by or on behalf of the Underwriters in connection
with (A) the issuance by the Company of the Shares, (B) the
purchase by the Underwriters and the Representative of the
Shares and the Advisor's Warrants, respectively, from the
Company, (C) the consummation by the Company of any of its
obligations under this Agreement or the Advisor's Warrant
Agreement, or (D) resales of the Shares in connection with the
distribution contemplated hereby;
iv) [intentionally omitted]
v) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and
no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or Prospectus or any
part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the
best of such counsel's knowledge threatened or contemplated
under the Act;
vi) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments
or supplements thereto (other than the financial statements
and other financial and statistical data included therein, as
to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the
Rules and Regulations;
vii) to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required
by the Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are
correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party
or by which it is bound, including any document to which the
Company is a party or
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<PAGE>
by which it is bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are
accurate in all material respects and fairly represent the
information required to be shown by Form S-1; (C) there is not
pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including,
without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of
the Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed, (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), (y)
questions the validity of the capital stock of the Company or
this Agreement or the Advisor's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; (D) no statute or
regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and
(E) there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court
or arbitrator or governmental body, agency or official (or any
basis thereof known to such counsel) in which there is a
reasonable possibility of an adverse decision which may result
in a material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders'
equity, value, operation, properties, business or results of
operations of the Company, which could adversely affect the
present or prospective ability of the Company to perform its
obligations under this Agreement or the Advisor's Warrant
Agreement or which in any manner draws into question the
validity or enforceability of this Agreement or the Advisor's
Warrant Agreement;
viii) the Company has full legal right, power and
authority to enter into each of this Agreement and the
Advisor's Warrant Agreement and to consummate the transactions
provided for herein and therein; and each of this Agreement
and the Advisor's Warrant Agreement has been duly authorized,
executed and delivered by the Company. Each of this Agreement
and the Advisor's Warrant Agreement, assuming due
authorization, execution and delivery by each other party
thereto constitutes a legal, valid and binding agreement of
the Company enforceable against the Company in accordance with
its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting
enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited
by applicable law), and none of the Company's execution or
delivery of this Agreement and the Advisor's Warrant
Agreement, its performance hereunder or thereunder, its
consummation of the transactions contemplated herein or
therein, or the conduct of its business as described in the
Registration Statement, the Prospectus and any amendments or
supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute
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<PAGE>
a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company, (B)
any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument to which
the Company is a party or by which it is or may be bound or to
which any of its respective properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (C)
any statute, judgement, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or any of its activities
or properties;
ix) except as described in the Prospectus, no
consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws,
as to which no opinion need be rendered) is required in
connection with the issuance of the Shares pursuant to the
Prospectus, the issuance of the Advisor's Warrants, the
performance of this Agreement and the Advisor's Warrant
Agreement and the transactions contemplated hereby and
thereby;
x) the properties and business of the Company conform
in all material respects to the description thereof contained
in the Registration Statement and the Prospectus; and the
Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or
leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus,
and liens for taxes not yet due and payable;
xi) to the best knowledge of such counsel, the
Company is not in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, partnership agreement,
note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which the property
or assets (tangible or intangible) of the Company is subject
or affected; and the Company is not in violation of any term
or provision of its certificate of incorporation by-laws, or
in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation;
xii) the statements in the Prospectus under
"BUSINESS," "MANAGEMENT," "PRINCIPAL SHAREHOLDERS," "CERTAIN
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<PAGE>
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES
ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel,
and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
xiii) the Shares have been accepted for quotation
on Nasdaq;
xiv) the persons listed under the caption "PRINCIPAL
SHAREHOLDERS" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in regulation 13d-3 under
the Exchange Act) of the securities set forth opposite their
respective names thereunder as and to the extent set forth
therein;
xv) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity
has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any
security in such registration statement;
xvi) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings
for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or
financial consulting arrangement or any other arrangements,
agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the
NASD;
xvii) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements are legal,
valid and binding obligations of parties thereto, enforceable
against the party and any subsequent holder of the securities
subject thereto in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles
in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law);
and
xviii) except as described in the Prospectus, the
Company does not (A) maintain, sponsor or contribute to any
ERISA Plans, (B) maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in SECTION
3(35) of ERISA, and (C) has never completely or partially
withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
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Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company, and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the
Representative and they are justified in relying thereon. Such opinion shall
also state that Underwriters' Counsel is entitled to rely thereon.
(e) At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinion of Broad and Cassel, counsel to the
Company, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of the
Option Closing Date the statements made by Broad and Cassel in its opinion
delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this SECTION 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
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<PAGE>
(g) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is materially adverse to the Company; (iii) the
Company shall not be in default under any provision of any instrument relating
to any outstanding indebtedness; (iv) the Company shall not have issued any
securities (other than the Securities); the Company shall not have declared or
paid any dividend or made any distribution in respect of its capital stock of
any class; and there has not been any change in the capital stock of the
Company, or any material change in the debt (long or short term) or liabilities
or obligations of the Company (contingent or otherwise); (v) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may adversely affect the business, operations,
prospects or financial condition or income of the Company, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
i) The representations and warranties of the Company
in this Agreement are true and correct as if made on and as of
the Closing Date or the Option Closing Date, as the case may
be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may
be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued,
and no proceedings for that purpose have been instituted or
are pending or, to the best of each of such person's
knowledge, after due inquiry are contemplated or threatened
under the Act;
iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto,
contain all statements and information
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<PAGE>
required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and
neither the Preliminary Prospectus nor any supplement thereto
included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and
including the Closing Date or the Option Closing Date, as the
case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or
contingent; (b) the Company has not paid or declared any
dividends or other distributions on its capital stock; (c) the
Company has not entered into any transactions not in the
ordinary course of business; (d) there has not been any change
in the capital stock of the Company or any material change in
the debt (long or short-term) of the Company; (e) the Company
has not sustained any material loss or damage to its property
or assets, whether or not insured; (g) there is no litigation
which is pending or threatened (or circumstances giving rise
to same) against the Company, or any affiliated party of any
of the foregoing which is required to be set forth in an
amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not
been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from Deloitte:
i) confirming that they are independent public
accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in
all material respects with the applicable accounting
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requirements of the Act and the Rules and Regulations
thereunder and that the Representative may rely upon the
opinion of Deloitte with respect to such financial statements
and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of the Company, a reading of the
latest available minutes of the stockholders and board of
directors and the various committees of the board of directors
of the Company, consultations with officers and other
employees of the Company responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would
lead them to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in
the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements of the Company
included in the Registration Statement, or (B) at a specified
date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in
the capital stock of the Company, any change in the long-term
debt of the Company, or any decrease in the stockholders'
equity of the Company or any decrease in the net current
assets or net assets of the Company as compared with amounts
shown in the December 31, 1996 balance sheet included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such
change or decrease, and (C) during the period from December
31, 1996 to a specified date not more than five (5) days prior
to the effective date of the Registration Statement, there was
any decrease in net revenues or net earnings of the Company or
increase in net earnings per common share of the Company, in
each case as compared with the corresponding period beginning
December 31, 1995 other than as set forth in or contemplated
by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the
amount of liabilities of the Company (including a break-down
of commercial paper and notes payable to the banks);
v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an
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examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in
agreement; and
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Representative may
request.
(k) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Deloitte a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm the statements made in the letter furnished pursuant to SUBSECTION
(i) of this SECTION hereof except that the specified date referred to shall be a
date not more than five days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of SUBSECTION (j) of this SECTION with
respect to certain amounts, percentages and financial information as specified
by the Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(l) The Company shall have delivered to the Representative a
letter from Deloitte addressed to the Company stating that they have not during
the immediately preceding two year period brought to the attention of the
Company's management any "weakness" as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(m) On each of the Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Shares.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
SECTION 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(o) On or before the Closing Date, the Underwriters shall have
received the favorable opinion of Brookstein & Kudirka, P.C., special patent
counsel to the Company, dated the Closing Date, addressed to the Underwriters,
in form and substance satisfactory to Underwriters' counsel, and in
substantially the form of Exhibit A attached hereto.
(p) At each Option Closing date, if any, the Underwriters
shall have received the favorable opinion of Brookstein & Kudirka, P.C., dated
the relevant Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriter's Counsel confirming, as of the Option
Closing Date, the statements made by Brookstein & Kudirka, P.C., in its opinion
delivered on the Closing Date
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(q) On or before the Closing Date, the Company shall have
executed and delivered to Josephthal, (i) the Advisor's Warrant Agreement
substantially in the form filed as Exhibit 4.2 to the Registration Statement in
final form and substance satisfactory to Josephthal, and (ii) the Advisor's
Warrants in such denominations and to such designees as shall have been provided
to the Company
(r) On or before the Closing Date, the Shares shall have been
duly approved for quotation on Nasdaq, subject to official notice of issuance.
(s) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this SECTION 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in SECTION 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this SECTION 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any other securities exchange, (B) the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), or (C) any breach of any
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representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
SECTION 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this SECTION 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this SECTION 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
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case but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this SECTION 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this SECTION 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received
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<PAGE>
by the Company, on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth in
the table on the Cover Page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of SECTION 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in SECTION 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter, the Company, and shall
survive termination of this Agreement or the issuance, sale and delivery of the
Securities to the Underwriters and the Representative, as the case may be.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the
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<PAGE>
Registration Statement becomes effective as the Representative, in their
discretion, shall release the Securities for sale to the public; PROVIDED,
HOWEVER, that the provisions of SECTIONS 5, 7 and 10 of this Agreement shall at
all times be effective. For purposes of this SECTION 9, the Shares to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representatives of telegrams to securities dealers releasing
such shares for offering or the release by the Representative for publication
of the first newspaper advertisement which is subsequently published relating to
the Shares.
10. TERMINATION.
(a) Subject to subsection (b) of this SECTION 10, the
Representative shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Commission or any other government authority having jurisdiction; or (iv) if
trading of any of the securities of the Company shall have been suspended, or
any of the securities of the Company shall have been delisted, on any exchange
or in any over-the-counter market; or (v) if the United States shall have become
involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency shall
have been declared in the United States; or (vi) if a banking moratorium has
been declared by a state or federal authority; or (vii) if a moratorium in
foreign exchange trading has been declared; or (viii) if the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery of
the Securities; or (viii) if there shall have occurred any outbreak or
escalation of hostilities or any calamity or crisis or there shall have been
such a material adverse change in the conditions or prospects of the Company, or
such material adverse change in the general market, political or economic
conditions, in the United States or elsewhere as in the Representative's
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities or (ix) if Stephen R. Cohen, Robert Kennedy and Shane
D. Mattaway shall no longer serve the Company in their present capacity.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of SECTION 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to SECTION 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
SECTION 6 or SECTION 12) then, the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket
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<PAGE>
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to SECTION 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to SECTIONS 6, 10, 11 and 12 hereof), and whether or not
this Agreement is otherwise carried out, the provisions of SECTION 5 and SECTION
7 shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of SECTION 6, SECTION 10 or
SECTION 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Shares to be purchased
on such date, the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10%
of the total number of Firm Shares, this Agreement shall
terminate without liability on the part of any non-defaulting
Underwriters.
No action taken pursuant to this SECTION shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Date or at any Option Closing Date, as applicable, to sell and deliver
the number of Shares which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Shares to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Shares from
the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to SECTION 5, SECTION 7 and SECTION 10
hereof. No action taken pursuant to this SECTION shall relieve the Company from
liability, if any, in respect of such default.
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13. NOTICES. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative c/o Josephthal Lyon & Ross Incorporated at 200 Park Avenue, 24th
Floor, New York, New York 10166, Attention: Scott A. Weisman, with a copy to
Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103,
Attention: Lawrence B. Fisher, Esq. Notices to the Company shall be directed to
the Company at 902 Clint Moore Road, Suite 104, Boca Raton, Florida 33487,
Attention: Stephen R. Cohen, Chairman of the Board and Chief Executive Officer,
with a copy to Broad and Cassel, Suite 3000, Miami Center, 201 Souther Biscayne
Boulevard, Miami, Florida 33131, Attention: Dale Bergman, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriters, the Company, and the controlling
persons, directors and officers referred to in SECTION 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Advisor's Warrant Agreement constitute the entire agreement of the parties
hereto and supersede all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in a writing, signed by the Representative and the Company.
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If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
NETSPEAK CORPORATION
By:
-----------------------------------------
Stephen R. Cohen
Chairman of the Board and
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
JOSEPHTHAL LYON & ROSS INCORPORATED
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
---------------------------------------------
Name:
Title:
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SCHEDULE A
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
Josephthal Lyon & Ross Incorporated
TOTAL 2,000,000
=========
<PAGE>
EXHIBIT A
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1997
JOSEPHTHAL, LYON & ROSS INCORPORATED
200 Park Avenue, 24th Floor
New York, New York 10166
Re: Public Offering of NetSpeak Corporation
Gentlemen:
We have acted as special counsel to NETSPEAK CORPORATION, a Florida corporation
(the "Company"), in connection with the entering into by the Company of that
certain Underwriting Agreement by and between Josephthal, Lyon & Ross
Incorporated ("Josephthal"), as representative of the several underwriters named
in Schedule A thereto, and the Company, dated _______________, 1997 (the
"Underwriting Agreement"). This opinion is provided to you pursuant to Section
____ of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we have reviewed the
following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Registration Statement filed _____, 1997,
together with any and all amendments thereof exhibits thereto
(collectively, the "Registration Statement");
(iii) the company's Prospectus dated _____________, 1997
(the "Prospectus");
(iv) a search of the United States Patent and Trademark Office
records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed on
Schedule A annexed hereto and hereby incorporated by
<PAGE>
reference herein (collectively, the "Patents")), and
trademarks, trademark applications, service marks and service
mark applications (collectively, the "Marks") (including,
without limitation, the Marks listed on Schedule B annexed
hereto and hereby incorporated by reference herein
(collectively, the "Trademarks")),
owned, purportedly owned or licensed by the Company
(including, those patents, patent applications and Marks
licensed, without limitation, pursuant to the licenses listed
on Schedule C annexed hereto and hereby incorporated by
reference herein (collectively, the "Licenses")), conducted by
______________________________ and certified as true and
correct as of _______________________, 1997 (no earlier than 5
days prior to the date of the Closing (as defined in the
Underwriting Agreement));
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material
(including, without limitation, the copyright in, or license
permitting the Company's actual use of, the material licensed
or otherwise distributed by the Company and listed on Schedule
D annexed hereto and hereby incorporated by reference herein
(collectively, the "Copyrighted Material")), owned,
purportedly owned or licensed by the Company conducted by
_____________________ and certified as true and correct as of
__________________, 1997 (no earlier than 5 days prior to the
date of the Closing);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted Material,
listed on Schedules A, B, C and D, respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
[________________, _____________ and _______], with respect to
the following two categories of general intangibles:
(a) the intellectual property general intangibles of the
Company, including, without limitation, the Company's patents,
patent applications, inventions, know how, trademarks, service
marks, copyrights, service and trade names, intellectual
property licenses and other rights, and
<PAGE>
(b) the intellectual property general intangibles licensed to
the Company, including, without limitation, the patents,
patent applications, inventions, know how, trademarks, service
marks, copyrights, service and trade names and other
intellectual property rights licensed to the Company pursuant
to the Licenses (listed on Schedule C),
said search certified to us as complete and accurate by
________________ and current through ________________________,
1996 (no earlier than 5 days prior to the date of the Closing)
and said jurisdictions being the only jurisdictions in which
filing of UCC financing statements or other documents may be
filed to effectively evidence a security or other interest in
said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating to
the Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other
matters, as we have deemed necessary or appropriate as a basis
for the opinions set forth herein. Whenever our opinion herein
is qualified by the phrase "to the best of our knowledge" or
"to the best of our knowledge, after due inquiry," such
language means that, based upon (i) our inquiries of officers
of the Company, (ii) our review of the Documents, and (iii)
our review of such other corporate records, documents,
instruments and agreements described in the first sentence of
this paragraph, we believe that such opinions are factually
correct.
To the best of our knowledge, as to all matters of fact represented to you by
the Company, we advise you that nothing has come to our attention that would
cause us to believe that such facts are incorrect, incomplete or misleading or
that reliance thereon is not warranted under the circumstances. We call to your
attention that our opinion is limited to such facts as they exist on the date
hereof and do not take into account any change of circumstances, fact or law
subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion that:
1. To the best of our knowledge, after due inquiry, except as described in the
Registration Statement, the Company owns or has the right to use, free and clear
of all liens, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever,
<PAGE>
(i) all patents and patent applications (including, without
limitation, the Patents),
(ii) all trademarks and service marks (including, without
limitation, the Trademarks),
(iii) all copyrights (including, without limitation, the
Copyrighted Material),
(iv) all service and trade names,
(v) all intellectual property licenses (including, without
limitation, the Licenses), and
(vi) all technology used in, contemplated to be used in or
required for, the conduct of the Company's business.
2. To the best of our knowledge, after due inquiry, the Company possesses all
material intellectual property licenses or rights used in, or required for, the
conduct of its business (including, the Licenses and without limitation, any
such licenses or rights described in the Registration Statement as being owned,
possessed or licensed by the Company, as the case may be), such licenses and
rights are in full force and effect, and the Company's products, methods and
services do not infringe any unlicensed intellectual property of any third
parties.
3. To the best of our knowledge, after due inquiry, there is no claim or action,
pending, threatened or potential, which affects or could affect the rights of
the Company with respect to any trademarks, service marks, copyrights, service
names, trade names, patents, patent applications or licenses used in, or
required for, the conduct of the Company's business and all trademarks, service
marks, copyrights, trade names, and patents owned or licensed to the Company are
valid.
4. To the best of our knowledge, after due inquiry, there is no intellectual
property based claim or action, pending, threatened or potential, which affects
or could affect the rights of the Company with respect to any products,
services, processes or licenses, including, without limitation, the Licenses
used in the conduct of the Company's business.
5. To the best of our knowledge, after due inquiry, except as described in the
Registration Statement, the Company is not under any obligation to pay royalties
or fees to any third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used by the Company.
<PAGE>
6. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement under the headings, "Risk Factors - Patents, Trademarks
and Proprietary Information" and "Business - Patents, Trademarks and Proprietary
Information", are accurate in all material respects, fairly represent the
information disclosed therein and do not omit to state any fact necessary to
make the statements made therein complete and accurate.
7. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement and the Prospectus do not contain any untrue statement of
a material fact with respect to the intellectual property position of the
Company, or omit to state any material fact relating to the intellectual
property position of the Company which is required to be stated in the
Registration Statement and the Prospectus or is necessary to make the statements
therein not misleading.
We call your attention to the fact that the members of this firm are licensed to
practice law in the State of ______________ and before the United States Patent
and Trademark Office as Registered Patent Attorneys. Accordingly, we express no
opinion with respect to the laws, rules and regulations of any jurisdictions
other than the State of ___________ and the United States of America.
The opinions expressed herein are for the sole benefit of, and may be relied
upon only by, the several Underwriters named in Schedule A to the Underwriting
Agreement and Orrick, Herrington & Sutcliffe.
Very truly yours,
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
COMNET CORPORATION
ARTICLE I
The name of the corporation is COMNET CORPORATION (hereinafter called
the "Corporation").
ARTICLE II
The address of the principal office and the mailing address of the
Corporation is One South Ocean Boulevard, Suite 305, Boca Raton, Florida 33432.
ARTICLE III
The aggregate number of shares of all classes of capital stock which
this Corporation shall have authority to issue is Twenty Six Million
(26,000,000), consisting of (i) Twenty Five Million (25,000,000) shares of
common stock, par value $.01 per share (the "Common Stock'), and (ii) One
Million (1,000,000) shares of preferred stock, par value $.01 per share (the
"Preferred Stock").
The designations and the preferences, limitations and relative rights
of the Preferred Stock and the Common Stock of the Corporation are as follows:
A. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have such
designations and powers, preferences and rights, and qualifications, limitations
and restrictions thereof as are stated and expressed herein and in the
resolution or resolutions providing for the issuance of such class or series
adopted by the Board of Directors as hereinafter prescribed.
2. Authority is hereby expressly granted to and vested in the
Board of Directors to authorize the issuance of the Preferred Stock from time to
time in one or more classes or series, to determine and take necessary
proceedings fully to effect the issuance and redemption of any such Preferred
Stock, and, with respect to each class or series of Preferred Stock, to fix and
state by the resolution or resolutions from time to time adopted providing for
the issuance thereof the following:
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a. whether or not the class or series is to
have voting rights, full or limited, or is to be without voting rights;
b. the number of shares to constitute the
class or series and the designations thereof
c. the preferences and relative, participants
optional or other special rights, if any, and the qualifications, limitations or
restrictions thereof if any, with respect to any class or series;
d. whether or not the shares of any class or
series shall be redeemable and if redeemable the redemption price or prices,
and the time or times at which and the terms and conditions upon which, such
shares shall be redeemable and the manner of redemption;
e. whether or not the shares of a class or
series shall be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement, and if such
retirement or sinking fund or funds shall be established, the annual amount
thereof and the terms and provisions relative to the operation thereof;
f. the dividend rate, if any, whether any such
dividends are payable in cash, stock of the Corporation or other property, the
conditions upon which and the times when any such dividends are payable, the
preference to or the relation to the payment of the dividends payable on any
other class or classes or series of stock, whether or not such dividend shall be
cumulative or noncumulative, and if cumulative, the date or dates from which
such dividends shall accumulate;
g. the preferences, if any, and the amounts
thereof which the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of or upon any
distribution of the assets of the Corporation;
h. whether or not the shares of any class or
series shall be convertible into, or exchangeable for, the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock of the Corporation and the conversion price, ratio or rate at
which such conversion or exchange may be made, with such adjustments, if any,
as shall be stated and expressed or provided for in such resolution or
resolutions; and
i. such other special rights and protective
provisions with respect to any class or series as the Board of Directors may
deem advisable and in the best interests of the Corporation.
The shares of each class or series of Preferred Stock may vary from the
shares of any other series thereof in any or all of the foregoing respects. The
Board of Directors may increase the number of shares of Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized and unissued shares of Preferred Stock not
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designated for any other class or series. The Board of Directors may decrease
the number of shares of Preferred Stock designated for any class or series by a
resolution, subtracting from such series unissued shares of Preferred Stock
designated for such class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of Preferred Stock.
B. PROVISIOM RELATING TO THE COMMON STOCK.
1. Except as otherwise required by law or as may be provided
by the resolutions of the Board of Directors authorizing the issuance of any
class or series of Preferred Stock, as herein above provided, all rights to vote
and all voting power shall be vested exclusively in the holders of Common Stock.
2. Subject to the rights of the holders of the Preferred
Stock, the holders of Common Stock shall be entitled to receive when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends payable in cash, stock or otherwise.
3. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled (if any) or a sum sufficient for such payment in full shall have been
set aside, the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock in accordance with their respective
rights and interests to the exclusion of the holders of the Preferred Stock.
C. GENERAL PROVISIONS.
1. Except as may be provided by the resolutions of the Board
of Directors authorizing the issuance of any class or series of Preferred Stock,
as hereinabove provided, cumulative voting by any shareholder is hereby
expressly denied.
2. No shareholder of this Corporation shall have, by reason of
its holding shares of any class or series of stock of the Corporation, any
preemptive or preferential rights to purchase or subscribe for any other shares
of any class or series of this Corporation now or hereafter authorized and any
other equity securities, or any notes, debentures, warrants, bonds, or other
securities convertible into or options or warrants to purchase shares of any
class, now or hereafter authorized whether or not the issuance of any such
shares, or such notes, debentures, bonds or other securities, would adversely
affect the dividend or voting rights of such shareholder.
ARTICLE IV
The Corporation shall hold a special meeting of shareholders only:
(1) On call of the board of directors or persons authorized to do
so by the Corporation's bylaws; or
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(2) If the holders of not less than 50 percent of all votes entitled to
be cast on any issue proposed to be considered at the proposed special meeting
sign, date, and deliver to the Corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held.
ARTICLE V
The street address of the Corporation's initial registered office in
the State of Florida is 1201 Hays Street, Tallahassee, Florida 32301, City of
Tallahassee, County of Leon, and the name of its initial registered agent at
such office is Corporation Service Company.
ARTICLE VI
The Board of Directors of the Corporation shall consist of at least one
director, with the exact number to be fixed from time to time in the manner
provided in the Corporation's bylaws. The number of directors constituting the
initial Board of Directors is three (3), and the names and addresses of the
members of the initial Board of Directors, who are to serve as the Corporation's
directors until their successors are duly elected and qualified are:
Stephen R. Cohen
One South Ocean Boulevard
Suite 305
Boca Raton, Florida 33432
Robert Kennedy
One South Ocean Boulevard
Suite 305
Boca Raton, Florida 33432
Harvey Kaufman
One South Ocean Boulevard
Suite 305
Boca Raton, Florida 33432
ARTICLE VII
The name of the Incorporator is Dale S. Bergman and the address of the
Incorporator is 1221 Brickell Avenue, Miami, Florida 33131.
ARTICIE VIII
This Corporation shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent not prohibited by any law in
existence either now or hereafter.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Incorporator named
above, for the purpose of forming a corporation pursuant to the Florida Business
Corporation Act of the State of Florida has signed these Articles of
Incorporation this 7th day of December, 1995.
/s/ DALE S. BERGMAN
---------------------------
Dale S. Bergman
Incorporator
ACCEPTANCE OF APPOINTMENT OF REGISTERED AGENT
The undersigned, having been named the Registered Agent of COMNET
CORPORATION, hereby accepts such designation and is familiar with, and accepts,
the obligations of such position, as provided in Florida Statutes Section
607.0505.
CORPORATION SERVICE COMPANY
By:/s/
----------------------------
Registered Agent
DATED: December 8, 1995
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<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
COMNET CORPORATION
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act (the "Act"), the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
1. The name of the corporation is COMNET CORPORATION (the"Corporation"),
Charter #P95000093582, filed on December 8, 1995.
2. The following Amendment to the Articles of Incorporation was adopted by
all of the Directors of the Corporation on December 14, 1995 and by the
Shareholders of the Corporation, the number of votes cast being sufficient for
approval on December 14, 1995 in the manner prescribed by Section 607.1003 of
the Act:
RESOLVED, that Article I of the Corporation's Articles of Incorporation
shall be amended in its entirety to read as follows:
ARTICLE 1
The name of the Corporation is Netspeak Corporation (hereinafter called the
"Corporation").
3. Except as hereby amended, the Articles of Incorporation of the Corporation
shall remain the same.
IN WITNESS WHEREOF, the undersigned being the Chairman of the Board and the
Chief Executive Officer of the Corporation, has executed these Articles of
Amendment to Articles of Incorporation of Comnet Corporation this 14th day
of December, 1995.
COMNET CORPORATION,
a Florida corporation
BY: /s/ STEPHEN R. COHEN
-----------------------------------
Stephen R. Cohen, Chairman of the
Board and Chief Executive Officer
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EXHIBIT 3.2
BYLAWS
OF
NETSPEAK CORPORATION
(A FLORIDA CORPORATION)
(NAME AMENDED FROM COMNET CORPORATION 12/18/95)
<PAGE>
INDEX
PAGE
NUMBER
ARTICLE ONE - OFFICES.....................................................1
1. Registered Office............................................1
2. Other Offices................................................1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS....................................1
1. Place........................................................1
2. Time of Annual Meeting.......................................1
3. Call of Special Meetings.....................................1
4. Conduct of Meeting...........................................1
5. Notice and Waiver of Notice..................................2
6. Business of Special Meeting..................................2
7. Quorum.......................................................2
8. Voting Per Share.............................................3
9. Voting of Shares.............................................3
10. Proxies......................................................3
11. Shareholder List.............................................4
12. Action Without Meeting.......................................4
13. Fixing Record Date...........................................4
14. Inspectors and Judges........................................5
15. Voting for Directors.........................................5
ARTICLE THREE - DIRECTORS.................................................5
1. Number, Election and Term....................................5
2. Vacancies....................................................5
3. Powers.......................................................6
4. Place of Meetings............................................6
5. Annual Meeting...............................................6
6. Regular Meetings.............................................6
7. Special Meetings and Notice..................................6
8. Quorum; Required Vote; Presumption of Assent.................6
9. Action Without Meeting.......................................7
10. Conference Telephone or Similar Communications Equipment
Meetings.....................................................7
11. Committees...................................................7
12. Compensation of Directors....................................8
ARTICLE FOUR - OFFICERS...................................................8
1. Positions....................................................8
2. Election of Specified Officers by Board......................8
3. Election or Appointment of Other Officers....................8
4. Salaries.....................................................8
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5. Term; Resignation............................................8
6. Chairman of the Board........................................9
7. President....................................................9
8. Vice Presidents..............................................9
9. Secretary....................................................9
10. Treasurer....................................................9
11. Other Officers, Employees and Agents........................10
ARTICLE FIVE - CERTIFICATES FOR SHARES...................................10
1. Issue of Certificates.......................................10
2. Legends for Preferences and Restrictions on Transfer........10
3. Facsimile Signatures........................................11
4. Lost Certificates...........................................11
5. Transfer of Shares..........................................11
6. Registered Shareholders.....................................11
7. Redemption of Control Shares................................11
ARTICLE SIX - GENERAL PROVISIONS.........................................12
1. Dividends...................................................12
2. Reserves....................................................12
3. Checks......................................................12
4. Fiscal Year.................................................12
5. Seal........................................................12
6. Gender......................................................12
ARTICLE SEVEN - AMENDMENTS OF BYLAWS.....................................12
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<PAGE>
NETSPEAK CORPORATION
(NAME AMENDED 12/18/95)
BYLAWS
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of NETSPEAK
CORPORATION, a Florida corporation (the "Corporation"), shall be located in the
City of Tallahassee, State of Florida, unless otherwise designated by the Board
of Directors.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided that there shall be an annual meeting held every
year at which the shareholders shall elect a Board of Directors and transact
such other business as may properly be brought before the meeting.
Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
shareholders shall be held if called by the Board of Directors, the President,
or if the holders of not less than 50 percent of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date, and deliver to the Secretary one or more written demands for the
meeting describing the purpose or purposes for which it is to be held.
Section 4. CONDUCT OF MEETING. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and
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special meetings of shareholders and shall be given full discretion in
establishing the rules and procedures to be followed in conducting the meetings,
except as otherwise provided by law or in these Bylaws.
Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by
law, written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than sixty
(60) days before the day of the meeting, either personally or by first-class
mail, by or at the direction of the President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least thirty (30) days before the date
of the meeting, it may be done by a class of United States mail other than
first-class. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation, with postage
thereon prepaid. If a meeting is adjourned to another time and/or place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fixes a new record date for the adjourned
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether signed before, during or after the time of the meeting stated
therein, and delivered to the Corporation for inclusion in the minutes or filing
with the corporate records, shall be equivalent to the giving of such notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the shareholders need be specified in any written waiver of
notice. Attendance of a person at a meeting shall constitute a waiver of (a)
lack of or defective notice of such meeting, unless the person objects at the
beginning to the holding of the meeting or the transacting of any business at
the meeting, or (b) lack of defective notice of a particular matter at a meeting
that is not within the purpose or purposes described in the meeting notice,
unless the person objects to considering such matter when it is presented.
Section 6. BUSINESS OF SPECIAL MEETING. Business transacted at any
special meeting shall be confined to the purposes stated in the notice thereof.
Section 7. QUORUM. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof. Once a share is represented for any purpose
at a meeting, it is
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<PAGE>
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 8. VOTING PER SHARE. Except as otherwise provided in the
Articles of Incorporation or by law, each shareholder is entitled to one (1)
vote for each outstanding share held by him on each matter voted at a
shareholders' meeting.
Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
Section 10. PROXIES. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholders shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
him by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation or such other officer or agent which is authorized
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<PAGE>
to tabulate votes, and shall be valid for up to 11 months, unless a longer
period is expressly provided in the appointment form. The death or incapacity of
the shareholder appointing a proxy does not affect the right of the Corporation
to accept the proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. An appointment
of a proxy is revocable by the shareholder unless the appointment is coupled
with an interest.
Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment
Section 12. ACTION WITHOUT MEETING. Any action required by law to be
taken at a meeting of shareholders, or any action that may be taken at a meeting
of shareholders, may be taken without a meeting or notice if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted with respect to the subject
matter thereof, and such consent shall have the same force and effect as a vote
of shareholders taken at such a meeting.
Section 13. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 13, such determination
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shall apply to any adjournment thereof, except where the Board of Directors
fixes a new record date for the adjourned meeting or as required by law.
Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are
not appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors or judges. In case any person who may be appointed as an
inspector or judge fails to appear or act, the vacancy may be filled by the
Board of Directors in advance of the meeting, or at the meeting by the person
presiding thereat. The inspectors or judges, if any, shall determine the number
of shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.
Section 15. VOTING FOR DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Articles of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 2 of this Article,
and each director elected shall hold office for the term for which he is elected
and until his successor is elected and qualified or until his earlier
resignation, removal from office or death. Directors must be natural persons who
are 18 years of age or older but need not be residents of the State of Florida,
shareholders of the Corporation or citizens of the United States. Any director
may be removed at any time, with or without cause, at a special meeting of the
shareholders called for that purpose.
Section 2. VACANCIES. A director may resign at any time by giving
written notice to the Corporation, the Board of Directors or the Chairman of the
Board. Such resignation shall take effect when the notice is delivered unless
the notice specifies a later effective date, in which
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event the Board of Directors may fin the pending vacancy before the effective
date if they provide that the successor does not take office until the effective
date. Any vacancy occurring in the Board of Directors and any directorship to be
filled by reason of an increase in the size of the Board of Directors shall be
filled by the affirmative vote of a majority of the current directors though
less than a quorum of the Board of Directors, or may be filled by an election at
an annual or special meeting of the shareholders called for that purpose, unless
otherwise provided by law. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office, or until the next election
of one or more directors by shareholders if the vacancy is caused by an increase
in the number of directors.
Section 3. POWERS. Except as provided in the Articles of Incorporation
and by law, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.
Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of shareholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
Written notice of special meetings of the Board of Directors shall be given to
each director at least forty-eight (48) hours before the meeting. Except as
required by statute, neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notices to directors shall be
in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be received. Notice to
directors may also be given by telegram, teletype or other form of electronic
communication. Notice of a meeting of the Board of Directors need not be given
to any director who signs a written waiver of notice before, during or after the
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting and a waiver of any and all objections to the place of
the meeting, the time of the meeting and the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting or
promptly upon arrival at the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened.
Section 8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority
of the number of directors fixed by, or in the manner provided in, these bylaws
shall constitute a quorum for
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the transaction of business; provided, however, that whenever, for any reason, a
vacancy occurs in the Board of Directors, a quorum shall consist of a majority
of the remaining directors until the vacancy has been filled. The act of a
majority of the directors present at a meeting at which a quorum is present when
the vote is taken shall be the act of the Board of Directors. A director of the
Corporation who is present at a meeting of the Board of Directors or a committee
of the Board of Directors when corporate action is taken shall be presumed to
have assented to the action taken, unless he objects at the beginning of the
meeting, or promptly upon his arrival, to holding the meeting or transacting
specific business at the meeting, or he votes against or abstains from the
action taken.
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or a committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT
MEETINGS. Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation in such a meeting shall constitute presence in
person at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
the meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
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Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a President, Chief Executive Officer, one or more Vice Presidents, a Secretary
and a Treasurer, and, if elected by the Board of Directors by resolution, a
Chairman of the Board. Any two or more offices may be held by the same person.
Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a President, one or more Vice Presidents, a Secretary and a Treasurer.
Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the President of the Corporation. The Board of Directors
shall be advised of appointments by the President at or before the next
scheduled Board of Directors meeting.
Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
Section 5. TERM; RESIGNATION. The officers of the Corporation shall
hold office until their successors are chosen and qualified. Any officer or
agent elected or appointed by the Board of Directors or the President of the
Corporation may be removed, with or without cause, by the Board of Directors.
Any officers or agents appointed by the President of the Corporation pursuant to
Section 3 of this Article Four may also be removed from such officer positions
by the President, with or without cause. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors, or, in the case of an officer appointed by the President
of the Corporation, by the President or the Board of Directors. Any officer of
the Corporation may resign from his respective office or position by delivering
notice to the Corporation. Such resignation is effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the
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Corporation accepts the future effective date, the Board of Directors may fill
the pending vacancy before the effective date if the Board provides that the
successor does not take office until the effective date.
Section 6. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
shareholders and of the directors and shall be an ex officio member of all
standing committees. The Chairman of the Board shall be the Chief Executive
Officer of the Corporation and shall have such other powers and shall perform
such other duties as shall be designated by the Board of Directors. The Chairman
of the Board shall be a member of the Board of Directors but no other officers
of the Corporation need be a director. The Chairman of the Board shall serve
until his successor is chosen and qualified, but he may be removed at any time
by the affirmative vote of a majority of the Board of Directors.
Section 7. PRESIDENT. The President shall be the Chief Operating
Officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event the Board of Directors shall not have designated a
chairman of the board, the President shall preside at meetings of the
shareholders and the Board of Directors.
Section 8. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
Section 9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it.
Section 10. TREASURER. The Treasurer shall have the custody of
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors at its regular meetings or
when the Board of Directors so requires an account of all his transactions as
treasurer and of the financial condition of the Corporation
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unless otherwise specified by the Board of Directors, the Treasurer shall be the
Corporation's Chief Financial Officer.
Section 11. OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, the officer so appointing him
and such officer or officers who may from time to time be designated by the
Board of Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, President or a
Vice President, and by the Secretary or an Assistant Secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer and there shall be set forth or fairly summarized upon
the certificate, or the certificate shall indicate that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
such restrictions. If the Corporation issues any shares that are not registered
under the Securities Act of 1933, as amended, and registered or qualified under
the applicable state securities laws, the transfer of any such shares shall be
restricted substantially in accordance with the following legend:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW OR (2) AT HOLDER'S
EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL
(SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED.
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Section 3. FACSIMILE SIGNATURES. The signatures of the Chairman of the
Board, the President or a Vice President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles, if the certificate is manually
signed by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of the issuance.
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof except as otherwise provided by the laws of the State of
Florida.
Section 7. REDEMPTION OF CONTROL SHARES. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may redeem the control shares at fair market value at any time
during the 60-day period after the last acquisition of such control shares. If a
person acquiring control shares of the Corporation files an acquiring person
statement with the Corporation, the control shares may be redeemed by the
Corporation only ff such shares are not accorded full voting rights by the
shareholders as provided by law.
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ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Articles of Incorporation.
Section 2. RESERVES. The Board of Directors may by resolution create
a reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end
on December 31 of each year, unless otherwise fixed by resolution of the Board
of Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6. GENDER. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by action of the Board of Directors.
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EXHIBIT 4.2
OH&S DRAFT
NETSPEAK CORPORATION
AND
JOSEPHTHAL LYON & ROSS INCORPORATED
ADVISOR'S
WARRANT AGREEMENT
DATED AS OF ______________, 1997
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ADVISOR'S WARRANT AGREEMENT dated as of ______________, 1997
between NETSPEAK CORPORATION, a Florida corporation (the "Company"), and
JOSEPHTHAL LYON & ROSS INCORPORATED (hereinafter referred to variously as the
"Holder", "Josephthal" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Josephthal or its
designees warrants ("Warrants") to purchase up to an aggregate 200,000 shares of
common stock of the Company ("Common Stock"); and
WHEREAS, Josephthal has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof among
Josephthal, [Co-Manager] ("[Co-Manager]", collectively with Josephthal, the
"Representatives") as the Representatives of the Several Underwriters named in
Schedule A thereto, and the Company to act as a Representative in connection
with the Company's proposed public offering of up to 2,000,000 shares of Common
Stock at a public offering price of $____ per share of Common Stock (the "Public
Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to Josephthal in consideration for, and as part of
Josephthal's compensation in connection with, Josephthal providing the Company
with financial advisory services;
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NOW, THEREFORE, in consideration of the premises, the payment
by Josephthal to the Company of an aggregate of twenty dollars ($20.00), the
agreements herein set forth and other good and valuable consideration, hereby
acknowledged, the parties hereto agree as follows:
1. GRANT. Josephthal is hereby granted the right to purchase,
at any time from ___________, 1998 [one year from the effective date of the
registration statement], until 5:30 P.M., New York time, on ______________, 2002
[five years from the effective date of the registration statement], up to an
aggregate of 200,000 shares of Common Stock (the "Shares") at an initial
exercise price (subject to adjustment as provided in SECTION 8 hereof) of $____
per share [120% of the initial public offering price per share] of Common Stock
subject to the terms and conditions of this Agreement. Except as set forth
herein, the Shares issuable upon exercise of the Warrants are in all respects
identical to the shares of Common Stock being purchased by the Underwriters for
resale to the public pursuant to the terms and provisions of the Underwriting
Agreement.
2. WARRANT CERTIFICATES. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A, attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
/section/ 3.1 METHOD OF EXERCISE. The Warrants initially are
exercisable at an aggregate initial exercise price (subject to adjustment as
provided in Section 8 hereof) per share of Common Stock set forth in SECTION 6
hereof payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in SECTION 8 hereof. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed,
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together with payment of the Exercise Price (as hereinafter defined) for the
shares of Common Stock purchased at the Company's principal offices in Boca
Raton, Florida (presently located at 902 Clint Moore Road, Suite 104, Boca
Raton, Florida 33487) the registered holder of a Warrant Certificate ("Holder"
or "Holder") shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
the Warrants). Warrants may be exercised to purchase all or part of the shares
of Common Stock represented thereby. In the case of the purchase of less than
all the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock purchasable thereunder.
ss.3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the
method of payment set forth in SECTION 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in SECTION 3.1 in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which the Warrants are being exercised multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined in SECTION 3.3
below) of the Shares less the Exercise Price and the denominator of which is
such Market Price. Solely for the purposes of this paragraph, Market Price shall
be calculated either (i) on the date which the form of election attached hereto
is deemed to have been sent to the Company pursuant to SECTION 13 hereof
("Notice Date") or (ii)
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as the average of the Market Prices for each of the five trading days preceding
the Notice Date, whichever of (i) or (ii) is greater.
/section/ 3.3 DEFINITION OF MARKET PRICE. As used herein, the
phrase "Market Price" at any date shall be deemed to be the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading or by the Nasdaq National Market
("NNM"), or, if the Common Stock is not listed or admitted to trading on any
national securities exchanged or quoted by NNM, the average closing bid price as
furnished by the NASD through NNM or similar organization if NNM is no longer
reporting such information, or if the Common Stock is not quoted on NNM, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock and/or other
securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of SECTIONS 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
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requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the
Shares underlying the Warrants (and/or other securities, property or rights
issuable upon the exercise of the Warrants) shall be executed on behalf of the
Company by the manual or facsimile signature of the then Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the date hereof, except to officers of Josephthal.
6. EXERCISE PRICE.
/section/ 6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as
otherwise provided in SECTION 8 hereof, the initial exercise price of each
Warrant shall be $____ per share [120% of the initial public offering price per
share] of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of SECTION 8 hereof.
/section/ 6.2 EXERCISE PRICE. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise price, depending
upon the context.
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7. REGISTRATION RIGHTS.
/section/ 7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Warrants, the Shares, and any of the other securities issuable upon exercise
of the Warrants have been registered under the Securities Act of 1933, as
amended (the "Act"), pursuant to the Company's Registration Statement on Form
S-1 (Registration No. 333-_____) (the "Registration Statement"). All of the
representations and warranties of the Company contained in the Underwriting
Agreement relating to the Registration Statement, the Preliminary Prospectus and
Prospectus (as such terms are defined in the Underwriting Agreement) and made as
of the dates provided therein, are hereby incorporated by reference. The Company
agrees and covenants promptly to file post-effective amendments to such
Registration Statement as may be necessary in order to maintain its
effectiveness and otherwise to take such action as may be necessary to maintain
the effectiveness of the Registration Statement as long as any Warrants are
outstanding. In the event that, for any reason, whatsoever, the Company shall
fail to maintain the effectiveness of the Registration Statement, upon exercise,
in part or in whole, of the Warrants, certificates representing the Shares
underlying the Warrants, and any of the other securities issuable upon exercise
of the Warrants (collectively, the "Warrant Securities") shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or sold except pursuant to (i)
an effective registration statement under the Act, (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
/section/ 7.2 PIGGYBACK REGISTRATION. If, at any time
commencing after the date hereof and expiring seven (7) years from the date
hereof, the Company proposes to register any of
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its securities under the Act (other than in connection with a merger or pursuant
to Form S-8) it will give written notice by registered mail, at least thirty
(30) days prior to the filing of each such registration statement, to Josephthal
and to all other Holder(s) of the Warrants and/or the Warrant Securities of its
intention to do so. If Josephthal or other Holder(s) of the Warrants and/or
Warrant Securities notify the Company within twenty (20) business days after
receipt of any such notice of its or their desire to include any such securities
in such proposed registration statement, the Company shall afford Josephthal and
such Holder(s) of the Warrants and/or Warrant Securities the opportunity to have
any such Warrant Securities registered under such registration statement
(sometimes referred to herein as the "Piggyback Registration").
Notwithstanding the provisions of this SECTION 7.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this SECTION 7.2 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
/section/ 7.3 DEMAND REGISTRATION.
(a) At any time commencing one year after the date hereof and
expiring five (5) years from the date hereof, the Holder of the Warrants and/or
Warrant Securities representing a "Majority" (as hereinafter defined) of such
securities (assuming the exercise of all of the Warrants) shall have the right
(which right is in addition to the registration rights under SECTION 7.2
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may
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<PAGE>
be necessary in the opinion of both counsel for the Company and counsel for
Josephthal and Holder, in order to comply with the provisions of the Act, so as
to permit a public offering and sale of their respective Warrant Securities for
nine (9) consecutive months by such Holder and any other Holder of the Warrants
and/or Warrant Securities who notify the Company within ten (10) days after
receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this SECTION 7.3 by any Holder or Holder(s) to
all other registered Holder(s) of the Warrants and the Warrant Securities within
ten (10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under SECTION 7.2
and subsection (a) of this SECTION 7.3, at any time commencing after the date
hereof and expiring five (5) years thereafter, any Holder of Warrants and/or
Warrant Securities shall have the right, exercisable by written request to the
Company, to have the Company prepare and file, on one occasion, with the
Commission a registration statement so as to permit a public offering and sale
for nine (9) consecutive months by any such Holder of its Warrant Securities,
provided, however, that the provisions of SECTION 7.4(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request.
(d) Notwithstanding anything to the contrary contained herein,
the Company shall have the option to repurchase any and all Warrant Securities
at the Market Price per share of Common Stock on the date of the notice sent
pursuant to SECTION 7.3(a) less the Exercise Price of such Warrant. Such
repurchase shall be in immediately available funds and shall close
8
<PAGE>
within two (2) days after the later of (i) the expiration of the period
specified in SECTION 7.4(a) or (ii) the delivery of the written notice of
election specified in this SECTION 7.3(d).
/section/ 7.4 COVENANTS OF THE COMPANY WITH RESPECT TO
REGISTRATION. In connection with any registration under SECTION 7.2 or 7.3
hereof, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within forty-five (45) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each Holder
desiring to sell Warrant Securities such number of prospectuses as shall
reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed pursuant
to SECTIONS 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to SECTION 7.3(c). If the Company shall
fail to comply with the provisions of SECTION 7.4(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental or special damages sustained by the Holder(s)
requesting registration of their Warrant Securities.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general
9
<PAGE>
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holder within the meaning of SECTION 15 of the Act or
SECTION 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in SECTION 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of SECTION
15 of the Act or SECTION 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holder, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in SECTION 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
10
<PAGE>
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Securities to be included in any registration
statement filed pursuant to SECTION 7.3 hereof, or permit any other registration
statement to be or remain effective during the effectiveness of a registration
statement filed pursuant to SECTION 7.3 hereof, without the prior written
consent of the Holder(s) of the Warrants and Warrant Securities representing a
Majority of such securities.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
11
<PAGE>
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with SECTION 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriters, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriters to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
or underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holder(s)
holding a Majority of the Warrant Securities requested to be included in such
underwriting, which may be Josephthal. Such agreement shall be satisfactory in
form and substance to the Company, each Holder and such managing underwriters,
and shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type
12
<PAGE>
used by the managing underwriter. The Holder(s) shall be parties to any
underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such
Holder(s). Such Holder(s) shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as they
may relate to such Holder(s) and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holder(s) of Warrants or Warrant Securities, shall mean in
excess of fifty percent (50%) of the then outstanding Warrants or Warrant
Securities that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
and (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
/section/ 8.1 SUBDIVISION AND COMBINATION. In case the Company
shall at any time subdivide or combine the outstanding shares of Common Stock,
the Exercise Price shall
13
<PAGE>
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination.
/section/ 8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the
Company shall pay a dividend in, or make a distribution of, shares of Common
Stock or of the Company's capital stock convertible into Common Stock, the
Exercise Price shall forthwith be proportionately decreased. An adjustment made
pursuant to this SECTION 8.2 shall be made as of the record date for the subject
stock dividend or distribution.
/section/ 8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each
adjustment of the Exercise Price pursuant to the provisions of this SECTION 8,
the number of Warrant Securities issuable upon the exercise at the adjusted
exercise price of each Warrant shall be adjusted to the nearest whole number by
multiplying a number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Securities issuable upon exercise of
the Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
/section/ 8.4 DEFINITION OF COMMON STOCK. For the purpose of
this Agreement, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Articles of Incorporation of the Company as
may be amended as of the date hereof, or (ii) any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value.
/section/ 8.5 MERGER OR CONSOLIDATION. In case of any
consolidation of the Company with, or merger of the Company with, or merger of
the Company into, another corporation (other than a consolidation or merger
which does not result in any reclassification or change
14
<PAGE>
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to the Holder a supplemental warrant
agreement providing that the holder of each Warrant then outstanding or to be
outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of shares of Common Stock of
the Company for which such warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in SECTION 8. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
/section/ 8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN
CASES. No adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the
shares of Common Stock issuable upon the exercise of the
Warrants;
(b) If the amount of said adjustment shall be less
than two cents (2(cent)) per Warrant Security, provided,
however, that in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents (2(cent)) per
Warrant Security.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like
15
<PAGE>
tenor and date representing in the aggregate the right to purchase the same
number of Warrant Securities in such denominations as shall be designated by the
Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
outstanding, the
16
<PAGE>
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to the
public in connection herewith may then be listed and/or quoted.
12. NOTICES TO WARRANT HOLDER. Nothing contained in this
Agreement shall be construed as conferring upon the Holder the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than
in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or
17
<PAGE>
substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to the address set forth in
SECTION 3 hereof or to such other address as the Company may
designate by notice to the Holder.
14. SUPPLEMENTS AND AMENDMENTS. The Company and Josephthal may
from time to time supplement or amend this Agreement without the approval of any
holder of Warrant Certificates (other than Josephthal) in order to cure any
ambiguity, to correct or
18
<PAGE>
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and Josephthal may deem
necessary or desirable and which the Company and Josephthal deem shall not
adversely affect the interests of the Holder(s) of Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holder(s) and their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close
of business on ______________, 2004. Notwithstanding the foregoing, the
indemnification provisions of SECTION 7 shall survive such termination until the
close of business on ______________, 2010.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company, Josephthal and the Holder hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, Josephthal and the Holder hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the Company, Josephthal and the Holder(s)
(at the option of the party bringing such action, proceeding or claim) may be
served by
19
<PAGE>
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in SECTION
13 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, Josephthal and the Holder(s) agree that the prevailing party(ies) in
any such action or proceeding shall be entitled to recover from the other
party(ies) all of its/their reasonable legal costs and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and Josephthal and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole benefit
20
<PAGE>
of the Company and Josephthal and any other registered Holder(s) of Warrant
Certificates or Warrant Securities.
22. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
NETSPEAK CORPORATION
By:
-----------------------------------
Name:
Title:
Attest:
- --------------------------------------
Secretary
JOSEPHTHAL LYON & ROSS INCORPORATED
By:
-----------------------------------
Name:
Title:
22
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, ______________, 2002
No. W- Warrants to Purchase
____ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________________,
or registered assigns, is the registered holder of _________________ Warrants to
purchase initially, at any time from ___________, 1997 [one year from the
effective date of the Registration Statement] until 5:30 p.m. New York time on
____________, 2002 [five years from the effective date of the Registration
Statement] ("Expiration Date"), up to __________ fully-paid and non-assessable
shares of common stock, ("Common Stock") of NETSPEAK CORPORATION, a Florida
corporation (the "Company"), (one share of Common Stock referred to individually
as a "Security" and collectively as the "Securities") at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $____
per share [120% of the initial public offering price per share] of Common Stock
upon surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, but subject to the conditions set forth
herein and in the warrant agreement dated as of ______________, 1997 between the
Company, and JOSEPHTHAL LYON & ROSS INCORPORATED (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company.
A-1
<PAGE>
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holder(s) (the words "holder" or "holder(s)" meaning the
registered holder or registered holder(s)) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ___________, 1997
NETSPEAK CORPORATION
[SEAL] By:
--------------------------------
Name:
Title:
Attest:
- --------------------------------------
Secretary
A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
| |_________________________ shares of Common Stock;
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of NetSpeak
Corporation in the amount of $____, all in accordance with the terms of Section
3.1 of the Advisor's Warrant Agreement dated as of ______________, 1997 between
NetSpeak Corporation and Josephthal Lyon & Ross Incorporated. The undersigned
requests that a certificate for such securities be registered in the name of
_______________________________ whose address is ____________________________
and that such Certificate be delivered to____________________ whose address is
__________________________________.
Dated:
Signature
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
A-4
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED__________________________ hereby sells, assigns and
transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
------------------------- -------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
-----------------------------------------
(Insert Social Security or Other Identifying
Number of Assignee)
A-5
EXHIBIT 10.1
NETSPEAK CORPORATION
1995 STOCK OPTION PLAN
(AS AMENDED)
1. PURPOSE. The purpose of this Plan is to advance the interests of
NETSPEAK CORPORATION, a Florida corporation (the "Company"), by providing an
additional incentive to attract, retain and motivate highly qualified and
competent persons who are key to the Company, including key employees,
consultants, Officers and Directors, and upon whose efforts and judgment the
success of the Company and its Subsidiaries is largely dependent, by authorizing
the grant of options to purchase Common Stock of the Company to persons who are
eligible to participate hereunder, thereby encouraging stock ownership in the
Company by such persons, all upon and subject to the terms and conditions of
this Plan.
2. DEFINITIONS. As used herein, the following terms shall have
the meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has
been a willful, reckless or grossly negligent failure by the Optionee to perform
his or her duties as an employee of the Company;
(ii) a determination by the Company that there has
been a willful breach by the Optionee of any of the material terms or provisions
of any employment agreement between such Optionee and the Company;
(iii) any conduct by the Optionee that either
results in his or her conviction of a felony under the laws of the United States
of America or any state thereof, or of an equivalent crime under the laws of any
other jurisdiction;
(iv) a determination by the Company that the
Optionee has committed an act or acts involving fraud, embezzlement,
misappropriation, theft, breach of fiduciary duty or material dishonesty against
the Company, its properties or personnel;
(v) any act by the Optionee that the Company
determines to be in willful or wanton disregard of the Company's best interests,
or which results, or is intended to result, directly or indirectly, in improper
gain or personal enrichment of the Optionee at the expense of the Company;
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(vi) a determination by the Company that there has
been a willful, reckless or grossly negligent failure by the Optionee to comply
with any rules, regulations, policies or procedures of the Company, or that the
Optionee has engaged in any act, behavior or conduct demonstrating a deliberate
and material violation or disregard of standards of behavior that the Company
has a right to expect of its employees; or
(vii) if the Optionee, while employed by the
Company and for two years thereafter, violates a confidentiality and/or
noncompete agreement with the Company, or fails to safeguard, divulges,
communicates, uses to the detriment of the Company or for the benefit of any
person or persons, or misuses in any way, any Confidential Information;
PROVIDED, HOWEVER, that, if the Optionee has entered into a written employment
agreement with the Company which remains effective and which expressly provides
for a termination of such Optionee's employment for "cause", the term "Cause" as
used herein shall have the meaning as set forth in the Optionee's employment
agreement in lieu of the definition of "Cause" set forth in this Section 2(b).
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the stock option committee
appointed by the Board or, if not appointed, the Board.
(e) "Common Stock" shall mean the Company's Common Stock, par
value $.01 per share.
(f) "Confidential Information" shall mean any and all
information pertaining to the Company's financial condition, clients, customers,
prospects, sources of prospects, customer lists, trademarks, trade names,
service marks, service names, "know-how," trade secrets, products, services,
details of client or consulting contracts, management agreements, pricing
policies, operational methods, site selection, results of operations, costs and
methods of doing business, owners and ownership structure, marketing practices,
marketing plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques, credit and
financial data concerning customers and business acquisition plans, that is not
generally available to the public.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers,
directors, consultants and independent contractors employed by the Company or
any parent or Subsidiary of the Company.
(i) "Fair Market Value" of a Share on any date of reference
shall be the Closing Price of a share of Common Stock on the business day
immediately preceding such date, unless the Committee in its sole discretion
shall determine otherwise in a fair and uniform manner. For this purpose, the
"Closing Price" of the Common Stock on any business day shall
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be (i) if the Common Stock is listed or admitted for trading on any United
States national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last reported sale
price of the Common Stock on such exchange or reporting system, as reported in
any newspaper of general circulation, (ii) if the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or any similar system of automated dissemination of quotations of
securities prices in common use, the mean between the closing high bid and low
asked quotations for such day of the Common Stock on such system, or (iii) if
neither clause (i) nor (ii) is applicable, the mean between the high bid and low
asked quotations for the Common Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the 10 preceding
days. If the information set forth in clauses (i) through (iii) above is
unavailable or inapplicable to the Company (E.G., if the Company's Common Stock
is not then publicly traded or quoted), then the "Fair Market Value" of a Share
shall be the fair market value (I.E., the price at which a willing seller would
sell a Share to a willing buyer when neither is acting under compulsion and when
both have reasonable knowledge of all relevant facts) of a share of the Common
Stock on the business day immediately preceding such date as the Committee in
its sole and absolute discretion shall determine in a fair and uniform manner.
(j) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.
(k) "Non-Statutory Stock Option" or "Nonqualified Stock
Option" shall mean an Option which is not an Incentive Stock Option.
(l) "Officer" shall mean the Company's chairman, president,
principal financial officer, principal accounting officer (or, if there is no
such accounting officer, the controller), any vice-president of the Company in
charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of Subsidiaries shall be deemed Officers of the Company if
they perform such policy-making functions for the Company. As used in this
paragraph, the phrase "policy-making function" does not include policy-making
functions that are not significant. Unless specified otherwise in a resolution
by the Board, an "executive officer" pursuant to Item 401(b) of Regulation S-K
(17 C.F.R. ss. 229.401(b)) shall be only such person designated as an "Officer"
pursuant to the foregoing provisions of this paragraph.
(m) "Option" (when capitalized) shall mean any stock option
granted under this Plan.
(n) "Optionee" shall mean a person to whom an Option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
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(o) "Plan" shall mean this 1995 Stock Option Plan of the
Company, which Plan shall be effective on December 8, 1995, upon approval by the
Board and shareholders of the Company.
(p) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(q) "Share" or "Shares" shall mean a share or shares, as the
case may be, of the Common Stock, as adjusted in accordance with Section 10 of
this Plan.
(r) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. Subject to adjustment in accordance with Section
10 hereof, the Company may grant to Optionees from time to time Options to
purchase an aggregate of up to Two Million Seven Hundred Thousand (2,700,000)
Shares from Shares held in the Company's treasury or from authorized and
unissued Shares. If any Option granted under this Plan shall terminate, expire,
or be canceled, forfeited or surrendered as to any Shares, the Shares relating
to such lapsed Option shall be available for issuance pursuant to new Options
subsequently granted under this Plan. Upon the grant of any Option hereunder,
the authorized and unissued Shares to which such Option relates shall be
reserved for issuance to permit exercise under this Plan. Subject to the
provisions of Section 14 hereof, an Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or Non-Statutory Stock Option. All Incentive Stock
Options shall be granted within 10 years from the effective date of this Plan.
4. LIMITATIONS. Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Code
Section 422(b) are exercisable for the first time by any individual during any
calendar year (under all stock option or similar plans of the Company and any
Subsidiary), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all regular
Employees of the Company or its Subsidiaries, including Employee Directors and
Officers who are regular or former regular employees of the Company, as well as
consultants to the Company. Any person who files with the Committee,
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in a form satisfactory to the Committee, a written waiver of eligibility to
receive any Option under this Plan shall not be eligible to receive any Option
under this Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made, or is expected to make, to
the success of the Company or its Subsidiaries and such other factors as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from Officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee may
from time to time in granting Options under this Plan prescribe such terms and
conditions concerning such Options as it deems appropriate, including, without
limitation, (i) the exercise price or prices of the Option or any installments
thereof, (ii) prescribing the date or dates on which the Option becomes and/or
remains exercisable, (iii) providing that the Option vests or becomes
exercisable in installments over a period of time, and/or upon the attainment of
certain stated standards, specifications or goals, (iv) relating an Option to
the continued employment of the Optionee for a specified period of time, or (v)
conditions or termination events with respect to the exercisability of any
Option, provided that such terms and conditions are not more favorable to an
Optionee than those expressly permitted herein; PROVIDED, HOWEVER, all Incentive
Stock Options shall vest and become exercisable in three equal installments over
a three year period following the date of grant, one-third one year from the
date of grant, an additional one-third (or two-thirds cumulatively) two years
from the date of grant and 100% after three years from the date of grant.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither this
Plan nor any Option granted under this Plan shall confer upon any person any
right to employment or continuance of employment (or related salary and
benefits) by the Company or its Subsidiaries.
6. EXERCISE PRICE. The exercise price per Share of any Option shall be
any price determined by the Committee but shall not be less than the par value
per Share; PROVIDED, HOWEVER, that in no event shall the exercise price per
Share of any Incentive Stock Option be less than the Fair Market Value of the
Shares underlying such Option on the date such Option is granted. Re-granted
Options, or Options which are canceled and then re-granted covering such
canceled Options, will, for purposes of this Section 6, be deemed to have been
granted on the date of the re-granting.
7. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when (i) the Company
has received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate option price of the Shares as to
which the Option is exercised has been made, (iii) the Optionee has agreed to be
bound by the terms, provisions and conditions of any applicable shareholders'
agreement, and (iv) arrangements that are satisfactory to the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount
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that is necessary for the Company or the Subsidiary employing the Optionee to
withhold in accordance with applicable Federal or state tax withholding
requirements. Unless further limited by the Committee in any Option, the
exercise price of any Shares purchased pursuant to the exercise of such Option
shall be paid in cash, by certified or official bank check, by money order, with
Shares or by a combination of the above; PROVIDED, HOWEVER, that the Committee
in its sole discretion may accept a personal check in full or partial payment of
any Shares. If the exercise price is paid in whole or in part with Shares, the
value of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established by the Committee in
connection with this Plan, lend money to an Optionee to exercise all or a
portion of the Option granted hereunder. If the exercise price is paid in whole
or part with the Optionee's promissory note, such note shall (i) provide for
full recourse to the maker, (ii) be collateralized by the pledge of the Shares
that the Optionee purchases upon exercise of such Option, (iii) bear interest at
a rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
shares subject to an Option unless and until a stock certificate or certificates
for such shares are issued to the person(s) under the terms of this Plan. No
adjustments shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof
(b) No Optionee shall be deemed to be a holder of any Shares
subject to an Option unless and until a stock certificate or certificates for
such Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals, upon such events or occurrences and upon such
other terms and conditions as shall be provided in an individual Option
agreement evidencing such Option, except as otherwise provided in Section 5(b)
or this Section 8.
(a) The expiration date(s) of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of the
Option.
(b) Unless otherwise expressly provided in any Option as
approved by the Committee, notwithstanding the exercise schedule set forth in
any Option, each outstanding Option, may, in the sole discretion of the
Committee, become fully exercisable upon the date of the occurrence of any
Change of Control, but, unless otherwise expressly provided in any Option, no
earlier than six months after the date of grant, and if and only if Optionee is
in the employ of the Company on such date.
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(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise expressly provided in any Option, the
unexercised portion of any Option shall automatically and without notice
immediately terminate and become forfeited, null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment is terminated for any reason other than by reason of (A)
Cause, (B) the termination of the Optionee's employment with the Company by
such Optionee following less than ninety (90) days' prior written notice to the
Company of such termination (an "Improper Termination"), (C) a mental or
physical disability as determined by a medical doctor satisfactory to the
Committee, or (D) death;
(ii) immediately upon (A) the termination by the
Company of the Optionee's employment for Cause, or (B) an Improper Termination;
(iii) one year after the date on which the
Optionee's employment is terminated by reason of a mental or physical disability
(within the meaning of Code Section 22(e)) as determined by a medical doctor
satisfactory to the Committee; or
(iv) the later of (A) twelve months after the
date of termination of the Optionee's employment by reason of death of the
employee, or (B) three months after the date on which the Optionee shall die if
such death shall occur during the one year period specified in Subsection
9(a)(iii) hereof
(b) The Committee in its sole discretion may by giving written
notice ("cancellation notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsection 10(d) hereof,
any Option that remains unexercised on such date. Such cancellation notice shall
be given a reasonable period of time prior to the proposed date of such
cancellation and may be given either before or after approval of such corporate
transaction.
(c) Upon Optionee's termination of employment as described in
this Section 9, or otherwise, any Option (or portion thereof) not previously
vested or not yet exercisable pursuant to Section 8 of this Plan or the vesting
schedule set forth in such Option shall be immediately canceled.
10. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding
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Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split, combination or exchange of Shares
(other than any such exchange or issuance of Shares through which Shares are
issued to effect an acquisition of another business or entity or the Company's
purchase of Shares to exercise a "call" purchase option), then and in such
event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under this Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(iii) Such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsection 10(d) hereof, or otherwise.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into or exchangeable for shares of its capital stock of
any class, either in connection with a direct or underwritten sale or upon the
exercise of rights or warrants to subscribe therefor or purchase such Shares, or
upon conversion of shares of obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, reclassifications, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or liquidation of
the Company; (vi) any sale, transfer, encumbrance, pledge or assignment of all
or any part of the assets or business of the Company; or (vii) any other
corporate act or proceeding, whether of a similar character or otherwise.
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(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option.
11. TRANSFERABILITY OF OPTIONS. No Option granted hereunder shall be
sold, pledged, assigned, hypothecated, disposed or otherwise transferred by the
Optionee other than by will or the laws of descent and distribution, and no
Option shall be exercisable during the Optionee's lifetime by any person other
than the Optionee.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee
to the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) (A) an agreement and undertaking to
comply with all of the terms, restrictions and provisions set forth in any then
applicable shareholders' agreement relating to the Shares, including, without
limitation, any restrictions on transferability, any rights of first refusal
and any option of the Company to "call" or purchase such Shares under then
applicable agreements, and
(B) any restrictive legend or legends,
to be embossed or imprinted on Share certificates, that are, in the discretion
of the Committee, necessary or appropriate to comply with the provisions of any
securities law or other restriction applicable to the issuance of the Shares.
13. ADMINISTRATION OF THIS PLAN.
(a) This Plan shall be administered by the Committee, which
shall consist of not less than two Directors. The Committee shall have all of
the powers of the Board with respect to this Plan. Any member of the Committee
may be removed at any time, with or without cause, by resolution of the Board
and any vacancy occurring in the membership of the Committee may be filled by
appointment by the Board.
(b) Subject to the provisions of this Plan, the Committee
shall have the authority, in its sole discretion, to: (i) grant Options, (ii)
determine the exercise price per Share at which Options may be exercised, (iii)
determine the Optionees to whom, and time or times at which, Options shall be
granted, (iv) determine the number of Shares to be represented by each Option,
(v) determine the terms, conditions and provisions of each Option granted (which
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need not be identical) and, with the consent of the holder thereof, modify or
amend each Option, (vi) defer (with the consent of the Optionee) or accelerate
the exercise date of any Option, and (vii) make all other determinations deemed
necessary or advisable for the administration of this Plan, including repricing,
canceling and regranting Options.
(c) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final, conclusive and binding upon all Optionees and any holders
of any Options granted under this Plan.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting of the Committee or (ii) without a meeting by the unanimous written
approval of the members of the Committee.
(e) No Member of the Committee, or any Officer or Director of
the Company or its Subsidiaries, shall be personally liable for any act or
omission made in good faith in connection with this Plan.
14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of this Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Code) at the date of grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or of
its Subsidiary) at the date of grant unless the exercise price of such Option is
at least 110% of the Fair Market Value of the Shares subject to such Option on
the date the Option is granted, and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
15. INTERPRETATION.
(a) This Plan shall be administered and interpreted so that
all Incentive Stock Options granted under this Plan will qualify as Incentive
Stock Options under Section 422 of the Code. If any provision of this Plan
should be held invalid for the granting of Incentive Stock Options or illegal
for any reason, such determination shall not affect the remaining provisions
hereof, and this Plan shall be construed and enforced as if such provision had
never been included in this Plan.
(b) This Plan shall be governed by the laws of the State of
Florida.
(c) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan or affect the meaning
or interpretation of any part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
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(e) Time shall be of the essence with respect to all time
periods specified for the giving of notices to the company hereunder, as well as
all time periods for the expiration and termination of Options in accordance
with Section 9 hereof (or as otherwise set forth in an option agreement).
16. AMENDMENT AND DISCONTINUATION OF THIS PLAN. Either the Board or the
Committee may from time to time amend this Plan or any Option without the
consent or approval of the shareholders of the Company; PROVIDED, HOWEVER, that,
except to the extent provided in Section 9, no amendment or suspension of this
Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.
17. TERMINATION DATE. This Plan shall terminate ten years after
the date of adoption by the Board of Directors.
11
EXHIBIT 10.2
NETSPEAK CORPORATION
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of _____ __, 199_, by and
between NetSpeak Corporation, a corporation organized under the laws of the
State of Florida (the "Corporation"), with its principal office located at 902
Clint Moore Road, Suite 104, Boca Raton, Florida 33487, and _____, an individual
with an address at___________________________ (the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the substantial increase in corporate litigation subjects
directors and officers of corporations and others to expensive litigation risks
at the same time that the availability of competent and qualified directors,
officers, employees, consultants, advisers and agents has been greatly reduced,
and the coverage offered by directors' and officers' liability insurance has
been severely limited;
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation, By-laws and insurance as adequate in
the present circumstances, and may not be willing to serve as a director to the
Corporation without adequate protection, and the Corporation desires Indemnitee
to serve in such capacity;
WHEREAS, as a condition to the Indemnitee's agreement to continue to
serve as a director of the Corporation, the Indemnitee requires that he be
indemnified from liability to the fullest extent permitted by law; and
WHEREAS, the Corporation is willing to indemnify the Indemnitee to the
fullest extent permitted by law in order to retain the services of the
Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the Corporation and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 5
hereof, the Corporation shall indemnify and hold harmless the Indemnitee from
and against any and all claims, damages, expenses (including attorneys' fees),
judgments, penalties, fines (including excise taxes assessed with respect to an
employee benefit plan), settlements, and all other liabilities incurred or paid
by him in connection with the investigation, defense, prosecution, settlement or
appeal of any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) and to which the Indemnitee was or is a
party or is threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director,
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shareholder, employee, consultant adviser or agent of the Corporation, or is or
was serving at the request of the Corporation as an officer, director, partner,
trustee, employee, adviser or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity or capacities,
provided that the Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT
OF THE CORPORATION. Subject to Section 5 hereof the Corporation shall indemnify
and hold harmless the Indemnitee from and against any and all expenses
(including attorneys' fees) and amounts actually and reasonably incurred or paid
by him in connection with the investigation, defense, prosecution, settlement or
appeal of any threatened, pending or completed action, suit or proceeding by or
in the right of the Corporation to procure a judgment in its favor, whether
civil, criminal, administrative or investigative, and to which the Indemnitee
was or is a party or is threatened to be made a party by reason of the fact that
the Indemnitee is or was an officer, director, shareholder, employee,
consultant, adviser or agent of the Corporation, or is or was serving at the
request of the Corporation as an officer, director, partner, trustee, employee,
adviser or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, or by reason of anything done or not
done by the Indemnitee in any such capacity or capacities, provided that (i) the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and (ii) no
indemnification shall be made under this Section 2 in respect of any claim,
issue or matter as to which the Indemnitee shall have been adjudged to be liable
to the Corporation for misconduct in the performance of his duty to the
Corporation unless, and only to the extent that, the court in which such
proceeding was brought (or any other court of competent jurisdiction) shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
SECTION 3. MANDATORY INDEMNIFICATION AGAINST EXPENSES INCURRED WHILE
TESTIFYING. Subject to Section 5 hereof, the Corporation shall indemnify the
Indemnitee against expenses (including attorney's fees) incurred or paid by the
Indemnitee as a result of providing testimony in any proceeding, whether civil,
criminal, administrative or investigative (including but not limited to any
action or suit by or in the right of the Corporation to procure judgment in its
favor), by reason of the fact that the Indemnitee is or was an officer,
director, shareholder, employee, consultant, adviser or agent of the
Corporation, or is or was serving at the request of the Corporation as an
officer, director, partner, trustee, employee, adviser or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.
SECTION 4. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION
OF NEGLIGENCE. The Corporation shall reimburse the Indemnitee for any expenses
(including attorney's fees) and amounts actually and reasonably incurred or paid
by him in
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connection with the investigation, defense, settlement or appeal of any action
or suit described in Section 2 hereof that results in an adjudication that the
Indemnitee was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Corporation; provided,
however, that the Indemnitee acted in good faith and in a manner he believed to
be in the best interests of the Corporation.
SECTION 5. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Sections 1, 2 and 3 hereof (unless ordered by a court) and any reimbursement
made under Section 4 hereof shall be made by the Corporation only as authorized
in the specific case upon a determination (the "Determination") that
indemnification or reimbursement of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable requirements set
forth in Section 1, 2, 3 and 4 hereof, as the case may be. Subject to Sections
6.6, 6.7 and 9 of this Agreement, the Determination shall be made in the
following order of preference:
(1) first, by the Corporation's Board of
Directors (the "Board") by majority vote or consent of a quorum consisting of
directors ("Disinterested Directors") who are not, at the time of the
Determination, named parties to such action, suit or proceeding; or
(2) next, if such a quorum of Disinterested
Directors cannot be obtained, by majority vote or consent of a committee duly
designated by the Board (in which designation all directors, whether or not
Disinterested Directors, may participate) consisting solely of two or more
Disinterested Directors; or
(3) next, if such a committee cannot be
designated, by any independent legal counsel (who may be any outside counsel
regularly employed by the Corporation) in a written opinion; or
(4) next, if such legal counsel determination
cannot be obtained, by vote or consent of the holders of a majority of the
Corporation's common stock.
5.1 NO PRESUMPTIONS. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
did not act in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
5.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with respect to an
employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Corporation.
5.3 RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed
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to be in or not opposed to the best interests of the Corporation, or, with
respect to any criminal action or proceeding, to have had no reasonable cause to
believe his conduct was unlawful, if his action is based on (i) the records or
books of account of the Corporation or another enterprise, including financial
statements, (ii) information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, (iii) the advice of legal
counsel for the Corporation or another enterprise, or (iv) information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 5.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Corporation as an officer, director, partner, trustee, employee, adviser or
agent. The provisions of this Section 5.3 shall not be deemed to be exclusive or
to limit in any way the other circumstances in which the Indemnitee may be
deemed to have met the applicable standard of conduct set forth in Sections 1, 2
or 4 hereof, as the case may be.
5.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision
of this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Section 1 or 2 hereof, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 5.4, the term
"successful on the merits or otherwise" shall include, but not be limited to,
(i) any termination, withdrawal, or dismissal (with or without prejudice) of any
claim, action, suit or proceeding against the Indemnitee without any express
finding of liability or guilt against him, and (ii) the expiration of 120 days
after the making of any claim or threat of an action, suit or proceeding without
the institution of the same and without any promise or payment made to induce a
settlement.
5.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Corporation for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines or amounts
paid in settlement by the Indemnitee in connection with the investigation of,
defense of, settlement of, appeal of or testimony provided with respect to any
action specified in Section 1, 2, or 3 hereof, but not, however, for the total
amount thereof, the Corporation shall nevertheless indemnify and/or reimburse
the Indemnitee for the portion thereof to which the Indemnitee is entitled. The
party or parties making the Determination shall determine the portion (if less
than all) of such claims, damages, expenses (including attorneys' fees),
judgments, penalties, fines or amounts paid in settlement for which the
Indemnitee is entitled to indemnification and/or reimbursement under this
Agreement.
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SECTION 6. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS
HAVE BEEN SATISFIED.
6.1 COSTS. All costs of making the Determination required by Section 6
hereof shall be borne solely by the Corporation, including, but not limited to,
the costs of legal counsel, proxy solicitations and judicial determinations. The
Corporation shall also be solely responsible for paying (i) all reasonable
expenses incurred by the Indemnitee to enforce this Agreement, including, but
not limited to, the costs incurred by the Indemnitee to obtain court-ordered
indemnification pursuant to Section 9 hereof regardless of the outcome of any
such application or proceeding, and (ii) all costs of defending any suits or
proceedings challenging payments to the Indemnitee under this Agreement.
6.2 TIMING OF THE DETERMINATION. The Corporation shall use its
best efforts to make the Determination contemplated by Section 5 hereof
promptly. In addition, the Corporation agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the
Corporation by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after a Request
is delivered to the Corporation by the Indemnitee; and
(c) if the Determination is to be made by the shareholders of
the Corporation, such Determination shall be made not later than 90 days after a
Request is delivered to the Corporation by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
6.3 REASONABLENESS OF EXPENSES. The evaluation and finding as to the
reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Corporation of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum
consisting of Disinterested Directors; or
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(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the Board (in
which designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either
subdivision (a) or (b), by vote or consent of the holders of a majority of the
Corporation's Common Stock that are represented in person or by proxy at a
meeting called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 6.3 is not made within the prescribed
time. The finding required by this Section 6.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
6.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a
Determination that the Indemnitee has met the applicable requirements set forth
in Section 1, 2, 3 or 4 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 6.3 hereof, or the passage of
time prescribed for making such determination(s), the Corporation shall pay to
the Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
6.5 SHAREHOLDER VOTE ON DETERMINATION. Notwithstanding the provisions
of the Florida statutes, if the Indemnitee is a shareholder of the Corporation,
the Indemnitee and any other shareholder who is a party to the proceeding for
which indemnification or reimbursement is sought shall be entitled to vote on
any Determination to be made by the Corporation's shareholders, including a
Determination made pursuant to Section 6.3 hereof. In addition, in connection
with each meeting at which a shareholder Determination will be made, the
Corporation shall solicit proxies that expressly include a proposal to indemnify
or reimburse the Indemnitee. The Corporation proxy statement relating to the
proposal to indemnify or reimburse the Indemnitee shall not include a
recommendation against indemnification or reimbursement.
6.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination
required under Section 5 is to be made by independent legal counsel, such
counsel shall be selected by the Indemnitee with the approval of the Board,
which approval shall not be unreasonably withheld. The fees and expenses
incurred by counsel in making any Determination (including Determinations
pursuant to Section 6.8 hereof) shall be borne solely by the Corporation
regardless of the results of any Determination and, if requested by counsel, the
Corporation shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel.
6.7 RIGHT OF INDEMNITEE TO APPEAL AN ADVERSE DETERMINATION BY BOARD. If
a Determination is made by the Board or a committee thereof that the Indemnitee
did not meet the
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requirements set forth in Section 1, 2, 3 or 4 hereof upon the written request
of the Indemnitee and the Indemnitee's delivery of $500 to the Corporation, the
Corporation shall cause a new Determination to be made by the Corporation's
shareholders at the next regular or special meeting of shareholders. Subject to
Section 9 hereof, such Determination by the Corporation's shareholders shall be
binding and conclusive for all purposes of this Agreement.
6.8 RIGHT OF INDEMNITEE TO SELECT FORUM FOR DETERMINATION. If, at any
time subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Corporation (as contemplated by Item 403(c) of
Regulation S-K), then upon the request of the Indemnitee, the Corporation shall
cause the Determination required by Section 5 hereof to be made by independent
legal counsel selected by the Indemnitee and approved by the Board (which
approval shall not be unreasonably withheld), which counsel shall be deemed to
satisfy the requirements of clause (3) of Section 5 hereof. If none of the legal
counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Corporation shall cause the Determination to be made by
a majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
6.9 ACCESS BY INDEMNITEE TO DETERMINATION. The Corporation shall afford
to the Indemnitee and his representatives ample opportunity to present evidence
of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Corporation shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Corporation proxy
statement relating to a shareholder Determination.
6.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action or
suit described in Section 2 hereof, the Corporation shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Indemnitee is liable for
negligence or misconduct in the performance of his duty to the Corporation, and,
if the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
SECTION 7. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his capacities as a Corporation director, officer, adviser or
agent and actions taken in another capacity while serving as director, officer,
adviser or agent, including, but not limited to, actions or proceedings
involving (i) compensation paid to the Indemnitee by the Corporation, (ii)
activities by the Indemnitee on behalf of the Corporation, including actions in
which the Indemnitee is plaintiff, (iii) actions alleging a misappropriation of
a 'corporate opportunity," (iv) responses to a takeover attempt or threatened
takeover attempt of the Corporation, (v) transactions by the Indemnitee in
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Corporation securities, and (vi) the Indemnitee's preparation for and appearance
(or potential appearance) as a witness in any proceeding relating, directly or
indirectly, to the Corporation. In addition, the Corporation agrees that, for
purposes of this Agreement, all services performed by the Indemnitee on behalf
of, in connection with or related to any subsidiary of the Corporation, any
employee benefit plan established for the benefit of employees of the
Corporation or any subsidiary, any corporation or partnership or other entity in
which the Corporation or any subsidiary has a 5% ownership interest, or any
other affiliate shall be deemed to be at the request of the Corporation.
SECTION 8. ADVANCE FOR EXPENSES.
8.1 MANDATORY ADVANCE. Expenses (including attorneys' fees) incurred by
the Indemnitee in investigating, defending, settling or appealing any action,
suit or proceeding described in Section 1 or 2 hereof shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding. The Corporation shall promptly pay the amount of such expenses to
the Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Corporation of a written request for an advance pursuant to this
Section 8, together with a reasonable accounting of such expenses.
8.2 UNDERTAKING TO REPAY. The Indemnitee hereby undertakes and agrees
to repay to the Corporation any advances made pursuant to this Section 8 if and
to the extent that it shall ultimately be found that the Indemnitee is not
entitled to be indemnified by the Corporation for such amounts.
8.3 MISCELLANEOUS. The Corporation shall make the advances contemplated
by this Section 8 regardless of the Indemnitee's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee by the
Corporation will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 8 shall be unsecured and interest-free.
SECTION 9. COURT-ORDERED INDEMNIFICATION.
9.1 Regardless whether the Indemnitee has met the requirements set
forth in Sections 1, 2, 3 or 4 hereof, as the case may be, and notwithstanding
the presence or absence of any Determination whether such standards have been
satisfied, the Indemnitee may apply for indemnification (and/or reimbursement
pursuant to Section 4 or 13 hereto to the court conducting any proceeding to
which the Indemnitee is a party or to any other court of competent jurisdiction.
On receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification (and/or reimbursement) if it
determines the Indemnitee is fairly and reasonably entitled to indemnification
(and/or reimbursement) in view of all the relevant circumstances (including this
Agreement).
9.2 The right to indemnification and advances as provided by this
Agreement shall be enforceable by Indemnitee in an action in any court of
competent jurisdiction. In such an
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action, the burden of proving that indemnification is not required hereunder
shall be on the Corporation. Neither the failure of the Corporation (including
its Board and independent legal counsel) to have made a Determination prior to
the commencement of such an action that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct, nor
an actual Determination by the Corporation (including its Board and independent
legal counsel) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to such an action or create a presumption that Indemnitee has
not met the applicable standard of conduct. Indemnitee's expenses reasonably
incurred in connection with establishing his right to indemnification, in whole
or in part, in connection with any proceeding shall also be indemnified by the
Corporation.
SECTION 10. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless otherwise required by law,
be described only in Corporation proxy or information statements relating to
special and/or annual meetings of the Corporation's shareholders, and the
Corporation shall afford the Indemnitee the reasonable opportunity to review all
such disclosures and, if requested, to explain in such statement any mitigating
circumstances regarding the events reported.
SECTION 11. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Corporation (or any of its subsidiaries) against
the Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either an officer, director, adviser or
agent of the Corporation, and any claim or cause of action of the Corporation
(or any of its subsidiaries) shall be extinguished and deemed released unless
asserted by filing of a legal action within such 2-year period.
SECTION 12. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any
other provision of this Agreement, if the Indemnitee is deceased, and
indemnification of the Indemnitee would be permitted and/or required under this
Agreement, the Corporation shall indemnify and hold harmless the Indemnitee's
estate, spouse, heirs, administrators, personal representatives and executors
(collectively the "Indemnitee's Estate") against, and the Corporation shall
assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
SECTION 13. MISCELLANEOUS.
13.1 NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the
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respective party to whom it is directed, or when deposited by registered or
certified mail, with postage and charges prepaid and addressed to the parties at
the addresses set forth in the preamble to this Agreement. Any party may by
notice change the address to which notice or other communications to it are to
be delivered or mailed.
13.2 ENTIRE AGREEMENT. Except for the Corporation's Articles of
Incorporation and ByLaws, this Agreement constitutes the entire understanding of
the parties and supersedes all prior understandings, whether written or oral
between the parties with respect to the subject matter of this Agreement.
13.3 NON-EXCLUSIVITY. The rights of indemnification and reimbursement
provided in this Agreement shall be in addition to any rights to which the
Indemnitee may otherwise be entitled under the Corporation's Articles of
Incorporation or By-Laws or any statute, agreement, vote of shareholders or
otherwise.
13.4 SEVERABILITY OF PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.5 SAVING CLAUSE. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify Indemnitee as to expenses, judgments,
fines and penalties with respect to any proceeding to the full extent permitted
by any applicable portion of Agreement that shall not have been invalidated or
by any applicable law.
13.6 COOPERATION AND INTENT. The Corporation shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
13.7 SECURITY. To the fullest extent permitted by applicable law, the
Corporation may from time to time, but shall not be required to, provide such
insurance, collateral, letters of credit or other security devices as its Board
may deem appropriate to support or secure the Corporation's obligations under
this Agreement.
13.8 APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
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13.9 AMENDMENT. No amendment, modification or alteration of the terms
of this Agreement shall be binding unless in writing, dated subsequent to the
date of this Agreement, and executed by the parties.
13.10 BINDING EFFECT. The obligations of the Corporation to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee, adviser and/or agent of
the Corporation. Each and all of the covenants, terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Corporation and, upon the death of the Indemnitee, to the benefit
of the estate, heirs, executors, administrators and personal representatives of
the Indemnitee.
13.11 EXECUTION IN COUNTERPARTS. This Agreement and any amendment may
be executed simultaneously or in counterparts, each of which together shall
constitute one and the same instrument.
13.12 EFFECTIVE DATE. The provisions of this Agreement shall cover
claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
NETSPEAK CORPORATION
By:______________________
Name:____________________
Title:___________________
THE INDEMNITEE:
_________________________
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this 1st
day of October, 1996 by and between NETSPEAK CORPORATION, a Florida corporation
with its principal office at 902 Clint Moore Road, Boca Raton, Florida 33487
(the "Company") and Stephen R. Cohen, whose residence address is One North
Breakers Row, Apt. 361 The Surf Building, Palm Beach, Florida 33480 (the
"Executive").
RECITALS
1. The Executive is currently the Chairman of the Board and Chief
Executive Officer of the Company.
2. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
3. The Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution, as Chairman of the Board
and Chief Executive Officer of the Company, to the growth and
success of the Company has been and will be substantial and
desires to assure the Company of the Executive's present and
continued employment in an executive capacity and to
compensate him therefore.
4. The Board has determined that this Agreement will reinforce
and encourage the Executive's continued attention and
dedication to the Company.
5. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall continue to
employ the Executive and the Executive shall continue
to serve the Company, on the terms and conditions set
forth herein, for the period (the "Term") effective
as of October 1, 1996 (the "Commencement Date") and
expiring on the second anniversary of the
Commencement Date, unless sooner terminated as
hereinafter set forth; provided, however, that the
Term of this Agreement shall automatically be
extended so that at all times, the balance of the
Term shall not be less than two (2) years.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
Chairman of the Board and Chief Executive Officer of
the Company and shall perform the duties of an
executive commensurate with such position, shall
diligently perform all services as may be reasonably
designated by the Board and shall exercise such power
and
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authority as is necessary and customary to the
performance of such duties and services. The
Executive shall devote such time as he deems
necessary to the business and affairs of the Company.
1.3 PLACE OF PERFORMANCE. In connection with his
employment by the Company, the Executive shall be
based at the Company's principal executive offices in
Boca Raton, Florida except for required travel on the
Company's business to an extent substantially
consistent with his present travel obligations.
2. COMPENSATION.
2.1 BASE SALARY. During the Term, the Executive shall
receive a base salary at the annual rate of
$175,000.00. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 ADDITIONAL CASH COMPENSATION. Executive shall also be
entitled to receive such increments in base salary
and performance or merit bonuses (collectively
"Bonus") as shall be determined from time to time
during the Term by the Board.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, and in accordance with Company
policies for its executives, shall reimburse the
Executive for all expenses actually paid or incurred
by the Executive in the course of and pursuant to the
business of the Company, including expenses for
travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain and shall
continue in force comprehensive major medical and
hospitalization insurance coverages, including dental
coverages, either group or individual, for the
Executive and his dependents, and shall obtain or
shall continue in force disability and life insurance
for the Executive (collectively, the "Policies"),
which Policies the Company shall keep in effect at
its sole expense throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board. Within 30 days following
termination of this Agreement, at the Executive's
option, the Company shall assign to the executive all
insurance policies on the life of the Executive then
owned by the Company in consideration of the payment
by the Executive of the cash surrender value, if any,
and the Executive's agreement to assume the Company
liability to pay any premiums accruing thereon after
the date of such termination.
3.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, a secretary and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
3.4 AUTOMOBILE ALLOWANCE. Throughout the Term of this
Agreement, the Company
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will pay Executive an automobile allowance in the
amount of $600.00 per month. Such automobile
allowance shall be for no more than one automobile
and shall include all expenses related thereto,
including, without limitation, lease expenses,
maintenance and insurance.
3.5 VACATION. Executive shall be entitled to reasonable
vacations during each year of the Term, the time and
duration thereof to be determined by mutual agreement
between the Executive and the Company.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in the Agreement, "Cause" shall only mean (i)
subject to the following sentences, any action or
omission of the Executive which constitutes a willful
and material breach of this Agreement which is not
cured or as to which diligent attempts to cure have
not commenced within 30 business days after receipt
by Executive of notice of same, (ii) fraud,
embezzlement or misappropriation as against the
Company, or (iii) the conviction (from which no
appeal can be taken) of Executive for any criminal
act which is a felony. Upon any determination by the
Company's Board of Directors that Cause exists under
clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be
called and held at a time mutually convenient to the
Board and the Executive, but in no event later than
10 business days after Executive's receipt of the
notice contemplated by clause (i). Executive shall
have the right to appear before such special meeting
of the Board with legal counsel of his choosing to
refute any determination of Cause specified in such
notice, and termination of Executive's employment by
reason of such Cause specified in such notice, and
any termination of Executive's employment by reason
of such Cause determination shall not be effective
until Executive is afforded such opportunity to
appear. Any termination for Cause pursuant to clause
(ii) or (iii) of this Paragraph 4.1 shall be made in
writing to Executive, which notice shall set forth in
detail all acts or omissions upon which the Company
is relying for such termination. Upon any termination
pursuant to this Paragraph 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in such notice. In addition, the Company shall pay
any benefits, if any, owed to Executive under any
plan provided for Executive under Paragraph 3 hereof
in accordance with the terms of such plan as in
effect on the date of termination of employment under
this paragraph 4.1. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Paragraph 3.1
hereof).
4.2 DISABILITY. Notwithstanding anything to the contrary
contained in this Agreement if, during the Term
hereof the Executive suffers a disability (as defined
below) the Company shall, subject to the provisions
of Paragraph 4.3 hereof continue to pay Executive the
compensation provided in Paragraphs 2.1
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and 2.2 hereof during the period of his disability,
provided, however, that, in the event Executive is
disabled for a period of more than 180 days in any 12
month period (The "Disability Period"), the Company
may, at its election, by a vote of 75% of the members
of the Boards of Directors within 90 days from the
end of the Disability Period, terminate this
Agreement. In the event of such termination, (a)
payment of the Executive's Base Salary at the rate
prevailing on the date of termination of the
Executive and fringe benefits (to the extent
permissible by applicable law) shall be continued for
a period of 12 months after such termination and (b)
Executive shall receive a bonus, equal to the amount
of bonus paid to the Executive during the 12 months
preceding the date of termination of the Executive.
As used in this Agreement, the term "disability"
shall mean the complete inability of Executive to
perform his duties under this Agreement as determined
by an independent physician selected with the
approval of the Company and the Executive. Except as
provided above, the Company shall have no further
liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the
date of termination subject, however, to the
provisions of Paragraph 3.1 hereof).
4.3 DEATH. In the event of the death of Executive during
the Term of this Agreement, the Company shall pay to
Executive's legal representative, any unpaid Base
Salary accrued through the date of his death plus a
bonus in an amount equal to the amount of bonus paid
in the 12 months preceding the date of death of the
Executive. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of the Executive's death,
subject, however to the provisions of Paragraph 3.1
hereof).
5. MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement.
6. CHANGE IN CONTROL.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if : (i)
any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the owner or beneficial owner of
Company securities, after the date of this Agreement,
having 20% or more of the combined voting power of
the then outstanding securities of the Company that
may be cast for the election of directors of the
Company (other than as a result of an issuance of
securities initiated by the Company, or open market
purchases approved by the Board, as long as the
majority of the Board approving the purchases is the
majority at the time the purchases are made), or (ii)
the persons who were directors of the Company before
such transactions shall cease to constitute a
majority of the Board of the Company, or any
successor to the Company, as the direct or indirect
result of or in connection with, any cash tender or
exchange offer, merger or other business combination,
sale of assets or contested election, or any
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combination of the foregoing transaction. For Change
of Control purposes, if the company is a private
entity, then the trigger on change of control would
be the ownership, beneficially or otherwise, of 50%
of the voting securities.
(b) The Company and Executive hereby agree that, if
Executive is affiliated with the Company on the date
on which a Change of control occurs, (the "Change of
Control Date"), the Company (or, if Executive is
affiliated with a subsidiary, the subsidiary) will
continue to retain Executive and Executive will
remain affiliated with the Company (or subsidiary)
for the period commencing on the Change of Control
Date and ending on the second anniversary of such
date, to exercise such authority and perform such
executive duties as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date. If after the Change of Control
Executive is requested, and, in his sole and absolute
discretion, consents to change his principal business
location, the Company will reimburse the Executive
for his reasonable relocation expenses, including,
without limitation, moving expenses, temporary living
and travel expenses for a reasonable time while
arranging to move his residence to the changed
location, closing costs, if any, associated with the
sale of his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for Executive at that
location commensurate with the Company's office prior
to the Change of Control Date.
(c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i)
continue to pay Executive a salary at not less than
the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts
not less in amount than those paid during the twelve
month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to
Executive at levels in effect on the Change of
Control Date (but subject to such reductions as may
be required to maintain such plans in compliance with
applicable federal law regulating employee benefit
programs).
(d) If during the remaining term hereof after the Change
of Control Date (i) Executive's employment is
terminated by the Company (or subsidiary), or (ii)
there shall have occurred a material reduction in
Executive's compensation or employment related
benefits, or a material change in Executive's status,
working conditions, management responsibilities or
titles, and Executive voluntarily terminates his
relationship with the Company within 60 days of any
such occurrence, or the last in a series of
occurrences, then Executive shall be entitled to
receive, subject to the provisions of subparagraphs
(e) and (f) below, a lump sum payment equal to 200%
of Executive's "base period income" as determined
under (e) below. Such amount will be paid to
Executive within 15 business days
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after his termination of affiliation with the
Company.
(e) The Executive's "base period income" shall be his
base salary and annual incentive bonuses paid or
payable to him during or with respect to the twelve
month period preceding the date of his termination of
affiliation. If Executive has not been affiliated for
twelve months at the time of his termination of
affiliation, his "base period income" shall be his
annualized base salary at the rate then in effect and
any annual incentive bonus paid to Executive prior to
the date of his termination of affiliation or payable
to Executive with respect to his period of
affiliation.
(f) In the event of a proposed Change in Control, the
Company will allow Executive to participate in all
meetings and negotiations related thereto.
7. RESTRICTIVE COVENANT
7.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination (other than
without Cause, as defined in Paragraph 4.1) of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services competitive with the Company's and/or any
subsidiary's products and services in any and all
states in which the Company and/or any subsidiary
conducts its business during the Term or at the time
Executives's employment with the Company is
terminated (the "Territory"); provided, however, that
Executive may hold Company securities and/or acquire,
solely as an investment, shares of capital stock or
other equity securities of any such company, so long
as Executive does not acquire a controlling interest
in or become a member of a group which exercises
direct or indirect control of, more than five percent
of any class of capital stock of such corporation.
7.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information" means
information disclosed to the Executive or known by
the Executive as a
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consequence of or through his employment by the
Company (including information conceived, originated,
discovered or developed by the Executive) prior to or
after the date hereof and not generally known or in
the public domain, about the Company or its business.
Notwithstanding the foregoing, nothing herein shall
be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by
law.
7.3 NONSOLICITATION OF EMPLOYEES. During the Term and for
a period of two years following termination of the
Executive's employment with the Company, Executive
shall not directly or indirectly, for himself or for
any other person, firm, corporation, partnership,
association or other entity, attempt to employ or
enter into any contractual arrangement with any
employee or former employee of the Company for a
period in excess of six months.
7.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Paragraph 7 of this Agreement will
cause irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in
Paragraph 7 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or
indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the
Company may possess.
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation which assumes this
Agreement, and all obligations of the Company hereunder, in
writing. Upon such consolidation, merger, or transfer of
assets and assumption, the term "the Company" as used herein,
shall mean such other corporation and this Agreement shall
continue in full force and effect, subject to the provisions
of Paragraph 6 hereof.
10. BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall inure to the benefit of and shall be binding
upon the parties hereto, their personal representatives,
successors, heirs and assigns.
11. SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any other provisions.
12. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the
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masculine or the feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice
versa. Titles of Paragraphs are for convenience only, and
neither limit nor amplify the provisions of the Agreement
itself.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
14. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties and may not be changed or
modified except by an Agreement in writing signed by all
parties.
15. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the
parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time
designate to the other party by notice in writing as provided
herein.
16. OTHER INSTRUMENTS. The parties hereby covenant and agree that
they will execute such other and further instructions and
documents as are or may become necessary or convenient to
effectuate and carry out the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all
purposes be deemed an original.
18. ASSIGNABILITY. This Agreement shall not be assigned by either
party, except with the written consent of the other and except
as provided in Paragraph 9 hereof.
IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
NETSPEAK CORPORATION
By: /s/ [Illegible]
-----------------------------
Name: [Illegible]
Title: President
/s/ STEPHEN R. COHEN
----------------------------------
Stephen R. Cohen
8
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this 1st
day of October, 1996 by and between NETSPEAK CORPORATION, a Florida corporation
with its principal office at 902 Clint Moore Road, Boca Raton, Florida 33487
(the "Company") and Robert A. Kennedy, whose residence address is 501 South
Ocean Boulevard, Unit 101, Boca Raton, FL 33432 (the "Executive").
RECITALS
1. The Executive is currently the President and Chief Operating
Officer of the Company.
2. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
3. The Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution, as President and Chief
Operating Officer of the Company, to the growth and success of
the Company has been and will be substantial and desires to
assure the Company of the Executive's present and continued
employment in an executive capacity and to compensate him
therefore.
4. The Board has determined that this Agreement will reinforce
and encourage the Executive's continued attention and
dedication to the Company.
5. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall continue to
employ the Executive and the Executive shall continue
to serve the Company, on the terms and conditions set
forth herein, for the period (the "Term") effective
as of October 1, 1996 (the "Commencement Date") and
expiring on the second anniversary of the
Commencement Date, unless sooner terminated as
hereinafter set forth; provided, however, that the
Term of this Agreement shall automatically be
extended so that at all times, the balance of the
Term shall not be less than two (2) years.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
President and Chief Operating Officer of the Company
and shall perform the duties of an executive
commensurate with such position, shall diligently
perform all services as may be reasonably designated
by the Board and shall exercise such power and
authority as is necessary and customary to the
performance of such duties and services. The
Executive shall devote such time as he deems
necessary to the business and
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affairs of the Company.
1.3 PLACE OF PERFORMANCE. In connection with his
employment by the Company, the Executive shall be
based at the Company's principal executive offices in
Boca Raton, Florida except for required travel on the
Company's business to an extent substantially
consistent with his present travel obligations.
2. COMPENSATION.
2.1 BASE SALARY. During the Term, the Executive shall
receive a base salary at the annual rate of
$150,000.00. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 ADDITIONAL CASH COMPENSATION. Executive shall also be
entitled to receive such increments in base salary
and performance or merit bonuses (collectively
"Bonus") as shall be determined from time to time
during the Term by the Board.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, and in accordance with Company
policies for its executives, shall reimburse the
Executive for all expenses actually paid or incurred
by the Executive in the course of and pursuant to the
business of the Company, including expenses for
travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain and shall
continue in force comprehensive major medical and
hospitalization insurance coverages, including dental
coverages, either group or individual, for the
Executive and his dependents, and shall obtain or
shall continue in force disability and life insurance
for the Executive (collectively, the "Policies"),
which Policies the Company shall keep in effect at
its sole expense throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board. Within 30 days following
termination of this Agreement, at the Executive's
option, the Company shall assign to the executive all
insurance policies on the life of the Executive then
owned by the Company in consideration of the payment
by the Executive of the cash surrender value, if any,
and the Executive's agreement to assume the Company
liability to pay any premiums accruing thereon after
the date of such termination.
3.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, a secretary and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
3.4 AUTOMOBILE ALLOWANCE. Throughout the Term of this
Agreement, the Company will pay Executive an
automobile allowance in the amount of $600.00 per
month. Such automobile allowance shall be for no more
than one automobile and shall include all expenses
related thereto, including, without limitation, lease
expenses, maintenance and insurance.
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3.5 VACATION. Executive shall be entitled to reasonable
vacations during each year of the Term, the time and
duration thereof to be determined by mutual agreement
between the Executive and the Company.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in the Agreement, "Cause" shall only mean (i)
subject to the following sentences, any action or
omission of the Executive which constitutes a willful
and material breach of this Agreement which is not
cured or as to which diligent attempts to cure have
not commenced within 30 business days after receipt
by Executive of notice of same, (ii) fraud,
embezzlement or misappropriation as against the
Company, or (iii) the conviction (from which no
appeal can be taken) of Executive for any criminal
act which is a felony. Upon any determination by the
Company's Board of Directors that Cause exists under
clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be
called and held at a time mutually convenient to the
Board and the Executive, but in no event later than
10 business days after Executive's receipt of the
notice contemplated by clause (i). Executive shall
have the right to appear before such special meeting
of the Board with legal counsel of his choosing to
refute any determination of Cause specified in such
notice, and termination of Executive's employment by
reason of such Cause specified in such notice, and
any termination of Executive's employment by reason
of such Cause determination shall not be effective
until Executive is afforded such opportunity to
appear. Any termination for Cause pursuant to clause
(ii) or (iii) of this Paragraph 4.1 shall be made in
writing to Executive, which notice shall set forth in
detail all acts or omissions upon which the Company
is relying for such termination. Upon any termination
pursuant to this Paragraph 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in such notice. In addition, the Company shall pay
any benefits, if any, owed to Executive under any
plan provided for Executive under Paragraph 3 hereof
in accordance with the terms of such plan as in
effect on the date of termination of employment under
this paragraph 4.1. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Paragraph 3.1
hereof).
4.2 DISABILITY. Notwithstanding anything to the contrary
contained in this Agreement if, during the Term
hereof the Executive suffers a disability (as defined
below) the Company shall, subject to the provisions
of Paragraph 4.3 hereof continue to pay Executive the
compensation provided in Paragraphs 2.1 and 2.2
hereof during the period of his disability, provided,
however, that, in the event Executive is disabled for
a period of more than 180 days in any 12 month period
(The "Disability Period"), the Company may, at its
election, by a vote of 75% of the members of the
Boards of Directors within 90 days from the end of
the Disability Period, terminate this Agreement. In
the event of such termination, (a) payment of the
Executive's Base Salary at the rate prevailing on the
date of termination of the Executive and fringe
benefits (to the extent permissible by applicable
law) shall be continued for a period of 12 months
after
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such termination and (b) Executive shall receive a
bonus, equal to the amount of bonus paid to the
Executive during the 12 months preceding the date of
termination of the Executive. As used in this
Agreement, the term "disability" shall mean the
complete inability of Executive to perform his duties
under this Agreement as determined by an independent
physician selected with the approval of the Company
and the Executive. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination
subject, however, to the provisions of Paragraph 3.1
hereof).
4.3 DEATH. In the event of the death of Executive during
the Term of this Agreement, the Company shall pay to
Executive's legal representative, any unpaid Base
Salary accrued through the date of his death plus a
bonus in an amount equal to the amount of bonus paid
in the 12 months preceding the date of death of the
Executive. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of the Executive's death,
subject, however to the provisions of Paragraph 3.1
hereof).
5. MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement.
6. CHANGE IN CONTROL.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if : (i)
any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the owner or beneficial owner of
Company securities, after the date of this Agreement,
having 20% or more of the combined voting power of
the then outstanding securities of the Company that
may be cast for the election of directors of the
Company (other than as a result of an issuance of
securities initiated by the Company, or open market
purchases approved by the Board, as long as the
majority of the Board approving the purchases is the
majority at the time the purchases are made), or (ii)
the persons who were directors of the Company before
such transactions shall cease to constitute a
majority of the Board of the Company, or any
successor to the Company, as the direct or indirect
result of or in connection with, any cash tender or
exchange offer, merger or other business combination,
sale of assets or contested election, or any
combination of the foregoing transaction. For Change
of Control purposes, if the company is a private
entity, then the trigger on change of control would
be the ownership, beneficially or otherwise, of 50%
of the voting securities.
(b) The Company and Executive hereby agree that, if
Executive is affiliated with the Company on the date
on which a Change of control occurs, (the "Change of
Control Date"), the Company (or, if Executive is
affiliated with a subsidiary, the subsidiary) will
continue to retain Executive and Executive will
remain affiliated
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with the Company (or subsidiary) for the period
commencing on the Change of Control Date and ending
on the second anniversary of such date, to exercise
such authority and perform such executive duties as
are commensurate with the authority being exercised
and duties being performed by the Executive
immediately prior to the Change of Control Date. If
after the Change of Control Executive is requested,
and, in his sole and absolute discretion, consents to
change his principal business location, the Company
will reimburse the Executive for his reasonable
relocation expenses, including, without limitation,
moving expenses, temporary living and travel expenses
for a reasonable time while arranging to move his
residence to the changed location, closing costs, if
any, associated with the sale of his existing
residence and the purchase of a replacement residence
at the changed location, plus an additional amount
representing a gross-up of any state or federal taxes
payable by Executive as a result of any such
reimbursement. If the Executive shall not consent to
change his business location, the Executive may
continue to provide the services required of him
hereunder from his then residence and/or business
address, and the Company shall continue to maintain
an office for Executive at that location commensurate
with the Company's office prior to the Change of
Control Date.
(c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i)
continue to pay Executive a salary at not less than
the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts
not less in amount than those paid during the twelve
month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to
Executive at levels in effect on the Change of
Control Date (but subject to such reductions as may
be required to maintain such plans in compliance with
applicable federal law regulating employee benefit
programs).
(d) If during the remaining term hereof after the Change
of Control Date (i) Executive's employment is
terminated by the Company (or subsidiary), or (ii)
there shall have occurred a material reduction in
Executive's compensation or employment related
benefits, or a material change in Executive's status,
working conditions, management responsibilities or
titles, and Executive voluntarily terminates his
relationship with the Company within 60 days of any
such occurrence, or the last in a series of
occurrences, then Executive shall be entitled to
receive, subject to the provisions of subparagraphs
(e) and (f) below, a lump sum payment equal to 200%
of Executive's "base period income" as determined
under (e) below. Such amount will be paid to
Executive within 15 business days after his
termination of affiliation with the Company.
(e) The Executive's "base period income" shall be his
base salary and annual incentive bonuses paid or
payable to him during or with respect to the twelve
month period preceding the date of his termination of
affiliation. If Executive has not been affiliated for
twelve months at the time of his termination of
affiliation, his "base period income" shall be his
annualized base salary at the rate then in effect and
any annual incentive bonus paid to Executive prior to
the
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<PAGE>
date of his termination of affiliation or payable to
Executive with respect to his period of affiliation.
(f) In the event of a proposed Change in Control, the
Company will allow Executive to participate in all
meetings and negotiations related thereto.
7. RESTRICTIVE COVENANT
7.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination (other than
without Cause, as defined in Paragraph 4.1) of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services competitive with the Company's and/or any
subsidiary's products and services in any and all
states in which the Company and/or any subsidiary
conducts its business during the Term or at the time
Executives's employment with the Company is
terminated (the "Territory"); provided, however, that
Executive may hold Company securities and/or acquire,
solely as an investment, shares of capital stock or
other equity securities of any such company, so long
as Executive does not acquire a controlling interest
in or become a member of a group which exercises
direct or indirect control of, more than five percent
of any class of capital stock of such corporation.
7.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information" means
information disclosed to the Executive or known by
the Executive as a consequence of or through his
employment by the Company (including information
conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof and not
generally known or in the public domain, about the
Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict
the Executive from disclosing Confidential
Information to the extent required by law.
7.3 NONSOLICITATION OF EMPLOYEES. During the Term and
for a period of two years
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<PAGE>
following termination of the Executive's employment
with the Company, Executive shall not directly or
indirectly, for himself or for any other person,
firm, corporation, partnership, association or other
entity, attempt to employ or enter into any
contractual arrangement with any employee or former
employee of the Company for a period in excess of six
months.
7.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Paragraph 7 of this Agreement will
cause irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in
Paragraph 7 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or
indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the
Company may possess.
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation which assumes this
Agreement, and all obligations of the Company hereunder, in
writing. Upon such consolidation, merger, or transfer of
assets and assumption, the term "the Company" as used herein,
shall mean such other corporation and this Agreement shall
continue in full force and effect, subject to the provisions
of Paragraph 6 hereof.
10. BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall inure to the benefit of and shall be binding
upon the parties hereto, their personal representatives,
successors, heirs and assigns.
11. SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any other provisions.
12. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine or the feminine or neuter
gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of Paragraphs are
for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
14. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties
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<PAGE>
and may not be changed or modified except by an Agreement in
writing signed by all parties.
15. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the
parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time
designate to the other party by notice in writing as provided
herein.
16. OTHER INSTRUMENTS. The parties hereby covenant and agree
that they will execute such other and further instructions and
documents as are or may become necessary or convenient to
effectuate and carry out the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all
purposes be deemed an original.
18. ASSIGNABILITY. This Agreement shall not be assigned by either
party, except with the written consent of the other and except
as provided in Paragraph 9 hereof.
IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
NETSPEAK CORPORATION
By: /s/ [Illegible]
----------------------------------
Name: [Illegible]
Title: [Illegible]
/s/ ROBERT A. KENNEDY
--------------------------------------
Robert A. Kennedy
-8-
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this 1st
day of October, 1996 by and between NETSPEAK CORPORATION, a Florida corporation
with its principal office at 902 Clint Moore Road, Boca Raton, Florida 33487
(the "Company") and Shane Mattaway, whose residence address is 826 Periwinkle
Street, Boca Raton, FL 33486 (the "Executive").
RECITALS
1. The Executive is currently the Chief Technical Officer and
Executive Vice President of the Company.
2. The Executive possesses intimate knowledge of the business
and affairs of the Company, its policies, methods and
personnel.
3. The Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution, Chief Technical Officer and
Executive Vice President of the Company, to the growth and
success of the Company has been and will be substantial and
desires to assure the Company of the Executive's present and
continued employment in an executive capacity and to
compensate him therefore.
4. The Board has determined that this Agreement will reinforce
and encourage the Executive's continued attention and
dedication to the Company.
5. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall continue to
employ the Executive and the Executive shall continue
to serve the Company, on the terms and conditions set
forth herein, for the period (the "Term") effective
as of October 1, 1996 (the "Commencement Date") and
expiring on the second anniversary of the
Commencement Date, unless sooner terminated as
hereinafter set forth; provided, however, that the
Term of this Agreement shall automatically be
extended so that at all times, the balance of the
Term shall not be less than two (2) years.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
Chief Technical Officer and Executive Vice President
of the Company and shall perform the duties of an
executive and commensurate with such position, shall
diligently perform all services as may be reasonably
designated by the Board and shall exercise such power
and authority as is necessary and customary to the
performance of such duties and services. The
Executive shall devote such time as he deems
necessary
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<PAGE>
to the business and affairs of the Company.
1.3 PLACE OF PERFORMANCE. In connection with his
employment by the Company, the Executive shall be
based at the Company's principal executive offices in
Boca Raton, Florida except for required travel on the
Company's business to an extent substantially
consistent with his present travel obligations.
2. COMPENSATION.
2.1 BASE SALARY. During the Term, the Executive shall
receive a base salary at the annual rate of
$125,000.00. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 ADDITIONAL CASH COMPENSATION. Executive shall also be
entitled to receive such increments in base salary
and performance or merit bonuses (collectively
"Bonus") as shall be determined from time to time
during the Term by the Board.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, and in accordance with Company
policies for its executives, shall reimburse the
Executive for all expenses actually paid or incurred
by the Executive in the course of and pursuant to the
business of the Company, including expenses for
travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain and shall
continue in force comprehensive major medical and
hospitalization insurance coverages, including dental
coverages, either group or individual, for the
Executive and his dependents, and shall obtain or
shall continue in force disability and life insurance
for the Executive (collectively, the "Policies"),
which Policies the Company shall keep in effect at
its sole expense throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board. Within 30 days following
termination of this Agreement, at the Executive's
option, the Company shall assign to the executive all
insurance policies on the life of the Executive then
owned by the Company in consideration of the payment
by the Executive of the cash surrender value, if any,
and the Executive's agreement to assume the Company
liability to pay any premiums accruing thereon after
the date of such termination.
3.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, a secretary and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
3.4 AUTOMOBILE ALLOWANCE. Throughout the Term of this
Agreement, the Company will pay Executive an
automobile allowance in the amount of $600.00 per
month. Such automobile allowance shall be for no more
than one automobile and shall include all expenses
related thereto, including, without limitation, lease
expenses, maintenance and insurance.
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<PAGE>
3.5 VACATION. Executive shall be entitled to reasonable
vacations during each year of the Term, the time and
duration thereof to be determined by mutual agreement
between the Executive and the Company.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in the Agreement, "Cause" shall only mean (i)
subject to the following sentences, any action or
omission of the Executive which constitutes a willful
and material breach of this Agreement which is not
cured or as to which diligent attempts to cure have
not commenced within 30 business days after receipt
by Executive of notice of same, (ii) fraud,
embezzlement or misappropriation as against the
Company, or (iii) the conviction (from which no
appeal can be taken) of Executive for any criminal
act which is a felony. Upon any determination by the
Company's Board of Directors that Cause exists under
clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be
called and held at a time mutually convenient to the
Board and the Executive, but in no event later than
10 business days after Executive's receipt of the
notice contemplated by clause (i). Executive shall
have the right to appear before such special meeting
of the Board with legal counsel of his choosing to
refute any determination of Cause specified in such
notice, and termination of Executive's employment by
reason of such Cause specified in such notice, and
any termination of Executive's employment by reason
of such Cause determination shall not be effective
until Executive is afforded such opportunity to
appear. Any termination for Cause pursuant to clause
(ii) or (iii) of this Paragraph 4.1 shall be made in
writing to Executive, which notice shall set forth in
detail all acts or omissions upon which the Company
is relying for such termination. Upon any termination
pursuant to this Paragraph 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in such notice. In addition, the Company shall pay
any benefits, if any, owed to Executive under any
plan provided for Executive under Paragraph 3 hereof
in accordance with the terms of such plan as in
effect on the date of termination of employment under
this paragraph 4.1. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Paragraph 3.1
hereof).
4.2 DISABILITY. Notwithstanding anything to the contrary
contained in this Agreement if, during the Term
hereof the Executive suffers a disability (as defined
below) the Company shall, subject to the provisions
of Paragraph 4.3 hereof continue to pay Executive the
compensation provided in Paragraphs 2.1 and 2.2
hereof during the period of his disability, provided,
however, that, in the event Executive is disabled for
a period of more than 180 days in any 12 month period
(The "Disability Period"), the Company may, at its
election, by a vote of 75% of the members of the
Boards of Directors within 90 days from the end of
the Disability Period, terminate this Agreement. In
the event of such termination, (a) payment of the
Executive's Base Salary at the rate prevailing on the
date of termination of the Executive and fringe
benefits (to the extent permissible by applicable
law) shall be continued for a period of 12 months
after
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<PAGE>
such termination and (b) Executive shall receive a
bonus, equal to the amount of bonus paid to the
Executive during the 12 months preceding the date of
termination of the Executive. As used in this
Agreement, the term "disability" shall mean the
complete inability of Executive to perform his duties
under this Agreement as determined by an independent
physician selected with the approval of the Company
and the Executive. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination
subject, however, to the provisions of Paragraph 3.1
hereof).
4.3 DEATH. In the event of the death of Executive during
the Term of this Agreement, the Company shall pay to
Executive's legal representative, any unpaid Base
Salary accrued through the date of his death plus a
bonus in an amount equal to the amount of bonus paid
in the 12 months preceding the date of death of the
Executive. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of the Executive's death,
subject, however to the provisions of Paragraph 3.1
hereof).
5. MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement.
6. CHANGE IN CONTROL.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if : (i)
any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the owner or beneficial owner of
Company securities, after the date of this Agreement,
having 20% or more of the combined voting power of
the then outstanding securities of the Company that
may be cast for the election of directors of the
Company (other than as a result of an issuance of
securities initiated by the Company, or open market
purchases approved by the Board, as long as the
majority of the Board approving the purchases is the
majority at the time the purchases are made), or (ii)
the persons who were directors of the Company before
such transactions shall cease to constitute a
majority of the Board of the Company, or any
successor to the Company, as the direct or indirect
result of or in connection with, any cash tender or
exchange offer, merger or other business combination,
sale of assets or contested election, or any
combination of the foregoing transaction. For Change
of Control purposes, if the company is a private
entity, then the trigger on change of control would
be the ownership, beneficially or otherwise, of 50%
of the voting securities.
(b) The Company and Executive hereby agree that, if
Executive is affiliated with the Company on the date
on which a Change of control occurs, (the "Change of
Control Date"), the Company (or, if Executive is
affiliated with a subsidiary, the subsidiary) will
continue to retain Executive and Executive will
remain affiliated
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<PAGE>
with the Company (or subsidiary) for the period
commencing on the Change of Control Date and ending
on the second anniversary of such date, to exercise
such authority and perform such executive duties as
are commensurate with the authority being exercised
and duties being performed by the Executive
immediately prior to the Change of Control Date. If
after the Change of Control Executive is requested,
and, in his sole and absolute discretion, consents to
change his principal business location, the Company
will reimburse the Executive for his reasonable
relocation expenses, including, without limitation,
moving expenses, temporary living and travel expenses
for a reasonable time while arranging to move his
residence to the changed location, closing costs, if
any, associated with the sale of his existing
residence and the purchase of a replacement residence
at the changed location, plus an additional amount
representing a gross-up of any state or federal taxes
payable by Executive as a result of any such
reimbursement. If the Executive shall not consent to
change his business location, the Executive may
continue to provide the services required of him
hereunder from his then residence and/or business
address, and the Company shall continue to maintain
an office for Executive at that location commensurate
with the Company's office prior to the Change of
Control Date.
(c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i)
continue to pay Executive a salary at not less than
the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts
not less in amount than those paid during the twelve
month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to
Executive at levels in effect on the Change of
Control Date (but subject to such reductions as may
be required to maintain such plans in compliance with
applicable federal law regulating employee benefit
programs).
(d) If during the remaining term hereof after the Change
of Control Date (i) Executive's employment is
terminated by the Company (or subsidiary), or (ii)
there shall have occurred a material reduction in
Executive's compensation or employment related
benefits, or a material change in Executive's status,
working conditions, management responsibilities or
titles, and Executive voluntarily terminates his
relationship with the Company within 60 days of any
such occurrence, or the last in a series of
occurrences, then Executive shall be entitled to
receive, subject to the provisions of subparagraphs
(e) and (f) below, a lump sum payment equal to 200%
of Executive's "base period income" as determined
under (e) below. Such amount will be paid to
Executive within 15 business days after his
termination of affiliation with the Company.
(e) The Executive's "base period income" shall be his
base salary and annual incentive bonuses paid or
payable to him during or with respect to the twelve
month period preceding the date of his termination of
affiliation. If Executive has not been affiliated for
twelve months at the time of his termination of
affiliation, his "base period income" shall be his
annualized base salary at the rate then in effect and
any annual incentive bonus paid to Executive prior to
the
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<PAGE>
date of his termination of affiliation or payable to
Executive with respect to his period of affiliation.
(f) In the event of a proposed Change in Control, the
Company will allow Executive to participate in all
meetings and negotiations related thereto.
7. RESTRICTIVE COVENANT
7.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination (other than
without Cause, as defined in Paragraph 4.1) of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services competitive with the Company's and/or any
subsidiary's products and services in any and all
states in which the Company and/or any subsidiary
conducts its business during the Term or at the time
Executives's employment with the Company is
terminated (the "Territory"); provided, however, that
Executive may hold Company securities and/or acquire,
solely as an investment, shares of capital stock or
other equity securities of any such company, so long
as Executive does not acquire a controlling interest
in or become a member of a group which exercises
direct or indirect control of, more than five percent
of any class of capital stock of such corporation.
7.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information" means
information disclosed to the Executive or known by
the Executive as a consequence of or through his
employment by the Company (including information
conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof and not
generally known or in the public domain, about the
Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict
the Executive from disclosing Confidential
Information to the extent required by law.
7.3 NONSOLICITATION OF EMPLOYEES. During the Term and
for a period of two years
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<PAGE>
following termination of the Executive's employment
with the Company, Executive shall not directly or
indirectly, for himself or for any other person,
firm, corporation, partnership, association or other
entity, attempt to employ or enter into any
contractual arrangement with any employee or former
employee of the Company for a period in excess of six
months.
7.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Paragraph 7 of this Agreement will
cause irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in
Paragraph 7 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or
indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the
Company may possess.
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation which assumes this
Agreement, and all obligations of the Company hereunder, in
writing. Upon such consolidation, merger, or transfer of
assets and assumption, the term "the Company" as used herein,
shall mean such other corporation and this Agreement shall
continue in full force and effect, subject to the provisions
of Paragraph 6 hereof.
10. BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall inure to the benefit of and shall be binding
upon the parties hereto, their personal representatives,
successors, heirs and assigns.
11. SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any other provisions.
12. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine or the feminine or neuter
gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of Paragraphs are
for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
14. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties
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<PAGE>
and may not be changed or modified except by an Agreement in
writing signed by all parties.
15. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the
parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time
designate to the other party by notice in writing as provided
herein.
16. OTHER INSTRUMENTS. The parties hereby covenant and agree that
they will execute such other and further instructions and
documents as are or may become necessary or convenient to
effectuate and carry out the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all
purposes be deemed an original.
18. ASSIGNABILITY. This Agreement shall not be assigned by
either party, except with the written consent of the other and
except as provided in Paragraph 9 hereof.
IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
NETSPEAK CORPORATION
By: /s/ [Illegible]
--------------------------------
Name: [Illegible]
Title: President
/s/ SHANE MATTAWAY
-------------------------------------
Shane Mattaway
-8-
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this 7th
day of October, 1996 by and between NETSPEAK CORPORATION, a Florida corporation
with its principal office at 902 Clint Moore Road, Boca Raton, Florida 33487
(the "Company") and John W. Staten, whose residence address is 19626 Star Island
Drive, Boca Raton, Florida 33498 (the "Executive").
RECITALS
1. The Executive is currently the Chief Financial Officer of the
Company.
2. The Executive possesses intimate knowledge of the business
and affairs of the Company, its policies, methods and
personnel.
3. The Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution, as Chief Financial Officer
of the Company, to the growth and success of the Company has
been and will be substantial and desires to assure the Company
of the Executive's present and continued employment in an
executive capacity and to compensate him therefore.
4. The Company and the Executive have previously entered into an
Employment Agreement dated February 24, 1996.
5. The Board has determined to amend and restate the prior
Employment Agreement in order to reinforce and encourage the
Executive's continued attention and dedication to the Company.
6. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall continue to
employ the Executive and the Executive shall continue
to serve the Company, on the terms and conditions set
forth herein, for the period (the "Term") effective
as of October 1, 1996 (the "Commencement Date") and
expiring on the second anniversary of the
Commencement Date, unless sooner terminated as
hereinafter set forth; provided, however, that the
Term of this Agreement shall automatically be
extended so that at all times, the balance of the
Term shall not be less than two (2) years.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
Chief Financial Officer of the
1
<PAGE>
Company and shall perform the duties of an executive
commensurate with such position, shall diligently
perform all services as may be reasonably designated
by the Board and shall exercise such power and
authority as is necessary and customary to the
performance of such duties and services.
1.3 PLACE OF PERFORMANCE. In connection with his
employment by the Company, the Executive shall be
based at the Company's principal executive offices in
Boca Raton, Florida except for required travel on the
Company's business to an extent substantially
consistent with his present travel obligations.
2. COMPENSATION.
2.1 BASE SALARY. During the Term, the Executive shall
receive a base salary at the annual rate of
$90,000.00. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 STOCK OPTIONS. The Company has heretofore granted to
the Executive nonstatutory stock options under the
Company's 1995 Stock Option Plan (the "Plan") to
purchase an aggregate of 100,000 Shares of Common
Stock at an exercise price of $2.50 per share being
the fair market value on the date of grant (the
"Options") as hereinafter set forth. The Options
shall vest as to 20,000 Options on the Commencement
Date, as to 20,000 Options on the 60th day after the
Commencement Date, as to 40,000 Options 18 months
following the Commencement Date and as to 20,000
Options 24 months following the Commencement Date,
and shall otherwise be governed by the terms of the
Plan.
2.3 ADDITIONAL CASH COMPENSATION. Executive shall also be
entitled to receive such increments in base salary
and performance or merit bonuses (collectively
"Bonus") as shall be determined from time to time
during the Term by the Board.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, and in accordance with Company
policies for its executives, shall reimburse the
Executive for all expenses actually paid or incurred
by the Executive in the course of and pursuant to the
business of the Company, including expenses for
travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain and shall
continue in force comprehensive major medical and
hospitalization insurance coverages, including dental
coverages, either group or individual, for the
Executive and his dependents, and shall obtain or
shall continue in force disability and life insurance
for the Executive (collectively, the "Policies"),
which Policies the Company shall keep in effect at
its sole expense throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board. Within 30 days following
termination of this Agreement, at the
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Executive's option, the Company shall assign to the
executive all insurance policies on the life of the
Executive then owned by the Company in consideration
of the payment by the Executive of the cash surrender
value, if any, and the Executive's agreement to
assume the Company liability to pay any premiums
accruing thereon after the date of such termination.
3.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, a secretary and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
3.4 AUTOMOBILE ALLOWANCE. Throughout the Term of this
Agreement, the Company will pay Executive an
automobile allowance in the amount of $600.00 per
month. Such automobile allowance shall be for no more
than one automobile and shall include all expenses
related thereto, including, without limitation, lease
expenses, maintenance and insurance.
3.5 VACATION. Executive shall be entitled to reasonable
vacations during each year of the Term, the time and
duration thereof to be determined by mutual agreement
between the Executive and the Company.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in the Agreement, "Cause" shall only mean (i)
subject to the following sentences, any action or
omission of the Executive which constitutes a willful
and material breach of this Agreement which is not
cured or as to which diligent attempts to cure have
not commenced within 30 business days after receipt
by Executive of notice of same, (ii) fraud,
embezzlement or misappropriation as against the
Company, or (iii) the conviction (from which no
appeal can be taken) of Executive for any criminal
act which is a felony. Upon any determination by the
Company's Board of Directors that Cause exists under
clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be
called and held at a time mutually convenient to the
Board and the Executive, but in no event later than
10 business days after Executive's receipt of the
notice contemplated by clause (i). Executive shall
have the right to appear before such special meeting
of the Board with legal counsel of his choosing to
refute any determination of Cause specified in such
notice, and termination of Executive's employment by
reason of such Cause specified in such notice, and
any termination of Executive's employment by reason
of such Cause determination shall not be effective
until Executive is afforded such opportunity to
appear. Any termination for Cause pursuant to clause
(ii) or (iii) of this Paragraph 4.1 shall be made in
writing to Executive, which notice shall set forth in
detail all acts or omissions upon which the Company
is relying for such termination. Upon any termination
pursuant to this Paragraph 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in such notice. In addition, the Company shall pay
any
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benefits, if any, owed to Executive under any plan
provided for Executive under Paragraph 3 hereof in
accordance with the terms of such plan as in effect
on the date of termination of employment under this
paragraph 4.1. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject,
however, to the provisions of Paragraph 3.1 hereof).
4.2 DISABILITY. Notwithstanding anything to the contrary
contained in this Agreement if, during the Term
hereof the Executive suffers a disability (as defined
below) the Company shall, subject to the provisions
of Paragraph 4.3 hereof continue to pay Executive the
compensation provided in Paragraphs 2.1 and 2.2
hereof during the period of his disability, provided,
however, that, in the event Executive is disabled for
a period of more than 180 days in any 12 month period
(The "Disability Period"), the Company may, at its
election, by a vote of 75% of the members of the
Boards of Directors within 90 days from the end of
the Disability Period, terminate this Agreement. In
the event of such termination, (a) payment of the
Executive's Base Salary at the rate prevailing on the
date of termination of the Executive and fringe
benefits (to the extent permissible by applicable
law) shall be continued for a period of 12 months
after such termination and (b) Executive shall
receive a bonus, equal to the amount of bonus paid to
the Executive during the 12 months preceding the date
of termination of the Executive. As used in this
Agreement, the term "disability" shall mean the
complete inability of Executive to perform his duties
under this Agreement as determined by an independent
physician selected with the approval of the Company
and the Executive. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination
subject, however, to the provisions of Paragraph 3.1
hereof).
4.3 DEATH. In the event of the death of Executive during
the Term of this Agreement, the Company shall pay to
Executive's legal representative, any unpaid Base
Salary accrued through the date of his death plus a
bonus in an amount equal to the amount of bonus paid
in the 12 months preceding the date of death of the
Executive. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of the Executive's death,
subject, however to the provisions of Paragraph 3.1
hereof).
5. MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement.
6. CHANGE IN CONTROL.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if : (i)
any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the
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owner or beneficial owner of Company securities,
after the date of this Agreement, having 20% or more
of the combined voting power of the then outstanding
securities of the Company that may be cast for the
election of directors of the Company (other than as a
result of an issuance of securities initiated by the
Company, or open market purchases approved by the
Board, as long as the majority of the Board approving
the purchases is the majority at the time the
purchases are made), or (ii) the persons who were
directors of the Company before such transactions
shall cease to constitute a majority of the Board of
the Company, or any successor to the Company, as the
direct or indirect result of or in connection with,
any cash tender or exchange offer, merger or other
business combination, sale of assets or contested
election, or any combination of the foregoing
transaction. For Change of Control purposes, if the
company is a private entity, then the trigger on
change of control would be the ownership,
beneficially or otherwise, of 50% of the voting
securities.
(b) The Company and Executive hereby agree that, if
Executive is affiliated with the Company on the date
on which a Change of control occurs, (the "Change of
Control Date"), the Company (or, if Executive is
affiliated with a subsidiary, the subsidiary) will
continue to retain Executive and Executive will
remain affiliated with the Company (or subsidiary)
for the period commencing on the Change of Control
Date and ending on the second anniversary of such
date, to exercise such authority and perform such
executive duties as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date. If after the Change of Control
Executive is requested, and, in his sole and absolute
discretion, consents to change his principal business
location, the Company will reimburse the Executive
for his reasonable relocation expenses, including,
without limitation, moving expenses, temporary living
and travel expenses for a reasonable time while
arranging to move his residence to the changed
location, closing costs, if any, associated with the
sale of his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for Executive at that
location commensurate with the Company's office prior
to the Change of Control Date.
(c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i)
continue to pay Executive a salary at not less than
the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts
not less in amount than those paid during the twelve
month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to
Executive at levels in effect on the Change of
Control Date (but subject to such reductions as may
be required to maintain such plans in compliance with
applicable federal law regulating employee benefit
programs).
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(d) If during the remaining term hereof after the Change
of Control Date (i) Executive's employment is
terminated by the Company (or subsidiary), or (ii)
there shall have occurred a material reduction in
Executive's compensation or employment related
benefits, or a material change in Executive's status,
working conditions, management responsibilities or
titles, and Executive voluntarily terminates his
relationship with the Company within 60 days of any
such occurrence, or the last in a series of
occurrences, then Executive shall be entitled to
receive, subject to the provisions of subparagraphs
(e) and (f) below, a lump sum payment equal to 200%
of Executive's "base period income" as determined
under (e) below and all Options granted to the
Executive pursuant to the Plan not fully vested shall
immediately vest upon such termination. Such amount
will be paid to Executive within 15 business days
after his termination of affiliation with the
Company.
(e) The Executive's "base period income" shall be his
base salary and annual incentive bonuses paid or
payable to him during or with respect to the twelve
month period preceding the date of his termination of
affiliation. If Executive has not been affiliated for
twelve months at the time of his termination of
affiliation, his "base period income" shall be his
annualized base salary at the rate then in effect and
any annual incentive bonus paid to Executive prior to
the date of his termination of affiliation or payable
to Executive with respect to his period of
affiliation.
(f) In the event of a proposed Change in Control, the
Company will allow Executive to participate in all
meetings and negotiations related thereto.
7. RESTRICTIVE COVENANT
7.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination (other than
without Cause, as defined in Paragraph 4.1) of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services competitive with the Company's and/or any
subsidiary's products and services in any and all
states in which the Company and/or any subsidiary
conducts its business during the Term or at the time
Executives's employment with the Company is
terminated (the "Territory"); provided, however, that
Executive may hold Company securities and/or acquire,
solely as an investment, shares of capital stock or
other equity securities of any such company, so long
as Executive does not acquire a controlling interest
in or become a member of a group which exercises
direct or indirect control of, more than five percent
of any class of capital stock of such corporation.
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7.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information" means
information disclosed to the Executive or known by
the Executive as a consequence of or through his
employment by the Company (including information
conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof and not
generally known or in the public domain, about the
Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict
the Executive from disclosing Confidential
Information to the extent required by law.
7.3 NONSOLICITATION OF EMPLOYEES. During the Term and for
a period of two years following termination of the
Executive's employment with the Company, Executive
shall not directly or indirectly, for himself or for
any other person, firm, corporation, partnership,
association or other entity, attempt to employ or
enter into any contractual arrangement with any
employee or former employee of the Company for a
period in excess of six months.
7.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Paragraph 7 of this Agreement will
cause irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in
Paragraph 7 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or
indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the
Company may possess.
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation which assumes this
Agreement, and all
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obligations of the Company hereunder, in writing. Upon such
consolidation, merger, or transfer of assets and assumption,
the term "the Company" as used herein, shall mean such other
corporation and this Agreement shall continue in full force
and effect, subject to the provisions of Paragraph 6 hereof.
10. BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall inure to the benefit of and shall be binding
upon the parties hereto, their personal representatives,
successors, heirs and assigns.
11. SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any other provisions.
12. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine or the feminine or neuter
gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of Paragraphs are
for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
14. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties and may not be changed or
modified except by an Agreement in writing signed by all
parties.
15. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the
parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time
designate to the other party by notice in writing as provided
herein.
16. OTHER INSTRUMENTS. The parties hereby covenant and agree that
they will execute such other and further instructions and
documents as are or may become necessary or convenient to
effectuate and carry out the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all
purposes be deemed an original.
18. ASSIGNABILITY. This Agreement shall not be assigned by
either party, except with the written consent of the other and
except as provided in Paragraph 9 hereof.
19. CONFLICT. In the event of any conflict between the original
contract and this amended contract, the terms of this amended
contract shall govern.
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IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
NETSPEAK CORPORATION
By: /s/ STEPHEN R. COHEN
---------------------------------
Name: Stephen R. Cohen
Title: CEO and Chairman
/s/ JOHN W. STATEN
---------------------------------
John W. Staten
9
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this 1st
day of October, 1996 by and between NETSPEAK CORPORATION, a Florida corporation
with its principal office at 902 Clint Moore Road, Boca Raton, Florida 33487
(the "Company") and Harvey Kaufman, whose residence address is 2000 South Ocean
Boulevard, Apt. 17C, Boca Raton, FL 33432 (the "Executive").
RECITALS
1. The Executive is currently the Secretary, Treasurer and
Executive Vice President of the Company.
2. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
3. The Board of Directors (the "Board") of the Company recognizes
that the Executive's contribution, as Secretary, Treasurer and
Executive Vice President of the Company, to the growth and
success of the Company has been and will be substantial and
desires to assure the Company of the Executive's present and
continued employment in an executive capacity and to
compensate him therefore.
4. The Board has determined that this Agreement will reinforce
and encourage the Executive's continued attention and
dedication to the Company.
5. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall continue to
employ the Executive and the Executive shall continue
to serve the Company, on the terms and conditions set
forth herein, for the period (the "Term") effective
as of October 1, 1996 (the "Commencement Date") and
expiring on the second anniversary of the
Commencement Date, unless sooner terminated as
hereinafter set forth; provided, however, that the
Term of this Agreement shall automatically be
extended so that at all times, the balance of the
Term shall not be less than two (2) years.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
Secretary, Treasurer and Executive Vice President of
the Company and shall perform the duties of an
executive and commensurate with such position, shall
diligently perform all
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services as may be reasonably designated by the Board
and shall exercise such power and authority as is
necessary and customary to the performance of such
duties and services. The Executive shall devote such
time as he deems necessary to the business and
affairs of the Company.
1.3 PLACE OF PERFORMANCE. In connection with his
employment by the Company, the Executive shall be
based at the Company's principal executive offices in
Boca Raton, Florida except for required travel on the
Company's business to an extent substantially
consistent with his present travel obligations.
2. COMPENSATION.
2.1 BASE SALARY. During the Term, the Executive shall
receive a base salary at the annual rate of
$75,000.00. The Base Salary shall be payable in
substantially equal installments consistent with the
Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 ADDITIONAL CASH COMPENSATION. Executive shall also be
entitled to receive such increments in base salary
and performance or merit bonuses (collectively
"Bonus") as shall be determined from time to time
during the Term by the Board.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, and in accordance with Company
policies for its executives, shall reimburse the
Executive for all expenses actually paid or incurred
by the Executive in the course of and pursuant to the
business of the Company, including expenses for
travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain and shall
continue in force comprehensive major medical and
hospitalization insurance coverages, including dental
coverages, either group or individual, for the
Executive and his dependents, and shall obtain or
shall continue in force disability and life insurance
for the Executive (collectively, the "Policies"),
which Policies the Company shall keep in effect at
its sole expense throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board. Within 30 days following
termination of this Agreement, at the Executive's
option, the Company shall assign to the executive all
insurance policies on the life of the Executive then
owned by the Company in consideration of the payment
by the Executive of the cash surrender value, if any,
and the Executive's agreement to assume the Company
liability to pay any premiums accruing thereon after
the date of such termination.
3.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, a secretary and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
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3.4 VACATION. Executive shall be entitled to reasonable
vacations during each year of the Term, the time and
duration thereof to be determined by mutual agreement
between the Executive and the Company.
3.5 AUTOMOBILE ALLOWANCE. Throughout the Term of this
Agreement, the Company will pay Executive an
automobile allowance in the amount of $600.00 per
month. Such automobile allowance shall be for no more
than one automobile and shall include all expenses
related thereto, including, without limitation, lease
expenses, maintenance and insurance.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in the Agreement, "Cause" shall only mean (i)
subject to the following sentences, any action or
omission of the Executive which constitutes a willful
and material breach of this Agreement which is not
cured or as to which diligent attempts to cure have
not commenced within 30 business days after receipt
by Executive of notice of same, (ii) fraud,
embezzlement or misappropriation as against the
Company, or (iii) the conviction (from which no
appeal can be taken) of Executive for any criminal
act which is a felony. Upon any determination by the
Company's Board of Directors that Cause exists under
clause (i) of the preceding sentence, the Company
shall cause a special meeting of the Board to be
called and held at a time mutually convenient to the
Board and the Executive, but in no event later than
10 business days after Executive's receipt of the
notice contemplated by clause (i). Executive shall
have the right to appear before such special meeting
of the Board with legal counsel of his choosing to
refute any determination of Cause specified in such
notice, and termination of Executive's employment by
reason of such Cause specified in such notice, and
any termination of Executive's employment by reason
of such Cause determination shall not be effective
until Executive is afforded such opportunity to
appear. Any termination for Cause pursuant to clause
(ii) or (iii) of this Paragraph 4.1 shall be made in
writing to Executive, which notice shall set forth in
detail all acts or omissions upon which the Company
is relying for such termination. Upon any termination
pursuant to this Paragraph 4.1, the Company shall pay
to the Executive any unpaid Base Salary accrued
through the effective date of termination specified
in such notice. In addition, the Company shall pay
any benefits, if any, owed to Executive under any
plan provided for Executive under Paragraph 3 hereof
in accordance with the terms of such plan as in
effect on the date of termination of employment under
this paragraph 4.1. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination,
subject, however, to the provisions of Paragraph 3.1
hereof).
4.2 DISABILITY. Notwithstanding anything to the contrary
contained in this Agreement if, during the Term
hereof the Executive suffers a disability (as defined
below) the Company shall, subject to the provisions
of Paragraph 4.3
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hereof continue to pay Executive the compensation
provided in Paragraphs 2.1 and 2.2 hereof during the
period of his disability, provided, however, that, in
the event Executive is disabled for a period of more
than 180 days in any 12 month period (The "Disability
Period"), the Company may, at its election, by a vote
of 75% of the members of the Boards of Directors
within 90 days from the end of the Disability Period,
terminate this Agreement. In the event of such
termination, (a) payment of the Executive's Base
Salary at the rate prevailing on the date of
termination of the Executive and fringe benefits (to
the extent permissible by applicable law) shall be
continued for a period of 12 months after such
termination and (b) Executive shall receive a bonus,
equal to the amount of bonus paid to the Executive
during the 12 months preceding the date of
termination of the Executive. As used in this
Agreement, the term "disability" shall mean the
complete inability of Executive to perform his duties
under this Agreement as determined by an independent
physician selected with the approval of the Company
and the Executive. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination
subject, however, to the provisions of Paragraph 3.1
hereof).
4.3 DEATH. In the event of the death of Executive during
the Term of this Agreement, the Company shall pay to
Executive's legal representative, any unpaid Base
Salary accrued through the date of his death plus a
bonus in an amount equal to the amount of bonus paid
in the 12 months preceding the date of death of the
Executive. Except as provided above, the Company
shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses
incurred prior to the date of the Executive's death,
subject, however to the provisions of Paragraph 3.1
hereof).
5. MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement.
6. CHANGE IN CONTROL.
(a) For the purposes of this Agreement, a "Change of
Control" shall be deemed to have taken place if : (i)
any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, becomes the owner or beneficial owner of
Company securities, after the date of this Agreement,
having 20% or more of the combined voting power of
the then outstanding securities of the Company that
may be cast for the election of directors of the
Company (other than as a result of an issuance of
securities initiated by the Company, or open market
purchases approved by the Board, as long as the
majority of the Board approving the purchases is the
majority at the time the purchases are made), or (ii)
the persons who were directors of the Company before
such transactions shall cease to constitute a
majority of the Board of the Company, or any
successor to the Company, as the direct or indirect
result of or in connection with, any cash tender or
exchange offer,
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merger or other business combination, sale of assets
or contested election, or any combination of the
foregoing transaction. For Change of Control
purposes, if the company is a private entity, then
the trigger on change of control would be the
ownership, beneficially or otherwise, of 50% of the
voting securities.
(b) The Company and Executive hereby agree that, if
Executive is affiliated with the Company on the date
on which a Change of control occurs, (the "Change of
Control Date"), the Company (or, if Executive is
affiliated with a subsidiary, the subsidiary) will
continue to retain Executive and Executive will
remain affiliated with the Company (or subsidiary)
for the period commencing on the Change of Control
Date and ending on the second anniversary of such
date, to exercise such authority and perform such
executive duties as are commensurate with the
authority being exercised and duties being performed
by the Executive immediately prior to the Change of
Control Date. If after the Change of Control
Executive is requested, and, in his sole and absolute
discretion, consents to change his principal business
location, the Company will reimburse the Executive
for his reasonable relocation expenses, including,
without limitation, moving expenses, temporary living
and travel expenses for a reasonable time while
arranging to move his residence to the changed
location, closing costs, if any, associated with the
sale of his existing residence and the purchase of a
replacement residence at the changed location, plus
an additional amount representing a gross-up of any
state or federal taxes payable by Executive as a
result of any such reimbursement. If the Executive
shall not consent to change his business location,
the Executive may continue to provide the services
required of him hereunder from his then residence
and/or business address, and the Company shall
continue to maintain an office for Executive at that
location commensurate with the Company's office prior
to the Change of Control Date.
(c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i)
continue to pay Executive a salary at not less than
the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts
not less in amount than those paid during the twelve
month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to
Executive at levels in effect on the Change of
Control Date (but subject to such reductions as may
be required to maintain such plans in compliance with
applicable federal law regulating employee benefit
programs).
(d) If during the remaining term hereof after the Change
of Control Date (i) Executive's employment is
terminated by the Company (or subsidiary), or (ii)
there shall have occurred a material reduction in
Executive's compensation or employment related
benefits, or a material change in Executive's status,
working conditions, management responsibilities or
titles, and Executive voluntarily terminates his
relationship with the Company within 60 days of any
such occurrence, or the last in a series of
occurrences, then Executive shall be entitled to
receive, subject to the provisions of subparagraphs
(e) and (f) below, a lump sum payment equal to 200%
of Executive's "base period income" as determined
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<PAGE>
under (e) below. Such amount will be paid to
Executive within 15 business days after his
termination of affiliation with the Company.
(e) The Executive's "base period income" shall be his
base salary and annual incentive bonuses paid or
payable to him during or with respect to the twelve
month period preceding the date of his termination of
affiliation. If Executive has not been affiliated for
twelve months at the time of his termination of
affiliation, his "base period income" shall be his
annualized base salary at the rate then in effect and
any annual incentive bonus paid to Executive prior to
the date of his termination of affiliation or payable
to Executive with respect to his period of
affiliation.
(f) In the event of a proposed Change in Control, the
Company will allow Executive to participate in all
meetings and negotiations related thereto.
7. RESTRICTIVE COVENANT
7.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination (other than
without Cause, as defined in Paragraph 4.1) of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services competitive with the Company's and/or any
subsidiary's products and services in any and all
states in which the Company and/or any subsidiary
conducts its business during the Term or at the time
Executives's employment with the Company is
terminated (the "Territory"); provided, however, that
Executive may hold Company securities and/or acquire,
solely as an investment, shares of capital stock or
other equity securities of any such company, so long
as Executive does not acquire a controlling interest
in or become a member of a group which exercises
direct or indirect control of, more than five percent
of any class of capital stock of such corporation.
7.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information"
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means information disclosed to the Executive or known
by the Executive as a consequence of or through his
employment by the Company (including information
conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof and not
generally known or in the public domain, about the
Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict
the Executive from disclosing Confidential
Information to the extent required by law.
7.3 NONSOLICITATION OF EMPLOYEES. During the Term and for
a period of two years following termination of the
Executive's employment with the Company, Executive
shall not directly or indirectly, for himself or for
any other person, firm, corporation, partnership,
association or other entity, attempt to employ or
enter into any contractual arrangement with any
employee or former employee of the Company for a
period in excess of six months.
7.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Paragraph 7 of this Agreement will
cause irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in
Paragraph 7 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or
indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the
Company may possess.
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all
of its assets to, another corporation which assumes this
Agreement, and all obligations of the Company hereunder, in
writing. Upon such consolidation, merger, or transfer of
assets and assumption, the term "the Company" as used herein,
shall mean such other corporation and this Agreement shall
continue in full force and effect, subject to the provisions
of Paragraph 6 hereof.
10. BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall inure to the benefit of and shall be binding
upon the parties hereto, their personal representatives,
successors, heirs and assigns.
11. SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any other provisions.
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<PAGE>
12. TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine or the feminine or neuter
gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of Paragraphs are
for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.
13. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
14. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties and may not be changed or
modified except by an Agreement in writing signed by all
parties.
15. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the
parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time
designate to the other party by notice in writing as provided
herein.
16. OTHER INSTRUMENTS. The parties hereby covenant and agree that
they will execute such other and further instructions and
documents as are or may become necessary or convenient to
effectuate and carry out the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each such counterpart shall for all
purposes be deemed an original.
18. ASSIGNABILITY. This Agreement shall not be assigned by either
party, except with the written consent of the other and except
as provided in Paragraph 9 hereof.
IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.
NETSPEAK CORPORATION
By: /s/ [Illegible]
-------------------------------
Name: [Illegible]
Title: President
/s/ HARVEY KAUFMAN
-------------------------------
Harvey Kaufman
-8-
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this 25th day of October, 1996 by and between NetSpeak Corporation, a Florida
corporation (hereinafter call the "Company"), and Steven F. Mills (hereinafter
called the "Executive").
The Company wishes to employ the Executive, and the Executive wishes to
enter into the employ of the Company, on the terms and conditions contained in
this Agreement.
Accordingly, in consideration of the foregoing and of the mutual
promises hereinafter set forth, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company shall employ the
Executive and the Executive shall serve the Company,
on the terms and conditions set forth herein, for the
period (the "Term") commencing on a date selected by
the Executive, which date shall be no later than 15
days from the date of the Agreement (the
"Commencement Date") and expiring on the second
anniversary of the Commencement Date unless sooner
terminated as hereinafter set forth; provided,
however, that the Term of the Agreement shall be
extended for successive one-year periods unless, at
least 60 days prior to the expiration of the Term or
any renewal term, the Company shall have delivered to
the Executive or the Executive shall have delivered
to the Company written notice that this Agreement
will not be renewed.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as
Vice President of Marketing of the Company, shall
perform the duties commensurate with such position,
shall diligently perform all services as may be
assigned to him by the Board of Directors of the
Company (the "Board") and shall exercise such power
and authority as may from time to time be delegated
to him by the Board. The Executive shall devote all
of his working time and attention to the business and
affairs of the Company. However, the Executive may
participate as a member of the Board of Directors or
Technical Advisory Committees of non-competing
companies with the prior approval of the President
and/or Chief Executive Officer of the Company, which
approval will not be unreasonably withheld.
1.3 THE COMPANY. As used herein, the term the "Company"
shall be deemed to include any and all present and
future subsidiaries, divisions and affiliates of the
Company.
2. COMPENSATION
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2.1 SALARY. During the Term, the Executive shall receive
a salary (the "Salary") at the annual rate of
$120,000 during the Term. The Salary is to be payable
in substantially equal installments consistent with
the Company's normal payroll schedule, subject to
applicable withholding and other taxes.
2.2 ADDITIONAL CASH COMPENSATION. Executive shall also
be entitled to receive such increments and salary
performance or merit bonuses as shall be determined
from time to time during the term by the Board.
2.3 STOCK OPTIONS On the Commencement Date, the Company
shall grant to the Executive statutory stock options
under the Company's 1995 Stock Option Plan (the
"Plan") to purchase an aggregate of 100,000 Shares of
Common Stock at an exercise price of $5.50 per share
being the fair market value on the date of grant (the
"Options") as hereinafter set forth. The Options
shall vest in equal increments on the first, second
and third anniversary of the Commencement Date of
this Agreement.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
3.1 EXPENSE REIMBURSEMENT. During the Term, the Company,
upon the submission of supporting documentation by
the Executive, shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the
Executive in the course of and pursuant to the
business of the Company, including reasonable
expenses for travel and entertainment.
3.2 OTHER BENEFITS. The Company shall obtain or shall
continue in force such medical, dental, life and
disability insurance coverages, either group or
individual, as the Company may provide for its
employees generally, for the Executive (collectively,
the "Policies"), which Policies the Company shall
keep in effect throughout the Term. The Policies to
be provided by the Company shall be on terms as
determined by the Board.
3.3 VACATION. The Executive shall be entitled to three
weeks paid vacation during each year of the Term,
which shall not accrue from year to year.
4. TERMINATION
4.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, this
Agreement may be terminated by the Company for Cause.
As used in this Agreement by way of example and not
limitation "Cause" shall mean (i) any action or
omission of the Executive which constitutes a willful
breach of this Agreement which is not cured or as to
which diligent attempts to cure have not commenced
within 10 days after receipt by Executive of notice
thereof, (ii)
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<PAGE>
fraud, embezzlement or misappropriation as against
the Company, (iii) the conviction of the Executive
for any criminal act, or (iv) any action or omission
of the Executive which, as reasonably determined by
the Company, is materially contrary to the business
interests, reputation or goodwill of the Company.
Upon any termination pursuant to this Section 4.1,
the Company shall pay to the Executive any unpaid
Salary accrued through the effective date of
termination specified in such notice. Except as
provided above, the Company shall have no further
liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the
date of termination, subject, however to the
provisions of Section 3.1 and all Options not vested
shall immediately terminate and expire).
4.2 TERMINATION WITHOUT CAUSE. Except as otherwise
expressly provided in Sections 4.3, 4.4 and 4.5
hereof, in the event the Executive is terminated
other than for Cause pursuant to Section 4.1, the
Company shall pay to the Executive upon such
termination an amount equal to (i) any unpaid Salary
accrued through the effective date of termination,
plus (ii) a lump sum payment equal to the Salary
which would have been paid to the Executive during
the remaining Term of this Agreement (iii) all
Options granted to the Executive pursuant to the Plan
not fully vested shall immediately vest upon such
termination and (iv) continue employee benefit
programs as to the Executive for a period of 90 days
subsequent to termination date. The Company shall
have no further liability hereunder (other than for
reimbursement for reasonable business expenses
incurred prior to the date of termination, subject,
however to the provisions of Section 3.1).
4.3 RESIGNATION BY EXECUTIVE. This Agreement may be
terminated by the Executive upon delivery of notice
therefore not less than 45 days prior to such
termination date. Upon receipt of such notice, the
Company may, in its sole discretion, release the
Executive of his duties and his employment hereunder
prior to the expiration of the 45 day notice period.
Notwithstanding anything contained in this Agreement
or the Plan to contrary, in the event of a
termination by the Executive pursuant to this Section
4.3 (i) the Company shall pay to the Executive any
unpaid Salary accrued through the effective date of
termination, and (ii) all options granted to the
Executive pursuant to the Plan not fully vested as of
the date of termination shall immediately be
canceled.
4.4 DISABILITY. Notwithstanding anything contained in
this Agreement to the contrary, the Company, by 30
days written notice to the Executive, shall at all
times have the right to terminate this Agreement, and
the Executive's employment hereunder, if the
Executive shall, as the result of mental or physical
incapacity, illness or disability, fail to perform
his duties and responsibilities provided for herein
for a period of more than 60 days in any 12 month
period. Upon any termination pursuant to this Section
4.4, the Company shall pay to the Executive any
unpaid
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Salary accrued through the effective date of
termination and continue employee benefit programs as
to the Executive for a period of 90 days subsequent
to termination date. Except as provided above, the
Company shall have no further liability hereunder
(other than for reimbursement for reasonable business
expenses incurred prior to the date of termination,
subject, however to the provisions of Section 3.1).
4.5 DEATH. In the event of the death of the Executive
during the Term of his employment hereunder, the
Company shall pay to the personal representative of
the estate of the deceased Executive any unpaid
Salary accrued through the date of his death. Except
as provided above, the Company shall have no further
liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the
date of the Executive's death, subject, however to
the provisions of Section 3.1).
5. RESTRICTIVE COVENANTS
5.1 NON-COMPETITION. During the Term and for a period of
two (2) years following the termination of the
Executive's employment by the Company, Executive
shall not, directly or indirectly engage in or have
any interest in, directly or indirectly, any sole
proprietorship, partnership, corporation, business or
any other person or entity (whether as an employee,
officer, director, partner, agent, security holder,
creditor, consultant, or otherwise) that, directly or
indirectly, engages primarily in the development,
manufacturing, distribution or supply of products and
services which directly compete with the Company's
and/or any subsidiary's products and services in any
and all states in which the Company and/or any
subsidiary conducts its business during the Term or
at the time Executives's employment with the Company
is terminated (the "Territory"); provided, however,
that Executive may hold Company securities and/or
acquire, solely as an investment, shares of capital
stock or other equity securities of any such company,
so long as Executive does not acquire a controlling
interest in or become a member of a group which
exercises direct or indirect control of, more than
five percent of any class of capital stock of such
corporation.
5.2 NONDISCLOSURE. During the Term and following
termination of the Executive's employment with the
Company Executive shall not divulge, communicate, use
to the detriment of the Company or for the benefit of
any other person or persons, or misuse in any way,
any Confidential Information (as hereinafter defined)
pertaining to the business of the Company. Any
Confidential Information or data now or hereafter
acquired by the Executive with respect to the
business of the Company (which shall include, but not
be limited to, information concerning the Company's
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<PAGE>
financial condition, prospects, technology,
customers, suppliers, methods of doing business and
marketing and promotion of the Company's services)
shall be deemed a valuable, special and unique asset
of the Company that is received by the Executive in
confidence and as a fiduciary. For purposes of this
Agreement, "Confidential Information" means
information disclosed to the Executive or known by
the Executive as a consequence of or through his
employment by the Company (including information
conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof and not
generally known or in the public domain, about the
Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict
the Executive from disclosing Confidential
Information to the extent required by law.
5.3 NONSOLICITATION OF EMPLOYEES. During the Term and for
a period of two years following termination of the
Executive's employment with the Company, Executive
shall not directly or indirectly, for himself or for
any other person, firm, corporation, partnership,
association or other entity, attempt to employ or
enter into any contractual arrangement with any
employee or former employee of the Company.
5.4 BOOKS AND RECORDS. All books, records, accounts and
similar repositories of Confidential Information of
the Company, whether prepared by the Executive or
otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and
shall be returned immediately to the Company on
termination of this Agreement or on the Board's
request at any time.
6. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 5 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 5 of this Agreement by the
Executive or any of his affiliates, associates, partners or
agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
7. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
8. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given when delivered by hand or when deposited in the United
States mail, by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE>
If to the Company NetSpeak Corporation
902 Clint Moore Road
Suite 104
Boca Raton, FL 33487
Attn: John W. Staten
If to the Executive: Steven F. Mills
1950 NW 29th Road
Boca Raton, FL 33431
9. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or merging
into or with, or transferring all or substantially all of its
assets to, another corporation which assumes this Agreement, and
all obligations of the Company hereunder, in writing. Upon such
consolidation, merger or transfer of assets and assumption, the
term "the Company" as used herein, shall mean such other
corporation and this Agreement shall continue in full force and
effect. Notwithstanding the foregoing, in the event that the
Company merges into or with, or transfers all or substantially
all, of its assets to another corporation, which results in a
material change of ownership of the Company, all Options granted
to the Executive pursuant to the Plan not fully vested shall
immediately vest upon such transaction.
10. ARBITRATION. Any controversy or claim arising out of or
relating to this agreement, of the breach thereof, shall be
settled by arbitration in accordance with the thereof, and
judgement upon the award rendered by the Arbitrators may be
entered in any Court having jurisdiction thereof. Venue of the
arbitration shall be in Palm Beach County, Florida. Any
controversy or claim shall be submitted to three arbitrators
selected from the panels of the Arbitrators of the American
Arbitrators Association. The arbitrators, in addition to any award
made, shall have the discretion to award the prevailing party the
costs of the proceedings, together with reasonable attorney's
fees, provided that absent such award, each party shall bear the
costs of its own counsel and presentation of evidence, and each
party shall share equally the cost of such arbitration proceeding.
Any award made hereunder may be docketed in a court of competent
jurisdiction in Palm Beach County, Florida, and all parties hereby
consent to the personal jurisdiction of such court for purposes of
the enforcement of the arbitration award.
11. BINDING EFFECT. This Agreement shall be for the benefit of and
binding upon the parties hereto and their perspective heirs,
personal representatives, legal representatives, successors and,
where applicable, assigns. The Executive may not assign his rights
or benefits, or delegate any of his duties, hereunder without the
prior written consent of the Company.
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12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this
Agreement shall not affect the enforceability conditionally on
their being valid in law, and, in the event that any one or more
of the words, phrases, sentences, clauses, or sections contained
in this Agreement shall be declared invalid, this Agreement shall
be construed as if such invalid word or words, phrase or phrases,
sentence or sentences, clause or clauses, or section or sections,
had not been inserted. If such invalidity is caused by duration,
geographic scope or both, the otherwise invalid provision will be
considered to be reduced to a period or area which would cure such
invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach of
violation.
14. SURVIVAL. The provisions of Section 5.1, 5.2, 5.3, 5.4 and 10
hereof shall survive the termination of this Agreement upon the
expiration of the Term or pursuant to Section 4 hereof.
Notwithstanding the foregoing, the provisions of Section 5.1 and
5.3 hereof shall not survive in the event the Company ceases
business operations for a consecutive period of 90 days, subject,
however, to Section 9 hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
NETSPEAK CORPORATION
By: /s/ JOHN W. STATEN
------------------------------
Name: John W. Staten
Title: Chief Financial Officer
/s/ STEVEN F. MILLS
------------------------------
Steven F. Mills
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FIRST AMENDMENT TO THE LEASE
between
REGENT HOLDING CORPORATIONS,
a Florida corporation
and
NETSPEAK CORPORATION
a Florida corporation
for premises located at
Congress Corporate Plaza II
902 Clint Moore Road
Suite 104/106
Boca Raton, FL 33487
Submission of this Lease Agreement for examination does not constitute an offer
to amend the Lease, and this Lease Agreement shall become effective only upon
execution and delivery hereof by Landlord and Tenant.
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
REGENT HOLDING CORPORATION, A FLORIDA CORPORATION,
("LANDLORD") AND NETSPEAK CORPORATION, A
FLORIDA CORPORATION, ("TENANT")
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 104/106, BOCA RATON, FLORIDA 33487
THIS FIRST AMENDMENT TO LEASE is made this 14th day of January, 1997 between
REGENT HOLDING CORPORATION, a FLORIDA CORPORATION, ("Landlord") and NETSPEAK
CORPORATION, a FLORIDA CORPORATION ("Tenant").
BACKGROUND
By the Lease dated December 30, 1995 (the "Lease"), Landlord leased to Tenant
approximately 4,476 square feet at 902 Clint Moore Road, Suites 104/106, Boca
Raton, Florida, hereinafter referred to as the "Premises".
The parties now wish to expand the Premises and extend and modify the Lease.
WITNESSETH
In consideration of the mutual promises of the parties, intending to be legally
bound, hereby agree as follows:
1. EXPANSION PREMISES: Tenant agrees to lease from Landlord approximately
5,348 square feet in Suite 100, hereinafter known as the "Expansion
Premises," and further described along with the original Premises in the
Legal Description in Exhibit A and the Site Plan in Exhibit B, both
attached.
2. LEASE TERM: The Lease Term for the Expansion Premises shall start on January
6, 1997, or the date that Landlord delivers the Expansion Premises to
Tenant, whichever is later (the "Rent Commencement Date"). Landlord shall
use reasonable efforts to deliver the Expansion Premises on or before
January 15, 1997. The Lease Term shall expire 36 months later, provided
however, in the event that the Rent Commencement Date is a date other than
the first day of the calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the
Rent Commencement Date.
3. BASE RENT: The Base Rent for the Expansion Premises shall be Four Thousand
Six Hundred Seventy-Nine and 50/100 Dollars ($4,679.50) per month. The Base
Rent shall escalate by the Consumer Price Index as provided for in Section
3.02 of the Lease.
Tenant shall continue to pay Base Rent on the original Premises as called
for in the original Lease.
4. COTERMINOUS LEASES: The Lease Term for the original space in Suites 104/106
shall be extended to be coterminous with the Expansion Premises. The Base
Rent for the original space in Suites 104/106 shall remain the same as in
the original Lease expect that it shall continue to escalate on the
anniversary date of the original Lease as called for in Section 3.02 of the
Lease.
5. OPERATING COST; Tenant shall continue to pay it's Proportionate Share of
Operating Costs as called for in the Lease. The additional Operating Cost
for the Expansion Premises are estimated at One Thousand Four Hundred
Fifty-Two and 87/100 Dollars ($ 1,452.87) per month subject to adjustments
per the Lease.
Landlord: ___________ Tenant:___________
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
REGENT HOLDING CORPORATION, A FLORIDA CORPORATION,
("LANDLORD") AND NETSPEAK CORPORATION, A
FLORIDA CORPORATION, ("TENANT")
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 104/106, BOCA RATON, FLORIDA 33487
(CONTINUED)
6. CAP ON CONTROLLABLE OPERATING COSTS: Notwithstanding anything to the
contrary contained in the Lease, Landlord agrees to cap the increase in the
"Controllable" components of Tenant's Proportionate Share of Operating Costs
for the original Premises and the Expansion Premises during the Lease. Said
increases will be limited to not more than seven (7%) percent per year
during the specified Lease Term, on a cumulative basis from the "Base Year".
For purposes of this paragraph, the Base Year shall be the budget year
1996/1997. The following expense categories shall be defined as
"non-controllable" and shall not be subject to any type of cap: trash
removal, insurance, utilities, and taxes.
7. SECURITY DEPOSIT: Tenant shall deposit with Landlord upon execution of
this Lease Amendment, Thirty-Eight Thousand Nine Hundred Ninety-Eight and
44/100 Dollars ($38,998.44) of additional security deposit (the "Additional
Security Deposit"). Landlord will invest the Additional Security Deposit in
a certificate of deposit or other low risk similar investment vehicle and
the interest will accrue to the Tenant, to be paid to Tenant at the end of
the Lease. Provided that Tenant does not default on any of the terms of the
Lease during the Lease Term, Tenant will receive back one-third of the
Additional Security Deposit at the end of the first lease year, and an
additional third of the Additional Security Deposit at the end of the second
lease year, with the final one-third of the Additional Security Deposit to
be held through the end of the Lease by Landlord.
8. ACCEPTANCE OF PREMISES: Tenant acknowledges that it has inspected the
Expansion Premises, knows the condition thereof, and accepts such Expansion
Premises, and specifically the buildings and improvements comprising the
same, in their present condition, as suitable for the purposes for which the
Expansion Premises are leased. Taking of possession by Tenant shall be
deemed conclusively to establish that said buildings and other improvements
are in good and satisfactory condition as of when possession was taken.
Tenant further acknowledges that no representations as to the repair of the
Expansion Premises, nor promises to alter, remodel or improve the Expansion
Premises have been made by Landlord. Landlord makes no representations about
the condition of the Building and/or the Expansion Premises. Landlord is not
liable for any defects to the Building and/or the Expansion Premises,
whether such defects are patent or latent, and makes no warranties as to the
condition of the Expansion Premises. Notwithstanding anything else mentioned
in this lease, if this lease is executed before the Expansion Premises
become vacant or otherwise available and ready for occupancy, or if any
present tenant or occupant of the Expansion Premises holds over, or fails to
vacate the Expansion Premises when estimated by Landlord, and Landlord
cannot, using good faith efforts, acquire possession of the Expansion
Premises prior to the date above recited as the Commencement Date of this
lease, Landlord shall not be deemed to be in default hereunder, nor in any
way liable to Tenant because of such failure, and Tenant agrees to accept
possession of the Expansion Premises at such time as Landlord is able to
tender the same, which date shall thenceforth be deemed the "Commencement
Date"; and the term of this lease shall automatically be extended so as to
include the full number of months herein before provided for, except that if
the commencement date is other than the first day of calendar month, such
term shall also be extended for the remainder of the calendar month in which
possession is tendered. Landlord hereby waives payment of rent covering any
period prior to such tendering of possession. After the Commencement Date,
Tenant shall, upon
Landlord: ___________ Tenant:___________
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
REGENT HOLDING CORPORATION, A FLORIDA CORPORATION,
("LANDLORD") AND NETSPEAK CORPORATION, A
FLORIDA CORPORATION, ("TENANT")
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 104/106, BOCA RATON, FLORIDA 33487
(CONTINUED)
demand, execute and deliver to Landlord a letter of acceptance of delivery
of the Expansion Premises.
9. CONTINGENCY: This Lease is contingent upon Landlord and P. B. Lubes
executing a Lease amendment which will allow Landlord to relocate P.B. Lubes
to Suite 220 in the Development.
10. MISCELLANEOUS: This Lease Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof,
and supersedes all other negotiations, understandings, and representations
(if any) made by and between such parties. Should there be any conflicts
between the Lease and this Rider, this Rider shall control.
The parties intending to be bound hereby execute or cause this Second
Amendment to be executed this 14th day of January, 1997.
WITNESSES: LANDLORD:
/S/ ILLEGIBLE
- --------------------- REGENT HOLDING CORPORATION,
ANGELICO ASTAIZA a Florida corporation
By: /S/ ILLEGIBLE
------------------------
Title: Vice President
WITNESSES: TENANT:
/S/ ILLEGIBLE
- --------------------- NETSPEAK CORPORATION,
/S/ ILLEGIBLE a Florida corporation
By: /S/ ILLEGIBLE
------------------------
Title: CFO
Landlord: ___________ Tenant:___________
<PAGE>
CCP Phase II, Building 3
LEGAL DESCRIPTION
EXHIBIT A
Approximately 9,824 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suite 100 and Suites 104/106, Boca Raton, Florida. Further described as
Congress Corporate Plaza, Phase II situated within a development known as
Congress Corporate Plaza containing of approximately 106,044 square feet.
<PAGE>
EXHIBIT B
(DESCRIPTION TO FOLLOW)
Landlord: ___________ Tenant:___________
<PAGE>
MEMORANDUM OF LEASE,
THIS MEMORANDUM OF LEASE, dated this 14th day of January, 1997, by and
between REGENT HOLDING CORPORATION, C/O TRAMMELL CROW COMPANY whose address is
1515 South Federal Highway, Suite 113, Boca Raton, Florida 33432 (Landlord), and
NETSPEAK CORPORATION, whose address is 902 CLINT MOORE ROAD, SUITES
100/104/106, BOCA RATON, FLORIDA 33487 (Tenant).
WITNESSETH:
Landlord hereby demises and leases unto Tenant and Tenant hereby hires
and takes from Landlord, upon and subject to the covenants and agreements set
forth in that certain Lease dated 1/7, 1997 (the "Lease"), made between
Landlord and Tenant, certain premises (Demised Premises) comprising part of
the commercial real property known as CONGRESS CORPORATE PLAZA II, located upon
the tract of land described in Exhibit A-l attached hereto and made a part
hereof, and consisting of the parcel of land, together with the building(s)
erected thereon.
Landlord and Tenant desire to record this Memorandum of Lease for the
purpose of placing the public on notice of inquiry as to the specific
provisions, terms, covenants and conditions of the Lease, all of which are
incorporated herein by reference with the same force and effect as if herein set
forth in full. Specifically, the Lease contains, among others, the following
covenants and agreements between the parties:
Neither Tenant nor anyone claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and laborers, shall have any right to file or place mechanic's,
materialmen's or other liens of any kind whatsoever upon the demised premises
or upon the tract of land described on Exhibit A-l, or any portion thereof; on
the contrary, any such liens are specifically prohibited and shall be null and
void and of no further force or effect. Notice is hereby given pursuant to
Section 713.10, Florida Statutes, that the Lease contains the following
provision:
"Tenant has no power to subject Landlord's interest in the demised
premises to any claim or lien of any kind or character and any persons dealing
with Tenant must look solely to the credit of the Tenant for payment".
This Memorandum of Lease is being recorded in lieu of recording the
Lease itself for the purpose of placing the public on notice or inquiry as to
the specific provisions, terms, covenants and conditions thereof, and nothing
herein contained is intended to or does change modify or affect any of the terms
or provisions of the Lease or the rights, duties, obligations, easements and
covenants running with the land created hereby, all of which remain in full
force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and sealed
this Memorandum of Lease as of the day and year first above written.
TENANT:
NETSPEAK CORPORATION,
a Florida corporation
By: /S/ ILLEGIBLE
----------------------
Name: JOHN W. STATEN
Title: CFO
<PAGE>
As to Tenant TENANT
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 30th day of
December, 1996, by John Staten, an officer of Netspeak Corp. on behalf of the
corporation. The above-named individual [] is personally known to me, or []
has produced the following identification ___________ which is current or has
been issued within the past five years and bears a serial or other identifying
number and did (did not) take an oath.
NOTARY PUBLIC
STATE OF FLORIDA
CHRISTINE CERVANTES CHRISTINE CERVANTES
NOTARY PUBLIC, STATE OF FLORIDA Print Name:________________
COMMISSION NO. CC 602128 NOTARY PUBLIC - STATE OF FLORIDA
MY COMMISSION EXP. 11/18/2000 Commission Number: CC 602128
BONDED THROUGH FLA. NOTARY SERVICE My Commission Expires: 11/18/2000
& BONDING CO.
LANDLORD:
REGENT HOLDING CORPORATION,
a Florida corporation
By: /S/ ILLEGIBLE
-------------------------
Name: /S/ ILLEGIBLE
-----------------------
Title: Vice President
As to Landlord LANDLORD
(NOTARIAL SEAL)
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 29th day of
January, 1997, by Leo Ghites, a Vice President of Regent Holding Corp. on
behalf of the ___________. The above-named individual [] is personally known
to me, or [] has produced the following identification ___________ which is
current or has been issued within the past five years and bears a serial or
other identifying number and did (did not) take an oath.
JANET HORNE
Print Name: JANET HORNE
NOTARY PUBLIC - STATE OF FLORIDA
Commission Number:_______________
My Commission Expires:___________
(NOTARIAL SEAL) JANET HORNE
NOTARY PUBLIC, STATE OF FLORIDA
MY COMM. EXPIRES NOV. 1 1997
NO. CC 327293
<PAGE>
CCP Phase II, Building 3
LEGAL DESCRIPTION
EXHIBIT A
Approximately 9,824 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suite 100 and Suites 104/106, Boca Raton, Florida. Further described as
Congress Corporate Plaza, Phase II situated within a development known as
Congress Corporate Plaza containing of approximately 106,044 square feet.
<PAGE>
CONGRESS CORPORATE PLAZA, PHASE II
NETSPEAK CORP.
902 CLINT MOORE ROAD, SUITES 104/106
BOCA RATON, FLORIDA 33487
LEASE DRAFTED: DECEMBER 15, 1995
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between______________________
REGENT HOLDING CORPORATION, A FLORIDA CORPORATION_______________________________
("Landlord"), and NETSPEAK Corp., A Florida corporation_________________________
_____________________________________________________________________("Tenant"):
WITNESSETH:
1.01 PREMISES In consideration of the obligation of Tenant to pay rent and
of the other terms, provisions and covenants hereof, Landlord leases to Tenant
and Tenant leases from Landlord, all that portion of certain real property
situated within the County of Palm Beach, State of Florida, legally described in
Exhibit A, and the buildings and improvements to be constructed thereon as
outlined on the site plan contained in Exhibit B (the "Premises"), including any
truck loading areas specifically marked in red on said Exhibit B for the
exclusive use of Tenant. The Premises and the building within which the Premises
are located (the "Building") are part of a larger development (the
"Development") commonly known as CONGRESS CORPORATE PLAZA
2.01 TERM OF LEASE. The term of this lease shall commence on the "Rent
Commencement Date", as hereinafter defined, and ending 36 months thereafter,
provided however, that in the event the rent commencement date is a date other
than the first day of a calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the rent
commencement date.
2.02 RENT COMMENCEMENT DATE. The "Rent Commencement Date" shall be,
January 1, 1996 or date the Landlord delivers Premises to Tenant, which is late.
In the event this lease pertains to a building or building interior finish to be
constructed, the "Rent Commencement Date" shall be the date upon which the
buildings and other improvements erected and to be erected upon the premises
shall have been substantially completed in accordance with the plans and
specifications described on Exhibit "C" attached hereto and incorporated herein
by reference, provided however, that if Landlord shall be delayed in such
substantial completion as a result of: (i) Tenant's failure to agree to plans,
specifications, and cost estimates, within a reasonable period of time: (ii)
Tenant's request for materials, finishes or installations other than Landlord's
standard; (iii) Tenant's changes in plans: the commencement date and the payment
of rent hereunder shall be accelerated by the number of days of such delay, and
provided further that if Landlord cannot substantially complete the premises as
a result of any events (i) through (iii) above, Landlord may as its election
complete so much of Landlord's work as may be practical under the circumstances
and by written notice to Tenant, establish the commencement date as the date of
such partial completion, subject to any applicable accelerations due to delays
resulting from events (i) through (iii) above. Taking possession by Tenant shall
be deemed conclusively to establish that said buildings and other improvements
have been completed in accordance with the plans and specifications and that the
premises are in good and satisfactory condition, as of when possession was so
taken. Tenant acknowledges that no representations as to the repair of the
premises have been made by Landlord, unless such are expressly set forth in the
lease. After such "Rent Commencement Date" Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery of the premises. In
the event of any dispute as to substantial completion of work performed, execute
or required to be performed by Landlord, the certificate of Landlord's architect
or general contractor shall be conclusive.
3.01 BASE RENT Tenant agrees to pay to Landlord rent for the premises, in
advance, without demand, deduction or set off, for the entire term hereof at the
rate of two thousand nine hundred eighty four and 00/100 ---- Dollars
($2,984.00) per month. One such monthly installment shall be due and payable on
the date hereof and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the rent commencement
date, except that the rental payment for any fractional calendar month at the
commencement of the lease period shall be prorated. The rental payment is
subject to adjustment as provided below.
3.02 RENT ESCALATION The base rent shall be subject to adjustment on the
first day of January of each year of the Lease term (such date being hereafter
referred to as the "rent adjustment date") in the following manner: (a) Landlord
and Tenant agree that on and as of the adjustment date each year during the term
of this lease, Landlord may increase the base rental for the premises then due
under the lease to an amount equal to the product of the current annual rental,
including any prior adjustments, multiplied by a fraction the numerator being
the Consumer Price Index published for the October immediately preceeding the
rent adjustment date, and the denominator being the Consumer Price Index for the
October twelve (12) months prior to the rent adjustment date. For the first rent
adjustment date occuring during the term of this lease, any increase in annual
rental effective through this paragraph shall be reduced by the percentage of
the calendar year (the calendar year being the period from January 1st through
December 31) preceding the rent adjustment date that the Tenant was not in
possession of the premises (b) "Consumer Price Index" shall be the Consumer
Price Index for all Urban Consumer - U.S. City Average for all items ( 1982-84=
100) of the Bureau of Labor Statistics of the United States Department of Labor.
If the Consumer Price Index published by the Department of Labor, Bureau of
Labor Statistics is changed so that it affects the calculations achieved
hereunder, the Consumer Price Index shall be converted in accordance with a
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the Consumer Price Index is discontinued or revised during
the term of the Lease, such other government index or computation with which it
is replaced shall be used in order to obtain substantially the same result as
would have been obtained if the Consumer Price Index had not been discontinued
or revised. Notwithstanding anything contained in this paragraph, the additional
rent payable by Tenant in any year pursuant to this paragraph shall in no event
be less than that paid in the prior year.
4.01 SECURITY DEPOSIT Tenant agrees to deposit with Landlord on the date
hereof the sum of eight thousand four hundred fifty three and 22/100-----------
- ------------------------------- Dollars ($8,453.22), which sum shall be held by
Landlord, without obligation for interest, as security for the full, timely and
faithful performance of Tenant's covenants and obligations under this Lease, it
being expressly agreed that such deposit is not an advance rental deposit or a
measure of Landlord's damages. Upon the occurrence of any event of default by
Tenant, Landlord may, from
Landlord: _________ Tenant: __________
1
<PAGE>
time to time, without prejudice to any other remedy, use such funds to the
extent necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by Tenant's
default; and Tenant shall pay to Landlord on demand the amount so applied in
order to restore the security deposit to its original amount. Although the
security deposit shall be deemed the property of Landlord, any remaining balance
of such deposit shall be returned by Landlord at such time after termination of
this Lease when Landlord shall have determined that all Tenant's obligations
under this Lease have been fulfilled.
5.01 PERMITTED USE. The Premises shall be continously used for the sole
purpose of general business offices and/or for receiving, storing, shipping and
selling (other than at retail) products, materials and merchandise made and/or
distibuted by Tenant and for no other use or purpose. Tenant shall at its own
cost and expense obtain any and all licenses and permits necessary for any such
use. The overnight parking of automobiles, trucks or other vehicles, and the
outside storage of any property including trash or garbage are prohibited.
Tenant agrees that it shall, at its own cost and expenses keep its employees,
agents, customers, invitees, and/or licensees from parking on any streets
running through or contiguous to the buildings or development of which the
premises are part thereof. Tenant agrees that no washing of any type will take
place in the premises including the truck apron and parking areas. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of
Development or unreasonably interfere with such tenants' use of their respective
premises or permit any use which would adversely affect the reputation of the
Development. Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive, highly flammable or constitutes a
hazardous substance or waste. Tenant shall not permit the Premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof. Tenant agrees to indemnify and hold Landlord harmless
against any and all loss, costs and claims, including attorney's fees relating
to the improper storage, handling, transportation or disposal of explosive,
highly flammable or hazardous materials or resulting from any other improper
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the Premises, and shall promptly comply with all governmental
orders and directives for the connection, prevention and abatement of any
violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances and regulations, the Premises must be altered to accommodate lawfully
the use and occupancy thereof, such alterations shall be made only with the
consent of Landlord, but the entire cost thereof shall be borne by Tenant;
provided that the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to comply with such laws,
ordinances and regulations. Tenant shall take whatever other actions are
necessary so that the Premises and Tenant's use thereof complies with the Fire
Prevention Code of the National Fire Protection Association and any other fire
prevention laws, ordinances, rules or regulations applicable to the Premises.
6.01 TENANT'S TAXES. Tenant shall be responsible to pay before delinquency
all franchise taxes, assessments, levies or charges measured by or based in
whole or in part upon the rents payable hereunder or the gross receipts of
Tenant and all sales taxes and other taxes imposed upon or assessed by reason of
the rents and other charges payable hereunder. The Florida sales tax imposed on
rent and on other charges payable hereunder shall be paid by Tenant to Landlord
with the payment of Tenant's rental payments and other charges payable
hereunder.
7.01 DEFINITION OF OPERATING COSTS. The term "Operating Costs shall mean
all costs and expenses paid or incurred by Landlord or on Landlord's behalf in
connection with the ownership, management, repair, replacement, remodeling,
maintenance and operation of the Development (including, without limitation, all
assessed real property taxes, assessments (whether general or special) and
governmental charges of any kind and nature whatsoever including assessments due
to deed restrictions and/or owner's associations, which accrue against the
building and/or development of which the premises are a part, the costs of
maintaining and repairing parking lots, parking structures, easements, and
landscaping, property management fees, utility costs to the extent not
separately metered, insurance premiums, depreciation of the costs of replacement
(as defined below) of the building and improvements in the Development but not
including any structural repairs or replacements which are normally
chargeable to capital accounts under sound accounting principles, and the
Building's share of costs of the Development). The term "operating costs" does
not include; (i) costs of alterations of tenants' premises; (ii) costs of curing
construction defects; (iii) interest and principal payments on mortgages, and
other debt cost; (iv) real estate brokers, leasing commissions or compensation;
(v) any cost or expenditure for which Landlord is reimbursed, whether by
insurance proceeds or otherwise; (vi) cost of any service furnished to any other
occupant of the Building which Landlord does not provide to tenant hereunder.
Structural repairs and replacements are repairs and replacements to the
foundations, load-bearing walls, columns and joists and replacement of roofing
and roof deck. Notwithstanding anything contained herein to the contrary,
depreciation of any capital improvements which are intended to reduce Operating
Costs, or are required under any governmental laws, regulations or ordinances
which were not applicable to the Building or the Development at the time it was
constructed, or are recommended by the N.F.P.A. Life Safety Code, shall be
included in Operating Costs. The useful life of any such improvement as well as
all non-structural replacements shall be reasonably determined by Landlord. In
addition, interest on the undepreciated cost of any such improvement or
non-structural replacement (at the prevailing construction loan rate available
to Landlord on the date the cost of such improvement was incurred) shall also be
included in Operating Costs. If Landlord selects the accrual method of
accounting rather than the cash accounting method for Operating Costs purposes,
Operating Costs shall be deemed to have been paid when such expenses have
accrued. Landlord shall have the right at any time and from time to time to
elect, which election shall be subject to revocation, to exclude that portion of
Operating Costs attributable to any separately assessed part of the Development
and any separate building within the Development. During any period that
Operating Costs attributable to any separately assessed part of the Development
and/or separate building are so excluded from Operating Costs, then for the
purposes of calculating Tenant's proportionate share of Operating Costs as
provided in Section 7.02, the denominator shall not include the rentable area of
such separately assessed part of the Development and/or such separate building.
Landlord may, in a reasonable manner, allocable insurance premiums for so-called
"blanket" insurance policies which insure other properties as well as the
Development and said allocated amount shall be deemed to be an Operating Cost.
If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
7.02 TENANT'S PROPORTIONATE SHARE OF OPERATING COST. Tenant shall pay to
Landlord, as additional rent, its proportionate share of operating costs
calculated on the basis of the ratio set forth in Section 8.01. Any payments
with respect to any partial calendar year in which the Term commences or ends
shall be prorated. Tenant agrees to pay $1,003.37 per month as an escrow amount
for operating costs as defined in Article 7.01. Landlord may, at any time,
deliver to Tenant its estimate (or revised estimate) of such additional amounts
payable under this Section for each calendar year. On or before the first day of
the next month and on or before first day of each month thereafter, Tenant shall
pay to Landlord as additional rent such amount as Landlord reasonably determines
to be necessary to bring and keep Tenant current. As soon as practicable after
the close of each calendar
Landlord:__________ Tenant: __________
2
<PAGE>
year, Landlord shall deliver to Tenant a statement showing the total amount
payable by Tenant under this Article. If such statement shows an amount due from
Tenant that is less than the estimated payments previously paid by Tenant, it
shall be accompanied by a refund of the excess to Tenant or at Landlord's option
the excess shall be credited against the next monthly installment of rent. If
such statement shows an amount due from Tenant that is more than the estimated
payments paid by Tenant, Tenant shall pay the deficiency to Landlord, as
additional rent. In the event an amount is due and is not paid within thirty
(30) days after the date of Landlord's statement to tenant, the unpaid amount
shall bear interest at the rate of eighteen (18%) percent per annum from the
date of such statement until payment by tenant. Landlord and Tenant acknowledge
that certain of the costs of management, operation and maintenance, of the
Development are allocated among all of the buildings in the Development using
methods of allocation that are considered reasonable and appropriate under the
circumstances. Tenant hereby consents to such allocations provided that the
determination of such costs and the allocation of all or part thereof to
Operating Costs hereunder shall be in accordance with generally accepted
accounting principles applied on a consistent basis. Tenant or its'
representatives shall have the right after seven (7) days prior written notice
to Landlord to examine Landlord's books and records of Operating Costs during
normal business hours within twenty (20) days following the furnishing of the
statement to Tenant. Unless Tenant takes written exception to any item within
thirty (30) days following the furnishing of the statement to Tenant (which item
shall be paid in any event), such statement shall be considered as final and
accepted by Tenant. The taking of exception to any item shall not excuse Tenant
from the obligation to make timely payment based upon the statement as delivered
by Landlord.
6.01 TENANT'S PROPORTIONATE SHARE. (a) Tenant's "proportionate share" as
used in this Lease with respect to the Building shall mean a fraction the
numerator of which shall be the rentable area contained in the Premises and the
denominator of which shall be the rentable area contained in the Building, as
determined by Landlord. Tenant's "proportionate share" as used in this Lease
with respect to costs relating to more than the Building, shall mean a fraction
the numerator of which shall be the rentable area contained in the Premises and
the denominator of which shall be the rentable area of all buildings, as
determined by Landlord, within the Development. Notwithstanding anything
contained in the Lease to the contrary, Landlord shall have the right, from time
to time, to add to or exclude from the Development real property and any
buildings constructed thereon. In the event Landlord elects to add to or exclude
from the Development, Landlord shall notify Tenant in writing of any such
addition or exclusion which notice shall describe the property added or
excluded.
9.01 TENANT'S OBLIGATIONS. (a) Tenant shall at its own cost and expense
keep and maintain all parts of the Premises and such portion of the Development
within the exclusive control of Tenant in good condition, promptly making all
necessary repairs and replacements, whether ordinary or extraordinary, with
materials and workmanship of the same character, kind and quality as the
original, induding but not limited to, windows, glass and plate glass, doors,
skylights, any special office entries, interior walls and finish work, floors
and floor coverings, heating and air conditioning systems, electrical systems
and fixtures, sprinkler systems, water heaters, dock board, truck doors, dock
bumpers, and plumbing work and fixtures. Tenant as part of its obligation
hereunder shall keep the whole of the Premises in a clean and sanitary
condition. Tenant will as far as possible keep all such parts of the Premises
from deteriorating, ordinary wear and tear excepted, and from falling
temporarily out of repair, and upon termination of this Lease in any way. Tenant
will yield up the Premises to Landlord in good condition and repair, loss by
fire or other casualty covered by insurance to be secured pursuant to Article
15 excepted (but not excepting any damage to glass or loss not reimbursed by
insurance because of the existence of a deductible under the appropriate
policy). Tenant shall not damage any demising wall or disturb the integrity and
supports provided by any demising wall and shall, at its sole cost and expense,
properly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees. Tenant shall, at its own cost and expense, as
additional rent, pay for the repair of any damage to the Premises, the Building,
or the Development resulting from and/or caused in whole or in part by the
negligence or misconduct of Tenant, its agents, servants, employees, patrons,
customers, or any other person entering upon the Development as a result of
Tenant's business activities or caused by Tenant's default hereunder.
(b) Tenant at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor
approved by Landlord, for servicing all heating and air conditioning systems and
equipment servicing the Premises and an executed copy of such contract shall be
delivered to Landlord. This service contract must include all services suggested
by the equipment manufacturer within the operations/maintenance manual and must
become effective within thirty (30) days of the date Tenant takes possession of
the Premises. Landlord may (but shall not be required to), upon notice to
Tenant, elect to enter into such a maintenance service contract on behalf of
Tenant or perform the work itself and, in either case, charge Tenant therefore,
together with a reasonable charge for overhead.
9.02 LANDLORD'S OBLIGATIONS. Landlord shall maintain in good repair,
reasonable wear and tear and any casualty covered by the provisions of Article
15 excepted, all parts of the Development, other than tenants' demised premises
or portions of the Development within the exclusive control of tenants of the
Development, making all necessary repairs and replacements, whether ordinary or
extraordinary structural or nonstructural, including roof, foundation, walls,
downspouts, gutters, regular mowing of any grass, trimming, weed removal and
general landscape maintenance, including any rail spur areas, exterior painting,
exterior lighting, exterior signs and common sewage plumbing and the maintenance
of all paved areas including driveways and alleys, including, but not limited
to, cleaning, repaving, restripping and resealing. Tenant shall immediately give
Landlord written notice of any defect or need for repairs, after which Landlord
shall have a reasonable opportunity to repair the same or cure such defect.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any of the provisions of this Lease shall be
limited to the cost of such repairs or maintenance or the curing of such defect.
The term "walls" as used herein shall not include windows, glass or plate glass,
doors, special store front or office entry.
10.01 ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including, without limitation, the roof and wall
penetrations) without the prior written consent of Landlord. If Landlord shall,
consent to any alterations, additions or improvements proposed by Tenant, Tenant
shall construct the same in accordance with all governmental laws, ordinances,
rules and regulations and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications approved by
Landlord; and any contractor or person selected by Tenant to make the same, or,
at Landlord's option and discretion, the alterations, additions or improvements
shall be made by Landlord for Tenant's account and Tenant shall fully reimburse
Landlord for the entire cost thereof. Tenant may, without the consent of
Landlord, but at its own cost and expense and in good workmanlike manner erect
such shelves, bins, machinery and other trade fixtures as it may deem advisable,
without altering the basic character of the Building or Development and without
overloading the floor or damaging such Building or Development, and in each case
after complying with all applicable governmental laws, ordinances, regulations
and other requirements, All shelves, bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the termination of this
Lease if Tenant so elects, and shall be removed by the date of termination of
this Lease or upon earlier vacating of the Premises if required by Landlord;
upon any such removal Tenant shall restore the Premises to their original
condition. Al1 such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to damage the primary structure or structural
quality of the Building.
11.01 SIGNS AND WINDOW TREATMENT. Tenant shall not install any signs upon
the Building or Development. Landlord will provide, at Tenant's request and
cost, Landlord's standard identification sign, which sign shall be removed by
Tenant upon termination of this lease at which time Tenant shall restore the
property to the same condition as prior to installation of said sign. Tenant
shall not install drapes, curtains, blinds or any window treatment without
Landlord's prior written consent. Landlord may from time to time require Tenant
to change its signage to conform to a revised standard for the Building,
provided Landlord pays
Landlord:__________ Tenant: __________
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the cost of removing and replacing such signs. Landlord shall maintain all
signs and the cost thereof shall be charged to Tenant.
12.01 INSPECTIONS. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
premises or in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the premises and shall arrange to meet with Landlord for
a joint inspection of the premises prior to vacating. In the event of Tenant's
failure to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the premises shall be conclusively
deemed correct for purposes of determining Tenants responsibility for repairs
and restoration.
13.01 UTILITIES Tenant shall pay for all gas, heat, light, power,
telephone, and other utilities and services used on or from the Premises,
including without limitation, Tenant's proportionate share as determined by
Landlord for the use of such utilities which are not separately metered and any
central station signaling system installed in the Premises or the Building,
together with any taxes, penalties and surcharges or the like pertaining thereto
and any maintenance charges for utilities. Tenant shall furnish and install all
electric light bulbs, tubes and ballasts, other than those originally provided
to the Premises by Landlord. Landlord shall in no event be liable for any
interruption or failure of utility services on or to the Premises.
14.01 ASSIGNMENT AND SUBLETTING. (a) Tenant shall not have the right to
assign, sublet, transfer or encumber this lease, or any interest therein,
without the prior written consent of Landlord, such consent not to be
unreasonably withheld or delayed. Any attempted assignment, subletting, transfer
or encumbrance by Tenant in violation of the terms and covenants of this
Paragraph shall be void. All cash or other proceeds of any assignment, such
proceeds as exceed the rentals called for hereunder in the case of a
subletting and all cash or other proceeds of any other transfer of Tenants
interest in this lease shall be paid to Landlord, whether such assignment,
subletting or other transfer is consented to by Landlord or not, unless Landlord
agrees to the contrary in writing, and Tenant hereby assigns all rights it
might have or ever acquire in any such proceeds to Landlord. Any assignment,
subletting or other transfer of Tenants interest in this lease shall be for an
amount equal to the then fair market value of such interest. These covenants
shall run with the land and shall bind Tenant and Tenants heirs, executors,
administrators, personal representatives, representatives in any bankruptcy
proceeding, successors and assigns. Any assignee, sublessee or transferee of
Tenant's interest in this lease (all such assignees, sublesses and transferees
being hereinafter referred to as "successors"), by assuming Tenant's obligations
hereunder shall assume liability to Landlord for all amounts paid to persons
other than Landlord by such successors in contravention of this Paragraph. No
assignment, subletting or other transfer, whether consented to by Landlord or
not, shall relieve Tenant of its liability hereunder. Upon the occurrence of an
"event of default" as hereinafter defined, if the premises or any part thereof
are then assigned or sublet, Landlord, in addition to any other remedies herein
provided, as provided by law, may at its option collect directly from such
assignee or subtenant all rents becoming due to Tenant under such assignment or
sublease and apply such rent against any sums due to Landlord for Tenant
hereunder, and no such collection shall be construed to constitute a novation or
a release of Tenant from the further performance of Tenant's obligations
hereunder.
(b) If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. 101 et seq., (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and be promptly
paid or delivered to Landlord.
(c) Any person or entity to which this lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this lease on and afer the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Landlord an instrument confirming such assumption.
15.01 FIRE AND CASUALTY DAMAGE. (a) Landlord agrees to maintain insurance
covering the building of which the premises are a part in an amount not less
than eighty (80%) percent (or such greater percentage as may be necessary to
comply with the provisions of any co-insurance clauses of the policy) of the
replacement cost thereof, insuring against the perils of Fire, Lightning,
Extended Coverage, Vandalism and Malicious Mischief, extended by Special
Extended Coverage Endorsement to insure against all other Risks of Direct
Physical Loss, such coverages and endorsements to be as defined, provided and
limited in the standard bureau forms prescribed by the insurance regulatory
authority for the state in which the premises are situated for use by insurance
companies admitted in such state for thc writing of such insurance on risks
located within such state. Subject to the provisions of subparagraphs 15.01(c),
15.01(d), and 15.01(e) below, such insurance shall be for the sole benefit of
Landlord and under its sole control.
(b) If the building situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, tenant shall give written notice
thereof to Landlord.
(c) If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be completed
within two hundred (200) days afer the date upon which Landlord is notified by
Tenant of such damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the date of the
occurrence of such damage.
(d) If the buildings situated upon the premises should be damaged by any
peril covered by insurance to be provided by Landlord under subparagraph
15.01(a) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within two hundred (200) days afer the date
upon which Landlord is notified by Tenant of such damage, this lease shall not
terminate, and Landlord shall at its sole cost and expense thereupon proceed
with reasonable diligence to rebuild and repair such buildings to substantially
the condition in which they existed prior to such damage, except that Landlord
shall not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the premises by Tenant and except that Tenant shall pay to Landlord upon
demand any amount by which Landlord's cost of such rebuilding, repair and/or
replacement exceeds net insurance proceeds paid to Landlord in connection with
such damage and except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of any option
which is unexercised at the time of such damage. If the premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. In the
event that Landlord should fail to complete such repairs and rebuilding within
two hundred (200) days after the date upon which Landlord is notified by Tenant
of such damage, Tenant may at its option terminate this lease by delivering
written notice of termination to Landlord as Tenant's exclusive remedy,
whereupon all rights and or obligations hereunder shall cease and terminate.
Should construction be delayed because of changes, deletions, or additions in
construction requested by Tenant, strikes, lockouts, casualties, acts of God,
war, material or labor shortages, governmental regulation or control or other
causes beyond the reasonable control of Landlord, the period of restoration,
repair or rebuilding shall be extended for the time Landlord is so delayed.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such
Landlord:__________ Tenant: __________
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requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
(f) Each of Landlord and Tenant hereby releases the other from any loss or
damage to property caused by fire or any perils insured in policies of insurance
covering such property, even if such loss or damage shall have been caused by
the fault or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and
in force and effect only with respect to loss or damage occurring during such
times as the releasor's policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect or impair said policies
or prejudice the right of the releasor to recover thereunder and then only to
the extent of the insurance proceeds payable under such policies. Each of the
Landlord and Tenant agrees that it will request its insurance carriers to indude
in its policies such a clause or endorsement.
16.01 LIABILLTY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation attorney's fees and damages, both real and alleged, arising
out of any such damage or injury; except injury to persons or damage to property
the sole cause of which is the gross negligence of Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt of
written notice from Tenant of needed repairs. Tenant shall procure and maintain
throughout the term of the lease a policy or policies of insurance, at its sole
cost and expense, insuring both Landlord and Tenant against all claims, demands
or actions arising out of or in connection with (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenants liability assumed under this lease, the limits
of such policy or policies to be in the amount of not less than $2,000,000 per
occurrence in respect to injury to persons (including death), and in the amount
of not less than $1,000,000 per occurence in respect to property damage or
destruction, including loss of use thereof. All such policies shall be procured
by Tenant from responsible insurance companies satisfactory to Landlord.
Certified copies of such policies, together with receipt evidencing payment of
premiums thereof. All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies of such policies,
together with receipt evidencing payment of premiums therefore, shall be
delivered to Landlord prior to the commencement date of this lease. Not less
than fifteen (15) days prior to the expiration date of any such policies,
certified copies of the renewal thereof bearing (notations evidencing the
payment of renewal premiums) shall be delivered to Landlord. Such policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be cancelled or changed to reduce
insurance provided thereby.
17.01 CONDEMNATION. (a) If the whole or any substantial part of the
Premises or Building should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof and the taking would prevent or materially
interfere with the use of the Premises or Building for the purpose for which
they are then being used, this Lease shall terminate effective when the legal
taking shall occur as if the date of such taking were the date originaly fixed
in the Lease for the expiration of the Term.
(b) If the part of the Premises or Building shall be taken for any public
or quasi-public use under governmental law, ordinance or regulation, or by right
of eminent domain, or by private purchase in lieu thereof, and this Lease is not
terminated as provided above, this Lease shall not terminate but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced to
such extent as may be fair and reasonable under all of the circumstances and
Landlord shall undertake to restore the Premises to a condition suitable for
Tenant's use, as near to the condition thereof immediately prior to such taking
as is reasonably feasible under all the circumstances.
(c) In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation precedings; provided that Tenant shall not be
entitled to receive any award for the loss of any improvements paid for by
Landlord or for Tenant's loss of its leasehold interest, the right to such award
as to such items being hereby assigned by Tenant to Landlord.
18.01 HOLDING OVER. Tenant will, at the termination of this lease by lapse
of time or otherwise, yield up immediate possession to Landlord with all repairs
and maintenance required herein to be performed by Tenant completed. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this lease, unless the parties hereto otherwise agree in writing on the terms
of such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advance written notice,
and all of the other terms and provisions of this lease shall be applicable
during that period, except that Tenant shall pay Landlord from time to time upon
demand, as rental for the period of any hold over, an amount equal to double the
rent in effect on the termination date, computed on a daily basis for each day
of the hold over period. Tenant shall also pay to Landlord all damages sustained
by Landlord resulting from retention of possession by Tenant, including the loss
of any proposed subsequent tenant for any portion of the Premises. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this lease except otherwise expressly provided. The preceding provisions
of this paragraph shall not be construed as consent for Tenant to hold over.
19.01 QUIET ENJOYMENT. Landlord represents and warrants that it has full
right and authority to enter into this Lease and that Tenant, upon paying the
rental herein set forth and performing its other covenants and agreements herein
set forth, shall peaceably and quietly have, hold and enjoy the Premises for the
Term without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease. Landlord agrees to make reasonable efforts to protect
Tenant from interference or disturbance by other tenants or third persons;
however, Landlord shall not be liable for any such interference or disturbance,
nor shall Tenant be released from any of the obligations of this Lease because
of such interference or disturbance. In the event this Lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior lease.
20.01 EVENTS OF DEFAULT. The following events shall be deemed to be events of
default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due and such failure shall continue for a period of five (5) days from the date
such payment was due.
(b) Tenant or any guarantor of Tenant,s obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors; or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor to adjudicate it as bankrupt or insolvent, or seeking reorganization or
relief of debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property; or Tenant or any such guarantor shall take any action to authorize or
in contemplation of any of the actions set forth above in this paragraph; or
Landlord:__________ Tenant: __________
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(c) Any case, proceeding or other action against Tenant or any guarantor
of Tenant's obligations hereunder shall be commenced seeking to have an order
for relief entered against it as debtor or to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
(d) A receiver or trustee shall be appointed for all or substantially all
of the assets of the Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
premises.
(f) Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 26.01 hereof within twenty (20) days after any such lien
or encumbrance is filed against the premises.
(g) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 20.01, and shall not cure
such failure within twenty (20) days after written notice thereof to Tenant.
(h) Tenant shall fail to continuously operate its business at the premises
for the permitted use set forth in Paragraph 5.01 whether or not Tenant is in
default of the rental payment due under this lease
20.02 REMEDIES. (a) Upon the occurrence of any of such events of default
described in Paragraph 20.01 hereof. Landlord shall have the option to pursue
any one or more of the following remedies without any notice or demand
whatsoever;
(1) Terminate this lease, in which event Tenant shall immediately surrender
the premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the premises and
expel or remove Tenant and any other person who may be occupying such
premises or any part thereof, by force if necessary, without being liable
for prosecution or any claim of damages therefore.
(2) Enter upon and take possession of the premises and expel or remove Tenant
and any other person who may be occupying such premises or any part
thereof, by force if necessary, without being liable for prosecution or
any claim for damages therefore, and relet the premises and receive the
rent therefore.
(3) Enter upon the premises, by force if necessary, without being liable for
prosecution or any claim for damages therefore, and do whatever Tenant is
obligated to do under the terms of this lease; and Tenant agrees to
reimburse Landlord on demand for any expenses which Landlord may incur in
thus effecting compliance with Tenant's obligations under this lease, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action, whether caused by the negligence
of Landlord or otherwise.
(4) Alter all locks and other security devices at the premises without
terminating this lease.
(b) In the event Landlord may elect to regain possession of the premises
by a forcible detainer proceeding, Tenant hereby specifically waives any
statutory notice which may be required prior to such proceeding, and agrees that
Landlord's execution of this lease is, in part, consideration for this waiver.
(c) In the event Tenant fails to pay any installment of rent hereunder as
when such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five (5%) percent of such installment; and the
failure to pay such amount within five (5) days after demand therefore shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
(d) In the event Tenant's check, given to Landlord in payment, is returned
by the bank for non-payment, Tenant agrees to pay all expenses incurred by
Landlord as a result thereof.
(e) Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the wrirten agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of Tenant
or others at the premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any event of default, to the
aforesaid exercise of dominion over Tenant's property within the premises. All
claims for damages by reason of such re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Tenant agrees
that any re-entry by Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Landlord may elect, and Landlord shall not be liable for
trespass or otherwise.
(f) In the event Landlord elects to terminate the lease by reason of an
event of default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord, at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the greater of (i) the total
rental hereunder for the remaining portion of the lease term (had such term not
been terminated by Landlord prior to the date of expiration and (ii) the then
present value of the then fair rental value of the premises for such period.
(g) In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant at Landlord's option, shall be liable for and shall pay to Landlord,
at the address specified for notice to Landlord herein, all rental and other
indebtedness accrued to the date of such repossession, plus rental required to
be paid by Tenant to Landlord during the remainder of the lease term until the
date of expiration of the term as stated in Section 3.01 diminished by any net
sums thereafter received by Landlord through reletting the premises during said
period (after deducting expenses incurred by Landlord as provided in
subparagraph 20.02(h). In no event shall Tenant be entitled to any excess of any
rental obtained by reletting over and above the rental herein reserved. Actions
to collect amounts due by Tenant to Landlord under this subparagraph may be
brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
(h) In case of any evenly of default or breach by Tenant, or threatened or
anticipatory breach or default, Tenant shall also be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, in addition to
any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
(i) In the event of termination or repossession of the premises for an
event of default. Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord may relet the whole or any
portion of the premises for any period to any tenant and for any use and
purpose.
Landlord::__________Tenant.___________
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(j) If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligations to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fee's) incurred by Landlord in
taking such remedial action.
(k) In the event that Landlord shall have taken possession of the premises
pursuant to the authority herein granted then Landlord shall have the right to
keep in place and use all of the furniture, fixtures and equipment at the
premises, including that which is owned or leased to Tenant at all times prior
to any foreclosure thereon by Landlord or repossession thereof by any lessor
thereof or third party having a lien thereof, Landlord shall also have the right
to remove from the premises (without the necessity of obtaining a distress
warrant, writ of sequestration or other legal process) all or any portion of
such furniture, fixtures, equipment and other property located thereon and to
place same in storage at any premises within the County in which the premises is
located; and in such event, Tenant shall be liable to Landlord for costs
incurred by Landlord in connection with such removal and storage. Landlord shall
also have the right to relinquish possession of all or any portion of such
furniture, fixtures, equipment and other property to any person ("Claimant")
claiming to be entitled to possession thereof who presents to Landlord a copy of
any instrument represented to Landlord by Claimant to have been executed by
Tenant (or an predecessor Tenant granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Landlord to inquire into the
authenticity of said instrument's copy of Tenant's or Tenant's predecessors
signature(s) thereon and without the necessity of Landlord making any nature of
investigation or inquiry as to the validity of the factual or legal basis upon
which Claimant purports to act; and Tenant agrees to indemnity and hold Landlord
harmless from all cost, expense, loss, damage and liability incident to
Landlord's relinquishment of possession of all or any portion of such furniture,
fixtures, equipment or other property to Claimant. Any and all property which
may be removed from the Premises by Landlord pursuant to the authority of this
Lease or of Law, to which Tenant is or may be entitled, may be handled, removed
and stored, as the case may be, by or at the direction of Landlord at the risk,
cost and expense of Tenant, and Landlord shall in no event be responsible for
the value, preservation or safekeeping thereof. Tenant shall pay to Landlord,
upon demand any and all expenses incurred in such removal and all storage
charges against such property so long as the same shall be in Landlord's
possession or under Landlord's control. Any such property of Tenant not retaken
by Tenant from storage within thirty (30) days after the removal from the
Premises shall conclusively be presumed to have been conveyed by Tenant to
Landlord under this Lease as a bill of sale without further payment or credit by
Landlord to Tenant. The rights of Landlord herein stated shall be in addition to
any and all other rights which Landlord has or may hereafter have at law or in
equity; and Tenant stipulates and agrees that the rights herein granted Landord
are commercially reasonable.
21.01 RIGHTS RESERVED TO LANDLORD. Landord reserves and may exercise the
following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or the
Development;
(b) To install and maintain a sign or signs on the exterior of the
Building;
(c) To designate all sources furnishing sign painting and lettering, lamps
and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or the Development:
(f) To change the arrangement and/or location of entrances and corridors
in and to the Building and to add, remove, rename or modify buildings,
roadways, parking areas, walkways, landscaping, lakes, grading and
other improvements in or to the Development.
22.01 RELOCATION OF PREMISES. Landlord reserves the right to relocate
Tenant during the Term to other premises in the Building or in another building
within the Development (the "New Premises"), in which event the New Premises
shall be deemed to be the Premises for all purposes under this Lease, provided:
(a) the New Premises shall be similar to the Premises in area and
appropriateness for the use of Tenant's purposes: (b) if Tenant is then
occupying the Premises, Landlord shall pay the reasonable expense of moving
Tenant, its property and equipment to the New Premises and such moving shall be
done at such time and in such manner so as to cause the least inconvenience to
Tenant; (c) Landlord shall give to Tenant not less than thirty (30) days prior
written notice of such substitution; and (d) Landlord shall, at its sole cost,
improve the New Premises with improvements substantially similar to those
located in the Premises.
23.01 LANDLORD'S LIEN. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages in
rent as well as any and all other sums of money then due to Landlord hereunder
shall first have been paid and discharged. In the event of a default under this
Lease, Landlord shall have, in addition to any other remedies provided herein or
by law, all rights and remedies under the Uniform Commercial Code, including
without limitation the right to sell the property described in this Section at
public or private sale upon five (5) days notice to Tenant. Tenant hereby agrees
to execute such financing statements and other instruments necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created.
24.0 SUBORDINATION. Tenant accepts this Lease subject and subordinate to
any mortgage and/or deed of trust now or at any time hereafter constituting a
lien or charge upon the Development, the Building, or the Premises, without the
necessity of any act or execution of any additional instrument of subordination;
provided, however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of evidencing
the subjection and subordination of this Lease to the lien of any such mortgage
or for the purpose of evidencing the superiority of this Lease to the lien of
any such mortgage as may be the case.
25.01 MECHANICS LIENS AND OTHER TAXES. (a) Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind the interests of Landlord in
the premises or to charge the rentals payable hereunder for any claim in favor
of any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the premises on which any lien is or can be validly and legally asserted against
its leasehold interest in the premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense
based on or arising out of asserted claims or liens against the leasehold estate
or against the right, title and interest of the Landlord in the premises or
under the terms of this lease. Tenant agrees to give Landlord immediate written
notice if any lien or encumbrance
Landlord:________ Tenant:________
7
<PAGE>
is placed on the premises.
(b) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
26.01 NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
shall be deemed to be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to Landlord
shall be payable to: Regent Holding Corporation or to such other entity at the
such other address as Landlord may specify from time to time by written notice
delivered in accordance herewith.
(b) Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered, whether actually received or not, when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
Landlord: Tenant:
- ------------------------------ -------------------------------
Regent Holding Corporation Netspeak Corp.
- ------------------------------ -------------------------------
C/O Trammell Crow Company 902 Clint Moore Road
- ------------------------------ ------------------------------
1515 South Federal Highway, Suite 113 Suites 104/106
- ------------------------------ ------------------------------
Boca Raton, Florida 33432 Boca Raton, Florida 33487
- ------------------------------ -------------------------------
- ------------------------------ -------------------------------
If and when included within the term "Landlord", or "Tenant", as used in
this instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments. All panics included within the terms "Landlord" and "Tenant",
respectively, shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such notice.
27.01 MISCELLANEOUS. (a) Words of any gender used in this Lease shall be
held or construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
(b) The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord shall
have the right to assign any of its rights and obligations under this Lease and
Landlord's grantee or Landlord's successor, as the case may be, shall upon such
assignment, become Landlord hereunder, thereby freeing and relieving the grantor
or assignor, as the case may be of all covenants and obligations of Landlord
hereunder. Each party agrees to furnish to the other, promptly upon demand a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease. Nothing herein contained shall give any other tenant in
the Development or the Building any enforceable rights either against Landlord
or Tenant as a result of the covenants and obligations of either party set forth
herein. If there is more than one Tenant, the obligations of Tenant shall be
joint and several. Any indemnification of, insurance of, or option granted to
Landlord shall also include or be exercisable by Landlord's agents and
employees.
(c) The captions inserted in this Lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current Term
(exclusive of any renewal periods which have not then actually commenced). This
provision is not intended to be a measure or agreed amount of Landlord's
liability with respect to any particular breach and shall not be utilized by any
court or otherwise for the purpose of determining any liability of Landlord
hereunder, except only as a maximum amount not to be exceeded in any event. In
addition, it is expressly understood and agreed that nothing in this Lease shall
be construed as creating any liability against Landlord, or its successors and
assigns, personally, and in particular without limiting the generality of the
foregoing, there shall be no personal liability to pay any indebtedness accruing
hereunder or to perform any covenant, either express or implied, herein
contained, and that all personal liability of Landlord, or its successors and
assigns, of every sort, if any, is hereby expressly waived by Tenant, and that
so far as Landlord, or its successors and assigns is concerned Tenant shall look
solely to the Building for the payment thereof.
(e) Except as set forth in Section 8.01 above, this Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
(f) All obligations of Tenant not fully performed as of the expiration or
earlier termination of the term of this Lease shall survive the expiration or
earlier termination of the Term, including without limitation, all payment
obligations with respect to Operating Costs and all obligations concerning the
condition of the Premises. Upon the expiration or earlier termination of the
Term, and prior to Tenant vacating the Premises, Landlord and Tenant shall
jointly inspect the Premises and Tenant shall pay to Landlord any amount
estimated by Landlord as necessary to put the Premises, including without
limitation heating and air conditioning systems and equipment therein, in good
condition and repair. Any work required to be done by Tenant prior to its
vacation of the Premises which has not been completed upon such vacation, shall
be completed by Landlord and billed to Tenant at cost plus fifteen percent.
Tenant shall also, prior to vacating the Premises, pay to Landlord the amount,
as estimated by Landlord, of Tenant's obligation hereunder for Operating Costs.
All such amounts shall be used and held by Landlord for payment of such
Landlord: Illegible Tenant: Illegible
8
<PAGE>
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any security deposit held by Landlord shall be audited against the
amount payable by Tenant under this Section.
(g) If any clause, provision or portion of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable under
applicable law, such event shall not affect, impair or render invalid or
unenforceable the remainder of this Lease nor any other clause, phrase,
provision or portion hereof, nor shall if affect the application of any clause,
phrase, provision or portion hereof to other persons or circumstances, and it is
also the intention of the parties to this Lease that in lieu of each such
clause, phrase, provision or portion of this Lease that is invalid or
unenforceable, there be added as a part of this Lease a clause, phrase,
provision or portion as similar in terms to such invalid or unenforceable
clause, phrase, provision or ponion as may be possible and be valid and
enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation of the
Premises. Landlord shall not be bound hereby until its delivery to Tenant of an
executed copy hereof signed by Landlord, already having been signed by Tenant,
and until such delivery Landlord reserves the right to exhibit and lease the
Premises to other prospective tenants. Notwithstanding anything contained herein
to the contrary Landlord may withhold delivery of possession of the Premises
from Tenant until such time as Tenant has paid to Landlord the security deposit
required hereunder and the first month's rent as required hereunder, and any
other sums required hereunder.
(i) Tenant shall at any time and from time to time within ten (10) days
after written request from Landlord, execute and deliver to Landlord an estoppel
certificate, in form reasonable satisfactory to Landlord.
(j) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there shall be
excluded from the computations for any such time period, any delays due to
causes beyond the control of Landlord.
(k) Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over a time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit. The above statement is incorporated in the lease as a
requirement in order to comply with Florida Statute 404,056(8).
(1) Attached iS a Rider to the Lease Paragraph 29.01 through 36.01.
28.01 EFFECTIVE DATE. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date in point of time,
on which all parties hereto have executed this Lease.
The parties intending to be bound hereby execute or cause this Lease to be
executed this 30 day of December, 1995.
WITNESSES: LANDLORD:
- --------------------------- REGENT HOLDING CORPORATlON.
a Florida corporation
- ---------------------------
By: /s/ ILLEGIBLE
------------------------
Agent
----------------------------
Title:
TENANT:
/s/ ILLEGIBLE
- --------------------------- Netspeak Corp.,
/s/ ILLEGIBLE a Florida corporation
- ---------------------------
----------------------------
BY: /s/ ILLEGIBLE
------------------------
Executive Vice President
----------------------------
Title:
Landlord: Illegible Tenant: Illegible
9
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN REGENT HOLDING
CORPORATION, A FLORIDA CORPORATION. ("LANDLORD") AND
NETSPEAK CORP., A FLORIDA CORPORATION.
("TENANT") FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 1O4/106, BOCA RATON, FLORIDA 33487
29.01 AMERICANS WITH DISABILITIES ACT: Tenant, at Tenant's sole expense,
shall comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal
authorities as applicable now in force or which may hereafter be in
force, which shall impose any duty upon the Landlord or Tenant with
respect to the use, occupation or alteration of the premises.
30.01 ACCEPTANCE OF PREMISES: Tenant acknowledges that it has inspected the
Premises, knows the condition thereof, and accepts such Premises, and
specifically the buildings and improvements comprising the same, in
their present condition, as suitable for the purposes for which the
Premises are leased. Taking of possession by Tenant shall be deemed
conclusively to establish that said buildings and other improvements
are in good and satisfactory condition as of when possession was taken.
Tenant further acknowledges that no representations as to the repair of
the Premises, nor promises to alter, remodel or improve the Premises
have been made by Landlord, unless such are expressly set forth in this
lease. If this lease is executed before the Premises become vacant or
otherwise available and ready for occupancy, or if any present tenant
or occupant of the Premises holds over, and Landlord cannot, using good
faith efforts, acquire possession of the Premises prior to the date
above recited as the commencement date of this lease, Landlord shall
not be deemed to be in default hereunder, nor in any way liable to
Tenant because of such failure, and Tenant agrees to accept possession
of the Premises at such time as Landlord is able to tender the same,
which date shall thenceforth be deemed the "commencement date"; and the
term of this lease shall automatically be extended so as to include the
full number of months hereinbefore provided for, except that if the
commencement date is other than the first day of calendar month, such
term shall also be extended for the remainder of the calendar month in
which possession is tendered. Landlord hereby waives payment of rent
covering any period prior to such tendering of possession. After the
commencement date, Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises.
31.01 ENVIRONMENTAL MATTERS: Tenant hereby agrees to conform and comply with
all provisions of Exhibit E, known herein as Environmental Matters.
Landlord: Illegible Tenant: Illegible
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN REGENT HOLDING
CORPORATION, A FLORIDA CORPORATION, ("LANDLORD") AND
NETSPEAK CORP., A FLORIDA CORPORATION.
("TENANT") FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 104/106, BOCA RATON, FLORIDA 33487
(CONTINUED)
32.01 LANDLORD'S LIEN PROTECTION: Neither Tenant nor anyone claiming by,
through or under Tenant, including, without limitation, contractors,
subcontractors, material men, mechanics and laborers, shall have any
right to file or place mechanic's, material men's or other liens of any
kind whatsoever upon the demised premises or upon the tract of land
described on Exhibit A, or any portion thereof; on the contrary, any
such liens are specifically prohibited and shall be null and void and
of no further force or effect.
Tenant has no power to subject Landlord's interest in the demised
premises to any claim or lien of any kind or character and any persons
dealing with Tenant must look solely to the credit of the Tenant for
payment.
33.01 INSURANCE REQUIREMENT: Certified copies of insurance policies, as
described in paragraph 16.01, together with receipt evidencing payment
of premiums therefore, shall be delivered to Landlord prior to Tenant
taking possession of the Premises. Tenant's failure to provide proof of
insurance shall not delay the Rent Commencement date as defined in
paragraph 2.02 above. In the event Landlord notifies Tenant in writing
that the Premises are ready for occupancy, but Tenant has not furnished
Landlord with proof of insurance, all rent and other charges due under
the lease shall begin to accrue as if Tenant had taken possession of
the Premises as of the date of Landlord's notice.
34.01 ASSIGNING, MORTGAGE & SUBLETTING: Any transfer, sale, pledge, or other
disposition, in any single transaction or cumulatively during the term
of the Lease or any renewal or extension thereof, of a legal or an
equitable interest in as much as fifty percent (50%) of the shares or
assets of Tenant shall be deemed an assignment of the Lease, and
prohibited without the express written consent of Landlord, as provided
in paragraph 14.01 of the Lease.
35.01 RIGHT OF FIRST REFUSAL: If Landlord receives an offer (an "Outside
Offer") from a prospective tenant to lease space contiguous to the
Premises which Landlord desires to accept, Tenant shall have the right
of first refusal, subordinate to any preexisting rights or options to
renew, to lease such space from the Landlord upon the identical terms
and provisions contained in the Outside Offer. Tenant shall have seven
(7) calendar days from receipt of notification by Landlord of the
Outside Offer to elect to exercise this right of first refusal by
providing written notification of such election to the Landlord and
entering into a legally binding agreement. In the event the Tenant
fails to timely exercise this right of first refusal, then the Landlord
shall be free to consummate the lease transaction specified in the
Outside Offer with the prospective tenant which has submitted the
Outside Offer or with any other prospective tenant. Tenant's right of
first refusal shall terminate upon Tenant electing not to exercise its
right, and thereafter Landlord may lease the space without first
offering it to Tenant.
36.01 LETTER OF CREDIT: In addition to the Security Deposit paid by Tenant
under the Lease (Paragraph 4.01), Tenant agrees to supply Landlord with
an irrevocable Letter of Credit in the amount of $16,906.45 and drawn
on a Florida Bank, said Bank to be reasonably approved in advance by
Landlord. The Letter of Credit shall be in full force and effect
throughout thc Lease Term.
Landlord: Illegible Tenant: Illegible
<PAGE>
RIDER TO THE LEASE AGREEMENT BETWEEN REGENT HOLDING
CORPORATION, A FLORIDA CORPORATION, ("LANDLORD") AND
NETSPEAK CORP., A FLORIDA CORPORATION.,
("TENANT") FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITES 104/106, Boca RATON, FLORIDA 33487
(CONTINUED)
37.01 MISCELLANEOUS: This Lease Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter
hereof, and supersedes all other negotiations, understandings, and
representations (if any) made by and between such parties. Should there
be any conflicts between the Lease and this Rider, this Rider shall
control.
The parties intending to be bound hereby execute or cause this Rider to be
executed this 30 day of December, 1997.
ATTEST/WITNESS LANDLORD:
By:
-------------------------- REGENT HOLDING CORPORATlON.
a Florida coloration
By:
--------------------------
By: /s/ ILLEGIBLE
------------------------
Title: Agent
----------------------------
ATTEST/WITNESS TENANT:
By: /s/ ILLEGIBLE Netspeak Corp.,
--------------------------- a Florida corporation
By: /s/ ILLEGIBLE
---------------------------
By: /s/ ILLEGIBLE
------------------------
Title: Executive Vice President
----------------------------
Landlord:________ Tenant:________
<PAGE>
CCP Phase 11, Building 3
EXHIBIT A
LEGAL DESCRIPTION
Approximately 4,476 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suites 104/106, Boca Raton, Florida as shown in Exhibit B. Further
described as Congress Corporate Plaza, Phase II situated within a development
known as Congress Corporate Plaza containing of approximately 106,044 square
feet.
Landlord: Illegible Tenant: Illegible
<PAGE>
EXHIBIT B
DESCRIPTION TO FOLLOW
INITIALS: Landlord:________ Tenant:________
<PAGE>
EXHIBIT E
ENVIRONMENTAL MATTERS
(1) Tenant's Covenants Regarding Hazardous Materials.
(A) COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant shall at all
times and in all respects comply with all federal, state and local laws,
ordinances and regulations ("Hazardous Materials Laws") relating to industrial
hygiene, environmental protection or the use, analysis, generation, manufacture,
storage, presence, disposal or transportation of any oil, flammable explosives,
asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous,
toxic, contaminated or polluting materials, substances or wastes, including,
without limitations, any "hazardous substances," "hazardous wastes," hazardous
materials" or "toxic substances" under any such laws, ordinances or regulations
(collectively, "Hazardous Materials").
(B) Hazardous Materials Handling. Tenant shall at lts own expense
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required for
Tenant's use of the Premises, including, without limitation, discharge of
(appropriately treated) materials or wastes into or through any sanitary sewer
serving the Premises. Except as discharged into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws, Tenant
shall cause any and all Hazardous Materials removed from the Premises to be
removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. Tenant shall in all
respects handle, treat, deal with and manage any and all Hazardous Materials in,
on under or about the Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regarding management of such
Hazardous Materials. All reporting obligatlons imposed by Hazardous Materials
Laws are strictly the responsibility of Tenant. Upon expiration or earlier
termination of the term of the Lease, Tenant shal1 cause all Hazardous
Materials to be removed from the Premises and transported for use, storage or
disposal in accordance and compliance with all applicable Hazardous Materials
Laws. Tenant shall not take any remedial action in response to the presence of
any Hazardous Materials in or about the Premises or any Bulldlng, nor enter into
any settlement agreement, consent decree or other compromise in respect to any
claims relating to any Hazardous Materials in any way connected with the
Premises or Building, without first notifying Landlord of Tenant's Intention to
do so and affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, Tenant shall remove any tanks or fixtures
which contain or contained, or are contaminated with Hazardous Materlals.
(C) NOTICES. Tenant shal1 immediately notify Landlord in writing
of: (i) any enforcement, cleanup, removal or other governmental or regulatory
action instituted, completed or threatened pursuant to any Hazardous Materials
Laws; (ii) any claim made or threatened by any person against Tenant, the
Premises or Building relating to damage, contribution, cost recovery
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; and (iii) any reports made to any environmental agency
arising out of or in connection with any Hazardous Materials; and (iiii) any
reports made to any environmental agency arising out of or in connection with
any Hazardous Materials in, on or removed from the Premises or Building,
including any complaints, notices, warnings, reports or asserted violations in
connection therewith. Tenant shal1 also supply to Landlord as promptly as
possible, and in any event within five (5) business days after Tenant first
receives or sends the same, with copies of all claims, reports, complaints,
notices, warnings or asserted violations relating in any way to the Premises,
Building or Tenant's use thereof. Tenant shall promptly deliver to Landlord
copies of hazardous waste manifests reflecting the legal and proper disposal of
all Hazardous Materials removed from the Premises.
INITIALS: Landlord:__________Tenant:_________
<PAGE>
(2) INDEMNIFICATION OF LANDLORD. Tenant shall indemnify, defend (by counsel
acceptable to Landlord), protect, and hold Landlord, and each of Landlord's
partners, employees, agents, attorneys, successors and assigns, free and
harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
injury to any person or demage to any property whatsoever (including water
tables and atmosphere), arising from or caused in whole or in part, directly or
indirectly, by (A) the presence ln, on, under or abour the Premises or Bullding
or discharge in or from the Premises or Building of any Hazardous Materials or
Tenant's use, analysis, storage, transportation, disposal, release, threatened
release, discharge or generation of Hazardous Materials to, in, on, under, about
or from the Premises or Building, or (B) Tenant's failure to comply with any
Hazardous Materials Law whether knowingly or unknowingly, the standard herein
being one of strict liability. Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repair, cleanup or detoxification or decontamination of
the Premises or Building, and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, snd shall
survive the expiration or earlier termination of the term of the Lease. For
purposes of the release and indemnity provision hereof, any acts or omissions of
Tenant, or by employees, agents, assignees, contractors or subcontractors of
Tenant or others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
(3) ADDITIONAL INSURANCE OR FINANCIAL CAPACITY. If at any time it
reasonably appears to Landlord that Tenant is not maintaining sufficienct
insurance or other means of financial capacity to enable Tenant to fulfill its
obligation to Landlord hereunder, whether or not when accrued, liquidated,
conditional or contingent, Tenant shall procure and thereafter maincain in full
force and effect such insurance or other form of financial assurance, with or
from companies or persons and in forms reasonably acceptable to Landlord, as
Landlord may from time to time reasonably request. Landlord may procure such
insurance if Tenant falls to meet its obligation hereunder and the cost thereof
shall be passed through to Tenant.
(4) ENVIRONMENTAL AUDIT; RIGHT OF ENTRY. Landlord shall have the right
to require Tenant to undertake and submit to Landlord a periodic environmental
audit from an environmental company approved by Landlord, which audit shall
cover Tenant's compliance with this Section. Tenant shall promptly comply with
all requirements of such audit and cure all matters raised therein at Tenant's
sole cost.
(5) RADON GAS - Radon is a naturally occuring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
The above statement is incorporated in the lease as a requirement
ln order to comply with Florida Statute 404.056(8).
INITIALS: Landlord:________Tenant_________
<PAGE>
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, dated this 30th day of December, 1995, by and
between REGENT HOLDING CORPORATION, C/O TRAMMELL CROW COMPANY whose address is
1515 South Federal Highway, Suite 113, Boca Raton, Florida 33432 (Landlord), and
Netspeak Corp., whose address is 902 Clint Moore Road, Suites 104/106, Boca
Raton, Florida 33487 (Tenant).
WITNESSETH:
Landlord has demised and leased unto Tenant and Tenant has hired and
taken from Landlord, upon and subject to the covenants and agreements set
forth in that certain Lease dated between Landlord certain premises (Demised
Premises) comprising part of the commercial real property known as CONGRESS
CORPORATE PLAZA II, located upon the tract of land described in Exhibit A
attached hereto and made a part hereof, and consisting of the parcel of land,
together with the building(s) erected thereon.
Landlord and Tenant desire to record this Memorandum of Lease for the
purpose of placing the public on notice of inquiry as to the specific
provisions, terms, covenants and conditions of the Lease, all of which are
incorporated herein by reference with the same force and effect as if herein set
forth in full. Specifically, the Lease contains, among others, the following
covenants and agreements between the parties:
Neither Tenant nor anyone claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and laborers, shall have any right to file or place mechanic's,
materialmen's or other liens of any kind whatsoever upon the demised premises or
upon the tract of land described on Exhibit A, or any portion thereof: on the
contrary, any such liens are specifically prohibited and shall be null and void
and of no further force or effect. Notice is hereby given pursuant to Section
713.10, Florida Statutes, that the Lease contains the following provision:
"Tenant has no power to subject Landlord's interest in the demised
premises to any claim or lien of any kind or character and any persons
dealing with Tenant must fool: solely to the credit of the Tenant for
payment."
This Memorandum of Lease is being recorded in lieu of recording the
Lease itself for the purpose of placing the public on notice or inquiry as to
the specific provisions, terms, covenants and conditions thereof, and nothing
herein contained is intended to or does change modify or affect any of the terms
or provisions of the Lease or the rights, duties, obligations, easements and
covenants running with the land created hereby, all of which remain in full
force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and sealed
this Memorandum of Lease as of the day and year first above written.
TENANT:
NETSPEAK CORP.,
a Florida corporation
By: /s/ HARVEY KAUFMAN
---------------------------------
Name: Harvey Kaufman
---------------------------------
Title: Executive Vice President
---------------------------------
<PAGE>
As to Tenant TENANT
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 20 day of
December, 1995, by Harvey Kaufman, a Executive Vice President of Netspeak Corp.
on behalf of the Tenant. The above-named individual [X] is personally known to
me, or [] has produced the following identification ___________ which is current
or has been issued within the past five years and bears a serial or other
identifying number and did (did not) take an oath.
NOTARY PUBLIC
STATE OF FLORIDA
PATRICIA HILDEBRAND PATRICIA HILDEBRAND
NOTARY PUBLIC - STATE OF FLORIDA Print Name: Patricia Hildebrand
COMMISSION NO. CC 412478 NOTARY PUBLIC - STATE OF FLORIDA
MY COMMISSION EXP. 10/10/1998 Commission Number: CC 412478
BONDED BY HAI My Commission Expires: 10/10/1998
800-422-1555
LANDLORD:
REGENT HOLDING CORPORATION,
a Florida corporation
By: /s/ ILLEGIBLE
-------------------------
Name: /s/ ILLEGIBLE
-----------------------
Title: Agent
-----------------------
As to Landlord LANDLORD
(NOTARIAL SEAL)
STATE OF FLORIDA
COUNTY OF _____________
The foregoing instrument was acknowledged before me this ____ day of
_______, 1995, by __________, a ______________ of ____________________ on
behalf of the ___________. The above-named individual [] is personally known
to me, or [] has produced the following identification ___________ which is
current or has been issued within the past five years and bears a serial or
other identifying number and did (did not) take an oath.
_________________________________
Print Name: _____________________
NOTARY PUBLIC - STATE OF ________
Commission Number:_______________
My Commission Expires:___________
(NOTARIAL SEAL)
<PAGE>
CCP Phase II, Building 3
EXHIBIT A
LEGAL DESCRIPTION
Approximately 4,476 square feet of office and/or warehouse space located in a
building containing, approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suites 104/106, Boca Raton, Florida as shown in Exhibit B. Further
described as Congress Corporate Plaza, Phase II situated within a development
known as Congress Corporate Plaza containing of approximately 106,044 square
feet.
Landlord:_________ Tenant: Illegible
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Internet Telphone Cmpany, a Florida corporation.
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of NetSpeak Corporation on
Form S-1 of our report dated January 24, 1997, appearing in the Prospectus,
which is part of this Registration Statement, and to the references to us under
the headings "Selected Consolidated Financial Data" and "Experts" in such
Prospectus.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
February 20, 1997
