<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BUSINESS@WEB, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
<TABLE>
<CAPTION>
DELAWARE 7379 04-3249618
<S> <C> <C>
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
ORGANIZATION) CODE NUMBER)
</TABLE>
----------------
ONE ARSENAL MARKETPLACE
WATERTOWN, MASSACHUSETTS 02172
(617) 923-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
KLAUS P. BESIER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BUSINESS@WEB, INC.
ONE ARSENAL MARKETPLACE
WATERTOWN, MASSACHUSETTS 02172
(617) 923-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
<TABLE>
<CAPTION>
WILLIAM E. KELLY, ESQ. JOHN J. EGAN III, ESQ. MARK G. BORDEN, ESQ.
<S> <C> <C>
PEABODY & ARNOLD GOODWIN, PROCTER & HOAR LLP HALE AND DORR
50 ROWES WHARF EXCHANGE PLACE 60 STATE STREET
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02109
</TABLE>
----------------
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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value.... 4,312,500 $15.00 $64,687,500 $22,307
- ---------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes 562,500 shares of Common Stock which the Underwriters have the
option to purchase from the Company to cover over-allotments.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BUSINESS@WEB, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS OF
THE RESPONSES TO THE ITEMS OF FORM S-1
(PURSUANT TO ITEM 501 OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER OF CAPTION LOCATION OR HEADING IN PROSPECTUS
------------------------------- ---------------------------------
<S> <C>
1.Forepart of Registration Statement and Outside
Front Cover of Prospectus...................... Outside Front Cover Page
2.Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover Page and Outside
Back Cover Page of Prospectus;
Prospectus Summary; Risk Factors
3.Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges...................... Outside Front Cover Page;
Inside Front Cover Page;
Prospectus Summary; The Company;
Risk Factors; Business
4.Use of Proceeds.................................. Use of Proceeds
5.Determination of Offering Price.................. Outside Front Cover Page; Underwriting
6.Dilution......................................... Dilution
7.Selling Security Holders......................... Management; Principal and Selling
Stockholders
8.Plan of Distribution............................. Outside Front Cover Page;
Inside Front Cover Page; Underwriting
9.Description of Securities to be Registered....... Description of Capital Stock
10.Interests of Named Experts and Counsel........... Not Applicable
11.Information with Respect to the Registrant
a.Description of Business....................... Risk Factors; The Company; Use of
Proceeds; Management's Discussion
and Analysis of Financial Condition
and Results of Operations; Business
b.Description of Property....................... Business--Facilities
c.Legal Proceedings............................. Not Applicable
d.Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters........................ Front Cover Page; Dividend Policy;
Underwriting; Principal and Selling
Stockholders; Shares Eligible for
Future Sale; Description of Capital Stock
e.Financial Statements.......................... Financial Statements
f.Selected Financial Data....................... Selected Financial Data
g.Supplementary Financial Information........... Not Applicable
h.Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
i.Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures.... Not Applicable
j.Directors and Executive Officers.............. Management
k.Executive Compensation........................ Management; Certain Transactions
l.Security Ownership of Certain Beneficial
Owners and Management...................... Principal and Selling Stockholders
m.Certain Relationships and Related
Transactions............................... Certain Transactions
12.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 MAY 22, 1996
3,750,000 SHARES
BUSINESS@WEB, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
-----------
Of the 3,750,000 shares of Common Stock offered hereby, 3,000,000 shares are
being sold by the Company and 750,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $13.00 and $15.00. For factors to be considered
in determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "BATW".
-----------
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.
-----------
<TABLE>
<CAPTION>
PROCEEDS
INITIAL PUBLIC UNDERWRITING TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------ ---------- -------------------
<S> <C> <C> <C> <C>
Per Share........... $ $ $ $
Total(3)............ $ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $800,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 562,500 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
-----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. HAMBRECHT & QUIST
-----------
The date of this Prospectus is , 1996.
<PAGE>
[Graphic entitled "Business@Web Multi-Tier Architecture" depicts a three
dimensional rectangular platform angled from the upper left to bottom right of
the page, divided into three segments. There is a small gap between each of the
platform segments. The front edges of these segments are labeled, from right to
left, "Data Access", "Functionality" and "Presentation". The left end of the
platform ends in a low brick wall, labeled "Firewall." On the left side of the
firewall is a cloud labeled "Internet". Beyond the "Internet" cloud are three
personal computers, labeled "Distributor", "Partner" and "Customer". The screen
of each computer says "Web Browser", and the top of each computer is labeled
"B@W WebEngine Client". There are arrows from each computer to the "Firewall".
On the "Presentation" platform segment there are two computers. One is labeled
"B@W WebEngine Client", with the words "Web Browser" on its screen, and the
other is labeled B@W WebEngine Client, with the words "Desktop Application" on
its screen. There are arrows between the Firewall and each of these computers to
the box on the "Functionality" platform segment. The "Functionality" segment is
entirely occupied by a box labeled "B@W Distributed WebEngine Data Integration &
Analysis". Attached to this box and extending across the gap and over a small
portion of the "Data Access" segment is a rectangular box with four cylinders
extending farther out over the "Data Access" segment labeled B@W OpenExtension".
Placed on the "Data Access" segment, in front of each of these cylinders, are
four small rectangular boxes labeled (from back to front) "Legacy System",
"Client/Server System", "Database" and "Emerging Technologies". There is an
arrow from each of the "OpenExtension" cylinders to the box directly in front of
it. Behind the "Presentation" segment is the label "Intranet"; behind the
"Functionality" segment is the label "Enterprise"; and behind the "Data Access"
segment is the label "Current IT System."]
The Company's OpenScape products allow organizations to Web-enable business
applications through use of a distributed component, multi-tier client/server
architecture, where presentation, functionality and data access layers are
developed and deployed independently of each other. OpenScape products provide
the high-volume and real-time performance capabilities required by businesses
through the utilization of standard Internet protocols, component-based,
object-oriented technology, a scalable, multi-tier architecture and an
intuitive point-and click development environment. The Company believes that
its products will enable organizations to achieve significant competitive
advantages by increasing responsiveness to changing business conditions, and
exploiting the low cost, flexibility and ease-of-use of Internet technologies.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
---------------------
"Business@Web" and all of the Company's logos and product names are
trademarks of the Company and are used throughout this document as such. This
prospectus also contains trademarks of other companies.
<PAGE>
[Graphic entitled "Business@Web Solution" depicts a map of the United States,
with images of buildings labeled as "Company Headquarters", "Company Sales
Office", Company Manufacturing Plant", "Company Distribution Center", "Company
R&D Center" and "Company Southeast Regional Office", placed at various locations
around the map, and encircled by arrows labeled "intranet" in two places.
Another arrow leads from "Company Headquarters" to "Company Sales Office".
Another arrow leads from "Company Headquarters" to a brick wall labeled
"Firewall" located in the upper left quarter of the graphic. Beyond the
"Firewall" there is a cloud labeled "Internet". Beyond the cloud farther to the
left and top of the picture, there are nine buildings, arranged in three lines
of three buildings each, with each building in the first line labeled
"Distributors", in the second line labeled "Business Partners" and in the third
line labeled "Customers". There are arrows leading from each of the buildings
which is first in each line into the "Internet" cloud.]
Business@Web, Inc. is a provider of "Web-enabled" software for the
development and deployment of mission-critical business applications across an
organization's disparate information technology ("IT") systems and the
extension of those applications to Intranets and the Internet. The Company's
OpenScape products enable organizations to extend their current IT
capabilities to conduct new, dynamic and interactive communications and
transactions with key audiences in their extended enterprise, including
customers, suppliers, distributors and business partners.
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and qualified in
its entirety by, the more detailed information and the Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. Except as otherwise
noted, all information contained in this Prospectus, including share and per
share information, (i) assumes no exercise of the Underwriters' over-allotment
option, (ii) reflects the conversion upon the consummation of this offering of
all outstanding shares of the Company's Series B Redeemable Convertible
Preferred Stock ("Series B Preferred Stock") and Series C Convertible Preferred
Stock ("Series C Preferred Stock") into 1,775,194 shares of Common Stock, and
(iii) reflects a two-for-three reverse stock split of the Company's Common
Stock to be effected in May 1996.
THE COMPANY
Business@Web, Inc. ("Business@Web" or the "Company") is a provider of "Web-
enabled" software for the development and deployment of mission-critical
business applications across an organization's disparate information technology
("IT") systems and the extension of those applications to Intranets and the
Internet. The Company's OpenScape products enable organizations to extend their
current IT capabilities to conduct new, dynamic and interactive communication
and transactions with key audiences in their "extended enterprise", including
customers, suppliers, distributors and business partners. OpenScape products
provide the high-volume and real-time performance capabilities required by
businesses through the utilization of standard Internet protocols, component-
based, object-oriented technology, a scaleable, multi-tier architecture and an
intuitive point-and-click development environment. The Company believes that
its products will enable organizations to achieve significant competitive
advantages by increasing responsiveness to changing business conditions, and
exploiting the low cost, flexibility and ease-of-use of Internet technologies.
In response to increased competitive pressures, businesses have engaged in
the reengineering of critical business processes in an attempt to realize
productivity and efficiency gains. A critical enabler of these reengineering
efforts has been the strategic use of information technology, such as legacy
and client/server systems. To date, the development and deployment of effective
enterprise-wide business applications have been limited by the proliferation of
multiple IT systems. The recent emergence of the World Wide Web and Internet
technologies offers businesses the opportunity to significantly improve
collaboration and communication both within the enterprise and with the
extended enterprise. Accordingly, organizations are increasingly seeking a
cost-effective IT solution which maximizes the value of their existing IT
infrastructure, while simultaneously capturing the strategic business benefits
of the Internet. Organizations are able to address this need through the use of
the Company's OpenScape development environment and its Distributed WebEngine,
WebEngine Client and OpenExtension products.
The Company's objective is to be a leading provider of software which
supports the development and deployment of Web-enabled business applications.
The Company intends to integrate emerging technologies in future OpenScape
product releases and to continually introduce additional OpenExtensions,
specific preconfigured add-on products which enable communications with
proprietary environments. The Company also intends to develop multiple
distribution channels, focusing primarily on the Company's direct sales force,
and its strategic relationships with leading technology companies including
BBN, Baan, Deloitte & Touche/ICS, Hewlett-Packard, Informix, NEC, PeopleSoft
and SAP.
The Company was incorporated in Delaware in January 1994. The Company's
executive offices are located at One Arsenal Marketplace, Watertown, MA 02172
and its telephone number is (617) 923-6500.
THE OFFERING
<TABLE>
<S> <C>
Common Stock
offered by the
Company....... 3,000,000 shares
Common Stock
offered by the
Selling Stock-
holders....... 750,000 shares
Common Stock to
be outstanding
after the of-
fering........ 14,844,890 shares(1)
Proposed Nasdaq
National Mar-
ket symbol.... BATW
Use of pro- For working capital,
ceeds......... repayment of debt and other
general corporate purposes,
including possible
acquisitions.
</TABLE>
3
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 19, 1994
(INCEPTION) TO YEAR ENDED THREE MONTHS
DECEMBER 31, 1994 DECEMBER 31, 1995 ENDED MARCH 31,
----------------- ----------------- ----------------
1995 1996
------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ -- $6,070 $ 416 $ 2,381
Gross profit............ -- 2,669 222 1,118
Operating loss.......... (1,180) (2,621) (290) (8,497)
Net loss................ (1,180) (2,698) (290) (8,515)
Pro forma net loss per
common and common
equivalent share(2).... $(.21) $ (.65)
Pro forma weighted
average number of
common and common
equivalent shares
outstanding(2)......... 12,871 13,141
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(3) ADJUSTED(3)(4)
------- ----------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 4,822 $ 4,792 $43,052
Working capital (deficit).................. (925) (955) 37,305
Total assets............................... 8,939 8,909 47,169
Redeemable preferred stock................. 7,380 -- --
Stockholders' equity (deficit)............. (6,933) 417 38,677
</TABLE>
- --------
(1) Based upon the number of shares of Common Stock outstanding as of May 1,
1996 after giving effect to the conversion of all outstanding shares of
Series C Preferred Stock into 799,994 shares of Common Stock and all
outstanding shares of Series B Preferred Stock into 975,200 shares of
Common Stock, in each case upon the consummation of this offering and, with
respect to the Series B Preferred Stock, assuming an initial public
offering price of $14.00 per share. If the initial public offering price
varies from $14.00 per share, the number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock is subject to adjustment
from a maximum of 1,103,137 shares of Common Stock (in the event that the
initial public offering price is $12.375 per share or less) to a minimum of
888,085 shares of Common Stock (in the event that the initial public
offering price is $15.375 per share or greater). Excludes (i) 3,500,000
shares of Common Stock reserved for issuance pursuant to the Company's
stock option plans, under which options for the purchase of an aggregate of
2,404,133 shares were outstanding as of May 1, 1996, (ii) 150,000 shares of
Common Stock reserved for issuance pursuant to the Company's Employee Stock
Purchase Plan and (iii) 23,333 shares of Common Stock that may be issued
upon the exercise of an outstanding Common Stock purchase warrant. See
"Management--Stock Plans", "Description of Capital Stock--Authorized and
Outstanding Capital Stock", "--Employee Stock Purchase Plan" and "--
Warrant" and Note 6 of Notes to Financial Statements.
(2) See Note 1(k) of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per common and common equivalent share.
(3) Presented on a pro forma basis to give effect to (i) the sale subsequent to
March 31, 1996 of 1,200,000 shares of Series C Preferred Stock and the
receipt of $5,970,000 in net proceeds therefrom, (ii) the repurchase and
retirement subsequent to March 31, 1996 of 800,000 shares of Common Stock
for $6,000,000 and (iii) the automatic conversion of all outstanding shares
of Series B Preferred Stock and Series C Preferred Stock into 1,775,194
shares of Common Stock upon the consummation of this offering. See
"Description of Capital Stock--Authorized and Outstanding Capital Stock".
(4) Adjusted to give effect to the sale of 3,000,000 shares of Common Stock
offered by the Company at an assumed public offering price of $14.00 per
share, after deduction of the estimated underwriting discount and estimated
offering expenses payable by the Company.
4
<PAGE>
RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results could differ
materially from those set forth in the forward-looking statements as a result
of certain of the risk factors set forth below and elsewhere in this
Prospectus. In addition to the other information contained in this Prospectus,
the following factors should be considered carefully in evaluating an
investment in the Common Stock offered by this Prospectus.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT
The Company was founded in January 1994 and introduced its first OpenScape
products on a commercial basis in late December 1995. Most of the Company's
revenues to date have been attributable to consulting and education services.
Accordingly, the Company has only a limited operating history upon which an
evaluation of the Company and its products and prospects can be based. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. To
address these risks, the Company must, among other things, respond to
competitive developments, continue to attract, retain and motivate qualified
management and other employees, continue to upgrade its technologies and
commercialize products and services which incorporate such technologies and
achieve market acceptance for its OpenScape products. There can be no
assurance that the Company will be successful in addressing such risks. The
Company has incurred net losses since inception and expects to continue to
operate at a loss for the foreseeable future. As of March 31, 1996, the
Company had an accumulated deficit of approximately $12,400,000. There can be
no assurance that the Company will achieve or sustain profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company may experience significant fluctuations in future quarterly
operating results that may be caused by many factors, including demand for the
Company's products, introduction, enhancement or announcement of products by
the Company and its competitors, market acceptance of new products, size and
timing of significant orders, budgeting cycles of its customers, mix of
distribution channels, mix of products and services sold, mix of international
and North American revenues, changes in the level of operating expenses,
changes in the Company's sales incentive plans, customer order deferrals in
anticipation of enhancements or new products offered or announced by the
Company or its competitors, and general economic conditions. The Company
believes that a significant portion of its revenues may be derived from a
limited number of large orders, and the timing of such orders and their
fulfillment can be expected to cause material fluctuations in the Company's
operating results, particularly on a quarterly basis. In addition, the Company
intends to continue to expand its direct sales force. The timing of such
expansion and the rate at which new salespeople become productive could also
cause material fluctuations in the Company's quarterly financial condition and
operating results. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance. In
addition, it is typical for software companies to recognize a substantial
portion of their revenues during the last few weeks of each quarter;
therefore, any delays in orders or shipments are likely to result in revenues
not being recognized until the following quarter. The Company's current
expense levels are based in part on its expectations of future revenues and,
as a result, net income for a given period could be disproportionately
affected by any reduction in revenues. There can be no assurance that the
Company will be able to achieve significant revenues, that the level of
revenues in the future will not decrease from past levels or that in some
future quarter the Company's revenues or operating results will not be below
the expectations of stock market securities analysts and investors. In such
event, the
5
<PAGE>
Company's profitability and price of its Common Stock could be materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
RECENT INTRODUCTION OF OPENSCAPE PRODUCTS; PLANNED NEW RELEASES
The Company introduced its first OpenScape products in late December 1995.
Sales of OpenScape products accounted for $488,000, or 20% of total revenues,
in the three months ended March 31, 1996. The Company's future success will
depend in large part on the Company's ability to increase sales of the
OpenScape product line which, in turn, will depend in part on the successful
development, introduction and market acceptance of new releases of OpenScape
products. To date, only a limited number of the Company's customers have
developed and deployed Internet applications using the Company's software. In
June 1996, the Company plans to introduce Version 2.0 of its OpenScape
product, which is expected to provide additional capabilities for the
effective development of Internet applications. The Company anticipates that
its future revenues will depend to a significant degree on the successful
introduction and market acceptance of its OpenScape Version 2.0. In addition,
the Company's future success will depend on its ability to develop new
OpenExtensions that enable applications developed with the Company's products
to integrate with various back-end systems, applications and databases from
vendors such as Baan, Informix, PeopleSoft and SAP. There can be no assurance
that any of the Company's planned products will be successfully introduced or
will achieve market acceptance, and such failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
DEVELOPING MARKET; UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS
The market for the Company's software and services has only recently begun
to develop, is rapidly evolving and is characterized by an increasing number
of market entrants who have introduced, developed or announced products and
services for communication, collaboration and commerce over Intranets and the
Internet. As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty. The industry is evolving and has few
proven products. While the Company believes that its software products offer
significant advantages for communication, collaboration and commerce over
Intranets and the Internet, there can be no assurance that the market for the
Company's products and services will develop, that the Company's products and
services will achieve market acceptance, or that Intranets, the Internet and
related technologies will achieve widespread acceptance by businesses. If the
market for the Company's software and services fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if the
Company's products do not achieve market acceptance, the Company's business,
prospects, financial condition and results of operations will be materially
adversely affected.
DEPENDENCE ON THE INTERNET
Sales of the Company's products will depend to a significant degree upon
development of robust demand for, and the infrastructure necessary to support,
commercial Internet access and traffic. The Internet may not prove to be a
viable commercial marketplace because of inadequate development of the
necessary infrastructure, such as a reliable network backbone or timely
development of complementary products, such as high speed modems. Because
communication, collaboration and commerce over Intranets and the Internet is
new and evolving, it is difficult to predict with any certainty whether the
infrastructure or complementary products necessary to make such applications
commercially viable will develop or, if developed, that there will be
sufficient commercial demand for the use of Intranets and the Internet. In
addition, critical issues concerning the commercial use of the Internet,
including security, reliability, cost, ease-of-use, access, and quality of
service, remain
6
<PAGE>
unresolved and may impact the growth of such use by businesses. Moreover, the
adoption of Intranets and the Internet for communications, collaboration and
commerce may be slowed as a result of enterprises that have already invested
substantial resources in other IT systems being particularly reluctant or slow
to adopt a new strategy or technology. If the infrastructure or complementary
products necessary for widespread business use of Intranets and the Internet
are not developed, or if Intranets or the Internet does not otherwise become
commercially viable, the Company's business, prospects, financial condition
and results of operations will be materially adversely affected.
COMPETITION
The market for Internet-based software and services is new, intensely
competitive and subject to rapid technological change. The Company expects
competition to persist and intensify in the future. Almost all of the
Company's current and potential competitors have significantly greater
financial, technical and marketing resources than the Company. The Company's
competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources
than the Company to the development, promotion and sale of their products.
Also, many current and potential competitors have greater name recognition and
more extensive customer bases that could be leveraged to gain market share to
the Company's detriment.
The Company expects to face additional competition as other established and
emerging companies enter the market for Internet-based solutions and new
products and technologies are introduced. Increased competition could result
in price reductions, fewer customer orders, reduced profitability and loss of
market share, any of which could materially adversely affect the Company's
business, prospects, financial condition and results of operations. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing their ability to deliver products which address the needs
of the Company's prospective customers. Current and potential competitors may
also be more successful than the Company in having their products or
technologies widely accepted. Accordingly, it is possible that new competitors
or alliances among current and new competitors may emerge and rapidly gain
significant market share. Such competition could materially adversely affect
the Company's ability to obtain and retain market acceptance for its products
and services. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and the failure
to do so could have a material adverse effect upon the Company's business,
prospects, financial condition and results of operations. See "Business--
Competition".
NEW PRODUCT DEVELOPMENT
A substantial portion of the Company's future revenues is expected to be
derived from the license of its OpenScape software and the sale of related
services. Accordingly, broad acceptance of the Company's software products and
services by customers is critical to the Company's future success, as is the
Company's ability to design, develop, test and support new software products
and enhancements on a timely basis that meet changing customer needs and
respond to technological developments and emerging industry standards. There
can be no assurance that the Company will be successful in developing and
marketing new software products and enhancements that meet changing customer
needs and respond to such technological changes or evolving industry
standards. In addition, there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products and enhancements, or
that its new products and enhancements will adequately meet the requirements
of the marketplace and achieve market acceptance. If any of the Company's
future enhancements or products experience delays in release dates, or if they
fail to achieve market acceptance, the Company's business, prospects,
financial condition and results of operations could be materially adversely
affected. In addition, the introduction or announcement of new product
offerings or
7
<PAGE>
enhancements by the Company or the Company's competitors may cause customers
to defer or forgo purchases of current versions of the Company's products
which could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. See "Business--
Products" and "--Research and Development".
RISK OF SOFTWARE DEFECTS
Software products as internally complex as the Company's products frequently
contain errors or defects, especially when first introduced or when new
versions or enhancements are released. The Company plans to introduce Version
2.0 of OpenScape in June 1996. There can be no assurance that, despite testing
by the Company, defects and errors will not be found in the Company's current
products, OpenScape Version 2.0, or future products and enhancements,
resulting in loss of revenues or delay in market acceptance, which in turn
could have a material adverse effect upon the Company's business, prospects,
financial condition and results of operations. See "Business--Research and
Development".
RELIANCE ON STRATEGIC RELATIONSHIPS
A key element of the Company's business strategy is to develop relationships
with leading industry organizations in order to increase the Company's market
presence, expand distribution channels and broaden the Company's product line.
The Company believes that its continued success depends in large part on its
ability to develop and maintain such relationships. Many of the Company's
strategic relationships are informal and non-exclusive, and do not require the
other party to sell the Company's products or expend resources toward the
promotion of the Company's products. In addition, these relationships
generally can be terminated by either party at any time. There can be no
assurance that the Company's existing or future strategic partners will not
develop and market products in direct competition with the Company or
otherwise discontinue their relationships with the Company, or that the
Company will be able to successfully develop additional strategic
relationships. The failure of the Company's strategic partners to augment the
sales of the Company's products could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
See "Business--Strategic Alliances".
MANAGEMENT OF GROWTH
The rapid execution necessary for the Company to fully exploit the market
window for its products and services requires an effective planning and
management process. The Company's rapid growth has placed, and is expected to
continue to place, a significant strain on the Company's managerial,
operational and financial resources. The senior members of the Company's
management, including Klaus P. Besier, the Company's Chairman of the Board,
President and Chief Executive Officer, John Burke, the Company's Vice
President of Sales, Carolyn LoGalbo, the Company's Vice President of
Marketing, and Joseph Grattadauria, the Company's Vice President of Support
Services and Quality, have joined the Company during 1996. In addition, most
of the Company's development and engineering staff was only recently hired. To
manage its growth, the Company must continue to implement and improve its
operational and financial systems and to expand, train and manage its employee
base. The Company's future operating results will also depend on its ability
to expand its sales and marketing organizations, implement and manage new
distribution channels, penetrate different and broader markets, and grow its
services and support organizations commensurate with the increasing base of
its installed products. Further strain could also be placed on the Company's
resources should the Company choose to make acquisitions of complementary
businesses, products or technologies. If the Company is unable to plan and
manage its growth effectively, the Company's business, prospects, financial
condition and results of operations could be materially adversely affected.
See "Business--Research and Development" and "-- Employees".
8
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees, most of whom have worked together
for only a short period of time. Given the Company's early stage of
development, the Company is dependent on its ability to retain and motivate
high quality personnel, especially its management and highly skilled
development teams. The loss of the services of Klaus P. Besier, the Company's
Chairman of the Board, President and Chief Executive Officer, or any of its
executive officers or other key employees could have a material adverse effect
on the Company. The Company's future success also depends on its continuing
ability to identify, hire, train and retain other highly qualified technical
and managerial personnel. Competition for such personnel is intense, and there
can be no assurance that the Company will be able to attract, assimilate or
retain other highly qualified technical and managerial personnel in the
future. The inability to attract and retain the necessary technical and
managerial personnel could have a material adverse effect upon the Company's
business, prospects, financial condition and results of operations. See
"Business--Employees" and "Management".
EVOLVING DISTRIBUTION STRATEGY
The Company's distribution strategy includes leveraging its strategic
relationships and expanding its direct sales force. The Company has received
limited commitments to assist in the marketing and sale of its products from
the organizations with which it has established strategic relationships, but
there can be no assurance that any such commitments will lead to sales of such
products. The Company plans to expand its direct sales and support
organization to pursue prospects generated through its strategic relationships
and marketing initiatives. There can be no assurance that such internal
expansion will be successfully completed, that the cost of such expansion will
not exceed the revenues generated, or that the Company's sales and marketing
organization will be able to successfully compete against the significantly
more extensive and well-funded sales and marketing operations of many of the
Company's current or potential competitors. The Company's inability to
effectively manage its internal expansion could have a material adverse effect
on the Company's business, prospects, financial condition and results of
operations.
The Company also expects to augment its direct sales efforts by adding
value-added resellers ("VARs") and independent software vendors ("ISVs"). The
Company expects that any material increase in sales through VARs and ISVs as a
percentage of total revenues, especially in the percentage of sales through
VARs, will adversely affect the Company's average selling prices and gross
margins due to the lower unit prices that are typically received by the vendor
when selling through indirect channels. Agreements with VARs and ISVs
typically do not restrict VARs and ISVs from distributing competing products,
and in many cases may be terminated by either party without cause. The
Company's inability to recruit, manage or retain qualified VARs and ISVs, or
their inability to penetrate their respective market segments, could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Business--Sales and Marketing".
PROPRIETARY TECHNOLOGY; INTELLECTUAL PROPERTY
The Company's success and ability to compete is dependent in part upon its
proprietary technology. While the Company relies on a combination of
trademark, copyright and trade secret laws, employee and third-party
nondisclosure agreements and other methods to protect its technology, the
Company believes that factors such as the skills of its development personnel
are more essential to establishing and maintaining a technology leadership
position. The Company presently has no patents or patent applications pending.
There can be no assurance that competitors will not develop technologies that
are similar or superior to the Company's technology. The Company generally
enters into confidentiality or license agreements with its employees and
consultants, and generally controls access to and distribution of its source
code and other proprietary information. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's
products or technology without authorization, or to develop similar technology
independently. In
9
<PAGE>
addition, effective copyright and trade secret protection may be unavailable
or limited in certain foreign countries, and the global nature of the Internet
makes it virtually impossible to control the ultimate destination of the
Company's products. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that such agreements will be
enforceable. In addition, litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
DEPENDENCE ON THIRD-PARTY TECHNOLOGY
Certain of the Company's products contain software that is licensed to the
Company by third parties. There can be no assurance that these third-party
software licenses will continue to be available to the Company on commercially
reasonable terms. For example, certain technology incorporated in the
Company's software, including InterGroup Technologies, Inc.'s VisualWare for
Windows and Mystic River Software, Inc.'s Softbridge Basic Language, is
licensed from third parties on a nonexclusive basis. The termination of any of
such licenses, or the failure of the third-party licensors to adequately
maintain or update their products, could result in significant delay in the
Company's ability to ship certain of its products while it seeks to implement
technology offered by alternative sources. In addition, any required
replacement licenses could prove more costly than the Company's current
license relationships and might not provide technology as powerful and
functional as the third-party technology currently licensed by the Company.
Also, any such delay could have a material adverse effect on the Company's
results of operations for that quarter. While it may be necessary or desirable
in the future to obtain other licenses relating to one or more of the
Company's products or relating to current or future technologies, there can be
no assurance that the Company will be able to do so on commercially reasonable
terms or at all. The loss of, or inability to maintain, any such software
could result in shipment delays or reductions until equivalent software could
be developed, identified, licensed and integrated which could materially
adversely affect the Company's business, prospects, financial condition and
results of operations. See "Business--Strategic Alliances" and "--Proprietary
Rights".
PRODUCT LIABILITY
The Company markets its products and services to customers for the
development, deployment and management of critical business applications. The
Company's license agreements with its customers typically contain provisions
designed to limit the Company's exposure to potential product liability
claims. The Company may not, however, always be able to obtain adequate
contractual limitations on liability from its customers and end users and, in
any event, such provisions may not be effective as a result of existing or
future federal, state or local laws or ordinances or unfavorable judicial
decisions. Although the Company has not experienced any material product
liability claims to date, the sale and support of the Company's products may
entail the risk of such claims, which could be significant. A successful
product liability claim brought against the Company could have a material
adverse effect upon the Company's business, prospects, financial condition and
results of operations.
RISKS ASSOCIATED WITH GLOBAL OPERATIONS
Since its inception, the Company has derived less than 17% of its total
revenues in each year from sales to customers outside of the United States.
The Company intends to expand its operations outside of the United States and
enter additional international markets, which will require significant
10
<PAGE>
management attention and financial resources. The Company's ability to expand
the acceptance and use of its core technologies internationally is limited by
the general acceptance of the Internet and Intranets in other countries. The
Company expects to commit additional time and development resources to
customizing its products for selected international markets and developing
international sales and support channels. There can be no assurance that such
efforts will be successful. In addition, as the Company increases its
international sales, its total revenues may also be affected to a greater
extent by seasonal fluctuations resulting from lower sales that typically
occur during the summer months in Europe and other parts of the world. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". In addition, the use of encryption technologies in the Company's
products could subject such products to export and/or import restrictions. Any
such export or import limitations could have a material adverse effect on the
ability to sell the Company's products outside the United States.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any
governmental agency, other than regulations applicable to business generally,
and there are currently few laws or regulations directly applicable to access
to or commerce on the Internet. Due to the increasing popularity and use of
the Internet, however, it is possible that a number of laws and regulations
may be adopted with respect to the Internet, covering issues such as user
privacy, pricing and characteristics and quality of products and services. The
adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the demand for the Company's products
and increase the Company's cost of doing business or otherwise have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. Moreover, the applicability to the Internet of existing
laws governing issues such as property ownership, libel and personal privacy
is uncertain.
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, the present directors, executive officers,
holders of 5% or more of the Common Stock, and their respective affiliates
will beneficially own approximately 66% of the outstanding Common Stock
assuming no exercise of the Underwriters' over-allotment option and 63% of the
outstanding Common Stock assuming full exercise of the Underwriters' over-
allotment option. As a result, these stockholders will be able to exercise
significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such concentration of ownership may also have the effect of
delaying or preventing a change in control of the Company. See "Principal and
Selling Stockholders" and "Description of Capital Stock--Delaware Law and
Certain Charter Provisions".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for
the Common Stock will develop or be sustained after the offering. The initial
offering price was determined by negotiation between the Company and the
Underwriters based upon several factors. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price.
The market price of the Company's Common Stock is likely to be highly volatile
and could be subject to wide fluctuations in response to quarterly variations
in operating results, announcements of technological innovations or new
products by the Company or its competitors, changes in financial estimates by
securities analysts, or other events or factors. In addition, the stock market
has experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that have been unrelated to the operating performance
of such companies. In the past, following periods of volatility in the market
price of a company's securities, securities class
11
<PAGE>
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, prospects, financial condition and results of operations.
These broad market fluctuations may adversely affect the market price of the
Company's Common Stock. See "Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price for the Common
Stock. See "Description of Capital Stock" and "Shares Eligible for Future
Sale".
EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS OF RESTATED
CERTIFICATE OF INCORPORATION, RESTATED BY-LAWS AND DELAWARE LAW
The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue shares of Preferred Stock. Further, certain provisions of the Company's
Restated Certificate of Incorporation, including provisions that create a
classified board of directors, and of the Company's Restated By-laws and of
Delaware law could delay or make difficult a merger, tender offer or proxy
contest involving the Company. See "Management--Executive Officers and
Directors", "Description of Capital Stock--Preferred Stock" and "--Delaware
Law and Certain Charter Provisions".
DILUTION
Investors in this offering will incur immediate, substantial dilution. To
the extent outstanding options to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution".
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock being offered by the Company in this offering are estimated to be
$38,260,000 ($45,583,750 if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $14.00, and
after the deduction of the estimated underwriting discount and estimated
offering expenses payable by the Company. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders. See
"Principal and Selling Stockholders".
The principal purposes of this offering are to increase the Company's equity
capital, to create a public market for the Company's Common Stock, to
facilitate future access by the Company to public equity markets, to provide
liquidity to existing stockholders, to provide increased visibility and
credibility in a marketplace where many of its current and potential
competitors are or will be publicly held companies, and to enhance the ability
of the Company to use its Common Stock as consideration for acquisitions and
as a means of attracting and retaining key employees.
The Company intends to use a portion of the net proceeds for the repayment
of a $2,000,000 principal amount term loan from State Street Bank and Trust
Company which matures in September 1996. The term loan bears interest at the
bank's prime rate plus 1% and the proceeds thereof were used to fund the
license fees due under a certain source code license agreement.
The remainder of the net proceeds will be used for working capital and other
general corporate purposes. The amount actually expended by the Company for
working capital purposes will vary significantly depending upon a number of
factors, including future revenue growth, the amount of cash generated by the
Company's operations and the progress of the Company's product development
efforts. The Company may also use a portion of the net proceeds to fund
possible acquisitions of, or investments in, businesses, products and
technologies that are complementary to those of the Company. The Company has
no specific agreements, commitments or understandings with respect to any such
acquisitions or investments. Pending such uses, the Company intends to invest
the net proceeds of this offering in investment-grade, interest bearing
instruments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources".
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company currently intends to retain all of its earnings to finance future
growth and therefore does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. The Company is prohibited by its term
loan agreement from paying cash dividends.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996: (i) on an actual basis, (ii) on a pro forma basis as described in
Note 2 below and (iii) on a pro forma basis, as adjusted to give effect to the
sale of 3,000,000 shares of Common Stock offered by the Company at an assumed
initial public offering price of $14.00 per share. See "Use of Proceeds". The
capitalization information set forth in the table below is qualified by the
more detailed Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996(1)
----------------------------------
PRO PRO FORMA
ACTUAL FORMA(2) AS ADJUSTED(2)
-------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt............................. $ 2,000 $ 2,000 $ 2,000
======== ======== ========
Series B Redeemable Convertible Preferred
Stock, $1.00 par value; 1,332,127 shares
authorized, issued or outstanding (actual);
no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)...... 7,380 -- --
Stockholders' equity (deficit)(3):
Series C Convertible Preferred Stock, $1.00
par value; 1,220,000 shares authorized, no
shares issued or outstanding (actual); no
shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)...... -- -- --
Preferred Stock, $1.00 par value;
447,873 shares authorized, no shares issued
or outstanding (actual); 5,000,000 shares
authorized, no shares issued or outstanding
(pro forma and pro forma as adjusted)...... -- -- --
Common Stock, $.001 par value;
30,000,000 shares authorized, 10,803,030
shares
issued and outstanding (actual); 50,000,000
shares
authorized, 11,778,224 and 14,778,224
shares issued and outstanding (pro forma
and pro forma as adjusted)(3).............. 11 12 15
Additional paid-in capital.................. 8,145 15,494 53,751
Note receivable from executive officer...... (2,560) (2,560) (2,560)
Deferred compensation....................... (135) (135) (135)
Accumulated deficit......................... (12,394) (12,394) (12,394)
-------- -------- --------
Total stockholders' equity (deficit)........ (6,933) 417 38,677
-------- -------- --------
Total capitalization........................ $ 447 $ 417 $ 38,677
======== ======== ========
</TABLE>
- --------
(1) The Company's Board of Directors and stockholders have approved the
amendment and restatement of the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock and Preferred
Stock to 50,000,000 and 5,000,000 shares, respectively. See "Description
of Capital Stock" and Note 6 of Notes to Financial Statements.
(2) Presented on a pro forma basis to give effect to (i) the sale subsequent
to March 31, 1996 of 1,200,000 shares of Series C Preferred Stock and the
receipt of $5,970,000 in net proceeds therefrom, (ii) the repurchase and
retirement subsequent to March 31, 1996 of 800,000 shares of Common Stock
for $6,000,000 and (iii) the automatic conversion of all outstanding
shares of Series C Preferred Stock into 799,994 shares of Common Stock and
all outstanding shares of Series B Preferred Stock into 975,200 shares of
Common Stock, in each case upon the consummation of this offering and,
with respect to the Series B Preferred Stock, assuming an initial public
offering price of $14.00 per share. If the initial public offering price
varies from $14.00 per share, the number of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock is subject to
adjustment from a maximum of 1,103,137 shares of Common Stock (in the
event that the initial public offering price is $12.375 per share or less)
to a minimum of 888,085 shares of Common Stock (in the event that the
initial public offering price is $15.375 per share or greater). See
"Description of Capital Stock--Authorized and Outstanding Capital Stock"
and "Statement of Redeemable Convertible Stock and Stockholders' Equity
(Deficit)" contained on page F-5 of the Financial Statements.
(3) Excludes (i) 3,500,000 shares of Common Stock reserved for issuance
pursuant to the Company's stock option plans, under which options for the
purchase of an aggregate of 2,404,133 shares were outstanding as of May 1,
1996, (ii) 150,000 shares of Common Stock reserved for issuance pursuant
to the Company's Employee Stock Purchase Plan and (iii) 23,333 shares of
Common Stock that may be issued upon the conversion of an outstanding
common stock warrant. See "Management--Stock Plans" and "--Employee Stock
Purchase Plan", "Description of Capital Stock--Warrant" and Note 6 of
Notes to Financial Statements.
14
<PAGE>
DILUTION
As of March 31, 1996, the Company had a pro forma net tangible book value of
approximately $417,000 or $.04 per share of Common Stock. Pro forma net
tangible book value per share represents the Company's total tangible assets
less its total liabilities, divided by the aggregate pro forma number of
shares of Common Stock outstanding (after giving effect to the conversion of
the outstanding shares of Series C Stock and Series B Preferred Stock into
1,775,194 shares of Common Stock as described in Note 1 below, and the
repurchase of 800,000 shares of Common Stock by the Company). After giving
effect to the sale of the 3,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $14.00 per share
and after deducting the estimated underwriting discount and estimated offering
expenses payable by the Company, the pro forma net tangible book value at
March 31, 1996 would have been approximately $38,677,000 or $2.62 per share of
Common Stock. This represents an immediate increase in pro forma net tangible
book value per share of $2.58 to existing stockholders and an immediate
dilution of $11.38 per share to the investors purchasing the shares of Common
Stock offered hereby. The following table illustrates such dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $14.00
Pro forma net tangible book value per share as of March 31,
1996........................................................ $ .04
Increase per share attributable to this offering............. 2.58
Pro forma net tangible book value per share after this offer-
ing.......................................................... 2.62
------
Dilution per share to new investors........................... $11.38
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the total number of shares of Common Stock purchased from the Company, the
total consideration paid, and the average price per share paid, by existing
stockholders and by new investors, based (for new investors) upon an assumed
initial public offering price of $14.00 per share (before deducting the
estimated underwriting discount and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockhold-
ers(2)(3) 11,778,224 79.7% $14,440,784 25.6% $ 1.23
New investors(3)........ 3,000,000 20.3 42,000,000 74.4 14.00
---------- ----- ----------- -----
Total................... 14,778,224 100.0% $56,440,784 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) All outstanding shares of Series C Preferred Stock convert into 799,994
shares of Common Stock and all outstanding shares of Series B Preferred
Stock convert into 975,200 shares of Common Stock, in each case upon the
consummation of this offering and, with respect to the Series B Preferred
Stock, assuming an initial public offering of $14.00 per share. If the
initial public offering price varies from $14.00 per share, the number of
shares of Common Stock issuable upon conversion of the Series B Preferred
Stock is subject to adjustment from a maximum of 1,103,137 shares of
Common Stock (in the event that the initial public offering price is
$12.375 per share or less) to a minimum of 888,085 shares of Common Stock
(in the event that the initial public offering price is $15.375 per share
or greater). See "Description of Capital Stock--Authorized and Outstanding
Capital Stock".
(2) Does not includes an aggregate of 3,673,333 shares reserved for issuance
under the Company's stock option plans, the Company's Employee Stock
Purchase Plan and upon exercise of an outstanding Common Stock warrant.
See "Management--Stock Plans" and "Description of Capital Stock--Warrant".
(3) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders to 11,028,224, or 74.6% (71.9% if
the over-allotment option is exercised in full) of the total shares
outstanding after this offering, and will increase the number of shares
held by new investors to 3,750,000, or 25.4% of the total number of shares
of Common Stock outstanding after this offering (4,312,500 or 28.1% of the
total number of shares of Common Stock after this offering if the over-
allotment option is exercised in full).
15
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of the Company, including the Notes
thereto, included elsewhere in this Prospectus. The statement of operations
data set forth below for the period from inception (January 19, 1994) to
December 31, 1994, and for the fiscal year ended December 31, 1995 and the
balance sheet data as of December 31, 1994 and 1995 are derived from the
Company's audited financial statements which have been audited by Arthur
Andersen LLP, independent public accountants, and which are included elsewhere
in this Prospectus. The statement of operations data for the three months
ended March 31, 1995 and 1996 and the balance sheet data as of March 31, 1996
are derived from unaudited financial statements of the Company and include, in
the opinion of the Company, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the Company's
results of operations for those periods. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results to
be expected for the year ending December 31, 1996. The historical results are
not necessarily indicative of the results of operations to be expected in the
future.
<TABLE>
<CAPTION>
JANUARY 19, 1994 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, -------------------
1994 1995 1995 1996
---------------- ------------ --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license and main-
tenance................... $ -- $ 2,151 $ 43 $ 710
Consulting and education
services.................. -- 3,919 373 1,671
------- ------- ------- -------
Total revenues........... -- 6,070 416 2,381
Cost of Revenues:
Software license and main-
tenance................... -- 717 22 289
Consulting and education
services.................. -- 2,684 172 974
------- ------- ------- -------
Total cost of revenues... -- 3,401 194 1,263
Gross profit............. -- 2,669 222 1,118
Operating Expenses:
Selling, general and admin-
istrative................. 286 2,108 337 1,701
Research and development... 894 3,182 175 399
Compensation to executive
officer................... -- -- -- 7,515
------- ------- ------- -------
Total operating ex-
penses.................. 1,180 5,290 512 9,615
------- ------- ------- -------
Operating loss........... (1,180) (2,621) (290) (8,497)
Interest Expense, net........ -- (77) -- (18)
------- ------- ------- -------
Net loss................. $(1,180) $(2,698) $ (290) $(8,515)
======= ======= ======= =======
Pro forma net loss per common
and common equivalent
share(1).................... $ (.21) $ (.65)
Pro forma weighted average
number of common and common
equivalent shares
outstanding(1).............. 12,871 13,141
<CAPTION>
DECEMBER 31, PRO FORMA
----------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996(2)
---------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $ -- $ 105 $ 4,822 $ 4,792
Working capital (deficit).... (932) (1,967) (925) (955)
Total assets................. 63 2,626 8,939 8,909
Redeemable convertible pre-
ferred stock................ -- -- 7,380 --
Stockholders' equity (defi-
cit)........................ (868) (2,804) (6,933) 417
</TABLE>
- -------
(1) See Note 1(k) of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per common and common equivalent share.
(2) Presented on a pro forma basis to give effect to (i) the sale subsequent
to March 31, 1996 of 1,200,000 shares of Series C Preferred Stock and the
receipt of $5,970,000 in net proceeds therefrom, (ii) the repurchase and
retirement subsequent to March 31, 1996 of 800,000 shares of Common Stock
for $6,000,000 and (iii) the automatic conversion of all outstanding
shares of Series C Convertible Preferred Stock into 799,994 shares of
Common Stock and all outstanding shares of Series B Preferred Stock into
975,200 shares of Common Stock, in each case upon the consummation of this
offering and, with respect to the Series B Preferred Stock, assuming an
initial public offering price of $14.00 per share. If the initial public
offering price varies from $14.00 per share, the number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock is
subject to adjustment from a maximum of 1,103,137 shares of Common Stock
(in the event that the initial public offering price is $12.375 per share
or less) to a minimum of 888,085 shares of Common Stock (in the event that
the initial public offering price is $15.375 per share or greater). See
"Description of Capital Stock--Authorized and Outstanding Capital Stock".
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in Delaware in January 1994 (under the name
Object Power, Incorporated) and changed its name to Business@Web, Inc. in
February 1996. In 1994, the Company focused on research and development and
did not generate revenues. In 1995, the Company began generating revenues
through the reselling of software licenses of a related party and associated
maintenance and providing consulting and education services. These revenues
contributed to the funding of increased research and development and the
creation of market awareness for its OpenScape product line. The Company began
shipping OpenScape products in late December 1995. Total revenues from the
sale of OpenScape products in 1995 were $609,000, which included a sale to
Hewlett-Packard of $490,000, or 80% of total 1995 OpenScape revenues. For the
three months ended March 31, 1996, the Company generated total revenues of
$2,381,000, of which $710,000, or 30%, were software license and maintenance
revenues and $1,671,000, or 70%, were consulting and education services
revenues. The OpenScape product line accounted for 69% of total software
license and maintenance revenues for the three months ended March 31, 1996,
with the remaining software license and maintenance revenues generated through
reselling related party software licenses and maintenance. In June 1996, the
Company plans to introduce Version 2.0 of its OpenScape product, which is
expected to provide additional capabilities for the effective development of
Internet applications. As a result, the Company anticipates that its future
revenues will depend to a significant degree on successful introduction and
market acceptance of OpenScape Version 2.0.
In 1996, the Company intends to increase its research and development
expenses and selling, general and administrative expenses. The Company's
expected levels of research and development expenditures are based on a plan
for current product enhancements and new product development. Selling and
marketing expenses are expected to increase significantly as a result of
continued expansion of distribution channels, strategic relationships,
headcount, and marketing programs. Increases in general and administrative
expenses are planned as the Company expands its executive management, finance
and administration support, information systems and other administrative
functions required to support the Company's operations.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company and its prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets and technologies. To address
these risks, the Company must, among other things, respond to competitive
developments, continue to attract, retain and motivate qualified management
and other employees, continue to upgrade its technologies and commercialize
products and services which incorporate such technologies, and achieve market
acceptance for its OpenScape products. There can be no assurance that the
Company will be successful in addressing such risks. The Company has achieved
only limited revenues to date and its ability to generate significant revenues
is subject to substantial uncertainty. The limited operating history of the
Company makes the prediction of future results of operations difficult or
impossible, and therefore, there can be no assurance that the Company will
sustain revenue growth or achieve profitability. The Company has incurred net
losses since inception and expects to continue to incur losses on a quarterly
and annual basis for the foreseeable future. Due to all of the foregoing
factors, it is possible that in some future quarter, the Company's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock may be materially
adversely affected.
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a percentage of
total revenues for the year ended December 31, 1995 and the three months ended
March 31, 1995 and 1996. The table does not set forth such operational data as
a percentage of total revenues for the period from inception
17
<PAGE>
to December 31, 1994, as the Company did not generate revenues in such period
and therefore such information is not meaningful.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -------------------
1995 1995 1996
------------ ------- --------
<S> <C> <C> <C>
Revenues:
Software license and maintenance........... 35% 10% 30%
Consulting and education services.......... 65 90 70
--- ------- --------
Total revenues........................... 100 100 100
Cost of Revenues:
Software license and maintenance........... 12 5 12
Consulting and education services.......... 44 41 41
--- ------- --------
Total cost of revenues................... 56 47 53
Gross profit............................. 44 53 47
Operating Expenses:
Selling, general and administrative........ 35 81 71
Research and development................... 52 42 17
Compensation to executive officer.......... -- -- 316
--- ------- --------
Total operating expenses................. 87 123 404
--- ------- --------
Operating loss........................... (43) (70) (357)
Interest Expense, net........................ 1 -- 1
--- ------- --------
Net loss................................. (44)% (70)% (358)%
=== ======= ========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
REVENUES. Total revenues increased $1,965,000 to $2,381,000, for the three
months ended March 31, 1996 from $416,000 for the comparable quarter in 1995.
The increase was due primarily to the introduction and expansion of the
Company's product offerings, including consulting and education services,
related party software licenses and the OpenScape product line. For the three
months ended March 31, 1996, revenues consisted of 30% from software license
and maintenance revenues and 70% from consulting and education services
revenues compared with 10% and 90%, respectively, for the comparable period
for the prior year. For the three months ended March 31, 1996, OpenScape
software license and maintenance revenues were $488,000, representing 69% of
software license and maintenance revenues and 20% of total revenues. For the
three months ended March 31, 1995, the Company's software license and
maintenance revenues consisted solely of sales of software licenses of a
related party and associated maintenance. The Company has achieved only
limited revenues from OpenScape products and there can be no assurance that
the Company will sustain revenue growth or market acceptance for these or
other products which it markets.
COST OF REVENUES. Cost of software license and maintenance revenues consists
of the cost of software and maintenance purchased for resale from a related
party, distribution costs and support personnel costs. The cost of consulting
and education services consists primarily of consulting and support personnel
salaries, related costs and fees to third-party service providers. Total cost
of revenues increased $1,069,000 to $1,263,000 for the three months ended
March 31, 1996 from $194,000 for the comparable prior period. Total cost of
revenues as a percentage of total revenues was 47% and 53% for the three
months ended March 31, 1995 and 1996, respectively. The cost of revenues as a
percentage of associated software license and maintenance revenues for the
three months ended March 31, 1996 and 1995 were 41% and 52%, respectively. The
cost of software license and maintenance revenues as a percentage of
associated revenues has decreased due to an increase in revenues derived from
the sale of the Company's OpenScape products, which have a lower cost of
revenues than the resale of related party software licenses and maintenance.
The cost
18
<PAGE>
of revenues as a percentage of associated consulting and education services
revenues for the three months ended March 31, 1996 and 1995 were 58% and 46%,
respectively. The cost of consulting and education services revenues increased
as a percentage of associated revenues due to the greater costs associated
with consulting services, which the Company commenced offering in the third
quarter of 1995. Consulting service revenues generally have a higher cost of
associated revenue as compared with education service revenues. The Company
believes that cost of revenues comparisons are not meaningful or
representative of future results. In future periods, cost of revenues may be
affected by several factors, including distribution channels, price
reductions, competition, increases in cost of revenues, changes in product mix
and other factors.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist of payroll costs related to executive
management, finance, administration, sales and marketing personnel, and costs
for advertising, marketing and related administrative support. Selling,
general and administrative expenses increased to $1,701,000 for the three
months ended March 31, 1996 from $337,000 for the comparable prior period,
representing 71% and 81% of total revenues, respectively. The total dollar
increase reflects the Company's increased sales, marketing and distribution
efforts through increased headcount and related staffing expenditures. The
Company expects such total dollar increases to continue throughout 1996 and
future periods.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
primarily consist of payroll-related costs, fees to independent contractors
and purchases of technology. To date, the Company has expensed all software
development costs as incurred. Research and development expenses increased to
$399,000 for the three months ended March 31, 1996 from $175,000 for the
comparable prior period, representing 17% and 42% of total revenues,
respectively. The total dollar increase is attributable to increased headcount
and related costs which reflect the Company's efforts to enhance the
functionality of its products. The Company believes that it will be necessary
to make continued significant expenditures on research and development to
remain competitive.
COMPENSATION TO EXECUTIVE OFFICER. During the three months ended March 31,
1996, certain of the Company's controlling stockholders sold 960,000 shares of
Common Stock to Klaus Besier for an aggregate purchase price of $1,440,000,
and agreed to make certain payments to Mr. Besier to secure his services as
the Company's Chief Executive Officer. In accordance with generally accepted
accounting principles, the Company recorded a non-cash expense of $7,515,000
relating to these transactions. This non-cash expense consists of: (i)
$5,760,000, which represents the difference between the purchase price paid by
Mr. Besier for the shares of Common Stock that he purchased and the fair
market value of those shares at that time; (ii) $1,000,000, relating to a
payment received by Mr. Besier from one of the Company's controlling
stockholders; and (iii) $755,000, representing the value of a payment that
such stockholder agreed to make to Mr. Besier in the event of a decline in the
value of certain stock appreciation rights held by Mr. Besier on capital stock
of his former employer. In the event of fluctuations in the value of these
stock appreciation rights, the Company may record additional non-cash charges
or credits, which could be significant, through September 30, 1996. See Note
10 of Notes to the Financial Statements.
INTEREST EXPENSE, NET. For the three months ended March 31, 1996, the
Company recorded net interest expense of $18,000. This expense is comprised of
interest on the Company's $1,000,000 notes payable to stockholders and
$2,000,000 advance under its secured term note with a bank, offset by interest
income of approximately $16,000 on the Company's cash and cash equivalents.
The Company did not have any outstanding debt for the comparable period in the
prior year. In March 1996, the outstanding notes payable to stockholders were
repaid in full.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE PERIOD FROM INCEPTION
(JANUARY 19, 1994) TO DECEMBER 31, 1994
REVENUES. In 1994, the Company focused on research and development and did
not generate revenues. In 1995, the Company began generating revenues through
the reselling of related-party
19
<PAGE>
software licenses and associated maintenance and providing consulting and
education services. These revenues contributed to the funding of increased
research and development and creation of market awareness for its OpenScape
product line. The Company began shipping OpenScape in late December 1995.
Total revenues in 1995 were $6,070,000, of which 35%, or $2,151,000, were
software license and maintenance revenues and 65%, or $3,919,000, were
consulting and education services revenues. Software license revenues includes
$500,000 from a non-recurring sale of source code for an application unrelated
to the OpenScape product line to a related party. See "Certain Transactions"
and Note 7 of Notes to Financial Statements. In 1995, OpenScape software
license and maintenance revenues were $609,000, which represented 28% of total
software license and maintenance revenues for the year. Total 1995 OpenScape
revenues included a sale to Hewlett-Packard of $490,000, or 80% of total 1995
OpenScape revenues. The Company has achieved only limited revenues from
OpenScape products and there can be no assurance that the Company will sustain
revenue growth or market acceptance for these or other products which it
markets.
COST OF REVENUES. The Company did not generate revenues in 1994 and
therefore did not incur cost of revenues in this period. Total cost of
revenues as a percentage of total revenues was 56% in 1995. Total software
license and maintenance costs and consulting and education services costs as a
percentage of associated revenues were 33% and 68%, respectively, in 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $2,108,000 in 1995 from $286,000 for the
prior year. Selling, general and administrative expenses represented 35% of
total revenues in 1995. The total dollar increase in selling, general and
administrative expenses reflected the Company's increased sales, marketing and
distribution efforts from increased headcount and related staffing. The
Company expects such total dollar increases to continue throughout 1996 and
future periods.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $3,182,000 in 1995 from $894,000 for the prior year. Research and
development expenses represented 52% of total revenues in 1995. To date, the
Company has expensed all software development costs as incurred. Research and
development expenses in 1994 included $350,000 relating to the purchase of
technology rights and $373,000 for independent contractors. The total dollar
increase is attributable to increased headcount and related costs which
reflect the Company's efforts to enhance the functionality of products. During
1995, the Company recorded non-recurring expenses of $2,550,000 for purchases
of technology rights to incorporate in its OpenScape products. See Note 1 of
Notes to Financial Statements.
INTEREST EXPENSE, NET. For the year ended December 31, 1995, the Company
recorded net interest expense of $77,000. This expense is comprised of
interest on the Company's $1,000,000 debt to stockholders. The Company did not
have any outstanding debt for the period from inception to December 31, 1994.
20
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth statement of operations data for each of the
five quarters in the period ended March 31, 1996, as well as the percentage of
the Company's total revenues represented by each item. This unaudited
quarterly information has been prepared on the same basis as the audited
financial statements appearing elsewhere in this Prospectus and in the opinion
of management, all necessary adjustments (consisting only of normal recurring
adjustments) have been included to present fairly the unaudited quarterly
results when read in conjunction with the Company's audited financial
statements and the notes thereto appearing elsewhere in this Prospectus. The
operating results for any quarter are not necessarily indicative of the
results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
DEC.
MARCH 31, JUNE 30, SEPT. 30, 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- --------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues:
Software license and main-
tenance................... $ 43 $ -- $ 400 $ 1,708 $ 710
Consulting and education
services.................. 373 598 1,629 1,319 1,671
----- ----- ------ ------- -------
Total revenues........... 416 598 2,029 3,027 2,381
Cost of Revenues:
Software license and main-
tenance................... 22 -- 208 487 289
Consulting and education
services.................. 172 407 1,170 935 974
----- ----- ------ ------- -------
Total cost of revenues... 194 407 1,378 1,422 1,263
Gross profit............. 222 191 651 1,605 1,118
Operating Expenses:
Selling, general and admin-
istrative................. 337 313 440 1,018 1,701
Research and development... 175 139 331 2,537 399
Compensation to executive
officer................... -- -- -- -- 7,515
----- ----- ------ ------- -------
Total operating ex-
penses.................. 512 452 771 3,555 9,615
Operating loss........... (290) (261) (120) (1,950) (8,497)
Interest Expense, net........ -- 17 20 40 18
----- ----- ------ ------- -------
Net loss................. $(290) $(278) $ (140) $(1,990) $(8,515)
===== ===== ====== ======= =======
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues:
Software license and main-
tenance................... 10% -- % 20% 56% 30%
Consulting and education
services.................. 90 100 80 44 70
----- ----- ------ ------- -------
Total revenues........... 100 100 100 100 100
Cost of Revenues:
Software license and main-
tenance................... 5 -- 10 16 12
Consulting and education
services.................. 41 68 58 31 41
----- ----- ------ ------- -------
Total cost of revenues... 47 68 68 47 53
Gross profit............. 53 32 32 53 47
Operating Expenses:
Selling, general and admin-
istrative................. 81 52 22 34 71
Research and development... 42 23 16 84 17
Compensation to executive
officer................... -- -- -- -- 316
----- ----- ------ ------- -------
Total operating ex-
penses.................. 123 76 38 117 404
Operating loss........... (70) (44) (6) (64) (357)
Interest Expense, net........ -- 3 1 1 1
----- ----- ------ ------- -------
Net loss................. (70)% (46)% (7)% (66)% (358)%
===== ===== ====== ======= =======
</TABLE>
Software license and maintenance revenues and consulting and education
services revenues commenced in the three months ended March 31, 1995, and
increased significantly in the second half
21
<PAGE>
of 1995. Software license and maintenance revenues increased in the three
months ended December 31, 1995 as a result of the $500,000 non-recurring sale
of source code for an application unrelated to the OpenScape product line to a
related party; the $490,000 license of OpenScape to Hewlett-Packard; and
increased revenues from the resale of software licenses from a related party
and associated maintenance. Software license and maintenance revenues for the
three months ended March 31, 1996 decreased from the prior three month period
due to the $500,000 nonrecurring sale in the prior three month period, and a
decrease in revenues from resale activities, partially offset by an increase
in OpenScape software license revenues. Consulting and education services
revenues increased significantly in the three months ended September 30, 1995
primarily as a result of increased consulting activities and to a lesser
extent an increase in education services. Consulting and education services
revenues decreased in the three months ended December 31, 1995 and increased
in the three months ended March 31, 1996, primarily due to seasonal
fluctuations in education service activities, while consulting activities
remained relatively stable. Operating expenses increased in the second half of
1995 primarily due to the increase in personnel and the purchase of technology
in the three months ended December 31, 1995.
The Company may experience significant fluctuations in future quarterly
operating results that may be caused by many factors including, among others,
the timing or introduction of, or enhancement to, the Company's products or
services, the demand for the Company's products or services, the distribution
of the Company's products and services, the timing of introduction of products
or services by the Company's competition, the mix of products and services
that the Company provides, the rate of market acceptance of Internet
technology, the timing and rate at which the Company increases its expenses to
support projected growth, competitive conditions in the industry and general
economic conditions. The Company believes that period-to-period comparisons of
its operating results are not meaningful and should not be relied upon as any
indication of future performance. Due to the foregoing factors, among others,
it is possible that the Company's future quarterly operating results from time
to time will not meet the expectations of market analysts or investors, which
may have an adverse effect on the price of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its cash requirements principally
through the sale of its equity securities, borrowings from its stockholders
and bank borrowings. From inception through March 31, 1996, the Company had
raised net proceeds of approximately $7,842,000 from the private sale of
equity securities, including approximately $6,780,000 in the three months
ended March 31, 1996. The Company, as of March 31, 1996, had cash and cash
equivalents of $4,822,000 and a working capital deficit of $925,000. In April
1996, the Company issued 1,200,000 shares of Series C Preferred Stock at a
price of $5.00 per share for net proceeds of $5,970,000 and repurchased and
retired 800,000 shares of outstanding Common Stock at $7.50 per share. In
addition, in April 1996, the Company received $100,000 upon the exercise of an
option to purchase 66,666 shares of Common Stock at $1.50 per share.
In February 1996, the Company entered into a financing agreement with a
bank. The agreement provides for a revolving line of credit, an equipment line
of credit and a secured term note. As of May 1, 1996, the Company had no
outstanding balances under the revolving line of credit or the equipment line
of credit. Borrowings under the revolving line of credit are limited to the
lesser of $2,500,000 or 80% of qualified accounts receivable and bear interest
at either the bank's prime rate plus 1% or LIBOR. Borrowings under the
equipment line are limited to $500,000 for the purchase of new equipment.
Advances under the equipment line of credit will be repaid over a three-year
period. Borrowings under the equipment line bear interest at either the bank's
cost of funds plus 3 1/2% or the bank's prime rate plus 1 1/2%. In March 1996,
the Company borrowed the $2,000,000 under the secured term note, which was
used to pay for source code technology purchased from a related party. The
secured term note is repayable on September 30, 1996. Borrowings under the
secured term note bear interest at the bank's prime rate plus 1%. The
revolving line of credit and equipment line of credit
22
<PAGE>
expire on June 30, 1997. The financing agreement contains certain restrictive
covenants regarding, among other items, minimum levels of tangible net worth.
The agreement is collateralized by all assets of the Company and is guaranteed
by certain stockholders.
The Company's operating activities utilized cash and cash equivalents of
approximately $236,000, $1,495,000 and $1,801,000 in the period from inception
to December 31, 1994, the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively.
The Company's investing activities, which consisted of purchases of property
and equipment, utilized cash and cash equivalents of approximately $76,000,
$150,000 and $1,261,000 in the period from inception to December 31, 1994, the
year ended December 31, 1995 and the three months ended March 31, 1996,
respectively.
The Company's financing activities provided cash and cash equivalents of
approximately $312,000, $1,750,000 and $7,780,000 in the period from inception
to December 31, 1994, the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively, primarily from the private issuance of
equity securities, borrowings under its secured term note payable and
borrowings under its long term debt agreements with stockholders.
The Company has agreed to loan to an executive officer up to $2,560,000 for
payment of his anticipated income tax liability resulting from his purchase of
960,000 shares of the Company's Common Stock from a significant stockholder
for a purchase price less than its then current fair market value. The Company
believes that it will fund the amounts under the loan agreement in the first
quarter of 1997. See "Certain Transactions". The Company has no other
significant commitments other than obligations under its secured term note
payable and operating leases.
At December 31, 1995, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $3,020,000. These
losses are available to reduce federal and state taxable income, if any, in
future years. See Note 4 of Notes to Financial Statements.
The Company estimates that capital expenditures in 1996 will be
approximately $2,000,000 to $3,000,000. In the event that the public offering
contemplated by this Prospectus is not consummated, the Company believes that
its existing capital resources are adequate to meet its cash requirements
through December 31, 1996. In addition, certain stockholders have committed,
in the event that the public offering is not consummated, to provide the
necessary funding to allow the Company to operate through December 31, 1996 if
the existing capital resources are not sufficient to fund the Company's
operations. See "Certain Transactions".
The Company currently anticipates that the net proceeds of this offering,
existing cash balances and borrowings available under the Company's bank
agreement will be sufficient to meet its anticipated working capital and
capital expenditure requirements for the next 18 months. Thereafter, the
Company may need to raise additional funds. The Company may need to raise
additional funds sooner in order to fund more rapid expansion, to develop new
or enhanced products or services, to respond to competitive pressures or to
acquire complementary businesses or technologies. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
the stockholders of the Company will be reduced, stockholders may experience
additional dilution, or such equity securities may have rights, preferences or
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may be unable to develop
or enhance products or services, take advantage of future opportunities, or
respond to competitive pressures, which could have a material adverse effect
on the Company's business, financial condition or operating results.
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BUSINESS
Business@Web, Inc. ("Business@Web" or the "Company") is a provider of "Web-
enabled" software for the development and deployment of mission-critical
business applications across an organization's disparate information
technology ("IT") systems and the extension of those applications to Intranets
and the Internet. The Company's OpenScape products enable organizations to
extend their current IT capabilities to conduct new, dynamic and interactive
communication and transactions with key audiences in their "extended
enterprise" including customers, suppliers, distributors and business
partners. OpenScape products provide the high-volume and real-time performance
capabilities required by businesses through the utilization of standard
Internet protocols, component-based, object-oriented technology, a scaleable,
multi-tier architecture and an intuitive point-and-click development
environment. The Company believes that its products will enable organizations
to achieve significant competitive advantages by increasing responsiveness to
changing business conditions, and exploiting the low cost, flexibility and
ease-of-use of Internet technologies.
INDUSTRY BACKGROUND
BUSINESS REENGINEERING AND THE USE OF INFORMATION TECHNOLOGY
In response to increased competitive pressures, businesses in recent years
have engaged in the extensive reengineering of critical business processes in
an attempt to reduce operating costs, shorten product development cycles and
time-to-market, improve product quality and increase responsiveness to the
demands of customers and business partners. To date, these reengineering
efforts have primarily focused on realizing productivity and efficiency gains
within internal business processes, such as finance, order entry,
manufacturing and resource planning. Businesses have begun to shift the focus
of their reengineering efforts from internal to external business processes,
such as supply chain and distribution channel management. A key enabler of
reengineering efforts has been the deployment and effective use of IT systems
to manage critical business processes and information. Historically, most
organizations addressed their IT requirements through legacy systems, which
are highly customized, proprietary mainframe or mini-computer systems. The
limitations of legacy systems, such as cost and lack of flexibility, have led
organizations to utilize powerful and relatively inexpensive personal
computers and networking technologies to deploy departmental client/server IT
systems.
Organizations' ability to develop and deploy effective, enterprise-wide
business applications has been limited by the proliferation of disparate IT
systems. The lack of interoperability across different systems has introduced
inefficiencies by creating isolated islands of information which are
inaccessible from certain locations within an organization. Such problems are
dramatically compounded when organizations attempt to extend business
applications to connect their IT systems with the disparate IT systems of
their "extended enterprise", including customers, suppliers, distributors and
business partners.
THE EMERGENCE OF THE INTERNET AND INTRANETS
The recent emergence of the World Wide Web ("Web") and Internet technologies
offers businesses the opportunity to significantly improve collaboration and
communication both within the enterprise and with the extended enterprise.
Unlike current legacy and client/server IT solutions, Internet technologies
enable data exchange and collaboration based on cost-effective, easily
deployable and non-proprietary technology. The Company believes that
businesses will be able to realize substantial productivity and efficiency
gains by using the Internet to conduct business transactions with key
audiences of the extended enterprise. The Company also believes that
significant gains will be realized by organizations deploying "Intranets",
internal networks that utilize the same
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Internet technologies and protocols. Intranets exploit the openness, ease-of-
use and cross-platform functionality of Internet technologies to facilitate
information dissemination, communication and collaboration within the
enterprise.
MARKET OPPORTUNITY
The Company believes that significant demand exists for a solution which not
only integrates business applications with legacy systems, client/server
systems and databases, but also seamlessly extends those applications across
the enterprise to internal users via Intranets or to users in the extended
enterprise through the Internet. The Company believes that an effective IT
solution must address the following challenges:
. LACK OF ENTERPRISE-WIDE SOLUTIONS FOR THE EXTENDED ENTERPRISE. Current
legacy and client/server systems generally do not adequately integrate
an organization's enterprise-wide business applications with the
constituents of its extended enterprise. Historically, business-to-
business electronic transactions have been limited to inflexible,
platform-specific electronic data interchange ("EDI") links. The
emergence of the Internet has made the development of more dynamic
applications for business-to-business communication and transactions
possible. However, current Internet business applications addressing the
extended enterprise require expertise in multiple, complex Web-related
programming languages, the costly use of multiple Web servers and the
difficult integration of those servers and applications across disparate
IT systems.
. ABSENCE OF FLEXIBLE DEVELOPMENT ENVIRONMENT. Most current development
and application frameworks are designed for specific IT systems and do
not provide a migration path for extending business applications from
one IT infrastructure to another. For example, a business application
developed for a client/server system would typically require substantial
redevelopment in order to be deployed in an Intranet or Internet
environment.
. LACK OF HIGH-PERFORMANCE INTERNET BUSINESS SOLUTIONS. Effective use of
the Internet for mission-critical business processes requires that
existing Web technologies be enhanced to accommodate the high volume and
performance requirements of most business transactions. For example,
most current Web technologies rely on the retrieval of "static" Web
pages from a dedicated Web server. As a result, such technologies do not
allow the development of a business application with a robust, real-
time, direct connection between a business user in the extended
enterprise and the necessary database, application server, legacy or
client/server system within an enterprise, Intranet or Internet
environment.
. SIGNIFICANT CONTINUED USE OF LEGACY SYSTEMS. Many businesses seeking to
implement Web-enabled solutions must do so while preserving their
significant investments in legacy systems. Legacy systems continue to
play an integral role in IT infrastructures of numerous organizations
due to the importance of the functions managed by those systems, the
desire to preserve the integrity and validity of the data in those
systems, and the cost and/or time constraints of migrating those systems
to a client/server framework.
. EXISTENCE OF INACCESSIBLE ISLANDS OF INFORMATION. Businesses with IT
infrastructures based on legacy or client/server frameworks often deploy
several different hardware, software and networking technologies in the
attempt to capture the benefits of the best components from multiple
vendors. Current development environments have limited ability to
address this "best-of-breed" approach, which results in limited
operability across systems and applications and has created isolated
islands of information throughout an organization.
. NEED TO ACCELERATE APPLICATION DEVELOPMENT. Organizations are
increasingly seeking flexible IT solutions that enable the rapid
development and deployment of robust business
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applications. Rapid application development is currently limited by the
need for recoding each time a new application is developed. Object-
oriented computing provides the benefit of reusable software, but is
limited by the necessity of using complex programming languages.
Although current object-oriented application development tools enable
the creation of shareable, reusable software components, few such tools
offer rapid development and deployment capabilities across the
enterprise, Intranet and Internet environments.
THE BUSINESS@WEB SOLUTION
The Company's OpenScape product line enables organizations to develop and
deploy business applications which take advantage of the low cost, ease-of-use
and flexibility of Internet technologies. OpenScape solutions not only
integrate existing legacy systems, client/server systems and databases within
the enterprise, but also extend applications on those systems through Intranet
and Internet environments. The Company's products allow organizations to reach
beyond the enterprise and conduct new, dynamic and interactive transactions
with key audiences in the extended enterprise. The Company believes that its
products and services offer businesses a number of key benefits, including the
following:
. ENABLE RAPID ADOPTION AND MIGRATION OF INTRANET AND INTERNET
STRATEGIES. The Company's OpenScape development environment, based upon
a distributed component, multi-tiered architecture, allows the
development of enterprise-wide applications which can be easily
integrated with disparate legacy and client/server systems, existing
business applications and emerging technologies. The integration and
extension capabilities of OpenScape provide organizations with the
ability to rapidly adopt an Intranet or Internet strategy which is
highly customized to current business needs and flexible enough to be
reconfigured to meet future business requirements and evolving
technology standards.
. SUPPORT HIGH PERFORMANCE INTERNET BUSINESS APPLICATIONS. Unlike current
Web technologies, OpenScape allows development of applications with the
high volume and real-time performance capabilities required by
businesses. For example, using OpenScape and a Web browser, suppliers in
the extended enterprise can directly access the necessary business
application on their manufacturer's legacy or client/server system
without being routed through a Web server. This direct access can
provide the speed and robustness required for high performance business
transactions.
. LEVERAGE EXISTING IT INVESTMENTS. The open, standards-based nature of
the Company's products allows businesses to maximize the value of their
existing IT systems. The Company's "Web-enabled" application framework
provides organizations with an inexpensive and efficient method for
developing new applications and modifying existing applications to
access current legacy and client/server systems and extend those
applications to Intranets and the Internet. The Company's powerful and
easy-to-use development and deployment products also allow organizations
to extend their IT capabilities while preserving investments in training
and personnel.
. CONNECT ISOLATED ISLANDS OF INFORMATION. Through OpenScape's open,
standards-based architecture and its broad, cross-platform operability,
the Company is able to bridge the traditional communication gaps between
disparate systems within an organization. In addition, organizations are
able to rapidly develop and deploy enterprise-wide business applications
that access multiple information sources and business applications
through an Intranet or Internet environment.
. ACCELERATE APPLICATION DEVELOPMENT. The Company's OpenScape development
products utilize distributed component, object-oriented technology which
provides an intuitive point-and-click development environment. These
products enable organizations to rapidly develop
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shareable, reusable software components by utilizing existing skills
without requiring mastery of complex programming languages. Once
business applications have been developed, they can be easily modified
with little or no recoding through component sharing and reuse. The use
of OpenScape components can create competitive advantages for
organizations by reducing the time-to-market of future business
applications, increasing responsiveness to changing business conditions
and increasing return on IT investments.
THE BUSINESS@WEB STRATEGY
Business@Web's objective is to be a leading provider of "Web-enabled"
software that supports the development and deployment of mission-critical
business applications across disparate IT systems and extends those
applications to Intranets and the Internet. To achieve this objective, the
Company is focusing on the following key elements of its business strategy:
. CONTINUALLY RELEASE NEW PRODUCTS TO INTEGRATE EMERGING TECHNOLOGIES. The
Company's OpenScape products are able to access a wide variety of
environments and applications. Due to the modular nature of the
Company's core OpenScape technology, the Company can rapidly develop
OpenExtensions--specific add-on products which enable communication with
proprietary environments, such as SAP R/3--and continually integrate new
capabilities such as improved security mechanisms and component
repositories. The Company intends to release OpenExtensions for Baan and
PeopleSoft applications during 1996 and regularly introduce additional
OpenScape products for emerging environments and applications.
. SUPPORT MULTIPLE POINTS OF ENTRY. The Company's OpenScape products have
been designed to provide organizations with a flexible and comprehensive
Internet solution regardless of their current IT infrastructure.
Business applications developed with OpenScape products support multiple
points of entry due to their ability to function in enterprise, Intranet
and Internet environments. The Company's products utilize Internet
protocols and a scalable multi-tier architecture which provide
organizations with the built-in capability of extending an enterprise
solution to an Intranet or the Internet at a later date. This
flexibility allows the Company's solution to be adapted to changing
business needs and the evolving Internet environment.
. LEVERAGE RELATIONSHIPS WITH LEADING TECHNOLOGY COMPANIES. The Company
believes that a key element to the success of delivering a complete Web-
enabled business solution is to leverage the use of its technologies
through the development of strategic relationships with leading
technology companies. To this end, the Company has developed
relationships with third-party technology implementors such as Deloitte
& Touche/ICS, software application vendors such as Baan, PeopleSoft and
SAP, an Internet service provider, BBN, and other technology providers
such as Hewlett-Packard, NEC and Informix. These strategic relationships
provide the Company with the opportunity to market its products to a
large installed base of organizations in need of Web-enabling extensions
and enhancements for their current IT infrastructure.
. DEVELOP MULTIPLE CHANNELS OF DISTRIBUTION. To reach a broad potential
customer base, the Company believes that it must develop multiple
distribution channels. The Company anticipates that its direct sales
force will focus on large and mid-sized customers and leverage the
Company's strategic relationships to access particular vertical markets
of target organizations. Through its strategic relationships with system
integrators, hardware vendors, application providers and database
vendors, the Company expects to gain access to a large installed based
of potential customers. Over time, the Company intends to extend the
depth and breadth of its product penetration by augmenting its direct
selling efforts and strategic relationships with additional indirect
distribution channels, including VARs and ISVs.
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TECHNOLOGY
OVERVIEW
The Company's OpenScape products allow organizations to Web-enable business
applications through the use of a distributed component architecture employing
a multi-tier client/server infrastructure, where presentation, functionality
and data access are developed and deployed as independent layers. In this
multi-tier architecture, each tier may be expanded in a modular fashion by
adding components which are reusable and shareable across applications.
Client-based components are handled by the Company's WebEngine Client and the
server-based components are run using the Company's Distributed WebEngine.
OpenScape components can be partitioned, or split apart, placing the
appropriate application logic on the server or client.
[Graphic entitled "Business@Web Multi-Tier Architecture" depicts a three
dimensional rectangular platform angled from the upper left to bottom right of
the page, divided into three segments. There is a small gap between each of the
platform segments. The front edges of these segments are labeled, from right to
left, "Data Access", "Functionality" and "Presentation". The left end of the
platform ends in a low brick wall, labeled "Firewall." On the left side of the
firewall is a cloud labeled "Distributor", "Partner" and "Customer". The screen
of each computer says "Web Browser", and the top of each computer is labeled
"B@W WebEngine Client". There are arrows from each computer to the "Firewall".
On the "Presentation" platform segment there are two computers. One is labeled
"B@W WebEngine Client", with the words "Web Browser" on its screen, and the
other is labeled B@W WebEngine Client, with the words "Desktop Application" on
its screen. There are arrows between the Firewall and each of these computers to
the box on the "Functionality" platform segment. The "Functionality" segment is
entirely occupied by a box labeled "B@W Distributed WebEngine Data Integration &
Analysis". Attached to this box and extending across the gap and over a small
portion of the "Data Access" segment is a rectangular box with four cylinders
extending farther out over the "Data Access" segment labeled B@W OpenExtension".
Placed on the "Data Access" segment, in front of each of these cylinders, are
four small rectangular boxes labeled (from back to front) "Legacy System",
"Client/Server System", "Database" and "Emerging Technologies". There is an
arrow from each of the "OpenExtension" cylinders to the box directly in front of
it. Behind the "Presentation" segment is the label "Intranet"; behind the
"Functionality" segment is the label "Enterprise"; and behind the "Data Access"
segment is the label "Current IT System."]
Presentation components within the WebEngine Client run on the client
machine and provide the screens and dialogs needed for highly interactive
applications. When deployed, OpenScape presentation components require minimal
processing power from the client machine, allowing standard desktop PCs to
access an organization's business applications. The presentation layer
implemented in OpenScape may be used in multiple Web browsers as well as other
client environments to allow for support of multiple deployment environments
and migration of enterprise applications towards Web-enabled solutions.
Functionality components implement the business logic of an application and
support several types of requesting clients such as enterprise, Intranet or
Internet users. The separation of the functionality layer from the
presentation and data access layers allows modification of the functionality
layer independent from the other layers. Functionality components run on
either the WebEngine Client or the Distributed WebEngine, but are typically
server-based to simplify management and to leverage the server's processing
capabilities.
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Data access components running in the Distributed WebEngine are used to
retrieve data from databases and other sources such as legacy applications.
Functionality components which utilize this information are not dependent on
the actual data source, but only the results which are supplied by the data
access components. This independence allows data sources to be changed without
requiring modifications to the business logic. The Distributed WebEngine
supports data translation and local calculations with retrieved data, thereby
facilitating the creation of consistent results from different data sources.
To reduce the amount of traffic between the client and the server, and thereby
increase the performance of the Web-enabled application, the Distributed
WebEngine transfers only necessary data to the client.
OpenScape's distributed component architecture allows disparate back-end
information systems to be "plugged-in" to the same application framework. For
example, Business@Web products allow development of an application with
seamless access to data from both an SAP R/3 system and a mainframe database.
Access to each system is provided through the Company's Distributed WebEngine,
which regulates, manages and secures all application traffic from the clients.
The Company's OpenExtensions provide pre-configured connectivity to each back-
end system managed by the Distributed WebEngine. The code libraries and
processes that are typically required for integrating with a target back-end
IT system need only reside on the server with the OpenExtension, which
simplifies licensing and management and eliminates the need for installation
on the client machine. Any number of OpenExtensions may be incorporated into
an application as required. OpenExtensions also may be used to support access
to connectivity standards such as Microsoft's OLE (Object Linking and
Embedding) and the Open Software Foundation's DCE (Distributed Computing
Environment). The Company will continually develop additional OpenExtensions
to support connectivity to new systems and standards as they evolve.
DEVELOPMENT
Components for all application tiers are developed and defined within the
OpenScape Workbench, a graphical environment designed to simplify and
accelerate application development by minimizing, and often eliminating,
programming tasks. The OpenScape development environment is extensible to
accommodate rapid changes in technology. OpenScape provides the following
capabilities during the development process:
. RAPID APPLICATION DEVELOPMENT. Components may be run and debugged within
the Workbench to facilitate testing and iterative development. Most
aspects of the OpenScape scripting language and visual components are
similar to Visual Basic for Applications ("VBA"), allowing an
organization to leverage the existing programming skills of its
application developers.
. VISUAL COMPONENT REUSE. OpenScape utilizes a modular building block
approach to development where complex components are assembled from sets
of more basic components. Once a visual component has been developed for
an application, the same component can be embedded in additional
components or deployed in the original application for use in the
enterprise, Intranet or Internet without any additional recoding.
. EASE OF INTEGRATION. OpenExtensions directly import function definitions
from back-end systems using point-and-click operations. The same
scripting language can be used to access all back-end systems and
components regardless of the original development environment. This
significantly reduces the complexity typically involved in creating
applications with numerous back-end systems.
. LOCAL AND REMOTE TRANSPARENCY. The scripting language used to access a
client-based or server-based component with OpenScape is the same.
Applications that have been configured for a specific environment, such
as Microsoft's desktop environment, do not have to be significantly
rewritten to accommodate a different configuration, such as NetScape's
Navigator.
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. THIRD-PARTY COMPONENTS. Components from other vendors, such as
Microsoft's ActiveX controls, may be used as part of an OpenScape
project for enhanced functionality. In addition, interoperability with
productivity applications, such as Microsoft Excel, allows these
applications to be utilized as part of an OpenScape solution.
DEPLOYMENT
Once developed, an application's components are deployed onto an
organization's server platforms. The visual components of an application are
deployed onto the Web server, and are stored there with the organization's Web
pages. The components in the functionality and data access layers are
typically deployed onto a separate server that hosts the Distributed
WebEngine.
Once an application has been deployed, it can be accessed over the Internet
through an organization's Web site. The visual components are downloaded on
demand to a Web browser using the standard Internet HTTP protocol. This
process ensures that the client always runs the most current version of an
application. To minimize download time, only the necessary components need be
downloaded initially; additional components may be transferred and run by an
application as needed. Multiple browser standards are supported for running
components, such as ActiveX from Microsoft and the plug-in capabilities of
Netscape. An external viewer is also available for browsers that do not
support component standards or to run downloaded applications independently
from a browser. Desktop environments are also supported by OpenScape
components using OLE or OCX standards.
Once the client application is downloaded, the Web server does not need to
be contacted for further application functions. Web page access and delivery
is separated from back-end integration and multiple geographically dispersed
servers may be accessed directly from the client. All application
communication occurs via an encrypted, secure connection between the WebEngine
Client on the Internet client machine and the Distributed WebEngine on the
application server hardware. The Distributed WebEngine supports multiple
security standards for different customer needs and can be expanded to
accommodate additional standards as they emerge. The Distributed WebEngine is
multi-threaded, which enables high performance for many simultaneous users.
While the current release of OpenScape has certain limited development
capabilities for Internet applications, the Company plans in June 1996 to
introduce OpenScape Version 2.0, which is expected to provide additional
capabilities for the effective development of Internet applications. See "Risk
Factors-- Recent Introduction of OpenScape Products; Planned New Releases".
PRODUCTS
DEVELOPMENT PRODUCTS
The Company's development products are designed to facilitate the rapid
development of multi-tiered enterprise, Intranet and Internet applications
from a single platform. OpenScape development products include the following:
OPENSCAPE. OpenScape provides a single environment for building all tiers of
a distributed enterprise, Intranet or Internet business application. OpenScape
includes the OpenScape Workbench, the Visual Component Builder, the
OpenExtension for OLE Automation and the OpenExtension for Open Database
Connectivity ("ODBC"). The OpenScape Workbench acts as a repository for
storing and managing multiple applications while providing the ability to
share and reuse components between applications. The Visual Component Builder
provides a point-and-click development environment for the creation of
reusable graphical user interface screens. The Visual Component Builder's
integrated development environment, with application programming and debugging
features, provides the ability to write application code in a VBA compatible
language. Application components built with the Visual Component Builder can
also incorporate off-the-shelf user interface controls, such as Microsoft's
ActiveX controls, and can integrate with off-the-shelf productivity
applications, such as Microsoft Excel and Lotus Notes. The OpenExtension for
OLE Automation automatically imports function and interface
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information from existing OLE Automation servers. The OpenExtension for ODBC
provides graphical database browsing and query-building tools for quickly
exposing ODBC-compliant data sources as logical components.
OPENSCAPE OPENEXTENSIONS. OpenExtensions communicate with targeted back-end
systems using each system's native protocols, while providing a single,
standard interface to the end-users of integrated OpenScape business
applications. The following environments are currently accessible via
OpenExtensions: Open Software Foundation's DCE, ODBC, OLE Automation, SAP R/3
and Open Environment's Entera. Business@Web is currently developing additional
OpenExtensions, which will allow OpenScape applications to communicate with
Baan and PeopleSoft applications, the Illustra multimedia database from
Informix, and CORBA systems.
OPENSCAPE VIRTUAL DATABASE SOLUTION. The OpenScape Virtual Database
solution, to be available with Version 2.0, allows multiple disparate data
sources to be accessed through a unified view, which simplifies the
development and deployment of applications that access multiple data sources.
The Virtual Database does not rely upon batch feeds or data extracts to
provide the common data view. Instead, live connections are maintained with
master production data to ensure that OpenScape applications access current
data.
DEPLOYMENT PRODUCTS
The OpenScape deployment architecture enables reusable components to be
managed, stored and accessed across an enterprise; provides organizations with
the flexibility to create applications on demand through a Web server; and
encrypts application data for transmission over an Intranet or the Internet.
While the current release of OpenScape has certain limited development
capabilities for Internet applications, the Company plans in June 1996 to
introduce OpenScape Version 2.0, which is expected to provide additional
capabilities for the effective development of Internet applications. See "Risk
Factors--Recent Introduction of OpenScape Products; Planned New Releases".
OpenScape deployment products include the following:
OPENSCAPE WEBENGINE CLIENT. The OpenScape WebEngine Client is a freely
distributable runtime library that allows Intranet or Internet users to
execute OpenScape user interfaces within leading Web browsers. The WebEngine
Client also allows OpenScape visual components to run in other desktop
applications, such as Visual Basic and Lotus Notes. In addition, the WebEngine
Client facilitates secure communications over the Internet to and from an
OpenScape visual component. Other key features of the WebEngine Client
include: 16-bit and 32-bit platform support; the exposure of visual components
such as Netscape plug-ins, ActiveX Internet controls or Desktop OLE objects;
the ability of individual users to restrict downloaded applications from
performing unwanted actions (such as local file access); and facilitation of
secure, encrypted Internet connections with Distributed WebEngines.
OPENSCAPE DISTRIBUTED WEBENGINE. The OpenScape Distributed WebEngine is a
server-based runtime process that provides application and integration
services to OpenScape WebEngine Clients. The Distributed WebEngine manages all
network communication in OpenScape applications and facilitates the
appropriate levels of security for applications on the Internet. Because all
WebEngine Clients access information via the Distributed WebEngine, third-
party networking or client software is only necessary on the application
server, and not on Internet client machines. Other key features of the
Distributed WebEngine include: multi-threaded operation for high-performance
and scaleability; the ability to facilitate RSA-encrypted communications with
the Web; the ability to distribute onto multiple application servers for
optimal load-balancing; and the ability to support single-log-on for systems
which integrate multiple enterprise applications and databases. The Company is
also integrating NEC's workflow product that will plug into the Distributed
WebEngine and allow multiple organizations to participate in integrated
workflow processes over the Internet.
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PRICING
OpenScape development license fees are priced on a per developer basis. Each
developer on a corporate application development team is required to purchase
an OpenScape license. Each developer who accesses specific back-end systems is
required to purchase an appropriate OpenExtension license. Total development
license fees are expected to range from $5,000 and $35,000 per named developer
for a specific project.
For enterprise and Intranet applications, OpenScape deployment license fees
are priced on a simultaneous user basis. For Internet applications, OpenScape
deployment license fees are based on server hardware capacity. All costs are
associated with the Distributed WebEngine on the server; there is no
deployment fee for the WebEngine Client. Depending on the size of the system,
the license fees for OpenScape deployment products are expected to range from
$25,000 to $250,000.
CUSTOMER SUPPORT AND MAINTENANCE
The Company offers a wide range of customer support options which can be
packaged to meet the specific needs of customers and business partners. The
Company's Professional Services Group ("PSG") provides technical support to
customers, distributors and strategic partners throughout the implementation
cycle of a Business@Web solution as well as on an on-going basis. Support
service offerings include direct telephone consulting support by experienced
technical account representatives, toll-free telephone customer support, 24-
hour pager access, e-mail and fax support, Internet access to the Company's
knowledge repository, case study updates and discussion group access. The
Company's maintenance support services are typically charged at an annual
maintenance fee equal to approximately 20% of the then-current list price of
the licensed products. In addition, this maintenance fee entitles customers to
receive software enhancements to their licensed versions of software.
SERVICES
The Company's consulting and education services are designed to educate the
Company's potential customers and support its customers and strategic alliance
partners in implementing the Company's software solutions. The Company
believes that its services play a significant role in generating demand for
its solutions by demonstrating the capabilities and advantages of its software
solutions. Historically, the Company's consulting and education services have
generated the vast majority of the Company's revenues, representing 65% of the
Company's revenues in 1995. The Company expects that the percentage of its
revenues resulting from sales of software licenses will increase over time,
resulting in a corresponding decrease in the percentage of revenues derived
from its services.
CONSULTING SERVICES
Business@Web's consulting services are designed to minimize the
implementation cycle of the Company's software solutions. The range of
services offered includes the scoping, design and implementation of the
Company's products and comprehensive solutions. A critical portion of the
Company's consulting service strategy is to leverage the skills and reach of
the Company's strategic alliance partners, supplemented by the Company's
internal consulting personnel. The Company's consulting services personnel are
highly trained and experienced in identifying and delivering system
architecture analysis, design plans and implementation strategies for
organizations worldwide.
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EDUCATION SERVICES
Business@Web's education services are used primarily to educate potential
customers on the strategic business benefits of the Company's technologies and
to support current customers at any stage of the implementation cycle of the
Company's software solutions. The Company's education services may be
purchased individually or in a packaged form through open enrollment sessions
or focused programs delivered at on-site customer locations. The Company
anticipates broadening its education services offerings to support future
product releases and target specific industry segments. A key responsibility
of the education services group is to actively engage in certifying third-
party implementation providers to facilitate accelerated adoption of its
software-based business solutions and to assure that the highest quality of
service is provided to the Company's customers.
STRATEGIC ALLIANCES
The Company is actively developing a network of strategic relationships in
order to accelerate the adoption of the Company's products and to assist the
Company in delivering complete business solutions to its customers. The
Company believes that these relationships allow it to focus on developing,
marketing, distributing and supporting its core software products, while also
accelerating the introduction of those products into major customer accounts
and providing those customers with additional sources of established
implementation support and consulting services.
The Company believes that its relationships with hardware systems vendors,
such as Hewlett-Packard and NEC, help to accelerate the introduction of the
Company's products to new customers. For example, Hewlett-Packard trained over
100 of its Information Integration Solutions Practice consultants to deliver
solutions on the Company's software. Additional Hewlett-Packard service groups
are marketing the Company's software in connection with their Internet, Baan,
PeopleSoft and SAP practices. Hewlett-Packard is sponsoring numerous one-day
seminars around the world to market the use of the Company's products to major
Hewlett-Packard customers, and Hewlett-Packard and the Company have jointly
developed service engagements as an immediate follow-on to the seminars. NEC
and the Company are jointly developing workflow application software for the
Internet based on OpenScape and NEC's current workflow application StarOffice.
NEC will be marketing, selling and supporting the installation of this
workflow software in the Pacific Rim. Both Hewlett-Packard and NEC have made
equity investments in the Company.
The Company believes that its relationships with major applications
providers such as Baan, PeopleSoft and SAP will help such providers improve
the speed and flexibility of their implementations. Baan, PeopleSoft and SAP
are educating their organizations on the Company's products, as well as
marketing the products externally to their customers through trade shows, user
group meetings and joint demonstrations. In addition, the Company believes
that these application providers benefit from these relationships because the
Company provides an effective means for them to bring their applications onto
the Web.
The Company is seeking to establish relationships with major and regional
systems integrators. The objective of these alliances with solutions providers
is to establish a large number of trained experts who will incorporate the
Company's products into their business solutions projects. Deloitte &
Touche/ICS, for example, has trained a group of consultants to offer the
Company's solutions to its installed base of SAP users. Deloitte & Touche/ICS
is sponsoring marketing seminars jointly implementing the Company's solutions.
The Company is seeking to establish relationships with other industry
software leaders. For instance, the Company has developed a sales, marketing
and technology alliance with Informix based upon Informix's new Illustra
server. The Company is engaged in joint development efforts with Informix,
will be showcased at their user conference and plans to introduce their joint
capabilities to Informix channel partners. Informix has made an equity
investment in the Company.
The Company is seeking to establish relationships with major Internet
service providers ("ISPs"). ISPs offer managed Internet access and value-added
services to corporations planning to establish and maintain an Internet
presence. The Company believes that its technology can be published by
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ISPs as part of their Internet service, further expanding the reach and reuse
of the Company's component technology. In particular, the Company has a
strategic alliance with BBN and is marketing its capabilities with BBN through
a series of seminars.
SALES AND MARKETING
To reach a broad potential customer base, the Company believes that it must
pursue multiple distribution channels. The Company's direct sales force will
focus on large and mid-sized customers and leverage the Company's strategic
relationships to access target organizations within particular vertical
markets of target organizations. The Company will also seek to develop and
maintain a sales force with expertise in specific industries and intends to
open two additional U.S. regional offices to support its sales force. The
Company's strategic relationships with hardware vendors, systems integrators,
application providers and database vendors are expected to provide the Company
with access to a large installed based of potential customers. The Company
will engage in joint marketing programs and targeted industry events. Over
time, the Company intends to extend the depth and breadth of its product
penetration by augmenting direct selling efforts and strategic relationships
with additional indirect distribution channels including VARs and ISVs. The
Company also intends to promote general awareness for its products and
services among business and trade press and industry analysts and to advertise
in selected business media and target industry press.
CUSTOMERS AND MARKETS
As of May 1, 1996, the Company has sold software, consulting services and
education services to customers in a wide variety of industries. In an effort
to generate demand for its solutions by demonstrating the capabilities and
advantages of its software solutions, the Company has provided consulting and
education services to over 80 customers. Although the Company expects that the
number of purchasers of its software will increase over time, to date the
Company has had limited software sales. In 1994, no individual customer
accounted for more than 10% of the Company's total revenues. In 1995,
approximately 21% and 10% of the Company's revenues were derived from sales of
services and products to Hewlett-Packard and Shell Oil, respectively.
The following examples illustrate how organizations are using Business@Web
products to provide "Web-enabled" IT solutions for their extended enterprises:
WHOLESALE SALES AND DISTRIBUTION
Associated Foods, a large, regional food wholesaler and distributor, is
working with the Company to create an on-line Intranet application to analyze
retail sales. The purpose of the application is to provide the wholesaler with
the capability to quickly consolidate store purchase data from the over 700
independent stores which it services and transform the data into useable,
easily accessible information. Using OpenScape's reusable object-oriented
technology, the wholesaler will be able to efficiently distribute an accurate
database of store performance. The application will enable accurate reporting,
providing valuable statistical analysis of buying trends and performance while
presenting the information in a clear, easy-to-use manner for store managers,
regional directors, managers and executives.
EDUCATION
Babson College, a New England college with over 1,600 undergraduate students
and various graduate and executive education programs, is working with the
Company to implement an on-line grading system via an Intranet which will
eliminate all forms and enable faculty members to submit grades
electronically. In addition, the college is implementing a workflow process
which will route the "virtual forms" to the appropriate faculty members for
input and approval. It is anticipated that the workflow application will be
expanded to include a "to do" list of activities that will circulate to
relevant
34
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faculty members as workflow processes are completed. The new system will
interact with the college's existing reengineering initiatives. A college
official anticipates that the new system will improve communication between
departments by sharing existing information, eliminating redundancy of data
and reducing both faculty and administrative time. Currently, the college is
completing the implementation and is expecting a fully operational on-line
grading system in 1996. Following this Intranet implementation, the college
plans to extend the system to the Internet by building an on-line college
handbook that allows any student on or off campus to review course material
and register for classes.
RESEARCH AND DEVELOPMENT
The Company believes that its future success will depend in large part on
its ability to enhance its OpenScape product line, develop new products,
maintain technological leadership, and satisfy continually changing customer
requirements for Web-based business application development. The Company's
product management and development groups are responsible for product
architecture, functionality and quality assurance. This group is also
responsible for expanding OpenScape's ability to integrate with emerging
industry standards, additional third-party application packages and leading
database management systems as well as for new product definition and
development.
The Company has made substantial investments in product development and
technology integration. The OpenScape product line has been developed
primarily by the Company's internal development staff. Certain technologies
also have been purchased and integrated into OpenScape products. The Company
spent approximately $894,000 and $3,182,000 on research and development
activities in 1994 and 1995, respectively (including purchased technology
rights of approximately $350,000 in 1994 and $2,550,000 in 1995). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
The Company currently intends to extend OpenScape's functionality by adding
support for Macintosh and UNIX browser platforms, creating additional
OpenExtensions for Baan, PeopleSoft, CORBA and Informix Illustra applications,
and enabling the product to accommodate Japanese character sets. There can be
no assurance that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products and enhancements, or that its new products and enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance.
COMPETITION
The market for Internet-based technologies is new, intensely competitive and
subject to rapid technological change. The Company expects competition to
persist and intensify in the future. The Company has experienced and expects
to continue to experience increased competition from current and future
competitors, many of whom have significantly greater financial, technical,
marketing and other resources than the Company. The Company's current and
potential competitors include, among others: software companies which offer
proprietary all-in-one development tools, such as Dynasty, Forte, NeXT and
Spider; established client/server tools and database vendors who may transfer
their technology to take advantage of the Internet, such as Borland (which has
recently announced its intention to acquire Open Environment), Parc Place and
Sybase; companies which develop electronic commerce and automated service
software products and services, such as Edify, Open Market and Premenos; major
systems vendors such as DEC, IBM and Sun Microsystems; packaged application
35
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developers such as Baan and SAP; software industry leaders such as Microsoft,
Netscape and Oracle; and emerging alliances between industry participants such
as the recently announced alliances between Microsoft and SAP; Digital, MCI
and Microsoft; and GE and Netscape.
The Company's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than the
Company. Also, many current and potential competitors have greater financial
or management resources or name recognition or more extensive customer bases
that could be leveraged, thereby gaining market share to the Company's
detriment. The Company expects to face additional competition as other
established and emerging companies enter the market for Internet-based
technologies and new products and technologies are introduced. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins and loss of market shares, any of which could materially
adversely affect the Company's business, operating results and financial
condition. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of the Company's prospective customers. Current and potential customers
may also be more successful than the Company in having their products or
technologies accepted as industry standards. Accordingly, it is possible that
new competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect the Company's ability to obtain and retain support for the
Company's products and services. There can be no assurance that the Company
will be able to compete successfully against current and future competitors
and the failure to do so could have a material adverse effect upon the
Company's business, operating results and financial condition.
The principal competitive factors affecting the market for the Company's
products and services are ease of application development, deployment and
management functionality and features, product architecture, product
performance, reliability and scaleability, product quality, price and customer
support. The Company believes it presently competes favorably with respect to
each of these factors. However, the Company's market is still evolving and
there can be no assurance that the Company will be able to compete
successfully against current and future competitors. The failure to compete
successfully could have a material adverse affect upon the Company's business,
operating results and financial condition.
PROPRIETARY TECHNOLOGY
The Company relies on a combination of trademark, copyright and trade secret
laws, employee and third-party nondisclosure agreements and other methods to
protect its proprietary rights in its products. Many products are distributed
in object code form only, and all end-user license agreements prohibit the
reverse engineering or decompiling of the Company's software. The Company is
considering the possibility of obtaining patents covering its technology, and
the Company intends to file applications for registration of its various
trademarks in the near future. There can be no assurance that any trademark or
patent applications will result in issued patents or trademarks or that, if
issued, such patents or trademarks would be upheld if challenged.
There can be no assurance that the Company's competitors will not
independently develop technologies that are substantially equivalent or
superior to the Company's technology. There can also be no assurance that the
measures taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or independent
development by others of similar technology. In addition, the laws of various
countries in which the Company's products may be sold may not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States.
There can be no assurance that third parties will not assert intellectual
property infringement claims against the Company or that any such claims will
not require the Company to enter into royalty
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<PAGE>
arrangements or result in costly litigation. The Company is not the subject of
any legal action alleging that the Company's products infringe on any
copyright or trademark rights of any person, or of any violation of trade
secrets or other proprietary rights claimed by any third party relating to the
Company or the Company's products. However, the computer software market is
characterized by frequent and substantial intellectual property litigation.
Intellectual property litigation is complex and expensive, and the outcome of
such litigation is difficult to predict.
The Company believes that, due to the rapid pace of technological innovation
for software products, the Company's ability to establish and maintain a
position of technology leadership in the industry is dependent more upon the
skills of its development personnel than upon the legal protections afforded
its existing technology.
Certain of the Company's products contain software that is licensed to the
Company by third parties. There can be no assurance that these third-party
software licenses will continue to be available to the Company on commercially
reasonable terms. The loss of, or inability to maintain, any such software
could result in shipment delays or reductions until equivalent software could
be independently developed or licensed from a third party and integrated,
which could materially adversely affect the Company's business operating
results and financial condition.
EMPLOYEES
As of May 1, 1996, the Company had a total of 102 employees, 29 of whom were
engaged in sales, marketing and alliance management, 25 were in research and
development, 29 were in professional services and 19 were in general and
administration. The Company's future success depends in significant part upon
the continued service of its key technical and senior management personnel and
its continuing ability to attract and retain highly qualified technical and
managerial personnel. Competition for highly qualified personnel is intense
and there can be no assurance that the Company will be able to retain its key
managerial and technical employees or that it will be able to attract and
retain additional and highly technical and managerial personnel in the future.
None of the Company's employees is represented by a labor union. The Company
has not experienced any work stoppages and considers its relations with its
employees to be good.
The rapid execution necessary for the Company to fully exploit the market
opportunity for its products and services requires an effective planning and
management process. The Company's rapid growth has placed, and is expected to
continue to place, a significant strain on the Company's managerial,
operational and financial resources. The senior members of the Company's
management, including Klaus P. Besier, the Company's Chairman of the Board,
President and Chief Executive Officer, John Burke, the Company's Vice
President of Sales, Carolyn LoGalbo, the Company's Vice President of
Marketing, and Joseph Gruttadauria, the Company's Vice President of Support
Services and Quality, joined the Company during 1996. In addition, most of the
Company's development and engineering staff was only recently hired. To manage
its growth, the Company must continue to implement and improve its operational
and financial systems and to expand, train and manage its employee base. The
Company's future operating results also will depend on its ability to expand
its sales and marketing organizations, implement and manage new distribution
channels to penetrate different and broader markets and expand its support
organization commensurate with the increasing base of its installed products.
If the Company is unable to manage growth effectively, the Company's business,
operating results and financial condition could be materially adversely
affected.
FACILITIES
The Company leases approximately 26,000 square feet of office space in
Watertown, Massachusetts under a five-year lease agreement which commenced in
March, 1996. Management believes that although its current facilities are
sufficient to meet its requirements for the foreseeable future, the Company
may need to expand its existing facilities or obtain additional space in the
future. Management believes that adequate facilities for expansion will be
available, if necessary, in the greater Boston area at competitive rates.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, key employees and directors of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Klaus P. Besier.............. 44 Chairman of the Board, President and
Chief Executive Officer
John Burke................... 36 Vice President of Sales
William Cullen............... 37 Director of Product Development
Joseph Gruttadauria.......... 36 Vice President of Support Services and Quality
Carolyn LoGalbo.............. 45 Vice President of Marketing
Craig Newfield............... 36 General Counsel and Secretary
James Nondorf................ 28 Vice President of Strategic Alliances
Eric Sockol.................. 35 Chief Financial Officer and Treasurer
Albert Carnesale(1).......... 59 Director
Manuel Diaz.................. 62 Director
Stephen R. Levy(2)........... 56 Director
Ofer Nemirovsky(2)........... 38 Director
Sundar Subramaniam(1)........ 30 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Klaus P. Besier has served as Chairman, President and Chief Executive
Officer of the Company since February 1996. Mr. Besier has more than 20 years
of experience in international management and computer services. From 1994 to
1996, Mr. Besier was the Chief Executive Officer of SAP America, Inc., a
business application software vendor. From 1992 to 1993, Mr. Besier served as
the President of SAP America, Inc. From 1991 to 1992, Mr. Besier was Vice
President of Sales of SAP America, Inc. From 1977 to 1990, Mr. Besier held
various senior management positions, including General Manager and Corporate
Vice President, with various affiliates of Hoechst Celanese in Germany, Italy
and the U.S.
John Burke has served as Vice President of Sales of the Company since April
1996. From 1994 to 1996, Mr. Burke served as Senior Vice President of SAP
America, Inc. and was responsible for the Midwest region. From 1990 to 1994,
Mr. Burke held various senior sales management positions with SAP America,
Inc. From 1981 to 1990, Mr. Burke held management and sales positions at Dun
and Bradstreet Software (formerly Management Science America, Inc.) and
International Business Machines.
William Cullen has served as Director of Product Development of the Company
since May 1995. From May 1994 to April 1995, Mr. Cullen served as a Software
Architect for Progress Software Corporation, a 4GL software tools provider.
From June 1993 to April 1994, Mr. Cullen served as Project Leader/Senior
Software Engineer of Information Resources, Inc. From January 1991 to May
1993, Mr. Cullen was a software consultant at Softbridge Microsystems, Inc.
Joseph Gruttadauria has served as Vice President of Support Services and
Quality of the Company since April 1996. From March 1995 to April 1996, Mr.
Gruttadauria served as Director of Customer Services for SAP America, Inc. Mr.
Gruttadauria was responsible for building and managing SAP America's worldwide
customer service and support organization. From 1989 to 1995, Mr. Gruttadauria
served as Vice President of Services and Manufacturing for SoftSwitch, Inc., a
supplier of enterprise electronic mail products.
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Carolyn LoGalbo has served as Vice President of Marketing of the Company
since March 1996. From 1993 to 1995, Ms. LoGalbo served as Chief Marketing
Officer of MFS Intelenet Inc., a wholly owned subsidiary of MFS Communications
Company. From 1990 to 1993, Ms. LoGalbo served as Category Manager at Kraft
General Foods and was responsible for segmented coffee brands. From 1988 to
1990, Ms. LoGalbo served as Group Product Manager at Kraft General Foods and
was responsible for Maxwell House Coffee. Prior to Kraft General Foods, Ms.
LoGalbo served as Marketing Manager at Nestle Corporation.
Craig Newfield has served as General Counsel to the Company since April 1996
and as Secretary of the Company since May 1996. From February 1993 to April
1996, Mr. Newfield served as in-house counsel for Marcam Corporation, a
business application software vendor. From 1990 to 1993, Mr. Newfield was
employed as an associate at the law firm of Jager, Smith, Stetler & Arata,
P.C. From 1987 to 1990, Mr. Newfield was employed as an associate at the law
firm of Brown, Rudnick, Freed & Gesmer.
James Nondorf has served as Vice President of Strategic Alliances of the
Company since February 1996. From 1995 to 1996, Mr. Nondorf served as the
President and a director of the Company. From 1994 to 1996, Mr. Nondorf served
as the Company's Chief Executive Officer. From 1990 to 1994, Mr. Nondorf
served as the Chief Operating Officer of Cambridge Technology Group, a
provider of technology seminars and executive training services. Mr. Nondorf
also serves as a director of Open Environment Corporation.
Eric Sockol has served as Chief Financial Officer and Treasurer of the
Company since October 1995. From May 1995 to October 1995, Mr. Sockol served
as Finance Director for Stream International Inc. (a merger of Corporate
Software and Global Software Services), a manufacturer and reseller of PC
software and related services. From June 1990 to May 1995, Mr. Sockol served
as Finance Director and Corporate Controller for Corporate Software. Mr.
Sockol is a Certified Public Accountant.
Albert Carnesale has served as a director of the Company since April 1996.
Dr. Carnesale is the Don K. Price Professor of Public Policy at Harvard
University. Since July 1994, Dr. Carnesale has been Provost of Harvard
University. From July 1991 through December 1995, Dr. Carnesale served as the
Dean of the John F. Kennedy School of Government at Harvard University. From
1981 to 1991, Dr. Carnesale served as the Academic Dean of the John F. Kennedy
School of Government of Harvard University. Dr. Carnesale has held positions
with Martin Marietta Corporation from 1957 to 1962 and the United States Arms
Control and Disarmament Agency from 1969 to 1972. He is also a member of the
Council on Foreign Relations and of the International Institute for Strategic
Studies. Dr. Carnesale also serves as a director of Open Environment
Corporation and Teradyne, Inc.
Manuel Diaz has served as a director of the Company since May 1996. Since
1993, Mr. Diaz has been a Vice President for Hewlett-Packard Company and
general manager of worldwide sales, marketing and services for its Computer
Systems Organization ("CSO"). Mr. Diaz joined HP Mexicana in Mexico City as
its general manager in 1982, and was promoted to managing director of HP Latin
America in 1986. In 1991, Mr. Diaz was named sales and marketing manager of
CSO for the US, Canada and Latin America, and in 1993 named to his current
position. Prior to joining HP, Mr. Diaz was director general of Infodinamica
S.A. de C.V. in Mexico City, executive vice president of Bancomer, S.A. and
general manager of IBM Corporation's Northern Latin America Region.
Stephen R. Levy has served as a director of the Company since May 1996.
Since 1995, Mr. Levy has been a private investor. Mr. Levy is presently a
director of BBN Corporation (formerly Bolt Beranek and Newman Inc.) and
previously served BBN as President and Chief Executive Officer from 1976 to
1983, as Chairman of the Board and Chief Executive Officer from 1983 to 1993,
as Chairman of the Board, President and Chief Executive Officer in 1993, and
as Chairman of the Board from 1994 to 1995. Mr. Levy also serves as a director
of ThermoOptek Corporation.
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<PAGE>
Ofer Nemirovsky has served as a director of the Company since March 1996.
Since December 1988, Mr. Nemirovsky has been a Vice President of, and a
general partner of the respective general partners of several investment funds
managed by, Hancock Venture Partners, Inc. ("HVP"). Prior to joining HVP in
1986, Mr. Nemirovsky held various computer sales and marketing positions at
Hewlett-Packard. He is currently a director of NETCOM On-Line Communications
Services, Inc. and AXENT Technologies, Inc., as well as several privately held
companies.
Sundar Subramaniam has been a director of the Company since January 1994.
Since 1994, Mr. Subramaniam has been President of Cambridge Technology
Enterprise, a group of companies which focus on the development of emerging
technology and new markets. He is also Chairman of International Integration
Incorporated ("I-Cube") and of Integrated Computing Engines ("ICE") and
Adjunct Assistant Professor of Finance at Brandeis University. He served as
Chairman of Business@Web from 1995 to 1996. From 1993 to 1994, Mr. Subramaniam
was President and Chief Executive Officer of Open Environment Corporation, and
from 1990 through 1993 he held various executive and management positions with
Cambridge Technology Group.
Officers of the Company are elected by, and serve at the discretion of, the
Board of Directors.
There are no family relationships among any of the executive officers or
directors of the Company.
BOARD OF DIRECTORS
Each director holds office until that director's successor has been elected
and qualified. The Company's Board of Directors is divided into three classes.
Messrs. Nemirovsky and Subramaniam serve in the class whose term expires in
1997; Messrs. Carnesale and Levy serve in the class whose term expires in
1998; and Messrs. Besier and Diaz serve in the class whose term expires in
1999. Upon expiration of the term of each class of director, directors
comprising such class will be elected for a three-year term at the annual
meeting of stockholders in the year of which such term expires.
Mr. Nemirovsky was nominated and elected to the Board of Directors pursuant
to a voting agreement among certain stockholders of the Company. This
agreement will terminate upon consummation of this offering. See "Certain
Transactions".
The Company's Board of Directors has established an Audit Committee (the
"Audit Committee") and a Compensation Committee (the "Compensation
Committee"). The Audit Committee recommends the firm to be appointed as
independent accountants to audit the Company's financial statements and to
perform services related to the audit, reviews the scope and results of the
audit with the independent accountants, reviews with management and the
independent accountants the Company's year-end operating results and considers
the adequacy of the Company's internal accounting procedures. The Audit
Committee consists of Messrs. Levy and Nemirovsky. The Compensation Committee,
which consists of Messrs. Carnesale and Subramanian, reviews and recommends
the compensation arrangements for all directors and officers and approves such
arrangements for other senior level employees. The Compensation Committee also
administers and takes such other action as may be required in connection with
the incentive plans of the Company, including the 1995 Stock Plan and the 1996
Stock Plan.
DIRECTOR COMPENSATION
Non-employee directors receive $1,250 for each Board of Directors meeting
attended in addition to reimbursement for reasonable out-of-pocket expenses
incurred. Non-employee directors are eligible to participate in the Company's
1996 Stock Plan under which each non-employee director will receive an initial
option to purchase 7,000 shares upon first joining the board and thereafter
receive an automatic grant to purchase 1,700 shares on each January 1,
beginning in 1997, that such director is
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<PAGE>
a member of the Board of Directors. In addition, all of the current non-
employee directors who joined the Board of Directors in 1996 shall be entitled
to receive an option to purchase 7,000 shares of Common Stock upon
consummation of this offering at a per share exercise price equal to the
initial public offering price. All such options will vest equally over four
years and have an exercise price equal to the fair market value of the Common
Stock on the date of grant. See "--Stock Plans".
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
the fiscal year ended December 31, 1995 to the person who was employed during
the fiscal year ended December 31, 1995 as the Company's Chief Executive
Officer (the "Named Executive Officer"). No officer or employee of the Company
received annual compensation exceeding $100,000 in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS(1)
------------ ------------
SECURITIES
UNDERLYING
YEAR SALARY OPTIONS
---- ------------ ------------
<S> <C> <C> <C>
James Nondorf................................... 1995 $39,086 266,666
Former President and Chief Executive Officer(2)
</TABLE>
- --------
(1) The Company did not grant any restricted stock awards or stock
appreciation rights (SARs) or make any long-term incentive plan payouts
during the fiscal year ended December 31, 1995.
(2) Mr. Nondorf became Vice President of Strategic Alliances in February 1996.
His current annual base salary is $110,000.
The following information with regard to executive compensation is provided
for the Company's current Chief Executive Officer and for the four other
current most highly compensated officers of the Company:
Klaus P. Besier joined the Company as Chairman, President and Chief
Executive Officer in February 1996. Mr. Besier's annual salary is set at
$200,000 for the years 1996 through 1998. Mr. Besier has been granted options
to purchase 330,000 shares of Common Stock, at an exercise price of $7.50 per
share, in lieu of receiving cash bonuses for the years 1996 through 1998. The
options vest as follows: (i) an option for 180,000 shares vesting equally over
three years and (ii) an option for 150,000 shares vesting equally in
six annual installments subject, in each case, to accelerated vesting upon the
occurrence of certain events.
In connection with his employment, Mr. Besier purchased 960,000 shares of
Common Stock from a principal stockholder of the Company for an aggregate
purchase price of $1,440,000. At the time of that purchase, the fair market
value of the Common Stock that Mr. Besier purchased exceeded the purchase
price paid by him and the Company agreed to lend Mr. Besier up to $2,560,000
to fund his income tax liability on account of such purchase. See "Certain
Transactions".
Mr. Besier also received (i) a $1,000,000 payment from a principal
stockholder of the Company and (ii) an agreement from such stockholder to
provide him with a payment related to changes in the value of his interest in
the SAP Phantom Convertible Debenture Appreciation Rights 1994/2004 Program.
See "Certain Transactions".
John Burke joined the Company as Vice President of Sales in April 1996. Mr.
Burke's annual salary is set at $200,000 for the years 1996 through 1998. Mr.
Burke has been granted an option to purchase 70,000 shares of Common Stock, at
an exercise price of $7.50 per share, in lieu of receiving
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<PAGE>
cash bonuses for the years 1996 through 1998. In addition Mr. Burke was granted
an option to purchase 333,333 shares of Common Stock at an exercise price of
$7.50 per share. The options vest as follows: (i) an option for 220,000 shares
vesting over three years; and (ii) an option for 183,333 shares vesting equally
in six annual installments subject, in each case, to accelerated vesting at
varying rates upon the occurrence of certain events.
Joseph Gruttadauria joined the Company as Vice President of Support Services
and Quality in April 1996. Mr. Gruttadauria's current base salary is $132,000
with a bonus of $80,000 for 1996. Mr. Gruttadauria was granted an option to
purchase 46,666 shares of Common Stock at an exercise price of $7.50 per share,
of which options for 13,333 shares vest within six months of grant and the
remaining options vest in equal installments over four years.
Carolyn LoGalbo joined the Company as Vice President of Marketing in March
1996. Ms. LoGalbo's annual salary is $200,000 plus a guaranteed cash bonus of
$50,000 for 1996. Ms. LoGalbo was granted an option to purchase, in the
aggregate, 233,333 shares of Common Stock at an exercise price of $7.50 per
share. The options vest as follows: (i) an option for 200,000 shares vesting
over two years and (ii) an option for 33,333 shares vesting equally in six
annual installments subject, in each case, to accelerated vesting upon the
occurrence of certain events.
Craig Newfield joined the Company as General Counsel in March 1996. Mr.
Newfield's current annual base salary is $110,000 plus a potential cash bonus
of $15,000 for 1996. Mr. Newfield was granted an option to purchase 33,333
shares of Common Stock at an exercise price of $7.50 per share. The options
granted have the following vesting provisions: (i) an option for 6,666 shares
vesting in six months and (ii) the remaining option, for 26,667 shares, vesting
over four years beginning on the first anniversary of the grant date.
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OPTION GRANTS
The following table sets forth certain information regarding stock options
granted during the fiscal year ended December 31, 1995 by the Company to the
Named Executive Officer. The Company granted no SARs during the fiscal year
ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
-------------------------------------------------- -----------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS EXERCISE
SECURITIES GRANTED PRICE
UNDERLYING TO EMPLOYEES PER EXPIRATION
OPTIONS GRANTED IN FISCAL YEAR SHARE(3) DATE(4) 5% 10%
--------------- -------------- -------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
James Nondorf........... 66,666 5.41% $1.50 03/01/05 $ 62,889 $ 159,373
200,000 16.22% $4.50 10/01/05 $566,055 $1,434,368
</TABLE>
- --------
(1) All options were granted at an exercise price equal to market value as
determined by the Board of Directors of the Company on the date of grant.
The Board of Directors determined the market value of the Common Stock
based on various factors, including the illiquid nature of an investment
in the Company's Common Stock, the Company's historical financial
performance, the preferences (including liquidation) of the Company's
outstanding Preferred Stock, the Company's future prospects and the price
paid for securities of the Company in arms-length transactions with third
parties.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of 5% and 10% compounded annually from
the date the respective options were granted to their expiration date. The
gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.
Actual gains, if any, are dependent on the performance of the Common Stock
and the date on which the option is exercised. There can be no assurance
that the amounts reflected will be achieved.
(3) The exercise price equals the fair market value of the Common Stock on the
date of grant as determined by the Company's Board of Directors.
(4) The vesting schedule for the option to purchase 66,666 shares of Common
Stock was accelerated so as to become fully exercisable on February 19,
1996. The option to purchase 200,000 shares of Common Stock became
exercisable with respect to 66,666 shares on March 8, 1996, and with
respect to the remaining 133,333 shares will become exercisable when the
Common Stock is listed for trading on the Nasdaq National Market.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information with respect to the
unexercised stock options held as of December 31, 1995 by the Named Executive
Officer.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY
OPTIONS OPTIONS AT DECEMBER 31,
AT DECEMBER 31, 1995(1) 1995(1)
------------------------- -------------------------
NAME
- ---- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
James Nondorf............... 16,666 250,000 $100,000 $900,000
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1995 of $7.50 per share, as determined by the
Company's Board of Directors, minus the per share exercise price.
43
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to May 1996, the Company did not have a Compensation Committee and
decisions relating to executive compensation were made by the Board of
Directors. On May 10, 1996, the Board of Directors established a Compensation
Committee, consisting of Messrs. Carnesale and Subramaniam and delegated to
the Compensation Committee responsibility for decisions concerning executive
compensation.
STOCK PLANS
The Company's 1995 Stock Plan (the "1995 Plan") was adopted by the Board of
Directors and approved by the stockholders of the Company in March 1995. The
Company's 1996 Stock Plan (the "1996 Plan", and collectively with the 1995
Plan, the "Stock Plans") was adopted by the Board of Directors in May 1996 and
approved by the stockholders in May 1996. The Company has reserved an
aggregate of 3,500,000 shares of Common Stock for issuance under the Stock
Plans. The Company's Stock Plans permit the grant of (i) options to purchase
shares of Common Stock intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code"),
(ii) options that do not so qualify, and (iii) shares of Common Stock. Each
non-employee director first joining the Board of Directors in the future will
receive an automatic option grant to purchase 7,000 shares of Common Stock
when such director is first elected or appointed to the Board of Directors. In
addition, each non-employee director will receive an automatic option grant to
purchase 1,700 shares of Common Stock on each January 1 that such director is
a member of the Board of Directors. All option shares granted to non-employee
directors will vest in equal annual installments over a four-year period. All
option grants to non-employee directors will be at a per share exercise price
equal to the fair market value of the Common Stock at the time of grant. The
Stock Plans are designed and intended as a performance incentive for officers,
directors, employees, consultants and other key persons performing services
for the Company to encourage such persons to acquire or increase a proprietary
interest in the success of the Company. The Stock Plans are administered by
the Compensation Committee as appointed by the Board of Directors from time to
time. The Compensation Committee determines the terms of each individual stock
option and stock award, subject to the terms of the Stock Plans, including the
exercise price or purchase price of such awards. The exercise price for
incentive stock options must be equal to the fair market value of the Common
Stock on the date of grant. The exercise price for non-qualified stock options
and the purchase price for Common Stock awards is determined at the discretion
of the Compensation Committee. As of May 1, 1996, options to purchase
2,404,133 shares of Common Stock were outstanding and an additional 1,095,867
shares of Common Stock were available for issuance under the Stock Plans.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan ("ESPP") was adopted by the Board
of Directors and approved by the stockholders of the Company in May 1996. The
Company has reserved a total of 150,000 shares of Common Stock for issuance
under the ESPP. The ESPP, which is intended to qualify under Section 423(b) of
the Code permits eligible employees of the Company to purchase Common Stock
through payroll deductions of up to ten percent of their salaries. The price
of Common Stock purchased under the ESPP will be 85% of the lower of the fair
market value of the Common Stock on the first or last day of each six-month
purchase period. The ESPP will be administered by the Compensation Committee
of the Board of Directors. Employees are eligible to participate if they are
customarily employed by the Company or any designated subsidiary for at least
20 hours per week.
44
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of May 1, 1996, and as adjusted to reflect the sale of the
Company's Common Stock offered hereby at an assumed initial public offering
price of $14.00 per share, by (i) each person or entity known to the Company
to own beneficially more than 5% of the outstanding shares of Common Stock,
(ii) each of the Company's directors, (iii) the Named Executive Officer,
(iv) all directors and executive officers of the Company as a group and (v)
each of the other Selling Stockholders. Except as indicated in the footnotes
to this table, the Company believes that the persons named in this table have
sole voting and investment power with respect to the shares of Common Stock
indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER THIS
OFFERING(1)(2) OFFERING(1)(2)(3)
-------------------- --------------------
NUMBER OF
DIRECTORS, OFFICERS SHARES
AND 5% STOCKHOLDERS NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Sundar Subramaniam(4)...... 3,332,000 28.13% 200,000 3,132,000 21.10%
219 Vassar Street
Cambridge, MA 02139
Moongate Holdings Ltd...... 3,009,697 25.41 311,641 2,698,056 18.17
Cedar House, 41 Cedar Ave-
nue
Hamilton, Bermuda HM 12
J&S Limited Partner-
ship(5)................... 1,100,000 9.29 118,022 981,978 6.61
219 Vassar Street
Cambridge, MA 02139
Legacy Investment Partner-
ship(6)................... 1,333,333 11.26 -- 1,333,333 8.98
219 Vassar Street
Cambridge, MA 02139
Klaus P. Besier............ 1,026,667 8.67 -- 1,026,667 6.92
c/o Business@Web, Inc
One Arsenal Marketplace
Watertown, MA 02172
James Nondorf(7)........... 66,666 * -- 66,666 *
Albert Carnesale........... -- -- -- -- --
Manuel Diaz................ -- -- -- -- --
Stephen R. Levy(8)......... 33,333 * -- 33,333 *
Ofer Nemirovsky(9)......... 528,567 4.46 -- 528,567 3.56
All directors and executive
officers as a group (10
persons)(7)............... 4,987,233 41.87 200,000 4,787,233 32.10
OTHER SELLING STOCKHOLDERS
- --------------------------
Pantio Holding Ltd.(10).... 132,142 1.12 120,337 11,805 *
</TABLE>
45
<PAGE>
* Less than one percent (1%).
- --------
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes general voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days
after May 1, 1996 ("Currently Exercisable Options") are deemed outstanding
for computing the percentage of a person holding such options but are not
deemed outstanding for computing the percentage of any other person. For
purposes of this table, stock options subject to acceleration upon the
occurrence of events other than the passage of time are not deemed to be
Currently Exercisable Options.
(2) The conversion of the Series B Preferred Stock is based on an assumed
initial public offering price of $14.00 per share. If the initial public
offering price varies from $14.00 per share, the number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock is
subject to adjustment from a maximum of 1,103,137 shares (in the event
that the initial public offering price is $12.375 per share or less) to a
minimum of 888,085 shares (in the event that the initial public offering
price is $15.375 per share or greater).
(3) Assumes no exercise of the Underwriters' over-allotment option.
(4) Does not include 1,100,000 shares held by J&S Limited Partnership in which
Mr. Subramaniam holds a 50% beneficial interest but over which Mr.
Subramaniam exercises no voting or investment power.
(5) John J. Donovan, Sr. is the president and sole stockholder of Controller
Corp., Inc., the general partner of J&S Limited Partnership, and, as such,
may be deemed the beneficial owner of these shares.
(6) John J. Donovan, Jr. is the managing partner of Legacy Investment
Partnership and, as such, has exclusive voting and investment power over
these shares.
(7) Includes 66,666 shares of Common Stock which may be purchased within 60
days of May 1, 1996 upon the exercise of stock options.
(8) Includes 33,333 shares of Common Stock issuable upon conversion of Series
C Preferred Stock.
(9) Includes (i) 502,139 shares of Common Stock issuable upon conversion of
Series B Preferred Stock held by Hancock Venture Partners IV-Direct Fund
L.P. and (ii) 26,428 shares of Common Stock issuable upon conversion of
Series B Preferred Stock held by Falcon Ventures II, L.P., of which
partnerships Mr. Nemirovsky is a general partner of the respective general
partners, but as to which Mr. Nemirovsky disclaims beneficial ownership.
(10) Includes 132,142 shares of Common Stock issuable upon conversion of
Series B Preferred Stock.
46
<PAGE>
CERTAIN TRANSACTIONS
Certain of the Company's principal stockholders are affiliated with each
other through family and other relationships. Sundar Subramaniam, a director
of the Company, and John J. Donovan, Sr., are limited partners, and Mr.
Donovan, Sr. is the sole stockholder and president of the corporate general
partner, of J&S Limited Partnership ("J&S"). Mr. Donovan Sr.'s adult children
are the ultimate beneficial owners of the shares of Common Stock held by
Moongate Holdings Ltd. ("Moongate") and Legacy Investment Partnership
("Legacy") and one of his sons, John J. Donovan, Jr., was the President of the
Company from its inception through June 1995 and a director of the Company
from its inception through March 1996. The shares of Common Stock currently
held by Moongate were previously held by Harrington Trust Limited, as Trustee
of the Appleby Trust ("Appleby"), the beneficiaries of which are Mr. Donovan
Jr. and his siblings. See "Principal and Selling Stockholders".
On May 3, 1995, the Company issued 6% 5-year convertible subordinated notes
to each of J&S (in the original principal amount of $250,000) and Appleby (in
the original principal amount of $750,000). On November 30, 1995, Appleby
converted the promissory note held by it into 1,136,363 shares of Common
Stock. In March 1996, the Company repaid in full the promissory note held by
J&S. On December 29, 1995, Appleby loaned the Company the principal sum of
$750,000 under a 9% 5-year subordinated note. The Company prepaid this note,
in full, in March 1996.
From its inception through March 1, 1996, the Company shared office
facilities in Cambridge, Massachusetts with Cambridge Technology Group, Inc.
("CTGroup"). John J. Donovan, Sr. is the President, sole director and sole
stockholder of CTGroup. During the period from the Company's inception until
December 1995, CTGroup provided a variety of technical and support services
for the Company and, from time to time, advanced funds to meet the Company's
operating expenses. The Company has reimbursed CTGroup, at cost, for all
services rendered and has repaid in full all amounts advanced for its benefit
by CTGroup. For use of the shared office facilities in Cambridge, the Company
reimbursed CTGroup for the Company's pro rata share (based on head count) of
the lease and maintenance costs of the facilities. The Cambridge facilities
are owned by a partnership in which Messrs. Donovan Sr. and Jr. are the
partners. A number of the Company's employees are former employees of CTGroup.
On July 28, 1995, in connection with the establishment by CTGroup of a
credit facility for $2,500,000 with the State Street Bank and Trust Company
("State Street"), the Company gave an unlimited guaranty of all of CTGroup's
obligations to State Street. The Company's obligations under the unlimited
guaranty were terminated on February 16, 1996.
In connection with the establishment by the Company of credit facilities in
the aggregate amount of $5,000,000 with State Street on February 16, 1996,
John J. Donovan, Sr., John J. Donovan, Jr. and J&S each gave an unlimited
guaranty of all of the Company's obligations to State Street. The guaranty of
J&S is secured by a pledge of 520,000 shares of common stock of Open
Environment Corporation ("OEC"). At April 30, 1996, the total amount
outstanding under the Company's credit facilities with State Street was
$2,000,000. Upon completion of this offering, the Company intends to request
that State Street terminate the guaranty obligations of Messrs. Donovan Sr.
and Jr. and J&S. The Company intends to use a portion of the proceeds of this
offering to repay the amounts borrowed under the $2,000,000 term loan portion
of this credit facility upon maturity in September 1996. See "Use of
Proceeds". John J. Donovan, Sr. has also personally guaranteed the performance
by the Company of its obligations under the lease of the Company's
headquarters in Watertown, Massachusetts. Mr. Donovan's obligation under the
lease guaranty will terminate upon consummation of this offering. Legacy, J&S
and Mr. Subramaniam have also agreed with the Company that, in the event this
offering is not successful, they will provide the funding, if any, necessary
to sustain the Company's operations through December 31, 1996. The terms on
which such funding would be provided would be determined by negotiation
between such stockholders and the Company at the time of any such funding.
47
<PAGE>
In connection with the Company's offer of employment to Klaus P. Besier as
President and Chief Executive Officer, J & S made a $1,000,000 payment to Mr.
Besier. The Company incurred no liability for such payment. As a former
employee of SAP America, Mr. Besier continues to be a participant in the SAP
Phantom Convertible Debenture Appreciation Right 1994/2004 Program (the "SAP
Plan") pursuant to which he holds a phantom stock appreciation right
evidencing the right to receive the appreciation in value of a specified
number of shares of SAP Preferred Stock. In connection with the Company's
offer of employment and as an inducement to Mr. Besier, J&S also agreed to pay
Mr. Besier an amount equal to the amount, if any, by which the value of his
stock appreciation right decreases between the date of such offer and
September 30, 1996. The Company has no liability or responsibility to make any
payment to Mr. Besier in connection with the SAP Plan. In addition, Appleby
sold 960,000 shares of Common Stock to Mr. Besier for a purchase price of
$1.50 per share, for an aggregate purchase price of $1,440,000. At the time of
this stock purchase, the Common Stock had a fair market value of $7.50 per
share. As an inducement to Mr. Besier to accept the Company's employment
offer, the Company agreed to lend Mr. Besier up to $2,600,000 to fund the
amount of income tax liability incurred by Mr. Besier in connection with this
stock purchase based upon the difference between the purchase price for the
shares and the fair market value of the shares at the time of such purchase.
The Company and OEC are parties to a Software, Education, Services
Distribution Agreement dated June 21, 1995 (as amended, the "Distribution
Agreement"), pursuant to which the Company is authorized to distribute, on a
non-exclusive basis, worldwide (except Japan) OEC's software products and
services. The Distribution Agreement expires on June 21, 1997, subject to
annual renewals by mutual consent. Under the Distribution Agreement, the
Company purchased, for $260,000, a master copy of OEC's software products and
received the right to make 25 copies of such software for resale during the
term of the Distribution Agreement. The Company is entitled to purchase for
resale additional copies of OEC software products at a discount of 50% below
OEC's list price, and to resell OEC services and education products at a
discount of 25% below OEC's list price. Under the Distribution Agreement, the
Company is prohibited from marketing, reselling or advocating products or
services competitive with the products or services of OEC. At the time the
Company entered into the Distribution Agreement, John J. Donovan, Jr. was
President and a director of the Company and a director of OEC and John J.
Donovan, Sr. was the Chairman of the Board of OEC. Sundar Subramaniam is a
former President and former director of OEC. James G. Nondorf, formerly
President and a director of the Company and currently the Company's Vice
President of Strategic Alliances, is a director of OEC. Appleby, Legacy, J&S
and Mr. Subramaniam are principal stockholders of OEC. A number of the
Company's employees are former employees of OEC.
On October 31, 1995, the Company sold to OEC the source code for certain
software technology relating to the customization and enhancement of SAP
software products. OEC paid the Company an initial fee of $500,000 under the
agreement by which the source code was transferred, and agreed to pay the
Company a royalty in an amount equal to 20% of the first $1,000,000 of sales
revenue recognized by OEC related to products incorporating components of the
transferred source code and 10% of such sales revenues in excess of
$1,000,000. OEC's royalty obligations expire on the earlier of October 1, 1997
or the date on which OEC's aggregate sales revenues related to products
incorporating components of the transferred source code exceed $3,000,000.
The Company and OEC are also parties to an OEM Source Code License Agreement
dated as of December 29, 1995 (the "OEM Agreement"), pursuant to which the
Company holds a perpetual, non-exclusive license to incorporate certain OEC
software products into, or bundle such products with, the Company's software
products and has received the source code for such OEC products. The Company
paid a license fee of $2,200,000 to OEC under the OEM Agreement. The Company
has allocated the cost of the source code to research and development expenses
in 1995.
48
<PAGE>
The Company, from time to time, sub-contracts consulting services from
International Integration Incorporated, in which Sundar Subramanian is a
significant stockholder and the Chairman of the Board of Directors. During the
fiscal year ended December 31, 1995, fees for these consulting services
totaled $662,000.
During April 1996, the Company repurchased an aggregate of 800,000 shares of
Common Stock from four stockholders, at a price of $7.50 per share. Of these
shares, 66,667 shares were repurchased from James Nondorf, a former President
and director of the Company and the current Vice President of Strategic
Alliances, for an aggregate price of $500,000; 233,333 shares were repurchased
from J&S, for an aggregate price of $1,750,000; and 233,333 shares were
repurchased from Appleby, for an aggregate price of $1,750,000. The remaining
266,667 shares were repurchased from Len Hafetz for an aggregate price of
$2,000,000, pursuant to a Stock Purchase Agreement between Mr. Hafetz and John
Donovan, Sr., who assigned his rights and obligations under such agreement to
the Company.
Since February 29, 1996, the Company has sold 1,332,127 shares of Series B
Preferred Stock at a purchase price per share of $5.54 and 1,200,000 shares of
Series C Preferred Stock at a purchase price per share of $5.00. Such shares
of Preferred Stock will be converted into shares of Common Stock as provided
by a formula set forth in the Company's Restated Certificate of Incorporation.
See "Description of Capital Stock--Authorized and Outstanding Capital Stock".
All of the Convertible Preferred Stock has been granted registration rights by
the Company. See "Description of Capital Stock--Registration Rights".
In connection with the purchase of Series B Preferred Stock, certain
purchasers of such stock and certain common stockholders agreed that such
stockholders would vote their shares to elect one director to the Board of
Directors designated by the holders of the Series B Preferred Stock. Pursuant
to such agreement, Ofer Nemirovsky, a general partner of the general partners
of certain investment funds which participated in such offering, was nominated
and elected to the Board of Directors. This Agreement will terminate upon
consummation of this offering.
In connection with its purchase of Series B Preferred Stock, Hewlett-Packard
Company was granted a right of first refusal, for as long as it owns at least
36,603 shares of Common Stock, with respect to securities of the Company which
the Company proposes to sell in private placements to designated computer
hardware manufacturers and other companies that derive a majority of their
revenues from the sale of computer hardware.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The description of the capital stock below is qualified in its entirety by
reference to the Company's Third Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") and Amended and
Restated By-Laws ("Restated By-Laws" together with the Restated Certificate of
Incorporation, the "Charter Documents"), copies of which are filed as exhibits
to the Registration Statement of which this Prospectus is a part. See
"Additional Information".
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Immediately following the consummation of this offering, the authorized
capital stock of the Company will consist of 50,000,000 shares of Common
Stock, par value $.001 per share ("Common Stock"), and 5,000,000 shares of
Preferred Stock, par value $1.00 per share ("Preferred Stock"). Prior to the
commencement of this offering, the Company's authorized capital stock included
the following shares: 30,000,000 shares of Common Stock, of which 10,069,696
shares were issued and outstanding, 1,332,127 shares of Series B Redeemable
Convertible Preferred Stock, par value $1.00 per share ("Series B Preferred
Stock"), of which 1,332,127 shares were issued and outstanding, and 1,220,000
shares of Series C Convertible Preferred Stock, par value $1.00 per share
("Series C Preferred Stock"), of which 1,200,000 were issued and outstanding.
Upon consummation of this offering, all of the issued and outstanding shares
of Series C Preferred Stock will convert into 799,994 shares of Common Stock.
Upon consummation of this offering at an offering price of $14.00 per share,
all of the issued and outstanding shares of Series B Preferred Stock will
convert into 975,200 shares of Common Stock. If the initial public offering
price varies from $14.00 per share, the number of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock is subject to
adjustment from a maximum of 1,103,137 shares (in the event that the initial
public offering price is $12.375 per share or less) to a minimum of 888,085
shares (in the event that the initial public offering price is $15.375 per
share or greater). Immediately following such conversion, all such shares of
the Preferred Stock shall have been cancelled, retired and eliminated from the
Company's authorized capital stock. At May 1, 1996, the Company's Series B
Preferred Stock, Series C Preferred Stock and Common Stock were held of record
by 32 stockholders.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted on by stockholders. Holders of Common Stock are not entitled to
cumulative voting rights. Therefore, the holders of a majority of the shares
voted in the election of directors can elect all of the Directors then
standing for election, subject to the rights of the holders of Preferred
Stock, if and when issued. The holders of Common Stock have no preemptive or
other subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference
over Common Stock as to dividends could impact the dividend rights of holders
of Common Stock. See "Dividend Policy".
There are no redemption or sinking fund provisions with respect to the
Common Stock. All outstanding shares of Common Stock, including the shares
offered hereby, are, or will be upon completion of this offering, fully paid
and non-assessable.
The Restated By-laws provide, subject to the rights of the holders of the
Preferred Stock, if and when issued, that the number of directors shall be
fixed by the Board of Directors. The directors, other than those who may be
elected by the holders of Preferred Stock, if and when issued, are divided
into three classes, as nearly equal in number as possible, with each class
serving for a three-year term,
50
<PAGE>
except with respect to the initial term of each class of directors which shall
be for the period described under "Management--Board of Directors". Subject to
any rights of the holders of Preferred Stock, if and when issued, to elect
directors, and to remove any director whom the holders of any such stock had
the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the
total votes eligible to be cast by stockholders in the election of such
director.
UNDESIGNATED PREFERRED STOCK
Upon consummation of this offering, the Board of Directors of the Company
will be authorized, without further action of the stockholders of the Company,
to issue up to 5,000,000 shares of Preferred Stock in classes or series and to
fix the designation, voting powers, preferences and the relative,
participating optional and other special rights of the shares of each series
and any qualifications, limitations and restrictions thereon as set forth in
the Restated Certificate of Incorporation. Any such Preferred Stock issued by
the Company may rank prior to the Common Stock as to dividend rights,
liquidation preferences or both, may have full or limited voting rights and
may be convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or seeking to acquire, a significant portion of the
outstanding stock of the Company.
WARRANT
On February 16, 1996, in connection with the establishment of a bank credit
facility, the Company issued to SSB Investments, Inc. a warrant (the
"Warrant") to purchase 23,333 shares of Common Stock at an exercise price per
share of $8.31. The Warrant is exercisable in whole or in part, at any time on
or before February 15, 2003.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER DOCUMENTS
A number of provisions of the Company's Restated Certificate of
Incorporation and Restated By-laws concern matters of corporate governance and
the rights of stockholders. Certain of these provisions, as well as the
ability of the Board of Directors to issue shares of Preferred Stock and to
set the voting rights, preferences and other terms thereof, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which certain
stockholders may deem to be in their best interests). These provisions,
together with the classified Board of Directors and the ability of the Board
of Directors to issue Preferred Stock without further stockholder action, also
could delay or frustrate the removal of incumbent directors or the assumption
of control by stockholders, even if such removal or assumption would be
beneficial to stockholders of the Company. These provisions also could
discourage or make more difficult a merger, tender offer or proxy contest,
even if they could be favorable to the interests of stockholders, and could
potentially depress the market price of the Common Stock and deprive
stockholders of an opportunity to receive a premium for their shares. The
Board of Directors of the Company believes that these provisions are
appropriate to protect the interests of the Company and all of its
stockholders. The Board of Directors has no present plans to adopt any other
measures or devices which may be deemed to have an "anti-takeover effect".
MEETINGS OF STOCKHOLDERS. The Restated By-laws provide that a special
meeting of stockholders may be called only by the Chief Executive Officer or
the Board of Directors unless otherwise required by law. The Restated By-laws
provide that only those matters set forth in the notice of the special meeting
may be considered or acted upon at that special meeting, unless otherwise
provided by law. In addition, the Restated By-laws set forth certain advance
notice and informational requirements and time limitations on any director
nomination or any new business which a stockholder wishes to propose for
consideration at an annual meeting of stockholders.
51
<PAGE>
NO STOCKHOLDER ACTION BY WRITTEN CONSENT. The Restated Certificate of
Incorporation provides that any action required or permitted to be taken by
the stockholders of the Company at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders in lieu thereof.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Restated By-laws provide
that directors and officers of the Company shall be, and in the discretion of
the Board of Directors non-officer employees may be, indemnified by the
Company to the fullest extent authorized by Delaware law, as it now exists or
may in the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company. The
Restated By-laws also provide that the right of directors and officers to
indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. The Restated Certificate of Incorporation
contains a provision permitted by Delaware law that generally eliminates the
personal liability of directors for monetary damages for breaches of their
fiduciary duty, including breaches involving negligence or gross negligence in
business combinations, unless the director has breached his or her duty of
loyalty failed to act in good faith, engaged in intentional misconduct or a
knowing violation of law, paid a dividend or approved a stock repurchase in
violation of the Delaware General Corporation Law or obtained an improper
personal benefit. This provision does not alter a director's liability under
the federal securities laws. In addition, this provision does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty.
AMENDMENT OF RESTATED CERTIFICATE. The Restated Certificate of Incorporation
provides that an amendment thereof must first be approved by a majority of the
Board of Directors and (with certain exceptions) thereafter approved by the
holders of a majority of the total votes eligible to be cast by holders of
voting stock with respect to such amendment or repeal; provided however, that
the affirmative vote of not less than 80% of the total votes eligible to be
cast by holders of voting stock, voting together as a single class, is
required to amend the provisions described above.
AMENDMENT OF RESTATED BY-LAWS. The Restated Certificate of Incorporation
provides that the Restated By-laws may be amended or repealed by the Board of
Directors or by the stockholders. Such action by the Board of Directors
requires the affirmative vote of a majority of the directors then in office.
Such action by the stockholders requires the affirmative vote of the holders
of at least two-thirds of the total votes eligible to be cast by holders of
voting stock with respect to such amendment or repeal at an annual meeting of
stockholders or a special meeting called for such purpose, unless the Board of
Directors recommends that the stockholders approve such amendment or repeal at
such meeting, in which case such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person, or affiliate or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved
by the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the
52
<PAGE>
same transaction that makes it an interested stockholder (excluding shares
owned by persons who are both officers and directors of the corporation, and
shares held by certain employee stock ownership plans) or (iii) on or after
the date the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and by the
holders of at least 66% of the corporation's outstanding voting stock at an
annual or special meeting, excluding shares owned by the interested
stockholder. Under Section 203, an "interested stockholder" is defined (with
certain limited exceptions) as any person that is (i) the owner of 15% or more
of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation that was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage, provided that such charter
or by-law amendment shall not become effective until twelve months after the
date it is adopted. Neither the Restated Certificate of Incorporation nor the
Restated By-laws of the Company contains any such exclusion.
REGISTRATION RIGHTS
The holders of the Company's Series B Preferred Stock (the "Series B
Investors") and the holders of the Company's Series C Preferred Stock (with
the Series B Investors, the "Preferred Registration Rights Holders") who
collectively will own a total of 1,654,857 shares of Common Stock (the
"Preferred Registrable Securities") upon the closing of this offering at an
initial offering price of $14.00 per share, and SSB Investments, Inc. the
Warrant Holder (with the Preferred Registration Rights Holders, the
"Registration Rights Holders") who will have the right to under the Warrant to
acquire 23,333 shares of Common Stock (with the Preferred Registrable
Securities, the "Registrable Securities"), are parties to agreements with the
Company under which each has certain rights with respect to the registration
under the Securities Act, for resale to the public, of such Registrable
Securities. If the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders, the Registration Rights Holders are entitled to notice of
such registration and to include their shares of Registrable Securities
therein, subject to certain conditions and limitations, which include the
right of the managing underwriter of any such offering to exclude some or all
of such shares from such registration. Each of the Preferred Registration
Rights Holders had these so-called "piggy-back" registration rights with
respect to this offering and the shares of Common Stock being sold in this
offering by Pantio Holding Ltd. have been included pursuant to the exercise of
such rights. Additionally, the Series B Investors have certain demand
registration rights pursuant to which they may require the Company on two
occasions to register all or part of their shares of Registrable Securities
for resale to the public under the Securities Act, subject to certain
conditions and limitations, including the requirement that the anticipated
aggregate price of the shares to be registered exceeds $10,000,000 and the
right of the Company not to effect such requested registration within 180 days
after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering of the securities of
the Company under the Securities Act. Further, the Series B Investors may
require the Company to file additional registration statements on Form S-3 if
the Company qualifies for the use of such form, subject to certain conditions
and limitations. The Company is required to bear the expenses of all such
registrations (except underwriting discounts and commissions) and to use its
best efforts to effect such registrations.
TRANSFER AGENT AND REGISTRAR
The Company has selected Boston EquiServe Limited Partnership as the
transfer agent and registrar for the Common Stock.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
14,844,890 shares of Common Stock (assuming no exercise of outstanding options
after May 1, 1996). Of these shares, the 3,000,000 shares sold in this
offering will be freely transferable without restriction or further
registration under the Securities Act unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 of the Securities Act (an
"Affiliate"), which shares will be subjected to the resale limitations of Rule
144 adopted under the Securities Act. The remaining 11,844,890 shares
outstanding upon completion of this offering and held by existing stockholders
will be "Restricted Securities" as that term is defined under Rule 144 (the
"Restricted Shares"), Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under
Rules 144 or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below,
and the provisions of Rules 144 and 701, additional shares will be available
for sale in the public market as follows: (i) 108,113 shares issuable upon the
exercise of stock options granted under the 1995 Plan and the 1996 Plan that
are vested or will vest and, if exercised, will become eligible for sale
without lock-up restrictions on various dates prior to 180 days following the
date of this Prospectus, (ii) 6,098,667 currently outstanding shares will be
eligible for sale upon expiration of lock-up agreements 180 days after the
date of this Prospectus (as well as 749,111 additional shares issuable upon
the exercise of stock options granted under the 1995 Plan and the 1996 Plan
that will be vested as of such date) and (iii) 11,844,890 currently
outstanding shares will be eligible for sale upon expiration of their
respective two-year holding periods, subject in the case of shares held by
affiliates to compliance with certain volume restrictions.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least two years (and, with respect to non-affiliates of the Company, a
person who has beneficially owned Restricted Securities less than three
years), will be entitled to sell in any three-month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of
the Company's Common Stock (approximately 148,448 shares immediately after the
offering) or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities
and Exchange Commission. Such sales pursuant to Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned Restricted Shares for at least three years is entitled
to sell such shares pursuant to Rule 144(k) without regard to the limitations
described above. The Securities and Exchange Commission has recently proposed
to reduce the two and three year holding periods under Rule 144 to one and two
years, respectively. If enacted, such modification will have a material effect
on the timing of when certain shares of Common Stock become eligible for
resale.
In addition, following the offering, the holders of 1,775,194 shares of
outstanding Common Stock and 23,333 shares of Common Stock issuable upon
exercise of a certain warrant will have rights under certain circumstances to
require the Company to register their shares for future sale. See "Description
of Capital Stock--Registration Rights of Certain Holders".
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of or consultant
to the Company who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144
54
<PAGE>
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares
are required to wait until 90 days after the date of this Prospectus before
selling such shares.
Persons who hold approximately 8,412,394 shares of the Company's Common
Stock after completion of the offering, including all officers, directors and
existing stockholders of the Company, have agreed with the Representatives
and/or the Company that, for a period of 180 days following the date of this
Prospectus, they will not sell, offer to sell, contract to sell, grant any
option to purchase, make any short sale or otherwise dispose of any shares of
Common Stock of the Company, or any options or warrants to purchase any shares
of Common Stock of the Company, or any securities convertible into or
exchangeable for shares of Common Stock of the Company, whether now owned or
hereinafter acquired, by such holders or with respect to which they have
beneficial ownership within the rules and regulations of the SEC. The Company
has also agreed not to sell, offer to sell, contract to sell, grant any option
to purchase or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
any rights to acquire Common Stock for a period of 180 days following the date
of this Prospectus without the prior written consent of Goldman, Sachs & Co.
on behalf of the Underwriters, subject to certain limited exceptions. The
lockup agreements may be released at any time as to all or any portion of the
shares subject to such agreements at the sole discretion of Goldman, Sachs &
Co. on behalf of the Underwriters.
Promptly following the consummation of this offering, the Company intends to
file a Registration Statement on Form S-8 to register the shares of Common
Stock issuable upon exercise of options granted under the 1995 Plan, the 1996
Plan and the ESPP. Following the filing of the Form S-8, shares of Common
Stock issued under the 1995 Plan, the 1996 Plan and the ESPP will be available
for sale in the public market upon vesting and exercise of such options,
subject to lock-up restrictions described above and the Rule 144 volume
limitations applicable to affiliates.
Prior to this offering, there has been no prior public market for the Common
Stock and there is no assurance a significant public market for the Common
Stock will develop or be sustained after this offering. Sales of a substantial
amount of Common Stock in the public market could adversely affect the market
price of the Common Stock and could impair the Company's future ability to
raise capital through the sale of its equity securities. See "Risk Factors".
55
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company and the Selling Stockholders by Peabody &
Arnold, Boston, Massachusetts. Certain other legal matters in connection with
this offering will be passed upon for the Company by Goodwin, Procter & Hoar
llp, Boston, Massachusetts, for the Selling Stockholders by Peabody & Arnold
and for the Underwriters by Hale and Dorr, Boston, Massachusetts.
EXPERTS
The financial statements and schedule for the period from inception (January
19, 1994) to December 31, 1994 and the year ended December 31, 1995 included
in this Prospectus and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (of which this Prospectus
is a part) under the Securities Act, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information about the Company and the securities
offered by this Prospectus, reference is made to the Registration Statement,
including the exhibits and schedules filed as a part thereof. Statements made
in this Prospectus as to the contents of any document referred to are not
necessarily complete, and in each instance, if such document is filed as an
exhibit, reference is made to such exhibit and each such statement is
qualified in its entirety by such reference.
The Registration Statement, including exhibits and schedules thereto, filed
by the Company with the Commission may be inspected, without charge, and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1024; 7 World Trade Center,
New York, New York 10048, Room 1400; and 500 West Madison Street, Chicago,
Illinois 60661, Suite 1400. Copies of such materials also may be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024, at prescribed rates. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http:/ /www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent auditors and with quarterly reports for the first three quarters
of each fiscal year containing unaudited summary financial information.
56
<PAGE>
BUSINESS@WEB, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets as of December 31, 1994 and 1995, March 31, 1996 (unau-
dited) and
Pro Forma as of March 31, 1996 (unaudited)............................... F-3
Statements of Operations for the Period from Inception (January 19, 1994)
to
December 31, 1994 for the Year Ended December 31, 1995 and for the Three-
Months Ended March 31, 1995 and 1996 (unaudited)......................... F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)
for the Period from Inception (January 19, 1994) to December 31, 1994,
for the Year Ended December 31, 1995, for the Three-Months Ended March
31, 1996 (unaudited) and Pro Forma as of March 31, 1996 (unaudited)...... F-5
Statements of Cash Flows for the Period from Inception (January 19, 1994)
to December 31, 1994, for the Year Ended December 31, 1995 and the Three-
Months Ended March 31, 1995 and 1996 (unaudited)......................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Business@Web, Inc.:
We have audited the accompanying balance sheets of Business@Web, Inc. (a
Delaware corporation) as of December 31, 1994 and 1995, and the related
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit) and cash flows for the period from inception
(January 19, 1994) to December 31, 1994 and for the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Business@Web, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for the period from inception (January 19, 1994) to December 31, 1994
and for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 12, 1996 (except with respect to the
matters discussed in Note 6
as to which the date is May 20, 1996)
F-2
<PAGE>
BUSINESS@WEB, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
------------------------ --------------------------
PRO FORMA
1994 1995 ACTUAL (NOTE 1)
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equiva-
lents (Note 1)......... $ 70 $ 104,622 $ 4,822,127 $ 4,792,127
Accounts receivable,
less reserve of
$100,000 and $150,000
at December 31, 1995
and March 31, 1996,
respectively........... -- 1,908,541 1,775,199 1,775,199
Inventories (Note 1).... -- 292,000 227,000 227,000
Prepaid expenses and
other current assets... -- 157,333 573,329 573,329
Due from affiliates
(Note 7)............... -- -- 168,793 168,793
----------- ----------- ------------ ------------
Total current as-
sets............... 70 2,462,496 7,566,448 7,536,448
----------- ----------- ------------ ------------
Property and Equipment,
at cost (Note 1):
Computer and office
equipment.............. 76,078 226,550 1,074,336 1,074,336
Furniture and fix-
tures.................. -- -- 371,978 371,978
Leasehold improve-
ments.................. -- -- 41,252 41,252
----------- ----------- ------------ ------------
76,078 226,550 1,487,566 1,487,566
Less--Accumulated
depreciation and
amortization........... 12,680 63,118 115,483 115,483
----------- ----------- ------------ ------------
Net property and
equipment.......... 63,398 163,432 1,372,083 1,372,083
----------- ----------- ------------ ------------
Total assets........ $ 63,468 $ 2,625,928 $ 8,938,531 $ 8,908,531
=========== =========== ============ ============
LIABILITIES AND STOCK-
HOLDERS' EQUITY (DEFI-
CIT)
Current Liabilities:
Accounts payable........ $ 275,000 $ 575,575 $ 2,153,072 $ 2,153,072
Note payable to a bank
(Note 2)............... -- -- 2,000,000 2,000,000
Due to affiliates (Note
7)..................... 656,844 2,938,086 553,302 553,302
Accrued expenses........ -- 637,613 3,467,396 3,467,396
Deferred revenues (Note
1)..................... -- 278,572 317,421 317,421
----------- ----------- ------------ ------------
Total current lia-
bilities........... 931,844 4,429,846 8,491,191 8,491,191
----------- ----------- ------------ ------------
Long-Term Debt to
Stockholders (Note 3)... -- 1,000,000 -- --
Commitments (Note 9)
Redeemable Convertible
Preferred Stock (Note
5)...................... -- -- 7,379,984 --
----------- ----------- ------------ ------------
Stockholders' Equity
(Deficit) (Note 6):
Preferred stock, $1.00
par value--
Authorized--5,000,000
shares
Issued and outstand-
ing--no shares....... -- -- -- --
Common stock, $.001 par
value--
Authorized--50,000,000
shares
Issued and
outstanding--
7,933,333 shares at
December 31, 1994,
10,803,030 shares at
December 31, 1995 and
March 31, 1996 and
11,778,224 shares at
March 31, 1996
pro forma............ 7,933 10,803 10,803 11,778
Additional paid-in cap-
ital................... 303,967 1,230,597 8,145,597 15,494,606
Note receivable from
executive officer...... -- -- (2,560,000) (2,560,000)
Deferred compensation... -- (166,594) (135,480) (135,480)
Accumulated deficit..... (1,180,276) (3,878,724) (12,393,564) (12,393,564)
----------- ----------- ------------ ------------
Total stockholders'
equity (deficit)... (868,376) (2,803,918) (6,932,644) 417,340
----------- ----------- ------------ ------------
Total liabilities
and stockholders'
equity (deficit)... $ 63,468 $ 2,625,928 $ 8,938,531 $ 8,908,531
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
BUSINESS@WEB, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 19, 1994) THREE MONTHS ENDED
TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ----------------------
1994 1995 1995 1996
------------------ ------------ --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues (Note 1):
Software license and maintenance... $ -- $ 2,150,735 $ 42,940 $ 710,181
Consulting and education services.. -- 3,918,927 373,495 1,670,520
----------- ----------- --------- -----------
Total revenues.................. -- 6,069,662 416,435 2,380,701
----------- ----------- --------- -----------
Cost of Revenues (Note 1):
Software license and maintenance... -- 716,392 22,400 288,980
Consulting and education services.. -- 2,684,216 171,920 974,244
----------- ----------- --------- -----------
Total cost of revenues.......... -- 3,400,608 194,320 1,263,224
----------- ----------- --------- -----------
Gross profit.................... -- 2,669,054 222,115 1,117,477
----------- ----------- --------- -----------
Operating Expenses:
Selling, general and
administrative.................... 285,962 2,107,956 337,488 1,701,196
Research and development (Note 1).. 894,314 3,181,972 174,723 398,592
Compensation to executive officer
(Note 10)......................... -- -- -- 7,515,000
----------- ----------- --------- -----------
Total operating expenses........ 1,180,276 5,289,928 512,211 9,614,788
----------- ----------- --------- -----------
Operating loss.................. (1,180,276) (2,620,874) (290,096) (8,497,311)
Interest Expense, net............... -- 77,574 -- 17,529
----------- ----------- --------- -----------
Net loss........................ $(1,180,276) $(2,698,448) $(290,096) $(8,514,840)
=========== =========== ========= ===========
Pro Forma Net Loss per Common and
Common Equivalent Share (Note 1)... $ (.21) $ (.65)
=========== ===========
Pro Forma Weighted Average Number of
Common and Common Equivalent Shares
Outstanding (Note 1)............... 12,871,554 13,140,961
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
BUSINESS@WEB, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK
-----------------------
NUMBER
OF CARRYING
SHARES VALUE
---------- -----------
<S> <C> <C>
Initial issuance
of stock at
inception at
$.0015 per
share........... -- $ --
Contribution
from
stockholders
for purchase of
Series A
preferred
stock.......... -- --
Net loss........ -- --
---------- -----------
Balance, December
31, 1994........ -- --
Issuance of
common stock at
$.0015 per
share.......... -- --
Issuance of
Series A
preferred stock
at $1.20 per
share.......... -- --
Conversion of
Series A
preferred stock
into common
stock.......... -- --
Conversion of
long-term debt
to stockholders
into common
stock at $.66
per share...... -- --
Deferred
compensation
related to
grant of stock
options........ -- --
Compensation
expense related
to stock
options........ -- --
Net loss........ -- --
---------- -----------
Balance, December
31, 1995........ -- --
Issuance of
Series B
redeemable
convertible
preferred stock
at $5.54 per
share, net of
issuance costs
of $600,000.... 1,332,127 7,379,984
Compensation
expense to
executive
officer........ -- --
Issuance of note
receivable from
executive
officer........ -- --
Compensation
expense related
to stock
options........ -- --
Net loss........ -- --
---------- -----------
Balance,
March 31, 1996
(Unaudited)..... 1,332,127 7,379,984
Pro forma effect
of issuance of
Series C
convertible
preferred stock
at $5.00 per
share, net of
issuance costs
of $30,000
(unaudited).... -- --
Pro forma effect
of repurchase
and retirement
of common stock
at $7.50 per
share
(unaudited).... -- --
Pro forma effect
of conversion
of redeemable
convertible
preferred stock
and convertible
preferred stock
into common
stock
(unaudited).... (1,332,127) (7,379,984)
---------- -----------
Pro Forma
Balance, March
31, 1996
(Unaudited)..... -- $ --
========== ===========
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
-----------------------------------------------------------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK NOTE
------------------------ --------------------- RECEIVABLE TOTAL
NUMBER NUMBER ADDITIONAL FROM STOCKHOLDERS'
OF $1.00 OF $.001 PAID-IN EXECUTIVE DEFERRED ACCUMULATED EQUITY
SHARES PAR VALUE SHARES PAR VALUE CAPITAL OFFICER COMPENSATION DEFICIT (DEFICIT)
----------- ------------ ----------- --------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial issuance
of stock at
inception at
$.0015 per
share........... -- $ -- 7,933,333 $ 7,933 $ 3,967 $ -- $ -- $ -- $ 11,900
Contribution
from
stockholders
for purchase of
Series A
preferred
stock.......... -- -- -- -- 300,000 -- -- -- 300,000
Net loss........ -- -- -- -- -- -- -- (1,180,276) (1,180,276)
----------- ------------ ----------- --------- ------------ ------------ ------------ ------------- -------------
Balance, December
31, 1994........ -- -- 7,933,333 7,933 303,967 -- -- (1,180,276) (868,376)
Issuance of
common stock at
$.0015 per
share.......... -- -- 66,667 67 33 -- -- -- 100
Issuance of
Series A
preferred stock
at $1.20 per
share.......... 250,000 250,000 -- -- (250,000) -- -- -- --
Conversion of
Series A
preferred stock
into common
stock.......... (250,000) (250,000) 1,666,667 1,667 248,333 -- -- -- --
Conversion of
long-term debt
to stockholders
into common
stock at $.66
per share...... -- -- 1,136,363 1,136 748,864 -- -- -- 750,000
Deferred
compensation
related to
grant of stock
options........ -- -- -- -- 179,400 -- (179,400) -- --
Compensation
expense related
to stock
options........ -- -- -- -- -- -- 12,806 -- 12,806
Net loss........ -- -- -- -- -- -- -- (2,698,448) (2,698,448)
----------- ------------ ----------- --------- ------------ ------------ ------------ ------------- -------------
Balance, December
31, 1995........ -- -- 10,803,030 10,803 1,230,597 -- (166,594) (3,878,724) (2,803,918)
Issuance of
Series B
redeemable
convertible
preferred stock
at $5.54 per
share, net of
issuance costs
of $600,000.... -- -- -- -- (600,000) -- -- -- (600,000)
Compensation
expense to
executive
officer........ -- -- -- -- 7,515,000 -- -- -- 7,515,000
Issuance of note
receivable from
executive
officer........ -- -- -- -- -- (2,560,000) -- -- (2,560,000)
Compensation
expense related
to stock
options........ -- -- -- -- -- -- 31,114 -- 31,114
Net loss........ -- -- -- -- -- -- -- (8,514,840) (8,514,840)
----------- ------------ ----------- --------- ------------ ------------ ------------ ------------- -------------
Balance,
March 31, 1996
(Unaudited)..... -- -- 10,803,030 10,803 8,145,597 (2,560,000) (135,480) (12,393,564) (6,932,644)
Pro forma effect
of issuance of
Series C
convertible
preferred stock
at $5.00 per
share, net of
issuance costs
of $30,000
(unaudited).... 1,200,000 1,200,000 -- -- 4,770,000 -- -- -- 5,970,000
Pro forma effect
of repurchase
and retirement
of common stock
at $7.50 per
share
(unaudited).... -- -- (800,000) (800) (5,999,200) -- -- -- (6,000,000)
Pro forma effect
of conversion
of redeemable
convertible
preferred stock
and convertible
preferred stock
into common
stock
(unaudited).... (1,200,000) (1,200,000) 1,775,194 1,775 8,578,209 -- -- -- 7,379,984
----------- ------------ ----------- --------- ------------ ------------ ------------ ------------- -------------
Pro Forma
Balance, March
31, 1996
(Unaudited)..... -- $ -- 11,778,224 $11,778 $15,494,606 $(2,560,000) $(135,480) $(12,393,564) $ 417,340
=========== ============ =========== ========= ============ ============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
BUSINESS@WEB, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
PERIOD FROM INCEPTION YEAR ENDED MARCH 31,
(JANUARY 19, 1994) TO DECEMBER 31, ----------------------
DECEMBER 31, 1994 1995 1995 1996
--------------------- ------------ --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operat-
ing Activities:
Net loss.............. $(1,180,276) $(2,698,448) $(290,096) $(8,514,840)
Adjustments to
reconcile net loss to
net cash provided by
(used in) operating
activities--
Depreciation and
amortization of
property and
equipment.......... 12,680 50,438 6,413 52,365
Compensation expense
to executive
officer............ -- -- -- 7,515,000
Compensation expense
related to stock
options............ -- 12,806 -- 31,114
Changes in operating
assets and
liabilities--
Accounts receiv-
able............. -- (1,908,541) (224,305) 133,342
Inventories....... -- (292,000) -- 65,000
Prepaid expenses
and other current
assets........... -- (157,333) -- (415,996)
Due from affili-
ates............. -- -- -- (168,793)
Accounts payable.. 275,000 300,575 (42,846) 1,577,497
Due to affili-
ates............. 656,844 2,281,242 463,167 (2,384,784)
Accrued expenses.. -- 637,613 104,126 269,783
Deferred reve-
nues............. -- 278,572 -- 38,849
----------- ----------- --------- -----------
Net cash provided
by (used in)
operating
activities...... (235,752) (1,495,076) 16,459 (1,801,463)
----------- ----------- --------- -----------
Cash Flows from Invest-
ing Activities:
Purchases of property
and equipment........ (76,078) (150,472) -- (1,261,016)
----------- ----------- --------- -----------
Net cash used in
investing
activities...... (76,078) (150,472) -- (1,261,016)
----------- ----------- --------- -----------
Cash Flows from Financ-
ing Activities:
Proceeds from (pay-
ments on) long-term
debt to stockhold-
ers.................. -- 1,750,000 -- (1,000,000)
Proceeds from secured
note payable to a
bank................. -- -- -- 2,000,000
Net proceeds from
issuance of preferred
stock................ 300,000 -- -- 6,779,984
Proceeds from issuance
of common stock...... 11,900 100 100 --
----------- ----------- --------- -----------
Net cash provided
by financing
activities...... 311,900 1,750,100 100 7,779,984
----------- ----------- --------- -----------
Net Increase in Cash
and Cash Equivalents.. 70 104,552 16,559 4,717,505
Cash and Cash Equiva-
lents, beginning of
period................ -- 70 70 104,622
----------- ----------- --------- -----------
Cash and Cash Equiva-
lents, end of period.. $ 70 $ 104,622 $ 16,629 $ 4,822,127
=========== =========== ========= ===========
Supplemental Disclosure
of Cash Flow Informa-
tion:
Cash paid during the
period for interest... $ -- $ 25,843 $ -- $ 13,336
=========== =========== ========= ===========
Supplemental Disclosure
of Noncash Financing
Activities:
Conversion of long-
term debt to stock-
holders into common
stock................ $ -- $ 750,000 $ -- $ --
=========== =========== ========= ===========
Issuance of note re-
ceivable from execu-
tive officer......... $ -- $ -- $ -- $ 2,560,000
=========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1)OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Business@Web, Inc. (the Company), formerly Object Power, Incorporated
(a Delaware corporation), was incorporated and commenced operations on
January 19, 1994. The Company is a leading provider of "Web-enabled"
software which allows the development and deployment of mission-
critical business applications across an organization's disparate
information technology systems and the extension of those applications
to Intranets and the Internet.
The Company is subject to risks common to rapidly growing, technology-
based companies, including rapid technological change, the need to
raise equity capital, competition from substitute products and larger
companies, and the successful development and marketing of commercial
products and services. At March 31, 1996, the Company had cash and cash
equivalents of approximately $4,822,000 and a working capital deficit
of approximately $925,000. Based upon its current operating plan, the
Company believes that it had sufficient capital resources on hand at
March 31,1996 to sustain operations through December 31, 1996. In
addition, in the event that the proposed initial public offering is not
consummated, certain stockholders have committed to provide the
necessary funding to allow the Company to operate through December 31,
1996 if the existing capital resources are not sufficient to fund the
Company's operations.
(b) Interim Financial Statements
The accompanying balance sheet as of March 31, 1996, the statements of
operations and cash flows for the three months ended March 31, 1995 and
1996, and the statement of redeemable convertible preferred stock and
stockholders' equity (deficit) for the three months ended March 31,
1996 are unaudited, but, in the opinion of management, have been
prepared on a basis substantially consistent with the audited financial
statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results
of these interim periods. The results of the three months ended March
31, 1996 are not necessarily indicative of the results to be expected
for the year ended December 31, 1996.
(c) Unaudited Pro Forma Presentation
The unaudited pro forma balance sheet and unaudited statement of
redeemable convertible preferred stock and stockholders' equity
(deficit) as of March 31, 1996 reflect (i) the issuance of 1,200,000
shares of Series C convertible preferred stock at $5.00 per share to
new stockholders for net proceeds of $5,970,000; (ii) the repurchase
and retirement of 800,000 shares of common stock from existing
stockholders at $7.50 per share, for an aggregate cost of $6,000,000;
and (iii) the automatic conversion of all outstanding shares of
Series B redeemable convertible preferred stock and Series C
convertible preferred stock into an aggregate of 1,775,194 shares of
common stock, upon the closing of the Company's proposed initial public
offering.
(d)Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position No. 91-1 (SOP 91-1), Software Revenue
Recognition. The Company generates software and maintenance revenues
from licensing the rights to use its software products and the resale
of
F-7
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Revenue Recognition (Continued)
software products licensed from a related party (see Note 7(b)). The
Company also generates service revenues from the sale of consulting and
education services.
Revenues from software license fees are recognized upon delivery, net of
estimated returns, provided there are no significant postdelivery
obligations, and payment is due within one year. If acceptance is
required, software license revenues are recognized upon customer
acceptance. Fees for consulting and education services are recognized
upon customer acceptance or over the period in which services are
provided if customer acceptance is not required and the revenues are
fixed and determinable. Maintenance revenues are deferred at the time of
software license revenue recognition and are recognized ratably over the
term of the support period, which is typically one year.
Deferred revenues primarily relate to prepaid maintenance fees.
Cost of software license and maintenance revenues consists of the cost
of software and maintenance purchased for resale from a related party;
distribution costs; and support personnel costs. Cost of consulting and
education services consists primarily of consulting and support
personnel salaries and related costs and fees to third party service
providers.
(e) Cash and Cash Equivalents
The Company classifies all short-term, highly liquid investments with
original maturities at purchase of three months or less as cash
equivalents. The Company accounts for its investments in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Under SFAS No.
115, the Company's cash equivalents are classified as held-to-maturity
securities and recorded at amortized cost. At March 31, 1996, cash
equivalents consisted of an overnight repurchase agreement with a bank.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
expense is computed using the straight-line method over the estimated
useful lives of the assets (three to five years).
(g) Research and Development and Software Development Costs
In accordance with SFAS No. 86, Accounting for the Costs of Software To
Be Sold, Leased or Otherwise Marketed, the Company has evaluated the
establishment of technological feasibility of its various products
during the development phase. Due to the dynamic changes in the market,
the Company has concluded that it cannot determine technological
feasibility until a fully functional working model is complete. The time
period during which costs could be capitalized from the point of
reaching technological feasibility until the time of general product
release is very short, and consequently, the amounts that could be
capitalized are not material to the Company's financial position or
results of operations. In addition, the Company believes that the
estimated useful life of any potential product is uncertain due to the
rapid
F-8
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Research and Development and Software Development Costs (Continued)
technological change in the industry. Therefore, the Company charges all
research and development expenses to operations in the period incurred.
Included in research and development expenses for the period from
inception (January 19, 1994) to December 31, 1994 and the year ended
December 31, 1995 is $350,000 and $2,550,000, respectively, relating to
purchases of technology, of which $2,200,000 was purchased from a
related party in 1995 (see Note 7(b)).
(h) Inventories
Inventories are stated at the lower of cost or market and consist of
purchased software products of a related party held for resale. (See
Note 7(b))
(i) Postretirement Benefits
The Company has no obligations for postretirement benefits.
(j) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk, requires disclosure of any significant off-balance-sheet
and credit risk concentrations. Financial instruments that potentially
subject the Company to concentrations of credit risk are accounts
receivable. Concentration of credit risk with respect to accounts
receivable is limited to two customers that accounted for 21% and 10%,
respectively, of total revenues in the year ended December 31, 1995. One
of these customers accounted for approximately 14% of total revenues for
the three months ended March 31, 1996. In the year ended December 31,
1995 and the three months ended March 31, 1996, sales outside the United
States accounted for approximately 17% and 11% of total revenues,
respectively. To reduce risk, the Company routinely assesses the
financial strength of its customers and, as a consequence, believes that
its accounts receivable credit risk exposure is limited. The Company
maintains an allowance for potential credit losses but has not
experienced any significant losses related to individual customers or
groups of customers in any particular industry or geographic area.
(k) Pro Forma Net Loss per Common and Common Equivalent Share
For the year ended December 31, 1995 and the three months ended March
31, 1996, pro forma net loss per common and common equivalent share is
computed by dividing the net loss by the pro forma weighted average
number of common and common equivalent shares outstanding during the
period, which consist of (i) the weighted average number of common
shares outstanding, (ii) the number of shares of common stock issuable
upon conversion of all outstanding shares of Series B redeemable
convertible preferred stock and Series C convertible preferred stock,
and (iii) stock options granted after March 31, 1995, which have been
reflected as outstanding for all periods presented using the treasury
stock method as required by the Securities and Exchange Commission.
Common stock equivalents issued in earlier periods have not been
included as their effect would be antidilutive. Historical net loss per
share data have not been presented, as such information is not
considered to be relevant or meaningful.
F-9
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(m) New Accounting Standard
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, Accounting for Stock-Based Compensation. The Company has
determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board Opinion
No. 25 and elect the disclosure-only alternative under SFAS No. 123.
The Company will be required to disclose the pro forma net income or
loss and per share amounts in the notes to the financial statements
using the fair-value-based method beginning in the year ending December
31, 1996, with comparable disclosures for the year ended December 31,
1995. The Company has not determined the impact of these pro forma
adjustments.
(n) Financial Instruments
The estimated fair value of the Company's financial instruments, which
include cash equivalents, accounts receivable and long-term debt,
approximates their carrying value.
(2) BANK AGREEMENT
In February 1996, the Company entered into a financing agreement with a
bank. The agreement provides for a revolving line of credit, an equipment
line of credit and a secured term note. Borrowings under the revolving line
of credit are limited to the lesser of $2,500,000 or 80% of qualified
accounts receivable and bear interest at either the bank's prime rate plus
1%, or LIBOR. Borrowings under the equipment line are limited to $500,000
for the purchase of new equipment. Advances under the equipment line of
credit will be repaid over a three-year period. Borrowings under the
equipment line bear interest at either the bank's cost of funds plus 3 1/2%
or the bank's prime rate plus 1 1/2%. The secured term note of $2,000,000
was used for the repayment of the amount payable for purchased technology
(see Note 7(b)). In March 1996, the Company borrowed the $2,000,000 under
the secured term note. The secured term note is repayable on September 30,
1996. Borrowings under the secured term note bear interest at the bank's
prime rate plus 1%. The revolving line of credit and equipment line of
credit expire on June 30, 1997. The financing agreement contains certain
restrictive covenants, including among other items, minimum levels of
tangible net worth. The agreement is collateralized by all assets of the
Company and is guaranteed by certain stockholders.
(3) LONG-TERM DEBT TO STOCKHOLDERS
In May 1995, the Company issued a $250,000 subordinated note payable to a
stockholder. The note bore interest at 6% per annum and was payable on
April 30, 2000.
In December 1995, the Company issued a $750,000 subordinated note payable
to a stockholder. The note bore interest at 9% per annum and was payable on
December 31, 2000.
Both notes were outstanding as of December 31, 1995 and were repaid in full
in March 1996.
F-10
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(4) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, a deferred tax asset or
liability is measured by the enacted tax rates expected to be in effect when
the differences between the financial statement and tax bases of assets and
liabilities reverse.
As of December 31, 1995, the Company had available net operating loss
carryforwards of approximately $3,020,000 to reduce future federal and state
income taxes, if any. These carryforwards expire through 2010 and are
subject to review and possible adjustment by the Internal Revenue Service.
The Tax Reform Act of 1986 contains provisions that may limit the amount of
net operating loss carryforwards that the Company may utilize in any one
year in the event of certain cumulative changes in ownership over a three
year period in excess of 50%, as defined.
The approximate income tax effect of each type of temporary difference and
carryforward is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Net operating loss carryforwards........... $221,000 $1,208,000 $4,265,000
Other temporary differences................ 268,000 275,000 372,000
-------- ---------- ----------
489,000 1,483,000 4,637,000
Valuation allowance........................ (489,000) (1,483,000) (4,637,000)
-------- ---------- ----------
Net deferred tax asset..................... $ -- $ -- $ --
======== ========== ==========
</TABLE>
It is the Company's objective to become a profitable enterprise and to
realize the benefits of its deferred tax assets. However, in evaluating the
realizability of these deferred tax assets, management has considered the
Company's short operating history, the volatility of the market in which it
competes, and the operating losses incurred to date, and believes that,
given the significance of this evidence, a full valuation reserve against
its deferred tax asset is required as of December 31, 1994 and 1995 and
March 31, 1996.
(5) REDEEMABLE CONVERTIBLE PREFERRED STOCK
In March 1996, the Company authorized and issued 1,332,127 shares of Series
B redeemable convertible preferred stock (Series B Preferred Stock) at $5.54
per share, less offering costs of $600,000 for net proceeds of $6,779,984.
The Series B Preferred Stock has the following rights, preferences and
privileges:
Redemption
At any time after December 31, 2002, the holders of a majority of the
outstanding shares of Series B Preferred Stock may require the Company to
redeem all of the outstanding Series B Preferred Stock in three annual
installments of 33 1/3% per year.
The redemption price per share is $5.54 plus any accrued but unpaid
dividends.
F-11
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(5) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
Conversion and Antidilution
The Series B Preferred Stock is convertible into common stock at a rate of
two shares of common stock for every three shares of preferred stock. The
conversion rate of all preferred stock is adjustable for certain dilutive
events, including the issuance of shares below $15.375 in an initial public
offering. Assuming the sale price of the Company's common stock is $14.00 in
the proposed initial public offering, the conversion rate of Series B
Preferred Stock adjusts to .732 shares of common stock for each share of
Series B Preferred Stock. The actual number of shares issuable upon
conversion could vary from a maximum of 1,103,137 to a minimum of 888,085
depending on the price at which the shares of common stock are sold in the
proposed initial public offering. The conversion is at the option of a
majority of the outstanding stockholders but becomes automatic upon the
closing of a an initial public offering at a per share price that is at
least $12.375 per share and generates aggregate proceeds to the Company of
at least $15,000,000.
Voting Rights
The holders of the Series B Preferred Stock shall be entitled to vote on all
matters and shall be entitled to the number of votes equal to the number of
shares of common stock into which each share of the Series B Preferred Stock
could be converted.
Dividends
Dividends accrue on outstanding shares of Series B Preferred Stock at an
annual rate of $0.3324 per share. Additional dividends may be paid on the
Series B Preferred Stock when declared by the Board of Directors.
Liquidation Preference
The holders of the preferred stock have preference in the event of
liquidation or dissolution of the Company at a rate of $5.54 per share of
Series B Preferred Stock and thereafter participate with the holders of the
Series C Preferred Stock and common stock on a share for share basis in the
distribution of the remaining assets of the Company, as if there were no
Series C Preferred Stock liquidation preference.
(6) STOCKHOLDERS' EQUITY (DEFICIT)
(a) Authorized Capital Stock
As of March 31, 1996, the Company's authorized capital stock consisted
of 30,000,000 shares of common stock $.001, par value per share, and
3,000,000 of preferred stock, $1.00 par value per share. Of the
preferred stock 1,431,412 shares were designated Series B preferred
stock (Series B Preferred Stock) and 1,568,588 shares were
undesignated. In April 1996, the Company amended its Articles of
Incorporation to decrease the number of designated shares of Series B
Preferred Stock to 1,332,127 shares, to decrease the number of
undesignated shares of preferred stock to 447,873 and to designate
1,220,000 shares for the issuance of Series C convertible preferred
stock (Series C Preferred Stock). All shares of preferred stock that
had been designated Series A convertible preferred stock had been
surrendered for conversion into common stock and retired.
F-12
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) STOCKHOLDERS' DEFICIT (CONTINUED)
(a) Authorized Capital Stock (Continued)
On May 20, 1996, the Company's stockholders approved an increase in the
number of authorized shares of common stock to 50,000,000 shares, $.001
par value and authorized the issuance of 5,000,000 shares of $1.00 par
value preferred stock.
(b) Common Stock
In May 1995, the Company issued a convertible note payable to a
stockholder for $750,000. In accordance with the provisions of the note
payable agreement, the outstanding principal of the note was converted
into 1,136,362 shares of common stock in November 1995.
(c) Preferred Stock
In December 1994, certain stockholders contributed $300,000 to the
Company for the purchase of 250,000 shares of Series A convertible
preferred stock. The shares of Series A convertible preferred stock were
issued to the stockholders in February 1995 and were subsequently
converted to 1,666,667 shares of common stock in November 1995.
In April 1996, the Company issued 1,200,000 shares of Series C Preferred
Stock at a price of $5.00 per share, less offering costs of 30,000, for
net proceeds of $5,970,000.
The Series C Preferred Stock has the following rights, preferences and
privileges:
Conversion and Antidilution
The Series C Preferred Stock is convertible into common stock at a rate
of two shares of common stock for every three shares of preferred stock.
The conversion rate is adjustable for certain dilutive events, including
the issuance of shares below the effective conversion price of the
preferred stock. The conversion is at the option of a majority of the
outstanding stockholders but becomes automatic upon the closing of a
public offering at a per share price that is at least $12.375 per share
and generates aggregate proceeds to the Company of at least $15,000,000.
Voting Rights
The holders of the Series C Preferred Stock are entitled to vote on all
matters and shall be entitled to the number of votes equal to the number
of shares of common stock into which each share of the preferred stock
could be converted.
Liquidation Preference
The holders of the Series C Preferred Stock have preference in the event
of liquidation or dissolution of the Company at a rate of $5.00 per
share of Series C Preferred Stock, payable only after the full
liquidation preference of the holders of Series B Preferred Stock has
been paid or reserved; thereafter the remaining assets of the Company
are to be distributed to the holders of Series C Preferred Stock and
common stock on a share for share basis.
F-13
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6)STOCKHOLDERS' DEFICIT (CONTINUED)
(d) Stock Split
In February 1995, the Company effected a 10-for-1 stock split of the
common stock in the form of a stock dividend. On May 20, 1996, the
Company effected a 2-for-3 reverse stock split. The accompanying
financial statements and notes have been retroactively adjusted to
reflect the stock splits.
(e) 1995 Stock Plan
The Company has a stock plan (the 1995 Plan) that provides for the
issuance of incentive stock options (ISOs), nonqualified stock options
and shares of common stock. Under the terms of the 1995 Plan,
nonqualified options may be granted at a price not less than the lesser
of (i) the book value per share of common stock as of the end of the
fiscal year of the Company immediately preceding the date of such
grant, or (ii) 50% of the fair market value per share of common stock
on the date of such grant and, in the case of ISOs, not less than the
fair market value per share at the date of grant. Options generally
vest over a four-year period, commencing one year after the date of the
grant. In 1995, the Company granted an option to purchase 40,000 shares
of common stock to an employee at an exercise price of $.015 per share.
The difference between the estimated fair market value of the common
stock and the aggregate exercise price of $179,400 will be charged to
operations as these options vest. All other options have been granted
at exercise prices that represent the estimated fair market value of
the common stock as determined by the Company's Board of Directors at
the time of the grant and accordingly the Company has not recorded any
compensation on these option grants. In March 1996, the Company granted
options to purchase 366,666 shares of common stock at $7.50 per share
to several key executives which vest ratably over a 6-year period and
are subject to acceleration based on the Company achieving certain
levels of market capitalization. In addition, the vesting of options to
purchase 133,333 shares of Common Stock held by an officer of the
Company will accelerate upon the effectiveness of the Company's
proposed initial public offering.
The following table summarizes incentive and nonqualified stock option
activity under the 1995 Plan:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
SHARES SHARE
--------- -----------
<S> <C> <C>
Balance, December 31, 1994......................... -- $ --
Options granted.................................... 1,219,533 .015--4.50
--------- -----------
Balance, December 31, 1995......................... 1,219,533 .015--4.50
Options granted.................................... 1,281,333 7.50
Options canceled................................... (23,400) 1.50--4.50
--------- -----------
Balance, March 31, 1996............................ 2,477,467 $.015--7.50
========= ===========
Exercisable, March 31, 1996........................ 199,603 $.015--7.50
========= ===========
</TABLE>
In April 1996, an officer of the Company exercised an option to
purchase 66,666 shares at a price of $1.50 per share.
(f) Warrants
In February 1996, the Company issued a warrant to purchase 23,333
shares of common stock at a price of $8.31 per share in connection with
the Company's financing agreement as discussed in Note 2.
F-14
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) STOCKHOLDERS' DEFICIT (CONTINUED)
(g) Employee Stock Purchase Plan
On May 17, 1996, the stockholders approved the Company's Employee Stock
Purchase Plan (ESPP). The Company has reserved 150,000 shares for
issuance under the ESPP. The ESPP permits eligible employees of the
Company to purchase common stock through payroll deductions of up to 10%
of their total compensation. The price of common stock purchased under
the ESPP will be 85% of the lower of the fair market value of the common
stock on the first or last day of each six-month purchase period.
(h) 1996 Stock Plan
On May 17, 1996, the Board of Directors and stockholders approved the
Company's 1996 Stock Plan (the 1996 Plan). Each nonemployee director
will receive an option grant to purchase 7,000 shares of common stock,
at the then fair market value, when such director is first appointed or
elected to the Board of Directors. In addition, each nonemployee
director will receive an option grant to purchase 1,700 shares of common
stock, at the then fair market value, on each June 30 that such director
is a member of the Board of Directors. The Company has reserved
3,500,000 shares of Common Stock for issuance under the 1995 Plan and
the 1996 Plan.
(7) RELATED-PARTY TRANSACTIONS
(a) Cambridge Technology Group, Inc.
During 1994, 1995 and the first two months of 1996, the Company shared
office space with Cambridge Technology Group, Inc. (CTGroup), a company
under the control of a significant stockholder of the Company. CTGroup
charged the Company for a portion of certain common costs incurred in
addition to any specific items paid by CTGroup on the Company's behalf.
These costs were allocated based on head count or actual cost incurred.
During the years ended December 31, 1994 and 1995 and the three months
ended March 31, 1995 and 1996, CTGroup charged the Company $956,844,
$1,013,142, $271,702 and $117,442, respectively, for these costs.
During 1995, the Company sold software and services to CTGroup amounting
to $104,993. In addition, during 1995 and the three months ended March
31, 1996, the Company fulfilled certain obligations of CTGroup under
education, service and product contracts, including the resale of
software discussed in Note 7(b), for which the Company recorded revenues
of $2,403,235 and $100,000, respectively.
During the three months ended March 31, 1996, the Company purchased
$125,000 of computer equipment from CTGroup.
In July 1995, the Company gave an unlimited guarantee of all of
CTGroup's obligations under its credit facility. The Company's
obligations under the unlimited guaranty were terminated in February
1996.
Amounts (due to) from CTGroup for these costs were $(656,844),
$(169,939) and $218,793 at December 31, 1994 and 1995 and March 31,
1996, respectively.
The Company believes that the transactions described above were at terms
no less favorable than the Company would have obtained from unaffiliated
third parties.
F-15
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7)RELATED-PARTY TRANSACTIONS (CONTINUED)
(b)Open Environment Corporation
In 1995, the Company entered into a reseller agreement with Open
Environment Corporation (OEC) to license software developed by OEC, an
entity that was founded by significant stockholders of the Company.
These stockholders continue to hold an ownership interest in OEC at
December 31, 1995 and March 31, 1996. In addition, an executive of the
Company serves on OEC's Board of Directors. During the year ended
December 31, 1995 and the three months ended March 31, 1996, the
Company generated software license and maintenance revenues of
$1,111,992 and $222,617, respectively, from the resale of OEC products
and services. Total expenses relating to purchases of OEC software and
OEC software bundled with the Company's product and related maintenance
contracts totaled $716,392 and $288,980, in the year ended December 31,
1995 and the three months ended March 31, 1996, respectively. In
addition, the Company subcontracted consulting services from OEC
totaling $398,271 in 1995.
On December 29, 1995, the Company and OEC entered into a $2,200,000 OEM
source code license agreement which will provide the Company with a
certain source code developed by OEC. At the time of the purchase, the
Company intended to embed this source code into certain of the
Company's future software products which are currently under
development. In accordance with SFAS No. 86, the Company has charged
the cost of this source code to research and development expenses in
the year ended December 31, 1995.
On October 31, 1995, the Company sold to OEC the source code for
certain software technology relating to the customization and
enhancement of SAP software products. OEC paid the Company an initial
software license fee of $500,000 under the agreement by which the
source code was transferred, and agreed to pay the Company a royalty in
an amount equal to 20% of the first $1,000,000 of sales revenue
recognized by OEC related to products incorporating components of the
transferred source code and 10% of such sales revenues in excess of
$1,000,000. OEC's royalty obligations expire on the earlier of October
1, 1997 or the date on which OEC's aggregate sales revenues related to
products incorporating components of the transferred source code exceed
$3,000,000. This amount is included in 1995 software license revenues.
To date the Company has not received any royalties under this
arrangement.
The total accounts payable to OEC at December 31, 1995 and March 31,
1996 was $2,490,133 and $375,288, respectively.
The Company believes that the transactions described above were at
terms no less favorable than the Company would have obtained from
unaffiliated third parties.
(c)International Integration, Incorporated
The Company subcontracted consulting services from International
Integration, Incorporated, a company controlled by a significant
stockholder of the Company. During 1995, these consulting services
totaled $662,000 and are included in cost of revenues. At December 31,
1995 and March 31, 1996, the Company had outstanding accounts payable
to this entity of $274,444 and $174,444, respectively.
The Company believes that the transactions described above were at
terms no less favorable than the Company would have obtained from
unaffiliated third parties.
F-16
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8)EMPLOYEE BENEFIT PLAN
The Company's employees participate in an employee benefit plan under
Section 401(k) of the Internal Revenue Code, sponsored by CTGroup. The plan
is available to substantially all employees. The plan allows for employees
to make contributions up to a specified percentage of their compensation.
For all participants with greater than one year of continuous service, the
Company contributes 25% of the first 6% of employees' pay contributed to
the plan. The Company contributed $1,851 during the year ended December 31,
1995 and $1,741 during the three months ended March 31, 1996.
(9)COMMITMENTS
In March 1996, the Company executed a noncancelable operating lease for
office space. Future minimum rental payments for this lease are as follows:
<TABLE>
<S> <C>
1996........................................................... $ 310,000
1997........................................................... 463,000
1998........................................................... 463,000
1999........................................................... 463,000
2000........................................................... 463,000
Thereafter..................................................... 77,000
----------
Total.......................................................... $2,239,000
==========
</TABLE>
(10)COMPENSATION TO EXECUTIVE OFFICER
In January 1996, a significant stockholder of the Company entered into an
agreement with the Company's Chief Executive Officer (CEO) under which the
CEO purchased 960,000 shares of the Company's common stock held by the
stockholder at a price of $1.50 per share. To fund the purchase, the CEO
entered into a $1,440,000 note payable agreement with the stockholder. The
note payable accrues interest at 6.56% per annum and provides for full
recourse against the CEO. At the time of this sale transaction, the fair
market value of the Company's common stock was $7.50 per share. The Company
has recorded the aggregate difference between the fair market value of the
common stock and the price paid by the CEO, $5,760,000, in compensation to
executive officer in the accompanying statement of operations for the three
months ended March 31, 1996. In connection with this purchase, the Company
agreed to loan the CEO $2,560,000 which represents the CEO's estimated tax
liability resulting from the compensation on the purchase of shares at less
than fair market value. The Company has recorded this commitment as an
accrued expense and a corresponding note receivable from executive officer
in the accompanying balance sheet as of March 31, 1996. The Company expects
to fund this commitment in the first quarter of 1997. Borrowings under the
loan will be secured by shares of Common Stock purchased, will accrue
interest at 6.21% per annum and will be due and payable no later than
December 31, 2001.
In connection with the employment of the CEO in January 1996, the CEO
received a nonrefundable $1,000,000 cash payment from a significant
stockholder. The Company believes the nature of this payment to be a sign-
on bonus. Accordingly, the Company has recorded a $1,000,000 charge to
compensation to executive officer in the accompanying statement of
operations for the three months ended March 31, 1996 with a corresponding
contribution to additional paid-in capital.
F-17
<PAGE>
BUSINESS@WEB, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10)COMPENSATION TO EXECUTIVE OFFICER (CONTINUED)
Also in connection with the employment of the CEO, that significant
stockholder agreed to reimburse the CEO for any potential decline in value
(from January 1996 to the date of exercise) for certain stock appreciation
rights held by the CEO in an unrelated company. At the time this agreement
was entered into, the unrealized appreciation on the stock appreciation
rights was approximately $4,400,000. The stock appreciation rights are
exercisable by the CEO in September 1996. At March 31, 1996, the value of
the stock of the unrelated company had declined to the extent that if the
stock rights were exercised on that date, the stockholder would be required
to reimburse the CEO approximately $755,000 for the decline in
appreciation. Accordingly, the Company has recorded a $755,000 charge to
compensation to executive officer in the accompanying statement of
operations for the three months ended March 31, 1996, with a corresponding
contribution to additional paid-in capital. To the extent that the value of
the stock fluctuates below the value agreed to by the CEO and the
stockholder, the Company will continue to record charges or credits to the
accompanying statement of operations until the stock appreciation right is
exercised by the CEO.
F-18
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman,
Sachs & Co. and Hambrecht & Quist LLC are acting as representatives, has
severally agreed to purchase from the Company and the Selling Stockholders,
the respective number of shares of Common Stock set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman, Sachs & Co..................................................
Hambrecht & Quist LLC................................................
---------
Total............................................................... 3,750,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 562,500
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,750,000 shares of Common
Stock offered.
The Company has agreed that, subject to certain exceptions, during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, it will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option or purchase plans
existing, or on the conversion or exchange of convertible or exchangeable
securities outstanding on the date of this Prospectus) which are substantially
similar to the shares of Common Stock or which are convertible or exchangeable
into securities which are substantially similar to the shares of Common Stock
without the prior written consent of the representatives, except for the
shares of Common Stock offered in connection with the offering. The Company's
executive officers and directors and certain securityholders of the Company,
including the Selling Stockholders (who in the aggregate hold approximately
9,162,394 shares of Common Stock at May 1, 1996), have agreed not to offer,
sell, contract to sell or otherwise dispose of or agree to dispose of any
shares of Common Stock or substantially similar securities owned beneficially
by them for a period of 180 days after the date of this Prospectus, without
the prior written consent of the representatives, except for the shares
of Common Stock offered hereby. See "Shares Eligible for Future Sale".
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Common Stock offered by them.
U-1
<PAGE>
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company, the
Selling Stockholders and the representatives. Among the factors to be
considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of
companies in related businesses.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "BATW".
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
U-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. 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 THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 24
Management............................................................... 38
Principal and Selling Stockholders....................................... 45
Certain Transactions..................................................... 47
Description of Capital Stock............................................. 50
Shares Eligible for Future Sale.......................................... 54
Legal Matters............................................................ 56
Experts.................................................................. 56
Additional Information................................................... 56
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,750,000 SHARES
BUSINESS@WEB, INC.
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
------------------
PROSPECTUS
------------------
GOLDMAN, SACHS & CO.
HAMBRECHT & QUIST
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions payable in connection with the sale of
Common Stock being registered. All amounts are estimates, except the
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC registration fee............................................. 22,307
NASD filing fee.................................................. 6,969
Nasdaq National Market listing fee............................... 50,000
Printing and distribution expenses............................... 100,000
Accounting fees and expenses..................................... 175,000
Legal fees and expenses.......................................... 400,000
Blue Sky fees and expenses....................................... 20,000
Transfer agent's fees and expenses............................... 10,000
Miscellaneous.................................................... 15,724
--------
Total.......................................................... $800,000
========
</TABLE>
The Registrant intends to pay all expenses of registration, issuance and
distribution, excluding the Underwriters' discount and commissions, with
respect to shares being sold by the Selling Stockholders.
ITEM 14.INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in respect of or in successful defense of any action, suit or
proceeding if he 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.
Article VII of the Registrant's Restated Certificate of Incorporation
provides that a director of the Registrant shall not be personally liable to
the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (to the extent provided by applicable
law) for liability (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or any
amendment or successor provisions thereto, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Registrant shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended. Any repeal or modification of Article VII of the Registrant's
Restated Certificate of Incorporation shall not adversely affect any right or
protection of a director of the Registrant existing at the time of such repeal
or modification.
Article V of the Registrant's Restated By-laws provides that the Registrant
shall indemnify each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is, or was, a director, officer or employee of the Registrant, or
is or was serving at
II-1
<PAGE>
the request of the Registrant, as a director, officer or employee of any
subsidiary of the Company or in any other capacity with any other corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
reasonably incurred by him in connection with such action, suit or proceeding
to the maximum extent permitted by the Delaware General Corporation Law. The
terms of Article V substantially incorporate the provisions of Section 145 of
the Delaware General Corporation Law. The indemnification provided for in
Article V is expressly not exclusive of any other rights of indemnification to
which any such director or officer may be entitled under any by-law,
agreement, vote of stockholders or directors or otherwise.
In the Underwriting Agreement relating to the securities being offered
hereby (the form of which is attached as Exhibit 1.1 to this Registration
Statement), the Registrant and the Selling Stockholders have agreed to
indemnify each Underwriter and each person, if any, who controls the
Underwriter within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, against certain
types of civil liabilities arising in connection with the Registration
Statement or the Prospectus.
ITEM 15.RECENT SALES OF UNREGISTERED SECURITIES.
Described below are all unregistered securities which have been issued and
sold by the Registrant since the Registrant's incorporation on January 19,
1994. No underwriters were engaged with respect to any of the following
transactions and no underwriting discounts or commissions paid in connection
with the sale of any such securities, except where specifically noted below.
All numbers have been adjusted to give effect to the 2-for-3 reverse stock
split to be effected prior to the effectiveness of this offering.
1. On January 19, 1994, the Registrant sold 3,333,333 shares of Common
Stock to Sundar Subramaniam at a price of $0.0015 per share.
2. On January 19, 1994, the Registrant sold 1,333,333 shares of Common
Stock to J&S Limited Partnership at a price of $0.0015 per share.
3. On January 19, 1994, the Registrant sold 1,333,333 shares of Common
Stock to Legacy Investment Partnership at a price of $0.0015 per share.
4. On January 19, 1994, the Registrant sold 1,666,667 shares of Common
Stock to Harrington Trust Limited, as Trustee of The Appleby Trust at a
price of $0.0015 per share.
5. On January 19, 1994, the Registrant sold 266,667 shares of Common
Stock to Len Hafetz at a price of $0.0015 per share.
6. On January 1, 1995, the Registrant sold 66,667 shares of Common Stock
to James G. Nondorf at a price of $0.0015 per share.
7. On March 1, 1995, the Registrant sold 250,000 shares of Series A
Convertible Preferred Stock to Harrington Trust Limited, as Trustee of The
Appleby Trust, at a price of $1.20 per share. All shares of Series A
Preferred Stock were subsequently surrendered for conversion into Common
Stock (at the rate of 6.67 shares of Common Stock for each share of Series
A Convertible Preferred Stock) and retired. Upon the filing of the
Registrant's Restated Certificate of Incorporation on March 6, 1996, the
series of Preferred Stock designated as Series A Preferred Stock was
cancelled and eliminated from the shares which the Registrant is authorized
to issue.
8. On May 3, 1995, the Registrant sold, at face value of $750,000, a 6%
5-year convertible subordinated note to Harrington Trust Limited, as
Trustee of The Appleby Trust. This Note was converted, at the rate of $0.66
per share, into 1,136,362 shares of Common Stock, on October 30, 1995.
II-2
<PAGE>
9. On May 3, 1995, the Registrant sold, at face value of $250,000, a 6%
5-year convertible subordinated note to J&S Limited Partnership. This Note,
which was convertible into shares of Common Stock at the rate of $0.66 per
share, was subsequently repaid in full on March 1996 and no shares of
Common Stock were issued in respect thereof.
10. On December 29, 1995, the Registrant sold, at face value of $750,000,
a 9% 5-year subordinated note to Harrington Trust Limited, as trustee of
The Appleby Trust. This Note was subsequently repaid in full in March 1996.
11. On February 16, 1996, in connection with the establishment of the
Registrant's credit facility with State Street Bank and Trust Company, the
Registrant issued to SSB Investments, Inc., an affiliate of State Street
Bank and Trust Company, a warrant for the purchase 23,333 shares of Common
Stock at an exercise price of $8.31 per share. The warrant may be
exercised, in whole or in part, at any time on or before February 15, 2003.
12. On March 6, 1996, the Registrant sold an aggregate of 1,146,212
shares of Series B Redeemable Convertible Preferred Stock to Falcon
Ventures II, L.P., Hancock Venture Partners IV-Direct Fund L.P., Pantio
Holding Ltd., Juilliard Investments, Inc., Jan Baan, J.G. Paul Baan,
Lorenzo Cue and Tom C. Tinsley at a price of $8.31 per share. Cowen and
Company acted as the Registrant's placement agent in connection with these
sales and was paid a fee of $500,000.
13. On March 8, 1996, the Registrant sold 180,506 shares of Series B
Redeemable Convertible Preferred Stock to Hewlett-Packard Company at a
price of $5.54 per share.
14. On March 30, 1996, the Registrant sold 5,409 shares of Series B
Redeemable Convertible Preferred Stock to John C. Howe at a price of $5.54
per share.
15. On April 5, 1996, the Registrant sold 66,667 shares of Common Stock
to James G. Nondorf upon the exercise by Mr. Nondorf of an Incentive Stock
Option under the Registrant's 1995 Stock Plan at an exercise price of $1.50
per share.
16. On April 15, 1996, the Registrant sold 1,200,000 shares of Series C
Convertible Preferred Stock to Maritime Capital Partners, L.P., David A.
Duffield Trust, Margaret L. Taylor, Alex. Brown Leasing Services Company,
Stephen R. Levy, Onelux, Inc., Anthony Harris, Les Hayman, Juergan Sattler,
John McKenna, Randa Pehl, Ulrich Schell and Informix Corporation at a price
of $5.00 per share.
17. On April 20, 1996, the Registrant sold 200,000 shares of Series C
Convertible Preferred Stock to NEC Corporation at a price of $5.00 per
share.
All transactions described above were effected in reliance upon the
exemption from registration requirements of the Securities Act contained in
Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transactions did not involve
any public offering. All of the foregoing securities are deemed to be
restricted securities for purposes of the Securities Act. Other exemptions
from registration may also be available for such issuances and sales.
18. The Registrant has granted options to purchase shares of its Common
Stock to certain directors, officers, employees and consultants pursuant to
the 1995 Stock Plan as follows:
(a) Incentive Stock Options for an aggregate of 135,166 shares were
granted by the Registrant to twelve employees on March 1, 1995 at an
exercise price of $1.50 per share.
(b) Non-Qualified Stock Options for an aggregate of 136,666 shares
were granted by the Registrant to thirty-seven employees and
consultants on March 1, 1995 at an exercise price of $1.50 per share.
(c) Incentive Stock Options for an aggregate of 166,933 shares were
granted by the Registrant to forty-six employees on August 1, 1995 at
an exercise price of $1.50 per share.
II-3
<PAGE>
(d) Non-Qualified Stock Options for an aggregate of 87,833 shares
were granted by the Registrant to fifteen employees and consultants on
August 1, 1995 of which, 84,500 shares were granted at an exercise
price of $1.50 per share and 3,333 shares were granted at an exercise
price of $4.50 per share.
(e) Non-Qualified Stock Options for an aggregate of 10,000 shares
were granted by the Registrant to three employees of one of the
Registrant's strategic partners on September 13, 1995 at an exercise
price of $3.00 per share. These grants were subsequently rescinded.
(f) Incentive Stock Options for an aggregate of 344,600 shares were
granted by the Registrant to sixty employees (including one director
and executive officer) on October 1, 1995 at an exercise price of $4.50
per share.
(g) Non-Qualified Stock Options for an aggregate of 351,667 shares
were granted by the Registrant to sixty-five officers, employees and
consultants on October 1, 1995, of which 311,667 shares were granted at
an exercise price of $4.50 per share and 40,000 shares were granted at
an exercise price of $0.015 per share. Of these, an option for 3,333
shares granted to an employee of one of the Registrant's strategic
partners was subsequently rescinded.
(h) Incentive Stock Options for an aggregate of 358,000 shares were
granted by the Registrant to seventy-three employees on March 15, 1996
at an exercise price of $7.50 per share.
(i) Non-Qualified Stock Options for an aggregate of 923,333 shares
were granted by the Registrant to fifteen directors, officers,
employees and consultants on March 15, 1996 at an exercise price of
$7.50 per share.
The securities described in paragraphs 18(a) through 18(i) were issued in
reliance upon the exemption from registration under the Securities Act
contained in Rule 701 promulgated thereunder, in that they were offered and
sold pursuant to a written compensatory benefit plan or written contract
relating to compensation; however, other exemptions from registration may also
be available for such issuances and sales.
ITEM 16.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
* 1.1 Proposed Form of Underwriting Agreement
* 3.1 Restated Certificate of Incorporation
* 3.2 Certificate of Amendment to Restated Certificate of Incorporation
** 3.3 Form of Second Amended and Restated Certificate of Incorporation of
the Registrant to be filed with the Secretary of State of Delaware
prior to effectiveness of the offering.
** 3.4 Form of Third Amended and Restated Certificate of Incorporation of the
Registrant to be filed with the Secretary of State of Delaware upon
consummation of the offering
* 3.5 By-Laws of the Registrant
** 3.6 Form of Amended and Restated By-laws of the Registrant to be effective
prior to the effectiveness of the offering
** 4.1 Specimen Common Stock Certificate
** 5.1 Opinion of Peabody & Arnold with respect to legality of the Common
Stock
*10.1 1995 Stock Plan, as amended
**10.2 1996 Stock Plan
**10.3 Employee Stock Purchase Plan
*10.4 Lease for One Arsenal Marketplace, Watertown, Massachusetts
**10.5 Source Code License Agreement dated as of August 8, 1995 between the
Registrant and InterGroup Technologies, Inc.
**10.6 Software License Agreement dated as of August 8, 1995 between the
Registrant and InterGroup Technologies, Inc.
**10.7 Source Code License Agreement dated as of February 8, 1996 between the
Registrant and Mentor Communications Limited
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
**10.8 Software License Agreement dated as of August 10, 1995 between the
Registrant and Mystic River Software, Inc.
**10.9 Software, Education, Services Distribution Agreement dated June 21,
1995 between the Registrant and Open Environment Corporation
**10.10 "SAP Customization Software" Agreement dated October 1, 1995 between
the Registrant and Open Environment Corporation
**10.11 OEM Source License Agreement dated as of December 29, 1995 between the
Registrant and Open Environment Corporation
**10.12 Joint Marketing Agreement effective as of February 27, 1996 between
the Registrant and Hewlett-Packard Company
*10.13 Loan Agreement dated February 16, 1996 between the Registrant and
State Street Bank and Trust Company, together with Guaranty
(unlimited) of J&S Limited Partnership
**10.14 Warrant Purchase Agreement dated as of February 16, 1996 between the
Registrant and SSB Investments, Inc.
**10.15 Common Stock Purchase Warrant dated as of February 16, 1996 issued to
SSB Investments, Inc.
*10.16 Series B Convertible Preferred Stock Purchase Agreement dated February
27, 1996 between the Company and Hewlett-Packard Company
*10.17 Amendment to Series B Convertible Preferred Stock Purchase Agreement
dated as of March 6, 1996 between the Registrant and Hewlett-Packard
Company
*10.18 Series B Convertible Preferred Stock Purchase Agreement dated March 6,
1996 among the Company and the purchasers named therein
*10.19 Registration Rights Agreement dated March 6, 1996 among the Company
and the investors named therein
*10.20 Co-Sale Rights Agreement dated as of March 6, 1996 among the investors
and holders of shares of the Company's Common Stock named therein
**10.21 Voting Agreement dated March 6, 1996 among the investors and holders
of shares of the Company's Common Stock named therein
*10.22 Series C Convertible Preferred Stock Purchase Agreement dated as of
March 29, 1996 among the Company and the purchasers named therein
*10.23 Registration Rights Agreement dated as of March 29, 1996 among the
Company and the investors named therein
*10.24 Stock Purchase Agreement dated as of February 1996 between John J.
Donovan and Len Hafetz
*10.25 Assignment and Assumption Agreement dated as of March 15, 1996 between
John J. Donovan and the Registrant
*10.26 Stock Repurchase Agreement dated as of April 4, 1996 between the
Registrant and
James Nondorf
*10.27 Stock Repurchase Agreement dated as of April 15, 1996 between the
Registrant and J&S Limited Partnership
*10.28 Stock Repurchase Agreement dated as of April 15, 1996 between the
Registrant and Harrington Trust Limited as Trustee of The Appleby
Trust
*10.29 Five-Year 9% Subordinated Note dated December 29, 1995 issued to
Harrington Trust Limited as Trustee of The Appleby Trust in the
principle amount of $750,000
*10.30 Five-Year 6% Convertible Subordinated Note dated May 3, 1995 issued to
Harrington Trust Limited as Trustee of The Appleby Trust in the
principle amount of $750,000
*10.31 Five-Year 6% Convertible Subordinated Note dated May 3, 1995 issued to
J&S Limited Partnership in the principle amount of $250,000
**10.32 Loan Agreement dated as of March 31, 1996 between Klaus P. Besier and
the Registrant
*11 Statement Regarding Computation of Per Share Earnings
**23.1 Consent of Peabody & Arnold (included in Exhibit No. 5)
*23.2 Consent of Arthur Andersen LLP
**23.3 Consent of Goodwin, Procter & Hoar llp
*24 Power of Attorney (included in the signature page to this Registration
Statement).
*27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
II-5
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.
ITEM 17.UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston, Commonwealth of
Massachusetts, on May 20, 1996.
Business@Web, Inc.
/s/ Klaus P. Besier
By: _________________________________
KLAUS P. BESIER
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Business@Web, Inc. hereby severally constitute Klaus P. Besier,
Eric Sockol and Craig Newfield and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement
filed herewith and any and all amendments to said Registration Statement (or
any registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933), and
generally to do all such things in our names and in our capacities as officers
and directors to enable Business@Web to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Klaus P. Besier Chairman of the Board, May 20, 1996
- ------------------------------------- President and Chief
KLAUS P. BESIER Executive Officer
(Principal Executive
Officer)
/s/ Eric Sockol Chief Financial May 20, 1996
- ------------------------------------- Officer and Treasurer
ERIC SOCKOL and Principal
Accounting Officer)
(Principal Financial
Officer
/s/ Albert Carnesale Director May 10, 1996
- -------------------------------------
ALBERT CARNESALE
II-7
<PAGE>
Director , 1996
- -------------------------------------
MANUEL DIAZ
/s/ Stephen Levy Director May 20, 1996
- -------------------------------------
STEPHEN LEVY
/s/ Ofer Nemirovsky Director May 20, 1996
- -------------------------------------
OFER NEMIROVSKY
/s/ Sundar Subramaniam Director May 20, 1996
- -------------------------------------
SUNDAR SUBRAMANIAM
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Business@Web, Inc:
We have audited, in accordance with generally accepted auditing standards,
the balance sheets of Business@Web, Inc. as of December 1994 and 1995 and the
related statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit) and cash flows for the period from inception
(January 19, 1994) to December 31, 1994 and the year ended December 31, 1995,
included in this Registration Statement, and have issued our report thereon
dated March 12, 1996 (except with respect to the matters discussed in Note 6,
as to which the date is May 20, 1996). Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in S-2 is the responsibility of the Company's management and
is presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
March 12, 1996 (except with respect to the
matters discussed in 6, as to which
the date is May 20, 1996)
S-1
<PAGE>
SCHEDULE II
BUSINESS@WEB, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING BAD DEBT WRITE- END
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSE OFFS OF PERIOD
------------------------------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Period from inception (January 19,
1994) to December 31, 1994 ......... $ -- $ -- $ -- $ --
Year ended December 31, 1995 ........ -- 143,000 (43,000) 100,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
* 1.1 Proposed Form of Underwriting Agreement
* 3.1 Restated Certificate of Incorporation
* 3.2 Certificate of Amendment to Restated Certificate of
Incorporation
** 3.3 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be filed with the Secretary
of State of Delaware prior to effectiveness of the offering.
** 3.4 Form of Third Amended and Restated Certificate of Incorporation
of the Registrant to be filed with the Secretary of State of
Delaware upon consummation of the offering
* 3.5 By-Laws of the Registrant
** 3.6 Form of Amended and Restated By-laws of the Registrant to be
effective prior to the effectiveness of the offering
** 4.1 Specimen Common Stock Certificate
** 5.1 Opinion of Peabody & Arnold with respect to legality of the
Common Stock
*10.1 1995 Stock Plan, as amended
**10.2 1996 Stock Plan
**10.3 Employee Stock Purchase Plan
*10.4 Lease for One Arsenal Marketplace, Watertown, Massachusetts
**10.5 Source Code License Agreement dated as of August 8, 1995
between the Registrant and InterGroup Technologies, Inc.
**10.6 Software License Agreement dated as of August 8, 1995 between
the Registrant and InterGroup Technologies, Inc.
**10.7 Source Code License Agreement dated as of February 8, 1996
between the Registrant and Mentor Communications Limited
**10.8 Software License Agreement dated as of August 10, 1995 between
the Registrant and Mystic River Software, Inc.
**10.9 Software, Education, Services Distribution Agreement dated June
21, 1995 between the Registrant and Open Environment
Corporation
**10.10 "SAP Customization Software" Agreement dated October 1, 1995
between the Registrant and Open Environment Corporation
**10.11 OEM Source License Agreement dated as of December 29, 1995
between the Registrant and Open Environment Corporation
**10.12 Joint Marketing Agreement effective as of February 27, 1996
between the Registrant and Hewlett-Packard Company
*10.13 Loan Agreement dated February 16, 1996 between the Registrant
and State Street Bank and Trust Company, together with Guaranty
(unlimited) of J&S Limited Partnership
**10.14 Warrant Purchase Agreement dated as of February 16, 1996
between the Registrant and SSB Investments, Inc.
**10.15 Common Stock Purchase Warrant dated as of February 16, 1996
issued to SSB Investments, Inc.
*10.16 Series B Convertible Preferred Stock Purchase Agreement dated
February 27, 1996 between the Company and Hewlett-Packard
Company
*10.17 Amendment to Series B Convertible Preferred Stock Purchase
Agreement dated as of March 6, 1996 between the Registrant and
Hewlett-Packard Company
*10.18 Series B Convertible Preferred Stock Purchase Agreement dated
March 6, 1996 among the Company and the purchasers named
therein
*10.19 Registration Rights Agreement dated March 6, 1996 among the
Company and the investors named therein
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
*10.20 Co-Sale Rights Agreement dated as of March 6, 1996 among the
investors and holders of shares of the Company's Common Stock
named therein
**10.21 Voting Agreement dated March 6, 1996 among the investors and
holders of shares of the Company's Common Stock named therein
*10.22 Series C Convertible Preferred Stock Purchase Agreement dated
as of March 29, 1996 among the Company and the purchasers named
therein
*10.23 Registration Rights Agreement dated as of March 29, 1996 among
the Company and the investors named therein
*10.24 Stock Purchase Agreement dated as of February 1996 between John
J. Donovan and Len Hafetz
*10.25 Assignment and Assumption Agreement dated as of March 15, 1996
between John J. Donovan and the Registrant
*10.26 Stock Repurchase Agreement dated as of April 4, 1996 between
the Registrant and
James Nondorf
*10.27 Stock Repurchase Agreement dated as of April 15, 1996 between
the Registrant and J&S Limited Partnership
*10.28 Stock Repurchase Agreement dated as of April 15, 1996 between
the Registrant and Harrington Trust Limited as Trustee of The
Appleby Trust
*10.29 Five-Year 9% Subordinated Note dated December 29, 1995 issued
to Harrington Trust Limited as Trustee of The Appleby Trust in
the principle amount of $750,000
*10.30 Five-Year 6% Convertible Subordinated Note dated May 3, 1995
issued to Harrington Trust Limited as Trustee of The Appleby
Trust in the principle amount of $750,000
*10.31 Five-Year 6% Convertible Subordinated Note dated May 3, 1995
issued to J&S Limited Partnership in the principle amount of
$250,000
**10.32 Loan Agreement dated as of March 31, 1996 between Klaus P.
Besier and the Registrant
*11 Statement Regarding Computation of Per Share Earnings
**23.1 Consent of Peabody & Arnold (included in Exhibit No. 5)
*23.2 Consent of Arthur Andersen LLP
**23.3 Consent of Goodwin, Procter & Hoar llp
*24 Power of Attorney (included in the signature page to this
Registration Statement).
*27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
<PAGE>
Draft of May 17, 1996
EXHIBIT 1.1
BUSINESS@WEB, INC.
Common Stock
(par value $.001 per share)
Underwriting Agreement
----------------------
, 1996
Goldman, Sachs & Co.
Hambrecht & Quist LLC
As representatives of the several Underwriters
named in Schedule I hereto
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Business@Web, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
3,000,000 shares and, at the election of the Underwriters, up to 562,500
additional shares of Common Stock, $.001 par value ("Stock"), of the Company,
and the stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 750,000 shares of Stock. The aggregate
of 3,750,000 shares to be sold by the Company is herein called the "Firm Shares"
and the aggregate of 562,500 additional shares to be sold by the Company is
herein called the "Optional Shares". The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-....) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment thereto,
each in the form heretofore delivered to you, and, excluding exhibits
thereto, to you for each of the other Underwriters, have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a "Rule 462(b)
Registration Statement") filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to such registration
statement has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial Registration Statement
and incorporated by reference in the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
<PAGE>
initiated or threatened by the Commission (any preliminary prospectus included
in the Initial Registration Statement and incorporated by reference in the Rule
462(b) Registration Statement, if any, or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act, is
hereinafter called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including the information contained in the
form of final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the time it
was declared effective, or the Rule 462(b) Registration Statement, if any, at
the time it became effective, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively called the
"Registration Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman, Sachs &
Co. expressly for use therein or by a Selling Stockholder expressly for use in
the preparation of the answers therein to Items 7 and 11(l) of Form S-1;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein or by a Selling Stockholder expressly for use in the preparation of the
answers therein to Items 7 and 11(l) of Form S-1;
(iv) The Company has not sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock (other than
-2-
<PAGE>
changes resulting from the exercise of stock options after the respective dates
as of which information is given in the Prospectus and prior to the Time of
Delivery (as defined below)), or long-term debt of the Company, or any material
adverse change, or any development that is reasonably likely to result in a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company, otherwise than as set forth or contemplated in the Prospectus;
(v) The Company does not own any real property. The Company has good and
valid title to all personal property owned by them, in each case free and clear
of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company;
(vi) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation to do business and is in good standing as a foreign
corporation in each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except where the
failure to be so qualified would not materially adversely affect the condition
(financial or otherwise), business, properties or results of operations of the
Company. The Company has no subsidiaries, as such term is defined in Rule 1-02
of Regulation S-X of the Commission;
(vii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus;
(viii) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the Company and the
compliance by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties; and no
consent, approval, authorization, order, registration or qualification
-3-
<PAGE>
of or with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Act of the Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the Underwriters
and the clearance of the public offering of the Shares by the Underwriters with
the National Association of Securities Dealers, Inc. (the "NASD");
(x) The Company is not in violation of its Certificate of Incorporation or
By-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock are accurate and complete;
(xii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely to the
Company, would individually or in the aggregate have a material adverse effect
on the financial position, shareholders' equity or results of operations of the
Company; and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
(xiii) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company" or an entity controlled by an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(xv) Arthur Andersen LLP, who have certified certain financial statements of
the Company, are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder; and
(xvi) Other than as set forth in the Prospectus, the Company has sufficient
interests in all patents, trademarks, servicemarks, trade names, copyrights,
trade secrets, information, proprietary rights and processes ("Intellectual
Property") necessary for its business as now conducted and necessary in
connection with the products and services under development and described in the
Prospectus without any conflict with or infringement of the interests of others
and have taken all reasonable steps necessary to secure interests in such
Intellectual Property from their contractors; the Company is not aware of
outstanding options, licenses or agreements of any kind relating to the
Intellectual Property, and the Company is not a party to or bound by any
options, licenses or agreements with respect to the Intellectual Property of any
other person or entity; none of the technology employed
-4-
<PAGE>
by the Company has been obtained or is being used by the Company in
violation of any contractual fiduciary obligation binding on the Company or
any of its directors or executive officers or, to the Company's knowledge,
any of its employees or otherwise in violation of the rights of any person;
except as disclosed in the Prospectus, neither of the Company nor any of
its employees has received any written or, to the Company's knowledge, oral
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the Intellectual Property of any
other person or entity; neither the execution nor delivery of this
Agreement, nor the operation of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will
result in a breach or violation of the terms, conditions or provisions of,
or constitute a default under, any material contract, covenant or
instrument known to the Company under which any of such employees is now
obligated; and the Company has taken and will maintain reasonable measures
to prevent the unauthorized dissemination or publication of its
confidential information and, to the extent contractually required to do
so, the confidential information of third parties in its possession.
(b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and the Power of Attorney and the Custody Agreement hereinafter
referred to, and for the sale and delivery of the Shares to be sold by such
Selling Stockholder hereunder, have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement, the Power-of-Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of the
provisions of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of such Selling Stockholder if such Selling Stockholder is a
corporation, the Partnership Agreement of such Selling Stockholder if such
Selling Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to the
First Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims, other than the Power of Attorney and the
Custody Agreement hereinafter referred to; and,
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upon delivery of such Shares and payment therefor pursuant hereto, good and
valid title to such Shares, free and clear of all liens, encumbrances, equities
or claims, will pass to the several Underwriters;
(iv) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, such Selling
Stockholder will not offer, sell contract to sell or otherwise dispose of,
except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any securities
that are convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than pursuant
to employee stock option plans existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(v) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements to
the Registration Statement and the Prospectus, when they become effective or are
filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not 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 not misleading;
(vii) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, such Selling
Stockholder will deliver to you prior to or at the First Time of Delivery a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares to be
sold by such Selling Stockholder hereunder have been placed in custody under a
Letter of Transmittal and Custody Agreement, in the form heretofore furnished to
you (the "Custody Agreement"), duly executed and delivered by such Selling
Stockholder to Business@Web, Inc., as custodian (the "Custodian"), and such
Selling Stockholder has duly executed and delivered a Power of Attorney, in the
form heretofore furnished to you (the "Power of Attorney"), appointing the
persons indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price
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to be paid by the Underwriters to the Selling Stockholders as provided in
Section 2 hereof, to authorize the delivery of the Shares to be sold by such
Selling Stockholder hereunder and otherwise to act on behalf of such Selling
Stockholder in connection with the transactions contemplated by this
Agreement and the Custody Agreement; and
(ix) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder; the arrangements made by such
Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that
extent irrevocable; the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by
the occurrence of any other event; if any individual Selling Stockholder or
any such executor or trustee should die or become incapacitated, or if any
such estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the
Custody Agreements; and actions taken by the Attorneys-in-Fact pursuant to
the Powers of Attorney shall be as valid as if such death, incapacity,
termination, dissolution or other event had not occurred, regardless of
whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity, termination, dissolution or
other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $.............., the number of Firm Shares (to
be adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Shares to be sold by the Company and each of
the Selling Stockholders as set forth opposite their respective names in
Schedule II hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by such Underwriter as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the aggregate number of Firm Shares to be purchased by all of the Underwriters
from the Company and all of the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
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The Company hereby grants to the Underwriters the right to purchase at
their election up to 562,500 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery or, unless you and the
Company otherwise agree in writing, earlier than two or later than ten business
days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co., for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer or certified or
official bank check or checks, payable to the order of the Company and the
Custodian in federal (same day) funds. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on
............., 1996 or such other time and date as Goldman, Sachs & Co., the
Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of
the Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, will be delivered at the offices of Goodwin,
Procter & Hoar LLP, 53 State Street, Boston, Massachusetts 02109 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 3:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
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5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use all reasonable efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in such quantities as you may
reasonably request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such time any
events shall have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
during such period to amend or supplement the Prospectus in order to comply with
the Act, to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine months
or more after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
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(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option or employee stock purchase plans existing
on, or upon the conversion or exchange of convertible or exchangeable
securities, or the exercise of warrants, outstanding as of, the date of
this Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants);
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such as financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market;
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(k) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act.
6. The Company and each of the Selling Stockholders covenant and agree
with one another and with the several Underwriters that (a) the Company will pay
or cause to be paid the following: (i) the fees, disbursements and expenses of
the Company's counsel and
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accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the Nasdaq
National Market; (v) the filing fees incident to securing any required review by
the NASD of the terms of the sale of the Shares; (vi) the cost of preparing
stock certificates; (vii) the cost and charges of any transfer agent or
registrar and (viii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section and (b) such Selling Stockholder will pay, or cause to be paid, all
costs and expenses incident to the performance of such Selling Stockholder's
obligations hereunder which are not specifically provided for in this Section,
including all expenses and taxes incident to the sale and delivery of the Shares
to be sold by such Selling Stockholder to the Underwriters hereunder. In
connection with clause (b) of the preceding sentence, Goldman, Sachs & Co.
agrees to pay New York State stock transfer tax, and the Selling Stockholder
agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such
tax payment is not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that the Company shall bear, and
the Selling Stockholders shall not be required to pay or to reimburse the
Company for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with
Section 5(a) hereof if the Company has elected to rely upon Rule 462(b),
the Rule 462(b) Registration Statement shall have become effective by
10:00 p.m., Washington, D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
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(b) Hale and Dorr, counsel for the Underwriters, shall have furnished to
you such written opinion or opinions (a draft of such opinion is attached as
Annex II (a) hereto), dated such Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (vii), (xi) and (xiii) of subsection (c) below
as well as such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Goodwin, Procter & Hoar LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II (b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the Shares being delivered at such Time of Delivery) have been
duly and validly authorized and issued and are fully paid and non-
assessable; and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, except where failure to be so qualified would not materially
adversely affect the condition (financial or otherwise), business,
properties or results of operations of the Company (such counsel being
entitled to rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon certificates of
officers of the Company or certificates of government officials, provided
that such counsel shall state that they believe that both you and they are
justified in relying upon such certificates);
(iv) To the best of such counsel's knowledge, the Company has no
subsidiaries (such counsel being entitled to rely in respect of the opinion
in this clause upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(v) Any real property and buildings held under lease by the Company
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company (in
giving the opinion in this clause, such counsel may state that they are
relying upon opinions of counsel to the lessors of such property and, in
respect of matters of fact, upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and certificates);
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(vi) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property of the Company is the subject which are required to be described in the
Prospectus which are reasonably likely to have a material adverse effect on the
current or future financial position, stockholders' equity or results of
operations of the Company; and, to the best of such counsel's knowledge, no such
proceedings are threatened by governmental authorities or threatened by others;
(vii) This Agreement has been duly authorized, executed and delivered
by the Company;
(viii) The issue and sale of the Shares being delivered at such Time of
Delivery to be sold by the Company and the compliance by the Company with all of
the provisions of this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation of, or
constitute a default under, any document filed as an exhibit to the Registration
Statement or any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the Company is a
party or by which the Company is bound or to which any of the property or assets
of the Company is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of its
properties;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act of the Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Shares by
the Underwriters and the clearance of the public offering of the Shares with the
NASD;
(x) To the best of such counsel's knowledge, the Company is not in
violation of its Certificate of Incorporation;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock and in paragraph 5 under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and documents
referred to therein, are accurate and complete; provided, however, that such
counsel may rely on representations of the Company with respect to factual
matters contained in such statements (so long as such counsel shall state that
nothing has come to their attention which leads them to believe that such
representations are not true and correct in all material respects);
(xii) The Company is not an "investment company" or an entity controlled
by an "investment company", as such terms are defined in the Investment Company
Act;
(xiii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time of
Delivery (other than the financial statements and notes thereto, financial
schedules and other financial data included therein, as to which such
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counsel need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the opinion in
subsection (x) of this Section 7(c), they have no reason to believe that,
as of its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of Delivery (other
than the financial statements and notes thereto, financial schedules and
other financial data included therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and notes thereto, financial schedules and other financial data included
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of such Time of
Delivery, either the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements and notes thereto,
financial schedules and other financial data included therein, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(d) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their written
opinion with respect to each of the Selling Stockholders for whom they are
acting as counsel (a draft of each such opinion is attached as Annex II(c)
hereto), dated such Time of Delivery, in form and substance satisfactory to you,
to the effect that:
(i) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid and
binding agreements of such Selling Stockholder in accordance with their
terms;
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder; and the sale of the Shares to be sold
by such Selling Stockholder hereunder and the compliance by such Selling
Stockholder with all of the provisions of this Agreement, the Power-of-
Attorney and the Custody Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound or to which any of the
property or assets of such Selling Stockholder is subject,
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<PAGE>
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if
such Selling Stockholder is a corporation, the Partnership Agreement of
such Selling Stockholder if such Selling Stockholder is a partnership
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement in connection with
the Shares to be sold by such Selling Stockholder hereunder, except the
registration under the Act of such Shares, such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of such Shares by the Underwriters and the clearance
of the public offering of such Shares by the NASD;
(iv) Immediately prior to such Time of Delivery, such
Selling Stockholder had good and valid title to the Shares to be sold
at such Time of Delivery by such Selling Stockholder under this
Agreement, free and clear of all liens, encumbrances, equities or
claims, and full right, power and authority to sell, assign, transfer
and deliver the Shares to be sold by such Selling Stockholder
hereunder; and
(v) Good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or claims, has been transferred to
each of the several Underwriters who have purchased such Shares in good
faith and without notice of any such lien, encumbrance, equity or claim
or any other adverse claim within the meaning of the Uniform Commercial
Code.
In rendering the opinion in paragraph (iv), such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Arthur Andersen LLP shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance reasonably
satisfactory to you, to the effect set forth in Annex I hereto (the
executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(f)(i) The Company shall not have sustained since the date of the
latest audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have
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been any change in the capital stock (other than changes resulting from the
exercise of stock options after the respective dates as of which
information is given in the Prospectus and prior to the Time of Delivery)
or long-term debt of the Company or any change, or any development that is
reasonably likely to result in a prospective change, in or affecting the
general affairs, management, financial position, shareholders' equity or
results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on the Nasdaq
National Market; (ii) a suspension or material limitation in trading in the
Company's securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities declared by Federal, New York
or Massachusetts State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) The Shares at such Time of Delivery shall have been duly listed
for quotation on the Nasdaq National Market;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each holder of more than ____ shares
of Stock, substantially to the effect set forth in Subsection 1(b)(iv)
hereof in form and substance satisfactory to you;
(j) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and of the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholders, respectively,
herein at and as of such Time of Delivery, as to the performance by the
Company and the Selling Stockholders of all of their respective obligations
hereunder to be performed at or prior to such Time of Delivery, and as to
such other matters as you may reasonably request, and the Company shall
have furnished or caused to be furnished certificates as to the matters set
forth in subsections (a) and (f) of this Section; and
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof)
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arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Selling Stockholders shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein; and provided, further, that the liability of a
Selling Stockholder pursuant to this subsection (a) shall not exceed the product
of the number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus.
(b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of
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the indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
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<PAGE>
(e) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone a Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of
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the Company and the Selling Stockholders to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholders, except for the expenses
to be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason the any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you on request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
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13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel and the Custodian, if any, counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company and the Selling Stockholders
for examination, upon request, but without warranty on your part as to the
authority of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power-of-Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Business@Web, Inc.
By:..........................
Name:
Title:
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Moongate Holdings Ltd.
Sundar Subramaniam
Pantio Holding Ltd.
J&S Limited Partnership
By:..........................
Name:
Title:
As Attorney-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule II
to this Agreement.
Accepted as of the date hereof:
Goldman, Sachs & Co.
Hambrecht & Quist LLC
By:.................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
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SCHEDULE I
Number of Optional
Total Number of Shares to be Purchased
Firm Shares if Maximum
Underwriter to be Purchased Option Exercised
--------------- ------------------
Goldman, Sachs & Co.................
Hambrecht & Quist LLC..............
Total --------------- ------------------
3,750,000 562,500
=============== ==================
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SCHEDULE II
Number of Optional
Total Number of Shares to be Purchased
Firm Shares if Maximum
to be Purchased Option Exercised
--------------- -----------------------
The Company.......................... 3,000,000 562,500
The Selling Stockholders(a):
Moongate Holdings Ltd............ 311,641 0
Sundar Subramaniam............... 200,000 0
Pantio Holding Ltd............... 120,337 0
J&S Limited Partnership.......... 118,022 0
Total
--------------- -----------------------
3,750,000 562,500
=============== =======================
(a) This Selling Stockholder is represented by Peabody & Arnold and has
appointed Klaus P. Besier, Eric Sockol and Craig Newfield, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
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ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable published
rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such fiscal years included in
the Prospectus;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
<PAGE>
(vi) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred to
below, a reading of the latest available interim financial statements of the
Company and its subsidiaries, inspection of the minute books of the Company and
its subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations, or (ii) any material modifications
should be made to the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the
-2-
<PAGE>
latest balance sheet included in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
-3-
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
BUSINESS@WEB, INC.
Business@Web, Inc. (the "Corporation"), originally incorporated under the
name Object Power, Incorporated by original Certificate of Incorporation filed
with the office of the Secretary of State of the State of Delaware on January
19, 1994, as amended, and currently organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify
that the Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, has duly adopted a resolution, pursuant to Sections 141 and
242 of the General Corporation Law of the State of Delaware, setting forth an
amended and restated Certificate of Incorporation of the Corporation and
declaring said amendment and restatement to be advisable. The stockholders of
the Corporation have duly approved said amendment and restatement by the
required vote of such stockholders, adopted by a written action in lieu of a
meeting of such stockholders, all in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware, and written notice of
the taking of such action was given promptly to those stockholders who have not
consented in writing, as required by Section 228 of the General Corporation Law
of the State of Delaware. The Certificate of Incorporation of the Corporation,
as amended and restated in its entirety, is as follows:
FIRST: The name of the Corporation is Business@Web, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of the
Corporation's registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is thirty-three million
(33,000,000) shares, thirty million (30,000,000) of which shall be Common Stock,
par value $.001 per share ("Common Stock"), and three million (3,000,000) of
which shall be Preferred Stock, par value $1.00 per share ("Preferred Stock").
Of the authorized Preferred Stock, one million four hundred thirty-one thousand
four hundred twelve (1,431,412) shares shall be designated Series B Convertible
Preferred Stock and one million five hundred sixty-eight thousand five hundred
<PAGE>
eighty-eight (1,568,588) shares shall be undesignated. All shares of the series
of Preferred Stock designated Series A Preferred Stock issued and outstanding
prior to the filing of this Restated Certificate of Incorporation have been
surrendered for conversion into Common Stock and retired, and the series of
Preferred Stock designated as Series A Preferred Stock is hereby cancelled and
eliminated from the shares which the Corporation is authorized to issue.
Descriptions of the undesignated Preferred Stock, the Series B Convertible
Preferred Stock and the Common Stock are as follows:
I. PREFERRED STOCK
Description of Undesignated Preferred Stock.
- -------------------------------------------
1. Issuance of Preferred Stock in Classes or Series. The undesignated
------------------------------------------------
Preferred Stock of the Corporation may be issued in one or more classes or
series at such time or times and for such consideration as the Board of
Directors of the Corporation may determine. Each class or series shall be so
designated as to distinguish the shares thereof from the shares of all other
classes and series. Except as to the relative preferences, powers, dividends,
qualifications, rights and privileges referred to in the next paragraph below,
in respect of any or all of which there may be variations between different
classes or series of Preferred Stock, all shares of Preferred Stock shall be
identical. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes
unless otherwise specifically set forth herein.
2. Authority to Establish Variations Between Classes or Series of
--------------------------------------------------------------
Preferred Stock. The Board of Directors of the Corporation is expressly
- ---------------
authorized, by a vote of a majority of the members of the Board of Directors
then in office, subject to the limitations prescribed by law and the provisions
of this Certificate of Incorporation, to provide by adopting a vote or votes, a
Certificate of Designation of which shall be filed in accordance with the
General Corporation Law of the State of Delaware, for the issue of the
undesignated Preferred Stock in one or more classes or series, each with such
designations, preferences, voting powers, dividends, qualifications, special or
relative rights and privileges as shall be stated in the Certificate of
Designation and the resolutions of the Board of Directors creating such class or
series.
Description of Series B Convertible Preferred Stock.
- ---------------------------------------------------
1. Liquidation Rights.
------------------
(a) Treatment at Liquidation, Dissolution or Winding Up.
---------------------------------------------------
(i) Except as otherwise provided in Section 1(b) below, in the
event of any liquidation, dissolution or winding up of the affairs of the
corporation, whether voluntary or involuntary, the holders of Series B
Convertible Preferred Stock shall be entitled to be paid first out of the assets
of the corporation available for distribution to holders of the
<PAGE>
corporation's capital stock of all classes, before payment or distribution of
any of such assets to the holders of any other class or series of the
corporation's capital stock designated to be junior to the Series B Convertible
Preferred Stock, an amount equal to $5.54 per share of Series B Convertible
Preferred Stock (which amount shall be subject to equitable adjustment whenever
there shall occur a stock dividend, distribution, combination of shares,
reclassification or other similar event with respect to Series B Convertible
Preferred Stock and, as so adjusted from time to time, is hereinafter referred
to as the "Base Liquidation Price") plus all dividends thereon accrued but
unpaid, to and including the date full payment shall be tendered to the holders
of Series B Convertible Preferred Stock with respect to such liquidation,
dissolution or winding up.
(ii) Following payment in full to the holders of Series B
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof, the remaining assets of the corporation available for
distribution to holders of the corporation's capital stock shall be distributed
among the holders of the Common Stock and the holders of the Series B
Convertible Preferred Stock on a share for share basis, with each holder of a
share of Series B Convertible Preferred Stock receiving the amount that would
have been payable to the holder of such share had all shares of Series B
Convertible Preferred Stock been converted to Common Stock pursuant to Section
2(a) hereof immediately following payment in full to the holders of Series B
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof.
(iii) If the assets of the corporation shall be insufficient to
permit the payment in full to the holders of Series B Convertible Preferred
Stock of all amounts distributable to them under Section 1(a)(i) hereof, then
the entire assets of the corporation available for such distribution shall be
distributed ratably among the holders of Series B Convertible Preferred Stock.
(b) Treatment of Reorganizations, Consolidations, Mergers and Sales
---------------------------------------------------------------
of Assets. A consolidation or merger of the corporation, or a sale of all or
- ---------
substantially all of the assets of the corporation (other than a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in a transaction in which the shareholders of the corporation
immediately prior to the transaction possess more than 50% of the voting
securities of the surviving entity (or parent, if any) immediately after the
transaction) shall be regarded as a liquidation, dissolution or winding up of
the affairs of the corporation within the meaning of this Section 1.
(c) Distributions Other than Cash. Whenever the distribution provided
-----------------------------
for in this Section 1 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the corporation.
2. Conversion. The holders of Series B Convertible Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
<PAGE>
(a) Right to Convert; Conversion Price. Each share of Series B
----------------------------------
Convertible Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series B Convertible Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $5.54 by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. The Conversion Price
for purposes of calculating the number of shares of Common Stock deliverable
upon conversion without the payment of any additional consideration by the
holder of Series B Convertible Preferred Stock (the "Conversion Price") shall
initially be $5.54. Such initial Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into which
Series B Convertible Preferred Stock is convertible, as hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series B
-----------------------
Convertible Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Series B Convertible Preferred Stock, and shall give
written notice to the corporation at such office that such holder elects to
convert the same and shall state therein the name of such holder or the name or
names of the nominees of such holder in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued. No fractional shares
of Common Stock shall be issued upon conversion of any shares of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock
to which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series B Convertible Preferred Stock, or to such
holder's nominee or nominees, a-certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(c) Automatic Conversion.
--------------------
(i) Each share of Series B Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (subject to adjustment as provided in Section 2(c)(iii)) upon:
(A) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock to the public
at an initial public offering price per share of not less than $8.25
(adjusted proportionately to give effect to any stock dividend, stock
distribution or subdivision or any combination or
<PAGE>
consolidation of Common Stock) and with gross proceeds of not less than
$15,000,000 (a "Qualified IPO") or
(B) the written election of the holders of not less than a
majority of the then outstanding shares of Series B Convertible Preferred
Stock to require such mandatory conversion.
(ii) Upon the occurrence of an event specified in Section
2(c)(i) hereof, all shares of Series B Convertible Preferred Stock shall be
converted automatically without any further action by any holder of such shares
and whether or not the certificate or certificates representing such shares are
surrendered to the corporation or the transfer agent for the Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be obligated to issue a certificate or certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificate or
certificates evidencing such shares of Series B Convertible Preferred Stock
being converted are either delivered to the corporation or the transfer agent of
the Series B Convertible Preferred Stock, or the holder notifies the corporation
or such transfer agent that such certificate or certificates have been lost,
stolen, or destroyed and executes an agreement satisfactory to the corporation
to indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate indemnity
bond. Upon the automatic conversion of Series B Convertible Preferred Stock,
each holder of Series B Convertible Preferred Stock shall surrender the
certificate or certificates representing such holder's shares of Series B
Convertible Preferred Stock at the office of the corporation or of the transfer
agent for the Series B Convertible Preferred Stock. Thereupon, there shall be
issued and delivered to such holder, promptly at such office and in such
holder's name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Series B Convertible Preferred Stock surrendered were convertible
on the date on which such automatic conversion occurred. No fractional shares of
Common Stock shall be issued upon the automatic conversion of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock to
which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price.
(iii) In the event of the automatic conversion of shares of Series B
Convertible Preferred Stock into shares of Common Stock, pursuant to Section
2(c)(i)(A), upon the occurrence of a Qualified IPO in which the initial offering
price per share of Common Stock is less than $10.25 (the "Adjustment Trigger
Price"), the Conversion Price in effect immediately prior to the closing of the
Qualified IPO shall be adjusted automatically to the greater of (A) the price
determined by dividing (i) the initial offering price per share of Common Stock
in the Qualified IPO by (ii) 1.85 (the "IPO Adjusted Conversion Price") or (B)
$4.46 (the "Adjustment Floor Price"); provided, however, that there shall be no
adjustment of the Conversion Price pursuant to the foregoing clause if the
Conversion Price resulting from adjustment would be higher than the Conversion
Price in effect immediately prior to the closing of the Qualified IPO. If, prior
to the Qualified IPO, the Conversion Price shall have been adjusted pursuant to
Section 2(d)(vi)(A) in the event of a stock dividend, stock distribution or
subdivision or pursuant to Section 2(d)(vi)(B) in the event of a
<PAGE>
combination or consolidation of Common Stock, the Adjustment Trigger Price, the
Adjustment Floor Price and the IPO Adjusted Conversion Price shall be decreased
or increased proportionately to give effect to such stock dividend, stock
distribution or subdivision or such combination or consolidation.
(d) Adjustments to Conversion Price for Diluting Issues.
-------------------------------------------- ------
(i) Special Definitions. For purposes of this Section 2(d), the
-------------------
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
--------
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(B) "Original Issue Date" shall mean the date on which a
---------------------
share of Series B Convertible Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
------------------------
indebtedness, shares (other than Common Stock and Series B Convertible
Preferred Stock) or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
-----------------------------------
shares of Common Stock issued (or, pursuant to Section 2(d)(iii), deemed to
be issued) by the corporation after the Original Issue Date, other than the
following (collectively, "Excluded Shares"):
(I) shares of Common Stock issued or issuable upon
conversion of shares of Series B Convertible Preferred Stock; or
(II) shares of Common Stock issued or issuable upon
exercise or conversion of Options or Convertible Securities
outstanding on the Original Issue Date; or
(III) shares of Common Stock issued or issuable to
officers, employees or directors of, or consultants to, the
corporation pursuant to a stock purchase or option plan or other
employee stock bonus arrangement (collectively, the "Plans") approved
by the Board of Directors; provided, however, that shares of Common
Stock issued or deemed issued to a director of the corporation
pursuant to options or other purchase rights granted after the
Original Issue Date shall be Excluded Shares only if granted at the
time of, or in connection with, such director's initial election to
the Board of Directors; or
(IV) shares of Common Stock issued or issuable
pursuant to warrants issued in connection with the establishment of
credit
<PAGE>
facilities for the corporation (including, without limitation, in
connection with equipment leasing arrangements); or
(V) shares of Common Stock or Convertible Securities
issued with the written consent of the holders of not less than a
majority of the outstanding shares of Series B Convertible Preferred
Stock.
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which a share of Series B Convertible Preferred
Stock is convertible shall be made, by adjustment in the Conversion Price in
respect of the issuance of Additional Shares of Common Stock or otherwise: (i)
unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the corporation is less than the Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock or, (ii) if prior to such issuance, the
corporation receives written notice from the holders of a majority of the then
outstanding shares of Series B Convertible Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
---------------------------------------------------------------
Stock.
- -----
(A) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 2(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record date, as
the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(I) no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(II) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase
or decrease in
<PAGE>
the consideration payable to the corporation, or any increase or
decrease in the number of shares of Common Stock issuable upon the
exercise, conversion or exchange thereof, the Conversion Price
computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(III) upon the expiration of any such options or any rights
of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options for
Common Stock the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the
consideration actually received by the corporation upon such
exercise, or for the issue of all such Convertible Securities
which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the corporation upon
such conversion or exchange; and
(b) in the case of Options for Convertible Securities only
the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such
Options, and the consideration received by the corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the corporation
for the issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the corporation
(determined pursuant to Section 2(d)(v)) upon the issue of the
Convertible Securities with respect to which such Options were
actually exercised;
(IV) no readjustment pursuant to clause (II) or (III) above
shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (a) the Conversion Price on the original
adjustment date, or (b) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
<PAGE>
(V) in the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (III) above; and
(VI) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this Section 2(d)(iii) as of the
actual date of their issuance.
(B) Stock Dividends, Stock Distributions and Subdivisions. In
-----------------------------------------------------
the event the corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock), then and in
any such event, Additional Shares of Common Stock shall be deemed to have
been issued:
(I) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend or distribution, or
(II) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
corporate action becomes effective.
If such record date shall have been fixed and no part of such dividend
shall have been paid on the date fixed therefor, the adjustment
previously made for the Conversion price which became effective on
such record date shall be cancelled as of the close of business on
such record date, and thereafter the Conversion Price shall be
adjusted pursuant to this Section 2(d)(iii) as of the time of actual
payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
- ----------------------
(A) In the event the corporation shall issue Additional Shares
of Common Stock (including, without limitation, Additional Shares of Common
Stock deemed to be issued pursuant to Section 2(d)(iii) but excluding
Additional Shares of Common Stock deemed to be issued pursuant to Section
2(d)(iii)(B), which event is dealt with in Section 2(d)(vi) hereof),
without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and
<PAGE>
immediately prior to such issue, then and in such event, such Conversion
Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to such issue plus
(II) the number of shares of Common Stock which the aggregate consideration
received or deemed to have been received by the corporation for the total
number of Additional Shares of Common Stock so issued would purchase at
such Conversion Price, and the denominator of which shall be (I) the number
of shares of Common Stock outstanding immediately prior to such issue plus
(II) the number of Additional Shares of Common Stock so issued or deemed to
be issued.
(B) For the purposes of Section 2(d)(iv)(A) hereof, (i) all
shares of Common Stock issuable upon conversion of shares of Series B
Convertible Preferred Stock, and upon exercise of options or conversion or
exchange of Convertible Securities which are part of the Excluded Shares,
outstanding immediately prior to any issue of Additional Shares of Common
Stock, or any event with respect to which Additional Shares of Common Stock
shall be deemed to be issued, shall be deemed to be outstanding; and (ii)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 2(d)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(C) Notwithstanding anything to the contrary contained herein,
the applicable Conversion Price in effect at the time Additional Shares of
Common Stock are issued or deemed to be issued shall not be reduced
pursuant to Section 2(d)(iv)(A) hereof at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $0.01 or
more.
(v) Determination of Consideration. For purposes of this Section
------------------------------
2(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue,
as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
corporation
<PAGE>
for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and
(II) above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
----------------------------------
share received by the corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 2(d)(iii)(A), relating to
Options and Convertible Securities, shall be determined by dividing (I) the
total amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Con vertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration)
payable to the corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by (II) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
- ----------------------------------------------
(A) Stock Dividends, Distributions or Subdivisions. In the event
----------------------------------------------
the corporation shall issue Additional Shares of Common Stock pursuant to
Section 2(d)(iii)(B) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect immediately prior to such stock
dividend, stock distribution or subdivision shall, concurrently with the
effectiveness of such stock dividend, stock distribution or subdivision, be
proportionately decreased.
(B) Combinations or Consolidations. In the event the outstanding
------------------------------
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior to such combination
or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series B
Convertible Preferred Stock against impairment.
<PAGE>
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series B Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any affected holder of Series B Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of each share of Series B Convertible Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Series B Convertible Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all con vertible Series B Convertible Preferred Stock.
(i) Certain Taxes.. The corporation shall pay any issue or transfer
--------------
taxes payable in connection with the conversion of any shares of Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be required to pay any tax which may be payable in respect of any transfer to a
name other than that of the holder of such Series B Convertible Preferred Stock.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series B Convertible Preferred Stock,
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Convertible Preferred Stock, in any manner which interferes
with the timely conversion or transfer of such Series B Convertible Preferred
Stock.
3. Voting Rights.
-------------
Except as otherwise provided herein or required by law or by the
provisions establishing any other series of Preferred Stock, the holders of
Common Stock and the holders of Series B Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting and shall vote as one class upon
any matter submitted to the stockholders for a vote, on the following basis:
<PAGE>
(i) Holders of Common Stock shall have one vote per share of
Common Stock held by them; and
(ii) Holders of Series B Convertible Preferred Stock shall have
that number of votes per share of Series B Convertible Preferred Stock as is
equal to the number of shares of Common Stock into which each such share of
Series B Convertible Preferred Stock held by such holder could be converted on
the date for determination of stockholders entitled to vote at the meeting.
4. Dividend Rights.
---------------
(a) From and after the Original Issue Date, dividends shall accrue on
each share of the Series B Convertible Preferred Stock, whether or not funds are
legally available therefor and whether or not declared by the Board of
Directors, in the amount per annum of $0.3324 per share of Series B Convertible
Preferred Stock (the "Series B Dividends"). From time to time the Board of
Directors of the corporation may declare and pay dividends or distributions on
shares of the Common Stock or on any other class or series of capital stock of
the corporation, but only if all accrued Series B Dividends shall have been paid
in full prior to the date of any such declaration, payment or distribution.
(b) In the event the Board of Directors of the corporation shall
declare a dividend payable upon the then outstanding shares of the Common Stock
(other than a dividend payable entirely in shares of the Common Stock of the
corporation), the Board of Directors shall declare at the same time a dividend
upon the then outstanding shares of the Series B Convertible Preferred Stock,
payable at the same time as the dividend paid on the Common Stock, in an amount
equal to the amount of dividends per share of Series B Convertible Preferred
Stock, as would have been payable on the largest number of whole shares of
Common Stock into which each share of Series B Convertible Preferred Stock held
by each holder thereof if such Series B Convertible Preferred Stock had been
converted to Common Stock pursuant to the provisions of Section 2 hereof as of
the record date for the determination of holders of Common Stock entitled to
receive such dividends; and
(c) In the event the Board of Directors of the corporation shall
declare a dividend payable upon any class or series of capital stock of the
corporation other than Common Stock, the Board of Directors shall declare at the
same time a dividend upon the then outstanding shares of Series B Convertible
Preferred Stock, payable at the same time as such dividend on such other class
or series of capital stock in an amount equal to (i) in the case of any series
or class convertible into Common Stock, that dividend per share of Series B
Convertible Preferred Stock, as would equal the dividend payable on such other
class or series determined as if all such shares of such class or series had
been converted to Common Stock and all shares of Series B Convertible Preferred
Stock have been converted to Common Stock on the record date for the
determination of holders entitled to receive such dividend or (ii) if such class
or series of Capital Stock is not convertible into Common Stock, at a rate per
share of Series B Convertible Preferred Stock determined by dividing the amount
of the dividend payable on each share of such class or series of capital stock
by the original
<PAGE>
issuance price of such class or series of capital stock and multiplying such
fraction by the Base Liquidation Price then in effect.
5. Redemption.
----------
(a) At the written request, made on or after December 31, 2002, of
the holders of a majority of the then-outstanding shares of Series B Convertible
Preferred Stock, the corporation shall on March 31 in each of the three (3)
years immediately following the date of such request (each, a "Redemption
Date"), call for redemption in accordance with Section 5(b) hereof and shall
redeem for the applicable Redemption Amount (as hereinafter defined) from each
holder of Series B Convertible Preferred Stock such number of shares of Series B
Convertible Preferred Stock as shall be equal to thirty-three and one third
percent (33 1/3%) of all of the shares of Series B Convertible Preferred Stock
held by such holder on the Redemption Date. For the purposes of this Section 5,
the term "Redemption Amount" means, for each share of Series B Convertible
Preferred Stock to be redeemed, the sum of (i) the Base Liquidation Price plus
(ii) an amount equal to any dividends accrued and unpaid thereon at the time of
such redemption.
(b) Call for redemption shall be made by the corporation by notice
sent by first class mail, postage prepaid, to each holder of record of Series B
Convertible Preferred Stock to be redeemed, not less than thirty (30) days nor
more than sixty (60) days prior to the Redemption Date set forth therein, at
such holder's address as it appears on the books of the corporation. Such
notice shall set forth (i) the Redemption Date and the place of redemption, (ii)
the number of shares to be redeemed (in accordance with Section 5(a) hereof) and
(iii) the Redemption Amount per share and the aggregate Redemption Amount to be
paid with respect to the shares to be redeemed. The corporation shall be
obligated to redeem shares of Series B Convertible Preferred Stock in accordance
with Section 5(a) hereof whether or not any notice of redemption is given as
required herein. If, before the close of business on the relevant Redemption
Date, any holder of record of Series B Convertible Preferred Stock shall have
surrendered any shares of Series B Convertible Preferred Stock for conversion
pursuant to Section 2(a) hereof, the corporation shall credit against the number
of shares of Series B Convertible Preferred Stock otherwise required to be
redeemed from such holder, and shall not redeem the number of shares of Series B
Convertible Preferred Stock which had been converted by such holder on or before
such Redemption Date and which had not previously been credited against any
redemption.
(c) If, on or before any Redemption Date, the funds necessary for
such redemption shall have been set aside by the corporation and deposited with
a bank or trust company in trust for the pro rata benefit of the holders of
Series B Convertible Preferred Stock to be redeemed pursuant to Section 5(a)
hereof, then, notwithstanding that any certificates for such shares of Series B
Convertible Preferred Stock to be redeemed shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding from and after the Redemption Date, and all rights of holders of
such shares shall forthwith, after the Redemption Date, cease and terminate,
excepting only the right to receive the full redemption funds therefor to which
they are entitled. Any interest accrued on funds so deposited and unclaimed by
stockholders entitled thereto shall be paid to
<PAGE>
such stockholders at the time their respective shares are redeemed or to the
corporation at the time unclaimed amounts are paid to it. In case the holders
of Series B Convertible Preferred Stock to be redeemed pursuant to Section 5(a)
hereof shall not, within five (5) years after the Redemption Date, claim the
amounts so deposited with respect to the redemption thereof, any such bank or
trust company shall, upon demand, pay over to the corporation such unclaimed
amounts and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof to such holder and such holder shall look only
to the corporation for the payment thereof. Any funds so deposited with a bank
or trust company which shall not be required for such redemption by reason of
the exercise subsequent to the date of such deposit, of the right of conversion
of any shares, or otherwise, shall be returned to the corporation forthwith.
(d) If the funds of the corporation legally available for redemption
of shares of Series B Convertible Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series B Convertible
Preferred Stock required to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of whole
shares of Series B Convertible Preferred Stock pro rata from among all holders
of Series B Convertible Preferred Stock on the basis of the aggregate number of
shares of Series B Convertible Preferred Stock held by each such holder on the
Redemption Date. The shares of Series B Convertible Preferred Stock not
redeemed shall remain outstanding and entitled to all rights and preferences
provided herein. At any time thereafter when additional funds of the
corporation are legally available for the redemption of such shares of Series B
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available.
(e) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
corporation may not incur any indebtedness for money borrowed (unless the
proceeds of such incurrence of indebtedness are used to make all overdue
redemptions) or borrow or reborrow any amounts under any lines of credit which
it may then have outstanding without the prior written consent of the holders of
not less than a majority of the then outstanding shares of Series B Convertible
Preferred Stock; provided, however, that the corporation may incur indebtedness
for money borrowed or borrow or reborrow any amounts under any outstanding lines
of credit without the aforesaid approval if (i) the proceeds of such borrowing
are intended to be, and are in fact, used to pay obligations of the corporation
arising in the ordinary course of business as they become due and payable or
otherwise to maintain the operations of the corporation at the then current
level and not to expand the operations of the corporation in any respect,
whether through expansion or enhancement of, or addition to, the corporation's
then current product line, facilities, equipment, other capital assets or
workforce, or otherwise, (ii) the corporation provides prior written notice of
such borrowing to all holders of Series B Convertible Preferred Stock, which
notice shall include a statement of the intended use of the proceeds of such
borrowing and (iii) promptly upon
<PAGE>
request therefor, the corporation shall provide to any holder of Series B
Convertible Preferred Stock a certificate signed by the President and Chief
Financial Officer of the corporation certifying as to the allocation and use of
the proceeds of any such borrowing; and
(f) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
holders of Series B Convertible Preferred Stock, voting as a separate class and
not with the holders of Common Stock, shall be entitled to elect to the Board of
Directors the smallest number of directors which shall constitute a majority of
the authorized number of directors, and the holders of Common Stock, voting as a
separate class, shall be entitled to elect the remaining members of the Board of
Directors. Whenever under the provisions of the preceding sentence the right
shall have accrued to the holders of Series B Convertible Preferred Stock as a
class to elect directors of the corporation, the Board of Directors shall
promptly call (and in the event the Board of Directors fails to call, the
holders of at least twenty percent (20%) in voting power of the outstanding
shares of Series B Convertible Preferred Stock may call) a special meeting of
stockholders for the election of directors. Upon the election by the holders of
the Series B Convertible Preferred Stock of the directors they are entitled to
elect as provided in this Section 5(f), the terms of office of all persons who
were previously members of the Board of Directors shall immediately terminate,
whether or not the holders of Common Stock shall have elected the remaining
members of the Board of Directors. In the case of any vacancy of office
occurring among the directors elected by the holders of Series B Convertible
Preferred Stock, the remaining directors elected by the holders of Series B
Convertible Preferred Stock, by affirmative vote of a majority thereof, may
elect a successor to hold office for the unexpired term of the director whose
place shall be vacant; in the case of any vacancy of office occurring among the
directors elected by the holders of Common Stock, the remaining directors
elected by the holders of Common Stock, by affirmative vote of a majority
thereof, may elect a successor to hold office for the unexpired term of the
director whose place shall be vacant. Any director who shall have been elected
by the holders of Series B Convertible Preferred Stock (or by directors elected
by the holders of Series B Convertible Preferred Stock) may be removed during
his term of office by, and only by, the affirmative vote of the holders of the
then outstanding shares of Series B Convertible Preferred Stock; any director
who shall have been elected by the holders of Common Stock (or by directors
elected by the holders of Common Stock) may be removed during his term of office
by, and only by, the affirmative vote of the holders of the then outstanding
shares of Common Stock. If and when the delinquent Redemption Amount shall have
been paid in full, the holders of Series B Convertible Preferred Stock shall be
immediately divested of the special voting rights set forth in this Section
5(f), but always subject to the reinstatement of such voting rights in case of
similar future delinquency; upon the termination of such voting rights, the
Board of Directors shall call (and in the event the Board of Directors fails to
call, the holders of at least twenty percent (20%) in voting power of the
outstanding shares of Common Stock may call) a special meeting of stockholders
at which all directors shall be elected in accordance with
<PAGE>
Section 3, above, and the terms of office of all persons who are then directors
of the corporation shall terminate immediately upon the election of their
successors.
6. Covenants
---------
(a) So long as at least twenty-five percent (25%) of the number of
shares of Series B Convertible Preferred Stock outstanding on the Original Issue
Date shall be outstanding, the corporation shall not, without first having
provided the written notice of such proposed action to each holder of
outstanding shares of Series B Convertible Preferred Stock required by Section
6(b) hereof and having obtained the affirmative vote or written consent of the
holders of a majority of such outstanding shares of Series B Convertible
Preferred Stock:
(i) amend, alter or repeal any provision of, or add any
provision to, the corporation's Certificate of Incorporation or by-laws, if such
action would alter or change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the Series B Convertible
Preferred Stock;
(ii) reclassify any Common Stock or Preferred Stock into shares
having any preference or priority as to assets superior to or on a parity with
any such preference or priority of the Series B Convertible Preferred Stock;
(iii) create, authorize or issue any additional shares of Series
B Convertible Preferred Stock or any other class or classes of stock or series
of Common Stock or Preferred Stock or any security convertible into or
evidencing the right to purchase shares of any class or series of Common Stock
or Preferred Stock or any capital stock of the corporation senior to or on a
parity with the Series B Convertible Preferred Stock; or
(iv) apply any of its assets to the redemption, retirement,
purchase or other acquisition, directly or indirectly, through subsidiaries or
otherwise, of any shares of Common Stock except at their original purchase price
of shares of Common Stock from officers, employees or directors of, or
consultants to, the corporation upon termination of their status as such
pursuant to agreements containing vesting and/or repurchase provisions approved
by the Board of Directors of the corporation.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the corporation's by-laws to the contrary, notice of any action
specified in Section 6(a) hereof shall be given by the corporation to each
holder of shares of Series B Convertible Preferred Stock by first class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown by the records of the corporation, at least thirty (30) days before the
date on which the books of the corporation shall close or a record shall be
taken with respect to such proposed action, or, if there shall be no such date,
at least thirty (30) days before the date when such proposed action is scheduled
to take place. Any holder of outstanding shares of Series B Convertible
Preferred Stock may waive any notice required by this Section 6(b) by a written
document indicating such waiver.
<PAGE>
7. No Reissuance of Series B Convertible Preferred Stock. No share or
----------------------------------------------- -----
shares of Series B Convertible Preferred Stock acquired by the corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and eliminated from the shares which
the corporation shall be authorized to issue.
8. Residual Rights. All rights accruing to the outstanding shares of the
---------------
corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.
II. COMMON STOCK
Description of Common Stock
- ---------------------------
1. Voting Rights. Each holder of record of Common Stock shall be
-------------
entitled to one vote for each share of Common Stock standing in such holder's
name on the books of the Corporation. Except as otherwise required by law or
this Article FOURTH of this Restated Certificate of Incorporation, the holders
of Common Stock and the holders of Preferred Stock shall vote together as a
single class on all matters submitted to stockholders for a vote (including any
action by written consent).
2. Dividends. Subject to provisions of law and this Article FOURTH of
---------
this Restated Certificate of Incorporation, the holders of Common Stock shall be
entitled to receive dividends out of funds legally available therefor at such
times and in such amounts as the Board of Directors may determine in their sole
discretion.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, after the payment or provisions
for payment of all debts and liabilities of the Corporation and all preferential
amounts to which the holders of the Preferred Stock are entitled with respect to
the distribution of assets in liquidation, the holders of Common Stock shall be
entitled to share ratably in the remaining assets of the Corporation available
for distribution.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation.
B. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
<PAGE>
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except (to the extent provided by applicable law) for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of Delaware
or any amendment or successor provisions thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware, as so amended. Any
repeal or modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
NINTH. The Corporation shall indemnify each person who at any time is, or
shall have been, a director or officer of the Corporation, and is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is, or was, a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the maximum extent permitted by the General
Corporation Law of Delaware. The foregoing
<PAGE>
right of indemnification shall in no way be exclusive of any other rights of
indemnification to which any such director or officer may be entitled, under any
by-law, agreement, vote of directors or stockholders or otherwise.
TENTH: The Corporation reserves the right to amend or repeal any
provision of this Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the President and Secretary,
respectively, of Business@Web, Inc., declaring and certifying, under penalties
of perjury, that this is the act and deed of the Corporation and that the facts
stated herein are true, have hereunto set their hands as their free act and deed
this 6th day of March, 1996.
/s/ James G. Nondorf
---------------------------
James G. Nondorf, President
/s/ William E. Kelly
- ---------------------------
William E. Kelly, Secretary
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
BUSINESS@WEB, INC.
Business@Web, Inc. (the "Corporation"), does hereby certify that the Board
of Directors of the Corporation, by unanimous written consent in lieu of a
meeting, has duly adopted a resolution, pursuant to Sections 141 and 242 of the
General Corporation Law of the State of Delaware, setting forth an amendment to
the Restated Certificate of Incorporation of the Corporation and declaring said
amendment to be advisable. The stockholders of the Corporation, and the holders
of each class of the capital stock of the Corporation entitled to vote thereon
as a separate class, have duly approved said amendment by the required vote of
such stockholders, adopted by a written action in lieu of a meeting of such
stockholders, all in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of the taking of
such action was given promptly to those stockholders who have not consented in
writing, as required by Section 228 of the General Corporation Law of the State
of Delaware. The Restated Certificate of Incorporation of the Corporation is
hereby amended as follows:
I. The second sentence of Article Fourth is deleted and the following new
sentence is substituted in place thereof:
"Of the authorized Preferred Stock, one million three hundred thirty-two
thousand one hundred twenty-seven (1,332,127) shares shall be designated
Series B Convertible Preferred Stock, par value $1.00 per share, one
million two hundred twenty thousand (1,220,000) shares shall be designated
Series C Convertible Preferred Stock, par value $1.00 per share, and four
hundred forty-seven thousand eight hundred seventy-three (447,873) shares,
with a par value of $1.00 per share, shall be undesignated."
II Section 1(a)(ii) of the Description of the Series B Convertible Preferred
Stock, as set forth in Article Fourth, is deleted, and the following new Section
1(a)(ii) is substituted in place thereof:
"(ii) Following payment in full to the holders of Series B Convertible
Preferred Stock of all amounts distributable to them under Section 1(a)(i)
hereof, the remaining assets of the corporation available for distribution
to holders of the corporation's capital stock shall be distributed among
the holders of the Common Stock, the holders of the Series B Convertible
Preferred Stock, and the holders of the Series C
<PAGE>
Convertible Preferred Stock, with each holder of a share of Series B
Convertible Preferred Stock receiving the amount that would have been
payable to the holder of such share had all shares of Series B Convertible
Preferred Stock and all shares of Series C Convertible Preferred Stock been
converted to Common Stock immediately following payment in full to the
holders of Series B Convertible Preferred Stock of all amounts
distributable to them under Section 1(a)(i) hereof, and each holder of a
share of Series C Convertible Preferred Stock or a share of Common Stock
receiving the amount payable to the holder of such share as provided in the
terms of the Series C Convertible Preferred Stock."
III. At the end of Article Fourth, the following new language is added:
"A description of the Series C Preferred Stock is as set forth in Exhibit A
hereto, which Exhibit A is by this reference incorporated in and made a
part of the Restated Certificate of Incorporation, as amended."
IN WITNESS WHEREOF, the undersigned, being the President and Secretary,
respectively, of Business@Web, Inc., declaring and certifying, under penalties
of perjury, that this is the act and deed of the Corporation and that the facts
stated herein are true, have hereunto set their hands as their free act and deed
this 4th day of April 1996.
/s/ James G. Nondorf
---------------------------------
James G. Nondorf, President
/s/ William E. Kelly
- ------------------------------------
William E. Kelly, Secretary
<PAGE>
Exhibit A
Description of Series C Convertible Preferred Stock
- ---------------------------------------------------
Section 1. Liquidation Rights.
------------------
(a) Treatment at Liquidation, Dissolution or Winding Up.
---------------------------------------------------
(i) In the event of any liquidation, dissolution or winding
up of the affairs of the corporation, whether voluntary or involuntary, after
payment in full of all amounts payable to the holders of the corporation's
Series B Convertible Preferred Stock in accordance with Section 1(a)(i) of the
terms of the Series B Convertible Preferred Stock set forth in Article IV of the
Restated Certificate of Incorporation of the corporation, and before any payment
is made to the holders of any other class or series of the corporation's capital
stock designated to be junior to the Series C Convertible Preferred Stock,
including the corporation's Common Stock, the holders of Series C Convertible
Preferred Stock shall be entitled to be paid from the assets of the corporation
available for distribution to holders of the Series C Convertible Preferred
Stock and the holders of the Common Stock pursuant to Section 1(a)(ii) of the
terms of the Series B Convertible Preferred Stock, pari passu with the payments
required to be made to the holders of the Series B Convertible Preferred Stock
in accordance with said Section 1(a)(ii), but allocating all payments otherwise
required by the terms of said Section 1(a)(ii) to be made to the holders of the
Common Stock to the holders of the Series C Preferred Stock, an amount equal to
$5.00 per share of Series C Convertible Preferred Stock (which amount shall be
subject to equitable adjustment whenever there shall occur a stock dividend,
distribution, combination of shares, reclassification or other similar event
with respect to Series C Convertible Preferred Stock and, as so adjusted from
time to time, is hereinafter referred to as the "Base Liquidation Price") plus
all dividends thereon accrued but unpaid, to and including the date full payment
shall be tendered to the holders of Series C Convertible Preferred Stock with
respect to such liquidation, dissolution or winding up.
(ii) Following payment in full to the holders of Series C
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof, the remaining assets of the corporation shall be distributed
among the holders of the Common Stock and the holders of the Series C
Convertible Preferred Stock on a share for share basis, with each holder of a
share of Series C Convertible Preferred Stock receiving the amount that would
have been payable to the holder of such share had all shares of Series C
Convertible Preferred Stock been converted to Common Stock pursuant to Section
2(a) hereof immediately following payment in full to the holders of Series C
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof.
(iii) If the assets of the corporation shall be insufficient
to permit the payment in full to the holders of Series C Convertible Preferred
Stock of all amounts distributable to them under Section 1(a)(i) hereof, then
the entire assets of the corporation
<PAGE>
available for such distribution shall be distributed ratably among the holders
of Series C Convertible Preferred Stock.
(iv) In no event shall any payment be made with respect to any
liquidation, dissolution or winding up to the holders of the Series C
Convertible Preferred Stock or the holders of any other class or series of the
corporation's capital stock designated to be junior to the Series C Convertible
Preferred Stock, including the corporation's Common Stock, if and to the extent
that, as a result of such payment, the amount available for distribution to the
holders of the Series B Convertible Preferred Stock would be reduced to an
amount less than the amount that would have been payable to the holders of the
Series B Convertible Preferred Stock pursuant to Section 1 of the terms of the
Series B Convertible Preferred Stock had all shares of the Series C Convertible
Preferred Stock been converted into shares of Common Stock in accordance with
Section 2 hereof immediately prior to such liquidation, dissolution or winding
up.
(b) Treatment of Reorganizations, Consolidations, Mergers and Sales
---------------------------------------------------------------
of Assets. A consolidation or merger of the corporation, or a sale of all or
- ---------
substantially all of the assets of the corporation (other than a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in a transaction in which the shareholders of the corporation
immediately prior to the transaction possess more than 50% of the voting
securities of the surviving entity (or parent, if any) immediately after the
transaction) shall be regarded as a liquidation, dissolution or winding up of
the affairs of the corporation within the meaning of this Section 1.
(c) Distributions Other than Cash. Whenever the distribution provided
-----------------------------
for in this Section 1 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the corporation.
Section 2. Conversion. The holders of Series C Convertible Preferred Stock
----------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series C
----------------------------------
Convertible Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series C Convertible Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $5.00 by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. The Conversion Price
for purposes of calculating the number of shares of Common Stock deliverable
upon conversion without the payment of any additional consideration by the
holder of Series C Convertible Preferred Stock (the "Conversion Price") shall
initially be $5.00. Such initial Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into which
Series C Convertible Preferred Stock is convertible, as hereinafter provided.
<PAGE>
(b) Mechanics of Conversion. Before any holder of Series C
-----------------------
Convertible Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Series C Convertible Preferred Stock, and shall give
written notice to the corporation at such office that such holder elects to
convert the same and shall state therein the name of such holder or the name or
names of the nominees of such holder in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued. No fractional shares
of Common Stock shall be issued upon conversion of any shares of Series C
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock
to which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series C Convertible Preferred Stock, or to such
holder's nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series C Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(c) Automatic Conversion.
--------------------
(i) Each share of Series C Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (subject to adjustment as provided in Section 2(c)(iii)) upon:
(A) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock to the public
at an initial public offering price per share of not less than $8.25
(adjusted proportionately to give effect to any stock dividend, stock
distribution or subdivision or any combination or consolidation of Common
Stock) and with gross proceeds of not less than $15,000,000 (a "Qualified
IPO") or
(B) the written election of the holders of not less than a
majority of the then outstanding shares of Series C Convertible Preferred
Stock to require such mandatory conversion.
(ii) Upon the occurrence of an event specified in Section
2(c)(i) hereof, all shares of Series C Convertible Preferred Stock shall be
converted automatically without any further action by any holder of such shares
and whether or not the certificate or certificates representing such shares are
surrendered to the corporation or the transfer agent for the Series C
Convertible Preferred Stock; provided, however, that the corporation shall not
be obligated to issue a certificate or certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificate or
certificates evidencing such shares of
<PAGE>
Series C Convertible Preferred Stock being converted are either delivered to the
corporation or the transfer agent of the Series C Convertible Preferred Stock,
or the holder notifies the corporation or such transfer agent that such
certificate or certificates have been lost, stolen, or destroyed and executes an
agreement satisfactory to the corporation to indemnify the corporation from any
loss incurred by it in connection therewith and, if the corporation so elects,
provides an appropriate indemnity bond. Upon the automatic conversion of Series
C Convertible Preferred Stock, each holder of Series C Convertible Preferred
Stock shall surrender the certificate or certificates representing such holder's
shares of Series C Convertible Preferred Stock at the office of the corporation
or of the transfer agent for the Series C Convertible Preferred Stock.
Thereupon, there shall be issued and delivered to such holder, promptly at such
office and in such holder's name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series C Convertible Preferred Stock surrendered
were convertible on the date on which such automatic conversion occurred. No
fractional shares of Common Stock shall be issued upon the automatic conversion
of Series C Convertible Preferred Stock. In lieu of any fractional shares of
Common Stock to which the holder would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the then effective
Conversion Price.
(d) Adjustments to Conversion Price for Diluting Issues.
-------------------------------------------- ------
(i) Special Definitions. For purposes of this Section 2(d), the
-------------------
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
--------
Convertible Securities.
(B) "Original Issue Date" shall mean the date on which a
---------------------
share of Series C Convertible Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
------------------------
indebtedness, shares (other than Common Stock and Series C Convertible
Preferred Stock) or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
----------------------------------
shares of Common Stock issued (or, pursuant to Section 2(d)(iii), deemed to
be issued) by the corporation after the Original Issue Date, other than the
following (collectively, "Excluded Shares"):
(I) shares of Common Stock issued or issuable upon
conversion of shares of Series C Convertible Preferred Stock; or
(II) shares of Common Stock issued or issuable upon
exercise or conversion of Options or Convertible Securities
outstanding on the Original Issue Date; or
<PAGE>
(III) shares of Common Stock issued or issuable to
officers, employees or directors of, or consultants to, the
corporation pursuant to a stock purchase or option plan or other
employee stock bonus arrangement (collectively, the "Plans") approved
by the Board of Directors; provided, however, that shares of Common
Stock issued or deemed issued to a director of the corporation
pursuant to options or other purchase rights granted after the
Original Issue Date shall be Excluded Shares only if granted at the
time of, or in connection with, such director's initial election to
the Board of Directors; or
(IV) shares of Common Stock issued or issuable
pursuant to warrants issued in connection with the establishment of
credit facilities for the corporation (including, without limitation,
in connection with equipment leasing arrangements); or
(V) shares of Common Stock or Convertible Securities
issued with the unanimous consent of the Board of Directors of the
corporation.
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which a share of Series C Convertible Preferred
Stock is convertible shall be made, by adjustment in the Conversion Price in
respect of the issuance of Additional Shares of Common Stock or otherwise: (i)
unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the corporation is less than the Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock or, (ii) if prior to such issuance, the
corporation receives written notice from the holders of a majority of the then
outstanding shares of Series C Convertible Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
---------------------------------------------------------------
Stock.
- -----
(A) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 2(d)(v) hereof) of such Additional
Shares of
<PAGE>
Common Stock would be less than the Conversion Price in effect on the date
of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(I) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares
of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(II) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the corporation, or any
increase or decrease in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(III) upon the expiration of any such options or any rights
of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options for
Common Stock the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the
consideration actually received by the corporation upon such
exercise, or for the issue of all such Convertible Securities
which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the corporation upon
such conversion or exchange; and
(b) in the case of Options for Convertible Securities
only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such
Options, and the consideration received by the corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the corporation
for the issue of all such Options, whether or not
<PAGE>
exercised, plus the consideration deemed to have been received by
the corporation (determined pursuant to Section 2(d)(v)) upon the
issue of the Convertible Securities with respect to which such
Options were actually exercised;
(IV) no readjustment pursuant to clause (II) or (III)
above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (a) the Conversion Price on the
original adjustment date, or (b) the Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date;
(V) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration
or exercise of all such Options, whereupon such adjustment shall be
made in the same manner provided in clause (III) above; and
(VI) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this Section 2(d)(iii) as of the
actual date of their issuance.
(B) Stock Dividends, Stock Distributions and Subdivisions. In
-----------------------------------------------------
the event the corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock), then and in
any such event, Additional Shares of Common Stock shall be deemed to have
been issued:
(I) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend or distribution, or
(II) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
corporate action becomes effective.
If such record date shall have been fixed and no part of such dividend
shall have been paid on the date fixed therefor, the adjustment
previously made for the Conversion price which became effective on
such record date shall be cancelled as of the close of business on
such record date, and thereafter the
<PAGE>
Conversion Price shall be adjusted pursuant to this Section 2(d)(iii)
as of the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares
-----------------------------------------------------------------
of Common Stock.
- ----------------
(A) In the event the corporation shall issue Additional Shares
of Common Stock (including, without limitation, Additional Shares of Common
Stock deemed to be issued pursuant to Section 2(d)(iii) but excluding
Additional Shares of Common Stock deemed to be issued pursuant to Section
2(d)(iii)(B), which event is dealt with in Section 2(d)(vi) hereof),
without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and immediately prior
to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be (I) the number of shares of
Common Stock outstanding immediately prior to such issue plus (II) the
number of shares of Common Stock which the aggregate consideration received
or deemed to have been received by the corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such
Conversion Price, and the denominator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to such issue plus
(II) the number of Additional Shares of Common Stock so issued or deemed to
be issued.
(B) For the purposes of Section 2(d)(iv)(A) hereof, (i) all
shares of Common Stock issuable upon conversion of shares of Series C
Convertible Preferred Stock, and upon exercise of options or conversion or
exchange of Convertible Securities which are part of the Excluded Shares,
outstanding immediately prior to any issue of Additional Shares of Common
Stock, or any event with respect to which Additional Shares of Common Stock
shall be deemed to be issued, shall be deemed to be outstanding; and (ii)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 2(d)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(C) Notwithstanding anything to the contrary contained herein,
the applicable Conversion Price in effect at the time Additional Shares of
Common Stock are issued or deemed to be issued shall not be reduced
pursuant to Section 2(d)(iv)(A) hereof at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $0.01 or
more.
(v) Determination of Consideration. For purposes of this Section
------------------------------
2(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
<PAGE>
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I)
and (II) above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
----------------------------------
share received by the corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 2(d)(iii)(A), relating to
Options and Convertible Securities, shall be determined by dividing (I) the
total amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration)
payable to the corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by (II) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
- ----------------------------------------------
(A) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the corporation shall issue Additional Shares of Common Stock
pursuant to Section 2(d)(iii)(B) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect immediately prior to such stock
dividend, stock distribution or subdivision shall, concurrently with the
effectiveness of such stock dividend, stock distribution or subdivision, be
proportionately decreased.
(B) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in
<PAGE>
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series C
Convertible Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series C Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any affected holder of Series C Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of each share of Series C Convertible Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Series C Convertible Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all convertible Series C Convertible Preferred Stock.
(i) Certain Taxes.. The corporation shall pay any issue or transfer
--------------
taxes payable in connection with the conversion of any shares of Series C
Convertible Preferred Stock; provided, however, that the corporation shall not
be required to pay any tax which may be payable in respect of any transfer to a
name other than that of the holder of such Series C Convertible Preferred Stock.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series C Convertible Preferred Stock,
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series C Convertible
<PAGE>
Preferred Stock, in any manner which interferes with the timely conversion or
transfer of such Series C Convertible Preferred Stock.
Section 3. Voting Rights.
-------------
Except as otherwise provided herein or required by law or by the
provisions establishing any other series of Preferred Stock, the holders of
Common Stock and the holders of Series C Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting and shall vote, together with
the holders of Common Stock and the holders of any other series of Preferred
Stock, as one class upon any matter submitted to the stockholders for a vote.
Holders of Series C Convertible Preferred Stock shall have that number of votes
per share of Series C Convertible Preferred Stock as is equal to the number of
shares of Common Stock into which each such share of Series C Convertible
Preferred Stock held by such holder could be converted on the date for
determination of stockholders entitled to vote at the meeting.
Section 4. Covenants
---------
(a) So long as at least twenty-five percent (25%) of the number of
shares of Series C Convertible Preferred Stock outstanding on the Original Issue
Date shall be outstanding, the corporation shall not, without first having
provided the written notice of such proposed action to each holder of
outstanding shares of Series C Convertible Preferred Stock required by Section
4(b) hereof and having obtained the affirmative vote or written consent of the
holders of a majority of such outstanding shares of Series C Convertible
Preferred Stock, amend, alter or repeal any provision of, or add any provision
to, the corporation's Certificate of Incorporation or by-laws, if such action
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series C Convertible Preferred
Stock.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the corporation's by-laws to the contrary, notice of any action
specified in Section 4(a) hereof shall be given by the corporation to each
holder of shares of Series C Convertible Preferred Stock by first class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown by the records of the corporation, at least thirty (30) days before the
date on which the books of the corporation shall close or a record shall be
taken with respect to such proposed action, or, if there shall be no such date,
at least thirty (30) days before the date when such proposed action is scheduled
to take place. Any holder of outstanding shares of Series C Convertible
Preferred Stock may waive any notice required by this Section 4(b) by a written
document indicating such waiver.
Section 5. No Reissuance of Series C Convertible Preferred Stock. No
----------------------------------------------- -----
share or shares of Series C Convertible Preferred Stock acquired by the
corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the corporation shall be authorized to issue.
<PAGE>
Section 6. Residual Rights. All rights accruing to the outstanding shares
---------------
of the corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
<PAGE>
EXHIBIT 3.5
BY-LAWS
OF
BUSINESS@WEB, INC.
(FORMERLY KNOWN AS OBJECT POWER, INCORPORATED)
<PAGE>
BY-LAWS
OF
BUSINESS@WEB, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at
-----------------
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
--------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on the first Thursday of June in each
year, at a time fixed by the Board of Directors or the President. If this date
shall fall upon a legal holiday at the place of the meeting, then such meeting
shall be held on the next succeeding business day at the same hour. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
----------------
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the
<PAGE>
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time of
the meeting, and may be inspected by any stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and Place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election.
1.10 Action without Meeting. Any action required or permitted to be
------------------------
taken at any annual or special meeting of stockholders of the corporation may be
taken without a
2
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meeting, without prior notice and without a vote, if a consent in
writing,setting forth the action so taken, is 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 on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and to the corporation.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in
the Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time
to time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased
------------------------
at any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual
------
meeting and until his successor is elected and qualified, or until his earlier
death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
---------
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
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2.6 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or telex,
or delivering written notice by hand, to his last known business or home address
at least 48 hours in advance of the meeting, or (iii) by mailing written notice
to his last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
--------------------------------------
any committee designated by the directors may participate in meetings of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified: provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
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2.12 Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
-----------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Any one or more or all of the directors may be removed,
-------
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors, except that the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
-------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
5
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ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal . Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the
year or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
---------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
----------------------------------------------------
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of
6
<PAGE>
Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he
shall, in the absence or disability of the Chairman of the Board, perform the
duties and exercise the powers of the Chairman of the Board and shall perform
such other duties and possess such other powers as may from time to time be
vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the
---------
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
-----------------------------------
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have Such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
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<PAGE>
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the president. ln addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds and to render as required by the Board of Arrectors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurer shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
---------------------
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice-Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
8
<PAGE>
4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer , pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
--------------------------------------
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation, any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.
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<PAGE>
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
10
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ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated
-----------
by the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to
----------------
be given by law, by the Certificate of Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-Laws to
----------------------------
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the
11
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affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these By-Laws
------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
5.9 Pronouns. All pronouns used in these By-Laws shall be deemed to
--------
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - Indemnification
---------------------------
6.1 Actions, Suits and Proceedings Other than by or in the Right of the
-------------------------------------------------------------------
Corporation. The corporation shall indemnify each person who was or is a party
- -----------
or is threatened to be made a party to 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), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the corporation, or is or was serving, or has agreed to serve, at the
request of the corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise, including any employee benefit plan (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he 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. 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
---- ----------
12
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presumption that the person did not act in good faith and in a manner which 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. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6.6
below, the corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
corporation.
6.2 Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the corporation, or is or was serving, or has agreed to serve, at the
request of the corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise, including any employee benefit plan, or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
6.3 Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 6.1 and 6.2 of this Article, or in defense of
any claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
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6.4 Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the corporation is so
notified, the corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to such Indemnitee. After notice from the
corporation to the Indemnitee of its election so to assume such defense, the
corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 6.4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the corporation, except
as otherwise expressly provided by this Article. The corporation shall not be
entitled to assume the defense of any claim brought by or in the right of the
corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
6.5 Advance of Expenses. Subject to the provisions of Section 6.6 below,
-------------------
in the event that the corporation does not assume the defense pursuant to
Section 6.4 of this Article of any action, suit, proceeding or investigation of
which the corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
- -------- -------
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that such
Indemnitee is not entitled to be indemnified by the corporation as authorized in
this Article.
6.6 Procedure for Indemnification. Any indemnification or advancement of
-----------------------------
expenses pursuant to Section 6.1, 6.2, 6.3 or 6.5 of this Article shall be made
promptly, and in any event within 60 days after receipt by the corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 6.1, 6.2 or 6.5 the corporation determines within such 60-day period
that such Indemnitee did not meet the applicable standard of conduct set forth
in Section 6.1 or 6.2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of a quorum of the directors of the
corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a
14
<PAGE>
committee of two or more disinterested directors, (c) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(d) independent legal counsel (who may be regular legal counsel to the
corporation) appointed for such purpose by vote of the directors in the manner
specified in clause (a) or (b) above, or (e) a court of competent jurisdiction.
The right to indemnification or advances as granted by this Article shall be
enforceable by the Indemnitee in any court of competent jurisdiction if the
corporation denies such request, in whole or in part, or if no disposition
thereof is made within the 60-day period referred to above. Unless otherwise
required by law, the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Article 6 shall be on the
corporation. Neither the failure of the corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the corporation pursuant to
this Section 6.6 that the Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct. Such Indemnitee's
expenses (including attorneys' fees) incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
proceeding shall also be indemnified by the corporation. Unless otherwise
provided by law, the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Article shall be on the
corporation.
6.7 Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the Delaware General Corporation Law or
any other applicable laws shall affect or diminish in any way the rights of any
Indemnitee to indemnification under the provisions hereof with respect to any
action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
6.8 Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the corporation or other persons serving the corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
15
<PAGE>
6.9 Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which such Indemnitee is entitled.
6.10 Insurance. The corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise, including any employee benefit plan, against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law. The corporation's obligation to provide indemnification under
this Article shall be offset to the extent of any other source of
indemnification or any otherwise applicable insurance coverage under a policy
maintained by the corporation or any other person.
6.11 Merger or Consolidation. If the corporation is merged into or
-----------------------
consolidated with another corporation and the corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
6.12 Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
6.13 Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the Delaware General Corporation Law shall have the respective
meanings assigned to such terms in such Section 145(h) and Section 145(i).
6.14 Subsequent Legislation. If the Delaware General Corporation Law is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnities, then the corporation shall indemnify such persons to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
16
<PAGE>
ARTICLE 7 - Amendments
----------------------
7.1 By the Board of Directors. These By-Laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
7.2 By the Stockholders. These By-Laws may be altered, amended or
-------------------
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
17
<PAGE>
Exhibit 10.1
BUSINESS@WEB, INC.
1995 Stock Plan
(as amended)
1. Purpose. This 1995 Stock Plan (the "Plan") is intended to provide
-------
incentives: (a) to employees of Business@Web, Inc. (the "Company"), any present
or future parent or subsidiaries of the Company and any corporations now or
hereafter under common control with the Company (collectively, "Related
Corporations") by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder which qualify as "incentive stock
options" under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code") ("ISO" or "ISOs"); (b) to directors, officers, employees and
consultants of the Company and Related Corporations by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified
Options"); (c) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with awards of stock in the Company
("Awards"); and (d) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and Non-
Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options". Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights". As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation", respectively, as those terms are defined in Section 425 of the
Code.
2. Administration of the Plan
--------------------------
A. The Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board may appoint a Stock Plan Committee (the "Committee")
of three or more of its members to administer this Plan. Subject to
ratification of the grant or authorization of each Stock Right by the Board (if
so required by applicable state law), and subject to the terms of the Plan, the
Committee, if so appointed, shall have the authority to (i) determine the
employees of the Company and Related Corporation (from among the class of
employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and Awards and to
make Purchases) to whom Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price of
shares subject to each Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase price of shares subject to each
Purchase; (iv) determine whether each Option granted shall be an ISO or a Non-
Qualified Option; (v) determine (subject to paragraph 7) the time or times when
each Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions
1
<PAGE>
such as repurchase options are to be imposed on shares subject to Options,
Awards and Purchases and the nature of such restrictions, if any, and (vii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Stock Rights granted under it shall be final unless
otherwise determined by the Board. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. The Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee. All
references in this Plan to the Committee shall mean the Board if no Committee
has been appointed. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
C. Stock Rights may be granted to members of the Board, but no Stock Right
shall be granted to any person who is, at the time of the proposed grant, a
member of the Board, unless such grant has been approved by a majority vote of
the other members of the Board. All grants of Stock Rights to members of the
Board shall in all other respects be made in accordance with the provisions of
this Plan applicable to other eligible persons. Members of the Board who are
either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been
granted Stock Rights may vote on any matters affecting the administration of the
Plan or the grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself of Stock Rights, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting to him of
Stock Rights.
D. Notwithstanding any other provision of this paragraph 2, in the event
the Company registers any class of any equity security pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any grants
to directors of Stock Rights made at any time from the effective date of such
registration until six months after the termination of such registration shall
be made only by the Board; provided, however, that if a majority of the Board is
eligible to participate in the Plan or in any other stock option or other stock
plan of the Company or any of its affiliates, or has been so eligible at any
time within the preceding year, any grant to directors of Stock Rights must be
made by, or only in accordance with the recommendation of, a committee
consisting of three or more persons, who may but need not be directors or
employees of the Company, appointed by the
2
<PAGE>
Board but having full authority to act in the matter, none of whom is eligible
to participate in this Plan or any other stock option or other stock plan of the
Company or any of its affiliates, or has been eligible at any time within the
preceding year. The requirements imposed by the preceding sentence shall also
apply with respect to grants to officers who are also directors. Once
appointed, such Committee shall continue to serve until otherwise directed by
the Board.
3. Eligible Employees and Others. ISOs may be granted to any employee of
-----------------------------
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan. Non-
Qualified Options, Awards and authorizations to make Purchases may be granted to
any director (whether or not an employee), officer, employee or consultant of
the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
Granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.
4. Stock. The stock subject to Options, Awards and Purchases shall be
-----
authorized but unissued shares of Common Stock, par value $0.001 per share, of
the Company (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 5,000,000, subject to adjustment as provided in
paragraph 13. Any shares issued hereunder may be issued as ISOs, Non-Qualified
Options or Awards, or to persons or entities making Purchases, so long as the
number of shares so issued does not exceed the aggregate number of shares
subject to the Plan. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, or if the Company shall
reacquire any unvested shares issued pursuant to Awards or Purchases, the
unpurchased shares subject to such Options and any unvested shares so reacquired
by the Company shall again be available for grants of Stock Rights under the
Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan
------------------------
at any time on or after March 1, 1995 and prior to December 31, 2004. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. The price per share specified in the agreement relating to each Non-
Qualified Option granted under the Plan shall in no event be less than the
lesser of (i) the book value per share of Common Stock as of the end of the
fiscal year of the Company
3
<PAGE>
immediately preceding the date of such grant, or (ii) 50 percent of the fair
market value per share of Common Stock on the date of such grant.
B. The price per share specified in the agreement relation to each ISO
granted under the Plan shall not be less than the fair market value per share of
Common Stock on the date of such grant. In the case of an ISO to be granted to
an employee owning stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any Related Corporation,
the price per share specified in the agreement relating to such ISO shall not be
less than 110 percent of the fair market value per share of Common Stock on the
date of grant.
C. In no event shall the aggregate fair market value (determined at the
time an ISO is granted) of Common Stock for which ISOs granted to any employee
are exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company and any Related Corporation) exceed
$100,000; provided that this paragraph 6(C) shall have no force or effect it its
inclusion in the Plan is not necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(b)(7) of the Code.
D. If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for over-the-
counter securities, if the Common Stock is not reported on the NASDAQ National
Market List. However, if the Common Stock is not publicly traded at the time an
Option is granted under the Plan, "fair market value" shall be deemed to be the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or any
Related Corporation. Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO,
4
<PAGE>
except with respect to any part of such ISO that is converted into a Non-
Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
------------------
12, each Option granted under the Plan shall be exercisable as follows:
A. The Option shall either be fully exercisable on the date of grant or
shall become exercisable thereafter in such installments as the Committee may
specify.
B. Once an installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified by the
Committee.
C. Each Option or installment may be exercised at any time or from time to
time, in whole or in part, for up to the total number of shares with respect to
which it is then exercisable.
D. The Committee shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Committee shall not
accelerate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to paragraph 16) if such acceleration would violate the annual vesting
limitation contained in Section 422(b)(7) of the Code, as described in paragraph
6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
-------------------------
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of three
months from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
5
<PAGE>
10. Death; Disability.
-----------------
A. If an ISO optionee ceases to be employed by the Company and all Related
Corporations by reason of his death, any ISO of his may be exercised, to the
extent of the number of shares with respect to which he could have exercised it
on the date of his death, by his estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and distribution, at
any time prior to the earlier of the ISO's specified expiration date or 360 days
from the date of the optionee's death.
B. If an ISO optionee ceases to be employed by the Company and all Related
Corporations by reason of his disability, he shall have the right to exercise
any ISO held by him on the date of termination of employment, to the extent of
the number of shares with respect to which he could have exercised it on that
date, at any time prior to the earlier of the ISO's specified expiration date or
360 days from the date of the termination of the optionee's employment. For the
purposes of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor statute.
11. Assignability. No Stock Right shall be assignable or transferable by
-------------
the grantee except by will or by the laws of descent and distribution, and
during the lifetime of the grantee each Stock Right shall be exercisable only by
him. Shares of Common Stock issued upon exercise of Stock Rights shall be
subject to such rights of first refusal, repurchase rights and other
restrictions on transfer in favor of the Company and the Board or the Committee
may determine at the time such Stock Rights are granted.
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 and 11 hereof and may contain such other
provisions as the Committee deems advisable which are not inconsistent with the
Plan, including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and cancellation
provisions as the Committee may determine. The Committee may from time to time
confer authority and responsibility on one or more of its own members and/or one
or more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
-----------
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
6
<PAGE>
A. If the shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
B. If the Company is to be consolidated with or acquired by another entity
in a merger, sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor
Board"), shall, as to outstanding Options either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Acquisition; or
(ii) if the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition consists solely of cash and/or
publicly traded securities, terminate all Options in exchange for a cash payment
equal to the excess of the fair market value of the shares subject to such
Options (to the extent then exercisable) over the exercise price thereof.
C. In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to such
recapitalization or reorganization.
D. Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs A, B or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Committee determines that such adjustments
made with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments.
E. In the event of the proposed dissolution or liquidation of the Company,
each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Committee.
F. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price
7
<PAGE>
of shares subject to Options. No adjustments shall be made for dividends paid
in cash or in property other than securities of the Company.
G. No fractional shares shall be issued under the Plan and the optionee
shall receive from the Company cash in lieu of such fractional shares.
H. Upon the happening of any of the foregoing events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
--------------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares or Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee, by
any combination of (a), (b) and (c) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c) or (d) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO in
question. The holder of a Stock Right shall not have the rights of a
shareholder with respect to the shares covered by his Stock Right until the date
of issuance of a stock certificate to him for such shares. Except as expressly
provided above in paragraph 13 with respect to changes in capitalization and
stock dividends, no adjustment shall be made for dividends or similar rights for
which the record date is before the date such stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the board on
--------------------------
March 1, 1995 and amended by the board on February 19, 1996, subject (with
respect to the
8
<PAGE>
validation of ISOs granted under the Plan) to approval of the Plan by the
stockholders of the Company at the next Meeting of Stockholders or, in lieu
thereof, by unanimous written consent. If the approval of the stockholders is
not obtained on or before March 1, 1996 (or, with respect to the 2,500,000
shares added to the plan by the board's vote of February 19, 1996, on or before
February 19, 1997) any grants of ISOs under the Plan made prior to that date
will be rescinded. The Plan shall expire on December 31, 2004 (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Stock Rights may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within 12 months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the Plan may not be increased (except by adjustment pursuant
to paragraph 13); (b) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (c) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13); and (d) the
expiration date of the Plan may not be extended. Except as provided in the
fourth sentence of this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without his consent, under
any Stock Right previously granted to him.
16. Conversion of ISOs into Non-Qualified Options; Termination of ISOs.
------------------------------------------------------------------
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the Optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. Application of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
9
<PAGE>
19. Withholding of Additional Income Taxes. Upon the exercise of a Non-
--------------------------------------
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includable in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right on the grantee's payment of such additional
withholding taxes.
20. Notice to Company of Disqualifying Disposition. Each employee who
----------------------------------------------
receives an ISO must agree to notify the company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
21. Governing Law; Construction. The validity and construction of the
---------------------------
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the State of Delaware. In construing this Plan, the singular shall include
the plural and the masculine gender shall include the feminine and neuter,
unless the context otherwise requires.
10
<PAGE>
EXHIBIT 10.4
ARSENAL MALL
WATERTOWN, MASSACHUSETTS
OFFICE LEASE
- to -
BUSINESS@WEB, INC.
FROM THE OFFICE OF:
Goulston & Storrs
400 Atlantic Avenue
Boston, Massachusetts 02110-3333
<PAGE>
ARSENAL MALL
WATERTOWN, MASSACHUSETTS
OFFICE LEASE
- To -
BUSINESS@WEB, INC.
INDEX TO LEASE
--------------
<TABLE>
<CAPTION>
ARTICLE SECTION CAPTION PAGE
- ------- ------- ------- ----
<S> <C> <C> <C>
I. Basic Lease Provisions 1
----------------------
1.1 Introduction 1
1.2 Basic Data 1
II. Description of Premises,
------------------------
Appurtenant Rights and Term 3
---------------------------
2.1 Location of Premises 3
2.2 Appurtenant Rights and Reservations 3
2.3 Term 5
III. Rent 6
----
3.1 Fixed Rent 6
IV. Use of Premises 6
---------------
4.1 Permitted Use 6
4.2 Alterations 8
V. Assignment and Subletting 8
-------------------------
5.1 Prohibition 8
VI. Delivery of Premises and Responsibility
---------------------------------------
for Repairs and Condition of Premises 12
-------------------------------------
6.1 Delivery of Possession of Premises 12
6.2 Repairs to be Made by Landlord 14
6.3 Tenant's Agreement 14
6.4 Floor Load-Heavy Machinery 15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SECTION CAPTION PAGE
- ------- ------- ------- ----
<S> <C> <C> <C>
VII. Services to be Furnished by Landlord;
------------------------------------
Utilities 16
---------
7.1 Landlord's Services 16
7.2 Payment of Utility Charges 16
VIII. Real Estate Taxes and Other Expenses 16
------------------------------------
8.1 Tenant's Share of Real Estate Taxes 16
8.2 Tenant's Share of Operating Expenses 19
IX. Indemnity and Public Liability Insurance 22
----------------------------------------
9.1 Tenant's Indemnity 22
9.2 Public Liability Insurance 23
9.3 Tenant's Risk 24
9.4 Injury Caused by Third Parties 24
9.5 Fire and Hazard Insurance 24
X. Landlord's Access to Premises 25
-----------------------------
10.1 Landlord's Right of Access 25
10.2 Exhibition of Space to Prospective Tenants 25
XI. Fire, Eminent Domain, Etc. 25
--------------------------
11.1 Abatement of Rent 25
11.2 Termination in Event of Casualty
or Condemnation 26
11.3 Award 27
XII. Landlord's Remedies 27
-------------------
12.1 Events of Default 27
12.2 Remedies 28
12.3 Landlord's Default 30
12.4 Bankruptcy or Insolvency 30
XIII. Miscellaneous Provisions 34
------------------------
13.1 Extra Hazardous Use 34
13.2 Waiver 34
13.3 Covenant of Quiet Enjoyment 34
13.4 Notice to Mortgagee and Ground Lessor 35
13.5 Assignment of Rents 36
13.6 Mechanics' Liens 36
13.7 No Brokerage 36
13.8 Invalidity of Particular Provisions 37
13.9 Provisions Binding, Etc. 37
13.10 Recording 37
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SECTION CAPTION PAGE
- ------- ------- ------- ----
<S> <C> <C> <C>
13.11 Notices 37
13.12 When Lease Becomes Binding 38
13.13 Paragraph Headings 38
13.14 Rights of Mortgagee 38
13.15 Status Report 39
13.16 Security Deposit; Tenant's Financial
Condition 39
13.17 Additional Remedies of Landlord 40
13.18 Holding Over 40
13.19 Non-Subrogation 40
13.20 Expansion or Reduction 41
13.21 Governing Law 41
13.22 Definition of Additional Rent 41
13.23 Landlord's Fees and Expenses 41
13.24 Changes or Alterations by Landlord 42
13.25 Rules and Regulations 43
13.26 Parking 43
13.27 Right of First Offer 43
</TABLE>
GUARANTEE
EXHIBITS A Site Plan
B Permitted Signage
C Tenant's Work
D Building Services
APP Appraisal Procedure
OPER Exclusions from Operating Expenses
SNDA Form of Subordination, Etc. Agreement
-iii-
<PAGE>
THIS INSTRUMENT IS AN INDENTURE OF LEASE in which Landlord and Tenant are
the parties hereinafter named, and which relates to space in a building (the
"Building") known as Building G in a complex known as Arsenal Mall, in
Watertown, Massachusetts.
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
---------
BASIC LEASE PROVISIONS
----------------------
1.1 INTRODUCTION. As further supplemented in the balance of this instrument
and its Exhibits, the following sets forth the basic terms of this Lease
and, where appropriate, constitutes definitions of certain terms used in
this Lease.
1.2 BASIC DATA.
Execution Date: March 8, 1996
Landlord: Watertown Arsenal Associates, L.P., a
Massachusetts limited partnership existing
under a Certificate of Limited Partnership
dated as of December 19, 1980 as amended
and restated by Amended and Restated
Agreement and Certificate of Limited
Partnership dated as of July 1, 1982, as
the same may heretofore or may hereafter be
amended.
Present Mailing Address c/o New England Development
of Landlord: Suite 201
One Wells Avenue
Newton, Massachusetts 02159
Tenant: Business@Web, Inc., a Delaware corporation
Present Mailing Address
of Tenant: 219 Vassar Street
Cambridge, Massachusetts 02139
Initial Lease Term or Term: Sixty (60) calendar months (plus the
partial month, if any, in which falls the
Commencement Date).
Commencement Date: March 15, 1996, or such earlier date as
provided in Section 2.3.2 hereof.
-1-
<PAGE>
Fixed Rent: (a) For and with respect to the period
commencing on the Commencement Date and
continuing through July 31, 1996, at the
rate of Twenty-Three Thousand Three Hundred
Thirty-Three and 33/100 Dollars
($23,333.33) per calendar month, and
proportionately at such rate for any
partial month; and
(b) For and with respect to the balance of
the term hereof at the rate of Thirty-Eight
Thousand Six Hundred Sixteen and 67/100
Dollars ($38,616.67) per calendar month,
and proportionately at such rate for any
partial month.
Use: First class office uses and uses ancillary
thereto only, including, without
limitation, research and development,
education and training, all to the extent
lawfully permitted.
Description of Space:
(herein the "Premises") Approximately 26,480 square feet of floor
area on the second floor of the Building,
all as more particularly shown on Exhibit A
hereto annexed and made a part hereof. The
Building, designated "Building G" on
Exhibit A, hereto annexed and made a part
hereof, forms a part of the Development
known as the Arsenal Mall (the
"Development") situated on a tract of land
in the Town of Watertown, County of
Middlesex, Commonwealth of Massachusetts,
the boundaries of which are delineated on
said Exhibit A. The Building currently
includes an office portion (the "Office
Portion") as cross-hatched on Exhibits A-3
and A-4 annexed hereto and made a part
hereof and a garage portion (the "Garage
Portion") as hatched on said Exhibits A-3
and A-4.
Tenant's Proportionate
Building Share: 42%.
Tenant's Proportionate
Lot Share: 1.3%.
-2-
<PAGE>
Base Building Tax Amount: The amount of Taxes due from Landlord on
account of the Building during the period
from January 1, 1996 through December 31,
1996.
Base Lot Tax Amount: The amount of Taxes due from Landlord on
account of the Lot during the period from
January 1, 1996 through December 31, 1996.
Tenant's Proportionate
Office Portion Share: 50%.
Tenant's Proportionate
Garage Portion Share: 42%.
Base Operating Expenses: The amount of Operating Expenses for and
with respect to calendar year 1996.
Security Deposit: None.
Guarantor of Tenant's
Obligations: John J. Donovan, an individual.
Brokers: Fallon Hines & O'Connor and Leggatt
McCall/Grubb & Ellis.
ARTICLE II
----------
DESCRIPTION OF PREMISES,
------------------------
APPURTENANT RIGHTS AND TERM
---------------------------
2.1 LOCATION OF PREMISES. Subject to all of the provisions hereof, Landlord
hereby demises and leases to Tenant, and Tenant hereby accepts from
Landlord, the Premises identified in the foregoing portions of this
Lease.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant
to the Premises, the nonexclusive right to use and to permit its invitees
to use in common with others, public or common lobbies, hallways,
stairways, passenger and freight elevators and sanitary facilities in the
Building, but such rights shall always be subject to reasonable rules and
regulations from time to time established by Landlord by suitable notice
and to the right of Landlord to designate and change from time to time
areas and facilities so to be used, subject to the provisions of Section
13.24 hereof. The Premises are also being leased with the non-exclusive
right to use the common parking areas (subject to Section 13.26 hereof),
entranceways, exitways and driveways of the Development and the common
utility facilities serving the Premises, all as the same now exist or as
may hereafter exist.
-3-
<PAGE>
With the prior written consent of and approval by Landlord, Tenant shall
have the right, at its own expense, to install on the roof of the
Building in an area designated by Landlord, satellite or other
transmitting/receiving devices to be used solely for Tenant's own
operations. Without limitation, Landlord's right of prior approval shall
include Landlord's satisfaction with the safety, size and design of such
devices. In all events, Tenant shall be responsible for obtaining any
necessary permits and approvals for such devices and any required repair
and maintenance of such devices. Tenant shall install such devices solely
at its own risk and agrees to indemnify and hold harmless Landlord from
any claims for damages or liabilities or losses related to the
installation, repair, maintenance, removal or operation of such devices.
Upon the termination of this Lease, for whatever reason, Tenant agrees to
remove all such devices at its own expense and risk and to restore the
area of the roof approximately to its pre-existing condition.
Excepted and excluded from the Premises are the roof or ceiling, the
floor and all perimeter walls of the Premises, except the inner surfaces
thereof, any balconies (except to the extent same are shown as part of
the Premises on Exhibit A), terraces or roofs adjacent to the Premises
and any space in or adjacent to the Premises used for shafts, stacks,
pipes, conduits, wires and appurtenant fixtures, fan rooms, ducts,
electric or other utilities, sinks or other Building facilities, but the
entry doors to the Premises are not excluded from the Premises and are a
part thereof for all purposes; and Tenant agrees that Landlord shall have
the right to place in the Premises (but in such manner as to reduce to a
minimum interference with Tenant's use of the Premises) utility lines,
pipes and the like to serve premises within the Building other than the
Premises, and to replace, maintain and repair such utility lines, pipes
and the like, in, over and upon the Premises.
During the hours of 8:00 A.M. to 6:00 P.M., Monday through Friday, and
8:00 A.M. to 1:00 P.M. on Saturdays, legal holidays in all cases excepted
(hereinafter referred to as "Normal Building Operating Hours"), the
Building shall be open and a means of access to the Premises shall be
available, subject to interruption due to causes beyond Landlord's
reasonable control. During periods other than Normal Building Operating
Hours, Tenant shall have access to the Premises and Landlord shall, on
the reasonable prior request of Tenant, provide reasonable levels of
lighting for the parking areas and HVAC services for the Premises (with
Tenant agreeing to reimburse Landlord on demand for the reasonable costs
of providing such after hours lighting and HVAC services requested by
Tenant, subject to a reasonable allocation of such costs to any other
tenant who may concurrently have requested such after hours lighting or
HVAC services), but access to the Premises during Normal Building
Operating Hours and at other times shall always be subject to reasonable
rules and regulations therefor from time to time established by Landlord
by suitable notice. Tenant acknowledges that, in all events, Tenant is
responsible for providing security to the Premises and its own personnel,
and Tenant shall indemnify, defend with counsel of Landlord's selection,
and save Landlord harmless from any claim for injury
-4-
<PAGE>
to person or damage to property asserted by any personnel, employee,
guest, invitee or agent of Tenant which is suffered or occurs in or about
the Premises or in or about the Building by reason of the act of an
intruder or any other person in or about the Premises or the Building.
2.3 TERM.
Section 2.3.1. The Premises are leased hereunder for the Initial Term
-------------
specified in Section 1.1 hereof unless sooner terminated as provided
herein and subject to the extension provisions in Section 2.3.3.
Section 2.3.2. The term hereof shall commence on the earlier to occur of
-------------
(a) the Commencement Date, (b) the date that the Tenant first opens for
business in the Premises or (c) two (2) weeks following substantial
completion of Tenant's Work as described in Exhibit C hereto (which work
Tenant agrees to commence promptly upon the execution of the Lease and
to, thereafter, diligently prosecute to completion). The parties hereto
agree, upon demand of the other, to execute a supplemental instrument
prepared by the party requesting the same at such party's expense
expressing the Commencement Date and termination date of the term hereof
when the Commencement Date has been determined.
Section 2.3.3. Provided that no Event of Default (as hereinafter
-------------
defined) exists at the time of the giving of notice to exercise the
option to extend as hereinafter provided, the Tenant shall have the right
to extend the term of this lease for one (1) successive period of five
(5) years by notice to such effect given to the Landlord at least nine
(9) months prior to the end of the Initial Lease Term and, upon the
giving of such notice, the term of this lease shall be extended for such
five (5) year period upon all the terms and conditions herein contained
without the necessity of any further action, except that (i) Fixed Rent
for such 5-year option period shall be at the annual rate equal to
ninety-five percent (95%) of the market rent for such Premises determined
in accordance with Exhibit APP annexed hereto and incorporated herein,
payable in twelve (12) equal monthly installments and proportionately at
such rate for any partial month; and (ii) there shall be no further right
to extend the term of this lease except as set forth in this Section and
it shall be a condition to the exercise of the extension that the Tenant
shall have timely and properly exercised the extension right. Time shall
be strictly of the essence and the Tenant's failure to exercise any
extension right within the time period provided shall render null and
void such extension right.
-5-
<PAGE>
ARTICLE III
-----------
RENT
----
3.1 FIXED RENT. Tenant agrees to pay to Landlord at the Present Mailing
Address of Landlord, or as otherwise directed by Landlord in writing,
without notice, demand, offset or deduction, on the Commencement Date and
thereafter, monthly, in advance, on the first day of each and every
calendar month during the Lease Term, a sum equal to the monthly fixed
rent specified in Section 1.2 hereof.
Fixed Rent for any partial month shall be paid by Tenant at such rate on
a pro rata basis, and if the Lease Term commences on a day other than the
first day of a calendar month, the first payment which Tenant shall make
shall be a payment equal to a proportionate part of such monthly Fixed
Rent for the partial month from the Commencement Date to the first day of
the succeeding calendar month, and the monthly Fixed Rent for such
succeeding calendar month.
ARTICLE IV
----------
USE OF PREMISES
---------------
4.1 PERMITTED USE. Tenant agrees that the Premises shall be used and
occupied by Tenant only for the purpose specified as the use thereof in
Section 1.2 of this Lease, and for no other purpose or purposes.
Tenant further agrees to conform to the following provisions during the
entire Lease Term.
(a) Tenant shall cause all freight (including furniture, fixtures and
equipment used by Tenant in the occupancy of the Premises) to be
delivered to or removed from the Building and the Premises in
accordance with reasonable rules and regulations established by
Landlord therefor.
(b) Tenant shall not place on the exterior of exterior walls (including
both interior and exterior surfaces of windows and doors) or on any
part of the Building outside the Premises, any sign, symbol,
advertisement or the like visible to public view outside of the
Premises without the prior written consent of the Landlord. Without
limitation, lettering on windows and window displays are expressly
prohibited. Notwithstanding the foregoing, Landlord hereby approves
the signage identified in Exhibit B. Further, notwithstanding the
foregoing, subject to applicable law, Tenant may place on the
exterior of one (1) exterior wall of the Building one (1) sign, the
location, size, and design of which sign shall be subject to the
prior approval of the Landlord.
-6-
<PAGE>
(c) Tenant shall not perform any act or any practice which may injure
the Premises, or any other part of the Building, or cause any
offensive odors or loud noise, or constitute a nuisance or a menace
to any other tenant or tenants or other persons in the Building, or
be detrimental to the reputation or appearance of the Building.
(d) Tenant shall conduct Tenant's business in the Premises in such a
manner that Tenant's invitees shall not collect, line up or linger
in any common lobby or corridors of the Building, but shall be
entirely accommodated within the Premises.
(e) Tenant shall comply and shall cause all employees to comply with all
reasonable rules and regulations respecting the use of the Building
from time to time established by Landlord by suitable notice.
Landlord shall not, however, be responsible for the noncompliance
with any such rules and regulations by any other tenant or occupant
of the Building.
(f) Tenant shall not use the name of the Building directly or indirectly
in connection with Tenant's business, except as a part of Tenant's
address, and Landlord reserves the right to change the name of the
Building upon fifteen (15) business days' notice to Tenant.
(g) Tenant's use of the Premises shall at all times comply with all
applicable laws, statutes, ordinances, by-laws, as well as all
rules, regulations and orders of governmental authorities having
jurisdiction over the same. In no event, shall Tenant use the
Premises or permit the Premises to be used for the storage or
transport of any materials that are classified as hazardous
materials or waste under any law related to the protection of the
environment other than in de minimus amounts such as cleaning
-- -------
materials typically used in office operations and provided that
Tenant complies with all requirements of law and the manufacturer
with respect to the handling, storage and use thereof and does not
dispose of any such materials into the sanitary sewer or elsewhere
on the Premises or the Development in violation of applicable law.
(h) Tenant agrees that, within the Premises except with respect to the
stairways directly connected to the Premises, it shall be
responsible for compliance with the Americans with Disabilities Act
(42 U.S.C. (S)12101 et. seq.) and the regulations and Accessibility
Guidelines for Buildings and Facilities issued pursuant thereto to
the extent the same are applicable to the Premises. Landlord agrees
that it will have such responsibility with respect to such stairways
and the portions of the Building that are not a part of the
Premises.
4.2 ALTERATIONS. After initial completion of any work to be done by Tenant,
for which provision is made herein in Exhibit C attached hereto, Tenant
shall not alter or add to the Premises, except in accordance with written
consent from Landlord, which
-7-
<PAGE>
Landlord agrees not unreasonably to withhold as to nonstructural
alterations or additions. All alterations made by Tenant shall be made in
accordance with all applicable laws, in a good and first-class
workmanlike manner and in accordance with the requirements of Landlord's
insurers and Tenant's insurers. Any contractor or other person
undertaking any alterations of the Premises on behalf of Tenant shall be
subject to Landlord's prior written approval (not to be unreasonably
withheld or delayed) and covered by Comprehensive General Liability and
Workmen's Compensation insurance with coverage limits reasonably
acceptable to Landlord and evidence thereof shall be furnished to
Landlord prior to the performance by such contractor or person of any
work in respect of the Premises. All work performed by Tenant in the
Premises shall remain therein (unless Landlord directs Tenant to remove
such work, other than Tenant's Work, on termination) and, at termination,
shall be surrendered as a part thereof, except for Tenant's usual trade
furniture and equipment, if movable, installed prior to or during the
Lease Term at Tenant's cost, which trade furniture and equipment Tenant
may remove upon the termination of this Lease provided that Tenant is not
then in default hereunder. Tenant agrees to repair any and all damage to
the Premises resulting from such removal (including removal of Tenant's
improvements directed by Landlord) or, if Landlord so elects, to pay
Landlord for the reasonable cost of any such repairs forthwith after
billing therefor and such obligation of Tenant shall survive the
termination hereof.
-8-
<PAGE>
ARTICLE V
---------
ASSIGNMENT AND SUBLETTING
-------------------------
5.1 PROHIBITION. Notwithstanding any other provisions of this Lease, but
except as otherwise provided in this ARTICLE V, Tenant covenants and
agrees that it will not assign this Lease or sublet (which term, without
limitation, shall include the granting of concessions, licenses,
management arrangements and the like) the whole or any part of the
Premises without, in each instance, having first received the express
consent of Landlord, which consent Landlord agrees shall not be
unreasonably withheld, provided (and it shall be a condition of the
validity of any such assignment or subletting), without limitation, that:
the Tenant shall furnish the Landlord with such information regarding
such assignee or sublessee as the Landlord may reasonably require,
including, without limitation, information regarding good reputation,
financial ability and business experience, and Landlord determines, in
Landlord's reasonable judgment, that such assignee or sublessee at the
time of such assignment or subletting, is of satisfactory reputation,
creditworthiness and net worth. Any assignment of this Lease (which term
shall include a sale or transfer of the stock in Tenant, subject to the
provisions of the last paragraph of this Section 5.1), or subletting of
the whole or any part of the Premises (other than as permitted to a
Related Party, as defined below) by Tenant without Landlord's express
consent shall be invalid, void and of no force or effect. In any case
where Landlord shall consent to such assignment or subletting, the Tenant
named herein shall remain fully liable for the obligations of Tenant
hereunder, including, without limitation, the obligation to pay the Fixed
Rent and other amounts provided under this Lease. Any such request shall
set forth, in detail reasonably satisfactory to Landlord, the
identification of the proposed assignee or sublessee, its financial
condition and the terms on which the proposed assignment or subletting is
to be made, including, without limitation, the rent or any other
consideration to be paid in respect thereto and such request shall be
treated as Tenant's warranty in respect of the information submitted
therewith (provided, however, Tenant's warranty with respect to the
financial condition of the proposed assignee or sublessee shall only be a
warranty to the effect that the Tenant has provided to Landlord all
material information concerning such financial condition delivered to
Tenant by such proposed assignee or sublessee). In addition, if the
proposed assignee or sublessee pays more total rent and other
consideration to Tenant (the "Transferee's Rent") than Tenant is required
to pay to Landlord hereunder (for the purposes of this Section 5.1 only,
the "Tenant's Rent"), then fifty percent (50%) of the following amounts
(in excess of Tenant's reasonable out-of-pocket costs to third parties
incurred in connection with effectuating such permitted assignment or
sublease and Tenant's then unamortized cost of Tenant Work (calculated on
a per square foot basis) pro-rata to the portion of the Premises so
assigned or subleased) shall be payable by Tenant to Landlord within ten
(10) days of receipt by Tenant: (a) the difference between the
Transferee's Rent and the Tenant's Rent and (b) any lump sum payment
payable by the proposed assignee or sublessee.
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It shall be a condition of the validity of any such assignment or
subletting that the assignee or sublessee agrees directly with Landlord,
in form satisfactory to Landlord, to be bound by all the obligations of
Tenant hereunder, including, without limitation, the obligation to pay
Fixed Rent and other amounts provided for under this Lease and the
covenant against further assignment and subletting, but such assignment
or subletting shall not relieve the Tenant named herein of any of the
obligations of Tenant hereunder, and Tenant shall remain fully liable
therefor. In no event, however, shall Tenant assign this Lease or sublet
the whole or any part of the Premises to a proposed assignee or sublessee
which has been judicially declared bankrupt or insolvent according to
law, or with respect to which an assignment has been made of property for
the benefit of creditors, or with respect to which a receiver, guardian,
conservator, trustee in involuntary bankruptcy or similar officer has
been appointed to take charge of all or any substantial part of the
proposed assignee's or sublessee's property by a court of competent
jurisdiction, or with respect to which a petition has been filed for
reorganization under any provisions of the Bankruptcy Code now or
hereafter enacted, or if a proposed assignee or sublessee has filed a
petition for such reorganization, or for arrangements under any
provisions of the Bankruptcy Code now or hereafter enacted and providing
a plan for a debtor to settle, satisfy or extend the time for the payment
of debts (any such proposed assignee or sublessee being sometimes
referred to herein as a "Bankrupt Party"). Tenant shall, upon demand,
reimburse Landlord for the reasonable legal fees and expenses incurred by
Landlord in processing any request to assign this Lease or to sublet all
or any portion of the Premises, whether or not Landlord agrees thereto,
and if Tenant shall fail promptly so to reimburse Landlord, the same
shall be a default in Tenant's monetary obligations under this Lease.
Without limiting Landlord's discretion to grant or withhold its consent
to any proposed assignment or subletting, if Tenant requests Landlord's
consent to assign this Lease or sublet all or any portion of the
Premises, Landlord shall have the option (but never the obligation),
exercisable by written notice to Tenant given within thirty (30) days
after Landlord's receipt of such request, to terminate this Lease as of
the date specified in such notice which shall be not less than thirty
(30) nor more than one hundred twenty (120) days after the date of such
notice for the entire Premises, in the case of an assignment or
subletting of the whole, and for the portion of the Premises, in the case
of a subletting of a portion. In the event of termination in respect of a
portion of the Premises, the portion so eliminated shall be delivered to
Landlord on the date specified in good order and condition in the manner
provided in Section 4.2 at the end of the Lease Term and thereafter, to
the extent necessary in Landlord's judgment, Landlord, at its own cost
and expense, may have access to and may make modification to the Premises
so as to make such portion a self-contained rental unit with access to
common areas, elevators and the like; provided, however, in any reletting
of such recaptured portion or whole of the Premises, Landlord agrees for
a period of ninety (90) days after such termination not to relet such
space to any party identified in Tenant's request for Landlord's consent
without first obtaining Tenant's consent to such reletting, such consent
not to be unreasonably withheld or delayed.
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Fixed Rent and Tenant's Proportionate Share shall be adjusted pro rata
according to the extent of the Premises for which the Lease is
terminated. The recapture provisions of this paragraph shall apply to
each and every assignment of the Lease and each and every subletting of
all or a portion of the Premises, except to a Related Party (as herewith
defined). For the purposes of this Section 5.1, the term "rent" shall
mean all Fixed Rent, additional rent or other payments and/or
consideration payable by one party to another for the use and occupancy
of all or a portion of the Premises.
Notwithstanding the foregoing, it is understood and agreed that the
Landlord's consent shall not be required for an assignment of this Lease
or subletting of the Premises by Tenant to an entity which is not a
Bankrupt Party, but which is in control of, controlled by or in common
control with Tenant (each, a "Related Party") provided (and it shall be a
condition of the validity of any such assignment or sublease) that
Landlord is provided not less than thirty (30) days prior written notice
of such proposed assignment or sublease with sufficient detail evidencing
that such party is a Related Party and such Related Party agrees directly
with Landlord to be bound by all of the obligations of Tenant hereunder,
including, without limitation, the obligation to pay the rent and other
amounts provided for under this Lease, the covenant to use the Premises
only for the purposes specifically permitted under this Lease and the
covenant against further assignment or sublet; but such assignment or
sublet shall not relieve Tenant herein named of any of its obligations
hereunder, and Tenant shall remain fully liable therefor.
For purposes of this Lease, if Tenant is a corporation, the sale or
transfer of fifty percent (50%) or more of the stock of Tenant (whether
such sale or transfer occurs at one time or at intervals so that, in the
aggregate, over the term of this Lease, such a transfer shall have
occurred) shall be treated as if such sale or transfer were, for all
purposes, an assignment of this Lease and shall be governed by the
provisions of this Section 5.1; except that sales or transfer of stock by
existing stockholders for estate planning purposes or to trust entities
they control, or sales or transfers of stock to institutional investors
or existing stockholders, or sales of stock to the general public that do
not result in any non-institutional investor, directly or indirectly,
owning or controlling more than twenty percent (20%) of all such stock
shall not be considered "sales" or "transfers" of stock for these
purposes. To enable Landlord to determine ownership of Tenant, Tenant
agrees to furnish to Landlord, as reasonably requested by Landlord from
time to time, and promptly after Landlord's request therefor, an accurate
listing of the holders of its stock and/or the holders of the stock of
any Related Party/assignee or Related Party/sublessee as of the date of
the execution of this Lease and/or as of the date of Landlord's request.
5.2 In those circumstances where the Landlord's prior consent is required to
an assignment or sublease hereunder, Landlord shall have the right to
consider any reasonable factor in determining whether to withhold its
consent to a proposed assignment or sublease. Without limiting the other
instances in which it may be reasonable for Landlord to withhold its
consent to an assignment or sublease, the
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parties agree that it shall be reasonable for Landlord to withhold its
consent if any of the following conditions are not satisfied:
(a) The proposed transferee shall be at least as creditworthy as Tenant
and any guarantor of Tenant's obligations hereunder as of the date
hereof and, in Landlord's reasonable opinion, shall have the
financial strength and stability to perform all of Tenant's
obligations under this Lease;
(b) The proposed use of the Demised Premises by the transferee shall (i)
comply with the Permitted Use requirements of Section 4.1 of this
Lease (ii) be consistent with the general character of businesses
carried on by tenants of similar first-class developments, (iii) not
increase the likelihood of damage or destruction, (iv) not increase
the rate of wear and tear to the Premises, the Building or the
Development, (v) not be likely to cause an increase in insurance
premiums for insurance policies applicable to the Building or the
Development, (vi) not require new tenant improvements to the then-
existing Building systems and components (except to the extent such
improvements are paid for by the new tenant), and (vii) be a use
similar to Tenant's use or consistent with the tenant mix and
quality of tenant desired by Landlord;
(c) The proposed transferee shall not be (i) an existing tenant or
occupant of the Building, (ii) a person or entity with whom Landlord
is then dealing with respect to the leasing of space in the
Building, or (iii) a person or entity with whom Landlord has had any
dealings within the previous nine months with regard to leasing of
space in the Building;
(d) Any ground lessor or mortgagee of the Building or Development whose
consent to such transfer is required shall consent thereto (Landlord
agreeing to make a request for such consent);
(e) Any proposed subleasing shall not result in more than two subleases
of a portion of the Premises being in effect at any one time during
the term hereof; and
(f) At the time of the proposed transfer, no Event of Default under this
Lease shall have occurred and be continuing, and no state of facts
which, with notice and/or the passage of time, may ripen into an
Event of Default under this Lease shall have occurred and be
continuing.
Tenant shall have the burden of demonstrating that each of the foregoing
conditions has been satisfied.
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ARTICLE VI
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DELIVERY OF PREMISES AND
------------------------
RESPONSIBILITY FOR REPAIRS AND
------------------------------
CONDITION OF PREMISES
---------------------
6.1 DELIVERY OF POSSESSION OF PREMISES. The Premises shall be treated as
delivered hereunder on the Execution Date.
Promptly after delivery of the Premises to Tenant, Tenant shall perform,
at its sole cost and expense, all of Tenant's work as set forth in said
Exhibit C in that portion thereof entitled "Description of Tenant's Work"
("Tenant's Work" or "Tenant Work") and, subject to the terms and
conditions hereinafter set forth in this Section 6.1, Landlord agrees to
pay to Tenant on account of such work a Landlord's contribution of
$291,280.00 ("Landlord's Contribution").
By February 15, 1996, if the following conditions have been met: (i) the
Tenant shall have furnished evidence reasonably satisfactory to the
Landlord that Tenant has commenced, is diligently prosecuting to
completion and has completed, at least to the value of the First Contract
Amount (as defined herein), Tenant's Work in a good and workmanlike
manner by a contractor(s) and consistent with plans and specifications
approved by Landlord (in its reasonable discretion) and that any and all
liens therefor that have been or may be filed have been satisfied of
record, bonded or waived; (ii) the execution of this Lease shall have
occurred; and (iii) there is no uncured Event of Default hereunder or any
condition which with the passage of time and/or giving of notice could
constitute an Event of Default hereunder. -- the Landlord shall pay over
to the Tenant a sum equal to eighty percent (80%) of the amount due
(exclusive of any retainage amounts) Tenant's contractor(s) for Tenant's
Work completed prior to February 15, 1996 (said amount being referred to
herein as the "First Contract Amount") as an initial inducement to the
Tenant (the "Initial Payment").
By March 15, 1996, if the following conditions have been met: (i) there
is no uncured Event of Default hereunder or any condition which with the
passage of time and/or giving of notice could constitute an Event of
Default hereunder, (ii) Tenant shall have furnished evidence reasonably
satisfactory to Landlord that Tenant has completed, at least to the value
of the Second Contract Amount (as hereinafter defined) Tenant Work in
addition to the Work which was the subject of the Initial Payment in
accordance with the standards set forth in clause (i) of the immediately
preceding paragraph of this Section 6.1 and (iii) Tenant has qualified
for the Initial Payment and Tenant shall have executed and delivered an
instrument setting forth the commencement and expiration dates of the
term of this Lease, Landlord agrees to pay over to Tenant a sum equal to
eighty percent (80%) of the amount due (exclusive of any retainage
amounts) Tenant's contractor(s) for Tenant's Work completed prior to
March 15, 1996 which was not the subject of such contractor's prior
requisition for a
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First Contract Amount (said amount being referred to herein as the
"Second Contract Amount") as an additional inducement to Tenant (the
"Second Payment").
By April 15, 1996, if the following conditions have been met: (i) there
is no uncured Event of Default hereunder or any condition which with the
passage of time and/or giving of notice could constitute an Event of
Default hereunder, and (ii) Tenant shall have furnished evidence
reasonably satisfactory to Landlord that all of Tenant's Work has been
completed in accordance with the standards set forth in clause (i) of the
third paragraph of this Section 6.1, Landlord agrees to pay over to
Tenant the balance of Landlord's Contribution due (after taking into
account the First and Second Payments) as a final inducement to Tenant.
6.2 REPAIRS TO BE MADE BY LANDLORD. Except as otherwise provided in this
Lease, Landlord agrees to keep and maintain in good order, condition and
repair, the plumbing and sewage facilities within the Premises that serve
the Premises, the HVAC systems and equipment that serve the Premises
(Landlord agreeing to be responsible for providing an HVAC system that is
adequate to accommodate a standard office environment in the Premises),
the roof (but not the inside surface thereof), the exterior walls,
foundations, structural portions and the common areas of the Building,
insofar as any of the foregoing affects the Premises. Landlord shall in
no event be responsible to Tenant for the condition of glass in and about
the Premises or for the doors leading into the Premises, or for any
condition in the Premises or the Building caused by any act or neglect of
Tenant or any contractor, agent, employee or invitee of Tenant, or anyone
claiming by, through or under Tenant. Landlord shall not be responsible
to make any improvements or repairs to the Building or the Premises other
than as expressed in this Section 6.2 unless expressly otherwise provided
in this Lease.
Landlord shall never be liable for any failure to make repairs which,
under the provisions of this Section 6.2 or elsewhere in this Lease,
Landlord has undertaken to make unless: (a) Tenant has given notice to
Landlord of the need to make such repairs as a result of a condition in
the Building or in the Premises requiring any repair for which Landlord
is responsible; and (b) Landlord has failed to commence to make and
complete such repairs within a reasonable time after receipt of such
notice if any repairs are, in fact, necessary.
6.3 TENANT'S AGREEMENT. Tenant agrees that Tenant will keep neat and clean
and maintain in good order, condition and repair, the Premises and every
part thereof throughout the Lease Term, including, without limitation,
the exterior and interior portions of all doors and windows, fixtures and
interior walls, floors, ceilings, signs (including exterior signs where
permitted), and all wiring, electrical systems, interior building
appliances, and the like, (where the same is exclusively serving the
Premises) excepting only those repairs for which Landlord is responsible
under the terms of this Lease and damage by fire or other casualty or as
a consequence of the exercise of the power of eminent domain, and shall
surrender the Premises at the end of the term, in
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such condition. Without limitation, Tenant shall maintain and use the
Premises in accordance with all applicable laws, ordinances, governmental
rules and regulations, directions and orders of officers of governmental
agencies having jurisdiction and in accordance with the requirements of
Landlord's and/or Tenant's insurers, and shall, at Tenant's own expense,
obtain and maintain in effect all permits, licenses and the like required
by applicable law. Tenant shall not permit the Premises to suffer any
waste, and Tenant shall be responsible for the cost of repairs which may
be made necessary by reason of damage to any areas in the Building,
including the Premises, by Tenant, Tenant's contractors or Tenant's
agents, employees or invitees, or anyone claiming by, through or under
Tenant. Tenant shall have the responsibility, at its own expense, to
replace, as needed, any light bulbs and ballasts in the Premises during
the Lease Term.
If repairs are required to be made by Tenant pursuant to the terms
hereof, Landlord may demand that Tenant make the same forthwith, and if
Tenant refuses or neglects to commence such repairs and complete the same
with reasonable dispatch after such demand, Landlord may (but shall not
be required to do so) make or cause such repairs to be made and shall not
be responsible to Tenant for any loss or damage that may accrue to
Tenant's stock or business by reason thereof. If Landlord makes or causes
such repairs to be made, Tenant agrees that Tenant will forthwith, on
demand, pay to Landlord the cost thereof, and if Tenant shall default in
such payment, Landlord shall have the remedies provided for the
nonpayment of rent or other charges payable hereunder.
6.4 FLOOR LOAD - HEAVY MACHINERY. Tenant shall not place a load upon any
floor in the Premises exceeding the lesser of (a) the floor load per
square foot of area which such floor was designed to carry as shall have
been certified to Tenant by Landlord's architect and (b) the floor load
per square foot of area which is allowed by law. Landlord reserves the
right to prescribe in its reasonable discretion the weight and position
of all business machines and mechanical equipment, including scales,
which shall be placed so as to distribute the weight. Business machines
and mechanical equipment shall be placed and maintained by Tenant at
Tenant's expense in settings sufficient, in Landlord's judgment, to
absorb and prevent unreasonable vibration, noise and annoyance. Tenant
shall not move any safe, heavy machinery, heavy equipment, freight, bulky
matter or fixtures into or out of the Building without Landlord's prior
consent, not to be unreasonably withheld or delayed.
If such safe, machinery, equipment, freight, bulky matter or fixtures
requires special handling, Tenant agrees to employ only persons holding a
Master Rigger's License to do said work, and that all work in connection
therewith shall comply with applicable laws and regulations. Any such
moving shall be at the sole risk and hazard of Tenant and Tenant will
exonerate, indemnify and save Landlord harmless against and from any
liability, loss, injury, claim or suit resulting directly or indirectly
from such moving. Tenant shall schedule such moving at such times as
Landlord shall reasonably require for the convenience of the normal
operations of the Building.
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ARTICLE VII
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SERVICES TO BE FURNISHED BY LANDLORD; UTILITIES
-----------------------------------------------
7.1 LANDLORD'S SERVICES. Landlord covenants during the Lease Term during
Normal Building Operating Hours to furnish, through Landlord's employees
or independent contractors, the services listed in Exhibit D, if any.
7.2 PAYMENT OF UTILITY CHARGES. The Tenant shall pay for all of its
requirements for electricity. In the event that the Landlord shall elect
to supply the same, the Tenant agrees to purchase the same from the
Landlord, provided the rate does not exceed the rate which the Tenant
would be required to pay to the utility company furnishing the same to
the Development. Further, the Tenant shall pay for all electricity
consumed on the Premises from the date of delivery of possession thereof
by the Landlord to the Tenant to the date of the commencement of the term
of this lease. If through the negligence or willful misconduct of the
Landlord, its agents or employees, there shall be an interruption in a
utility service serving the Premises and such interruption shall continue
for one (1) business day after notice from Tenant to Landlord thereof and
if, as a result of such interruption, the Tenant shall be unable to
operate its business within the Premises and shall not so operate, then,
as the Tenant's remedy therefor, there shall be an abatement of the Fixed
Rent and other charges during the period of such interruption. Landlord
confirms its belief that the Building currently has sufficient electrical
power capacity to provide adequate electrical service to the Premises to
the extent of a standard office environment. If Tenant's presents
evidence to Landlord within twenty (20) days of the execution of this
Lease which demonstrates that such capacity does not exist, Landlord
agrees to promptly correct any such insufficiency at Landlord's expense.
ARTICLE VIII
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REAL ESTATE TAXES AND OTHER EXPENSES
------------------------------------
8.1 TENANT'S SHARE OF REAL ESTATE TAXES.
(a) For the purposes of this Section:
(i) The term "Tax Period" shall mean the period during which
Taxes (as hereinafter defined) are required to be paid
under applicable law. Thus, under the law presently in
effect in the Commonwealth of Massachusetts, Tax Period
means the period from July 1 of a calendar year to June
30 of the subsequent calendar year. Suitable adjustment
in the determination of Tenant's obligation under this
Section 8.1 shall be made in the computation for any Tax
Period which is greater than or less than twelve (12)
full calendar months.
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(ii) The term "Taxes" shall mean all real estate taxes and
assessments (which term, for purposes of this provision,
shall include water and sewer use charges), special or
otherwise, levied or assessed upon or with respect to
the Building and the lot on which the Building is
situated (the "Lot") thereof and ad valorem taxes for
any personal property of Landlord used in connection
therewith. Should the Commonwealth of Massachusetts, or
any political subdivision thereof, or any other
governmental authority having jurisdiction over the
Building on the Lot, (1) impose a tax, assessment,
charge or fee, which Landlord shall be required to pay,
by way of substitution for or as a supplement to such
real estate taxes and ad valorem personal property
taxes, or (2) impose an income or franchise tax or a tax
on rents in substitution for or as a supplement to a tax
levied against the Building or the Lot or any part
thereof and/or the personal property used in connection
with the Building or the Lot or any part thereof, all
such taxes, assessments, fees or charges (hereinafter
defined as "in lieu of taxes") shall be deemed to
constitute Taxes hereunder. Taxes shall also include, in
the year paid, all reasonable fees and costs incurred by
Landlord in seeking to obtain a reduction of, or a limit
on the increase in, any Taxes, regardless of whether any
reduction or limitation is obtained. Except as
hereinabove provided with regard to "in lieu of taxes",
Taxes shall not include any inheritance, estate,
succession, transfer, gift, franchise, net income or
capital stock tax.
(b) In the event that the Taxes imposed with respect to the Building and
the Lot shall be greater during any Tax Period than, respectively,
the Base Building Tax Amount on the Base Lot Tax Amount:
(i) Tenant shall pay to Landlord, as additional rent, an
amount equal to the sum of (1) Tenant's Proportionate
Building Share of the amount by which the Taxes imposed
with respect to the Building for such Tax Period exceed
the Base Building Tax Amount, apportioned for any
fraction of a Tax Period contained within the Term, and
(2) Tenant's Proportionate Lot Share of the amount by
which the Taxes imposed with respect to the Lot for such
Tax Period exceed the Base Lot Tax Amount, apportioned
for any fraction of a Tax Period contained within the
Term, and
(ii) Landlord shall submit to Tenant a statement setting
forth the amount of such additional rent, and within
fifteen (15) days after the delivery of such statement
(whether or not such statement shall be timely), Tenant
shall pay to Landlord the payment required under
subparagraph (i) above. So long as Taxes shall be
payable in installments under applicable law, Landlord
may submit such
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statements to Tenant in similar installments. The
failure by Landlord to send any statement required by
this subparagraph shall not be deemed to be a waiver of
Landlord's right to receive such additional rent. Any
such statement shall be accompanied by a copy of any
relevant tax bill and a reasonable explanation of
Landlord's calculations.
(c) Tenant's share of Taxes shall be equitably adjusted for and with
respect to any portion of the Term which does not include an entire
Tax Period.
(d) If Tenant is obligated to pay any additional rent as aforesaid with
respect to any Tax Period or fraction thereof during the Term, then
Tenant shall pay, as additional rent, on the first day of each month
of the next ensuing Tax Period, estimated monthly tax escalation
payments in an amount from time to time reasonably estimated by
Landlord to be sufficient to provide Landlord, in the aggregate, a
sum equal to the amount payable by Tenant under clause 8.1(b)(i)
above, ("Tenant's Tax Amount") ten (10) days, at least, before the
day on which payments on account of Taxes by Landlord would become
delinquent. Estimated monthly tax escalation payments for each
ensuing Tax Period shall be made retroactively to the first day of
the Tax Period in question. Following the close of each Tax Period
for and with respect to which Tenant is obligated to pay any
additional rent as aforesaid, Landlord shall submit the statement
set forth in paragraph (b)(ii) of this Section 8.1 and in the event
the total of the estimated monthly tax escalation payments
theretofore made by Tenant to Landlord for such Tax Period does not
equal Tenant's Tax Amount for such Tax Period, Tenant shall pay any
deficiency to Landlord as shown by such statement within fifteen
(15) days after the delivery of such statement (whether or not such
statement shall be timely). If the total of the estimated monthly
tax escalation payments paid by Tenant during such Tax Period exceed
the actual amount of Tenant's Tax Amount for said Tax Period,
Landlord shall credit the amount of such overpayment against
immediately subsequent obligations of Tenant under this Lease (or
promptly refund such overpayment if the Term has ended and Tenant
has no further obligations to Landlord under the Lease).
(e) When the applicable tax bill is not available prior to the end of
the Term, then a tentative computation shall be made by Landlord on
the basis of the Taxes for the next prior Tax Period, with a final
adjustment to be made between Landlord and Tenant promptly after
Landlord shall have received the applicable tax bill.
(f) Payments by Tenant to Landlord on account of Taxes shall not be
considered as being held in trust, in escrow or the like, by
Landlord; it being the express intent of Landlord and Tenant that
Tenant shall in no event be entitled to receive interest upon, or
any payments on account of earnings or profits derived from, such
payments by Tenant to Landlord. Landlord shall have the same rights
and remedies for the non-payment by Tenant of any amounts due on
account of such
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Taxes as Landlord has hereunder for the failure of Tenant to pay the
Fixed Rent.
8.2 TENANT'S SHARE OF OPERATING EXPENSES.
(a) For the purposes of this Section:
(i) The term "Operating Year" shall mean each successive
fiscal year (as adopted by Landlord) in which any part
of the Term of this Lease shall fall.
(ii) The term "Operating Expenses" shall mean the following
expenses, costs and disbursements, paid or incurred by
Landlord in operating, owning, managing, repairing and
maintaining the Building and its appurtenances: premiums
for fire, casualty, liability and such other insurance
as Landlord may from time to time maintain; security
expenses; compensation and all fringe benefits,
workmen's compensation insurance premiums and payroll
taxes paid by Landlord to, for or with respect to all
persons engaged in operating, maintaining, managing or
cleaning; fuel costs; steam, water, sewer, electric,
gas, telephone, and other utility charges, in each case,
not otherwise billed to tenants by Landlord or the
utility; expenses incurred in connection with the
central plant furnishing heating, ventilating (including
maintaining and repairing ventilating fans and fan
rooms); and air-conditioning to the Building; costs of
lighting; costs of repairing and maintaining fire
protection systems; costs of building and cleaning
supplies and equipment (including rental); cost of
maintenance, cleaning, trash removal and repairs; costs
of elevator maintenance; cost of snow plowing or
removal, or both, and care of interior and exterior
landscaping; payments to independent contractors under
contracts for cleaning, operating, management,
maintenance and/or repair (which payments may be to
affiliates of Landlord); all other expenses paid in
connection with cleaning, operating, management,
maintenance and repair, including reasonable reserves
for the replacement of capital improvements and
equipment contained in and/or used in connection with
operations; costs of any capital improvements completed
after the original construction of the Building as
reasonably amortized by Landlord, with interest on the
unamortized amount at the rate of the greater of (i) 12%
per annum or (ii) 2% per annum above the base rate of
interest charged from time to time by The First National
Bank of Boston (the Base Rate) (but in no event at a
rate which is more than the highest lawful rate
allowable in the Commonwealth of Massachusetts), to the
extent the cost of the particular capital improvement
exceeds the amount of the unused reserve, if any, for
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the replacement thereof previously included in Operating
Expenses and insurance proceeds, if any, received by
Landlord on account of damage to the particular capital
improvement; and a supervisory fee equal to the lesser
of (i) 105% of the prior Operating Year's supervisory
fee or (ii) fifteen percent (15%) of all of the
Operating Expenses for the Operating Year in question.
Operating Expenses shall not, however, include the
following:
a. Costs of alterations of any tenant's premises for a
particular tenant and not for the benefit of the
Building or any group of tenants therein;
b. Principal or interest payments on loans secured by
mortgages or trust deeds on the Building and/or on
the Development;
c. Any environmental clean-up costs incurred by
Landlord related to any contamination of the
Development existing prior to the date hereof and
those items, if any, listed in Exhibit OPER, annexed
hereto.
(b) After the expiration of each Operating Year, Landlord shall furnish
Tenant with a statement setting forth the Operating Expenses for
such Operating Year. Such statement shall be accompanied by a
computation, in reasonable detail, of the amount, if any, of the
additional rent payable to Landlord pursuant to this Section.
(c) In the event the Operating Expenses during any Operating Year shall
be greater than the Base Operating Expenses, Tenant shall pay to
Landlord, as additional rent, an amount equal to the sum of: (i)
Tenant's Proportionate Office Portion Share of the excess of the
Operating Expenses relating to the Office Portion for such Operating
Year over and above the Base Operating Expenses relating to the
Office Portion and (ii) Tenant's Proportionate Garage Portion Share
of the excess of the Operating Expenses relating to the Garage
Portion for such Operating Year over and above the Base Operating
Expenses relating to the Garage Portion.
Notwithstanding anything contained herein, with respect to all
Operating Expenses except for all Operating Expenses relating to
------
snow removal, insurance and utilities (the "Exclusions", provision
for which is made below), Tenant shall never be required under the
provisions hereof to pay more than the "Maximum Annual Charge" (as
defined hereinafter) for each respective Operating Year within the
term of this Lease commencing with the second Operating Year. For
the purposes hereof, the "Maximum Annual Charge" shall be, for and
with respect to the second Operating Year contained within the term
of this Lease, the actual such amount payable by Tenant in
accordance with the provisions
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hereof; and, for and with respect to each Operating Year thereafter
during the term of this Lease, an annual amount equal to one hundred
seven percent (107%) of the Maximum Annual Charge for and with
respect to the then immediately preceding Operating Year (with an
appropriate proration for any partial Operating Year occurring at
the end of the term of this Lease). In calculating the Maximum
Annual Charge in each instance, there shall be excluded, as
aforesaid, all Exclusions; and, with respect to all such Exclusions,
Tenant shall share therein as hereinabove provided without any
"cap", all as if the Operating Expenses in which the Tenant is
required to share pursuant to this Section 8.2 had been broken down
for all purposes into two separate categories - the aforesaid
Operating Expenses relating to snow removal, insurance and
utilities, with respect to which Tenant's share shall be calculated
as if this paragraph had not been contained in this Lease, and the
balance of the Operating Expenses in which Tenant is required to
share pursuant hereto, as to which the aforesaid calculation and
Maximum Annual Charge provisions of this paragraph shall be
applicable. Nothing contained in this paragraph shall be construed
to require Tenant to pay more for any Operating Year than the total,
actual amount payable therefor by the Tenant under the provisions of
this Section 8.2.
(d) Said additional rent shall, with respect to the Operating Years in
which the Commencement Date and end of the Term of this Lease fall,
be adjusted to that proportion thereof as the portion of the Term of
this Lease falling within such Operating Year bears to the full
Operating Year. If Landlord shall change its fiscal year,
appropriate adjustment shall be made for any Operating Year less
than twelve months which may result.
(e) Any additional rent payable by Tenant under this Section 8.2 shall
be paid within fifteen (15) days after Landlord has furnished Tenant
with the statement described above.
(f) If with respect to any Operating Year or fraction thereof during the
Term, Tenant is obligated to pay any additional rent as aforesaid,
then Tenant shall pay, as additional rent, on the first day of each
month of the next ensuing Operating Year, estimated monthly
operating escalation payments in an amount from time to time
reasonably estimated by Landlord to be sufficient to cover, in the
aggregate, a sum equal to the sum of (i) Tenant's Proportionate
Office Portion Share of the Operating Expenses relating to the
Office Portion in excess of the Base Operating Expenses relating to
the Office Portion and (ii) Tenant's Proportionate Garage Portion
Share of the Operating Expenses relating to the Garage Portion in
excess of the Base Operating Expenses relating to the Garage Portion
for the next ensuing Operating Year. Estimated monthly operating
escalation payments for each ensuing Operating Year shall be made
retroactively to the first day of the Operating Year in question. If
the estimated monthly operating escalation payments theretofore made
for such Operating Year by
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Tenant exceed the sum of (i) Tenant's Proportionate Office Portion
Share of the Operating Expenses relating to the Office Portion in
excess of the Base Operating Expenses relating to the Office Portion
and (ii) Tenant's Proportionate Garage Portion Share of the
Operating Expenses relating to the Garage Portion in excess of the
Base Operating Expenses relating to the Garage Portion for such
Operating Year according to the statement furnished Tenant by
Landlord pursuant to paragraph (b) of this Section 8.2, Landlord
shall credit the amount of such overpayment against immediately
subsequent obligations of Tenant under this Lease (or promptly
refund such overpayment if the Term has ended and Tenant has no
further obligation to Landlord under the Lease); but if the sum of
(i) Tenant's Proportionate Office Portion Share of the Operating
Expenses relating to the Office Portion in excess of the Base
Operating Expenses relating to the Office Portion and (ii) Tenant's
Proportionate Garage Portion Share of the Operating Expenses
relating to the Garage Portion in excess of the Base Operating
Expenses relating to the Garage Portion for said Operating Year is
greater than the estimated monthly operating escalation payments
theretofore made on account of such period, Tenant shall make
suitable payment to Landlord within the time set forth in paragraph
(e) of this Section 8.2.
(g) Tenant acknowledges that if Landlord is not furnishing any
particular work or service, the cost of which, if performed by
Landlord, would be included in Operating Expenses, to any tenant who
has undertaken to perform such work or service in lieu of the
performance thereof by Landlord, Operating Expenses shall be deemed
for purposes of determining Operating Expenses under this Section to
be increased by an amount equal to the additional Operating Expenses
which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such work or service
to such tenant.
(h) Tenant shall have the right to audit Landlord's books and records
compiled with respect to the Operating Expenses in which Tenant is
required to share hereunder, provided: (i) any such audit shall be
conducted only with respect to the then immediately preceding
Operating Year; (ii) no such audit shall be conducted unless the
Operating Expenses have increased by more than fifteen percent (15%)
from the level of Operating Expenses for the immediately preceding
Operating Year; (iii) any such audit shall be conducted upon at
least thirty (30) days prior written notice to Landlord (and no more
often than once in any Operating Year), during reasonable business
hours, at Landlord's accounting office where such records are
maintained by Landlord; (iv) Landlord shall incur no cost or expense
in connection with any such audit and, without limitation, Tenant
shall be required to reimburse Landlord, as additional rent, upon
demand, any and all such reasonable costs and expenses including
disbursements and charges incurred and the compensation paid by
Landlord to any of its agents or employees for their time devoted to
preparing for and attending to such audit (except that if it is
ultimately determined that Landlord
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overcharged Tenant, other than by reason of clerical or other
completely inadvertent error, then Tenant shall not be required so
to reimburse Landlord); and (v) in the event that it is ultimately
determined as a result of such audit that there has been an
overpayment or underpayment by Tenant hereunder, then, promptly when
the amount thereof has been determined, there shall be an
appropriate payment so that Tenant's additional rent for such
Operating Year shall be in the amount required to be paid pursuant
to the foregoing provisions of this Section, and no more.
ARTICLE IX
----------
INDEMNITY AND PUBLIC LIABILITY INSURANCE
----------------------------------------
9.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to indemnify and save harmless
Landlord from and against all claims of whatever nature arising from any
act, omission or negligence of Tenant, or Tenant's contractors,
licensees, invitees, agents, servants or employees, or arising from any
accident, injury or damage whatsoever caused to any person, or to the
property of any person, occurring after the commencement of construction
work by Tenant, and until the end of the Lease Term and thereafter, so
long as Tenant is in occupancy of any part of the Premises, within the
Premises, or arising from any accident, injury or damage occurring
outside of the Premises but within the Lot, where such accident, damage
or injury results or is claimed to have resulted from an act or omission
on the part of Tenant or Tenant's agents, employees, independent
contractors or invitees.
This indemnity and hold harmless agreement shall include indemnity
against all reasonable costs, reasonable expenses (including reasonable
attorney fees and expenses) and liabilities incurred in or in connection
with any such claim or proceeding brought thereon, and the defense
thereof.
9.2 PUBLIC LIABILITY INSURANCE. In addition to the insurance required to be
maintained by Tenant pursuant to Exhibit C, Tenant agrees to maintain in
full force and effect from the date on which Tenant first enters the
Premises for any reason, throughout the Lease Term, and thereafter so
long as Tenant is in occupancy of any part of the Premises, a policy of
Comprehensive General Liability insurance (without any so-called employee
exclusion or the like) in accordance with the broadest form of such
coverage as is available from time to time in the jurisdiction in which
the Premises are located. The minimum limits of liability of such
insurance shall be $1,000,000.00, each occurrence; $2,000,000.00 general
aggregate limit; $2,000,000.00 products - completed operations aggregate
limit; $1,000,000.00 personal and advertising liability; $50,000.00 fire
legal liability; and $5,000.00 medical expenses limit (each person); or
shall be for such higher limits, if directed by Landlord, as are
customarily carried in that area in which the Building is located upon
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property similar to the Building. In addition, the Tenant shall carry an
excess liability policy in umbrella form with a minimum limit of
liability in the amount of $5,000,000.00.
The policy shall also include, but shall not be limited to, the following
extensions of coverage:
(i) contractual liability, covering Tenant's liability
assumed under this Lease;
(ii) personal injury liability in the amount of one million
dollars ($1,000,000.00) annual aggregate, expressly
deleting the exclusion relating to contractual
assumptions of liability; and
(iii) civil assault and battery coverage with respect to the
acts of third parties or employees or agents of Tenant
acting outside of the scope of their employment or
agency.
Tenant further agrees to maintain a workers' compensation and employers'
liability insurance policy. The limit of liability as respects employers'
liability coverage shall be no less than one hundred thousand dollars
($100,000.00) per accident.
Except for workers' compensation and employers' liability coverage,
Tenant agrees that Landlord and its designees from time to time are named
as additional insureds. Further, all policies shall be noncancelable and
nonamendable with respect to Landlord and Landlord's said designees
without 30 days' prior written notice to Landlord. A duplicate original
or a Certificate of Insurance evidencing the above agreements shall be
delivered to Landlord upon the execution of this Lease.
9.3 TENANT'S RISK. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to use and occupy the Premises
and to use such other portions of the Building as Tenant is herein given
the right to use at Tenant's own risk; and Landlord shall have no
responsibility or liability for any loss of or damage to fixtures or
other personal property of Tenant for any reason whatsoever. The
provisions of this Section shall be applicable from and after the
execution of this Lease and until the end of the Lease Term, and during
such further period as Tenant may use or be in occupancy of any part of
the Premises or of the Building.
9.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement may
be made effective according to law, Tenant agrees that Landlord shall not
be responsible or liable to Tenant, or to those claiming by, through or
under Tenant, for any loss or damage that may be occasioned by or through
the acts or omissions of persons occupying adjoining premises or any part
of the premises adjacent to or connecting with the Premises or any part
of the Building or the Development, or otherwise or for any loss or
damage resulting to Tenant or those claiming by, through
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or under Tenant, or its or their property, from the breaking, bursting,
stopping or leaking of electric cables and wires, water, gas, sewer or
steam pipes, and from roof leaks and the like.
9.5 FIRE AND HAZARD INSURANCE. The Landlord shall keep the Premises insured
against loss or damage by fire, with the usual extended coverage
endorsements and such other insurance as the then holder of the first
mortgage which includes the Premises shall require, in amounts not less
than eighty percent (80%) of the full replacement value thereof above
foundation walls, with such deductibles as the Landlord deems advisable,
but specifically excluding any property or improvements installed by or
belonging to the Tenant.
The Tenant also agrees that it shall continuously keep its fixtures,
merchandise (if any), equipment and other personal property from time to
time located in, on or about the Premises, and all leasehold improvements
to the Premises constructed or installed by the Tenant insured by
reputable, duly licensed insurance companies against loss or damage by
fire with the usual extended coverage endorsements. Within a reasonable
time after the Commencement Date, no less often than annually thereafter,
and at any other time upon the request of the Landlord, the Tenant shall
furnish to the Landlord evidence of such continuous insurance coverage
satisfactory to the Landlord. It is understood and agreed that the Tenant
assumes all risk of damage to its own property arising from any cause
whatsoever, including, without limitation, loss by theft or otherwise.
ARTICLE X
---------
LANDLORD'S ACCESS TO PREMISES
-----------------------------
10.1 LANDLORD'S RIGHT OF ACCESS. Landlord shall have the right to enter the
Premises for the purpose of inspecting or making repairs to the same, and
Landlord shall also have the right to make access available to
prospective or existing mortgagees or purchasers of any part of the
Building. Such entry or access shall occur only during reasonable
business hours, upon reasonable advance notice to Tenant, and in the
presence of Tenant's agent(s) if requested by Tenant (Tenant agreeing to
make such agents reasonably available), except in cases of emergency
repairs.
10.2 EXHIBITION OF SPACE TO PROSPECTIVE TENANTS. For a period of nine (9)
months prior to the expiration of the Lease Term, Landlord may have
reasonable access to the Premises at all reasonable hours for the purpose
of exhibiting the same to prospective tenants, and may post suitable
notice on the Premises advertising the same for rent.
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ARTICLE XI
----------
FIRE, EMINENT DOMAIN, ETC.
--------------------------
11.1 ABATEMENT OF RENT. If the Premises or a substantial portion of the
parking areas within the Building that serve the Premises shall be
damaged by fire or casualty, the Fixed Rent and the additional rent
payable by Tenant under ARTICLE VIII hereof shall abate or be reduced
proportionately for the period in which, by reason of such damage, there
is substantial interference with the operation of Tenant's use of the
Premises, having regard to the extent to which Tenant may be required to
discontinue Tenant's use of the Premises, but such abatement or reduction
shall end if and when Landlord shall have substantially restored the
Premises (or such parking areas) (exclusive of any of Tenant's fixtures,
furnishings, equipment and the like or work performed therein by Tenant)
to substantially the condition in which the Premises were in prior to
such damage. In no event shall Landlord be obligated in connection with
the restoration of the Premises (or such parking areas), as aforesaid, to
expend an amount in excess of the proceeds of insurance recovered with
respect thereto. In the event the Premises (or such parking areas) shall
be damaged by fire or other casualty resulting from the act or neglect of
Tenant, its agents, contractors, employees or invitees, and this Lease
shall not be terminated by Landlord as a result of such damage, Tenant
shall not be released from any of its obligations hereunder including,
without limitation, its duty to pay the Fixed Rent and the additional
rent payable by Tenant under ARTICLE VIII hereof without abatement or
reduction.
If any part of the Building is taken by any exercise of the power of
eminent domain, as a result of which there is substantial interference
with the operation of Tenant's use of the Premises, then the Fixed Rent
and the additional rent payable by Tenant under ARTICLE VIII hereof shall
be justly and equitably abated and reduced according to the nature and
extent of the loss of use thereof suffered by Tenant.
11.2 TERMINATION IN THE EVENT OF CASUALTY OR CONDEMNATION. If the Premises or
the Building are substantially damaged by fire or casualty (the term
"substantially damaged" meaning damage of such a character that the same
cannot, in the ordinary course, reasonably be expected to be repaired
within thirty (30) days from the time that repair work would commence),
or any part of the Building is taken by an exercise of the right of
eminent domain, then Landlord shall have the option (a) to terminate this
Lease (even if the Landlord's entire interest in the Premises may have
been divested) by giving notice of Landlord's election so to do within
thirty (30) days of the occurrence of the casualty or taking, whereupon
this Lease shall terminate as of the date of such notice with the same
force and effect as if such date were the date originally established as
the expiration date hereof or (b) to restore the Premises to
substantially the condition existing prior to such casualty or taking;
provided, however, if Landlord does elect to restore, Landlord shall give
Tenant written notice thereof within thirty (30) days of the occurrence
of the casualty or taking and proceed with diligence to complete such
restoration, with Tenant having the right to terminate
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this Lease if such notice is not given or such restoration is not
substantially completed within 90 days of delivery of such notice to
Tenant.
If, however, the Premises suffer a "major casualty damage" (meaning for
purposes of this second paragraph of Section 11.2, damage of such a
character that the same, in the ordinary course, cannot reasonably be
expected to be repaired within ninety (90) days from the time repair work
would commence) that is not the result of Tenant's negligence or conduct
or suffer a condemnation that results in more than forty-five percent
(45%) of the Premises being unavailable for Tenant's use, Tenant shall
have the right to terminate this lease, provided that notice thereof is
given to Landlord not later than thirty (30) days after such damage or
condemnation occurs. If said right of termination is exercised, this
lease and the term thereof shall cease and come to an end as of the 30th
day following delivery of such termination notice.
11.3 AWARD. Landlord shall have and hereby reserves and accepts, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages
to the Building, the Development, and the leasehold interest hereby
created, and to compensation accrued or hereafter to accrue by reason of
such taking, damage or destruction, as aforesaid, and by way of
confirming the foregoing, Tenant hereby grants and assigns, and covenants
with Landlord to grant and assign to Landlord all rights to such damages
or compensation. Nothing contained herein shall be construed to prevent
Tenant from prosecuting in any condemnation proceedings a claim for the
value of any Tenant's usual trade fixtures installed in the Premises by
Tenant at Tenant's expense and for relocation expenses, provided that
such action shall not affect the amount of compensation otherwise
recoverable by Landlord from the taking authority.
ARTICLE XII
-----------
LANDLORD'S REMEDIES
-------------------
12.1 EVENTS OF DEFAULT. Any one of the following shall be deemed to be an
"Event of Default":
A. Failure on the part of Tenant to pay Fixed Rent, additional rent or
other charges for which provision is made herein on or before the date on
which the same become due and payable and such failure continues for ten
(10) days after Landlord has sent to Tenant notice of such default.
However, if: (i) Landlord shall have twice sent to Tenant a notice of
such default, even though the same shall have been cured and this Lease
not terminated; and (ii) during the twelve (12) month period in which
said notices of default have been sent by Landlord to Tenant, Tenant
thereafter shall default in any monetary payment - the same shall be
deemed to be an Event of Default upon Landlord giving Tenant written
notice thereof, without the ten (10) day grace period set forth above.
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B. With respect to a non-monetary default under this Lease, failure of
Tenant to cure the same within thirty (30) days following notice from
Landlord to Tenant of such default or an additional sixty (60) days in
the case of a default that cannot reasonably be cured within such thirty
(30) days. Notwithstanding the applicable cure period provided in the
preceding sentence, Tenant shall be obligated to commence forthwith and
to complete as soon as possible the curing of such default; and if Tenant
fails so to do, the same shall be deemed to be an Event of Default.
C. The commencement of any of the following proceedings, with such
proceeding not being dismissed within sixty (60) days after it has begun:
(i) the estate hereby created being taken on execution or by other
process of law; (ii) Tenant being judicially declared bankrupt or
insolvent according to law; (iii) an assignment being made of the
property of Tenant for the benefit of creditors; (iv) a receiver,
guardian, conservator, trustee in involuntary bankruptcy or other similar
officer being appointed to take charge of all or any substantial part of
Tenant's property by a court of competent jurisdiction; or (v) a petition
being filed for the reorganization of Tenant under any provisions of the
Bankruptcy Code now or hereafter enacted.
D. Tenant filing a petition for reorganization or for rearrangements
under any provisions of the Bankruptcy Code now or hereafter enacted, and
providing a plan for a debtor to settle, satisfy or to extend the time
for the payment of debts.
E. Execution by Tenant of an instrument purporting to assign Tenant's
interest under this Lease or sublet the whole or a portion of the
Premises to a third party without Tenant having first obtained Landlord's
prior express consent to said assignment or subletting where such consent
is required pursuant to ARTICLE V hereof.
12.2 REMEDIES. Should any Event of Default occur then, notwithstanding any
license of any former breach of covenant or waiver of the benefit hereof
or consent in a former instance, Landlord lawfully may, in addition to
any remedies otherwise available to Landlord, immediately or at any time
thereafter, and without demand or notice, enter into and upon the
Premises or any part thereof in the name of the whole and repossess the
same as of Landlord's former estate, and expel Tenant and those claiming
by, through or under it and remove its or their effects (forcibly if
necessary) without being deemed guilty of any manner of trespass, and
without prejudice to any remedies which might otherwise be used for
arrears of rent or preceding breach of covenant and/or Landlord may send
notice to Tenant terminating the Term of this Lease; and upon the first
to occur of: (i) entry as aforesaid; or (ii) the tenth (10th) day
following the mailing of such notice of termination, the Term of this
Lease shall terminate, but Tenant shall remain liable for all damages as
provided for herein.
Tenant covenants and agrees, notwithstanding any termination of this
Lease as aforesaid or any entry or re-entry by Landlord, whether by
summary proceedings, termination, or otherwise, to pay and be liable for
on the days originally fixed herein for the payment thereof, amounts
equal to the several installments of Fixed Rent and
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other charges reserved as they would become due under the terms of this
Lease if this Lease had not been terminated or if Landlord had not
entered or re-entered, as aforesaid, and whether the Premises be relet or
remain vacant, in whole or in part, or for a period less than the
remainder of the Term, or for the whole thereof; but in the event the
Premises be relet by Landlord (Landlord agreeing, if it elects to relet,
Landlord will use reasonable efforts to market the Premises for
reletting), Tenant shall be entitled to a credit in the net amount of
rent received by Landlord in reletting, after deduction of all reasonable
expenses incurred in reletting the Premises (including, without
limitation, remodeling costs, brokerage fees, and the like), and in
collecting the rent in connection therewith. It is specifically
understood and agreed that Landlord shall be entitled to take into
account in connection with any reletting of the Premises all relevant
factors which would be taken into account by a sophisticated developer in
securing a replacement tenant for the Premises, such as, but not limited
to, the first class quality of the Building and the financial
responsibility of any such replacement tenant; and Tenant hereby waives,
to the extent permitted by applicable law, any obligation Landlord may
have to mitigate Tenant's damages. As an alternative, at the election of
Landlord, Tenant will upon such termination pay to Landlord, as damages,
such a sum as at the time of such termination represents the amount of
the excess, if any, of the then value of the total rent and other
benefits which would have accrued to Landlord under this Lease for the
remainder of the Lease Term if the lease terms had been fully complied
with by Tenant over and above the then cash rental value (in advance) of
the Premises for the balance of the Term. For purposes of this ARTICLE,
if Landlord elects to require Tenant to pay damages in accordance with
the immediately preceding sentence, the total rent shall be computed by
assuming that Tenant's Proportionate Share of Taxes in excess of the Base
Tax Amount and Tenant's Proportionate Share of the Operating Expenses in
excess of the Base Operating Expenses would be, for the balance of the
unexpired term, the amount thereof (if any), respectively, for the
immediately preceding Tax Period or fiscal year, as the case may be,
payable by Tenant to Landlord.
If this Lease shall at any time be guaranteed on behalf of Tenant, all of
the foregoing provisions of this ARTICLE with respect to bankruptcy of
Tenant, etc., shall be deemed to read "Tenant or the guarantor hereof"
with respect to events occurring during such time.
In the event of any breach or threatened breach by Tenant of any of the
agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and
shall have the right to invoke any right or remedy allowed at law or in
equity or by statute or otherwise as though reentry, summary proceedings,
and other remedies were not provided for in this Lease.
Each right and remedy of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy
provided for in this Lease not now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the
exercise by Landlord of any one or more of the rights or remedies
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provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise shall not preclude the simultaneous or
later exercise by Landlord of any or all other rights or remedies
provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise.
If any payment of rent or any other payment payable hereunder by Tenant
to Landlord shall not be paid when due, the same shall bear interest from
the date when the same was payable (taking into account applicable cure
periods, if any) until the date paid at the lesser of (a) the Base Rate
plus three percent (3%) per annum, compounded monthly, or (b) the highest
lawful rate of interest which Landlord may charge to Tenant without
violating any applicable law. Such interest shall constitute additional
rent payable hereunder and be payable upon demand therefor by Landlord.
Without limiting any of Landlord's rights and remedies hereunder, and in
addition to all other amounts Tenant is otherwise obligated to pay, it is
expressly agreed that Landlord shall be entitled to recover from Tenant
all reasonable costs and expenses, including reasonable attorneys' fees
incurred by Landlord in enforcing this Lease from and after an Event of
Default.
12.3 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any of Landlord's obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30)
days, or such additional time as is reasonably required to correct any
such default, after notice by Tenant to Landlord properly specifying
wherein Landlord has failed to perform any such obligation.
12.4 BANKRUPTCY OR INSOLVENCY. In the event that the Tenant shall become a
Debtor under the Bankruptcy Code, and the Trustee or the Tenant shall
elect to assume this lease for the purpose of assigning the same or
otherwise, such election and assignment may only be made if all the terms
and conditions of Sections 12.4.1 and 12.4.2 hereof are satisfied. If
such Trustee shall fail to elect to assume this lease within sixty (60)
days after the filing of the Petition, this lease shall be deemed to have
been rejected. The Landlord shall be thereupon immediately entitled to
possession of the demised premises without further obligation to the
Tenant or the Trustee, and this lease shall be terminated, but the
Landlord's right to be compensated for damages both at law and as
provided in this ARTICLE XII hereof in such case shall survive.
Section 12.4.1.
--------------
A. No election by the Trustee or Debtor-In-Possession to assume this
lease, whether under Chapter 7, 11 or 13, shall be effective unless each
of the following conditions, which the Landlord and the Tenant
acknowledge and agree are commercially reasonable in the context of a
bankruptcy case of the Tenant, have been satisfied, and the Landlord has
so acknowledged in writing:
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(1) The Trustee or the Debtor-In-Possession has cured, or has provided
the Landlord adequate assurance (as hereinafter defined) that:
(a) Within ten (10) days from the date of such assumption, the
Trustee will cure all monetary defaults under this lease; and
(b) Within thirty (30) days from the date of such assumption, the
Trustee will cure all nonmonetary defaults under this lease.
(2) The Trustee or Debtor-In-Possession has compensated, or has provided
to the Landlord adequate assurance (as hereinafter defined) that
within ten (10) days from the date of assumption, the Landlord will
be compensated for any pecuniary loss incurred by the Landlord
arising from the default of the Tenant, the Trustee, or the Debtor-
In-Possession as recited in the Landlord's written statement of
pecuniary loss sent to the Trustee or Debtor-In-Possession.
(3) The Trustee or the Debtor-In-Possession has provided the Landlord
with adequate assurance (as hereinafter defined) of the future
performance of each of the Tenant's, the Trustee's or Debtor-In-
Possession's obligations under this lease, provided, however that:
(a) Whether or not otherwise required by the terms of this lease, the
Trustee or Debtor-In-Possession shall also pay in advance on the
date rent is payable hereunder, one-twelfth (1/12th) of the
Tenant's annual obligations under this lease for common area
maintenance, Taxes, and any other charges payable hereunder.
(b) The obligations imposed upon the Trustee or Debtor-In-Possession
under this lease shall continue with respect to the Tenant or any
assignee of this lease after the completion of the bankruptcy
case, subject to any further and/or increased obligations which
thereafter are imposed by any provisions of this lease.
(4) The assumption of this lease will not:
(a) Breach any provision in this lease or any other lease, mortgage,
financing agreement or other agreement by which the Landlord is
bound relating to the Development; or
(b) Disrupt, in the Landlord's judgment, the tenant mix of the
Development or any other attempt by the Landlord to provide a
specific variety of facilities in the Development which, in the
Landlord's judgment, would be most beneficial to all of the
tenants of the Development and would enhance the image,
reputation, and profitability of the Development.
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(5) The assumption has been ratified and approved by order of such court
or courts as have jurisdiction under the Bankruptcy Code.
B. For the purposes of this Section 12.4.1., the Landlord and the Tenant
acknowledge that, in the context of a bankruptcy proceeding of the
Tenant, at a minimum, "adequate assurance" shall mean:
(1) The Trustee or Debtor-In-Possession has and will continue to have
sufficient unencumbered assets after the payment of all secured
obligations and administrative expenses to assure the Landlord that
the Trustee or Debtor-In-Possession will have sufficient funds to
fulfill the obligations of the Tenant under this lease, and to keep
the Premises properly staffed with sufficient employees to conduct a
fully-operational, actively promoted business on the Premises; and
(2) The Bankruptcy Court or such court as is exercising jurisdiction
over the Bankruptcy Code shall have entered an Order segregating
sufficient cash payable to the Landlord and/or the Trustee or
Debtor-In-Possession shall have granted a valid and perfected first
lien and security interest and/or mortgage in property of the
Tenant, the Trustee or Debtor-In-Possession, acceptable as to value
and kind to the Landlord, to secure to the Landlord the obligation
of the Trustee or Debtor-In-Possession to cure any monetary and/or
nonmonetary defaults under this lease within the time periods set
forth above.
Section 12.4.2. If the Trustee or Debtor-In-Possession has assumed this
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lease pursuant to the terms and provisions of Section 12.4.1. hereof, for
the purpose of assigning (or elects to assign) the Tenant's interest
under this lease, or the estate created thereby, to any other person,
such interest or estate may be so assigned only if the Landlord shall
acknowledge in writing that the intended assignee has provided adequate
assurance of the future performance (as defined in this Section 12.4.2.)
of all of the terms, covenants and conditions of this lease to be
performed by the Tenant.
For the purposes of this Section 12.4.2., the Landlord and the Tenant
acknowledge that, in the context of a bankruptcy case of the Tenant, at a
minimum, "adequate assurance of future performance" shall mean that each
of the following conditions have been satisfied, and the Landlord has so
acknowledged in writing:
(1) The assignee has submitted a current financial statement audited by
a Certified Public Accountant which shows a net worth and working
capital in amounts (which amounts shall in no event be less than the
greater of those of the Tenant and any guarantor of the Tenant's
obligations hereunder at the time of the execution of this lease)
determined to be sufficient by the Landlord to assure the future
performance by such assignee of the Tenant's obligations under this
lease;
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(2) The Landlord has obtained all consents and waivers from any third
party required under any lease, mortgage, financing arrangement or
other agreement by which the Landlord is bound to permit the
Landlord to consent to such assignment;
(3) The assignee has complied with any other provisions, conditions and
requirements set forth in this Lease for an assignment of the
Tenant's interest in this lease or the estate created thereby; and
(4) The Assignee has deposited with the Landlord a security deposit in
such amount as determined by the Landlord to be appropriate based
upon the financial information supplied under this Section 12.4.2.
Section 12.4.3. When, pursuant to the Bankruptcy Code, the Trustee or
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Debtor-In-Possession shall be obligated to pay reasonable use and
occupancy charges for the use of the demised premises or any portion
thereof, such charges shall not be less than the rent specified in
Section 1.1 hereof and any other charges payable by the Tenant hereunder.
Section 12.4.4. The rights and remedies of the Landlord contained in the
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provisions of this ARTICLE XII are and shall be deemed to be in addition
to, and not in limitation of, applicable other provisions of this ARTICLE
XII and other provisions hereof, or any other rights which the Landlord
may have under applicable statutory or case law. Whenever any of the
terms or provisions of this lease, including, without limitation, rental
obligations, are modified pursuant to the provisions of this Section
12.4., upon the Landlord's request the parties hereto promptly shall
execute, acknowledge and deliver a written instrument evidencing and
confirming the same. In no event shall this lease, if the term hereof has
expired or has been terminated in accordance with the provisions hereof,
be revived, and no stay or other proceeding shall nullify, postpone or
otherwise affect the expiration or earlier termination of the term of
this lease pursuant to the provisions of ARTICLE XII hereof or prevent
the Landlord from regaining possession of the demised premises thereupon.
ARTICLE XIII
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MISCELLANEOUS PROVISIONS
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13.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do
or permit anything to be done in or upon the Premises, or bring in
anything or keep anything therein which shall increase the rate of
insurance on the Premises or on the Building above the standard rate
applicable to premises being occupied for the use to which Tenant has
agreed to devote the Premises; and Tenant further agrees that in the
event that Tenant shall do any of the foregoing, Tenant will promptly pay
to Landlord, on demand, any such increase resulting therefrom which shall
be due and payable as additional rent hereunder.
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13.2 WAIVER. Failure on the part of Landlord or Tenant to complain of any
action or non-action on the part of the other, no matter how long the
same may continue, shall never be a waiver by Tenant or Landlord,
respectively, of any of the other's rights hereunder. Further, no waiver
at any time of any of the provisions hereof by Landlord or Tenant shall
be construed as a waiver of any of the other provisions hereof, and a
waiver at any time of any of the provisions hereof shall not be construed
as a waiver at any subsequent time of the same provisions. The consent or
approval of Landlord or Tenant to or of any action by the other requiring
such consent or approval shall not be construed to waive or render
unnecessary Landlord's or Tenant's consent or approval to or of any
subsequent similar act by the other.
No payment by Tenant or acceptance by Landlord of a lesser amount than
shall be due from Tenant to Landlord shall be treated otherwise than as a
payment on account. The acceptance by Landlord of a check for a lesser
amount with an endorsement or statement thereon, or upon any letter
accompanying such check that such lesser amount is payment in full, shall
be given no effect, and Landlord may accept such check without prejudice
to any other rights or remedies which Landlord may have against Tenant.
In no event shall Tenant ever be entitled to receive interest upon, or
any payments on account of earnings or profits derived from any payments
hereunder by Tenant to Landlord.
13.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease, upon payment of the Fixed Rent and other charges due
hereunder and the observing, keeping and performing of all of the terms
and provisions of this Lease on Tenant's part to be observed, kept and
performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Premises during the Term hereof, without hindrance or ejection
by any persons lawfully claiming under Landlord to have title to the
Premises superior to Tenant; the foregoing covenant of quiet enjoyment is
in lieu of any other covenant, expressed or implied; and it is understood
and agreed that this covenant and any and all other covenants of Landlord
contained in this Lease shall be binding upon Landlord and Landlord's
successors only with respect to breaches occurring during Landlord's and
Landlord's successors' respective ownership of Landlord's interest
hereunder. Further, Tenant specifically agrees to look solely to
Landlord's then equity interest in the Building and Development at the
time owned, or in which Landlord holds an interest as ground lessee, for
recovery of any judgment from Landlord; it being specifically agreed that
Landlord (original or successor) shall never be personally liable for any
such judgment, or for the payment of any monetary obligation to Tenant.
The provision contained in the foregoing sentence is not intended to, and
shall not limit any right that Tenant might otherwise have to obtain
injunctive relief against Landlord or Landlord's successors in interest,
or any action not involving the personal liability of Landlord (original
or successor) to respond in monetary damages from Landlord's assets other
than Landlord's equity interest aforesaid in the Building and
Development. With respect to any obligations to be performed by Landlord
hereunder, Landlord shall in no event be liable for failure to furnish or
perform the same when (and the date for performance of the same shall be
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postponed so long as Landlord is) prevented from doing so by strike,
lockout, breakdown, accident, order or regulation of or by any
governmental authority, or failure of supply, or inability by the
exercise of reasonable diligence to obtain supplies, parts or employees
necessary to furnish such services, or perform such obligations or
because of war or other emergency, or for any cause beyond Landlord's
reasonable control, or for any cause due to any act or neglect of Tenant
or Tenant's servants, agents, employees, licensees, invitees or any
person claiming by, through or under Tenant. In no event shall Landlord
ever be liable to Tenant for any indirect, special or consequential
damages suffered by Tenant from whatever cause.
13.4 NOTICE TO MORTGAGEE AND GROUND LESSOR. After receiving written notice
from any person, firm or other entity (such notice to include the mailing
address of the applicable person, firm or entity) that it holds a
mortgage which includes the Premises as part of the mortgaged premises,
or that it is the ground lessor under a lease with Landlord, as ground
lessee, which includes the Premises as part of the demised premises, no
notice from Tenant to Landlord shall be effective unless and until a copy
of the same is given to such holder or ground lessor, and the curing of
any of Landlord's defaults by such holder or ground lessor shall be
treated as performance by Landlord. For the purposes of this Section
13.4, Section 13.5 or Section 13.14, the term "mortgage" includes a
mortgage on a leasehold interest of Landlord (but not one on Tenant's
leasehold interest). In the event Landlord shall subject the Premises to
a ground lease, Landlord agrees to obtain from such ground lessor an
agreement by such ground lessor (in reasonable form and substance) to
recognize Tenant's rights under this lease in the event of any
termination of such ground lease with Tenant agreeing to attorn to such
ground lessor upon such recognition.
13.5 ASSIGNMENT OF RENTS. With reference to any assignment by Landlord of
Landlord's interest in this Lease, or the rents payable hereunder,
conditional in nature or otherwise, which assignment is made to the
holder of a mortgage or ground lease on property which includes the
Premises. Tenant agrees:
(a) that the execution thereof by Landlord, and the acceptance thereof
by the holder of such mortgage, or the ground lessor, shall never be
treated as an assumption by such holder or ground lessor of any of
the obligations of Landlord hereunder, unless such holder or ground
lessor shall, by notice sent to Tenant, specifically otherwise
elect; and
(b) that, except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder only upon
foreclosure of such holder's mortgage and the taking of possession
of the Premises, or in the case of a ground lessor, the assumption
of Landlord's position hereunder by such ground lessor. In no event
shall the acquisition of title to the Building and the land on which
the same is located by a purchaser which, simultaneously therewith,
leases the entire Building or such land back to the seller thereof,
be
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treated as an assumption by operation of law or otherwise of
Landlord's obligations hereunder, but Tenant shall look solely to
such seller-lessee, and its successors from time to time in title,
for performance of Landlord's obligations hereunder. In any such
event, this Lease shall be subject and subordinate to the lease to
such seller. For all purposes such seller-lessee, and its successors
in title, shall be the landlord hereunder unless and until
Landlord's position shall have been assumed by such purchaser-
lessor.
13.6 MECHANICS' LIENS. Tenant agrees immediately to discharge (either by
payment or by the filing of the necessary bond, or otherwise) any
mechanics', materialmen's or other lien against the Premises and/or
Landlord's interest therein, which liens may arise out of any payment due
for, or purported to be due for, any labor, services, materials, supplies
or equipment alleged to have been furnished to or for Tenant in, upon or
about the Premises.
13.7 NO BROKERAGE. Tenant and Landlord each warrant and represent to the
other that each has not dealt with any broker other than the broker, if
any, named in Section 1.2 hereof, in connection with the consummation of
this Lease, and in the event any claim is made against either relative to
dealings with brokers other than any broker named in Section 1.2, the
breaching party shall defend the claim against the other with counsel of
the non-breaching party's selection and save harmless and indemnify the
non-breaching party on account of loss, cost or damage which may arise by
reason of any such claim. Landlord acknowledges that it is responsible
for the fees and commissions due to the brokers named in Section 1.2 in
connection with this transaction.
13.8 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall
not be affected thereby, and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
13.9 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms
hereof shall be binding upon and shall inure to the benefit of the
successors and assigns, respectively, of Landlord and Tenant and, if
Tenant shall be an individual, upon and to his heirs, executors,
administrators, successors and assigns. If two or more persons are named
as Tenant herein, each of such persons shall be jointly and severally
liable for the obligations of the Tenant hereunder, and Landlord may
proceed against any one without first having commenced proceedings
against any other of them. Each term and each provision of this Lease to
be performed by Tenant shall be construed to be both a covenant and a
condition. The reference contained to successors and assigns of Tenant is
not intended to constitute a consent to assignment by Tenant, but has
reference only to those instances in which Landlord may later give
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consent to a particular assignment as required by those provisions of
ARTICLE V hereof.
13.10 RECORDING. Tenant agrees not to record the within Lease, but each party
hereto agrees, on the request of the other, to execute a so-called
memorandum of lease or short form lease in form recordable and complying
with applicable law and reasonably satisfactory to Landlord's and
Tenant's attorneys. In no event shall such document set forth the rent or
other charges payable by Tenant under this Lease; and any such document
shall expressly state that it is executed pursuant to the provisions
contained in this Lease and is not intended to vary the terms and
conditions of this Lease.
13.11 NOTICES. Whenever, by the terms of this Lease, notice shall or may be
given either to Landlord or to Tenant, such notice shall be in writing
and shall be delivered in hand or sent by registered or certified mail,
postage prepaid:
If intended for Landlord, addressed to Landlord at the address set
forth in Section 1.2 of this Lease (or to such other address or
addresses as may from time to time hereafter be designated by
Landlord by like notice) with copies to Goulston & Storrs, P.C., 400
Atlantic Avenue, Boston, Massachusetts 02110, Attention: NED -
Arsenal Mall.
If intended for Tenant, addressed to Tenant at the address set forth
in Section 1.2 of this Lease (or to such other address or addresses
as may from time to time hereafter be designated by Tenant by like
notice) with copies to Thomas J. Phillips, Esq., Goodwin, Procter &
Hoar, Exchange Place, Boston, MA 02109 and to any guarantor of
Tenant's obligations at the address of the guarantor as set forth in
the guarantee.
All such notices shall be effective when delivered in hand, or when
deposited in the United States mail within the continental United States
provided that the same are received in the ordinary course at the address
to which the same were sent.
13.12 WHEN LEASE BECOMES BINDING. Employees or agents of Landlord have no
authority to make or agree to make a lease or any other agreement or
undertaking in connection herewith. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery hereof
by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are
incorporated herein and may be modified or altered only by written
agreement between Landlord and Tenant, and no act or omission of any
employee or agent of Landlord shall alter, change or modify any of the
provisions hereof.
13.13 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument
are for convenience and reference only, and the words contained therein
shall in no way
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be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this Lease.
13.14 RIGHTS OF MORTGAGEE. It is understood and agreed that the rights and
interests of Tenant under this Lease shall be subject and subordinate to
any mortgages or deeds of trust that may hereafter be placed upon the
Building and/or the Development, and to any and all advances to be made
thereunder, and to the interest thereon, and all renewals, modifications,
replacements and extensions thereof, if the mortgagee or trustee named in
said mortgages or deeds of trust shall elect by notice delivered to
Tenant to subject and subordinate the rights and interest of Tenant under
this Lease to the lien of its mortgage or deed of trust; it is further
agreed that any mortgagee or trustee may elect to give the rights and
interest of Tenant under this Lease priority over the lien of its
mortgage or deed of trust. In the event of either such election, and upon
notification by such mortgagee or trustee to Tenant to that effect, the
rights and interest of Tenant under this Lease shall be deemed to be
subordinate to, or to have priority over, as the case may be, the lien of
said mortgage or deed of trust, whether this Lease is dated prior to or
subsequent to the date of said mortgage or deed of trust. Tenant shall
execute and deliver whatever instruments may be required for such
purposes, (such instruments to be prepared at no expense to Tenant), and
in the event Tenant fails so to do within ten (10) days after demand in
writing, Tenant does hereby make, constitute and irrevocably appoint
Landlord as its attorney-in-fact and in its name, place and stead so to
do. Landlord shall use reasonable efforts to obtain from the holder of
the mortgage currently encumbering the Shopping Center a so-called non-
disturbance agreement in substantially the form which is annexed hereto
as Exhibit SNDA, with only such changes as are reasonably satisfactory to
the Tenant. With respect to any future mortgage encumbering the Shopping
Center to which this lease is to be subject and subordinate, at the
Tenant's request, the Tenant's obligation to subordinate shall be subject
to Landlord's utilization of reasonable efforts to obtain for the Tenant
such a non-disturbance agreement.
13.15 STATUS REPORT. Recognizing that both parties may find it necessary to
establish to third parties, such as accountants, banks, mortgagees or the
like, the then current status of performance hereunder, either party, on
the request of the other made from time to time, will promptly furnish to
Landlord, or the holder of any mortgage encumbering the Premises, or to
Tenant, as the case may be, a statement of the status of any matter
pertaining to this Lease, including, without limitation, acknowledgments
that (or the extent to which) each party is in compliance with its
obligations under the terms of this Lease.
13.16 SECURITY DEPOSIT; TENANT'S FINANCIAL CONDITION. If, in Section 1.2
hereof, a security deposit is specified, Tenant agrees that the same will
be paid upon execution and delivery of this Lease, and that Landlord
shall hold the same, throughout the term of this Lease, as security for
the performance by Tenant of all obligations on the part of Tenant to be
kept and performed. Landlord shall have the right from time to time
without prejudice to any other remedy Landlord may have on
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account thereof, to apply such deposit, or any part thereof, to
Landlord's damages arising from any default on the part of Tenant. Tenant
not then being in default, Landlord shall return the deposit, or so much
thereof as shall not have theretofore been applied in accordance with the
terms of this Section 13.16 to Tenant on the expiration or earlier
termination of the Lease Term and surrender of possession of the Premises
by Tenant to Landlord at such time. While Landlord holds such deposit,
Landlord shall have no obligation to pay interest on the same and shall
have the right to commingle the same with Landlord's other funds. If
Landlord conveys Landlord's interest under this Lease, the deposit or any
part thereof not previously applied may be turned over by Landlord to
Landlord's grantee, and if so turned over, Tenant agrees to look solely
to such grantee for proper application of the deposit in accordance with
the terms of this Section 13.16 and the return thereof in accordance
herewith.
Neither the holder of a mortgage nor the lessor in a ground lease of
property which includes the Premises shall ever be responsible to Tenant
for the return or application of any such deposit, whether or not it
succeeds to the position of Landlord hereunder, unless such deposit shall
have been received in hand by such holder or ground lessor.
Tenant warrants and represents that all information furnished to Landlord
or Landlord's representatives in connection with this Lease are true and
correct and in respect of the financial condition of Tenant, properly
reflect the same without material adverse change, as of the date hereof.
Upon Landlord's demand, which may be made no more often than annually,
Tenant shall furnish to Landlord, at Tenant's sole cost and expense,
Tenant's most recent annual financial statement, audited if an audited
statement shall have been prepared on behalf of Tenant, or otherwise
certified as being true and correct by the chief financial officer of
Tenant.
13.17 ADDITIONAL REMEDIES OF LANDLORD. Landlord shall have the right, but
shall not be required to do so, to pay such reasonable sums or do any
reasonable act which requires the expenditure of monies which may be
necessary or appropriate by reason of the failure or neglect of Tenant to
perform any of the provisions of this Lease, and in the event of the
exercise of such right by Landlord, Tenant agrees to pay to Landlord
forthwith upon demand all such sums; and if Tenant shall default in such
payment, Landlord shall have the same rights and remedies as Landlord has
hereunder for the failure of Tenant to pay the Fixed Rent.
Except as otherwise set forth herein, any obligations of Tenant as set
forth herein (including, without limitation, rental and other monetary
obligations, repair obligations and obligations to indemnify Landlord),
shall survive the expiration or earlier termination of this Lease, and
Tenant shall immediately reimburse Landlord for any expense incurred by
Landlord in curing Tenant's failure to satisfy any such obligation
(notwithstanding the fact that such cure might be effected by Landlord
following the expiration or earlier termination of this Lease).
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13.18 HOLDING OVER. Any holding over by Tenant after the expiration of the
Lease Term shall be treated as a tenancy at sufferance at one and one-
half the Fixed Rent and additional rent herein provided to be paid during
the last twelve (12) months of the Lease Term (prorated on a daily basis)
and shall otherwise be on the terms and conditions set forth in this
Lease, as far as applicable.
13.19 NON-SUBROGATION. Insofar as, and to the extent that, the following
provision may be effective without invalidating or making it impossible
to secure insurance coverage obtainable from responsible insurance
companies doing business in the locality in which the Premises are
located (even though extra premium may result therefrom): Landlord and
Tenant mutually agree that, with respect to any hazard which is covered
by insurance then being carried by them, respectively, the one carrying
such insurance and suffering such loss releases the other of and from any
and all claims with respect to such loss; and they further mutually agree
that their respective insurance companies shall have no right of
subrogation against the other on account thereof. In the event that extra
premium is payable by either party as a result of this provision, the
other party shall reimburse the party paying such premium the amount of
such extra premium. If, at the request of one party, this release and
non-subrogation provision is waived, then the obligation of reimbursement
shall cease for such period of time as such waiver shall be effective,
but nothing contained in this Section 13.19 shall derogate from or
otherwise affect releases elsewhere herein contained of either party for
claims.
13.20 EXPANSION OR REDUCTION. Landlord may expand the Development beyond its
present boundaries or remove from the Development one or more of the
Market Buildings and portions of land associated therewith. If Landlord
shall proceed as aforesaid (which Landlord shall be permitted to do) then
Landlord may from time to time elect either of the following procedures:
(1) To exclude all real estate taxes on the land and/or buildings of said
expansion or reduction area as well as all common area maintenance
charges with respect thereto from proratable charges in which Tenant
is required to participate, or
(2) To include all real estate taxes and common area maintenance charges
for the expansion or reduction area in the charges to be prorated
pursuant to the terms of this lease.
Landlord agrees to notify Tenant as to which of the foregoing procedures
Landlord elects to follow, which notice shall be sent to Tenant within a
reasonable time after any such election has been made.
13.21 GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts as
the same may from time to time exist.
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13.22 DEFINITION OF ADDITIONAL RENT. Without limiting any other provision of
this Lease, it is expressly understood and agreed that Tenant's
participation in Taxes, Operating Expenses, and all other charges which
Tenant is required to pay hereunder, together with all interest and
penalties that may accrue thereon, shall be deemed to be additional rent,
and in the event of non-payment thereof by Tenant, Landlord shall have
all of the rights and remedies with respect thereto as would accrue to
Landlord for non-payment of Fixed Rent.
13.23 LANDLORD'S FEES AND EXPENSES. Unless prohibited by applicable law,
Tenant agrees to pay to Landlord the amount of all reasonable legal fees
and expenses incurred by Landlord from and after an Event of Default
arising out of or resulting from any act or omission by Tenant with
respect to this Lease or the Premises, including without limitation, any
breach by Tenant of its obligations hereunder.
Further, if Tenant shall request Landlord's consent or joinder in any
instrument pertaining to this Lease, Tenant agrees promptly to reimburse
Landlord for the reasonable legal fees incurred by Landlord in processing
such request, whether or not Landlord complies therewith; and if Tenant
shall fail promptly so to reimburse Landlord, same shall be deemed to be
a default in Tenant's monetary obligations under this Lease.
Whenever Tenant shall request approval (or this lease shall require
preparation) by Landlord or the Landlord's architect of plans, drawings,
specifications, or otherwise with respect to initial alteration of the
Premises, subsequent remodeling thereof, installation of signs including
subsequent changes thereof, or the like, Tenant specifically agrees
promptly to pay to Landlord's architect (or reimburse Landlord for the
payment Landlord makes to said architect) for all charges involved in the
review (and re-review, if necessary) and approval or disapproval thereof
whether or not approval shall ultimately be given.
13.24 CHANGES OR ALTERATIONS BY LANDLORD. Landlord reserves the right,
exercisable by itself or its nominee, at any time and from time to time
without the same constituting an actual or constructive eviction and
without incurring any liability to Tenant therefor or otherwise affecting
Tenant's obligations under this Lease, to make such changes, alterations,
additions, improvements, repairs or replacements in or to the Building
(including the Premises) and the fixtures and equipment thereof, as well
as in or to the street entrances, halls, passages, elevators, escalators,
and stairways thereof, as it may deem necessary or desirable, including
without limitation changes to, or installation of, sprinkler systems,
removal of asbestos (it being expressly understood and agreed that under
no circumstances shall Tenant undertake any asbestos removal),
arrangement and/or location of entrances or passageways, doors and
doorways, and corridors, elevators, stairs, toilets, or other public
parts of the Building, provided, however, that there be no unreasonable
obstruction of the right of existing access to, or unreasonable
interference with the use and enjoyment of, the Premises by Tenant.
Landlord may exercise the foregoing rights only during
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reasonable business hours, following reasonable notice to Tenant and, if
requested by Tenant, in the presence of Tenant's agent(s), with Tenant
agreeing to make such agents reasonably available. Nothing contained in
this Section 13.24 shall be deemed to relieve Tenant of any duty,
obligation or liability of Tenant with respect to making any repair,
replacement or improvement or complying with any law, order or
requirement of any governmental or other authority. Landlord reserves the
right to adopt and at any time and from time to time to change the name
or address of the Building. Neither this Lease nor any use by Tenant
shall give Tenant any right or easement for the use of any door or any
passage or any concourse connecting with any other building or to any
public convenience, and the use of such doors, passages and concourses
and of such conveniences may be regulated or discontinued at any time and
from time to time by Landlord without notice to Tenant and without
affecting the obligation of Tenant hereunder or incurring any liability
to Tenant therefor.
13.25 RULES AND REGULATIONS. Tenant will faithfully observe and comply with
the Rules and Regulations, if any, annexed hereto and such other and
further reasonable Rules and Regulations as Landlord hereafter at any
time or from time to time may make and may communicate in writing to
Tenant, which in the reasonable judgment of Landlord shall be necessary
for the reputation, safety, care or appearance of the Building, or the
preservation of good order therein, or the operation or maintenance of
the Building, or the equipment thereof, or the comfort of tenants or
others in the Building, provided, however, that in the case of any
conflict between the provisions of this Lease and any such regulations,
the provisions of this Lease shall control, and provided further than
nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to enforce the Rules and Regulations or
the terms, covenants or conditions in any other lease as against any
other tenant and Landlord shall not be liable to Tenant for violation of
the same by any other tenant, its servants, employees, agents,
contractors, visitors, invitees or licensees.
13.26 PARKING. Tenant, upon the commencement of its occupancy of the Premises,
shall have the non-exclusive right to use for its designated employees
and visitors, as appurtenant to the Premises, the parking spaces located
in second story of the Building G parking garage (but not any on the
first floor parking level) with the exclusive right to use up to eleven
(11) of the second story parking spaces for employee and visitor parking
(such 11 spaces to be mutually designated by Landlord and Tenant, from
time to time, within an area on the second floor reasonably proportionate
to the Premises). Use of such spaces may not be sold, assigned, licensed
or otherwise given to any person for any compensation or fee or
otherwise, except in connection with an assignment of this Lease or
sublet of the Premises or a portion thereof that is permitted under
ARTICLE V hereof. The use of such parking spaces by Tenant in the
Building may be regulated by rules and regulations issued by the Landlord
from time to time.
13.27 RIGHT OF FIRST OFFER. With respect to the first time during any calendar
year during the term of this lease that the Landlord intends to lease
space in the Building to
-42-
<PAGE>
tenants other than existing tenants in the Building, the Landlord agrees
to give notice to the Tenant in writing of the availability of such space
prior to the entering into a lease of the same with any other such party.
For a period of ten (10) days after the giving of such notice Landlord
agrees to refrain from marketing such space for lease in order to provide
Tenant with an opportunity to discuss with Landlord Tenant's potential
interest in leasing such space. If, within such ten (10) day period
Tenant does not notify Landlord of its interest or, if such notice is
given, Landlord and Tenant are unable to reach a mutually satisfactory
agreement for the rental of such space to Tenant, then Landlord shall be
free to proceed to market and lease such space to any other party.
The obligations of the Landlord hereunder shall, in any event, terminate
and be of no further force and effect from and after any assignment by the
Tenant of its interest as the Tenant under this lease, any sublease by the
Tenant of all or any portion of the demised premises and from and after any sale
of the Development or transfer of title by the Landlord named herein to any
other party, including, without limitation the holder of any mortgage or deed of
trust affecting the Development upon foreclosure or the exercise of any of such
holder's rights or remedies thereunder.
WITNESS the execution hereof, under seal, in any number of counterparts,
each of which counterparts shall be deemed an original for all purposes, as of
the day and year first above written.
Witness: WATERTOWN ARSENAL ASSOCIATES, L.P
/s/ Suzanne Delamere By: /s/ Stephen R. Weiner
------------------------------- -----------------------------
General Partner
Witness: By: GILBANE PROPERTIES OF
WATERTOWN, INC., General Partner
/s/ Deborah Granzio By: /s/ Robert V. Gilbane
------------------------------- ------------------------------
Its: President
Hereunto duly authorized
(Landlord)
-43-
<PAGE>
BUSINESS@WEB, INC.
Attest: /s/ David W. Chapman By: /s/ Eric Sockol
-------------------- ---------------
Eric Sockol, Chief Financial Officer
Hereunto duly authorized
(Tenant)
-44-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
3-7 , 1996
-----------------------
COUNTY OF Middlesex
On this day personally appeared the above-named Stephen R. Weiner
and acknowledged this instrument, to be his free act and deed as general
partner of Watertown Arsenal Associates, L.P.
Before me:
/s/ Christine B. Rocco
----------------------------------
Notary Public
My Commission Expires: 3/30/98
STATE OF RHODE ISLAND
_______________, 1996_
COUNTY OF _________________________
On this day personally appeared the above-named ___________________
and acknowledged this instrument, to be his free act and deed as
_______________ of Gilbane Properties of Watertown, Inc., a general partner
of Watertown Arsenal Associates, L.P.
Before me:
__________________________________
Notary Public
My Commission Expires:
-45-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF Middlesex
On this 27th day of February, 1996, before me personally appeared
Eric Sockol who, being by me duly sworn, did say that he is Chief Financial
Officer of BUSINESS@WEB, INC., a Delaware corporation, that he knows the
seal of said corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors and its
stockholders, and said Eric Sockol acknowledged said instrument to be the
free act and deed of said corporation.
/s/ Jacqueline A. Le clair
------------------------------
Notary Public
My Commission Expires:4/4/2001
-46-
<PAGE>
GUARANTEE
---------
FOR VALUE RECEIVED, and in consideration for and as an inducement to
WATERTOWN ARSENAL ASSOCIATES, L.P. (the "Landlord") to make the foregoing lease
(the "Lease") with BUSINESS@WEB, INC. (the "Tenant"), the undersigned JOHN J.
DONOVAN, with a mailing address c/o Cambridge Technology Group, Inc., 219 Vassar
Street, Cambridge, MA 02139 (the "Guarantor"), unconditionally guarantees the
full performance and observance of all the covenants, conditions and agreements
therein provided to be performed and observed by the Tenant, the Tenant's
successors and assigns, and expressly agrees that the validity of this agreement
and the obligations of the Guarantor hereunder shall in no wise be terminated,
affected or impaired by reason of the granting by the Landlord of any
indulgences to the Tenant or by reason of the assertion by the Landlord against
the Tenant of any of the rights or remedies reserved to the Landlord pursuant to
the provisions of the Lease or by the relief of the Tenant from any of the
Tenant's obligations under the Lease by operation of law or otherwise
(including, but without limitation, the rejection of the Lease in connection
with proceedings under the bankruptcy laws now or hereafter enacted); the
Guarantor hereby waiving all suretyship defenses. The obligations of the
Guarantor include the payment to Landlord of any monies payable by Tenant under
any provisions of the Lease, at law, or in equity, including, without
limitation, any monies payable by virtue of the breach of any warranty, the
grant of any indemnity or by virtue of any other covenant of Tenant under the
Lease.
The Guarantor further covenants and agrees that this Guarantee shall remain
and continue in full force and effect as to any renewal, modification or
extension of the Lease, whether or not the Guarantor shall have received any
notice of or consented to such renewal, modification or extension. The Guarantor
further agrees that the liability of the Guarantor under this Guarantee shall be
primary (and that the heading of this instrument and the use of the word
"guarantee(s)" shall not be interpreted to limit the aforesaid primary
obligations of the Guarantor), and that, in any right of action which shall
accrue to the Landlord under the Lease, the Landlord may, at the Landlord's
option, proceed against the Guarantor, any other guarantor, and the Tenant,
jointly or severally, and may proceed against the Guarantor without having
commenced any action against or having obtained any judgment against the Tenant
or any other guarantor. The Guarantor irrevocably waives any and all rights the
Guarantor may have at any time (whether arising directly or indirectly, by
operation of law or by contract or otherwise) to assert any claim against the
Tenant on account of payments made under this Guarantee, including, without
limitation, any and all rights of or claim for subrogation, contribution,
reimbursement, exoneration and indemnity, and further waives any benefit of and
any right to participate in any security deposit or other collateral which may
be held by the Landlord; and the Guarantor will not claim any set-off or
counterclaim against the Tenant in respect of any liability the Guarantor may
have to the Tenant.
<PAGE>
It is agreed that the failure of the Landlord to insist in any one or more
instances upon a strict performance or observance of any of the terms,
provisions or covenants of the Lease or to exercise any right therein contained
shall not be construed or deemed to be a waiver or relinquishment for the future
of such term, provision, covenant or right, but the same shall continue and
remain in full force and effect. Receipt by the Landlord of rent with knowledge
of the breach of any provision of the Lease shall not be deemed a waiver of such
breach.
No subletting, assignment or other transfer of the Lease, or any interest
therein, shall operate to extinguish or diminish the liability of the Guarantor
under this Guarantee; and, wherever reference is made to the liability of the
Tenant named in the Lease, such reference shall be deemed likewise to refer to
the Guarantor.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of the respective successors and assigns of the Landlord,
and shall be binding upon the heirs, executors, administrators and assigns of
the Guarantor.
Notwithstanding anything to the contrary in this Guarantee contained, the
Landlord agrees that the Guarantor's liability under this Guarantee shall apply
only to the covenants, conditions and agreements to be performed and observed by
the Tenant (and its successors and assigns) under the Lease until such time, if
any, (the "Release Date") as (i) the initial public stock offering of the Tenant
is completed (the "IPO") and the Landlord is provided evidence reasonably
satisfactory to Landlord that the IPO has provided the company net proceeds in
an amount of not less than thirty million dollars ($30,000,000.00) or (ii) as an
alternative, at the sole discretion of the Landlord, until the Tenant has four
(4) consecutive profitable three (3) month periods, and is capitalized in an
amount satisfactory to Landlord in its sole discretion; however, said limitation
on the Guarantor's liability shall not prohibit the Landlord from proceeding
against the Guarantor at any time after the Release Date with respect to any
covenant, condition or agreement to be so performed and observed during the
period prior to the Release Date. The Release Date shall occur (if at all) only
upon a writing to such effect executed by Landlord and delivered to Guarantor.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this instrument, under seal,
this 4th day of March, 1996.
/s/ John J. Donovan (L.S.)
-----------------------------
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF Middlesex
On this 4th day of March, 1996, before me, personally appeared JOHN J.
DONOVAN, and he acknowledged this instrument, by him sealed and subscribed, to
be his free act and deed.
/s/
-----------------------------------
Notary Public
My Commission Expires: 4/6/2001
<PAGE>
EXHIBIT A
SITE PLAN
A-1
<PAGE>
EXHIBIT B-1
<PAGE>
EXHIBIT B
PERMITTED SIGNAGE
1. One (1) permitted exterior wall sign on garage facade facing Arsenal Street
in approximately the location marked on Exhibit B-1 annexed hereto. Such
exterior sign, however, to be subject to the prior written approval of
Landlord (which approval shall not be unreasonably withheld or delayed) and
the appropriate authorities of the Town of Watertown.
2. One (1) sign at the entrance to the garage. Such sign, however, to be
subject to the prior written approval of Landlord (which approval shall not
be unreasonably withheld or delayed) and the appropriate authorities of the
Town of Watertown.
3. Interior directional signs. The design, number and location of such signs
shall be subject, however, to Landlord's prior written approval (which
approval shall not be unreasonably withheld or delayed).
4. Interior visitor parking signs. The design, number and location of such
signs shall be subject, however, to Landlord's prior written approval
(which approval shall not be unreasonably withheld or delayed).
B-1
<PAGE>
EXHIBIT C
TENANT'S WORK
C-1
<PAGE>
EXHIBIT D
BUILDING SERVICES
- - Access to the Premises and Common Areas shall be as provided in the Lease
to which this Exhibit is annexed.
- - Heat and air-conditioning to the common areas of the Building and the
Premises during normal seasonal heating and cooling periods during Normal
Building Operating Hours and during Tenant's extended hours, as provided
above.
- - Hot and cold running water, liquid soap, toilet tissue and paper towers for
washrooms.
- - Removal of snow and ice from the entry and sidewalks to the Building and
from the driveway and parking garage ramp.
Cleaning Specifications
- -----------------------
Premises
Each Normal Business Day (being defined to mean each weekday during
Normal Building Operating Hours):
Empty trash receptacles
Empty and clean ashtrays
Dust and spot clean horizontal surfaces, furniture and bright
work
Spot clean vertical surfaces
Clean water fountains
Clean partition and door glass
Vacuum carpeting (shampooing by Tenant)
Clean coffee stations
Monthly:
Dust table and chair legs, baseboards, ledges, moldings
Vacuum fabric furniture
Clean and Sanitize phones
Quarterly:
Clean diffusers
High dusting
D-1
<PAGE>
Washrooms
Each Normal Business Day:
Clean and sanitize fixtures, mirrors, horizontal surfaces
Polish chrome
Mop floors
Refill dispensers
Empty trash
Spot clean vertical surfaces
Monthly:
Wash all partitions, tile wall and enamel surfaces
Exterior windows to be washed twice yearly.
Common stairways, sidewalks, entranceways, the driveway, the garage ramp and the
parking areas (herein collectively, the "Common Facilities") shall be kept
generally free of litter and debris and swept periodically. Common Facilities
shall be lighted whenever necessary during Normal Building Operating Hours.
Parking areas in the garage to be restriped as necessary in Landlord's
reasonable judgment.
D-2
<PAGE>
EXHIBIT APP
APPRAISAL PROCEDURE
Whenever the term "market rent" is required to be determined under this
Lease, the term shall mean the annual market rate rent chargeable for reasonably
comparable office space within Watertown or the area situated within a five (5)
mile radius of Watertown (notwithstanding any other use of the Premises which
may be permitted hereunder) and shall be determined as follows in the absence of
a mutual agreement by Landlord and Tenant on the amount of the annual market
rent:
If the Landlord and Tenant are unable to agree on the amount of "market
rent", either party shall have the right to initiate a proceeding hereunder for
the determination of such "market rent" by sending written notice to the other
party appointing a real estate appraiser who is a designated member in good
standing of either the Society of Real Estate Appraisers or the Appraisal
Institute with at least five (5) years' full-time commercial appraisal
experience for the purpose of establishing such "market rent" by a market survey
in the area of the Premises. Within ten (10) days after receipt by such party of
such notice, the party receiving such notice shall, by notice to the other
party, designate the name and address of another appraiser with such minimum
experience for the purpose of meeting with the appraiser appointed by the first
party to determine jointly such "market rent". If within thirty (30) days after
the second appraiser has been appointed, the two designated appraisers are
unable to agree upon such "market rent", they shall elect a third appraiser
meeting the qualifications stated in this paragraph within ten (10) days after
the expiration of the aforesaid 30 day period. If the two appraisers are not
able to agree upon such third appraiser, either appraiser may request the office
of the American Arbitration Association located nearest to Boston, Massachusetts
to designate a third appraiser willing so to act and an appraiser so appointed
shall, for all purposes, have the same standing and powers as though he had been
seasonably appointed by the appraisers first appointed. In the case of the
inability or refusal to serve of any person designated as an appraiser, or in
case any appraiser for any reason ceases to be such, an appraiser to fill such
vacancy shall be promptly appointed by the Landlord, the Tenant, the appraisers
first appointed or the said office of the American Arbitration Association, as
the case may be, whichever made the original appointment., and any appraiser so
appointed to fill such vacancy shall have the same standing and powers as though
originally appointed. The resulting board of appraisers shall, forthwith upon
their appointment (i) hear the parties to this Lease and their witnesses, (ii)
examine the records relating to the Premises, the market surveys and such other
documents and records as may, in their judgment, be necessary and (iii)
determine the annual "market rent" for such purposes.
The costs, other than counsel fees, of such appraisal shall be borne
equally by the parties. Any determination by a majority of the members of the
board of appraisers, shall be final and binding upon the parties, but, if a
majority of the members of the board of appraisers are unable to agree upon a
determination, the
APP-1
<PAGE>
determination of such third appraiser shall be binding upon the parties. Upon
determining such market rent and after computing the price as set forth above,
the board of appraisers shall promptly notify the parties in writing of such
determination. If any party shall fail to appear at the hearings appointed by
the appraisers, the appraisers may act in the absence of such party.
The determination of the board of appraisers (or the third appraiser, as
appropriate) made in accordance with the foregoing provisions shall be final and
binding upon the parties, such determination may be entered as an award in
arbitration in a court of competent jurisdiction, and judgment thereon may be
entered.
APP-2
<PAGE>
EXHIBIT OPER
EXCLUSIONS FROM OPERATING EXPENSES
1. Salaries or other compensation paid directly or indirectly to Landlord or
any officer, director, partner, stockholder, or any affiliate of Landlord,
except to the extent any such payment is for an item properly included as
an Operating Expense and is not in excess of the reasonable market rate for
similar services available from a third party.
2. Any work or services performed specifically at the request of a tenant with
respect to which the tenant has a specific reimbursement obligation outside
of any obligation to contribute to Operating Expenses.
3. Any item for which Landlord is actually reimbursed, by insurance proceeds.
4. Interest charges or penalties incurred by Landlord as a result of 30-day or
more late payments.
5. Uncollectible accounts (being accounts that Landlord has actually written
off as "bad debts").
6. In addition, with respect to any cost and expense included within the
calculation of Operating Expenses, the same shall always be net of
discounts, rebates, retainage and other offsets actually received or taken.
7. Costs of any services performed exclusively within and which only benefit
premises located within the Garage Portion that are exclusively leased to
another tenant.
OPER-1
<PAGE>
EXHIBIT SNDA
ARSENAL MALL
WATERTOWN, MASSACHUSETTS
NONDISTURBANCE AND ATTORNMENT AGREEMENT
---------------------------------------
THIS AGREEMENT made this _____ day of ______________, 1996, between
___________________________, a ____________________ corporation having a mailing
address _______________________________, _____________________,
______________________, ________________________ (hereinafter called "Tenant"),
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation having its
principal place of business at 900 Cottage Grove Road, Bloomfield, Connecticut
(hereinafter called "Mortgagee"), and WATERTOWN ARSENAL ASSOCIATES Limited
Partnership, a Massachusetts limited partnership having a mailing address at One
Wells Avenue, Newton, Massachusetts 02159 (hereinafter called "Landlord").
WITNESSETH:
WHEREAS, Tenant has entered into a certain lease (the "Lease") dated
__________, 199_, with Landlord covering premises (the "Premises") at Arsenal
Marketplace, so-called, in Watertown, Middlesex County, Massachusetts (the
"Shopping Center"); and
WHEREAS, Mortgagee is the holder of a certain first mortgage and security
agreement dated December 23, 1983 recorded with the Middlesex South District
Registry of Deeds in Book 15375 at Page 557 (the "Mortgage") on the Shopping
Center of which the Premises are a part; and
WHEREAS, Mortgagee has been requested by Tenant and by Landlord to enter
into a Nondisturbance Agreement with Tenant.
NOW THEREFORE, in consideration of the Premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or
modifications thereof, and all of the right, title and interest of the Tenant in
and to said Premises are and shall be subject and subordinate to the Mortgage
and to all of the terms and conditions contained therein, and to any renewals,
modifications, replacements, consolidations and extensions thereof.
2. In the event of foreclosure of the Mortgage, or in the event
Mortgagee comes into possession or acquires title to the Premises as a result of
the enforcement or foreclosure of the Mortgage or note(s) for which the Mortgage
is security or by a conveyance to Mortgagee in lieu of foreclosure, or as a
result of any other means,
SNDA-1
<PAGE>
Mortgagee agrees that Tenant shall not be disturbed in its possession of the
Premises for any reason other than one which would entitle Landlord to terminate
the Lease under its terms, or would cause, without any further action by such
Landlord, the termination of the Lease, or would entitle such Landlord to
dispossess Tenant from the Premises; and Tenant agrees and shall be bound to
Mortgagee under all of the terms, covenant and conditions of the Lease for the
balance of the term thereof remaining and any extension or renewals thereof
which may be affected in accordance with any option therefore in the Lease, with
the same force and effect as if Mortgagee were the landlord under the Lease, and
Tenant does hereby attorn to Mortgagee as its landlord, said attornment to be
effective and self-operative without the execution of any further instruments on
the part of any of the parties hereto immediately upon Mortgagee's succeeding to
the interest of Landlord in the Premises. Tenant agrees, however, upon the
election of and written demand by Mortgagee, within sixty (60) days after
Mortgagee receives title to the Premises, to execute an instrument in
confirmation of the foregoing provisions, reasonably satisfactory to Mortgagee,
in which Tenant shall acknowledge such attornment and shall set forth the terms
and conditions of its tenancy as provided in the Lease.
3. Tenant agrees with Mortgagee that if Mortgagee shall succeed to the
interest of Landlord under the Lease, Mortgagee shall not be (a) liable for any
action or omission of any prior landlord under the Lease, or (b) subject to any
offsets or defenses which Tenant might have against any prior landlord, or (c)
bound by any rent or additional rent which Tenant might have paid for more than
the current month to any prior landlord, or (d) bound to account for or return
any security deposit which Tenant may have paid to any prior landlord, unless
such deposit is in an escrow fund available to Mortgagee, or (e) bound by any
amendment or modification of the Lease made without Mortgagee's consent or (f)
bound by any provisions in the Lease which obligate the Landlord to erect or
complete any building or to perform any construction work or make any
improvements to the Premises. Tenant further agrees with Mortgagee that Tenant
will not voluntarily subordinate the Lease to any lien or encumbrance without
Mortgagee's consent.
4. In the event that Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to Mortgagee and Mortgagee shall have the
right (but not the obligation) to cure such default. Tenant shall not take any
action with respect to such default under the Lease, including, without
limitation, any action in order to terminate, rescind or avoid the Lease or to
withhold any rental thereunder, for a period of ten (10) days after receipt of
such written notice thereof by Mortgagee with respect to any such default
capable of being cured by the payment of money and for a period of thirty (30)
days after receipt of such written notice thereof by Mortgagee with respect to
any other such default (provided that, in the case of any default which cannot
be cured by the payment of money and cannot with diligence be cured within such
30-day period because of the nature of such default or because the Mortgagee
requires time to obtain possession of the Premises in order to cure such
default, if Mortgagee shall proceed promptly to attempt to obtain possession of
the Premises where such possession is required and to cure such default, the
time during which
SNDA-2
<PAGE>
such default may be cured shall be extended for such period as may be necessary
to complete the curing of the same with diligence and continuity).
5. This agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein, the term "Tenant" shall
include the Tenant, its successors and assigns; the words "foreclosure" and
"foreclosure sale' as used herein a shall be deemed to include the acquisition
of Landlord's estate in the Premises by voluntary deed (or assignment ( in lieu
of foreclosure; and the word "Mortgagee" shall include the Mortgagee herein
specifically named and any of its successors and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgage.
6. This Agreement shall not be modified or amended except in writing
signed by all parties hereto.
7. The use of the neuter gender in this Agreement shall be deemed to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
WITNESS the execution hereof under seal in any number of counterpart
copies, each of which shall be deemed an original for all purposes as of the day
and year first above written.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
________________________ By ________________________
Its Vice President
Hereunto duly authorized
[MORTGAGEE]
SNDA-3
<PAGE>
Witness: WATERTOWN ARSENAL
ASSOCIATES, L.P.
________________________ _________________________
and
Attest: By __________________ GENERAL
GILBANE PROPERTIES PARTNERS
OF WATERTOWN, INC.
______________________ By ______________________
Clerk President
[LANDLORD]
Attest: [____________________________]
______________________ By:______________________
Secretary Its ___________________
Hereunto duly authorized
[TENANT]
SNDA-4
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF
______________________, 199_
Then personally appeared _____________ and acknowledged the foregoing
instrument to be the free act and deed of Watertown Arsenal Associates, L.P., a
Massachusetts Limited Partnership, before me:
_________________________
Notary Public
My Commission expires:
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF
______________________, 199_
On this day, before me, personally appeared _____________________, who
being by me duly sworn, did say that he is ___________ of _________________;
that said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors; and said __________________ acknowledged
said instrument to be the free act and deed of said corporation.
_________________________
Notary Public
My Commission expires:
SNDA-5
<PAGE>
STATE OF NEW YORK
COUNTY OF
_____________________, 199_
On this day, before me, personally appeared _________________________,
who being by me duly sworn, did say that he is Vice President of CONNECTICUT
GENERAL LIFE INSURANCE COMPANY; that said instrument was signed and sealed on
behalf of said corporation by authority of its Board of Directors; and said
____________________ acknowledged said instrument to be the free act and deed of
said corporation.
_________________________
Notary Public
My Commission expires:
SNDA-6
<PAGE>
EXHIBIT 10.13
STATE STREET BANK AND TRUST COMPANY LOAN AGREEMENT
THIS AGREEMENT made this 16th day of February, 1996, by and between
Business@Web, Inc., formerly Object Power, Incorporated, a Delaware corporation
with an address and principal place of business at 219 Vassar Street, Cambridge,
Massachusetts, 02139 (hereinafter called the "BORROWER") and State Street Bank
and Trust Company, a Massachusetts trust company with a usual place of business
at 225 Franklin Street, Boston, Massachusetts, 02110 (hereinafter called the
"BANK").
W I T N E S S E T H :
The following agreement of the parties:
SECTION 1
---------
DEFINITIONS AND RULES OF INTERPRETATION
---------------------------------------
For purposes of this Agreement, the following terms shall have the
following meanings:
1. "ADVANCE" shall mean any sum of money loaned by Bank to the Borrower
pursuant to this Agreement and shall include all Loans (as defined
herein).
2. "BANKING DAY" shall mean a day on which banks are open for business in
Boston, Massachusetts, and if the applicable "BANKING DAY" relates to
a LIBOR Loan, a day on which dealings are carried on and banks are
open for business in the relevant Inter-bank Market.
3. "BORROWING DATE" shall mean any day upon which an Advance is made.
4. "COST OF FUNDS LOAN(S)" shall mean, when used in the singular, any
Advance on which the interest rate is calculated by reference to the
Cost of Funds Rate and, when used in the plural, shall mean all such
Advances.
5. "COST OF FUNDS RATE" shall mean a fixed per annum rate of interest as
of the Borrowing Date determined by the Bank in good faith in
accordance with the Bank's customary practices for loans in United
States currency and based on the Bank's cost of obtaining funds with a
maturity approximately equal to the period between the Borrowing
<PAGE>
Date and the Maturity Date from sources as may be selected by the Bank
in its sole and absolute discretion.
6. "DOLLARS" or "$" shall mean currency of the United States of America.
7. "EQUIPMENT LINE" shall have the meaning ascribed to that term in
Section 2.20 hereof.
8. "EUROCURRENCY LIABILITIES" shall have the meaning ascribed to that
term in REGULATION D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
9. "EURODOLLARS" shall mean dollars acquired by Bank for the purchase or
other acquisition of deposits denominated in dollars and made with any
bank or branch of bank (including any branch of the Bank) located
outside the United States of America.
10. "INTEREST PERIOD" shall mean: (i) with respect to any Cost of Funds
Loan, a period commencing on the Borrowing Date of such Advance, and
ending on the numerically corresponding day in the third year after
the date thereof or such shorter period as shall be acceptable to the
Bank in its sole discretion; and (ii) with respect to each LIBOR Loan,
a period commencing on the Borrowing Date of such Advance, and ending
on the numerically corresponding day in the first, second, third or
fourth calendar month thereafter, as determined in accordance with the
provisions of this Agreement, provided that any Interest Period which
would otherwise end on a day which is not a Banking Day, shall end,
and the next Interest Period shall commence (if applicable), on the
next preceding or the next succeeding day which is a Banking Day as
determined in good faith by the Bank in accordance with the then
current Bank practices in the relevant market.
11. "LIBOR" shall mean, with respect to a LIBOR Loan, the rate per annum
(rounded upward, if necessary, to the nearest one-sixteenth (1/16th)
of one (1%) percent) at which deposits in Dollars are offered to Bank
or Bank's representative or agent for delivery on the Borrowing Date
for such LIBOR Loan, in the relevant Interbank Market at 11:00 a.m.,
local time, two Banking Days prior to such Borrowing Date for a period
equal to the Interest Period chosen by Borrower with respect to such
LIBOR Loan and in an amount substantially equal to the principal
amount of such LIBOR Loan. The Bank shall give prompt notice to the
Borrower of the LIBOR determined for each
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LIBOR Loan and such notice shall be conclusive and binding, absent
manifest error, for all purposes.
12. "LIBOR INTEREST RATE" shall mean an interest rate per annum (rounded
upward, if necessary, to the nearest one-sixteenth (1/16th) of one
(1%) percent) determined by Bank pursuant to the following formula:
LIBOR Interest Rate = LIBOR
-------------------
1.00 - Reserve Rate
13. "LIBOR LOAN(S)" shall mean, when used in the singular, any loan on
which the interest rate is calculated by reference to LIBOR and, when
used in the plural, shall mean all such loans.
14. "MARGIN" shall mean: (i) with respect to each Cost of Funds Loan,
three and one-half (3.5%) percent; (ii) with respect to each LIBOR
Loan, three and one-half (3.5%) percent; (iii) with respect to each
Prime Rate Loan under the Revolving Loan or the Technology Line, one
(1%) percent; and (iv) with respect to each Prime Rate Loan under the
Equipment Line, one and one-half (1.5%) percent.
15. "MATURITY DATE" shall mean the date on which an Interest Period
expires.
16. "PRIME RATE" shall mean the rate of interest announced from time to
time by the Bank in Boston, as its Prime Rate.
17. "PRIME RATE LOAN(S)" shall mean, when used in the singular, any
Advance on which the interest rate is calculated by reference to the
Prime Rate and, when used in the plural, shall mean all such Advances.
18. "RESERVE RATE" shall mean the rate (expressed as a decimal) at which
Bank would be required to maintain reserves under REGULATION D of the
Board of Governors of the Federal Reserve System against Eurodollar
Liabilities if such Eurodollar Liabilities were outstanding. The
LIBOR Interest Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Rate.
19. "REVOLVING LOAN" shall have the meaning ascribed to that term in
Section 2.1 hereof.
20. "TECHNOLOGY LINE" shall have the meaning ascribed to that term in
Section 2.27 hereof.
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21. "TERMINATION DATE" shall mean June 30, 1997.
SECTION 2
---------
AMOUNT AND TERMS OF CREDIT AND INTEREST
---------------------------------------
THE REVOLVING LOAN
------------------
2.1 Subject to the terms and conditions of this Agreement, the Bank hereby
establishes a revolving line of credit of up to $2,500,000.00 (the "REVOLVING
LOAN") to be advanced as hereinafter provided. The Bank may, in its discretion,
from time to time, make Advances comprising the Revolving Loan to the Borrower
upon the Borrower's request; provided, however, that no Advance will be made if,
after giving effect to the Borrower's request for such Advance, the outstanding
principal balance of the Revolving Loan would exceed the lesser of:
(a) $1,000,000.00 through May 31, 1996 and $2,500,000.00 at such time
thereafter as Borrower has received an equity injection in the amount
of at least $1,000,000.00, as reflected in a Treasurer's Affidavit
Regarding Equity Injection (the "CREDIT LIMIT") or
(b) eighty percent (80%) of the face amount of eligible accounts
receivable of the Borrower less than ninety (90) days from the invoice
date thereof (the "BORROWING BASE").
2.2 For purposes of the Borrowing Base calculation set forth above,
eligible accounts receivable are those which are owing to the Borrower which met
the following specifications at the time it came into existence and continues to
meet the same until collected in full:
(i) The account arose from the outright sale of goods by Borrower or the
delivery of services by Borrower and if applicable, such goods have
been shipped to the account debtor, and Borrower has possession of
shipping and delivery receipts evidencing such shipment.
(ii) The account is not subject to any prior assignment, claim, lien, or
security interest, and Borrower will not make any further assignment
thereof or create any further security interest therein, nor permit
Borrower's rights therein to be reached by attachment, levy,
garnishment or other judicial process.
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(iii) The account is not subject to set-off, credit, allowance or adjustment
by the account debtor, except discount allowed for prompt payment and
the account debtor has not complained as to its liability thereon and
has not returned any of the goods from the sale of which the account
arose (if applicable).
(iv) The account arose in the ordinary course of Borrower's business and
did not arise from the performance of services or a sale of goods to a
supplier or employee of the Borrower.
(v) No notice of bankruptcy or insolvency of the account debtor has been
received by or is known to the Borrower.
(vi) The account is not owed by an entity which is a parent,
brother/sister, subsidiary or affiliate of Borrower, except for
accounts due from Open Environment Corporation.
(vii) The account debtor is not located in the State of New Jersey or
Minnesota unless Borrower has filed and shall file all legally
required Notice of Business Activities Report(s) with the New Jersey
Division of Taxation and the Minnesota Department of Revenue.
(viii) The account is not evidenced by a promissory note.
(ix) The account did not arise out of any sale made on a bill
and hold, dating or delayed shipment basis.
(x) The account did not arise out of a contract with the United States
government or any department, agency or instrumentality thereof,
unless the Borrower has complied with the Federal Assignment of Claims
Act.
(xi) The account does not constitute a prepayment, advance billing or
deposit in conjunction with the rendering of services to an account
debtor.
(xii) The Bank in its sole discretion does not deem the account to be
unacceptable for any reason.
Provided that if any time twenty-five percent (25%) or more of the
aggregate amount of the accounts due from any account debtor are unpaid in whole
or in part more than ninety (90) days from the respective dates of invoice, from
and after such time none of the accounts (then existing or thereafter arising)
due from such account debtor shall be deemed to be eligible accounts until such
time as less than twenty-five percent (25%) of the aggregate amount of accounts
due from such account debtor are (as a result of actual
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<PAGE>
payments received thereon) no more than ninety (90) days from the date of
invoice; accounts payable by Borrower to an account debtor shall be netted
against accounts due from such account debtor and the difference (if positive)
shall constitute eligible accounts from such account debtor for purposes of
determining the Borrowing Base (notwithstanding sub-paragraph (iii) above);
characterization of any account due from an account debtor as an eligible
account shall not be deemed a determination by Bank as to its actual value nor
in any way obligate Bank to accept any account subsequently arising from such
account debtor to be, or to continue to deem such account to be, an eligible
account; it is the Borrower's responsibility to determine the creditworthiness
of account debtors and all risks concerning the same and collection of accounts
are with Borrower; and all accounts, whether or not eligible accounts,
constitute Collateral (as hereinafter defined).
2.3 All Advances shall bear interest as provided below and shall be
conclusively evidenced by the Bank's record of disbursements and repayments,
absent manifest error. Interest shall be computed on the basis of the actual
number of days elapsed over a year of three hundred sixty (360) days. Interest
will be charged to the Borrower upon the balance of all Advances owing to the
Bank at the close of each day at the rates set forth below, as elected by the
Borrower in accordance with the terms of this Agreement:
(i) The Borrower shall pay interest on the aggregate unpaid principal
balance of each Prime Rate Loan at a rate which is the daily
equivalent to the Prime Rate in effect from time to time, plus
Margin. Interest shall be payable monthly in arrears on the
first day of each month until all of the Prime Rate Loans are
paid in full. The rate of interest payable by the Borrower on
the Prime Rate Loans shall be changed effective as of the date in
which a change in the Prime Rate becomes effective.
(ii) The Borrower shall pay interest on the aggregate unpaid principal
balance of each LIBOR Loan from the Borrowing Date for such LIBOR
Loan through and including the Maturity Date chosen by the
Borrower with respect to such LIBOR Loan at a per annum fixed
rate equal to the aggregate of the LIBOR Interest Rate plus
Margin, and shall pay all interest accrued but unpaid thereon on
the sooner to occur of the first day of each month or such
Maturity Date.
2.4 Bank shall not be required to make an Advance unless the Bank has
received from the Borrower a request for such Advance, in the form of Exhibit A
annexed hereto (herein a "NOTICE OF
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BORROWING"), which request complies with the requirements of this Section 2.4
(which requirement the Bank may waive in its discretion for Prime Rate Loans).
Each Notice of Borrowing shall designate (i) the Borrowing Date; (ii) the amount
of the Advance (which amount shall not be less than $100,000.00 and multiples of
$100,000.00 above $100,000.00 for LIBOR Loans); (iii) the Interest Period (for
LIBOR Loans) and (iv) the requested interest rate option (LIBOR or Prime). Each
Notice of Borrowing for a LIBOR Loan must be received by Bank not less than
three Banking Days prior to the Borrowing Date for LIBOR Loans. A Notice of
Borrowing for a Prime Rate Loan will be effective on the date received if
received prior to 1 p.m. Boston local time by the Bank. A Notice of Borrowing
may be transmitted by telecopier, telex, facsimile, cable or mail, but may not
be transmitted by telephone. If a Notice of Borrowing is transmitted by
telecopier, telex, facsimile or cable, the Borrower shall immediately mail the
Bank written confirmation thereof.
2.5 After receipt from the Borrower of any Notice of Borrowing which
requests a LIBOR Loan, Bank shall determine if it is able to make such LIBOR
Loan (or if it is unable to do so for reasons described in this Section 2.5
only) and will notify the Borrower upon confirmation of its ability to do so.
If Bank determines in good faith that, by reason of circumstances affecting the
Interbank Market, adequate and reasonable methods do not exist for ascertaining
the LIBOR which would otherwise be applicable to such LIBOR Loan, then Bank
shall so notify the Borrower on or before 4:00 p.m. on the Banking Day prior to
the Borrowing Date specified in the Notice of Borrowing, and in any event, Bank
shall not be obligated to make such LIBOR Loan and the Notice of Borrowing shall
be deemed to have been withdrawn by the Borrower with Bank's consent and
substituted with a request for a Prime Rate Loan in an amount equal to the
requested LIBOR Loan.
2.6 Except as otherwise provided in Section 2.5 above, any Notice of
Borrowing which requests a LIBOR Loan shall be irrevocable and binding upon the
Borrower. In the event the Borrower fails to borrow the LIBOR Loan requested on
the Borrowing Date specified in such Notice of Borrowing, the Borrower shall
indemnify Bank against any and all losses and expenses incurred by Bank by
reason of such failure including, without limiting the generality of the
foregoing, all losses and expenses incurred by reason of the liquidation,
disposition or reemployment of deposits or other funds acquired by Bank to fund
such LIBOR Loan.
2.7 If a LIBOR Loan is not repaid in full on its Maturity Date, then such
LIBOR Loan shall automatically convert to a Prime Rate Loan and shall bear
interest at the rate applicable to such Prime Rate Loan from and after such
Maturity Date.
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<PAGE>
2.8 Each Advance may be repaid with the proceeds of another Advance,
subject to the terms of this Agreement.
2.9 Except as otherwise provided herein with respect to Bank's rights
following the occurrence of an Event of Default, no LIBOR Loan may be repaid
prior to its Maturity Date and all monies received by Bank for application to a
LIBOR Loan prior to the Maturity Date of such LIBOR Loan shall be held by Bank
in a non-interest bearing cash collateral account as security for all
Liabilities.
2.10 Notwithstanding any other provision of this Agreement, (1) if the
introduction of or any change in any law or regulation (or change in the
interpretation thereof) applicable to Bank or any foreign branch, agent or
correspondent thereof shall make it unlawful, or (2) if any central bank or
other governmental authority having jurisdiction over Bank or any such branch,
agent or correspondent, shall assert that it is unlawful, for Bank to perform
its obligations hereunder or for any such branch, agent or correspondent to act
on behalf of Bank to make LIBOR Loans to the Borrower or to continue to fund or
maintain LIBOR Loans to the Borrower hereunder, or (3) if Bank determines after
making all reasonable efforts, that deposits of the relevant amount and for the
relevant LIBOR Loan to the Borrower are not available to Bank in the Interbank
Market, then, on notice thereof by Bank to the Borrower, the obligation of the
Bank to the Borrower to make future LIBOR Loans shall terminate. If, as a
result of any of the foregoing described events, Bank is prohibited from
maintaining LIBOR Loans, the Bank shall, upon the happening of such event,
notify the Borrower and the Borrower shall, in the case of each LIBOR Loan, on
the Maturity Date of such LIBOR Loan (or, in any event, if the Bank so requests,
on such earlier date as may be required by the relevant law, regulation or
interpretation), either prepay such LIBOR Loan or convert such LIBOR Loan into a
Prime Rate Loan.
2.11 If, due to payments made by the Borrower pursuant to this Agreement or
due to the acceleration of the Liabilities or due to any other reason, Bank
receives payments of principal of any LIBOR Loan prior to the Maturity Date for
such LIBOR Loan, the Borrower shall, upon demand by Bank, pay to Bank any
amounts required to compensate Bank for any additional losses, costs or expenses
which it may reasonably incur as a result of such payment, including, without
limitation, any loss, costs or expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund or maintain
such LIBOR Loans.
2.12 Calculation of the LIBOR Interest Rate, as well as all other fees and
charges payable with respect to each LIBOR Loan shall be made and paid as though
Bank had actually funded the relevant LIBOR Loan through the purchase of a
Eurodollar deposit at
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<PAGE>
LIBOR in an amount equal to the amount of the LIBOR Loan and having a maturity
comparable to the relevant Interest Period and through the transfer of such
Eurodollar deposit from an offshore agent or office of Bank to a domestic office
of Bank in the United States of America, provided, however, that Bank may fund
each LIBOR Loan in any manner it sees fit and the foregoing assumptions shall be
nevertheless used for the calculation of the LIBOR Interest Rate and such other
fees and charges.
2.13 The principal balance of the Revolving Loan shall be payable on the
Termination Date. On any date on which a payment of interest or principal is
due hereunder, the Bank may charge the Borrower's demand deposit account(s) with
the amount thereof. The failure of the Bank so to charge such account shall not
relieve the Borrower of its obligations to make payments hereunder.
2.14 The Bank may, at any time and from time to time, upon the request of
the Borrower, but in the Bank's sole and absolute discretion, extend the
Termination Date.
2.15 As evidence of the Borrower's obligations under the Revolving Loan,
the Borrower shall execute and deliver to the Bank a Secured Revolving Time Note
(the "REVOLVING NOTE") of even date herewith.
2.16 The Bank need not enter payments of interest and principal upon the
Revolving Note but may maintain a record thereof on a separate ledger maintained
by the Bank.
2.17 The entire unpaid principal balance of the Revolving Loan, together
with all unpaid interest accrued thereon and all accrued and unpaid fees, if
any, shall be due and payable without notice or demand on the Termination Date.
2.18 If, at any time, the unpaid principal balance of the Revolving Loan
exceeds the Borrowing Base or the Credit Limit, the Borrower shall immediately
pay to the Bank the amount of such excess without notice or demand.
2.19 In consideration of the Bank establishing the Revolving Loan, the
Borrower shall pay to the Bank an unused line fee equal to one-half of one (.5%)
percent of the difference between: (x) the Credit Limit and (y) the average
daily balance outstanding under the Revolving Loan (the "UNUSED LINE FEE"). The
Unused Line Fee shall be payable monthly in arrears and the Borrower hereby
authorizes the Bank to debit its operating account at the Bank for the amount of
any such payment(s).
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<PAGE>
THE EQUIPMENT LINE
------------------
2.20 Subject to the terms and conditions of this Agreement, the Bank will
make an equipment line available to the Borrower in the maximum principal amount
of $500,000.00 (less equipment line Advances outstanding as of the date hereof)
(the "EQUIPMENT LINE"), as evidenced by a Line of Credit Agreement for the
Acquisition of Equipment (the "LINE OF CREDIT AGREEMENT") of even date.
2.21 Advances under the Equipment Line shall bear interest as provided
below and shall be conclusively evidenced by secured term notes executed by the
Borrower with respect to each such Advance. Interest shall be computed on the
basis of the actual number of days elapsed over a year of 360-days. Interest
shall be charged to the Borrower upon the balance of all Equipment Line Advances
owing to the Bank at the close of each day at the rates set forth below, as
elected by the Borrower in accordance with the terms of this Agreement: (i) the
Borrower shall pay interest on the aggregate unpaid principal balance of each
Prime Rate Loan at a rate which is the daily equivalent of such Prime Rate Loan
in effect from time to time plus Margin. Interest shall be payable monthly in
arrears on the first day of each month, until all of the Prime Rate Loans are
paid in full. The rate of interest payable by the Borrower on the Prime Rate
Loans shall be changed effective as of the date in which a change in the Prime
Rate becomes effective; (ii) the Borrower shall pay interest on the aggregate
unpaid principal balance of each Cost of Funds Loan from the Borrowing Date for
such Advance through and including the Maturity Date chosen by the Borrower and
acceptable to the Bank with respect to such Advance at a per annum fixed rate
equal to the sum of the Cost of Funds Rate plus Margin. Interest shall be
payable on the sooner to occur of the first day of each month or such Maturity
Date.
2.22 The principal balance of each Equipment Line Advance shall be
amortized over a period of three years. Payments of principal shall be made
monthly in arrears on the first day of each month commencing on the first of
such dates next succeeding the date of any such Advance.
2.23 Bank shall not be required to make an Equipment Line Advance unless
the Bank has received from the Borrower a request for such Equipment Line
Advance, in the form of Exhibit B attached hereto (herein a "NOTICE OF
BORROWING") which request complies with the requirements of this subsection and
the Borrower has furnished the Equipment Documentation Certification required
pursuant to the Line of Credit Agreement. Each Notice of Borrowing shall
designate (1) the Borrowing Date for the requested Advance; (2) the requested
interest rate option; (3) the amount of the requested Advance; and (4) if such
request is for a Cost of Funds Loan, the requested Interest Period. The
Borrower may request Advances in the form of
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Cost of Funds Loans in minimum increments of $100,000.00, unless availability
under the Equipment Line is less than $100,000.00. A Notice of Borrowing may be
transmitted by facsimile and shall be effective on the date received not later
than 1 p.m. Boston local time by the Bank for any Prime Rate Loan and one
business day after receipt by the Bank for any Cost of Funds Loans.
2.24 Any Notice of Borrowing which requests a Cost of Funds Loan shall be
irrevocable and binding upon the Borrower. In the event the Borrower fails to
borrow the Advance requested on the Borrowing Date specified in such Notice of
Borrowing, the Borrower shall indemnify Bank against any and all losses and
expenses incurred by Bank by reason of such failure including, without
limitation, all losses and expenses incurred by reason of the liquidation,
disposition or reemployment of deposits or other funds acquired by Bank to fund
such Advance.
2.25 Each Cost of Funds Loan shall be repaid in full on the Maturity Date
set forth in the Secured Term Note executed pursuant thereto. Any Cost of Funds
Loan which is not repaid in full on its Maturity Date shall automatically
convert to a Prime Rate Loan and shall bear interest at the rate applicable to
the Prime Rate Loan from and after such Maturity Date.
2.26 No Cost of Funds Loan may be prepaid in whole prior to its Maturity
Date. In the event that a Cost of Funds Loan is prepaid prior to its Maturity
Date, whether by acceleration of the Liabilities, or otherwise, the Borrower
shall, upon demand by Bank, pay to Bank any amounts required to compensate Bank
for any additional losses (including lost profits), cost or expenses which it
may reasonably incur as the result of such payment, including, without
limitation, any loss, cost or expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund or maintain
such Cost of Funds Loan.
TECHNOLOGY LINE
---------------
2.27 Subject to the terms and conditions of this Agreement, the Bank will
make a technology non-revolving line available to the Borrower in the maximum
principal amount of Two Million ($2,000,000.00) Dollars (the "TECHNOLOGY LINE"
and together with the Revolving Loan and the Equipment Line, the "LOANS"), as
evidenced by a Secured Non-Revolving Time Note (the "NON-REVOLVING TIME NOTE")
of even date.
2.28 The Borrower may request Advances under the Technology Line until
March 31, 1996, which Advances shall be used solely for the purpose of acquiring
technology by the Borrower.
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2.29 Advances under the Technology Line shall bear interest as provided
below and shall be conclusively evidenced by the Non-Revolving Time Note.
Interest shall be computed on the basis of the actual number of days elapsed
over a year of 360-days. Interest shall be charged to the Borrower upon the
balance of all Technology Line Advances owing to the Bank at the close of each
day at a rate which is the daily equivalent of the Prime Rate plus Margin.
Interest shall be payable on the first day of each month, commencing with the
first day of the first month next succeeding the date of the first Advance under
the Technology Line.
2.30 The principal balance of the Technology Line shall be due and payable
upon the earlier to occur of September 30, 1996 or within five (5) business days
of the date upon which the Borrower has received proceeds of an equity injection
or the issuance of subordinated debt in an amount sufficient to pay off the
Technology Line in full.
2.31 All of the Borrower's obligations to the Bank, of every kind and
description, including those arising under this Agreement, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument they may be
evidenced, including those arising under any other agreements, instruments or
documents executed in conjunction herewith, or whether evidenced by an agreement
or instrument, including obligations to perform acts and refrain from taking
action, as well as obligations to repay the Loans, shall constitute the
Borrower's "LIABILITIES" to the Bank, as the same may be modified, amended,
replaced or extended from time to time.
2.32 The Revolving Note, Line of Credit Agreement and Non-Revolving Time
Note are incorporated herein to the same extent as if they were set forth in
full in this Agreement.
2.33 If after the date hereof, Bank determines that (i) the adoption of any
applicable law, rule, or regulation regarding capital requirements for banks,
bank holding companies or trust companies or the subsidiaries thereof, (ii) any
change in the interpretation or administration of any such law, rule or
regulation by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or (iii) compliance
by Bank or its holding company with any request or directive of any such
governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the rate of return on Bank's capital to a level below that which Bank could have
achieved (taking into consideration Bank's policies with respect to capital
adequacy immediately before such adoption, change, or compliance and assuming
that Bank's capital was fully utilized prior to such adoption, change, or
compliance)
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<PAGE>
but for such adoption, change, or compliance as a consequence of Bank's
commitment to make Advances pursuant hereto by any amount deemed by Bank to be
material:
(i) Bank shall promptly, after Bank's determination of such occurrence,
give notice thereof to Borrower; and
(ii) Borrower shall pay to Bank as an additional fee from time to time, on
demand, such amount as Bank certified to be the amount that will compensate Bank
for such reduction.
A certificate of Bank claiming entitlement to compensation as set forth
above will be conclusive in the absence of manifest error. Such certificate
will set forth the nature of the occurrence giving rise to such compensation,
the additional amount or amounts to be paid to Bank, and the method by which
such amounts were determined. In determining such amount, Bank may use any
reasonable averaging and attribution method.
SECTION 3
---------
WARRANTIES AND REPRESENTATIONS
------------------------------
3.1 To induce the Bank to enter into this Loan Agreement and to make the
Loans, the Borrower warrants and represents that, as of this date:
(a) The Borrower is a duly organized and existing corporation under
the laws of the State of Delaware and is in good standing under the laws of said
State.
(b) The Borrower is duly qualified to do business and in good standing
as a foreign corporation in each state or other jurisdiction where failure to
qualify would have a material adverse effect on Borrower's business or financial
condition including, without limitation, Massachusetts.
(c) The Borrower has good and clear record and marketable title to all
properties and assets which it purports to own, free and clear of all mortgages,
liens, pledges, charges, security interests and encumbrances, other than those
being granted to the Bank, if any, and those reflected on EXHIBIT C attached
hereto.
(d) The Borrower owns and holds or leases all real and personal
property necessary or incidental to the present and planned future conduct of
its business, including, without limitation, patents, trademarks, service marks,
trade names, copyrights and licenses and other rights with respect to the
foregoing.
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<PAGE>
(e) All books and records of the Borrower, including, but not limited
to, minute books, by-laws and books of account are accurate and reflect all
matters and transactions which should currently be reflected therein.
(f) The general nature of the Borrower's business is as set forth on
EXHIBIT C attached hereto.
(g) The Borrower has no subsidiaries and no investments in the stock
or securities of any other corporation, firm, trust or other entity, except as
set forth on EXHIBIT C.
(h) Except as set forth on EXHIBIT C, there are no actions, suits,
investigations or proceedings pending, or to the knowledge of the Borrower
threatened, against the Borrower or any of its properties in any court, before
any governmental authority, arbitration board, or any other tribunal which,
singly or in the aggregate, if decided adversely to the Borrower, would
materially and adversely affect the business, properties or condition (whether
financial or otherwise) of the Borrower. The Borrower is not, nor by execution
and delivery of this Agreement and the performance of its obligations hereunder
(with or without the passage of time) will the Borrower be in default with
respect to any order of any court, governmental authority, arbitration board or
other tribunal.
(i) The Borrower has furnished to the Bank the financial statements
for the time period indicated on EXHIBIT C attached hereto. Said statements
fairly present the condition of the Borrower at the dates thereof, and the
statements of operation contained therein fairly present the results of the
operations of the Borrower for the periods indicated, all in conformity with
generally accepted accounting principles consistently applied.
(j) Except to the extent reflected or reserved against in the
financial statements referred to above, the Borrower, as of the date of said
financial statements, had no material liabilities of any nature, whether
accrued, absolute, contingent or otherwise, including, without limitation, tax
liabilities, due or to become due, or arising out of transactions entered into
or any state of facts existing prior thereto.
(k) Since the date of the financial statements referred to in Section
3.1(i), and except as shown on EXHIBIT C, there has not been:
(i) any change in the condition of the Borrower's assets or liabilities,
other than changes in its ordinary course of business, none of which
has been materially adverse, nor has there been any depletion of cash
or decrease of working capital which has been materially adverse;
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<PAGE>
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the Borrower's properties or
business;
(iii) any declaration of, setting aside of, or making of a payment of any
dividend or other distribution with respect to the Borrower's capital
stock or any direct or indirect redemption, purchase or other
acquisition of any such stock, except for distributions to its
stockholders to satisfy federal and state tax liabilities on
undistributed income (if Borrower is a Subchapter "S" corporation); or
(iv) any materially adverse:
(1) controversy with any labor organization or employees;
(2) claim or controversy involving any federal, state or local
governmental agencies; or
(3) other event or condition materially affecting the business or
properties of the Borrower.
(l) The Borrower has filed all federal and state income tax returns,
excise tax returns, and all other tax returns of every kind and nature which are
required to be filed by the Borrower as of the date hereof and has paid all
taxes shown to be due on said returns.
(m) The Borrower keeps all records concerning its accounts (as said
term is defined in the Massachusetts Uniform Commercial Code) and has its chief
executive office and principal place of business at the address set forth at the
beginning of the Agreement. The Borrower has no other addresses at which the
Borrower has an office, conducts business or at which any of the Borrower's
property is located except as set forth on EXHIBIT C.
(n) The execution and delivery of this Agreement, the borrowing by the
Borrower as herein provided, the execution and delivery by the Borrower of all
instruments, agreements and documents of every kind and nature pursuant hereto
and the performance by the Borrower of all of its obligations to the Bank
hereunder have been duly authorized by the Board of Directors of the Borrower
and, to the extent required by law or otherwise, by the Borrower's stockholders,
and this Agreement and all instruments, agreements and documents executed
pursuant hereto are valid and binding obligations of the Borrower enforceable in
accordance with their terms except to the extent such enforceability may be
limited by laws of general application
- 15 -
<PAGE>
affecting the rights of creditors and except that certain equitable remedies may
be subject to the discretion of any applicable court.
(o) There is no provision in the articles of organization, agreement
of association or the by-laws of the Borrower, or any indenture, contract or
agreement to which it is a party or by which it is bound, which prohibits the
execution and delivery of this Agreement or the performance by the Borrower of
its obligations hereunder.
(p) No event has occurred and no condition exists, which, upon the
execution and delivery of this Agreement would constitute a default or an Event
of Default hereunder. Neither the nature of the Borrower or any of its business
or properties, nor any relationships between the Borrower and any other person,
nor any circumstances in connection with the execution or delivery of this
Agreement, is such as to require a consent, approval, or authorization of or
filing, registration, or qualification with, any governmental authority on the
part of the Borrower as a condition of the execution and delivery of this
Agreement or any other instrument, agreement or document contemplated hereby, or
the performance by the Borrower of its obligations hereunder or thereunder
except for the filing of uniform commercial code financing statements in the
appropriate filing offices.
(q) The Borrower has no pension, profit sharing, stock option,
Employee Stock Ownership Trust ("ESOT"), insurance or other similar plan
providing for a program of deferred compensation or benefits for any employee or
officer, except as indicated on EXHIBIT C hereto.
SECTION 4
---------
AFFIRMATIVE COVENANTS
---------------------
4.1 The Borrower will duly and punctually pay all interest and principal
becoming due to the Bank and will duly and punctually perform all things on its
part to be done or performed under this Agreement, or pursuant to any
instrument, document or agreement executed pursuant hereto.
4.2 The Borrower will, at all times, keep proper books of account in which
full, true and correct entries will be made of its transactions in accordance
with generally accepted accounting principles consistently applied.
4.3 The Borrower will, at all reasonable times, make its books and records
available, in its offices, for inspection, examination and copying by the Bank
and the Bank's representatives
- 16 -
<PAGE>
and will, at all reasonable times, permit inspection of its properties by the
Bank and the Bank's representatives.
4.4 The Borrower will, from time to time, furnish the Bank with such
information and statements as the Bank may reasonably request and with copies of
all financial statements and reports that it shall send or make available to
stockholders. Borrower agrees that at Bank's discretion, the Revolving Loan may
be administered by Bank on a "fully followed" basis, with daily reporting
required.
4.5 The Borrower will furnish the Bank monthly, within thirty (30) days
after the close of each fiscal monthly period, commencing with the monthly
period in which this Agreement is executed, a balance sheet and income and
surplus statement reflecting the financial condition of the Borrower at the end
of each such period and the results of its operation during each such period.
Each balance sheet and income and surplus statement is to be certified by the
President, Treasurer or Chief Financial Officer of the Borrower, such
certification to state that such balance sheet and income and surplus statement
fairly present the financial condition and the result of operations of the
Borrower at the end of such period and during such period in accordance with
generally accepted accounting principles consistently applied, subject, however,
to ordinary year-end adjustments, none of which will be materially adverse.
4.6 The Borrower will furnish the Bank annually, within one hundred and
twenty (120) days after the close of each fiscal year, a balance sheet and
income and surplus statement reflecting the financial condition of the Borrower
at the end of each such fiscal year and the results of its operation during such
fiscal year. Each such statement shall also contain comparative statements for
the prior fiscal year. Each such balance sheet and income and surplus statement
is to be audited by an independent certified public accountant satisfactory to
the Bank with an audit quality statement to be issued by the accountant and
signed by the President, Treasurer or Chief Financial Officer of the Borrower
representing that neither the accounting firm nor the President, Treasurer or
Chief Financial Officer of the Borrower is aware of any material modifications
necessary to the financial statements for them to be in conformity with
generally accepted accounting principles consistently applied. The Borrower
shall also cause each of the Guarantors (as hereinafter defined) to provide
their annual financial statements to the Bank in form and substance satisfactory
to Bank and at the same time as Borrower provides its financial statements to
Bank.
4.7 The Borrower will, on a quarterly basis, within forty-five (45) days
of the end of each fiscal quarter, commencing with the fiscal quarter ending
March 31, 1996, deliver to the Bank
- 17 -
<PAGE>
certificates, in the form of EXHIBIT D attached hereto, signed by its President,
Treasurer or Chief Financial Officer certifying that such officer has reviewed
the provisions of this Agreement (including, without limitation, the financial
covenants contained in this Agreement, to the extent they are being tested at
that time) and stating in his opinion, if such be the fact, that the Borrower
has not been and is not in default as to any of the covenants and agreements of
the Borrower contained in this Agreement, or in the event of any such default,
setting forth the details thereof. The Borrower shall also furnish the Bank, at
that time, with its twelve-month cash flow projections, in form and substance
satisfactory to Bank.
4.8 The Borrower shall furnish a Borrowing Base certificate and an
accounts receivable aging to the Bank on a weekly basis. Each such certificate
and aging to be in such form and certified by such officers of the Borrower as
Bank may prescribe from time to time.
4.9 The Borrower shall make its books and records available to the Bank
for audit, during normal business hours upon reasonable advance notice, absent
the occurrence of an Event of Default, at the Bank's discretion and at the
Borrower's expense.
4.10 The Borrower will maintain its corporate existence in good standing,
comply in all material respects with all laws and regulations of the United
States, of any state or states thereof, of any political subdivision thereof and
of any governmental authority which may be applicable to the Borrower or to the
Borrower's business.
4.11 The Borrower will pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefit, withholding, sales and other taxes assessed against it or payable by it
at such times and in such manner to prevent any penalty from accruing or any
lien or charge from attaching to its properties. The provisions of this section,
however, shall not preclude the Borrower from contesting in good faith and
diligently prosecuting any such tax, provided, however, that the Borrower shall,
upon request of the Bank, deposit with the Bank funds sufficient to discharge
such tax in the event such contest is resolved against the Borrower. The
Borrower shall not be in default under this Section by reason of the existence
of a lien for taxes not then due.
4.12 The Borrower will put and maintain its properties in good repair,
working condition and order and, from time to time, make all needful and proper
repairs, renewals and replacements.
4.13 The Borrower will maintain insurance at all times covering such risks
and in such amounts as the Bank may reasonably
- 18 -
<PAGE>
require in accordance with industry standards, all such insurance to be in such
form and for such periods and written by such companies as shall be reasonably
acceptable to the Bank.
4.14 The Borrower will pay or reimburse the Bank, on demand, for all
expenses (including, without limitation, reasonable counsel fees and expenses)
incurred or paid by the Bank in connection with the preparation, amendment,
interpretation, extension or negotiation of this Agreement, and any instrument,
agreement or document to be delivered pursuant hereto; the enforcement by the
Bank of its rights as against the Borrower or any other person primarily or
secondarily liable to the Bank hereunder or thereunder; the administration,
supervision, protection or realization on any Collateral held by the Bank as
security for any obligation of the Borrower or any other person primarily or
secondarily liable with respect thereto and in the defense of any action against
the Bank with respect to its rights or liabilities hereunder or thereunder.
4.15 The Borrower will punctually and promptly make all payments and
perform all other obligations which may be required of it with respect to any
indebtedness (whether for money borrowed, goods purchased, services rendered or
however such indebtedness may otherwise arise) owing to persons, firms or
corporations other than the Bank, including, without limitation, indebtedness
which may be secured by a security interest in assets of the Borrower or
property of the Borrower, and all obligations under the terms of any lease in
which the Borrower is the lessee. The provisions of this section shall not
preclude the Borrower from contesting in good faith and diligently prosecuting
any such indebtedness or obligation.
4.16 The Borrower shall pay or cause to be paid when due all amounts
necessary to fund in accordance with their terms all the Borrower's deferred
compensation plans whether now in existence or hereafter created, and the
Borrower will not withdraw from participation in, permit the termination or
partial termination of, or permit the occurrence of any other event with respect
to any deferred compensation plan maintained for the benefit of its employees
under circumstances that could result in liability to the Pension Benefit
Guaranty Corporation, or any of its successors or assigns, or to the entity
which provides funds for such deferred compensation plan.
4.17 The Borrower will maintain its primary operating accounts with the
Bank.
- 19 -
<PAGE>
SECTION 5
---------
NEGATIVE COVENANTS
------------------
5.1 The Borrower will not issue evidences of indebtedness or create,
assume, become contingently liable for, or suffer to exist indebtedness in
addition to indebtedness to the Bank, except for debt to its officers, directors
and stockholders that is subordinated to the Loans on terms satisfactory to the
Bank (the "SUBORDINATED DEBT"); provided, however, that the Borrower may incur
liabilities which are incurred or arise in the ordinary course of the Borrower's
business (other than liabilities incurred or arising with respect to money
borrowed) and purchase money financing, secured by the acquired assets only.
5.2 The Borrower will not pay dividends either in cash or in kind on any
class of its capital stock, except that as long as Borrower maintains a
Subchapter "S" tax status, the Borrower may pay dividends in an amount necessary
to satisfy its stockholders' federal and state tax liability for undistributed
income, or redeem, purchase or otherwise acquire, directly or indirectly, any of
its stock; provided that the Borrower may pay dividends in the form of stock.
5.3 The Borrower will not make any loans or advances to any individual,
firm or corporation, including, without limitation, its officers and employees;
provided, however, that the Borrower may make advances to its employees,
including its officers, with respect to expenses incurred by such employees,
which expenses are reimbursable by the Borrower and directly related to the
conduct of the Borrower's business, and Borrower may make advances to its
employees provided that the aggregate amount of such advances does not exceed
$50,000.00 at any time.
5.4 The Borrower will not invest in or purchase any stock or securities
of any individual, firm or corporation, provided, however, the Borrower may
invest in direct obligations of the United States of America having a maturity
of one year or less from the date of investment.
5.5 The Borrower will not merge or consolidate or be merged or
consolidated with or into any other corporation.
5.6 The Borrower will not sell or dispose of any of its assets except for
sales of inventory in the ordinary and usual course of its business; provided,
however, that the Borrower may dispose of (or trade in) equipment which is no
longer required for the conduct of the Borrower's business so long as the
Borrower receives therefor a sum (or credit) substantially equal to such
equipment's fair value.
- 20 -
<PAGE>
5.7 Except as set forth on EXHIBIT C and except for purchase money
security interests in acquired assets, the Borrower will not grant or suffer to
exist any mortgage, pledge, title retention agreement, security interest, lien,
charge or encumbrance with respect to any of its assets, tangible or intangible,
whether now owned or hereafter acquired, or subject any of such assets to the
prior payment of any indebtedness, or transfer in any manner any of such assets
with the intent or purpose, directly or indirectly, of subjecting such assets to
the payment of indebtedness.
5.8 The Borrower will not engage in any business other than the business
in which it is currently engaged or a business reasonably allied thereto.
5.9 (Minimum Net Income). The Borrower will not permit its Minimum Net
------------------
Income to be less than the following amounts as at the end of the following
periods:
<TABLE>
<CAPTION>
MINIMUM NET INCOME TIME PERIOD
<S> <C>
$ 25,000.00 For the fiscal quarters
ending June 30, 1996
and September 30, 1996
$100,000.00 For the fiscal year
ending December 31, 1996
$ 50,000.00 For the fiscal quarter
ending March 31, 1997
and as at the end of
each fiscal quarter
thereafter
</TABLE>
The term "NET INCOME" as used herein shall mean Borrower's net income after
taxes as determined in accordance with generally accepted accounting principles
consistently applied.
5.10 Maximum Senior Debt to Capital Base Ratio. The Borrower will not
-----------------------------------------
permit its total Senior Debt to be more than the following percentages of its
Capital Base for the following periods:
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE TIME PERIOD
<S> <C>
1,000% As at the end of the
fiscal year ending
December 31, 1996
and as at the end of
each fiscal quarter
thereafter
</TABLE>
- 21 -
<PAGE>
The term "SENIOR DEBT" as used herein shall mean Borrower's total debt
minus any Subordinated Debt. The term "CAPITAL BASE" as used herein shall mean
Borrower's Tangible Net Worth plus Subordinated Debt. The term "SUBORDINATED
DEBT" as used herein shall mean debt which is specifically subordinated to all
Liabilities, upon terms and conditions satisfactory to the Bank and its counsel.
The term "TANGIBLE NET WORTH" shall mean stockholders' equity determined in
accordance with generally accepted accounting principles, consistently applied,
subtracting therefrom: (i) intangibles (as determined in accordance with such
principles so applied), (ii) indebtedness owing from any employee, stockholder,
parent, subsidiary or other affiliate, and (iii) all leasehold improvements.
5.11 Minimum Capital Base. The Borrower will not permit its Capital Base
--------------------
to be less than the following amounts for the following periods:
<TABLE>
<CAPTION>
MINIMUM CAPITAL BASE TIME PERIOD
<S> <C>
$ 300,000.00 For the fiscal quarter
ending June 30, 1996
$ 350,000.00 For the fiscal quarter
ending September 30, 1996
$ 500,000.00 For the fiscal year ending
December 31, 1996 and as
at the end of each fiscal
quarter thereafter
</TABLE>
5.12 Minimum Interest Coverage Ratio. The Borrower will not permit its
-------------------------------
earnings before interest and taxes to be less than the following percentages of
its interest expense for the following periods:
<TABLE>
<CAPTION>
MINIMUM PERCENTAGE TIME PERIOD
<S> <C>
125% For the 6-month period
ending June 30, 1996, for
the 9-month period ending
September 30, 1996, for the
12-month period ending
December 31, 1996 and for
the 12-month period ending
as at the end of each
fiscal quarter thereafter
</TABLE>
- 22 -
<PAGE>
5.13 Maximum Capital Expenditures. The Borrower will not permit, directly
----------------------------
or indirectly, its capital expenditures for the purchase, fabrication or
creation of fixed assets, including, without limitation, all Capitalized Leases,
to exceed the aggregate amount of $1,000,000.00 in any fiscal year of Borrower.
5.14 All accounting terms shall be construed and interpreted in
accordance with generally accepted accounting principles consistently applied.
5.15 Minimum Collateral Coverage Ratio. The Borrower shall not permit
---------------------------------
the percentage reliance on the stock value of the Pledged OEC Stock (as defined
herein) and as calculated in accordance with EXHIBIT E attached hereto to exceed
seventy (70%) percent at any time.
SECTION 6
---------
SECURITY, GUARANTEES AND WARRANTS
---------------------------------
6.1 The Bank shall have and hold as security for the repayment of the
Loans and all other Liabilities of the Borrower to the Bank a security interest
in substantially all of the Borrower's business assets (the "COLLATERAL"), and
the Borrower will execute and deliver all agreements, instruments and documents,
in form and substance satisfactory to the Bank, to establish, create and perfect
the same, including, without limitation, a Security Agreement (All Assets) (the
"SECURITY AGREEMENT"). The Bank also holds certain warrants (the "WARRANTS") of
the Borrower as additional compensation for the Loans to the Borrower.
6.2 Any and all deposits or other sums at any time credited by or due
from the Bank to the Borrower shall at all times constitute additional security
for all Liabilities of the Borrower to the Bank and may be set off against any
such Liabilities at any time after the occurrence, and during the continuance of
an Event of Default, whether or not security held by the Bank is deemed to be
adequate. Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts receivable, choses in action, chattel
paper, cash, property and the proceeds thereof owned by the Borrower or in which
the Borrower has an interest, which now or hereafter are at any time in
possession or control of the Bank or in transit by mail or carrier to or from
the Bank or in the possession of any third party acting in the Bank's behalf,
without regard to whether the Bank received the same in pledge, for safekeeping,
as agent for collection or transmission or
- 23 -
<PAGE>
otherwise or whether the Bank has conditionally released the same, shall
constitute additional security for such Liabilities and may be applied at any
time after the occurrence and during the continuance of an Event of Default to
such Liabilities, whether due or not.
6.3 The Loans will be guaranteed on an unlimited basis by J&S Limited
Partnership, John J. Donovan and John J. Donovan, Jr. (together, the
"GUARANTORS"), pursuant to Unlimited Guarantees (each a "GUARANTEE" and together
the "GUARANTEES"). The Guarantee of J&S Limited Partnership shall be secured by
a pledge of 520,000 shares of the Common Stock of Open Environment Corporation
(the "PLEDGED OEC STOCK"). None of the Guarantors shall provide a guaranty to
anyone other than the Bank, without the Bank's prior written consent.
SECTION 7
---------
DEFAULT
-------
7.1 The occurrence of any of the following events (after the expiration
of any applicable grace period) shall be an Event of Default hereunder:
(a) The Borrower shall fail to pay any installment of principal or
interest on account of the Loans when such payment is due, or on demand, if such
payment is due on demand.
(b) The Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement or in any instrument, document or
agreement with Bank or delivered to Bank whether now existing or hereafter
created and the expiration of twenty-five (25) days from such failure, or
failure to adhere to the financial covenants contained in Section 5 hereof
(without any grace period).
(c) Any warranty, representation or statement made or furnished to
the Bank by or on behalf of the Borrower proves to have been false in any
material respect when made or furnished.
(d) Any event which results in the acceleration of the maturity of
the indebtedness of the Borrower to others in excess of $50,000.00 under any
indenture, agreement, undertaking or otherwise.
(e) Death, dissolution, termination of existence, insolvency, or
business failure of the Borrower or any Guarantor.
- 24 -
<PAGE>
(f) The Borrower shall: (i) cease, be unable, or admit in writing its
inability to pay its debts as they mature, or make a general assignment for the
benefit of, or enter into any composition, trust mortgage or other arrangement
with creditors; (ii) apply for, or consent (by admission of material allegations
of a petition or otherwise) to the appointment of a receiver, trustee or
liquidator of the Borrower or of a substantial part of its assets, or authorize
such application or consent, or proceedings seeking such appointment shall be
commenced against the Borrower and continue undismissed for sixty (60) days; or
(iii) apply for, or consent (by admission of material allegations of a petition
or otherwise) to the application of any bankruptcy, reorganization, readjustment
of debt, insolvency, dissolution, liquidation or other similar law of any
jurisdiction, or authorize such application or consent, or proceedings to such
end shall be instituted against the Borrower and remain unstayed and undismissed
for sixty (60) days, be approved as properly instituted or result in
adjudication of bankruptcy or insolvency. Upon the filing of any involuntary
petition, Bank's agreement to consider making additional Loans hereunder shall
terminate.
(g) The calling or sufferance by the Borrower of a meeting of the
creditors of the Borrower or the occurrence of a meeting by the Borrower or a
representative thereof with a formal or informal committee of creditors of the
Borrower.
(h) Termination of any Guarantee by any Guarantor or the issuance of
a guaranty by any Guarantor to anyone other than the Bank, without the prior
written consent of the Bank.
(i) The death or incapacity of John J. Donovan or John J. Donovan,
Jr.
7.2 Upon the occurrence of any Event of Default, all Liabilities of the
Borrower to the Bank shall, at the Bank's option and without notice or demand,
and notwithstanding any terms of payment in any note or other instrument
evidencing such Liabilities, become immediately due and payable, and any
obligation of the Bank to consider making Loans pursuant to Section 1 or Section
2 shall, at Bank's option, terminate.
SECTION 8
---------
[INTENTIONALLY DELETED]
-----------------------
- 25 -
<PAGE>
SECTION 9
---------
NOTICE
------
9.1 All notices and other communications hereunder shall be made by
telegram, telex, hand delivery, overnight air courier, or certified or
registered mail, return receipt requested, and shall be deemed to be received by
the party to whom it was sent one (1) business day after sending, if sent by
telegram, telex, or overnight air courier, three (3) business days after mailing
if sent by certified or registered mail and on the date delivered if hand
delivered. All such notices and other communications to a party hereto shall be
addressed to such party at the address set forth in Section 9.2 or to such other
address as such party may designate for itself in a notice to the other party
given in accordance with this section.
9.2 The addresses to which such communications shall be sent are as
follows:
(a) If intended for the Borrower, to:
Business@Web, Inc.
219 Vassar Street
Cambridge, MA 02139
Attn: Eric D. Sockol, Chief Financial Officer
with copies to:
Cuddy, Bixby and Denner
One Financial Center
Boston, MA 02111
Attn: Timothy E. McAllister, Esq.
(b) If intended for the Bank, to:
State Street Bank and Trust Company
225 Franklin Street, M-2
Boston, MA 02110
Attn: William R. Dewey IV, Vice President
with copies to:
Brian T. Garrity, Esq.
Shapiro, Israel & Weiner, P.C.
100 North Washington Street
Boston, Massachusetts 02114
9.3 The addresses set forth herein may be changed by notice hereunder.
- 26 -
<PAGE>
SECTION 10
----------
MISCELLANEOUS
-------------
10.1 The Borrower will from time to time execute and deliver to the Bank
all such other and further instruments and documents and take or cause to be
taken all such other and further action as the Bank may reasonably request in
order to effect and confirm or vest more securely in the Bank all rights
contemplated in this Agreement.
10.2 The Borrower may take any action herein prohibited or omit to perform
any act required to be performed by the Borrower if the Borrower shall obtain
the Bank's prior written consent to each such action, or omission to act. No
waiver on the Bank's part on any one occasion shall be deemed a waiver on any
other occasion. The Bank shall not be deemed to have waived any of its rights
hereunder unless such waiver shall be in writing and duly signed by an
authorized officer of the Bank.
10.3 This Agreement may be amended only by an instrument in writing and
duly signed by the Borrower and an authorized officer of the Bank.
10.4 All covenants, agreements, representations and warranties contained
in this Agreement shall bind the Borrower, its successors and assigns, and shall
inure to the Bank's benefit and the benefit of the Bank's successors and
assigns, whether expressed or not.
10.5 All rights of the Bank hereunder shall be cumulative. The Bank shall
not be required to have recourse to any Collateral before enforcing its rights
or remedies against the Borrower. The Borrower hereby waives presentment and
protest of any instrument and any notice thereof.
10.6 If any provisions of this Agreement shall be held to be illegal or
unenforceable, such illegality or unenforceability shall relate solely to such
provision and shall not affect the remainder of this Agreement.
10.7 This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts.
10.8 This Agreement shall take effect as an instrument under seal.
10.9 BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. Borrower hereby certifies
- 27 -
<PAGE>
that neither Bank nor any of its representatives, agents or counsel has
represented, expressly or otherwise, that Bank would not, in the event of any
such suit, action or proceeding, seek to enforce this waiver of right to trial
by jury. Borrower acknowledges that Bank has been induced to enter into this
Agreement by, among other things, this waiver. Borrower acknowledges that it
has read the provisions of this Agreement and in particular, this Section; has
consulted legal counsel; understands the right it is granting in this Agreement
and is waiving in this Section in particular, and makes the above waiver
knowingly, voluntarily and intentionally.
10.10 Borrower and Bank agree that any action or proceeding to enforce or
arising out of this Agreement may be commenced in any court of the Commonwealth
of Massachusetts sitting in the counties of Suffolk or Middlesex, or in the
District Court of the United States for the District of Massachusetts, and
Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confer personal jurisdiction if served by registered or certified
mail to Borrower or as otherwise provided by the laws of the Commonwealth of
Massachusetts or the United States of America.
10.11 The exhibits annexed hereto as EXHIBITS A, B, C, D and E are the
only exhibits to be annexed to this Agreement, and the material contained
therein shall be incorporated herein.
10.12 The captions herein contained are inserted as a matter of
convenience only and such captions do not form a part of this Agreement and
shall not be utilized in the construction hereof.
WITNESS: BUSINESS@WEB, INC., formerly
(As to Both) Object Power, Incorporated
/s/ Brian T. Garrity By: /s/ Eric D. Sockol
- ------------------------- --------------------------
Brian T. Garrity Eric D. Sockol
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY
By: /s/ William R. Dewey IV
------------------------------
William R. Dewey IV
Vice President
- 28 -
<PAGE>
EXHIBIT A
---------
_______________, 199_
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Mr. William R. Dewey IV
Vice President
Re: Loan Agreement between State Street Bank and Trust Company (the "BANK") and
Business@Web, Inc., formerly Object Power, Incorporated (the "BORROWER")
dated February ____, 1996, (the "AGREEMENT")
Gentlemen:
In accordance with Section 2.4 of the Agreement, the Borrower hereby
requests the following Advance:
(1) Borrowing Date: _____________________
(2) Interest Rate Type
(LIBOR or Prime): _____________________
(3) Amount of Advance*: _____________________
(4) Interest Period: ____________________
(1, 2, 3 or 4 months for LIBOR Loans)
The Borrower hereby certifies that all representations and warranties
contained in the Agreement are true and accurate in all material respects on the
date of this Notice of Borrowing as though such representations or warranties
had been made on this date (except to the extent such representation or warranty
expressly relates to an earlier date).
All capitalized terms used herein which are defined in the Agreement shall
have the meanings set forth in the Agreement.
Very truly yours,
BUSINESS@WEB, INC., formerly
Object Power, Incorporated
By:___________________________
*minimum of $100,000.00 and increments of $100,000.00 above $100,000.00 for
LIBOR Loans.
<PAGE>
EXHIBIT B
---------
_______________, 199_
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Mr. William R. Dewey IV
Vice President
Re: Loan Agreement between State Street Bank and Trust Company (the "BANK") and
Business@Web, Inc., formerly Object Power, Incorporated (the "BORROWER")
dated February ___, 1996, (the "AGREEMENT")
Gentlemen:
In accordance with Section 2.23 of the Agreement, the Borrower hereby
requests the following Equipment Line Advance:
(1) Borrowing Date: ___________________________
(2) Interest Rate Type: ___________________________
(Cost of Funds or Prime)
(3) Amount of Advance*: ___________________________
(4) Interest Period
Requested: ___________________________
The Borrower hereby certifies that all representations and warranties
contained in the Agreement are true and accurate in all material respects on the
date of this Notice of Borrowing as though such representations or warranties
had been made on this date (except to the extent such representation or warranty
expressly relates to an earlier date).
All capitalized terms used herein which are defined in the Agreement shall
have the meanings set forth in the Agreement.
Very truly yours,
BUSINESS@WEB, INC., formerly
Object Power, Incorporated
By:___________________________
* Minimum of $100,000.00 unless availability is less than $100,000.00.
<PAGE>
EXHIBIT C
---------
3.1(c) Encumbrances
SECURED PARTY OR LESSOR: COLLATERAL:
- ----------------------- ----------
See Attachment 1 hereto
------------
3.1(f) General Nature of Borrower's business
Software Development
3.1(g) Subsidiaries and Investments
None
3.1(h) Litigation
None
3.1(i) Date and period covered of most recent financial statements furnished
to the Bank.
November 30, 1995
3.1(k) Material Changes in Operations
None
3.1(m) Other Locations
17 Smith Point, Manchester, MA
3.1(q) Deferred Compensation Plans
None
<PAGE>
Attachment 1 to Exhibit C
-------------------------
(i) liens to secure taxes, assessments and other government charges or
claims for labor, material or supplies in respect of obligations not overdue;
(ii) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(iii) liens in respect of judgments or awards that have been in force for
less than the applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which the Borrower shall at the time in good
faith be prosecuting an appeal or proceedings for review and in respect of which
a stay of execution shall have been obtained and be in effect pending such
appeal or review;
(iv) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(v) encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto,landlord's or lessor's liens under leases to
which the Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the use of the
property affected in the ordinary conduct of the business of the Borrower, which
defects do not individually or in the aggregate have a materially adverse effect
on the business of the Borrower;
(vi) liens existing on the date hereof and listed on Attachment 1-A
--------------
hereto; and
(vii) capitalized leases, to the extent that the same may be deemed
to constitute security interests, and purchase money security interests in or
purchase money mortgages on real or personal property acquired after the date
hereof to secure purchase money indebtedness incurred in connection with the
acquisition of such property, which security interests or mortgages cover only
the real or personal property so acquired.
<PAGE>
EXHIBIT D
---------
TO LOAN AGREEMENT
COMPLIANCE CERTIFICATE
----------------------
Business@Web, Inc., formerly Object Power, Incorporated (the "BORROWER")
hereby certifies to State Street Bank and Trust Company (the "BANK") pursuant to
the Loan Agreement between Borrower and Bank dated February ____, 1996, as may
be amended from time to time ("LOAN AGREEMENT") that:
A. General
-------
1. Capitalized terms not defined herein shall have the meanings set forth
in the Loan Agreement.
2. The Borrower has complied with all the terms, covenants and conditions
to be performed or observed by it contained in the Loan Agreement.
3. As of the date hereof there does not exist an Event of Default or an
event which would with notice or the lapse of time, or both, constitute an Event
of Default under the Loan Agreement.
4. The representations and warranties contained in the Loan Agreement and
in any certificate, document or financial or other statement furnished at any
time thereunder are true, correct and complete in all material respects with the
same effect as though such representations and warranties had been made on the
date hereof, except to the extent that any such representation and warranty
relates solely to an earlier date (in which case such representation and
warranty shall be true, correct and complete on and as of such earlier date).
B. Financial Covenants:
-------------------
As of the date hereof or, for such period as may be designated below, the
computations, ratios and calculations as set forth below in accordance with
Sections 5.9, 5.10, 5.11, 5.12 and 5.13 of the Loan Agreement are true and
correct:
(a) (Section 5.9) Minimum net income after taxes of the Borrower for the
-----------
fiscal quarter ending ___________, 1996:
<TABLE>
<CAPTION>
AMOUNT OF NET INCOME AFTER
TIME PERIOD TAXES OR (NET LOSS)
----------- --------------------------
<S> <C>
For the fiscal quarters
ending June 30, 1996 and
September 30, 1996 = $________________
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Amount required under the
Loan Agreement = $ 25,000.00
For the fiscal year
ending December 31, 1996 = $________________
Amount required under the
Loan Agreement = $100,000.00
For the fiscal quarter
ending March 31, 1997 and at
the end of each fiscal
quarter thereafter = $_________________
Amount required under
the Loan Agreement = $ 50,000.00
</TABLE>
(b) (Section 5.10) Maximum Senior Debt to Capital Base Ratio of Borrower as
------------
at the end of the fiscal period ending ______________, 1996:
(i) Total Senior Debt = $______________
(ii) Capital Base = $______________
(iii) Total Senior Debt as
a percentage of Capital Base = __________%
(iv) Maximum percentage allowed
pursuant to the Loan
Agreement = 1,000% as at the end
of the fiscal year
ending December 31,
1996 and as at the
end of each fiscal
quarter thereafter
(c) (Section 5.11) Minimum Capital Base of Borrower as at the end of the
------------
fiscal quarter/year ending ____________, 19__:
<TABLE>
<CAPTION>
MINIMUM CAPITAL
BASE REQUIRED
FISCAL QUARTER PURSUANT TO THE ACTUAL CAPITAL
YEAR/ENDING LOAN AGREEMENT BASE
--------------- ---------------- ---------------
<S> <C> <C>
June 30, 1996 $ 300,000.00
September 30, 1996 $ 350,000.00
</TABLE>
<PAGE>
<TABLE>
<S> <C>
December 31, 1996
and as at the end
of each fiscal
quarter thereafter $ 500,000.00
</TABLE>
(d) (Section 5.12) Minimum interest coverage ratio of Borrower for the
______-month period ending on the last day of the fiscal quarter/year ending
_____________, 19__:
(i) Earnings before interest and
taxes = $______________
(ii) Interest expense = $______________
(iii) Earnings before interest and
taxes as a percentage of
interest expense = ________%
(iv) Minimum percentage required
pursuant to the loan agreement = (a) 125% for the
6-month period ending
on the last day of
the fiscal quarter
ending June 30, 1996,
(b) 125% for the
9-month period ending
on the last day of
the fiscal quarter
ending September 30,
1996, (c) 125% for
the 12-month period
ending on the last
day of the fiscal
quarter ending
December 31, 1996,
(d) 125% for the
12-month period
ending on the last
day of each fiscal
quarter thereafter
(e) (Section 5.13) Maximum aggregate capital expenditures for the fiscal
------------
year ending December 31, 1996:
(i) Actual aggregate capital
expenditures = $______________
(ii) Maximum capital expenditures
permitted pursuant to the
Loan Agreement = $1,000,000.00
<PAGE>
IN WITNESS WHEREOF, the undersigned, duly authorized officer of
Business@Web, Inc., formerly Object Power, Incorporated has executed and
delivered this Certificate in the name and on behalf of Business@Web, Inc.,
formerly Object Power, Incorporated on ________________, 19__.
BUSINESS@WEB, INC., formerly
Object Power, Incorporated
By:_______________________________
<PAGE>
EXHIBIT E
Cambridge Technology Group / Business@Web Stock Reliance Worksheet
<TABLE>
<S> <C> <C> <C>
1. A. Acceptable Accounts Receivable - CTG __________ x .70 = __________
B. Acceptable Accounts Receivable - BAW __________ x .70 = __________
C. Appraised Value - 219 Vassar Street $1,750,000 x .80 = $1,400,000
D. Sub-total of Collateral Pool __________
2. A. Current Balance of $2.5MM Revolver to CTG __________
B. Current Balance of $2.5MM Revolver to BAW __________
C. Amount of Borrowings under $2.0MM Time Note to BAW __________
D. Current Balance of Loan to 219 Vassar Street Trust __________
E. Total Loans Outstanding __________
3. Collateral Surplus/(Deficit) (1. D - 2. E) __________
Complete Sections 4 & 5 Only if Collateal Deficit
4. Market Value of pledged stock (520,000 shares OEC) __________ x .50 = __________
5. Stock Reliance ((Line 3 x - 1)/Line 4) - Not to Exceed 70% _________%
</TABLE>
<PAGE>
State Street Bank and Trust Company
GUARANTY (UNLIMITED) OF
J&S Limited Partnership
In consideration of the State Street Bank and Trust Company (hereinafter
called the "Bank") extending credit or otherwise in its discretion giving time,
financial or other accommodations to Business@Web, Inc., formerly Object Power,
Incorporated (hereinafter called the "Borrower"), the undersigned (hereinafter
called the "Guarantor") hereby unconditionally guarantees to the Bank that (a)
the Borrower will duly and punctually pay or perform, at the place specified
therefor, or if no place is specified, at the Bank's Head Office or at the
branch of the Bank where this Guaranty is given, all indebtedness, obligations
and liabilities, direct or indirect, matured or unmatured, primary or secondary,
certain or contingent, of the Borrower to the Bank, (except obligations of
Borrower to Bank under an Unlimited Guaranty of even date pertaining to a loan
to 219 Vassar Street Realty Trust, which obligations are not guaranteed hereby),
now or hereafter owing or incurred (including without limitation costs and
expenses incurred by the Bank in attempting to collect or enforce any of the
foregoing) which are chargeable to the Borrower either by law or under the terms
of the Bank's arrangements with the Borrower accrued in each case to the date of
payment hereunder (collectively the "Obligations" and individually an
"Obligation"); and (b) if there is an agreement or instrument evidencing or
executed and delivered in connection with any Obligation, the Borrower will
perform in all other respects strictly in accordance with the terms thereof.
This Guaranty is an absolute, unconditional and continuing guaranty of the
full and punctual payment and performance by the Borrower of the Obligations and
not of their collectibility only and is in no way conditioned upon any
requirement that the Bank first attempt to collect any of the Obligations from
the Borrower or any other party primarily or secondarily liable with respect
thereto or resort to any security or other means of obtaining payment of any of
the Obligations which the Bank now has or may acquire after the date hereof, or
upon any other contingency whatsoever.
Upon any default by the Borrower in the full and punctual payment and
performance of the Obligations, the liabilities and obligations of the Guarantor
hereunder shall, at the option of the Bank, become forthwith due and payable to
the Bank without demand or notice of any nature, all of which are expressly
waived by the Guarantor. Payments by the Guarantor hereunder may be required by
the Bank on any number of occasions.
The Guarantor further agrees, as the principal obligor and not as a
guarantor only, to pay to the Bank forthwith upon demand, in funds immediately
available to the Bank, all costs and expenses (including court costs and
reasonable legal expenses) incurred or
<PAGE>
expended by the Bank in connection with this Guaranty and the enforcement
hereof, together with interest on amounts recoverable under this Guaranty from
the time such amounts become due until payment at the usual rate charged by the
Bank in similar circumstances.
The liability of the Guarantor hereunder shall be unlimited in amount.
The obligations of the Guarantor under this Guaranty shall continue in full
force and effect until ten (10) days after the Bank shall have received from the
Guarantor written notice of the Guarantor's intention to discontinue this
Guaranty, notwithstanding any intermediate or temporary payment or settlement of
the whole or any part of the Obligations. No such notice shall affect the
liability of the Guarantor hereunder with respect to any Obligations incurred by
Borrower to the Bank or with respect to which the Bank has become committed
prior to ten (10) days after the receipt of such notice. In the event of any
such discontinuance of this Guaranty, all checks, drafts, notes, instruments
(negotiable or otherwise) and writings drawn or made by or for the account of
the Borrower on the Bank or any of its agents purporting to be dated on or
before ten (10) days after the date such discontinuance is received by the Bank,
although presented to and paid or accepted by the Bank after that date, shall
form part of the Obligations. No such notice shall be effective unless received
and acknowledged by an officer of the Bank at its Head Office.
The Guarantor grants to the Bank, as security for the full and punctual
payment and performance of the Guarantor's obligations hereunder, a continuing
lien on and security interest in all securities or other property belonging to
the Guarantor now or hereafter held by the Bank and in all deposits and other
sums credited by or due from the Bank and in all deposits and other sums
credited by or due from the Bank to the Guarantor or subject to withdrawal by
the Guarantor; and regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, the Bank may at any time during the
continuance of default with respect to the Obligations and without notice to the
Guarantor set off the whole or any portion or portions of any or all such
deposits and other sums against amounts payable under this Guaranty, whether or
not any other person or persons could also withdraw money therefrom.
The Bank shall be at liberty, without giving notice to or obtaining the
assent of the Guarantor, and without relieving the Guarantor of any liability
hereunder, to deal with the Borrower and with each other party who now is or
after the date hereof becomes liable in any manner for any of the Obligations,
in such manner as the Bank in its sole discretion deems fit, and to this end the
Guarantor gives to the Bank full authority in its sole discretion to
<PAGE>
do any or all of the following things: (a) extend credit, make loans and afford
other financial accommodations to the Borrower at such times, in such amounts
and on such terms as the Bank may approve; (b) vary the terms and grant
extensions or renewals of any present or future indebtedness or obligation to
the Bank of the Borrower or of any such other party; (c) grant time, waivers and
other indulgences in respect thereto; (d) vary, exchange, release or discharge,
wholly or partially, or delay in or abstain from perfecting and enforcing any
security or guaranty or other means of obtaining payment of any of the
Obligations which the Bank now has or acquires after the date hereof; (e) accept
partial payments from the Borrower or any such other party; (f) release or
discharge, wholly or partially, any endorser or guarantor; and (g) compromise or
make any settlement or other arrangement with the Borrower or any such other
party.
If for any reason the Borrower has no legal existence or is under no legal
obligation to discharge any of the Obligations undertaken or purported to be
undertaken by it or on its behalf, or if any of the moneys included in the
Obligations have become unrecoverable from the Borrower by operation of law or
for any other reason, this Guaranty shall nevertheless be binding on the
Guarantor to the same extent as if the Guarantor at all times had been the
principal debtor on all such Obligations. This Guaranty shall be in addition to
any other guaranty or other security for the Obligations, and it shall not be
prejudiced or rendered unenforceable by the invalidity of any such other
guaranty or security. Notwithstanding any payment by the Borrower to the Bank of
the whole or any portion of the Obligations, if the Bank shall be required to
pay any amount so paid to the Bank to a Trustee in Bankruptcy of the Borrower,
the Guarantor shall remain liable for any sums so paid to said Trustee.
The Guarantor waives notice of acceptance hereof, notice of any action
taken or omitted by the Bank in reliance hereon, and any requirement that the
Bank be diligent or prompt in making demands hereunder, giving notice to any
default by the Borrower or asserting any other right of the Bank hereunder. The
Guarantor also irrevocably waives, to the fullest extent permitted by law, all
defenses which at any time may be available in respect of the Guarantor's
Obligations hereunder by virtue of any homestead exemption, statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect.
The Guarantor will not, by paying any sum recoverable hereunder (whether or
not demanded by the Bank) or by any means or on any other ground, claim any
set-off or counterclaim against the Borrower in respect of any liability of the
Guarantor to the Borrower or, in proceedings under the Bankruptcy Code or
insolvency proceedings of any nature, prove in competition with the Bank in
respect of any payment hereunder or be entitled to have the benefit
<PAGE>
of any counterclaim or proof of claim or dividend or payment by or on behalf of
the Borrower or the benefit of any other security for any Obligation which, now
or hereafter, the Bank may hold or in which it may have any share or have any
right of subrogation, reimbursement or indemnity or right of recourse to any
security which the Bank may have or hold with respect to the Obligations until
such Obligations are paid in full.
Any demand on or notice to the Guarantor shall be in writing and shall be
effective when handed to the Guarantor or left at or mailed or sent by telegraph
to the Guarantor's usual or last-known address.
No provision of this Guaranty can be changed, waived or discharged except
by an instrument in writing signed by the Bank and the Guarantor expressly
referring to the provision of this Guaranty to which such instrument relates,
and no such waiver shall extend to, affect, or impair any right with respect to
any Obligation which is not expressly dealt with therein. No course of dealing
or delay or omission on the part of the Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto.
This Guaranty is intended to take effect as a sealed instrument to be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts and shall inure to the benefit of the Bank and its successors in
title and assigns, and shall be binding on the Guarantor and the Guarantor's
heirs, assigns and legal representatives.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty or has caused
this Guaranty to be executed on its behalf by an officer or other person
thereunto duly authorized on the 16th day of February, 1996.
Witness: J&S LIMITED PARTNERSHIP
By: Controller Corp., Inc.
Its Sole General Partner
____________________________________ By: /s/ John J. Donovan
__________________________________
John J. Donovan
President and Treasurer
Address: 219 Vassar Street
Cambridge, MA 02139
THIS GUARANTY IS SECURED PURSUANT TO A SECURITY
AGREEMENT (PLEDGED COLLATERAL) OF EVEN DATE.
<PAGE>
EXHIBIT 10.16
BUSINESS@WEB, INC.
HEWLETT-PACKARD COMPANY
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
FEBRUARY 27, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I - THE PREFERRED SHARES 1
Section 1.01 - Issuance, Sale and Delivery of the
Preferred Shares 1
Section 1.02 - Closing 1
Section 1.03 - Payment of Purchase Price 1
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY 2
Section 2.01 - Organization, Qualification and
Corporate Power 2
Section 2.02 - Authorization of Agreements, etc. 2
Section 2.03 - Validity 3
Section 2.04 - Authorized Capital Stock 3
Section 2.05 - Financial Statements; Corporate Minutes 4
Section 2.06 - Litigation, Compliance with Law 4
Section 2.07 - Proprietary Information of Third Parties 5
Section 2.08 - Title to Properties 5
Section 2.09 - Leasehold Interests 5
Section 2.10 - Taxes 5
Section 2.11 - Intellectual Property 6
Section 2.12 - Transactions with Affiliates 6
Section 2.13 - Governmental Approvals 6
Section 2.14 - Disclosure 7
Section 2.15 - Offering of the Preferred Shares 7
Section 2.16 - Brokers 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER 8
ARTICLE IV - CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASER 9
Section 4.01 - Opinion of Company's Counsel 9
Section 4.02 - Representations and Warranties to be
True and Correct 9
Section 4.03 - Performance 9
Section 4.04 - Conduct of Business 9
Section 4.05 - Registration Rights Agreement 9
Section 4.06 - Charter 10
Section 4.07 - Preemptive Rights 10
Section 4.08 - Marketing Agreement 10
Section 4.09 - Co-Sale Rights Agreement 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.10 - Secretary's Certificate 10
Section 4.11 - All Proceedings to be Satisfactory 11
ARTICLE V - COVENANTS OF THE COMPANY 11
Section 5.01 - Financial Statements, Reports, etc. 11
Section 5.02 - Reserve for Conversion of Shares 11
Section 5.03 - Corporate Existence 12
Section 5.04 - Properties, Business, Insurance 12
Section 5.05 - Visitation, Consultation and Advice 12
Section 5.06 - Notice of Extraordinary Corporate Actions 12
Section 5.07 - Board of Directors Meetings 13
Section 5.08 - Transactions with Affiliates 13
Section 5.09 - Right of First Refusal 13
Section 5.10 - Key Man Insurance 14
ARTICLE VI - RESTRICTIONS ON TRANSFER
OF PREFERRED SHARES 14
Section 6.01 - Transfer of Preferred Shares and Conversion Shares 14
Section 6.02 - First Offer Right 14
Section 6.03 - Permitted Transfers 15
Section 6.04 - Additional Transfer Restrictions 15
ARTICLE VII - MISCELLANEOUS 15
Section 7.01 - Expenses 15
Section 7.02 - Brokerage 16
Section 7.03 - Parties in Interest 16
Section 7.04 - Notices 16
Section 7.05 - Governing Law 16
Section 7.06 - Entire Agreement 16
Section 7.07 - Agreements with Other Investors 17
Section 7.08 - Counterparts 17
Section 7.09 - Amendments and Waivers 17
Section 7.10 - Severability 17
Section 7.11 - Titles and Subtitles 17
Section 7.12 - Certain Defined Terms 17
Section 7.13 - No Waiver; Cumulative Remedies 18
Section 7.14 - Confidentiality 18
Section 7.15 - Further Assurances 18
</TABLE>
-ii-
<PAGE>
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of
February 27, 1996, between Business@Web, Inc., a Delaware corporation (the
"Company"), and Hewlett-Packard Company, a California corporation (the
"Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser 180,506
shares (the "Preferred Shares") of the authorized but unissued Series B
Convertible Preferred Stock, $1.00 par value, of the Company (the "Series B
Convertible Preferred Stock"); and
WHEREAS, the Purchaser wishes to purchase the Preferred Shares on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PREFERRED SHARES
Section 1.01 Issuance, Sale and Delivery of the Preferred Shares. Subject
---------------------------------------------------
to the terms and conditions hereinafter set forth, the Company hereby agrees
to issue and sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, the Preferred Shares at the purchase price of $5.54
per share.
Section 1.02 Closing. The closing of the transactions contemplated hereby
-------
shall take place at the offices of Peabody & Arnold, 50 Rowes Wharf, Boston,
Massachusetts 02110, at 10:00 a.m., Boston time, on February 29, 1996, or at
such other location, date and time as may be agreed upon between the Purchaser
and the Company (such closing being called the "Closing" and such date and
time being called the "Closing Date"). At the Closing, the Company shall
issue and deliver to the Purchaser a stock certificate or certificates in
definitive form, registered in the name of the Purchaser, representing the
Preferred Shares.
Section 1.03 Payment of Purchase Price. As payment in full for the
-------------------------
Preferred Shares being purchased by it at the Closing, and against delivery of
the stock certificate or certificates therefor as aforesaid, on the Closing
Date the Purchaser shall deliver to the Company the amount of $1,000,003.24
(the "Purchase Price"). Payment of the Purchase Price shall be made by check
or checks payable to the order of the Company, by transfer to the account of
the Company by wire transfer, by surrender for cancellation of promissory
notes of the Company, or by any combination thereof.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as set
forth in the Disclosure Schedule attached as Schedule I:
----------
Section 2.01 Organization, Qualification and Corporate Power.
-----------------------------------------------
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified to transact business in all jurisdictions in which the
nature of the business transacted by the Company or the character of the
properties owned or leased by the Company requires that the Company qualify to
do business as a foreign corporation, except where the failure to be so
licensed or qualified would not have a material adverse effect on the
business, operations or financial condition of the Company. The Company has
the corporate power and authority to own and hold its properties and to carry
on its business as now conducted and as proposed to be conducted, to execute,
deliver and perform this Agreement, the Registration Rights Agreement (as such
term is hereinafter defined) and the Marketing Agreement (as such term is
hereinafter defined), and to issue, sell and deliver the Preferred Shares and
to issue and deliver the shares of Common Stock, $.001 par value, of the
Company ("Common Stock") issuable upon conversion of the Preferred Shares (the
"Conversion Shares").
(b) The Company has no subsidiaries. The Company does not own of
record or beneficially, directly or indirectly, (i) any shares of capital
stock or securities convertible into capital stock of any other corporation or
(ii) any participating interest in any partnership, joint venture or other
non-corporate business enterprise and does not control, directly or
indirectly, any other entity.
Section 2.02 Authorization of Agreements, etc.
--------------------------------
(a) The execution and delivery by the Company of this Agreement, the
Registration Rights Agreement, and the Marketing Agreement, the performance by
the Company of its obligations hereunder and thereunder, the issuance, sale
and delivery of the Preferred Shares and the issuance and delivery of the
Conversion Shares have been duly authorized by all requisite corporate action
and will not violate any provision of any law applicable to the Company, any
order of any court or other agency of government applicable to the Company,
the Certificate of Incorporation of the Company, as amended, (the "Charter"),
or the By-laws of the Company, as amended, or any provision of any indenture,
agreement or other instrument to which the Company or any of its properties or
assets is bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, restriction, claim or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company.
2
<PAGE>
(b) The Preferred Shares have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series B Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances. The Conversion Shares
have been duly reserved for issuance upon conversion of the Preferred Shares
and, when so issued, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances. Neither the issuance, sale or delivery of
the Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
Section 2.03 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, subject
to laws of general application from time to time in effect affecting
creditors' rights and the exercise of judicial discretion in accordance with
general equitable principles. The Registration Rights Agreement and the
Marketing Agreement, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligations of the
Company and of the other parties thereto, enforceable in accordance with their
respective terms, subject to laws of general application from time to time in
effect affecting creditors' rights and the exercise of judicial discretion in
accordance with general equitable principles.
Section 2.04 Authorized Capital Stock. The authorized capital stock of
------------------------
the Company will, immediately prior to the Closing, consist of (i) 3,000,000
shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), of which
1,750,000 shares have been designated Series B Convertible Preferred Stock,
and 1,250,000 shares remain undesignated and (ii) 30,000,000 shares of Common
Stock. Immediately prior to the Closing, 16,204,545 shares of Common Stock
will be validly issued and outstanding, and no other shares of Common Stock or
Preferred Stock will be outstanding. All shares of the series of Preferred
Stock designated Series A Convertible Preferred Stock which had been issued
prior to the date hereof have been surrendered for conversion into Common
Stock and retired, and the series of Preferred Stock designated Series A
Convertible Preferred Stock has been cancelled and eliminated from the shares
which the Company is authorized to issue. The stockholders of record and
holders of subscriptions, warrants, options, convertible securities, and other
rights (contingent or other) to purchase or otherwise acquire from the Company
any equity securities of the Company, and the number of shares of Common Stock
or Preferred Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth
in the attached Schedule II. The designations, powers, preferences, rights,
-----------
qualifications, limitations and restrictions in respect of each class and
series of authorized capital stock of the Company are as set forth in the
Charter, a copy of which is attached as Exhibit A. Except as set forth in the
---------
attached Schedule II, (i) no person owns of record or is known to the Company
-----------
to own beneficially any share of Common Stock or Preferred Stock, (ii) no
subscription, warrant, option, convertible security, or other right
3
<PAGE>
(contingent or other) to purchase or otherwise acquire from the Company any
equity securities of the Company is authorized or outstanding and (iii) there is
no commitment by the Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to holders of any
of its equity securities any evidence of indebtedness or asset. Except as
provided for in the Charter or as set forth in the attached Schedule II, the
-----------
Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
Section 2.05 Financial Statements; Corporate Minutes. Attached hereto
------------ ---------------------------------------
as Exhibit B are the unaudited balance sheet of the Company as of December 31,
---------
1995 and the related statement of operations, shareholders' equity and cash
flows for the fiscal year then ended (the "Financial Statements"). The
Financial Statements (a) are complete and correct in all material respects,
(b) are in accordance with the Company's books and records, (c) present fairly
the Company's financial position for the period and as of the date indicated
and (d) have been prepared in conformity with generally accepted accounting
principles consistently applied, subject to (i) adjustments which will not, in
the aggregate, be material and (ii) the absence of footnotes. The Company has
furnished to the Purchaser copies of the minutes of meetings and written
consents in lieu of meetings of the Company's shareholders and Board of
Directors from the date of the Company's incorporation through the date of
this Agreement (the "Corporate Minutes"). The Corporate Minutes accurately
reflect all actions taken by the Company's shareholders and Board of
Directors.
Section 2.06 Litigation, Compliance with Law. There is no (i) action,
-------------------------------
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any governmental license or
permit), and, to the best of the Company's knowledge, there is no basis for
any of the foregoing. The Company is not in default with respect to any
order, writ, injunction or decree known to or served upon the Company of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
There is no action or suit by the Company pending or threatened against
others. To the best of the Company's knowledge, the Company has complied in
all material respects with all laws, rules, regulations and orders applicable
to its business, operations, properties, assets, products and services, and
the Company has all necessary governmental permits, licenses and other
authorizations required to conduct its business as conducted and as proposed
to be conducted. There is no existing law, rule, regulation or order, and the
Company is not aware of any proposed law, rule, regulation or order, whether
Federal or state, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in conducting its business
in any
4
<PAGE>
jurisdiction in which it is now conducting business or in which it proposes to
conduct business.
Section 2.07 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or nondisclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company's
knowledge, no person employed by the Company has utilized or proposes to utilize
any trade secret or any information or documentation proprietary to any third
party, and to the best of the Company's knowledge, no person employed by the
Company has violated any confidential relationship which such person may have
had with any third party, in connection with the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such utilization or violation.
Section 2.08 Title to Properties. The Company has good and marketable
-------------------
title to its properties and assets reflected in the Financial Statements and
all such properties and assets are free and clear of mortgages, pledges,
security interests, liens, charges, claims, restrictions and other
encumbrances, except for liens for current taxes not yet due and payable and
minor imperfections of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company and its subsidiaries.
Section 2.09 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or
personal, is a valid and subsisting agreement without any default of the
Company thereunder and, to the best of the Company's knowledge, without any
default thereunder of any other party thereto. No event has occurred and is
continuing which, with due notice or lapse of time or both, would constitute a
default or event of default by the Company under any such lease or agreement
or, to the best of the Company's knowledge, by any other party thereto. The
Company's possession of such property has not been disturbed and, to the best
of the Company's knowledge, no claim has been asserted against the Company
adverse to its rights in such leasehold interests.
Section 2.10 Taxes. The Company has filed all tax returns, Federal,
-----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable,
including without limitation all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. The
Company has established adequate reserves for all taxes accrued but not yet
payable. The Federal income
5
<PAGE>
tax returns of the Company have never been audited by the Internal Revenue
Service. No deficiency assessment with respect to or proposed adjustment of the
Company's Federal, state, county or local taxes is pending or, to the best of
the Company's knowledge, threatened. There is no tax lien, whether imposed by
any Federal, state, county or local-taxing authority, outstanding against the
assets, properties or business of the Company. Neither the Company nor any of
its stockholders has ever filed (a) an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the Company be
taxed as an S corporation or (b) consent pursuant to Section 341(f) of the Code,
relating to collapsible corporations.
Section 2.11 Intellectual Property. The Company possesses adequate
---------------------
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") which the Company presently believes
are necessary or desirable to the conduct of its business as conducted and as
proposed to be conducted, and no claim is pending or, to the best of the
Company's knowledge, threatened to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property, and, to the best of the Company's knowledge,
there is no basis for any such claim (whether or not pending or threatened).
No claim is pending or threatened to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and to the best
of the Company's knowledge there is no basis for any such claim (whether or
not pending or threatened). To the best of the Company's knowledge, all
technical information developed by and belonging to the Company which has not
been patented has been kept confidential. The Company has not granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.
Section 2.12 Transactions with Affiliates. No director, officer, employee
----------------------------
or stockholder of the Company, or, to the Company's knowledge, any member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or, to the Company's knowledge, any member
of the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding
capital stock or other ownership interest thereof, is a party to any
transaction with the Company, including any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from, transfer of any asset (including any
Intellectual Property) from or to, or otherwise requiring payments to any such
person or firm.
Section 2.13 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by
6
<PAGE>
the Company of this Agreement, the Registration Rights Agreement or the
Marketing Agreement, the issuance, sale and delivery of the Preferred Shares or,
upon conversion thereof, the issuance and delivery of the Conversion Shares,
other than the filing of notice subsequent to the Closing that may be required
pursuant to federal and state securities laws in connection with the sale of the
Preferred Shares.
Section 2.14 Disclosure. Neither the Company's representations and
----------
warranties in this Agreement and in the Schedules and Exhibits to this
Agreement nor any statement made by the Company in the Confidential Private
Placement Memorandum dated February 1996 (a copy of which the Company has been
provided to the Purchaser) contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
Section 2.15 Offering of the Preferred Shares. Neither the Company nor
--------------------------------
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or
any security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which
might require the integration of such security with Preferred Shares under the
Securities Act of 1933, as amended (the "Securities Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder), in either case so as to subject the offering, issuance or sale of
the Preferred Shares to the registration provisions of the Securities Act or
of any applicable state securities (Blue Sky) laws or regulations.
Section 2.16 Brokers. The Company has engaged Cowen & Company to act as
-------
its exclusive agent for the private placement of shares of Series B Preferred
Stock and has agreed to pay Cowen & Company a placement fee (and to reimburse
Cowen & Company for certain expenses) in connection therewith. Cowen &
Company has agreed to exclude the Preferred Shares being purchased hereunder
from the shares with respect to which it will be entitled to receive a
placement fee. The Company has no other contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
7
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act and was not organized for the
specific purpose of acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks
thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Preferred Shares being purchased by it are being acquired for
its own account for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof;
(e) it understands that (i) the Preferred Shares and the Conversion
Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements
of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506
promulgated under the Securities Act, (ii) the Preferred Shares and, upon
conversion thereof, the Conversion Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Preferred
Shares and the Conversion Shares will bear a legend to such effect, and
(iv) the Company will make a notation on its transfer books to such
effect;
(f) it has no present need for liquidity in connection with its
purchase of the Preferred Shares;
(g) the purchase of the Preferred Shares is consistent with the
general investment objectives of the Purchaser, and that it understands
that the purchase of the Preferred Shares involves a high degree of risk in
view of the fact that, among other things, the Company is a start-up
enterprise, and there may never be an established market for the Company's
capital stock; and
(h) the individual executing this Agreement on its behalf has been
duly authorized to execute and deliver this Agreement; the signature of
such individual is
8
<PAGE>
binding upon the Purchaser; the Purchaser is duly organized, validly
existing and in good standing in its jurisdiction of incorporation of
organization and has all requisite power and authority to execute and
deliver this Agreement; and the execution and delivery of this Agreement
and the purchase of the Preferred Shares hereunder will not result in the
violation of, constitute a breach of default under, or conflict with, any
term or provision of the charter, bylaws, or other governing document of
the Purchaser or, to its knowledge, material breach of default under any
material agreement, judgment, decree, order, statute or regulation by which
it is bound or applicable to it.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASER
The obligation of the Purchaser to purchase and pay for the Preferred
Shares to be purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
Section 4.01 Opinion of Company's Counsel. The Purchaser shall have
----------------------------
received from Peabody & Arnold, counsel for the Company, an opinion dated the
Closing Date, substantially in the form attached to this Agreement as Exhibit C.
---------
Section 4.02 Representations and Warranties to be True and Correct. The
------------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, and the President and Treasurer of the Company shall have
certified to such effect to the Purchaser in writing on behalf of the Company.
Section 4.03 Performance. The Company shall have performed and complied
-----------
in all material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
President and Treasurer of the Company shall have certified to the Purchaser
in writing to such effect on behalf of the Company.
Section 4.04 Conduct of Business. From the date of this Agreement through
-------------------
the Closing Date, the Company shall have conducted its business in the
ordinary course, shall have complied in all material respects with all
applicable laws, rules regulations and orders, noncompliance with which could
materially adversely affect the Company's business or financial condition, and
shall not have made any material change in the nature of its business.
Section 4.05 Registration Rights Agreement. The Company shall have
------------------------------
executed and delivered the Registration Rights Agreement in the form attached
hereto as Exhibit D, with
---------
9
<PAGE>
such changes therein as may be reasonably necessary to permit the Cowen
Investors to participate therein on a pro rata basis with the Purchaser (the
"Registration Rights Agreement").
Section 4.06 Charter. The Charter shall read in its entirety as set
-------
forth in Exhibit A.
---------
Section 4.07 Preemptive Rights. All stockholders, if any, of the Company
-----------------
having any preemptive, first refusal or other rights with respect to the
issuance of the Preferred Shares or the Conversion Shares shall have irrevocably
waived the same in writing.
Section 4.08 Marketing Agreement. The Company shall have executed and
-------------------
delivered a Marketing Agreement with the Purchaser in substantially the form
attached hereto as Exhibit E (the "Marketing Agreement").
---------
Section 4.09 Co-Sale Rights Agreement. Harrington Trust Limited as
------------------------
Trustee of The Appleby Trust, J&S Limited Partnership, Legacy Investment
Partnership, and Sundar Subramaniam (together, the Principal Shareholders")
shall have executed and delivered a Co-Sale Rights Agreement with the Purchaser
in substantially the form attached hereto as Exhibit F, with such changes
---------
therein as may be reasonably necessary to permit the Cowen Investors to
participate therein on a pro rata basis with the Purchaser (the "Co-Sale Rights
Agreement").
Section 4.10 Secretary's Certificate. The Purchaser shall have received
-----------------------
copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the Secretary
of State of the State of Delaware, (B) a certificate of said Secretary
dated as of a recent date as to the existence of the Company, the payment
of all excise taxes by the Company and listing all documents of the Company
on file with said Secretary, (C) a certificate of the Secretary of State of
each jurisdiction in which the Company is qualified to do business as a
foreign corporation dated as of a recent date as to the qualification and
good standing in such jurisdiction of the Company; and
(ii) a certificate of the Secretary of the Company dated the Closing
Date and certifying: (A) that attached thereto is a true and complete copy
of the By-laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and the stockholders of the
Company authorizing the execution, delivery and performance of this
Agreement and the issuance, sale and delivery of the Preferred Shares, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement; and (C) that the Charter has not been amended since the
date of the last amendment referred to in the certificate delivered
pursuant to clause (i)(B) above.
10
<PAGE>
Section 4.11 All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser as follows:
Section 5.01 Financial Statements, Reports, etc. The Company shall
----------------------------------
furnish to the Purchaser, so long as the Purchaser owns at least 50,000
Preferred Shares or Conversion Shares:
(a) within one hundred twenty (120) after the end of each fiscal year
of the Company, a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with generally accepted accounting
principles and audited by a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the
Company; and
(b) within sixty (60) days after the end of each fiscal quarter in
each fiscal year (other than the last fiscal quarter in each fiscal year),
a consolidated balance sheet of the Company and its subsidiaries and the
related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted
accounting principles and accompanied by a statement of the Chief Financial
Officer or other senior executive officer of the Company to the effect that
such financial statements have been prepared in accordance with generally
accepted accounting principals, subject to normal year-end adjustments and
the omission of notes, such consolidated balance sheet to be as of the end
of such fiscal quarter and such consolidated statements of income,
stockholders' equity and cash flows to be for such fiscal quarter and for
the period from the beginning of the fiscal year to the end of such fiscal
quarter.
The obligations of the Company to furnish financial information to the Purchaser
pursuant to this Section 5.01 shall terminate at such time as the Company
becomes subject to the reporting requirements of the Securities Exchange Act of
1934.
Section 5.02 Reserve for Conversion of Shares. The Company shall at all
--------------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as
11
<PAGE>
shall be sufficient to effect the conversion of the Preferred Shares from time
to time outstanding or otherwise to comply with the terms of this Agreement. If
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of the Preferred Shares or otherwise
to comply with the terms of this Agreement, the Company will forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes. The Company will obtain any authorization, consent, approval or other
action by or make any filing with any court or administrative body that may be
required under applicable state securities laws in connection with the issuance
of shares of Common Stock upon conversion of the Preferred Shares.
Section 5.03 Corporate Existence. So long as any Preferred Shares are
-------------------
outstanding, the Company shall maintain and cause each of its subsidiaries to
maintain their respective corporate existence, rights and franchises in full
force and effect.
Section 5.04 Properties, Business, Insurance. So long as any Preferred
-------------------------------
Shares are outstanding, the Company shall maintain and cause each of its
subsidiaries to maintain as to their respective properties and business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is approved by its Board
of Directors.
Section 5.05 Visitation, Consultation and Advice. So long as the
-----------------------------------
Purchaser holds at least 50,000 Preferred Shares or Conversion Shares, the
Company shall permit and cause each of its subsidiaries to permit the Purchaser
and such persons as it may designate, at the Purchaser's expense, upon
reasonable notice, reasonable access during normal business hours to visit the
Company and its subsidiaries, discuss the affairs of the Company and its
subsidiaries with their officers, and consult with and advise the management of
the Company and its subsidiaries; provided, however, the (i) the Company may
require the Purchaser and any person conducting such a visit or discussion to
execute an agreement not to use or disclose any information discovered during
such visit or discussion and (ii) the Company may withhold from the Purchaser
and its designees any documents or information relating to the following matters
(hereinafter referred to as "Confidential Matters"): (a) the Company's
relationships or contemplated relationships with any business competitor of the
Purchaser or (b) the Company's business relationships or contemplated business
relationships (as opposed to shareholder relationships) with the Purchaser or
any affiliate of the Purchaser.
Section 5.06 Notice of Extraordinary Corporate Actions. So long as the
-----------------------------------------
Purchaser holds at least 50,000 Preferred Shares or Conversion Shares, the
Company shall, at least 20 days prior to the earlier of effecting or entering
into any binding agreement to effect (i) any sale, lease, assignment, transfer
or other conveyance (other than the grant of a mortgage or security interest) of
all or substantially all the assets of the Company, (ii) any liquidation,
dissolution or winding up of the affairs of the Company, (iii) any consolidation
or merger of the Company with or into another corporation (other than a
transaction in which the holders of the Company's equity securities outstanding
immediately prior to the effectiveness of such
12
<PAGE>
transaction hold, in the aggregate, at least 51% of the equity securities of the
surviving entity immediately following the effectiveness of such transaction),
or (iv) any recapitalization of the Company (in each case, an "Extraordinary
Corporate Action"), give the Purchaser written notice of the proposed
Extraordinary Corporate Action.
Section 5.07 Board of Directors Meetings. The Company shall permit the
---------------------------
Purchaser, so long as the Purchaser holds at least 50,000 Preferred Shares or
Conversion Shares to have one representative attend each meeting of the Board of
Directors of the Company and each meeting of any committee thereof and to
participate in all discussions during each such meeting except during
discussions of Confidential Matters. The Company shall send to such designee the
notice of the time and place of such meeting in the same manner and at the same
time as it shall send such notice to its directors or committee members, as the
case may be. The Company shall also provide to such designee copies of all
notices, reports, minutes and consents at the time and in the manner as they are
provided to the Board of Directors or committee, except for information relating
to Confidential Matters.
Section 5.08 Transactions with Affiliates. Neither the Company nor any
----------------------------
of its subsidiaries or entities under its control shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or other ownership interest in the Company, or with any of member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person or member of the family of any such person, is a
director, officer, trustee, partner or holder of more than 5% of the outstanding
capital stock or other ownership interest thereof, except for transactions on
terms no less favorable to the Company or its subsidiary or such controlled
entity than it would obtain in a transaction between unrelated parties.
Section 5.09 Right of First Refusal. So long as the Purchaser holds at
----------------------
least 50,000 Preferred Shares or Conversion Shares, in the event the Company
proposes to issue any of its securities (other than debt securities with no
equity feature) directly to, or to any subsidiary of, (i) Digital Equipment
Corporation, International Business Machines Corporation, Silicon Graphics Inc.,
Sun Microsystems, Inc., or Unisys Corp. (each, a "Hardware Manufacturing
Competitor") or (ii) any other entity engaged, as a significant part of its
business, in the manufacture of computer hardware (a "Hardware Manufacturer"),
the Company shall offer to the Purchaser, by written notice, the right, for a
period of 20 days (in the case of a proposed issuance to a Hardware
Manufacturing Competitor) or ten days (in the case of a Hardware Manufacturer),
to purchase all but not less than all of such securities at the same price and
on the same terms as those on which the Company proposes to issue such
securities to the Hardware Manufacturing Competitor or Hardware Manufacturer.
The Company's written notice to the Purchaser shall identify the Hardware
Manufacturing Competitor or Hardware Manufacturer to whom the proposed issuance
will be made and shall describe the securities proposed to be issued and specify
the number, price and payment terms. The Purchaser may accept the Company's
offer as to the full number of securities offered to it, but not for any lesser
number, by written notice thereof given by it to the Company prior to the
expiration of
13
<PAGE>
the aforesaid 20-day or 10-day period (whichever is applicable), in which event
the Company shall promptly sell and the Purchaser shall buy, upon the terms
specified, such securities. In the event the Purchaser does not timely accept
the Company's offer under this Section 5.09, the Company shall be free at any
time following expiration of the 20-day or 10-day offer period (whichever is
applicable) and prior to 120 days after the date of its notice of offer to the
Purchaser, to offer and sell to the identified Hardware Manufacturing Competitor
or Hardware Manufacturer the offered securities at a price and on payment terms
no less favorable to the Company than those specified in the notice of offer to
the Purchaser. However, if such sale to the identified Hardware Manufacturing
Competitor or Hardware Manufacturer is not consummated within such period, the
Company shall not sell such securities as shall not have been purchased within
such period without again complying with this Section 5.09.
Section 5.10 Key Man Insurance. The Company shall use its best efforts to
-----------------
obtain, promptly after the Closing, and to maintain in force a key man insurance
policy in the amount of at least $2,000,000 on the life of Klaus Besier, the
Company's Chairman and Chief Executive Officer.
ARTICLE VI
RESTRICTIONS ON TRANSFER OF PREFERRED SHARES
Section 6.01 Transfer of Preferred Shares and Conversion Shares. Except
--------------------------------------------------
as otherwise provided herein, the Purchaser shall not, prior to the consummation
of a firm commitment underwritten public offering of Common Stock pursuant to an
effective registration statement under the Securities Act covering the offer and
sale of Common Stock to the public at an initial public offering price of not
less than $8.25 per shares and with gross proceeds of not less than $15,000,000
(the "IPO"), sell, transfer, assign or otherwise dispose of (a "Transfer") any
interest in any Preferred Shares or Conversion Shares except pursuant to
Sections 6.02 or 6.03. Subject to the terms and conditions set forth below, the
Purchaser agrees not to consummate any such Transfer (other than in the IPO)
until 30 days after the later of the delivery to the Company of an Offer Notice
(as defined below).
Section 6.02 First Offer Right. Until the IPO, the Purchaser will, at
-----------------
least 30 days prior to making any Transfer (other than in the IPO) of any
Preferred Shares or Conversion Shares, deliver a written notice (the "Notice of
Proposed Sale") to the Company. The Notice of Proposed Sale will disclose in
reasonable detail the identity of the prospective transferee(s), the proposed
number of Preferred Shares or Conversion Shares to be transferred and the
proposed material terms and conditions of the Transfer. If, but only if, the
prospective transferee(s) identified in the Notice of Proposed Sale is, in the
Company's reasonable judgment, a competitor or prospective competitor of (i) the
Company or any of its subsidiaries, (ii) any shareholder of the Company, or
(iii) any customer or supplier of the Company, the Company shall have the right
to purchase all, but not less than all, of the
14
<PAGE>
Shares specified in the Notice of Proposed Sale at the price and on the terms
and conditions specified therein by delivering written notice of its exercise of
such right to the Purchaser as soon as practicable but in any event within 30
days after the receipt of the Notice of Proposed Sale. If the Company has
elected to purchase any of the Preferred Shares or Conversion Shares specified
in the Notice of Proposed Sale from the Purchaser, the transfer of such
Preferred Shares or Conversion Shares will be consummated as soon as practicable
after the delivery of the election notice, but in any event within 60 days after
the date of the Notice of Proposed Sale. In the event that the Company has not
elected to purchase all of the Preferred Shares or Conversion Shares specified
in the Notice of Proposed Sale, the Purchaser may, within 90 days after the
expiration of the Company's 30-day election period, transfer such Preferred
Shares or Conversion Shares to the transferees identified in the Notice of
Proposed Sale at a price no less than the price per share specified in the
Notice of Proposed Sale and on other terms and conditions no more favorable to
the transferee(s) than offered to the Company in the Notice of Proposed Sale.
The purchase price specified in any Notice of Proposed Sale shall be payable
solely by check or in cash or by wire transfer of immediately available funds at
the closing of the transaction.
Section 6.03 Permitted Transfers. The restrictions set forth in this
-------------------
Article VI shall not apply with respect to any Transfer to any person
controlling, controlled by or under common control with the Purchaser (a
"Permitted Transferee"); provided, that the restrictions contained in this
Article VI shall continue to be applicable to the Preferred Shares and
Conversion Shares after any such Transfer; and provided further that the
transferees of such Preferred Shares or Conversion Shares shall have agreed in
writing to be bound by the provisions of this Article VI with respect to the
Preferred Shares or Conversion Shares so transferred.
Section 6.04 Additional Transfer Restrictions. Until the IPO, no Transfer
--------------------------------
of any Preferred Shares or Conversion Shares (other than in the IPO) may be made
unless the transferee executes and delivers a written instrument, in form and
substance satisfactory to the Company, acknowledging the receipt of a copy of
the provisions and restrictions contained in this Article VI and agreeing to
comply herewith and be bound hereby
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
15
<PAGE>
Section 7.02 Brokerage. Each party hereto will indemnify and hold
---------
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 7.03 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not; provided, however,
that the rights of the Purchaser under Section 5.01 and 5.06 may not be assigned
without the prior written consent of the Company.
Section 7.04 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed delivered (i)
when delivered in person or (ii) three business days after being mailed by
certified or registered mail, return receipt requested, or (iii) one business
day after being sent by a recognized overnight courier service, addressed as
follows:
(a) if to the Company, at with a copy to
Business@Web, Inc. William E. Kelly, Esq
219 Vassar Street Peabody & Arnold
Cambridge, Massachusetts 02139 50 Rowes Wharf
Attn: Chief Financial Officer Boston, Massachusetts 02110
(b) if to the Purchaser, at with a copy to
Hewlett-Packard Company Hewlett-Packard Company
3000 Hanover Street 3000 Hanover Street
Palo Alto, California 94304 Palo Alto, California 94304
Attn: Director, Corporate Development Attn: General Counsel
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 7.05 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
Section 7.06 Entire Agreement. This Agreement, including the Schedules
----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
16
<PAGE>
Section 7.07 Agreements with Other Investors. The Company has engaged
-------------------------------
Cowen & Company to act as its exclusive agent for the private placement of
shares of Series B Preferred Stock. In the event the Company proposes to enter
into agreements with investors in such private placement (the "Cowen Investors")
on any terms more favorable to the Cowen Investors than the terms afforded to
the Purchaser under this Agreement, the Charter, the Co-Sale Rights Agreement or
the Registration Rights Agreement, then, prior to executing any such agreements
with the Cowen Investors, the Company shall give the Purchaser written notice of
the terms of such proposed agreements (the "Cowen Terms") and, if the Purchaser
so elects, the Company and the Purchaser shall amend this Agreement, the
Charter, the Co-Sale Rights Agreement and/or the Registration Rights Agreement
to incorporate the Cowen Terms herein or therein for the benefit of the
Purchaser. The Purchaser will, at the request of the Company, execute and
deliver such consents and waivers as may be necessary to effect the proposed
private placement on the Cowen Terms, including without limitation, any consents
required for the amendment of the terms of the Series B Preferred Stock as set
forth in the Charter in order to incorporate therein the Cowen Terms (provided
such Cowen Terms increase the rights of the holders of Series B Preferred
Stock).
Section 7.08 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.09 Amendments and Waivers. This Agreement may be amended or
----------------------
modified, and provisions hereof may be waived, only with the written consent of
the Company and the Purchaser.
Section 7.10 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 7.11 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
Section 7.12 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency
or any agency or political subdivision thereof, or other entity.
(b) "subsidiary" shall mean, as to the Company, any corporation of
which more than 50% of the outstanding stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not
17
<PAGE>
at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by the Company, or
by one or more of its subsidiaries, or by the Company and one or more of
its subsidiaries.
Section 7.13 No Waiver; Cumulative Remedies. No failure or delay on the
------------------------------
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall nay single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 7.14 Confidentiality. The Purchaser agrees that it will maintain
---------------
with the same degree of care it uses with respect to its own confidential
information all confidential, proprietary or secret information which the
Purchaser may obtain from the Company pursuant to financial statements, reports
and other materials submitted by the Company to the Purchaser pursuant to this
Agreement, or pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information becomes known
through no fault of the Purchaser, to the public; provided, however, that the
-------- -------
Purchaser may disclosure such information (i) on a confidential basis to its
attorneys, accountants, consultants any other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (ii) to any affiliate of the Purchaser on a "need to know basis" and
(iii) as required by applicable law. If the Purchaser is required in any legal
or administrative or other governmental proceeding to disclose any of such
information, the Purchaser shall give the Company timely notice of the pending
requirement and use its best efforts to provide the Company an opportunity to
obtain protective provisions against further disclosure.
Section 7.15 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchaser or the Company, the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Preferred Shares.
18
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
BUSINESS@WEB, INC.
By: /s/ James G. Nondorf
---------------------
James G. Nondorf, President
HEWLETT-PACKARD COMPANY
By: /s/ Manuel Diaz
---------------
Manuel Diaz, Vice President
19
<PAGE>
EXHIBIT A
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
BUSINESS@WEB, INC.
Business@Web, Inc. (the "Corporation"), originally incorporated under the
name Object Power, Incorporated by original Certificate of Incorporation filed
with the office of the Secretary of State of the State of Delaware on January
19, 1994, as amended, and currently organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify
that the Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, has duly adopted a resolution, pursuant to Sections 141 and
242 of the General Corporation Law of the State of Delaware, setting forth an
amended and restated Certificate of Incorporation of the Corporation and
declaring said amendment and restatement to be advisable. The stockholders of
the Corporation have duly approved said amendment and restatement by the
required vote of such stockholders, adopted by a written action in lieu of a
meeting of such stockholders, all in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware, and written notice of
the taking of such action was given promptly to those stockholders who have not
consented in writing, as required by Section 228 of the General Corporation Law
of the State of Delaware. The Certificate of Incorporation of the Corporation,
as amended and restated in its entirety, is as follows:
FIRST: The name of the Corporation is Business@Web, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is thirty-three million
(33,000,000) shares, thirty million (30,000,000) of which shall be Common Stock,
par value $.001 per share ("Common Stock"), and three million (3,000,000) of
which shall be Preferred Stock, par value $1.00 per share ("Preferred Stock").
Of the authorized Preferred Stock, one million four hundred thirty-one thousand
four hundred twelve (1,431,412) shares shall be designated Series B Convertible
20
<PAGE>
Preferred Stock and one million five hundred sixty-eight thousand five hundred
eighty-eight (1,568,588) shares shall be undesignated. All shares of the series
of Preferred Stock designated Series A Preferred Stock issued and outstanding
prior to the filing of this Restated Certificate of Incorporation have been
surrendered for conversion into Common Stock and retired, and the series of
Preferred Stock designated as Series A Preferred Stock is hereby cancelled and
eliminated from the shares which the Corporation is authorized to issue.
Descriptions of the undesignated Preferred Stock, the Series B Convertible
Preferred Stock and the Common Stock are as follows:
I. PREFERRED STOCK
Description of Undesignated Preferred Stock.
1. Issuance of Preferred Stock in Classes or Series. The undesignated
Preferred Stock of the Corporation may be issued in one or more classes or
series at such time or times and for such consideration as the Board of
Directors of the Corporation may determine. Each class or series shall be so
designated as to distinguish the shares thereof from the shares of all other
classes and series. Except as to the relative preferences, powers, dividends,
qualifications, rights and privileges referred to in the next paragraph below,
in respect of any or all of which there may be variations between different
classes or series of Preferred Stock, all shares of Preferred Stock shall be
identical. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes
unless otherwise specifically set forth herein.
2. Authority to Establish Variations Between Classes or Series of
Preferred Stock. The Board of Directors of the Corporation is expressly
authorized, by a vote of a majority of the members of the Board of Directors
then in office, subject to the limitations prescribed by law and the provisions
of this Certificate of Incorporation, to provide by adopting a vote or votes, a
Certificate of Designation of which shall be filed in accordance with the
General Corporation Law of the State of Delaware, for the issue of the
undesignated Preferred Stock in one or more classes or series, each with such
designations, preferences, voting powers, dividends, qualifications, special or
relative rights and privileges as shall be stated in the Certificate of
Designation and the resolutions of the Board of Directors creating such class or
series.
Description of Series B Convertible Preferred Stock.
1. Liquidation Rights.
(a) Treatment at Liquidation, Dissolution or Winding Up.
21
<PAGE>
(i) Except as otherwise provided in Section 1(b) below, in the event
of any liquidation, dissolution or winding up of the affairs of the corporation,
whether voluntary or involuntary, the holders of Series B Convertible Preferred
Stock shall be entitled to be paid first out of the assets of the corporation
available for distribution to holders of the corporation's capital stock of
all classes, before payment or distribution of any of such assets to the holders
of any other class or series of the corporation's capital stock designated to be
junior to the Series B Convertible Preferred Stock, an amount equal to $5.54 per
share of Series B Convertible Preferred Stock (which amount shall be subject to
equitable adjustment whenever there shall occur a stock dividend, distribution,
combination of shares, reclassification or other similar event with respect to
Series B Convertible Preferred Stock and, as so adjusted from time to time, is
hereinafter referred to as the "Base Liquidation Price") plus all dividends
thereon accrued but unpaid, to and including the date full payment shall be
tendered to the holders of Series B Convertible Preferred Stock with respect to
such liquidation, dissolution or winding up.
(ii) Following payment in full to the holders of Series B Convertible
Preferred Stock of all amounts distributable to them under Section 1(a)(i)
hereof, the remaining assets of the corporation available for distribution to
holders of the corpora tion's capital stock shall be distributed among the
holders of the Common Stock and the holders of the Series B Convertible
Preferred Stock on a share for share basis, with each holder of a share of
Series B Convertible Preferred Stock receiving the amount that would have been
payable to the holder of such share had all shares of Series B Convertible
Preferred Stock been converted to Common Stock pursuant to Section 2(a) hereof
immediately following payment in full to the holders of Series B Convertible
Preferred Stock of all amounts distributable to them under Section 1(a)(i)
hereof.
(iii) If the assets of the corporation shall be insufficient to permit
the payment in full to the holders of Series B Convertible Preferred Stock of
all amounts distributable to them under Section 1(a)(i) hereof, then the entire
assets of the corporation available for such distribution shall be distributed
ratably among the holders of Series B Convertible Preferred Stock.
(b) Treatment of Reorganizations, Consolidations, Mergers and Sales
----------------------------------------------------------------
of Assets. A consolidation or merger of the corporation, or a sale of all or
- ---------
substantially all of the assets of the corporation (other than a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in a transaction in which the shareholders of the corporation
immediately prior to the transaction possess more than 50% of the voting
securities of the surviving entity (or parent, if any) immediately after the
transaction) shall be regarded as a liquidation, dissolution or winding up of
the affairs of the corporation within the meaning of this Section 1.
(c) Distributions Other than Cash. Whenever the distribution
-----------------------------
provided for in this Section 1 shall be payable in property other than cash, the
value of such distribution
22
<PAGE>
shall be the fair market value of such property as determined in good faith by
the Board of Directors of the corporation.
2. Conversion. The holders of Series B Convertible Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series B
----------------------------------
Convertible Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series B Convertible Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $5.54 by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. The Conversion Price
for purposes of calculating the number of shares of Common Stock deliverable
upon conversion without the payment of any additional consideration by the
holder of Series B Convertible Preferred Stock (the "Conversion Price") shall
initially be $5.54. Such initial Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into which
Series B Convertible Preferred Stock is convertible, as hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series B
-----------------------
Convertible Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Series B Convertible Preferred Stock, and shall give
written notice to the corporation at such office that such holder elects to
convert the same and shall state therein the name of such holder or the name or
names of the nominees of such holder in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued. No fractional shares of
Common Stock shall be issued upon conversion of any shares of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock to
which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series B Convertible Preferred Stock, or to such
holder's nominee or nominees, a-certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
23
<PAGE>
(i) Each share of Series B Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (subject to adjustment as provided in Section 2(c)(iii)) upon:
(A) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock to the public
at an initial public offering price per share of not less than $8.25
(adjusted proportionately to give effect to any stock dividend, stock
distribution or subdivision or any combination or consolidation of Common
Stock) and with gross proceeds of not less than $15,000,000 (a "Qualified
IPO") or
(B) the written election of the holders of not less than a majority of
the then outstanding shares of Series B Convertible Preferred Stock to
require such mandatory conversion.
(ii) Upon the occurrence of an event specified in Section 2(c)(i)
hereof, all shares of Series B Convertible Preferred Stock shall be converted
automatically without any further action by any holder of such shares and
whether or not the certificate or certificates representing such shares are
surrendered to the corporation or the transfer agent for the Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be obligated to issue a certificate or certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificate or
certificates evidencing such shares of Series B Convertible Preferred Stock
being converted are either delivered to the corporation or the transfer agent of
the Series B Convertible Preferred Stock, or the holder notifies the corporation
or such transfer agent that such certificate or certificates have been lost,
stolen, or destroyed and executes an agreement satisfactory to the corporation
to indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate indemnity
bond. Upon the automatic conversion of Series B Convertible Preferred Stock,
each holder of Series B Convertible Preferred Stock shall surrender the
certificate or certificates representing such holder's shares of Series B
Convertible Preferred Stock at the office of the corporation or of the transfer
agent for the Series B Convertible Preferred Stock. Thereupon, there shall be
issued and delivered to such holder, promptly at such office and in such
holder's name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Series B Convertible Preferred Stock surrendered were convertible
on the date on which such automatic conversion occurred. No fractional shares of
Common Stock shall be issued upon the automatic conversion of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock to
which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price.
(iii) In the event of the automatic conversion of shares of Series B
Convertible Preferred Stock into shares of Common Stock, pursuant to Section
2(c)(i)(A),
24
<PAGE>
upon the occurrence of a Qualified IPO in which the initial offering price per
share of Common Stock is less than $10.25 (the "Adjustment Trigger Price"), the
Conversion Price in effect immediately prior to the closing of the Qualified IPO
shall be adjusted automatically to the greater of (A) the price determined by
dividing (i) the initial offering price per share of Common Stock in the
Qualified IPO by (ii) 1.85 (the "IPO Adjusted Conversion Price") or (B) $4.46
(the "Adjustment Floor Price"); provided, however, that there shall be no
adjustment of the Conversion Price pursuant to the foregoing clause if the
Conversion Price resulting from adjustment would be higher than the Conversion
Price in effect immediately prior to the closing of the Qualified IPO. If, prior
to the Qualified IPO, the Conversion Price shall have been adjusted pursuant to
Section 2(d)(vi)(A) in the event of a stock dividend, stock distribution or
subdivision or pursuant to Section 2(d)(vi)(B) in the event of a combination or
consolidation of Common Stock, the Adjustment Trigger Price, the Adjustment
Floor Price and the IPO Adjusted Conversion Price shall be decreased or
increased proportionately to give effect to such stock dividend, stock
distribution or subdivision or such combination or consolidation.
(d) Adjustments to Conversion Price for Diluting Issues.
-------------------------------------------- ------
(i) Special Definitions. For purposes of this Section 2(d), the
-------------------
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to subscribe
--------
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Original Issue Date" shall mean the date on which a share
---------------------
of Series B Convertible Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
------------------------
indebtedness, shares (other than Common Stock and Series B Convertible
Preferred Stock) or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
----------------------------------
Common Stock issued (or, pursuant to Section 2(d)(iii), deemed to be
issued) by the corporation after the Original Issue Date, other than the
following (collectively, "Excluded Shares"):
(I) shares of Common Stock issued or issuable upon
conversion of shares of Series B Convertible Preferred Stock; or
(II) shares of Common Stock issued or issuable upon
exercise or conversion of Options or Convertible Securities
outstanding on the Original Issue Date; or
25
<PAGE>
(III) shares of Common Stock issued or issuable to officers,
employees or directors of, or consultants to, the corporation pursuant
to a stock purchase or option plan or other employee stock bonus
arrangement (collectively, the "Plans") approved by the Board of
Directors; provided, however, that shares of Common Stock issued or
deemed issued to a director of the corporation pursuant to options or
other purchase rights granted after the Original Issue Date shall be
Excluded Shares only if granted at the time of, or in connection with,
such director's initial election to the Board of Directors; or
(IV) shares of Common Stock issued or issuable pursuant to
warrants issued in connection with the establishment of credit
facilities for the corporation (including, without limitation, in
connection with equipment leasing arrangements); or
(V) shares of Common Stock or Convertible Securities issued
with the written consent of the holders of not less than a majority of
the outstanding shares of Series B Convertible Preferred Stock.
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which a share of Series B Convertible Preferred
Stock is convertible shall be made, by adjustment in the Conversion Price in
respect of the issuance of Additional Shares of Common Stock or otherwise: (i)
unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the corporation is less than the Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock or, (ii) if prior to such issuance, the
corporation receives written notice from the holders of a majority of the then
outstanding shares of Series B Convertible Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
---------------------------------------------------------------
Stock.
- -----
(A) Options and Convertible Securities. In the event the corporation
----------------------------------
at any time or from time to time after the Original Issue Date shall issue
any Options or Convertible Securities or shall fix a record date for the
deter mination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue or, in case such
a record date shall have been fixed, as of the close of business on such
record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per
26
<PAGE>
share (determined pursuant to Section 2(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record date, as
the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(I) no further adjustment in the Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(II) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the corporation, or any
increase or decrease in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(III) upon the expiration of any such options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options for Common
Stock the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the corporation for the issue of
all such Options, whether or not exercised, plus the consideration
actually received by the corporation upon such exercise, or for the
issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually
received by the corporation upon such conversion or exchange; and
(b) in the case of Options for Convertible Securities only the
Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional Shares of
Common Stock deemed to have
27
<PAGE>
been then issued was the consideration actually received by the
corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
corporation (determined pursuant to Section 2(d)(v)) upon the issue of
the Convertible Securities with respect to which such Options were
actually exercised;
(IV) no readjustment pursuant to clause (II) or (III) above
shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (a) the Conversion Price on the original
adjustment date, or (b) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(V) in the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of
the Conversion Price shall be made until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same
manner provided in clause (III) above; and
(VI) if such record date shall have been fixed and such Options
or Convertible Securities are not issued on the date fixed therefor,
the adjustment previously made in the Conversion Price which became
effective on such record date shall be cancelled as of the close of
business on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to this Section 2(d)(iii) as of the actual
date of their issuance.
(B) Stock Dividends, Stock Distributions and Subdivisions. In the
-----------------------------------------------------
event the corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution
on the Common Stock payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), then and in any such event,
Additional Shares of Common Stock shall be deemed to have been issued:
(I) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend or distribution, or
(II) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
corporate action becomes effective.
If such record date shall have been fixed and no part of such dividend
shall have been paid on the date fixed therefor, the adjustment
previously made for
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<PAGE>
the Conversion price which became effective on such record date shall
be cancelled as of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted pursuant to this
Section 2(d)(iii) as of the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
- -----------------------
(A) In the event the corporation shall issue Additional Shares of
Common Stock (including, without limitation, Additional Shares of Common
Stock deemed to be issued pursuant to Section 2(d)(iii) but excluding
Additional Shares of Common Stock deemed to be issued pursuant to Section
2(d)(iii)(B), which event is dealt with in Section 2(d)(vi) hereof),
without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and immediately prior
to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be (I) the number of shares of
Common Stock outstanding immediately prior to such issue plus (II) the
number of shares of Common Stock which the aggregate consideration received
or deemed to have been received by the corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such
Conversion Price, and the denominator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to such issue plus
(II) the number of Additional Shares of Common Stock so issued or deemed to
be issued.
(B) For the purposes of Section 2(d)(iv)(A) hereof, (i) all shares
of Common Stock issuable upon conversion of shares of Series B Convertible
Preferred Stock, and upon exercise of options or conversion or exchange of
Convertible Securities which are part of the Excluded Shares, outstanding
immediately prior to any issue of Additional Shares of Common Stock, or any
event with respect to which Additional Shares of Common Stock shall be
deemed to be issued, shall be deemed to be outstanding; and (ii)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 2(d)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(C) Notwithstanding anything to the contrary contained herein, the
applicable Conversion Price in effect at the time Additional Shares of
Common Stock are issued or deemed to be issued shall not be reduced
pursuant to Sec tion 2(d)(iv)(A) hereof at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $0.01 or
more.
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<PAGE>
(v) Determination of Consideration. For purposes of this Section
------------------------------
2(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue,
as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I)
and (II) above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per share
----------------------------------
received by the corporation for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 2(d)(iii)(A), relating to Options and
Con vertible Securities, shall be determined by dividing (I) the total
amount, if any, received or receivable by the corporation as consideration
for the issue of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (II) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
- ----------------------------------------------
(A) Stock Dividends, Distributions or Subdivisions. In the event the
----------------------------------------------
corporation shall issue Additional Shares of Common Stock pursuant to
Section 2(d)(iii)(B) in a stock dividend, stock distribution or
subdivision, the Con version Price in effect immediately prior to such
stock dividend, stock distribution or subdivision
30
<PAGE>
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
(B) Combinations or Consolidations. In the event the outstanding
------------------------------
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior to such combination
or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the corporation but shall
at all times in good faith assist in the carrying out of all the provisions of
this Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series B
Convertible Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series B Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any affected holder of Series B Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of each share of Series B Convertible Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Series B Convertible Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all convertible Series B Convertible Preferred Stock.
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<PAGE>
(i) Certain Taxes. The corporation shall pay any issue or transfer
-------------
taxes payable in connection with the conversion of any shares of Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be required to pay any tax which may be payable in respect of any transfer to a
name other than that of the holder of such Series B Convertible Preferred Stock.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series B Convertible Preferred Stock,
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Convertible Preferred Stock, in any manner which interferes
with the timely conversion or transfer of such Series B Convertible Preferred
Stock.
3. Voting Rights.
-------------
Except as otherwise provided herein or required by law or by the
provisions establishing any other series of Preferred Stock, the holders of
Common Stock and the holders of Series B Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting and shall vote as one class upon
any matter submitted to the stockholders for a vote, on the following basis:
(i) Holders of Common Stock shall have one vote per share of Common
Stock held by them; and
(ii) Holders of Series B Convertible Preferred Stock shall have that
number of votes per share of Series B Convertible Preferred Stock as is equal to
the number of shares of Common Stock into which each such share of Series B
Convertible Preferred Stock held by such holder could be converted on the date
for determination of stockholders entitled to vote at the meeting.
4. Dividend Rights.
---------------
(a) From and after the Original Issue Date, dividends shall accrue on
each share of the Series B Convertible Preferred Stock, whether or not funds are
legally available therefor and whether or not declared by the Board of
Directors, in the amount per annum of $0.3324 per share of Series B Convertible
Preferred Stock (the "Series B Dividends"). From time to time the Board of
Directors of the corporation may declare and pay dividends or distributions on
shares of the Common Stock or on any other class or series of capital stock of
the corporation, but only if all accrued Series B Dividends shall have been paid
in full prior to the date of any such declaration, payment or distribution.
(b) In the event the Board of Directors of the corporation shall
declare a dividend payable upon the then outstanding shares of the Common Stock
(other than a dividend payable entirely in shares of the Common Stock of the
corporation), the Board of Directors shall declare at the same time a dividend
upon the then outstanding shares of the
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<PAGE>
Series B Convertible Preferred Stock, payable at the same time as the dividend
paid on the Common Stock, in an amount equal to the amount of dividends per
share of Series B Convertible Preferred Stock, as would have been payable on the
largest number of whole shares of Common Stock into which each share of Series B
Convertible Preferred Stock held by each holder thereof if such Series B
Convertible Preferred Stock had been converted to Common Stock pursuant to the
provisions of Section 2 hereof as of the record date for the determination of
holders of Common Stock entitled to receive such dividends; and
(c) In the event the Board of Directors of the corporation shall
declare a dividend payable upon any class or series of capital stock of the
corporation other than Common Stock, the Board of Directors shall declare at the
same time a dividend upon the then outstanding shares of Series B Convertible
Preferred Stock, payable at the same time as such dividend on such other class
or series of capital stock in an amount equal to (i) in the case of any series
or class convertible into Common Stock, that dividend per share of Series B
Convertible Preferred Stock, as would equal the dividend payable on such other
class or series determined as if all such shares of such class or series had
been converted to Common Stock and all shares of Series B Convertible Preferred
Stock have been converted to Common Stock on the record date for the
determination of holders entitled to receive such dividend or (ii) if such class
or series of Capital Stock is not convertible into Common Stock, at a rate per
share of Series B Convertible Preferred Stock determined by dividing the amount
of the dividend payable on each share of such class or series of capital stock
by the original issuance price of such class or series of capital stock and
multiplying such fraction by the Base Liquidation Price then in effect.
5. Redemption.
----------
(a) At the written request, made on or after December 31, 2002, of
the holders of a majority of the then-outstanding shares of Series B Convertible
Preferred Stock, the corporation shall on March 31 in each of the three (3)
years immediately following the date of such request (each, a "Redemption
Date"), call for redemption in accordance with Section 5(b) hereof and shall
redeem for the applicable Redemption Amount (as hereinafter defined) from each
holder of Series B Convertible Preferred Stock such number of shares of Series B
Convertible Preferred Stock as shall be equal to thirty-three and one third
percent (33 1/3%) of all of the shares of Series B Convertible Preferred Stock
held by such holder on the Redemption Date. For the purposes of this Section 5,
the term "Redemption Amount" means, for each share of Series B Convertible
Preferred Stock to be redeemed, the sum of (i) the Base Liquidation Price plus
(ii) an amount equal to any dividends accrued and unpaid thereon at the time of
such redemption.
(b) Call for redemption shall be made by the corporation by notice
sent by first class mail, postage prepaid, to each holder of record of Series B
Convertible Preferred Stock to be redeemed, not less than thirty (30) days nor
more than sixty (60) days prior to the Redemption Date set forth therein, at
such holder's address as it appears on the books of the corporation. Such notice
shall set forth (i) the Redemption Date and the place of redemption,
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<PAGE>
(ii) the number of shares to be redeemed (in accordance with Section 5(a)
hereof) and (iii) the Redemption Amount per share and the aggregate Redemption
Amount to be paid with respect to the shares to be redeemed. The corporation
shall be obligated to redeem shares of Series B Convertible Preferred Stock in
accordance with Section 5(a) hereof whether or not any notice of redemption is
given as required herein. If, before the close of business on the relevant
Redemption Date, any holder of record of Series B Convertible Preferred Stock
shall have surrendered any shares of Series B Convertible Preferred Stock for
conversion pursuant to Section 2(a) hereof, the corporation shall credit against
the number of shares of Series B Convertible Preferred Stock otherwise required
to be redeemed from such holder, and shall not redeem the number of shares of
Series B Convertible Preferred Stock which had been converted by such holder on
or before such Redemption Date and which had not previously been credited
against any redemption.
(c) If, on or before any Redemption Date, the funds necessary for
such redemption shall have been set aside by the corporation and deposited with
a bank or trust company in trust for the pro rata benefit of the holders of
Series B Convertible Preferred Stock to be redeemed pursuant to Section 5(a)
hereof, then, notwithstanding that any certificates for such shares of Series B
Convertible Preferred Stock to be redeemed shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding from and after the Redemption Date, and all rights of holders of
such shares shall forthwith, after the Redemption Date, cease and terminate,
excepting only the right to receive the full redemption funds therefor to which
they are entitled. Any interest accrued on funds so deposited and unclaimed by
stockholders entitled thereto shall be paid to such stockholders at the time
their respective shares are redeemed or to the corporation at the time unclaimed
amounts are paid to it. In case the holders of Series B Convertible Preferred
Stock to be redeemed pursuant to Section 5(a) hereof shall not, within five (5)
years after the Redemption Date, claim the amounts so deposited with respect to
the redemption thereof, any such bank or trust company shall, upon demand, pay
over to the corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof to such
holder and such holder shall look only to the corporation for the payment
thereof. Any funds so deposited with a bank or trust company which shall not be
required for such redemption by reason of the exercise subsequent to the date of
such deposit, of the right of conversion of any shares, or otherwise, shall be
returned to the corporation forthwith.
(d) If the funds of the corporation legally available for redemption
of shares of Series B Convertible Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series B Convertible
Preferred Stock required to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of whole
shares of Series B Convertible Preferred Stock pro rata from among all holders
of Series B Convertible Preferred Stock on the basis of the aggregate number of
shares of Series B Convertible Preferred Stock held by each such holder on the
Redemption Date. The shares of Series B Convertible Preferred Stock not redeemed
shall remain outstanding and entitled to all rights and preferences provided
herein. At any time
34
<PAGE>
thereafter when additional funds of the corporation are legally available for
the redemption of such shares of Series B Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available.
(e) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
corporation may not incur any indebtedness for money borrowed (unless the
proceeds of such incurrence of indebtedness are used to make all overdue
redemptions) or borrow or reborrow any amounts under any lines of credit which
it may then have outstanding without the prior written consent of the holders
of not less than a majority of the then outstanding shares of Series B
Convertible Preferred Stock; provided, however, that the corporation may incur
indebtedness for money borrowed or borrow or reborrow any amounts under any
outstanding lines of credit without the aforesaid approval if (i) the proceeds
of such borrowing are intended to be, and are in fact, used to pay obligations
of the corporation arising in the ordinary course of business as they become due
and payable or otherwise to maintain the operations of the corporation at the
then current level and not to expand the operations of the corporation in any
respect, whether through expansion or enhancement of, or addition to, the
corporation's then current product line, facilities, equipment, other capital
assets or workforce, or otherwise, (ii) the corporation provides prior written
notice of such borrowing to all holders of Series B Convertible Preferred Stock,
which notice shall include a statement of the intended use of the proceeds of
such borrowing and (iii) promptly upon request therefor, the corporation shall
provide to any holder of Series B Convertible Preferred Stock a certificate
signed by the President and Chief Financial Officer of the corporation
certifying as to the allocation and use of the proceeds of any such borrowing;
and
(f) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
holders of Series B Convertible Preferred Stock, voting as a separate class and
not with the holders of Common Stock, shall be entitled to elect to the Board of
Directors the smallest number of directors which shall constitute a majority of
the authorized number of directors, and the holders of Common Stock, voting as a
separate class, shall be entitled to elect the remaining members of the Board of
Directors. Whenever under the provisions of the preceding sentence the right
shall have accrued to the holders of Series B Convertible Preferred Stock as a
class to elect directors of the corporation, the Board of Directors shall
promptly call (and in the event the Board of Directors fails to call, the
holders of at least twenty percent (20%) in voting power of the outstanding
shares of Series B Convertible Preferred Stock may call) a special meeting of
stockholders for the election of
35
<PAGE>
directors. Upon the election by the holders of the Series B Convertible
Preferred Stock of the directors they are entitled to elect as provided in this
Section 5(f), the terms of office of all persons who were previously members of
the Board of Directors shall immediately terminate, whether or not the holders
of Common Stock shall have elected the remaining members of the Board of
Directors. In the case of any vacancy of office occurring among the directors
elected by the holders of Series B Convertible Preferred Stock, the remaining
directors elected by the holders of Series B Convertible Preferred Stock, by
affirmative vote of a majority thereof, may elect a successor to hold office for
the unexpired term of the director whose place shall be vacant; in the case of
any vacancy of office occurring among the directors elected by the holders of
Common Stock, the remaining directors elected by the holders of Common Stock, by
affirmative vote of a majority thereof, may elect a successor to hold office for
the unexpired term of the director whose place shall be vacant. Any director who
shall have been elected by the holders of Series B Convertible Preferred Stock
(or by directors elected by the holders of Series B Convertible Preferred Stock)
may be removed during his term of office by, and only by, the affirmative vote
of the holders of the then outstanding shares of Series B Convertible Preferred
Stock; any director who shall have been elected by the holders of Common Stock
(or by directors elected by the holders of Common Stock) may be removed during
his term of office by, and only by, the affirmative vote of the holders of the
then outstanding shares of Common Stock. If and when the delinquent Redemption
Amount shall have been paid in full, the holders of Series B Convertible
Preferred Stock shall be immediately divested of the special voting rights set
forth in this Section 5(f), but always subject to the reinstatement of such
voting rights in case of similar future delinquency; upon the termination of
such voting rights, the Board of Directors shall call (and in the event the
Board of Directors fails to call, the holders of at least twenty percent (20%)
in voting power of the outstanding shares of Common Stock may call) a special
meeting of stockholders at which all directors shall be elected in accordance
with Section 3, above, and the terms of office of all persons who are then
directors of the corporation shall terminate immediately upon the election of
their successors.
6. Covenants
---------
(a) So long as at least twenty-five percent (25%) of the number of
shares of Series B Convertible Preferred Stock outstanding on the Original Issue
Date shall be outstanding, the corporation shall not, without first having
provided the written notice of such proposed action to each holder of
outstanding shares of Series B Convertible Preferred Stock required by Section
6(b) hereof and having obtained the affirmative vote or written consent of the
holders of a majority of such outstanding shares of Series B Convertible
Preferred Stock:
(i) amend, alter or repeal any provision of, or add any provision
to, the corporation's Certificate of Incorporation or by-laws, if such action
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series B Convertible Preferred
Stock;
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<PAGE>
(ii) reclassify any Common Stock or Preferred Stock into shares
having any preference or priority as to assets superior to or on a parity with
any such preference or priority of the Series B Convertible Preferred Stock;
(iii) create, authorize or issue any additional shares of Series B
Convertible Preferred Stock or any other class or classes of stock or series of
Common Stock or Preferred Stock or any security convertible into or evidencing
the right to purchase shares of any class or series of Common Stock or Preferred
Stock or any capital stock of the corporation senior to or on a parity with the
Series B Convertible Preferred Stock; or
(iv) apply any of its assets to the redemption, retirement, purchase
or other acquisition, directly or indirectly, through subsidiaries or otherwise,
of any shares of Common Stock except at their original purchase price of shares
of Common Stock from officers, employees or directors of, or consultants to,
the corporation upon termination of their status as such pursuant to agreements
containing vesting and/or repurchase provisions approved by the Board of
Directors of the corporation.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the corporation's by-laws to the contrary, notice of any action
specified in Section 6(a) hereof shall be given by the corporation to each
holder of shares of Series B Convertible Preferred Stock by first class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown by the records of the corporation, at least thirty (30) days before the
date on which the books of the corporation shall close or a record shall be
taken with respect to such proposed action, or, if there shall be no such date,
at least thirty (30) days before the date when such proposed action is scheduled
to take place. Any holder of outstanding shares of Series B Convertible
Preferred Stock may waive any notice required by this Section 6(b) by a written
document indicating such waiver.
7. No Reissuance of Series B Convertible Preferred Stock. No share or
-----------------------------------------------------
shares of Series B Convertible Preferred Stock acquired by the corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and eliminated from the shares which
the corporation shall be authorized to issue.
8. Residual Rights. All rights accruing to the outstanding shares of the
---------------
corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.
II. COMMON STOCK
Description of Common Stock
- ---------------------------
1. Voting Rights. Each holder of record of Common Stock shall be entitled
-------------
to one vote for each share of Common Stock standing in such holder's name on the
books of the
37
<PAGE>
Corporation. Except as otherwise required by law or this Article FOURTH of this
Restated Certificate of Incorporation, the holders of Common Stock and the
holders of Preferred Stock shall vote together as a single class on all matters
submitted to stockholders for a vote (including any action by written consent).
2. Dividends. Subject to provisions of law and this Article FOURTH of
---------
this Restated Certificate of Incorporation, the holders of Common Stock shall be
entitled to receive dividends out of funds legally available therefor at such
times and in such amounts as the Board of Directors may determine in their sole
discretion.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, after the payment or provisions
for payment of all debts and liabilities of the Corporation and all preferential
amounts to which the holders of the Preferred Stock are entitled with respect
to the distribution of assets in liquidation, the holders of Common Stock shall
be entitled to share ratably in the remaining assets of the Corporation
available for distribution.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation.
B. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as
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<PAGE>
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except (to the extent provided by applicable law) for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of Delaware
or any amendment or successor provisions thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware, as so amended. Any
repeal or modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
NINTH. The Corporation shall indemnify each person who at any time is, or
shall have been, a director or officer of the Corporation, and is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is, or was, a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the maximum extent permitted by the General
Corporation Law of Delaware. The foregoing right of indemnification shall in no
way be exclusive of any other rights of indemnification to which any such
director or officer may be entitled, under any by-law, agreement, vote of
directors or stockholders or otherwise.
TENTH: The Corporation reserves the right to amend or repeal any provision
of this Restated Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon a stockholder herein are
granted subject to this reservation.
39
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the President and Secretary,
respectively, of Business@Web, Inc., declaring and certifying, under penalties
of perjury, that this is the act and deed of the Corporation and that the facts
stated herein are true, have hereunto set their hands as their free act and deed
this 6th day of March, 1996.
------------------------------
James G. Nondorf, President
- ------------------------------
William E. Kelly, Secretary
40
<PAGE>
EXHIBIT B
---------
Business@Web, Inc.
Unaudited Balance Sheet
For the Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Actual Actual
December 31, December 31,
Assets 1995 1994
- --------------------------------------------- ------------ ------------
<S> <C> <C>
Cash and cash equivalents 104,623 70
Trade receivables net of allowance (100,000) 2,408,541 -
Prepaid expenses and other current assets 157,333 -
------------ ------------
Total current assets 2,670,497 70
Property plant & equipment - cost 226,551 76,078
Less: accum. depre & amort. 53,118 12,680
------------ ------------
Net property, plant & equipment 163,433 63,398
------------ ------------
Total assets 2,833,930 63,468
============ ============
Actual Actual
December 31, December 31,
Liabilities & Equity 1995 1994
- --------------------------------------------- ------------ ------------
Accounts payable 3,091,523 275,000
Deferred revenue 778,572 -
Accrued interest 43,750 -
Accrued expenses & sundry 690,564 -
------------ ------------
Total current liabilities 4,604,409 275,000
Due to Affiliates 183,109 556,844
Long-term debt less current maturities 1,000,000 -
Stockholders' equity (deficiency)
Preferred stock 256,250 250,000
Common stock 470 -
Additional paid in capital 793,750 50,000
Retained earnings (deficit) BOY (1,168,376) (1,168,376)
Current year income (2,835,682) (0)
------------ ------------
Stockholders' equity (def.) (2,953,588) (868,376)
------------ ------------
Total liab. & equity (def): 2,833,930 63,468
============ ============
</TABLE>
<PAGE>
Business@Web, Inc.
Unaudited Income Statement
For the Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Actual Actual
Revenues 1995 1994
------------ ------------
<S> <C> <C>
Education revenue 1,760,593
Software revenue 2,148,485
Maintenance revenue 57,850
Service revenue 2,158,334
------------ ------------
Net revenues 6,125,261 0
Gross Profit
Education 474,661
Software Product 1,455,485
Maintenance 5,858
Services 798,379
------------ ------------
Gross profit 2,734,383 0
Selling, general & administrative 5,492,491 1,168,376
------------ ------------
Operating income -2,758,108 -1,168,376
Interest expense -77,574 -37,600
------------ ------------
Income (loss) before income taxes -2,835,682 -1,205,976
Income tax expense 0 0
------------ ------------
Net income (loss) -2,835,682 -1,205,976
============ ============
</TABLE>
<PAGE>
Business@Web, Inc.
Unaudited Cash Flow Statement
For the Years Ended December 31, 1995
<TABLE>
<CAPTION>
Actual
December 31,
1995
------------
<S> <C>
Cash flows from operating activities:
Net income (loss) (2,835,682)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Non-operating income/expense items:
Depreciation and amortization of property and equipment 50,438
Provision for doubtful accounts 142,825
Change in operating assets and liabilities:
Trade and other receivables (2,551,366)
Other current assets (157,333)
Accounts payable 2,816,523
Accrued interest expense 43,750
Deferred Revenue 778,572
Other accrued expenses 690,564
Other adjustments - net (0)
------------
Net cash provided by operating activities (1,021,709)
Cash flows from investing activities:
Purchases of property, plant and equipment (150,473)
Other - net -
------------
Net cash provided by (used in) investing activities (150,473)
Cash flows from financing activities:
Proceeds from long-term debt 1,750,000
Advances from affiliates (473,735)
Proceeds from issuance of stock 470
Other - Net -
------------
Net cash provided by (used in) financing activities 1,276,735
Net increase (decrease) in cash and cash equivalents 104,553
Cash and cash equivalents, beginning of period 70
------------
Cash and cash equivalents, end of period 104,623
============
Unaudited Cashflow Statements
</TABLE>
<PAGE>
Business@Web, Inc.
Equity Rollforward
For the Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Preferred Common Accumulated
Stock Stock APIC Deficit Total
---------- ------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Beginning balance January 1, 1994 0.00
Issuance of Preferred Shares 250,000.00 50,000.00 300,000.00
Net loss -1,168,376.22 -1,168,376.22
---------- ------ ---------- ------------- -------------
Balance December 31, 1994 250,000.00 0.00 50,000.00 -1,168,376.22 -868,376.22
Issuance of Common Stock 470.00 470.00
Conversion of long-term debt to Preferred Stock 6,250.00 743,750.00 750,000.00
Net loss -2,835,681.91 -2,835,681.91
---------- ------ ---------- ------------- -------------
Balance December 31, 1994 256,250.00 470.00 793,750.00 -4,004,058.13 -2,953,588.13
========== ====== ========== ============= =============
</TABLE>
<PAGE>
Schedule III
------------
A. 16,204,545 Common Shares are issued and outstanding as of February 23, 1996:
<TABLE>
<S> <C> <C>
Sundar Subramaniam 4,998,000 Common Shares
Len Hafetz 400,000 Common Shares
James Nondorf 100,000 Common Shares
Legacy Investment Partnership 2,000,000 Common Shares
J&S Limited Partnership 2,000,000 Common Shares
Enamullah Khan 2,000 Common Shares
Isao Okawa 200,000 Common Shares
CSK Corporation 200,000 Common Shares
Klaus Besier 1,440,000 Common Shares
Harrington Trust Limited 4,864,545 Common Shares
as Trustee of The Appleby Trust
</TABLE>
B. 1,837,750 Common Shares are reserved for issuance upon exercise of
outstanding option grants to employees and consultants under the 1995 Stock
Plan as set forth in the attached schedule; these options are subject to
vesting (and the majority remain unvested).
C. Commitments to issue options for an aggregate of 52,000 Common Shares have
been made to persons who have accepted employment offers.
D. An employment offer has been extended (but not yet accepted) to a candidate
for the position of Vice President of Marketing; this candidate has been
offered options for a total of 250,000 Common Shares.
E. In connection with the establishment of a credit facility with State Street
Bank and Trust Company, the Company has agreed to issue to SSB Investments,
Inc., an affiliate of such bank, a warrant for the purchase of 35,000 Common
Shares on or before February 15, 2003 at an exercise price of $5.54 per
share, and to extend, with respect to such shares, piggy-back registration
rights in connection with any Company registration of its securities (other
than in its initial public offering).
45
<PAGE>
EXHIBIT C
---------
(617) 951-2100
March 6, 1996
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Ladies and Gentlemen:
We have acted as counsel for Business@Web, Inc., a Delaware corporation
(the "Company") in connection with the issuance and sale of 180,506 shares of
the Company's Series B Convertible Preferred Stock, par value $1.00 per share
(the "Preferred Shares"), to Hewlett-Packard Company (the "Purchaser"), pursuant
to the Series B Convertible Preferred Stock Purchase Agreement dated February
27, 1996 (the "Purchase Agreement") between the Company and Purchaser. Terms
used in this opinion, unless otherwise defined, shall have the meanings assigned
thereto in the Purchase Agreement. This opinion is furnished to you pursuant to
Section 4.01 of the Purchase Agreement.
For purposes of the opinions expressed below, we have examined original,
faxed or photocopies of executed counterparts of:
a. the Purchase Agreement;
b. the Registration Rights Agreement;
c. the Marketing Agreement; and
d. the Co-Sale Rights Agreement.
The Purchase Agreement, the Registration Rights Agreement, the Marketing
Agreement and the Co-Sale Rights Agreement are together referred to herein as
the "Transaction Documents".
46
<PAGE>
In addition, we have examined the originals or copies of such records,
agreements and instruments of the Company, certificates of public officials and
of officers of the Company and such other documents and records and such matters
of law as we have deemed appropriate as a basis for the opinions hereinafter
expressed. In making such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
all documents submitted to us as copies, which facts we have not independently
verified. As to various facts material to the opinions set forth herein, we have
relied without independent verification upon factual representations made by the
Company and the Purchaser in the Transaction Documents, upon certificates of
public officials and upon facts certified to us by officers of the Company. With
respect to the opinions expressed in paragraph number 8 below, we draw your
attention to the fact that we have not made any investigation of the records of
any court or other governmental agency or body.
Statements herein as to the truth of certain matters "to our knowledge",
"known to us", or as to which we have "knowledge" refer to the knowledge
consciously held by the individual lawyers in our firm who participated in the
negotiation and drafting of the Transaction Documents without independent
investigation.
For purposes of the opinions expressed herein, we have assumed that at all
relevant times the Purchaser had all requisite power and authority and had taken
all necessary action to enter into and perform all of its obligations under the
Transaction Documents and that each such Transaction Document was and will
continue to be the valid, binding and enforceable obligation of the Purchaser.
You have not asked us to express, and we do not express, any opinion concerning
the application of any federal, state or local statute, law, rule or regulation
to the authority of the Purchaser to enter into and to carry out its
obligations, and to exercise rights, under the Transaction Documents.
This opinion is limited to the laws of the Commonwealth of Massachusetts,
the General Corporation Law of the State of Delaware (the "DGCL"), and the
federal laws of the United States of America, and we express no opinions with
respect to the law of any other jurisdiction.
Based upon and subject to the foregoing and subject also to the general
qualifications stated following paragraph number 9 below, we hereby advise you
that, in our opinion, as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to do business as a foreign corporation in the Commonwealth of Massachusetts.
2. The Company has the corporate power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted, to execute, deliver and perform the Transaction Documents to which it
is a party, and to issue,
47
<PAGE>
sell and deliver the Preferred Shares and, upon conversion of the Preferred
Shares in accordance with their terms, the Conversion Shares.
3. The execution and delivery by the Company of the Purchase Agreement,
the Registration Rights Agreement and the Marketing Agreement, the performance
by the Company of its obligations thereunder, and the issuance of the Preferred
Shares and, upon conversion of the Preferred Shares in accordance with their
terms, the Conversion Shares have been duly authorized by all requisite
corporate action and will not violate any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company of which we have knowledge, the Certificate of Incorporation of the
Company, as amended, or the By-laws of the Company, as amended, or violate or
conflict with, result in or constitute (with due notice or lapse of time or
both) a default under or result in the creation or imposition of any material
lien, charge, restriction, claim or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company pursuant to any indenture,
agreement, or other instrument of which we have knowledge and to which the
Company or any of its properties or assets is bound.
4. The Preferred Shares and the Conversion Shares have been duly
authorized and, when issued in accordance with the Purchase Agreement (in the
case of the Preferred Shares) or upon conversion of the Preferred Shares in
accordance with their terms (in the case of the Conversion Shares), will be
validly issued, fully paid and nonassessable shares, with no personal liability
attaching to the ownership thereof, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances created by or through the
Company. The issuance, sale and delivery of the Preferred Shares and the
Conversion Shares will not subject to any preemptive right of stockholders of
the Company arising pursuant to the DGCL, the Certificate of Incorporation or
the Bylaws of the Company or, to our knowledge, otherwise existing or, to our
knowledge, to any right of first refusal or other right in favor of any person,
except as provided in Article VI of the Purchase Agreement.
5. The Purchase Agreement, the Registration Rights Agreement, and the
Marketing Agreement have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their terms.
6. The Co-Sale Rights Agreement, has been duly authorized, executed and
delivered by each of the Principal Shareholders and constitutes the legal, valid
and binding obligations of the Principal Shareholders, enforceable in accordance
with its terms.
7. The authorized capital stock of the Company consists solely of
30,000,000 shares of Common Stock and 3,000,000 shares of Preferred Stock
(1,750,000 of which have been designated Series B Convertible Preferred Stock
and 1,250,000 of which remain undesignated). Immediately prior to the Closing,
16,204,545 shares of Common Stock were validly issued and outstanding, and no
other shares of Common Stock or Preferred Stock were outstanding.
48
<PAGE>
8. To our knowledge, there is no (i) action, suit, claim, proceeding or
investigation pending against the Company, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pend ing under collective bargaining
agreements or otherwise, or (iii) governmental inquiry pending against the
Company. To our knowledge, the Company is not in default with respect to any
order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company
pending or threatened against others.
9. Assuming the accuracy of the representations and warranties of the
Purchaser made in Article III of the Purchase Agreement, the offering, issuance
and sale of the Preferred Shares and the Conversion Shares is exempt from the
registration provisions of the Securities Act of 1933, as amended, and of the
Massachusetts Uniform Securities Act (MGL ch. 110A).
Our opinions set forth above are subject to the following general
qualifications:
a. The validity and enforceability of any obligation and the exercise
of rights and remedies may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement generally of the rights and remedies of creditors
or the obligations of debts, and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding at
law or in equity), including, without limitation, the discretion of any
court of competent jurisdiction in granting specific performance or
injunctive or other equitable relief.
b. The enforcement of any rights or remedies is or may be subject to
an implied duty on the part of the party seeking to enforce such rights to
take action and made determinations on a reasonable basis and in good
faith.
c. The enforceability of the Transaction Documents may be limited by
general principals of contract law which include (i) the unenforceability
of provisions to the effect that provisions therein may only be amended or
waived in writing to the extent that an oral agreement modifying such
provisions has been entered into, and (ii) the general rule that, where
less than all of an agreement is enforceable, the balance is enforceable
only when the unenforceable portion is not an essential part of the agreed
exchange.
d. The indemnification and contribution provisions set forth in
Section 8 of the Registration Rights Agreement may not be enforceable to
the extent that they should be found contrary to public policy.
49
<PAGE>
e. We express no opinion with respect to the choice of law provisions
contained in the Transaction Documents.
This opinion is furnished to you solely for your benefit in connection with
the consummation of the Closing under the Purchase Agreement and may not be
relied upon by any other person or entity or for any other purpose without our
express, prior written consent. All of the opinions set forth herein are
rendered as of the date hereof, and we assume no obligation to update such
opinions to reflect any facts or circumstances which may hereafter come to our
attention or any changes in the law which may hereafter occur.
Very truly yours,
Peabody & Arnold
50
<PAGE>
EXHIBIT D
---------
REGISTRATION RIGHTS AGREEMENT
March 6, 1996
To the Investors named on Schedule I hereto
Ladies and Gentlemen:
In connection with the agreement by Hewlett-Packard Company ("HP") on the
date hereof to purchase shares of Series B Convertible Preferred Stock, $1.00
par value ("Preferred Stock"), of Business@Web, Inc., a Delaware corporation
(the "Company"), pursuant to the Series B Convertible Preferred Stock Purchase
Agreement dated as of February 27, 1996 (the "HP Agreement") between the Company
and HP, and in connection with the agreement by the other Investors named on
Schedule I hereto (with HP, the "Investors") on the date hereof to purchase
shares of Preferred Stock of the Company, pursuant to the Series B Convertible
Preferred Stock Purchase Agreement dated as of March 6, 1996 (with the HP
Agreement, the "Purchase Agreements") among the Company and such Investors and
as an inducement to the Investors to consummate the transactions contemplated by
the Purchase Agreements, the Company covenants and agrees with the Investors as
follows:
1. Certain Definitions As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Shares" shall mean all shares of the Company's Preferred
----------------
Stock issued to the Investors.
51
<PAGE>
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 8.
"Restricted Stock" shall mean the Conversion Shares, but excluding
----------------
shares of Common Stock which have been (a) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act, provided,
--------
however, that the term "Restricted Stock" shall be deemed to include the
-------
number of shares of Restricted Stock that would be issuable to a holder of
Preferred Shares upon conversion of all Preferred Shares held by such
holder at such time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares or
------------------
Conversion Shares shall, except as otherwise provided in Section 3, be stamped
or otherwise imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SHARES UNDER THAT ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.
3. Required Registration.
---------------------
(a) At any time after March 31, 1998, the holders of Restricted Stock
constituting at least 40% of the total shares of Restricted Stock then owned
beneficially or of record by Investors and Investor Transferees (as such term is
hereinafter defined) may request the Company to register under the Securities
Act all or any portion of the shares of Restricted Stock held by such requesting
holder or holders for sale in the manner specified in such notice, provided that
the reasonably anticipated aggregate price to the public of such public offering
would exceed $10,000,000.
Notwithstanding the foregoing, the only securities that the Company shall
be required to register pursuant hereto shall be shares of Common Stock,
provided, however, that in any underwritten public offering contemplated by
- -------- --------
this Agreement, the holders of Preferred Shares shall be entitled to sell such
Preferred Shares to the underwriters for conversion and sale of the shares of
Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3 within
180 days after the effective date of a registration statement filed by the
Company covering a firm
52
<PAGE>
commitment underwritten public offering of securities of the Company under the
Securities Act.
(b) Following receipt of any notice under this Section 3, the Company
shall immediately notify all Investors and Investor Transferees from whom notice
has not been received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Restricted Stock specified in such notice (and in all notices received by the
Company from other holders within 30 days after the giving of such notice by the
Company). If such method of disposition shall be an underwritten public
offering, the holders of a majority of the shares of Restricted Stock to be sold
in such offering may designate the managing underwriter of such offering,
subject to the approval of the Company, which approval shall not be unreasonably
withheld or delayed. The Company shall be obligated to register Restricted Stock
pursuant to this Section 3 on two occasions only, provided, however, that such
-------- -------
obligation shall be deemed only when a registration statement covering all
shares of Restricted Stock specified in notices received as aforesaid, for sale
in accordance with the method of disposition specified by the requesting
holders, shall have become effective and, if such method of disposition is a
firm commitment underwritten public offering, all such shares shall have been
sold pursuant thereto.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 3, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account and for the account of other selling
stockholders, except as and to the extent that, in the reasonable opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would materially adversely affect the marketing
of the Restricted Stock to be sold. Except for registration statements on Form
S-4, S-8 or any successor thereto, the Company will not file with the Commission
any other registration statement with respect to its Common Stock, whether for
its own account or that of other stockholders, from the date of receipt of a
notice from requesting holders pursuant to this Section 3 until the completion
of the period of distribution of the shares of Restricted Stock registered
thereby.
4. Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to Section 3 or Section 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do and of the proposed method of distribution of such
securities. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of its Restricted Stock, the Company will use its best efforts to
cause the Restricted Stock as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by
53
<PAGE>
the Company, all to the extent and under the conditions such registration is
permitted under the Securities Act. In the event that any registration pursuant
to this Section 4 shall be, in whole or in part, an underwritten public offering
of Common Stock, the number of shares of Restricted Stock to be included in such
an underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Restricted Stock owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that the inclusion
of some or all of the Restricted Stock would adversely affect the marketing of
the securities to be sold by the Company therein, provided, however, that such
-------- -------
number of shares of Restricted Stock (if reduced) shall not be reduced to a
number which is less than 35% of the total number of shares are to be included
in such underwriting for the account of persons other than the Company or
requesting holders of Restricted Stock. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to in
this Section 4 without thereby incurring any liability to the holders of
Restricted Stock.
5. Registration on Form S-3. If at any time (i) a holder or holders of
------------------------
Preferred Shares or Restricted Stock holding, in the aggregate, in excess of ten
percent (10%) of the then-outstanding Common Stock and Conversion Shares request
that the Company file a registration statement on Form S-3 or any successor
thereto for a public offering of all or any portion of the shares of Restricted
Stock held by such requesting holder or holders, the reasonably anticipated
aggregate price to the public (net of underwriting discounts and commissions) of
which would exceed $1,000,000, and (ii) the Company is a registrant entitled to
use Form S-3 or any successor thereto to register such shares, then the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Stock
specified in such notice. Whenever the Company is required by this Section 5 to
use its best efforts to effect the registration of Restricted Stock, each of the
procedures and requirements of Section 3 (including but not limited to the
requirement that the Company notify all holders of Restricted Stock from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration.
6. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 3, 4 or 5 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 3,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as
54
<PAGE>
may be necessary to keep such registration statement effective for the period
specified in Section 6(a) above and comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by such
registration statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
- -------- -------
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The Sellers of
Restricted Stock agree upon receipt of such notice forthwith to cease making
offers and sales of Restricted Stock pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose until the Company
has prepared and furnished such amendment or supplement to the prospectus as may
be necessary so that, as thereafter delivered to purchasers of such Restricted
Stock, such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
55
<PAGE>
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements and the notes thereto and the schedules
and other financial and statistical data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 6(a) and 6(b) and of Section 3(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock shall (a) provide such information and execute such documents
as may reasonably be required in connection with such registration, (b) agree to
sell Restricted Stock on the basis provided in any underwriting arrangements and
(c) complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements, which arrangements shall not be inconsistent
herewith.
In connection with each registration pursuant to Sections 3, 4 or 5
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an
56
<PAGE>
arrangement between such underwriter and companies of the Company's size and
investment stature.
7. Expenses. All expenses incurred by the Company in complying with
--------
Sections 3, 4 and 5, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc. transfer taxes,
fees of transfer agents and registrars, and fees and disbursements of one
counsel for the sellers of Restricted Stock, but excluding any Selling Expenses,
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Restricted Stock are called "Selling
Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 3, 4 or 5. All Selling Expenses in
connection with each registration statement under Sections 3, 4 or 5 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
8. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder,
each underwriter of such Restricted Stock thereunder and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will pay the legal
fees and other expenses of each such seller, each such underwriter and each such
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by any such
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus, and, provided
--------
further, however, that the Company will not be liable to any such seller, any
- ------- -------
such underwriter or any such controlling person in any such case to the extent
that any such
57
<PAGE>
loss, claim, damage, liability or action arises out of or is based upon an
untrue or alleged untrue statement or omission or an alleged omission made in
any preliminary prospectus or final prospectus delivered by such seller,
underwriter or controlling person in connection with the sale of the Restricted
Stock if (1) the final prospectus or prospectus supplement corrected such untrue
statement or omission and (2) the Company advised such seller, underwriter or
controlling person that such correction had been made and (3) such seller,
underwriter or controlling person failed to send or deliver a copy of the final
prospectus or prospectus supplement with or prior to the delivery of written
confirmation of the sale of the Restricted Stock.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will pay the legal
fees and other expenses of the Company and each such officer, director,
underwriter and controlling person incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
- -------- -------
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
-------- ------- -------
liability of each seller hereunder shall limited to the proportion of any such
loss, claim, damage, liability or expense that is equal to the proportion that
the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Restricted Stock covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any
58
<PAGE>
liability that it may have to such indemnified party other than under this
Section 8 and shall only relieve it from any liability that it may have to such
indemnified party under this Section 8 if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 8 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof;
provided, however, that, if the defendants in any such action include both the
- -------- -------
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded (based on the advice of counsel) that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel as required by the local rules of such jurisdiction)
at any time for all such indemnified parties.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
8; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
require to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 12(f) of the Securities Act) will
59
<PAGE>
be entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
8. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
9. Rule 144 Reporting and Rule 144A Information. With a view to making
--------------------------------------------
available the benefits of certain rules and regulations of the Commission that
may at any time permit the resale of the Restricted Stock without registration,
the Company will:
(a) at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration; and
(b) at any time, at the request of any holder of Preferred Shares or
shares of Restricted Stock, make available to such holder and to any prospective
transferee of such Preferred Shares or shares of Restricted Stock the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act.
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<PAGE>
11. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Investor as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
cause a material violation of any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
12. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not; provided, however, that registration rights conferred herein
-------- -------
on Investor shall only inure to the benefit of a transferee of Preferred Shares
or Restricted Stock if there is transferred to such transferee at least 60,000
shares of Restricted Stock (the transferee in any such case being referred to as
an "Investor Transferee").
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
(a) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
61
<PAGE>
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(b) if to any Investor, at such Investor's address as set forth on
Schedule I hereto
(c) if to any of Investor's Transferees, at such address as may have been
furnished to the Company in writing by it;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this Section
12(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the
holders of a majority of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In proving this Agreement it shall not be
necessary to produce or account for more than one such counterpart executed by
the party against whom enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period following the
effective date of the registration statement relating to such offering to be
reasonably determined by the underwriters.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
62
<PAGE>
EXHIBIT 10.17
BUSINESS@WEB, INC.
Amendment to
Series B Convertible Preferred
Stock Purchase Agreement
Agreement of Amendment dated as of March 6, 1996 by and between
Business@Web, Inc., a Delaware corporation (the "Company") and Hewlett-Packard
Company, a California corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser are parties to a certain Series B
Convertible Preferred Stock Purchase Agreement dated as of February 27, 1996
(the "Purchase Agreement"), pursuant to which the Company has agreed to issue
and sell to the Purchaser, and the Purchaser has agreed to purchase from the
Company, at a price of $5.54 per share, 180,506 shares of the Company's Series B
Convertible Preferred Stock; and
WHEREAS, the Purchase Agreement provides, in pertinent part, that, in the
event the Company proposes to enter into agreements with the Cowen Investors (as
such term is defined in the Purchase Agreement) on terms more favorable to the
Cowen Investors than the terms afforded to the Purchaser in the Purchase
Agreement, the Company and the Purchaser will, at the election of the Purchaser,
enter into an amendment of the Purchase Agreement to incorporate therein the
Cowen Terms (as such term is defined in the Purchase Agreement); and
WHEREAS, the Company has notified the Purchaser of the Cowen Terms (which
Cowen Terms include a purchase price of $5.54 per share) and the Purchaser has
elected to have such terms included, by amendment, in the Purchase Agreement for
the benefit of the Purchaser;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and the Purchaser hereby agree that the Purchase
Agreement be, and hereby is, amended, by deleting therefrom, in its entirety,
Article II thereof, and substituting in place thereof the following new Article
II:
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as set
forth in the Disclosure Schedule attached hereto as Schedule II:
-----------
<PAGE>
Section 2.01 Organization, Qualification and Corporate Power.
-----------------------------------------------
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified to transact business in all jurisdictions in which the
nature of the business transacted by the Company or the character of the
properties owned or leased by the Company requires that the Company qualify to
do business as a foreign corporation, except where the failure to be so licensed
or qualified would not have a material adverse effect on the business,
operations or financial condition of the Company. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, to execute, deliver and
perform this Agreement and the Registration Rights Agreement (as such term is
hereinafter defined) and the Marketing Agreement (as such term is hereinafter
defined), and to issue, sell and deliver the Preferred Shares and to issue and
deliver the shares of Common Stock, $.001 par value, of the Company ("Common
Stock") issuable upon conversion of the Preferred Shares (the "Conversion
Shares").
(b) The Company has no subsidiaries. The Company does not own of
record or beneficially, directly or indirectly, (i) any shares of capital stock
or securities convertible into capital stock of any other corporation or (ii)
any participating interest in any partnership, joint venture or other non-
corporate business enterprise and does not control, directly or indirectly, any
other entity.
Section 2.02 Authorization of Agreements, etc.
--------------------------------
(a) The execution and delivery by the Company of this Agreement and
the Registration Rights Agreement and the Marketing Agreement, the performance
by the Company of its obligations hereunder and thereunder, the issuance, sale
and delivery of the Preferred Shares and the issuance and delivery of the
Conversion Shares have been duly authorized by all requisite corporate action
and will not violate any provision of any law applicable to the Company, any
order of any court or other agency of government applicable to the Company, the
Restated Certificate of Incorporation of the Company (the "Charter"), or the By-
laws of the Company, as amended, or any provision of any indenture, agreement or
other instrument to which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) The Preferred Shares have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series B Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances. The Conversion Shares
have been duly reserved for issuance upon conversion of the Preferred Shares
and, when so issued, will be duly authorized, validly issued, fully paid and
2
<PAGE>
nonassessable shares of Common Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances. Neither the issuance, sale or delivery
of the Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
Section 2.03 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to laws of
general application from time to time in effect affecting creditors' rights and
the exercise of judicial discretion in accordance with general equitable
principles. The Registration Rights Agreement and the Marketing Agreement when
executed and delivered in accordance with this Agreement, will constitute the
legal, valid and binding obligation of the Company and of the other parties
thereto, enforceable in accordance with its terms, subject to laws of general
application from time to time in effect affecting creditors' rights and the
exercise of judicial discretion in accordance with general equitable principles.
Section 2.04 Authorized Capital Stock. The authorized capital stock of
------------------------
the Company will, immediately prior to the Closing, consist of (i) 3,000,000
shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), of which
1,431,412 shares have been designated Series B Convertible Preferred Stock, and
1,568,588 shares remain undesignated and (ii) 30,000,000 shares of Common Stock.
Immediately prior to the Closing, 16,204,545 shares of Common Stock will be
validly issued and outstanding, and no other shares of Common Stock or Preferred
Stock will be outstanding. All shares of the series of Preferred Stock
designated Series A Convertible Preferred Stock which had been issued prior to
the date hereof have been surrendered for conversion into Common Stock and
retired, and the series of Preferred Stock designated Series A Convertible
Preferred Stock has been cancelled and eliminated from the shares which the
Company is authorized to issue. The stockholders of record and holders of
subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire from the Company any
equity securities of the Company, and the number of shares of Common Stock or
Preferred Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth in
the attached Schedule 2. The designations, powers, preferences, rights,
----------
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Charter, a
copy of which is attached as Exhibit A. Except as set forth in the attached
---------
Schedule 2, (i) no person owns of record or is known to the Company to own
- ----------
beneficially any share of Common Stock or Preferred Stock, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire from the Company any equity securities of the
Company is authorized or outstanding and (iii) there is no commitment by the
Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence of indebtedness or asset. Except as provided for
in the Charter or as set forth in the attached Schedule 2, the Company has no
----------
obligation (contingent or other) to purchase, redeem or otherwise acquire
3
<PAGE>
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
Section 2.05 Financial Statements; Corporate Minutes. The Company has
------------ ---------------------------------------
furnished to the Purchaser the unaudited balance sheet of the Company as of
December 31, 1995 and the related statement of operations, shareholders' equity
and cash flows for the fiscal year then ended (the "Financial Statements"). The
Financial Statements (a) are complete and correct in all material respects, (b)
are in accordance with the Company's books and records, (c) present fairly the
Company's financial position for the period and as of the date indicated and (d)
have been prepared in conformity with generally accepted accounting principles
consistently applied, subject to (i) adjustments which will not, in the
aggregate, be material and (ii) the absence of footnotes. The Company has
furnished to the Purchaser copies of the minutes of meetings and written
consents in lieu of meetings of the Company's shareholders and Board of
Directors from the date of the Company's incorporation through the date of this
Agreement (the "Corporate Minutes"). The Corporate Minutes accurately reflect
all actions taken by the Company's shareholders and Board of Directors.
Section 2.06 Certain Events. Except as set forth in this Agreement and
--------------
the Schedules hereto, and the documents referred to therein, the Company has
not, since the date of the Financial Statements, (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into, in each case in the
ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities incurred in the ordinary course of
business, (iv) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other security, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or cancelled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
Section 2.07 Litigation, Compliance with Law. There is no (i) action,
-------------------------------
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pend-
4
<PAGE>
ing under collective bargaining agreements or otherwise, or (iii) governmental
inquiry pending or, to the best of the Company's knowledge, threatened against
or affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any governmental license or
permit), and, to the best of the Company's knowledge, there is no basis for any
of the foregoing. The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon the Company of any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There is no
action or suit by the Company pending or threatened against others. To the best
of the Company's knowledge, the Company has complied in all material respects
with all laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services, and the Company has all
necessary governmental permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted. There is no
existing law, rule, regulation or order, and the Company is not aware of any
proposed law, rule, regulation or order, whether federal or state, which would
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business.
Section 2.08 Proprietary Information of Third Parties. To the best of the
-----------------------------------------
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or nondisclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company's
knowledge, no person employed by the Company has utilized or proposes to utilize
any trade secret or any information or documentation proprietary to any third
party, and to the best of the Company's knowledge, no person employed by the
Company has violated any confidential relationship which such person may have
had with any third party, in connection with the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such utilization or violation.
Section 2.09 Title to Properties. The Company has good and marketable
-------------------
title to its properties and assets reflected in the Financial Statements and all
such properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances, except
for liens for current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company and its subsidiaries.
5
<PAGE>
Section 2.10 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
Section 2.11 Taxes. The Company has filed all tax returns, federal,
-----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. The
federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's Federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any federal, state, county or local-taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed (a) an election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
that the Company be taxed as an S corporation or (b) consent pursuant to Section
341(f) of the Code, relating to collapsible corporations.
Section 2.12 Intellectual Property. The Company possesses adequate
---------------------
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") which are necessary or desirable to the
conduct of the Company's business as conducted and as proposed to be conducted
or the lack of which would materially adversely affect the Company or its
business. No claim is pending or, to the best of the Company's knowledge,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the best of the Company's knowledge, there is no basis for any
such claim (whether or not pending or threatened). No claim is pending or
threatened to the effect that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company, and to the best of the Company's knowledge
there is no basis for any such claim (whether or not pending or threatened). To
the best of the Company's knowledge, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any right
to manufacture, have manufactured, assemble or sell the
6
<PAGE>
products or proposed products or to provide the services or proposed services of
the Company.
Section 2.13 Material Contracts. Except for the agreements identified in
------------------
the Schedule of Material Contracts attached hereto as Schedule 3 (the "Material
----------
Contracts"), the Company is not a party to or otherwise bound by any written or
oral contract or instrument or other restriction which individually or in the
aggregate could materially adversely affect the business, prospects, financial
condition, operations, property or affairs of the Company, including, without
limitation, any written or oral:
(a) contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company (except
for contracts which, in the aggregate, are not material to the business of
the Company);
(b) contract which entitles any customer to a rebate or right of set-
off, or which varies in any material respect from the Company's standard
form contracts;
(c) contract with any labor union;
(d) contract or other commitment with any supplier of goods or
services containing any provision permitting any party other than the
Company to renegotiate the price or other terms, or containing any pay-back
or other similar provision, upon the occurrence of a failure by the Company
to meet its obligations under the contract when due or the occurrence of
any other event;
(e) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of the Company's
normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not terminable
on notice without cost or other liability to the Company, except normal
severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, contract or
understanding pursuant to which benefits are provided to any employee of
the Company (other than group insurance plans applicable to employees
generally);
(h) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company;
7
<PAGE>
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company has advanced or
agreed to advance money or has agreed to lease any property as lessee or
lessor;.
(1) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any form of
intangible property;
(n) agreement under which it has granted any person any registration
rights, other than the Registration Rights Agreement (as such term is
hereinafter defined);
(o) agreement under which it has limited or restricted its right to
compete with any person in any respect; or
(p) other contract or group of related contracts with the same party
involving more than $250,000 or continuing over a period of more than two
(2) years from the date or dates thereof (including renewals or extensions
optional with another party), which contract or group of contracts is not
terminable by the Company without penalty upon notice of thirty (30) days
or less.
Section 2.14 Compliance with Governing Documents and Material Contracts.
----------------------------------------------------------
The Company and, to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date under each of the Material Contracts and have
received no notice of default and are not in default (with due notice or lapse
of time or both) under any Material Contract or any material provision of any
other agreement. The Company has no present expectation or intention of not
fully performing all its obligations under each Material Contract, and the
Company has no knowledge of any breach or anticipated breach by the other party
to any Material Contract. The Company is in full compliance with all of the
terms and provisions of its Charter and By-laws.
Section 2.15 Loans and Advances. The Company does not have any
------------------
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable
8
<PAGE>
business expenses anticipated to be incurred by them in connection with their
performance of services for the Company.
Section 2.16 Borrowings; Assumptions and Guaranties of Indebtedness of
------------------------------------------------------ --
Other Persons,. The Company is not obligated to any person for any money
- --------------
borrowed or liability incurred (absolute, accrued or contingent) except current
liabilities incurred and liabilities under contracts entered into, in each case
in the ordinary course of business. The Company is not obligated to any person
by reason of the Company having assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
Section 2.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which is significant to the Company has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
Section 2.18 Employees. Each of the officers of the Company and each
---------
other person now employed by the Company who has access to confidential
information of the Company has executed an Employee Agreement substantially in
the form of Exhibit B (collectively, the "Confidentiality Agreements"), and such
---------
agreements are in full force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company. To the best of the Company's knowledge,
the Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee-Retirement Income Security Act
of 1974, as amended.
Section 2.19 Transactions with Affiliates. No director, officer, employee
----------------------------
or stockholder of the Company, or, to the Company's knowledge, any member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or, to the Company's knowledge, any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock or other ownership interest thereof, (i) is a party to any transaction
with the Company, including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from, transfer of any asset (including any Intellectual
Property) from or to, or otherwise requiring payments to any such person or firm
or (ii) to the Company's knowledge, is an officer, director, trustee, partner or
holder of more than 5% of the outstanding capital stock or other ownership
interest in any entity engaged directly or indirectly in competition with the
Company.
9
<PAGE>
Section 2.20 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the Registration Rights Agreement or the Marketing Agreement,
the issuance, sale and delivery of the Preferred Shares or, upon conversion
thereof, the issuance and delivery of the Conversion Shares, other than (i) the
filing of the Charter with the Secretary of State of the State of Delaware and
(ii) the filing of notice subsequent to the Closing that may be required
pursuant to federal and state securities laws in connection with the sale of the
Preferred Shares.
Section 2.21 Disclosure. Neither the Company's representations and
----------
warranties in this Agreement and in the Schedules and Exhibits to this Agreement
nor any statement made by the Company in the Confidential Private Placement
Memorandum dated February 1996 (a copy of which the Company has been provided to
the Purchaser) contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. There is
no factor (other than causes or events beyond the control of the Company) which
the Company has not disclosed to the Purchaser and its counsel in writing and of
which the Company is aware which materially and adversely affects or could
materially and adversely affect the business, prospects, financial condition,
operations, property or affairs of the Company or any of its subsidiaries.
Section 2.22 Offering of the Preferred Shares. Neither the Company nor
--------------------------------
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act of 1933, as amended (the "Securities Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder), in either case so as to subject the offering, issuance or sale of
the Preferred Shares to the registration provisions of the Securities Act or of
any applicable state securities (Blue Sky) laws or regulations.
Section 2.23 Brokers. The Company has engaged Cowen & Company to act as
-------
its exclusive agent for the private placement of shares of Series B Preferred
Stock and has agreed to pay Cowen & Company a placement fee (and to reimburse
Cowen & Company for certain expenses) in connection therewith. Cowen & Company
has agreed to exclude the Preferred Shares being purchased hereunder from the
shares with respect to which it will be entitled to receive a placement fee.
The Company has no other contract, arrangement or
10
<PAGE>
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
**********
Except as specifically amended hereby, the Purchase Agreement, as executed
and delivered by the Company and the Purchaser on February 27, 1996, shall
remain in full force and effect without modification, alteration, deletion or
expansion.
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement of Amendment as of the day and year first above written.
BUSINESS@WEB, INC.
By: /s/ James G. Nordorf
---------------------
HEWLETT-PACKARD COMPANY
By: /s/ Manuel Diaz
---------------------
PABOS:WEK:240385_1
11
<PAGE>
SCHEDULE II
Exceptions to the representations and warranties of the Company set forth in
Article II.
Section 2.06: Since December 31, 1995, the following events have occurred:
------------
a. The Company has entered into the following credit facilities
with State Street Bank and Trust Company, and has granted
State Street Bank and Trust Company a security interest in
substantially all of the Company's assets as security
therefor:
$2,500,000 revolving line of credit,
$500,000 equipment line of credit,
$2,000,000 term loan due September 30, 1996.
b. Klaus Besier has been appointed chief executive officer of
the Company, at a base salary of $300,000 per annum. The
Company expects to enter into a performance bonus plan with
Mr. Besier under which Mr. Besier's bonus targets would be
$400,000 for 1996, $1,000,000 for 1997 and $2,500,000 for
1998.
c. The Company and Hewlett-Packard Company entered into a Series
B Preferred Stock Purchase Agreement on February 27, 1996,
pursuant to which the Company agreed to sell to Hewlett-
Packard Company 180,506 shares of Series B Convertible
Preferred Stock.
d. The Company entered into a Marketing Agreement with Hewlett-
Packard Company on February 27, 1996.
e. On March _, 1996, the Company entered into a 5-year lease of
premises at One Arsenal Marketplace, Watertown, Massachusetts
to be used as the Company's principal offices.
Section 2.09: State Street Bank and Trust Company holds a security
------------
interest in substantially all assets of the Company to secure the credit
facilities identified above.
Section 2.12: InterGroup Technologies, Inc. has communicated with the
------------
Company regarding alleged use of InterGroup's VisualWare software product by the
Company in violation of the Software License Agreement between InterGroup and
the Company. The Company believes that there is no basis for InterGroup's
allegations and has been engaged in friendly discussions with InterGroup in an
effort to resolve this issue.
Section 2.16: The Company is obligated to State Street Bank and Trust
------------
Company under the credit facilities identified above. Attached hereto is a
schedule of the Company's current assets and liabilities and an accounts payable
trial balance.
<PAGE>
Section 2.19:
------------
a. The Company is an authorized distributor and reseller of OEC
software.
b. The Company has purchased technology (Toolkit source code)
from OEC for $2.2 million dollars, with payment due on March
15, 1996. The Company intends to pay this amount from the
proceeds of this offering.
c. The Company sold technology (SAP Make tools) to OEC for
$500,000.
d. Klaus Besier and James Nondorf are employees of the Company.
e. The Company has a strategic partnership relationship with
I-Cube, pursuant to which the Company and I-Cube make joint
proposals and the Company subcontracts services to I-Cube.
The Company and I-Cube are not parties to a formal agreement.
f. The Company has a strategic partnership relationship with
Cambridge Technology Group, pursuant to which CTG promotes
the products and services of the Company through CTG's
executive education programs. The Company and CTG are not
parties to a formal agreement .
g. The Company has borrowed $250,000 from J&S Limited
Partnership under a 6% convertible subordinated note (and J&S
has waived its conversion privileges thereunder). The Company
intends to repay this note from the proceeds of this
offering.
h. The Company has borrowed $750,00 from the Appleby Trust under
a 9% subordinated note due December 31, 2000 (which has no
conversion feature). The Company intends to repay this note
from the proceeds of this offering.
i. Cambridge Technology Group, Professor John Donovan and John
J. Donovan, Jr. have guaranteed the Company's obligations to
State Street Bank and Trust Company.
j. The Company has licensed software (Logical Data Integrator)
from Mentor Communications Ltd., of which Len Hafetz
(a shareholder of the Company) is president.
<PAGE>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE 1
SYS DATE: 03/05/96 TRIAL BALANCE FOR PERIOD ENDING 03/31/96 TIME: 09:43 AM
ACCOUNTS 1000-000 THRU 3999-000
<TABLE>
<CAPTION>
ACCOUNT
NUMBER DESCRIPTION DEBIT CREDIT
<S> <C> <C> <C>
CURRENT ASSETS
1000-000 State Street Operating Acct 637,451.72
1012-000 Cash 371,531.86
1050-000 State Street Payroll Account 284,085.89
1060-000 BOB Functions Account 520.94
1200-000 Accounts Receivable - Trade 3,062,004.78
1201-000 Allow. for Doubtful Accounts 110,000.00
1250-000 Unbilled Receivables 6,000.00
1280-000 Unbilled Reimbursable Exp. 48,673.24
1300-000 Prepaid Expenses 25,404.00
1310-000 Prepaid Insurance 3,067.00
1350-000 Prepaid Maintenance Costs-OEC 177,174.67
-------------- --------------
CURRENT ASSETS: 4,241,315.24 484,598.86
FIXED ASSETS
1510-000 Furniture & Fixtures 153,855.67
1520-000 Computer Equipment 398,062.94
1521-000 A/D Computer Equip. - Current 9,071.06
1522-000 A/D Comp. Equip. - Prior 60,482.26
1530-000 Video/Audio Equip 15,814.75
1531-000 A/D Video/Audio Equip - Curr 439.30
1532-000 A/D Video/Audio Equip - Prior 2,635.79
1540-100 Leasehold Improvements 59,023.00
1550-000 Tradeshow Booth 14,700.00
1560-000 Software 2,894.00
-------------- --------------
FIXED ASSETS: 644,350.36 72,628.41
CURRENT LIABILITIES
2000-000 Accounts Payable - Trade 2,961,522.36
2001-000 Accrued Accounts Payable 130,610.69
2002-000 Accrued OEC Toolkits 109,500.00
2100-000 Accrued Expenses 472,457.21
2110-000 Accrued Commissions 5,664.24
2120-000 Accrued Sales Taxes 19.75
2130-000 Accrued Commissions - Outside 34,218.07
2140-000 Accrued Legal 64,775.00
2150-000 Accrued Audit 59,166.66
2160-000 Accrued Interest - J&S Limit 46,250.00
2170-000 Accrued Interest - Appleby 7,500.00
2180-000 Accrued Bonuses 18,500.00
2200-000 401K Payable - Employee 14,251.49
2210-000 401K Payable - Employer 681.86
2245-000 Payroll Adjustments 14,590.55
2250-000 Health Insurance Accrual 4,815.01
2260-000 Dental Insurance Accrual 683.44
2270-000 Other Benefits Accrual 141.60
2280-000 Dependent Care Accrual 352.20
2290-000 Accrued Allocated Benefits 15,228.61
</TABLE>
<PAGE>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 2
SYS DATE: 03/05/96 TRIAL BALANCE FOR PERIOD ENDING 03/31/96 TIME: 09:43 AM
ACCOUNTS 1000-000 THRU 3999-000
<TABLE>
<CAPTION>
ACCOUNT
NUMBER DESCRIPTION DEBIT CREDIT
<S> <C> <C> <C>
CURRENT LIABILITIES
2300-000 Deferred Revenue 1,251,800.00
2320-000 Unearned Revenue 19,200.00
2350-000 Unearned Maintenance Revenue 197,617.00
2400-000 Short-term Debt - LOC 878,000.00
2470-000 Due to Affiliate - CTG 555.66
2480-000 Due to Affiliate - CTR 13,170.00
-------------- --------------
CURRENT LIABILITIES: 136,274.93 6,184,996.47
LONG-TERM LIABILITIES
2500-000 L-T Port. - J&S Ltd. - N/P 250,000.00
2510-000 L-T Port. - Appleby - N/P 750,000.00
2520-000 L-T Port. - Appleby - N/P2 750,000.00
-------------- --------------
LONG-TERM LIABILITIES: 1,750,000.00
EQUITY
3100-000 Preferred Stock ($1.00 par) 250,000.00
3101-000 APIC - Preferred Stock 50,000.00
3150-000 Common Stock ($.001 Par) 470.00
3200-000 RETAINED EARNINGS - PRIOR 4,004,058.13
-------------- --------------
EQUITY: 4,004,058.13 300,470.00
-------------- --------------
REPORT TOTAL: 9,025,998.66 8,792,693.74
============== ==============
</TABLE>
<PAGE>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 1
SYS DATE: 03/05/95 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:38
ALL OPEN INVOICES
DIVISION NO: 60 MAIN DIVISION
<TABLE>
<CAPTION>
K
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICE +------TRANSACTION------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANDATAC ANDATACO
137305 02/01/96 03/02 N 7,026.88 .00 7,026.88 INV 02/20/96 7,026.88
----------- ---------- ---------- -----------
VENDOR ANDATAC TOTALS: 7,026.88 .00 7,026.88 7,026.88
ARMSTRG IAIN ARMSTRONG
039000835 02/21/96 02/21 N 2,187.43 .00 2,187.43 INV 02/29/96 2,187.43
----------- ---------- ---------- -----------
VENDOR ARMSTRG TOTALS: 2,187.43 .00 2,187.43 2,187.43
ARTAND Arthur Anderson LLP
021596 02/15/96 02/15 N 12,500.00 .00 12,500.00 INV 02/26/96 12,500.00
----------- ---------- ---------- -----------
VENDOR ARMSTRG TOTALS: 12,500.00 .00 12,500.00 12,500.00
ATLANTI ATLANTIC MEMORY GROUP, INC.
58111 02/01/96 02/14 N 9,656.20 .00 9,656.20 INV 02/20/96 9,656.20
58518 02/06/96 02/21 N 7,583.50 .00 7,583.50 INV 02/29/96 7,583.50
54904 02/16/96 03/02 N 8,932.75 .00 8,932.75 INV 02/29/96 8,932.75
58984 02/20/96 03/06 N 3,871.75 .00 3,871.75 INV 02/29/96 3,871.75
906545 02/09/96 02/24 N 5,006.40- .O0 5,000.40- INV 02/29/96 5,006.40-
----------- ---------- ---------- -----------
VENDOR ATLANTI TOTALS: 25,037.80 .00 25,037.80 25,037.80
ATLAS Atlas Watersystems
021096 02/10/96 02/10 N 141.75 .00 141.75 INV 02/10/96 141.75
----------- ---------- ---------- -----------
VENDOR ATLAS TOTALS: 141.75 .00 141.75 141.75
AVIS AVIS
111295 11/12/95 12/12 N 184.13 .00 184.13 INV 11/28/95 184.13
----------- ---------- ---------- -----------
VENDOR AVIS TOTALS: 184.13 .00 184.13 184.13
BERSHIR Bershire Computer Products
4284 02/13/96 02/13 N 6,571.35 .00 6,571.35 INV 02/29/96 6,571.35
----------- ---------- ---------- -----------
VENDOR BERSHIR TOTALS: 6,571.35 .00 6,571.35 6,571.35
BERTUCC BERTUCCI'S
27930 02/23/96 02/23 N 23.32 .00 23.32 INV 02/29/96 23.32
27933 02/24/96 02/24 N 39.55 .00 39.55 INV 02/29/96 39.55
27946 02/26/96 02/26 N 54.83 .00 54.83 INV 02/29/96 54.83
----------- ---------- ---------- -----------
VENDOR BERTUCC TOTALS: 117.70 .00 117.70 117.70
CFMOTOR CF Motorfreight
291-625751 02/14/96 02/14 N 309.58 .00 309.58 INV 02/29/96 309.58
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
RUN DATE: 03/05/96 TO BUSINESS@WEB PAGE: 2
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:26 AM
ALL OPEN INVOICES
</TABLE>
<TABLE>
<CAPTION>
DIVISION NO. 00 MAIN DIVISION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N
VENDOR/ +------DATES------+ L INVOICE DISCOUNT INVOICE +-----TRANSACTION-----+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
---------- --------- -------- ----------
VENDOR CFMOTOR TOTALS: 309.58 .00 309.58 309.58
CHONGCH CHONG CHO
022696 02/26/96 02/26 N 5,323.65 .00 5,323.65 INV 02/26/96 5,323.65
---------- --------- -------- ----------
VENDOR CHONGCE TOTALS: N 5,323.65 .00 5,323.65 INV 5,323.65
CLOVE TRACY CLORE
022396 02/23/96 02/26 N 3,999.92 .00 3,999.92 INV 02/26/96 3,999.92
---------- --------- -------- ----------
VENDOR CLOVE TOTALS: 3,999.92 .00 3,999.92 3,999.92
COMPUSA COMPUSA, INC.
447053790 02/01/96 03/02 N 1,968.75 .00 1,968.75 INV 02/20/96 1,968.75
447053974 02/01/96 03/02 N 2,150.40 .00 2,150.40 INV 02/29/96 2,150.40
447053979 02/01/96 03/02 N 546.00 .00 546.00 INV 02/29/96 546.00
447054044 02/02/96 03/03 N 2,253.56- .00 2,253.56- INV 02/29/96 2,253.56-
447054149 02/06/96 03/07 N 16,458.75 .00 16,458.75 INV 02/20/96 16,458.75
447054271 02/08/96 03/09 N 971.25 .00 971.25 INV 02/29/96 971.25
447054340 02/09/96 03/10 N 6,510.00 .00 6,510.00 INV 02/29/96 6,510.00
447054405 02/13/96 03/14 N 5,510.93 .00 5,510.93 INV 02/29/96 5,510.93
447045873 02/22/96 03/23 N 2,434.43 .00 2,434.43 INV 02/29/96 2,434.43
---------- --------- -------- ----------
VENDOR COMPUSA TOTALS: 34,296.95 .00 34,296.95 34,296.95
CRYSTAL CRYSTAL TRANSPORT, INC.
55795 02/12/96 03/13 N 220.00 .00 220.00 INV 02/29/96 220.00
55796 02/13/96 03/14 N 180.00 .00 180.00 INV 02/29/96 180.00
55797 02/14/96 03/15 N 180.00 .00 180.00 INV 02/29/96 180.00
55803 02/21/96 03/22 N 180.00 .00 180.00 INV 02/29/96 180.00
55804 02/22/96 03/23 N 180.00 .00 180.00 INV 02/29/96 180.00
---------- --------- -------- ----------
VENDOR CRYSTAL TOTALS: 940.00 .00 940.00 940.00
CTG CAMBRIDGE TECHNOLOGY GROUP
10210 02/22/96 02/22 N 74.75 .00 74.75 INV 02/29/96 74.75
10214 02/26/96 02/26 N 629.96 .00 629.96 INV 02/29/96 629.96
10215 02/26/96 02/26 N 329.70 .00 329.70 INV 02/29/96 329.70
10230 02/22/96 02/22 N 71.48 .00 71.48 INV 02/29/96 71.48
---------- --------- -------- ----------
VENDOR CTG TOTALS: 1,105.89 .00 1,105.89 1,105.89
DIGITAL DIGITAL EQUIPMENT CORPORATION
080195 08/01/95 08/31 N 85,712.00 .00 5,247.00 INV 08/17/95 85,712.00
INV 04/18/95 42,856.00- 000501 08/18/95
PMT 10/19/96 37,609.00- 000165 10/19/95
PMT 12/07/95 5,247.00- 000447 12/07/95
PMT 12/11/95 5,247.00 000447 12/07/95
</TABLE>
<PAGE>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 3
SYS DATE: 03/09/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:38 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
<TABLE>
<CAPTION>
K
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICES +------TRANSACTION------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ---------- ---------- -----------
VENDOR DIGITAL TOTALS: 85,712.00 .00 5,247.00 5,247.00
DONOVAN John Donovan
021296 02/12/96 02/12 N 7,155.18 .00 7,155.18 INV 02/12/96 7,155.18
----------- ---------- ---------- -----------
VENDOR DONOVAN TOTALS: 7,155.18 .00 7,155.18 7,155.18
DWILSON David Wilson Associates
98503 02/26/96 02/26 N 21,976.50 .00 21,976.50 INV 02/23/96 21,976.50
----------- ---------- ---------- -----------
VENDOR DWILSON TOTALS: 21,976.50 .00 21,976.50 21,976.50
EXHIBIT EXHIBIT SUPPORT
7708 12/21/95 12/21 N 500.00- .00 500.00- INV 12/31/95 500.00-
7779 12/11/95 12/11 N 598.50 .00 598.50 INV 12/31/96 598.50
----------- ---------- ---------- -----------
VENDOR EXHIBIT TOTALS: 98.50 .00 98.50 98.50
EXPOCON EXPOCON MANAGEMENT ASSOC.
122198 12/22/95 01/21 N 1,000.00 .00 1,000.00 INV 02/29/95 1,000.00
----------- ---------- ---------- -----------
VENDOR EXPOCON TOTALS: 1,000.00 .00 1,000.00 1,000.00
FEDI FEDERAL EXPRESS
572190223 02/07/96 03/08 N 94.75 .00 94.75 INV 02/29/96 94.75
----------- ---------- ---------- -----------
VENDOR FEDI TOTALS: 94.75 .00 94.75 94.75
FOGGART FOGG ART MUSEUM
38289 02/01/96 02/01 N 1,000.00 .00 1,000.00 INV 02/29/96 1,000.00
----------- ---------- ---------- -----------
VENDOR FOGGART TOTALS: 1,000.00 .00 1,000.00 1,000.00
FORMAGG Formaggie Kitchen Inc.
9691 02/26/96 02/26 N 125.80 .00 125.00 INV 02/29/96 125.80
----------- ---------- ---------- -----------
VENDOR FORMAGG TOTALS: 125.80 .00 125.80 125.80
FULLER LEE FULLER
020196 02/01/96 02/01 N 373.28 .00 373.28 INV 02/29/96 373.28
022796 02/27/96 02/27 N 1,526.62 .00 1,526.62 INV 02/29/96 1,526.62
----------- ---------- ---------- -----------
VENDOR FULLER TOTALS: 1,899.90 .00 1,899.90 1,899.90
GOURMET GOURMET CATERERS, INC.
21834 02/13/96 03/14 N 703.50 .00 703.50 INV 02/26/96 703.50
21835 02/13/96 02/14 N 120.75 .00 120.75 INV 02/26/96 120.75
21842 02/13/96 03/14 N 871.50 .00 871.50 INV 02/26/96 871.50
21844 02/14/96 03/15 N 761.25 .00 761.25 INV 02/26/96 761.25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 4
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:30 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
L
VENDOR/ --------DATES-------- L INVOICE DISCOUNT INVOICE --------TRANSACTION-------- CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOURMET GOURMET CATERERS, INC.
21750 02/15/96 03/16 N 871.50 .00 871.50 INV 02/26/96 871.50
21851 02/16/96 03/17 N 834.75 .00 834.75 INV 02/26/96 834.75
21837 02/19/96 03/20 N 514.50 .00 514.50 INV 02/26/96 514.50
21858 02/20/96 03/31 N 777.00 .00 777.00 INV 02/26/96 777.00
21859 02/21/96 03/22 N 624.75 .00 624.75 INV 02/26/96 624.75
21861 02/21/96 03/22 N 1,399.13 .00 1,399.13 INV 02/29/96 1,399.13
21867 02/22/96 03/23 N 644.70 .00 644.70 INV 02/26/96 644.70
21868 02/22/96 03/23 N 562.80 .00 562.80 INV 02/26/96 562.80
---------- --------- ------------ ----------
VENDOR GOURMET TOTALS: 8,686.13 .00 8,686.13 8,686.13
GRIFFIN KEN GRIFFIN
020196 02/01/96 02/01 N 165.65 .00 165.65 INV 02/29/96 165.65
020196A 02/01/96 02/01 N 126.84 .00 126.84 INV 02/29/96 126.84
020696 02/06/96 02/06 N 210.97 .00 210.97 INV 02/29/96 210.97
021496 03/14/96 02/14 N 366.90 .00 366.90 INV 02/29/96 366.90
2196 02/01/96 02/01 N 1,137.28 .00 1,137.28 INV 02/29/96 1,137.28
---------- --------- ------------ ----------
VENDOR GRIFFIN TOTALS: 2,007.64 .00 2,007.64 2,007.64
HANSON CORPORATE EXPRESS
51619960 02/13/96 03/14 N 158.13 .00 158.13 INV 02/29/96 158.13
51624730 02/14/96 03/15 N 184.49 .00 184.49 INV 02/29/96 184.49
51632110 02/20/96 03/21 N 24.53 .00 24.53 INV 02/29/96 24.53
51632111 02/21/96 03/22 N 36.79 .00 36.79 INV 02/29/96 36.79
---------- --------- ------------ ----------
VENDOR HANSON TOTALS: 403.94 .00 403.94 403.94
HARVEY Mary Harvey
021296 02/12/96 02/12 N 806.00 .00 806.00 INV 02/23/96 806.00
---------- --------- ------------ ----------
VENDOR HARVEY TOTALS: 806.00 .00 806.00 806.00
HEWLETT HEWLETT PACKARD-MIKE HOUGHTON
073195 07/31/95 07/31 N 16,573.00 .00 16,573.00 INV 07/31/95 16,573.00
082995 08/29/95 08/29 N 14,927.00 .00 14,927.00 INV 08/31/95 14,927.00
083195 08/31/95 08/31 N 8,000.00 .00 8,000.00 INV 08/31/95 8,000.00
---------- --------- ------------ ----------
VENDOR HEWLETT TOTALS: 39,500.00 .00 39,500.00 39,500.00
HP Hewlett - Packard
7561372 02/10/96 02/10 N 13,940.10 .00 13,940.10 INV 02/29/96 13,940.10
75K4246 02/21/96 02/21 N 2,485.35 .00 2,485.35 INV 02/29/96 2,485.35
---------- --------- ------------ ----------
VENDOR HP TOTALS: 16,425.45 .00 16,425.45 16,425.45
ICUBKD INTERNATIONAL INTEGRATION, INC.
951103 11/03/95 12/03 N 30,000.00 .00 30,000.00 INV 11/17/95 30,000.00
951103A 11/03/95 12/03 N 76,000.00 .00 76,000.00 INV 11/30/95 76,000.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 5
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:38 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
E
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICE +-------TRANSACTION-------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICUBKD INTERNATIONAL INTEGRATION, INC.
951128 11/28/95 12/28 N 80,000.00 .00 40,000.00 INV 11/30/95 80,000.00
PMT 01/15/96 40,000.00- 000566 01/15/96
951129J 12/01/95 12/31 N 5,588.65 .00 5,588.65 INV 12/29/95 5,588.65
951129E 12/01/95 12/31 N 4,714.12 .00 4,716.12 INV 12/29/95 4,716.12
951129L 12/01/95 12/31 N 10,925.91 .00 10,925.91 INV 12/29/95 10,925.91
951130R 12/01/95 12/31 N 1,759.42 .00 1,759.42 INV 12/29/95 1,759.42
951130C 12/01/95 12/31 N 5,453.68 .00 5,453.68 INV 12/29/95 5,453.68
------------- ------- ----------- -----------
VENDOR ICUBKD TOTALS: 214,443.78 .00 174,443.78 174,443.78
JMULLIK Jeffrey Mulliken - Architect
960103 01/31/96 01/31 N 9,402.40 .00 9,402.40 INV 01/31/96 9,402.40
------------- ------- ----------- -----------
VENDOR JMULLIK TOTALS: 9,402.40 .00 9,402.40 9,402.40
JORGEN James Jorgenson
022696 02/26/96 02/25 N 370.45 .00 370.45 INV 02/29/96 370.45
------------- ------- ----------- -----------
VENDOR JORGEN TOTALS: 370.45 .00 370.45 370.45
KIMMELM DAVID KIMMELMAN
21696 02/16/96 02/16 N 170.37 .00 170.37 INV 02/26/96 170.37
------------ ------- ----------- -----------
VENDOR KIMMELM TOTALS: 170.37 .00 170.37 170.37
IUO YU-MING IUO
020196 02/01/96 02/01 N 533.86 .00 533.86 INV 02/29/96 533.86
------------ -------- ----------- -----------
VENDOR IUO TOTALS: 533.86 .00 533.86 533.86
LASER LASER PERFECT
LA 52905 02/15/96 03/16 N 734.48 .00 734.48 INV 02/29/96 734.48
------------ ------- ----------- -----------
VENDOR LASER TOTALS: 734.48 .00 734.48 734.48
MILLER Software Development 36 West
1272966463 02/21/96 02/21 N 3,250.00 .00 3,250.00 INV 02/29/96 3,250.00
------------ ------- ----------- -----------
VENDOR MILLER TOTALS: 3,250.00 .00 3,250.00 3,250.00
NETWORK Network Cabinet Products
960091 02/05/96 02/05 N 3,855.67 .00 3,855.67 INV 02/29/96 3,858.67
------------ ------- ----------- -----------
VENDOR NETWORK TOTALS: 3,855.67 .00 3,855.67 3,855.67
OEC OPEN ENVIRONMENT CORP.
139 11/01/95 11/01 N 1,800.00 .00 1,800.00 INV 11/17/95 1,800.00
141 11/01/95 11/01 N 13,500.00 .00 13,500.00 INV 11/17/95 13,500.00
145 11/01/95 11/01 N 33,750.00 .00 33,750.00 INV 11/30/95 33,750.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 6
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:30 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
E
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICE +-------TRANSACTION-------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OEC OPEN ENVIRONMENT CORP.
3727 11/01/95 11/01 N 9,000.00 .00 9,000.00 INV 11/17/95 9,000.00
3821 11/01/95 11/02 N 10,944.50 .00 10,944.50 INV 11/30/95 10,344.50
3847 11/01/95 11/01 N 13,500.00 .00 13,500.00 INV 11/30/95 13,500.00
3867 11/01/95 11/01 N 2,700.00 .00 2,700.00 INV 11/30/95 2,700.00
3873 11/20/95 11/20 N 10,325.00 .00 10,325.00 INV 11/30/95 10,325.00
3874 11/20/95 11/20 N 2,065.00 .00 2,065.00 INV 11/30/95 2,065.00
3875 11/20/95 11/20 N 2,065.00 .00 2,065.00 INV 11/30/95 2,065.00
3887 12/01/95 12/01 N 5,988.94 .00 5,988.94 INV 12/23/95 5,988.94
3891 12/01/95 12/01 N 4,678.37 .00 4,678.37 INV 12/29/95 4,678.37
3892 12/01/95 12/01 N 4,243.53 .00 4,243.53 INV 12/29/95 4,243.53
3893 12/01/95 12/01 N 2,807.93 .00 2,807.93 INV 12/29/95 2,807.93
3912 01/01/96 01/01 N 15,000.00 .00 15,000.00 INV 01/31/96 15,000.00
3913 01/01/96 01/01 N 6,000.00 .00 6,000.00 INV 01/31/96 6,000.00
3924 01/01/96 01/01 N 3,000.00 .00 3,000.00 INV 01/31/96 3,000.00
4024-IN 01/01/96 01/01 N 2200,000.00 .00 2200,000.00 INV 01/31/96 2200,000.00
----------- -------- ----------- -----------
VENDOR OEC TOTALS: 2341,368.27 .00 2341,368.27 2341,368.27
ORGANIS ORGANISATION TECHNIQUE AUDIO
9773 08/01/95 08/01 N 10,096.26 .00 10,096.26 INV 08/22/95 13,591.26
ADJ 08/31/95 3,795.00-
----------- -------- ----------- -----------
VENDOR ORGANIS TOTALS: 10,096.26 .00 10,096.26 10,096.26
PENCOM PENCOM SYSTEMS INC.
64701 01/25/96 02/24 N 9,000.00 .00 9,000.00 INV 01/31/96 9,000.00
----------- -------- ----------- -----------
VENDOR PENCOM TOTALS: 9,000.00 .00 9,000.00 9,000.00
PIESNER MARK PIESNER
020196 02/01/96 02/01 N 324.35 .00 324.35 INV 02/29/96 324.35
----------- -------- ----------- -----------
VENDOR PIESNER TOTALS: 324.35 .00 324.35 324.35
PRESSRM THE PRESSROOM, INCORPORATED
37156 01/01/96 01/31 N 908.55 .00 908.55 INV 01/31/96 908.55
37370 01/23/96 02/22 N 567.00 .00 567.00 INV 01/31/96 567.00
----------- -------- ----------- -----------
VENDOR PRESSRM TOTALS: 1,475.55 .00 1,475.55 1,475.55
PWORKS PageWorks Accounting Dept.
196027 02/08/96 02/08 N 110.78 .00 110.78 INV 02/29/96 110.78
196373 02/14/96 02/14 N 40.43 .00 40.43 INV 02/28/96 40.43
----------- -------- ----------- -----------
VENDOR PWORKS TOTALS: 151.21 .00 151.21 151.21
QUEBLO Queblo
1145900 02/13/96 02/13 N 611.00 .00 611.00 INV 02/29/96 611.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 7
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:38 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
H
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICE +-------TRANSACTION-------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------- -------- ---------- ----------
VENDOR QUEBLO TOTALS: 611.00 .00 611.00 611.00
RGUPTA Raja Gupta
011596 01/15/96 02/15 N 79.00 .00 79.00 INV 01/23/96 79.00
---------- -------- ---------- ----------
VENDOR RGUPTA TOTALS: 79.00 .00 79.00 79.00
SHEPP Sheppard Riley Coughlin
21506 JMC 02/27/96 02/27 N 769.00 .00 769.00 INV 02/29/96 769.00
21507 JMC 02/27/96 02/27 N 3,123.00 .00 3,123.00 INV 02/29/96 3,123.00
21508 JMC 02/27/96 02/27 N 354.00 .00 354.00 INV 02/29/96 354.00
21510 JMC 02/27/96 02/27 N 1,996.00 .00 1,996.00 INV 02/29/96 1,996.00
---------- -------- ---------- ----------
VENDOR SHEPP TOTALS: 6,242.00 .00 6,242.00 6,242.00
SIEMENS Siemens Nixdorf, Inc.
90001944 02/01/96 02/01 N 127,500.00 .00 127,500.00 INV 02/29/96 127,500.00
---------- -------- ---------- ----------
VENDOR SIEMENS TOTALS: 127,500.00 .00 127,500.00 127,500.00
SNYDER MARTIN SNYDER
022796 02/27/96 02/27 N 99.97 .00 99.97 INV 02/29/96 99.97
---------- -------- ---------- ----------
VENDOR SNYDER TOTALS: 99.97 .00 99.97 99.97
SPEAR HEIDI SPEAR
021996 02/19/96 02/19 N 697.23 .00 697.23 INV 02/29/96 697.23
---------- -------- ---------- ----------
VENDOR SPEAR TOTALS: 697.23 .00 697.23 697.23
SPEEDYA AMERICAN SPEEDY
15049 02/07/96 03/08 N 233.12 .00 233.12 INV 02/29/96 233.12
15050 02/07/96 03/08 N 52.40 .00 52.40 INV 02/29/96 52.40
15059 02/09/96 03/10 N 237.56 .00 237.56 INV 02/29/96 237.56
15071 02/09/96 03/10 N 568.70 .00 568.70 INV 02/29/96 568.70
15096 02/14/96 03/15 N 526.26 .00 526.26 INV 02/29/96 526.26
15113 02/16/96 03/17 N 321.93 .00 321.93 INV 02/29/96 321.93
15120 02/19/96 03/20 N 266.74 .00 266.74 INV 02/29/96 266.74
15137 02/21/96 03/22 N 154.35 .00 154.35 INV 02/29/96 154.35
15141 02/21/96 03/22 N 306.23 .00 306.23 INV 02/29/96 306.23
15160 02/22/96 03/23 N 249.11 .00 249.11 INV 02/29/96 249.11
15166 02/23/96 03/24 N 280.77 .00 280.77 INV 02/29/96 280.77
15168 02/24/96 03/25 N 149.63 .00 149.63 INV 02/29/96 149.63
15170 02/23/96 03/24 N 438.69 .00 438.69 INV 02/29/96 438.69
15174 02/26/96 03/27 N 107.52 .00 107.52 INV 02/29/96 107.52
---------- -------- ---------- ----------
VENDOR SPEEDYA TOTALS: 3,893.01 .00 3,893.01 3,893.01
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUN DATE: 03/05/96 TO BUSINESS@WEB, INC. PAGE: 8
SYS DATE: 03/05/96 ACCOUNTS PAYABLE TRIAL BALANCE TIME: 09:38 AM
ALL OPEN INVOICES
DIVISION NO: 00 MAIN DIVISION
E
VENDOR/ +-------DATES-------+ L INVOICE DISCOUNT INVOICE +-------TRANSACTION-------+ CHECK CHECK
INVOICE NO. INVOICE DUE DSCNT D AMOUNT AMOUNT BALANCE TYPE DATE AMOUNT NUMBER DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TAKASHI QUNIO TAKASHIMA
022495 02/28/95 03/30 N 378.00 .00 378.00 INV 02/28/95 378.00
----------- ------- ----------- -----------
VENDOR TAKASHI TOTALS: 378.00 .00 378.00 378.00
TRIUMPH Triumph Technologies, Inc.
7972 02/01/96 02/01 N 4,602.85 .00 4,602.85 INV 02/29/96 4,602.85
7988 02/01/96 02/01 N 4,616.90 .00 4,616.90 INV 02/29/96 4,616.90
8038 02/01/96 02/01 N 3,054.10 .00 3,054.10 INV 02/29/96 3,054.10
----------- ------- ----------- -----------
VENDOR TRIUMPH TOTALS: 12,273.85 .00 12,273.85 12,273.85
UNITED United Lithograph, Inc.
078039 02/24/96 02/24 N 7,209.00 .00 7,209.00 INV 02/29/96 7,209.00
----------- ------- ------------ -----------
VENDOR UNITED TOTALS: 7,209.00 .00 7,209.00 7,209.00
URS URS INFORMATION SYSTEMS, INC.
92146628 03/01/96 03/02 N 31,399.60 .00 31,399.60 INV 02/20/96 31,399.60
92147370 02/13/96 03/14 N 2,584.95 .00 2,584.95 INV 02/29/96 2,584.95
----------- ------- ----------- -----------
VENDOR URS TOTALS: 33,984.55 .00 33,984.55 33,984.55
VORE BRANDON VORE
022396 02/23/96 02/23 N 125.99 .00 125.99 INV 02/29/96 125.99
----------- ------- ----------- -----------
VENDOR VORE TOTALS: 125.99 .00 125.99 125.99
WISE Terry Wise
021596 02/15/96 02/15 N 1,862.27 .00 1,862.27 INV 02/29/96 1,862.27
021696 02/16/96 02/16 N 2,267.95 .00 2,267.95 INV 02/29/96 1,267.95
022196 02/21/96 02/21 N 274.88 .00 274.88 INV 02/29/96 274.88
022596 02/25/96 02/25 N 2,677.19 .00 2,677.19 INV 02/29/96 2,677.19
----------- ------- ----------- -----------
VENDOR WISE TOTALS: 7,082.29 .00 7,082.29 7,082.29
----------- ------- ----------- -----------
DIVISION 00 TOTALS: 3081,987.36 .00 2961,322.36 2961,522.36
----------- ------- ----------- -----------
REPORT TOTALS: 3081,987.36 .00 2961,522.36 2961,522.36
=========== ======= =========== ===========
</TABLE>
<PAGE>
Schedule III
A. 16,204,545 Common Shares are issued and outstanding as of March 5, 1996:
<TABLE>
<S> <C> <C>
Sundar Subramaniam 4,998,000 Common Shares
Len Hafetz 400,000 Common Shares
James Nondorf 100,000 Common Shares
Legacy Investment Partnership 2,000,000 Common Shares
J&S Limited Partnership 2,000,000 Common Shares
Enamullah Khan 2,000 Common Shares
Isao Okawa 200,000 Common Shares
CSK Corporation 200,000 Common Shares
Klaus Besier 1,440,000 Common Shares
Harrington Trust Limited 4,864,545 Common Shares
as Trustee of The Appleby Trust
</TABLE>
B. 1,837,750 Common Shares are reserved for issuance upon exercise of
outstanding option grants to employees and consultants under the 1995
Stock Plan; these options are subject to vesting (and the majority remain
unvested).
C. Commitments to issue options for an aggregate of 302,000 Common Shares have
been made to persons who have accepted employment offers.
D. The Company has agreed to issue and sell to Hewlett-Packard Company 180,506
shares of Series B Convertible Preferred Stock pursuant to a certain Series
B Convertible Preferred Stock Purchase Agreement dated as of February 27,
1996.
E. In connection with the establishment of a credit facility with State Street
Bank and Trust Company, the Company has agreed to issue to SSB Investments,
Inc., an affiliate of such bank, a warrant for the purchase of 35,000
Common Shares on or before February 15, 2003 at an exercise price of $5.54
per share, and to extend with respect to such shares, piggy-back
registration rights in connection with any Company registration of its
securities (other than in its initial public offering).
PABOS:WEK:239980_1
<PAGE>
SCHEDULE IV
The Company is a party to the following Material Contracts:
1. The Company has an understanding with Klaus Besier, who was recently
appointed chief executive officer of the Company, pursuant to which it has
committed to develop, within three months, a performance bonus compensation
arrangement with Mr. Besier under which Mr. Besier will, upon achievement of
certain goals (to be mutually agreed upon by the Company and Mr. Besier), be
entitled to bonus compensation. Mr. Besier's bonus targets are $400,000 for
1996, $1,000,000 for 1997 and $2,500,000 for 1998.
2. The Company grants incentive stock options and non-qualified options to
its employees and consultants under the Company's 1995 Stock Plan.
3. The Company has entered into a series of related credit facilities with
State Street Bank and Trust Company providing for aggregate borrowings of up to
$5,000,000. The Company has granted State Street Bank and Trust Company a
security interest in substantially all of the Company's assets to secure its
obligations under such credit facilities.
4. The Company has agreed to issue securities of the Company to certain
persons and entities identified on Schedule III hereto.
5. The Company has granted Hewlett-Packard Company a right of first offer
with respect to any proposed sale by the Company of its equity securities to any
company engaged in the manufacture of computer hardware.
6. The Company leases its offices at One Arsenal Marketplace, Watertown,
Massachusetts under a 5-year lease expiring in 2001. The Company expects to
lease office furniture from a commercial office supply company.
7. The Company has acquired intellectual property rights from the following
sources:
(a) InterGroup Technologies, Inc. (VisualWare)
(b) Mentor Communications Ltd. (Logical Data Integrator)
(c) Mystic River Software Inc. (Softbridge Basic Language)
(d) Open Environment Corporation (Toolkit)
(e) VZ Corp. (object-oriented development platform)
The Company has transferred intellectual property to the following
entities:
(a) Open Environment Corporation (SAP customization software)
(b) Cambridge Executive Programme Ltd. (VZ development platform)
8. The Company has agreed to extend to SSB Investments, Inc. piggyback
registration rights with respect to the shares of the Company's Common Stock
issuable upon exercise of the warrant the Company has agreed to issue to SSB
Investments, Inc.
<PAGE>
9. The Company is a party to the following additional agreements involving
more than $250,000 or continuing over a period of more than two years:
(a) The Weber Group public relations project
(b) Siemans Nixdorf master partnership
(c) Shell Oil business management project
<PAGE>
EXHIBIT 10.18
BUSINESS@WEB, INC.
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
MARCH 6, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I - THE PREFERRED SHARES 1
Section 1.01 - Issuance, Sale and Delivery of the Preferred Shares 1
Section 1.02 - Closing 1
Section 1.03 - Payment of Purchase Price 1
Section 1.04 - Additional Purchasers 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
Section 2.01 - Organization, Qualification and Corporate Power 2
Section 2.02 - Authorization of Agreements, etc. 3
Section 2.03 - Validity 3
Section 2.04 - Authorized Capital Stock 3
Section 2.05 - Financial Statements; Corporate Minutes 4
Section 2.06 - Certain Events 4
Section 2.07 - Litigation, Compliance with Law 5
Section 2.08 - Proprietary Information of Third Parties 5
Section 2.09 - Title to Properties 6
Section 2.10 - Leasehold Interests 6
Section 2.11 - Taxes 6
Section 2.12 - Intellectual Property 7
Section 2.13 - Material Contracts 7
Section 2.14 - Compliance with Governing Documents and Material
Contracts 9
Section 2.15 - Loans and Advances 9
Section 2.16 - Borrowings; Assumptions and Guaranties of
Indebtedness of Other Persons 9
Section 2.17 - Significant Customers and Suppliers 9
Section 2.18 - Employees 9
Section 2.19 - Transactions with Affiliates 10
Section 2.20 - Governmental Approvals 10
Section 2.21 - Disclosure 10
Section 2.22 - Offering of the Preferred Shares 11
Section 2.23 - Brokers 11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 11
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV - CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS 12
Section 4.01 - Opinion of Company's Counsel 13
Section 4.02 - Representations and Warranties to be True and Correct 13
Section 4.03 - Performance 13
Section 4.04 - Conduct of Business 13
Section 4.05 - Charter 13
Section 4.06 - Confidentiality Agreement 13
Section 4.07 - Registration Rights Agreement 13
Section 4.08 - Preemptive Rights 13
Section 4.09 - Co-Sale Rights Agreement 13
Section 4.10 - Voting Agreement 14
Section 4.11 - Performance by Other Purchasers 14
Section 4.12 - Legal Fees 14
Section 4.13 - All Proceedings to be Satisfactory 14
ARTICLE V - COVENANTS OF THE COMPANY 14
Section 5.01 - Financial Statements, Reports, etc. 14
Section 5.02 - Reserve for Conversion of Shares 15
Section 5.03 - Corporate Existence 15
Section 5.04 - Properties, Business, Insurance 15
Section 5.05 - Visitation, Consultation and Advice 15
Section 5.06 - Notice of Extraordinary Corporate Actions 16
Section 5.07 - Transactions with Affiliates 16
Section 5.08 - Key Man Insurance 16
ARTICLE VI - RESTRICTIONS ON TRANSFER OF PREFERRED SHARES 17
Section 6.01 - Transfer of Preferred Shares and Conversion Shares 17
Section 6.02 - First Offer Right 17
Section 6.03 - Permitted Transfers 17
Section 6.04 - Additional Transfer Restrictions 18
ARTICLE VII - MISCELLANEOUS 18
Section 7.01 - Expenses 18
Section 7.02 - Brokerage 18
Section 7.03 - Parties in Interest 18
Section 7.04 - Notices 19
Section 7.05 - Governing Law 19
Section 7.06 - Entire Agreement 19
Section 7.07 - Counterparts 19
Section 7.08 - Amendments and Waivers 19
Section 7.09 - Severability 19
Section 7.10 - Titles and Subtitles 20
Section 7.11 - Certain Defined Terms 20
Section 7.12 - No Waiver; Cumulative Remedies 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 7.13 - Confidentiality 20
Section 7.15 - Further Assurances 21
</TABLE>
iii
<PAGE>
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of March
6, 1996, among Business@Web, Inc., a Delaware corporation (the "Company") and
the purchasers listed on Schedule I hereto (individually, a "Purchaser" and
collectively, the "Purchasers", which term shall include any additional
Purchasers who become parties to this Agreement and purchase Preferred Shares
pursuant to Section 1.04, below).
WHEREAS, the Company wishes to issue and sell to the Purchasers up to
1,250,906 shares (the "Preferred Shares") of the authorized but unissued Series
B Convertible Preferred Stock, $1.00 par value, of the Company (the "Series B
Convertible Preferred Stock"); and
WHEREAS, the Purchasers wish to purchase the Preferred Shares on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PREFERRED SHARES
Section 1.01 Issuance, Sale and Delivery of the Preferred Shares. Subject
---------------------------------------------------
to the terms and conditions hereinafter set forth, the Company hereby agrees to
issue and sell the Preferred Shares to the Purchasers, and each Purchaser,
severally and not jointly, hereby agrees to purchase from the Company the number
of Preferred Shares set forth under the heading "Shares Purchased" opposite such
Purchaser's name on Schedule I hereto, at the purchase price of $5.54 per share.
Section 1.02 Closing. The closing of the transactions contemplated hereby
-------
shall take place at the offices of Peabody & Arnold, 50 Rowes Wharf, Boston,
Massachusetts 02110, at 10:00 a.m., Boston time, on March 6, 1996, or at such
other location, date and time as may be agreed upon between the Purchasers and
the Company (such closing being called the "Closing" and such date and time
being called the "Closing Date"). At the Closing, the Company shall issue and
deliver to each Purchaser a stock certificate or certificates in definitive
form, registered in the name of such Purchaser, representing the Preferred
Shares being purchased by it.
Section 1.03 Payment of Purchase Price. As payment in full for the
-------------------------
Preferred Shares being purchased by it at the Closing, and against delivery of
the stock certificate or certificates therefor as aforesaid, on the Closing Date
each Purchaser shall deliver to the Company the amount set forth under the
heading "Purchase Price" opposite such Purchaser's name on Schedule I hereto
(the "Purchase Price"). Payment of the Purchase Price shall be made by check or
checks payable to the order of the Company, by transfer to the account of the
Company by wire transfer, by surrender for cancellation of promissory notes or
other obligations of the Company, or by any combination thereof.
1
<PAGE>
Section 1.04 Additional Purchasers. At any time on or before March 31,
---------------------
1996, Cowen & Company ("Cowen") and certain employees, affiliates and other
individuals designated by Cowen may become parties to this Agreement by
executing and delivering counterpart signature pages hereto indicating, in each
case, the number of Preferred Shares (not to exceed, in the aggregate, 95,668
Preferred Shares) being purchased thereby and delivering to the Company,
together therewith, payment in full for the Purchase Price for such Preferred
Shares. Payment of the Purchase Price shall be made by check or checks payable
to the order of the Company, by transfer to the account of the Company by wire
transfer, by surrender for cancellation of promissory notes or other obligations
of the Company (including, with respect to Cowen, the obligation of the Company
to pay a placement fee in connection with the transactions contemplated hereby),
or by any combination thereof. Upon such execution, delivery, and payment, such
persons shall become "Purchasers" entitled to all of the rights and benefits,
and subject to all of the provisions, of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers that, except
as set forth in the Disclosure Schedule attached hereto as Schedule II:
-----------
Section 2.01 Organization, Qualification and Corporate Power.
-----------------------------------------------
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
licensed or qualified to transact business in all jurisdictions in which the
nature of the business transacted by the Company or the character of the
properties owned or leased by the Company requires that the Company qualify to
do business as a foreign corporation, except where the failure to be so licensed
or qualified would not have a material adverse effect on the business,
operations or financial condition of the Company. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, to execute, deliver and
perform this Agreement and the Registration Rights Agreement (as such term is
hereinafter defined), and to issue, sell and deliver the Preferred Shares and to
issue and deliver the shares of Common Stock, $.001 par value, of the Company
("Common Stock") issuable upon conversion of the Preferred Shares (the
"Conversion Shares").
(b) The Company has no subsidiaries. The Company does not own of
record or beneficially, directly or indirectly, (i) any shares of capital stock
or securities convertible into capital stock of any other corporation or (ii)
any participating interest in any partnership, joint venture or other non-
corporate business enterprise and does not control, directly or indirectly, any
other entity.
2
<PAGE>
Section 2.02 Authorization of Agreements, etc.
--------------------------------
(a) The execution and delivery by the Company of this Agreement and
the Registration Rights Agreement, the performance by the Company of its
obligations hereunder and thereunder, the issuance, sale and delivery of the
Preferred Shares and the issuance and delivery of the Conversion Shares have
been duly authorized by all requisite corporate action and will not violate any
provision of any law applicable to the Company, any order of any court or other
agency of government applicable to the Company, the Restated Certificate of
Incorporation of the Company (the "Charter"), or the By-laws of the Company, as
amended, or any provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(b) The Preferred Shares have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series B Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances. The Conversion Shares
have been duly reserved for issuance upon conversion of the Preferred Shares
and, when so issued, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances. Neither the issuance, sale or delivery of
the Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
Section 2.03 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to laws of
general application from time to time in effect affecting creditors' rights and
the exercise of judicial discretion in accordance with general equitable
principles. The Registration Rights Agreement when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligation of the Company and of the other parties thereto, enforceable in
accordance with its terms, subject to laws of general application from time to
time in effect affecting creditors' rights and the exercise of judicial
discretion in accordance with general equitable principles.
Section 2.04 Authorized Capital Stock. The authorized capital stock of
------------------------
the Company will, immediately prior to the Closing, consist of (i) 3,000,000
shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), of which
1,431,412 shares have been designated Series B Convertible Preferred Stock, and
1,568,588 shares remain undesignated and (ii) 30,000,000 shares of Common Stock.
Immediately prior to the Closing, 16,204,545 shares of Common Stock will be
validly issued and outstanding, and no other shares of Common Stock or Preferred
Stock will be outstanding. All shares of the series of Preferred Stock
designated Series A Convertible Preferred Stock which had been issued prior to
the date hereof have been surrendered for conversion into Common Stock and
retired, and the series of Preferred
3
<PAGE>
Stock designated Series A Convertible Preferred Stock has been cancelled and
eliminated from the shares which the Company is authorized to issue. The
stockholders of record and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase or
otherwise acquire from the Company any equity securities of the Company, and the
number of shares of Common Stock or Preferred Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, are as set forth in the attached Schedule III. The designations,
------------
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Charter, a copy of which is attached as Exhibit A. Except
---------
as set forth in the attached Schedule III, (i) no person owns of record or is
------------
known to the Company to own beneficially any share of Common Stock or Preferred
Stock, (ii) no subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire from the Company
any equity securities of the Company is authorized or outstanding and (iii)
there is no commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or asset.
Except as provided for in the Charter or as set forth in the attached Schedule
--------
III, the Company has no obligation (contingent or other) to purchase, redeem or
- ---
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
Section 2.05 Financial Statements; Corporate Minutes. The Company has
---------------------------------------
furnished to the Purchasers the unaudited balance sheet of the Company as of
December 31, 1995 and the related statement of operations, shareholders' equity
and cash flows for the fiscal year then ended (the "Financial Statements"). The
Financial Statements (a) are complete and correct in all material respects, (b)
are in accordance with the Company's books and records, (c) present fairly the
Company's financial position for the period and as of the date indicated and (d)
have been prepared in conformity with generally accepted accounting principles
consistently applied, subject to (i) adjustments which will not, in the
aggregate, be material and (ii) the absence of footnotes. The Company has
furnished to the Purchaser copies of the minutes of meetings and written
consents in lieu of meetings of the Company's shareholders and Board of
Directors from the date of the Company's incorporation through the date of this
Agreement (the "Corporate Minutes"). The Corporate Minutes accurately reflect
all actions taken by the Company's shareholders and Board of Directors.
Section 2.06 Certain Events. Except as set forth in this Agreement and
--------------
the Schedules hereto, and the documents referred to therein, the Company has
not, since the date of the Financial Statements, (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into, in each case in the
ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities incurred in the ordinary course of
business, (iv) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other security, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or
4
<PAGE>
cancelled any debt or claim, (vii) sold, assigned, transferred or granted any
exclusive license with respect to any patent, trademark, trade name, service
mark, copyright, trade secret or other intangible asset, (viii) suffered any
loss of property or waived any right of substantial value whether or not in the
ordinary course of business, (ix) made any change in officer compensation except
in the ordinary course of business and consistent with past practice, (x) made
any material change in the manner of business or operations of the Company, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
Section 2.07 Litigation, Compliance with Law. There is no (i) action,
-------------------------------
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pend ing under
collective bargaining agreements or otherwise, or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (in cluding without limitation any inquiry as to the
qualification of the Company to hold or receive any governmental license or
permit), and, to the best of the Company's knowledge, there is no basis for any
of the foregoing. The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon the Company of any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There is no
action or suit by the Company pending or threatened against others. To the best
of the Company's knowledge, the Company has complied in all material respects
with all laws, rules, regulations and orders applicable to its business,
operations, properties, assets, products and services, and the Company has all
necessary governmental permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted. There is no
existing law, rule, regulation or order, and the Company is not aware of any
proposed law, rule, regulation or order, whether federal or state, which would
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business.
Section 2.08 Proprietary Information of Third Parties. To the best of the
-----------------------------------------
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or nondisclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company's
knowledge, no person employed by the Company has utilized or proposes to utilize
any trade secret or any information or documentation proprietary to any third
party, and to the best of the Company's knowledge, no person employed by the
Company has violated any confidential relationship which such person may have
had with any third party, in connection with the development, manufacture
5
<PAGE>
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such utilization or violation.
Section 2.09 Title to Properties. The Company has good and marketable
-------------------
title to its properties and assets reflected in the Financial Statements and all
such properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances, except
for liens for current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company and its subsidiaries.
Section 2.10 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
Section 2.11 Taxes. The Company has filed all tax returns, federal,
-----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. The
federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's Federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any federal, state, county or local-taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed (a) an election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
that the Company be taxed as an S corporation or (b) consent pursuant to Section
341(f) of the Code, relating to collapsible corporations.
Section 2.12 Intellectual Property. The Company possesses adequate
---------------------
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") which are necessary or desirable to the
conduct of the Company's business as conducted and as proposed to be conducted
or the lack of which would materially adversely affect the Company or its
business. No claim is pending or, to the best of the Company's knowledge,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the best of the Company's
6
<PAGE>
knowledge, there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company, and
to the best of the Company's knowledge there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential. The Company has not granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.
Section 2.13 Material Contracts. Except for the agreements identified in
------------------
the Schedule of Material Contracts attached hereto as Schedule IV (the "Material
-----------
Contracts"), the Company is not a party to or otherwise bound by any written or
oral contract or instrument or other restriction which individually or in the
aggregate could materially adversely affect the business, prospects, financial
condition, operations, property or affairs of the Company, including, without
limitation, any written or oral:
(a) contract or agreement which is not terminable on less than ninety
(90) days' notice without cost or other liability to the Company (except
for contracts which, in the aggregate, are not material to the business of
the Company);
(b) contract which entitles any customer to a rebate or right of set-
off, or which varies in any material respect from the Company's standard
form contracts;
(c) contract with any labor union;
(d) contract or other commitment with any supplier of goods or
services containing any provision permitting any party other than the
Company to renegotiate the price or other terms, or containing any pay-back
or other similar provision, upon the occurrence of a failure by the Company
to meet its obligations under the contract when due or the occurrence of
any other event;
(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of the
Company's normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not terminable
on notice without cost or other liability to the Company, except normal
severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, contract or
understanding pursuant to which
7
<PAGE>
benefits are provided to any employee of the Company (other than group
insurance plans applicable to employees generally);
(h) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company has advanced or
agreed to advance money or has agreed to lease any property as lessee or
lessor;.
(1) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any form
of intangible property;
(n) agreement under which it has granted any person any registration
rights, other than the Registration Rights Agreement (as such term is
hereinafter defined);
(o) agreement under which it has limited or restricted its right to
compete with any person in any respect; or
(p) other contract or group of related contracts with the same party
involving more than $250,000 or continuing over a period of more than two
(2) years from the date or dates thereof (including renewals or extensions
optional with another party), which contract or group of contracts is not
terminable by the Company without penalty upon notice of thirty (30) days
or less.
Section 2.14 Compliance with Governing Documents and Material Contracts.
----------------------------------------------------------
The Company and, to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date under each of the Material Contracts and have
received no notice of default and are not in default (with due notice or lapse
of time or both) under any Material Contract or any material provision of any
other agreement. The Company has no present expectation or intention of not
fully performing all its obligations under each Material Contract, and the
Company has no knowledge of any breach or anticipated breach by the other party
to any Material Contract. The Company is in full compliance with all of the
terms and provisions of its Charter and By-laws.
8
<PAGE>
Section 2.15 Loans and Advances. The Company does not have any
------------------
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company.
Section 2.16 Borrowings; Assumptions and Guaranties of Indebtedness of
------------------------------------------------------ --
Other Persons,. The Company is not obligated to any person for any money
- --------------
borrowed or liability incurred (absolute, accrued or contingent) except current
liabilities incurred and liabilities under contracts entered into, in each case
in the ordinary course of business. The Company is not obligated to any person
by reason of the Company having assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
Section 2.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which is significant to the Company has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
Section 2.18 Employees. Each of the officers of the Company and each
---------
other person now employed by the Company who has access to confidential
information of the Company has executed an Employee Agreement substantially in
the form of Exhibit B (collectively, the "Confidentiality Agreements"), and such
---------
agreements are in full force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company. To the best of the Company's knowledge,
the Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee-Retirement Income Security Act
of 1974, as amended.
Section 2.19 Transactions with Affiliates. No director, officer, employee
----------------------------
or stockholder of the Company, or, to the Company's knowledge, any member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or, to the Company's knowledge, any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock or other ownership interest thereof, (i) is a party to any transaction
with the Company, including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from, transfer of any asset (including any Intellectual
Property) from or to, or otherwise requiring payments to any such person or firm
or (ii) to the Company's knowledge, is an officer, director, trustee, partner or
holder of more than 5% of the outstanding capital stock or other ownership
interest in any entity engaged directly or indirectly in competition with the
Company.
9
<PAGE>
Section 2.20 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the Registration Rights Agreement, the issuance, sale and
delivery of the Preferred Shares or, upon conversion thereof, the issuance and
delivery of the Conversion Shares, other than (i) the filing of the Charter with
the Secretary of State of the State of Delaware and (ii) the filing of notice
subsequent to the Closing that may be required pursuant to federal and state
securities laws in connection with the sale of the Preferred Shares.
Section 2.21 Disclosure. Neither the Company's representations and
----------
warranties in this Agreement and in the Schedules and Exhibits to this Agreement
nor any statement made by the Company in the Confidential Private Placement
Memorandum dated February 1996 (a copy of which the Company has been provided to
each of the Purchasers) contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no factor (other than causes or events beyond the control
of the Company) which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company
or any of its subsidiaries.
Section 2.22 Offering of the Preferred Shares. Neither the Company nor
--------------------------------
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act of 1933, as amended (the "Securities Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder), in either case so as to subject the offering, issuance or sale of
the Preferred Shares to the registration provisions of the Securities Act or of
any applicable state securities (Blue Sky) laws or regulations.
Section 2.23 Brokers. The Company has engaged Cowen to act as its
-------
exclusive agent for the private placement of shares of Series B Preferred Stock
under this Agreement and has agreed to pay Cowen a placement fee (and to
reimburse Cowen for certain expenses) in connection therewith. The Company has
no other contract, arrangement or understanding with any broker, finder or
similar agent with respect to the transactions contemplated by this Agreement.
10
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers, severally and not jointly, represents and warrants
to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act and was not organized for the
specific purpose of acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks
thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Preferred Shares being purchased by it are being acquired for
its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof;
(e) it understands that (i) the Preferred Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506
promulgated under the Securities Act, (ii) the Preferred Shares and, upon
conversion thereof, the Conversion Shares must be held indefinitely unless
a subsequent disposition thereof is registered under the Securities Act or
is exempt from such registration, (iii) the Preferred Shares and the
Conversion Shares will bear a legend to such effect, and (iv) the Company
will make a notation on its transfer books to such effect;
(f) it has no present need for liquidity in connection with its
purchase of the Preferred Shares;
(g) the purchase of the Preferred Shares is consistent with the
general investment objectives of such Purchaser, and that it understands
that the purchase of the Preferred Shares involves a high degree of risk in
view of the fact that, among other things, the Company is a start-up
enterprise, and there may never be an established market for the Company's
capital stock; and
(h) the individual executing this Agreement on its behalf has been
duly authorized to execute and deliver this Agreement; the signature of
such individual is binding upon such Purchaser; such Purchaser is duly
organized, validly existing and in good standing in its jurisdiction of
incorporation of organization and has all requisite power and authority to
execute and deliver this Agreement; and the execution and delivery of this
Agreement and the purchase of the Preferred Shares hereunder will not
result in the violation of, constitute a breach of default under, or
conflict with, any
11
<PAGE>
term or provision of the charter, bylaws, or other governing document of
such Purchaser or, to its knowledge, material breach of default under any
material agreement, judgment, decree, order, statute or regulation by which
it is bound or applicable to it.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares to be purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
Section 4.01 Opinion of Company's Counsel. The Purchasers shall have
----------------------------
received from Peabody & Arnold, counsel for the Company, an opinion dated the
Closing Date, substantially in the form attached to this Agreement as Exhibit C.
---------
Section 4.02 Representations and Warranties to be True and Correct. The
------------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President and Treasurer of the Company shall have certified
to such effect to the Purchasers in writing on behalf of the Company.
Section 4.03 Performance. The Company shall have performed and complied
-----------
in all material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
President and Treasurer of the Company shall have certified to the Purchasers in
writing to such effect on behalf of the Company.
Section 4.04 Conduct of Business. From the date of this Agreement through
-------------------
the Closing Date, the Company shall have conducted its business in the ordinary
course, shall have complied in all material respects with all applicable laws,
rules regulations and orders, noncompliance with which could materially
adversely affect the Company's business or financial condition, and shall not
have made any material change in the nature of its business.
Section 4.05 Charter. The Charter shall read in its entirety as set forth
-------
in Exhibit A.
---------
Section 4.06 Confidentiality Agreements. All officers of the Company and
--------------------------
all employees of the Company who have access to confidential information of the
Company shall have signed Confidentiality Agreements and all such
Confidentiality Agreements shall be in full force and effect.
Section 4.07 Registration Rights Agreement. The Company shall have
------------------------------
executed and delivered the Registration Rights Agreement in the form attached
hereto as Exhibit D (the "Registration Rights Agreement").
---------
12
<PAGE>
Section 4.08 Preemptive Rights. All stockholders, if any, of the Company
-----------------
having any preemptive, first refusal or other rights with respect to the
issuance of the Preferred Shares or the Conversion Shares shall have irrevocably
waived the same in writing.
Section 4.09 Co-Sale Rights Agreement. Harrington Trust Limited as
------------------------
Trustee of The Appleby Trust, J&S Limited Partnership, Legacy Investment
Partnership, and Sundar Subramaniam (together, the Restricted Shareholders")
shall have executed and delivered a Co-Sale Rights Agreement with the Purchasers
in substantially the form attached hereto as Exhibit E (the "Co-Sale Rights
---------
Agreement").
Section 4.10 Voting Agreement. The Restricted Shareholders and Klaus
----------------
Besier ("Besier" and, together with the Restricted Shareholders, the "Principal
Shareholders") shall have executed and delivered a Voting Agreement with the
Purchasers in substantially the form attached hereto as Exhibit F (the "Voting
---------
Agreement") and Ofer Nemirovsky
shall have been elected a director of the Company in accordance with the terms
of the Voting Agreement.
Section 4.11 Performance by Other Purchasers. Each of the other
-------------------------------
Purchasers shall have performed and complied in all material respects with all
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, including without limitation payment of the
full Purchase Price for the Preferred Shares to be purchased by such Purchaser
pursuant to Article I.
Section 4.12 Legal Fees. The Company shall have paid the reasonable legal
----------
fees and disbursements of Debevoise & Plimpton, counsel for Hancock Venture
Partners, invoiced at the Closing.
Section 4.13 All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers as follows:
Section 5.01 Financial Statements, Reports, etc. The Company shall
----------------------------------
furnish to each of the Purchasers, so long as such Purchaser owns at least
50,000 Preferred Shares or Conversion Shares:
(a) within one hundred twenty (120) after the end of each fiscal year
of the Company, a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal
year then ended, prepared in
13
<PAGE>
accordance with generally accepted accounting principles and audited by a
firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company; and
(b) within sixty (60) days after the end of each fiscal quarter in
each fiscal year (other than the last fiscal quarter in each fiscal year),
a consolidated balance sheet of the Company and its subsidiaries and the
related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted
accounting principles and accompanied by a statement of the Chief Financial
Officer or other senior executive officer of the Company to the effect that
such financial statements have been prepared in accordance with generally
accepted accounting principals, subject to normal year-end adjustments and
the omission of notes, such consolidated balance sheet to be as of the end
of such fiscal quarter and such consolidated statements of income,
stockholders' equity and cash flows to be for such fiscal quarter and for
the period from the beginning of the fiscal year to the end of such fiscal
quarter.
The obligations of the Company to furnish financial information to the
Purchasers pursuant to this Section 5.01 shall terminate at such time as the
Company becomes subject to the reporting requirements of the Securities Exchange
Act of 1934.
Section 5.02 Reserve for Conversion of Shares. The Company shall at all
--------------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of the Preferred Shares or otherwise to comply with the terms of
this Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
Section 5.03 Corporate Existence. So long as any Preferred Shares are
-------------------
outstanding, the Company shall maintain and cause each of its subsidiaries to
maintain their respective corporate existence, rights and franchises in full
force and effect.
Section 5.04 Properties, Business, Insurance. So long as any Preferred
-------------------------------
Shares are outstanding, the Company shall maintain and cause each of its
subsidiaries to maintain as to their respective properties and business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is approved by its Board
of Directors.
14
<PAGE>
Section 5.05 Visitation, Consultation and Advice. So long as a Purchaser
-----------------------------------
holds at least 50,000 Preferred Shares or Conversion Shares, the Company shall
permit and cause each of its subsidiaries to permit such Purchaser and such
persons as it may designate, at such Pur chaser's expense, upon reasonable
notice, reasonable access during normal business hours to visit the Company and
its subsidiaries, discuss the affairs of the Company and its subsidiaries with
their officers, and consult with and advise the management of the Company and
its subsidiaries; provided, however, the (i) the Company may require such
Purchaser and any person conducting such a visit or discussion to execute an
agreement not to use or disclose any information discovered during such visit or
discussion and (ii) the Company may withhold from such Purchaser and its
designees any documents or information relating to the following matters
(hereinafter referred to as "Confidential Matters"): (a) the Company's
relationships or contemplated relationships with any business competitor of such
Purchaser or (b) the Company's business relationships or contemplated business
relationships (as opposed to shareholder relationships) with such Purchaser or
any affiliate of such Purchaser.
Section 5.06 Notice of Extraordinary Corporate Actions. So long as a
-----------------------------------------
Purchaser holds at least 50,000 Preferred Shares or Conversion Shares, the
Company shall, at least 20 days prior to the earlier of effecting or entering
into any binding agreement to effect (i) any sale, lease, assignment, transfer
or other conveyance (other than the grant of a mortgage or security interest) of
all or substantially all the assets of the Company, (ii) any liquidation,
dissolution or winding up of the affairs of the Company, (iii) any consolidation
or merger of the Company with or into another corporation (other than a
transaction in which the holders of the Company's equity securities outstanding
immediately prior to the effectiveness of such transaction hold, in the
aggregate, at least 51% of the equity securities of the surviving entity
immediately following the effectiveness of such transaction), or (iv) any
recapitalization of the Company (in each case, an "Extraordinary Corporate
Action"), give such Purchaser written notice of the proposed Extraordinary
Corporate Action.
Section 5.07 Transactions with Affiliates. Neither the Company nor any
----------------------------
of its subsidiaries or entities under its control shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or other ownership interest in the Company, or with any of member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person or member of the family of any such person, is a
director, officer, trustee, partner or holder of more than 5% of the outstanding
capital stock or other ownership interest thereof, except for transactions on
terms no less favorable to the Company or its subsidiary than it would obtain in
a transaction between unrelated parties.
Section 5.08 Key Man Insurance. The Company shall use its best efforts to
-----------------
obtain, promptly after the Closing, and to maintain in force a key man insurance
policy in the amount of at least $2,000,000 on the life of Besier, the Company's
Chairman and Chief Executive Officer.
Section 5.09 Redemption, Retirement, etc. of Common Stock. The Company
--------------------------------------------
will not redeem, retire, purchase or otherwise acquire any shares of Common
Stock (except at their original purchase price of shares of Common Stock from
officers, employees or directors of, or consultants to, the corporation upon
termination of their status as such pursuant to
15
<PAGE>
agreements containing vesting and/or repurchase provisions approved by the Board
of Directors of the Company.
ARTICLE VI
RESTRICTIONS ON TRANSFER OF PREFERRED SHARES
Section 6.01 Transfer of Preferred Shares and Conversion Shares. Except
--------------------------------------------------
as otherwise provided herein, the Purchasers shall not, prior to the
consummation of a firm commitment underwritten public offering of Common Stock
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock to the public (the "IPO"), sell,
transfer, assign or otherwise dispose of (a "Transfer") any interest in any
Preferred Shares or Conversion Shares except pursuant to Sections 6.02 or 6.03.
Subject to the terms and conditions set forth below, such Purchaser agrees not
to consummate any such Transfer (other than in the IPO) until 30 days after the
later of the delivery to the Company of an Offer Notice (as defined below).
Section 6.02 First Offer Right. Until the IPO, each Purchaser will, at
-----------------
least 30 days prior to making any Transfer (other than in the IPO) of any
Preferred Shares or Conversion Shares, deliver a written notice (the "Notice of
Proposed Sale") to the Company. The Notice of Proposed Sale will disclose in
reasonable detail the identity of the prospective transferee(s), the proposed
number of Preferred Shares or Conversion Shares to be transferred and the
proposed material terms and conditions of the Transfer. If, but only if, the
prospective transferee(s) identified in the Notice of Proposed Sale is, in the
Company's reasonable judgment, a competitor or prospective competitor of (i) the
Company or any of its subsidiaries, (ii) any shareholder of the Company, or
(iii) any material customer or supplier of the Company, the Company shall have
the right to purchase all, but not less than all, of the Shares specified in the
Notice of Proposed Sale at the price and on the terms and conditions specified
therein by delivering written notice of its exercise of such right to such
Purchaser as soon as practicable but in any event within 30 days after the
receipt of the Notice of Proposed Sale. If the Company has elected to purchase
any of the Preferred Shares or Conversion Shares specified in the Notice of
Proposed Sale from such Purchaser, the transfer of such Preferred Shares or
Conversion Shares will be consummated as soon as practicable after the delivery
of the election notice, but in any event within 60 days after the date of the
Notice of Proposed Sale. In the event that the Company has not elected to
purchase all of the Preferred Shares or Conversion Shares specified in the
Notice of Proposed Sale, such Purchaser may, within 90 days after the expiration
of the Company's 30-day election period, transfer such Preferred Shares or
Conversion Shares to the transferees identified in the Notice of Proposed Sale
at a price no less than the price per share specified in the Notice of Proposed
Sale and on other terms and conditions no more favorable to the transferee(s)
than offered to the Company in the Notice of Proposed Sale. The purchase price
specified in any Notice of Proposed Sale shall be payable solely by check or in
cash or by wire transfer of immediately available funds at the closing of the
transaction.
Section 6.03 Permitted Transfers. The restrictions set forth in this
-------------------
Article VI shall not apply to any Transfer (i) in the case of an individual, to
or among such Shareholder's Family Group (as defined below) or by will or the
laws of descent and distribution to such Shareholder's Family Group or (ii) in
the case of an entity, to or among its Affiliates (as
16
<PAGE>
defined below) (the persons to whom Transfers are permitted pursuant to clauses
(i) and (ii) being collectively referred to herein as "Permitted Transferees");
provided, that the restrictions contained in this Article VI shall continue to
be applicable to the Preferred Shares and Conversion Shares after any such
Transfer; and provided further that the transferees of such Preferred Shares and
Conversion Shares shall have agreed in writing to be bound by the provisions of
this Article VI with respect to the Preferred Shares or Conversion Shares so
transferred. "Family Group" means an individual's spouse and lineal descendants
and any trust or other fiduciary solely for the benefit of such individual
and/or such individual's spouse and/or lineal descendants. "Affiliate" of a
person means (i) any other person controlling, controlled by or under common
control with such person and (ii) any partner of any such person which is a
partnership.
Section 6.04 Additional Transfer Restrictions. Until the IPO, no Transfer
--------------------------------
of any Preferred Shares or Conversion Shares (other than in the IPO) may be
made unless the transferee executes and delivers a written instrument, in form
and substance satisfactory to the Company, acknowledging the receipt of a copy
of the provisions and restrictions contained in this Article VI and agreeing to
comply herewith and be bound hereby.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby, provided, however, that,
if but only if the Closing occurs, the Company shall pay on demand the
reasonable fees and disbursements of Debevoise & Plimpton, counsel for Hancock
Venture Partners in connection with such transactions.
Section 7.02 Brokerage. Each party hereto will indemnify and hold
---------
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 7.03 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not; provided, however,
that the rights of the Purchasers under Section 5.01, 5.05 and 5.06 may not be
assigned without the prior written consent of the Company.
Section 7.04 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed delivered (i)
when delivered in person or
17
<PAGE>
(ii) one business day after being mailed by certified or registered mail, return
receipt requested, or sent by a recognized overnight courier service, addressed
as follows:
(a) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(b) if to any of the Purchasers, at the address set forth below such
Purchaser's name on Schedule I hereto;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 7.05 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
Section 7.06 Entire Agreement. This Agreement, including the Schedules
----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 7.07 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.08 Amendments and Waivers. This Agreement may be amended or
----------------------
modified, and provisions hereof may be waived, only with the written consent of
the Company and Purchasers holding at least a majority of the Preferred Shares
outstanding.
Section 7.09 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 7.10 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
18
<PAGE>
Section 7.11 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency
or any agency or political subdivision thereof, or other entity.
(b) "subsidiary" shall mean, as to the Company, any corporation of
which more than 50% of the outstanding stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly
owned by the Company, or by one or more of its subsidiaries, or by the
Company and one or more of its subsidiaries.
Section 7.12 No Waiver; Cumulative Remedies. No failure or delay on the
------------------------------
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall nay single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 7.13 Confidentiality. Each of the Purchasers agrees that it will
---------------
maintain with the same degree of care it uses with respect to its own
confidential information all confidential, proprietary or secret information
which such Purchaser may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company to such
Purchaser pursuant to this Agreement, or pursuant to visitation or inspection
rights granted hereunder, unless such information is known, or until such
information becomes known through no fault of such Purchaser, to the public;
provided, however, that such Purchaser may disclosure such information (i) on a
- -------- -------
confidential basis to its attorneys, accountants, consultants any other
professionals to the extent necessary to obtain their services in connection
with its investment in the Company, (ii) to any affiliate of such Purchaser on a
"need to know basis", (iii) with respect to financial information, in summary
fashion as part of general financial reports by such Purchaser to its partners
and affiliates or to potential investors in such Purchaser, and (iv) as required
by applicable law. If such Purchaser is required in any legal or administrative
or other governmental proceeding to disclose any of such information, such
Purchaser shall give the Company timely notice of the pending requirement and
use its best efforts to provide the Company an opportunity to obtain protective
provisions against further disclosure.
Section 7.14 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchasers or the Company, the Company and
the Purchasers shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Preferred Shares.
19
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
BUSINESS@WEB, INC.
By:/s/ James Nondorf
------------------------
President
[Corporate Seal]
Attest:
/s/ William E. Kelly
- -------------------------
Secretary
PURCHASERS:
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ Robert Wadsworth
-----------------------------
authorized officer
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ Robert Wadsworth
-----------------------------
PANTIO HOLDING LTD.
By: /s/ Marlene Boesch - Weber
------------------------
Marlene Boesch - Weber, Secretary
20
<PAGE>
JUILLIARD INVESTMENTS, INC.
By:/s/ Javier Baz
------------------------
Javier Baz
/s/ Jan Baan
---------------------------
Jan Baan
/s/ J.G. Paul Baan
---------------------------
J.G. Paul Baan
/s/ Lorenzo Cue
---------------------------
Lorenzo Cue
/s/ Tom C. Tinsley
---------------------------
Tom C. Tinsley
BUSINESS@WEB, INC.
Series B Convertible Preferred Stock
Additional Investor's Signature Page
The undersigned, John C. Howe, having been designated as an "Additional
Purchaser" by Cowen & Company pursuant to Section 1.04 of that certain Series B
Convertible Preferred Stock Purchase Agreement dated as of March 6, 1996 by and
among Business@Web, Inc., a Delaware corporation ("the Company") and the several
Purchasers named on Schedule I thereto (the "Purchase Agreement") and desiring
to purchase from the Company 5,409 Preferred Shares (as such term is defined in
the Purchase Agreement), by his execution of this Additional Investor's
Signature Page hereby becomes a party to the Purchase Agreement and the
Registration Rights Agreement (as such term is defined in the Purchase
Agreement), ratifying and affirming with respect to himself, as of the date
hereof, the truth and accuracy of the representations, warranties, and covenants
of a Purchaser under the Purchase Agreement and of an Investor under the
Registration Rights Agreement. The undersigned Additional Purchaser has herewith
delivered to the Company his check in the amount of $30,000 in full payment for
the Preferred Shares being purchased hereunder.
/s/ John C. Howe
----------------------------------
John C. Howe
March 30, 1996
Accepted as of March 30, 1996:
BUSINESS@WEB, INC.
By: /s/ James G. Nondorf
----------------------------
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Purchaser Shares Purchased Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
Hancock Venture Partners 685,921 $3,800,002.34
IV-Direct Fund L.P.
One Financial Center
Boston, MA 02111
Falcon Ventures II, L.P. 36,101 $199,999.54
One Financial Center
Boston, MA 02111
Pantio Holding Ltd. 180,506 $1,000,003.24
Omar Hodge Building
Wyckam's Cay
Road Town, Tortolla
British Virgin Islands
copy to:
CISSA
13, avenue de Bude
1202 Geneva
Switzerland
Lorenzo Cue 36,101 $199,999.54
1451 Montgomery Street
San Francisco, CA 94133
Juilliard Investments, Inc. 27,076 $150,001.04
Palm Bay Towers
26 S. 720 NE 69th Street
Miami, FL 33138
Jan Baan 60,169 $333,336.26
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
J.G. Paul Baan 60,169 $333,336.26
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
Tom C. Tinsley 60,169 $333,336.26
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
</TABLE>
23
Exhibits to Series B
Preferred Stock Purchase
Agreement
<PAGE>
Exhibit 70
Series B Preferred
Stock Purchase
Agreements
SCHEDULE II
Exceptions to the representations and warranties of the Company set forth in
Article II.
Section 2.8: State Street Bank and Trust Company holds a security interest
-----------
in substantially all assets of the Company to secure the following credit
facilities:
$2,500,000 revolving line of credit,
$500,000 equipment line of credit,
$2,000,000 term loan due September 30, 1996.
Section 2.11: InterGroup Technologies, Inc. has communicated with the
------------
Company regarding alleged use of InterGroup's VisualWare software product by
the Company in violation of the Software License Agreement between InterGroup
and the Company. The Company believes that there is no basis for InterGroup's
allegations and has been engaged in friendly discussions with InterGroup in
effort to resolve this issue.
Section 2.12:
------------
a. The Company is an authorized distributor and reseller of OEC
software.
b. The Company has purchased technology (Toolkit source code) from
OEC for $2.2 million dollars, with payment due on March 15,
1996.
c. The Company sold technology (SAP Make tools) to OEC for
$500,000.
d. Klaus Besier and James Nondorf are employees of the Company.
e. The Company has a strategic partnership relationship with
I-Cube, pursuant to which the Company and I-Cube make joint
proposals and the Company subcontracts services to I-Cube. The
Company and I-Cube are not parties to a formal agreemen t.
f. The Company has a strategic partnership relationship with
Cambridge Technology Group, pursuant to which CTG promotes the
products and services of the Company through CTG's executive
education programs. The Company and CTG are not parties to a
formal agreement.
g. The Company has borrowed $250,000 from J&S Limited Partnership
under a 6% convertible subordinated note (and J&S has waived
its conversion privileges thereunder). The Company intends to
repay this note from the proceeds of this offering.
h. The Company has borrowed $750,00 from the Appleby Trust under a
9% subordinated note due December 31, 2000 (which has no
conversion feature). The Company intends to repay this note
from the proceeds of this offering.
<PAGE>
i. Cambridge Technology Group, Professor John Donovan and John J.
Donovan, Jr. have guaranteed the Company's obligations to State
Street Bank and Trust Company.
<PAGE>
Schedule III
A. 16,204,545 Common Shares are issued and outstanding as of March 5, 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
Sundar Subramaniam 4,998,000 Common Shares
Len Hafetz 400,000 Common Shares
James Nondorf 100,000 Common Shares
Legacy Investment Partnership 2,000,000 Common Shares
J&S Limited Partnership 2,000,000 Common Shares
Enamullah Khan 2,000 Common Shares
Isao Okawa 200,000 Common Shares
CSK Corporation 200,000 Common Shares
Klaus Besier 1,440,000 Common Shares
Harrington Trust Limited 4,864,545 Common Shares
as Trustee of The Appleby Trust
</TABLE>
B. 1,837,750 Common Shares are reserved for issuance upon exercise of
outstanding option grants to employees and consultants under the 1995 Stock
Plan; these options are subject to vesting (and the majority remain
unvested).
C. Commitments to issue options for an aggregate of 302,000 Common Shares have
been made to persons who have accepted employment offers.
D. The Company has agreed to issue and sell to Hewlett-Packard Company 180,506
shares of Series B Convertible Preferred Stock pursuant to a certain Series
B Convertible Preferred Stock Purchase Agreement dated as of February 27,
1996.
E. In connection with the establishment of a credit facility with State Street
Bank and Trust Company, the Company has agreed to issue to SSB Investments,
Inc., an affiliate of such bank, a warrant for the purchase of 35,000
Common Shares on or before February 15, 2003 at an exercise price of $5.54
per share, and to extend, with respect to such shares, piggy-back
registration rights in connection with any Company registration of its
securities (other than in its initial public offering).
<PAGE>
SCHEDULE IV
The Company is a party to the following Material Contracts:
1. The Company has an understanding with Klaus Besier, who was recently
appointed chief executive officer of the Company, pursuant to which it has
committed to develop, within three months, a performance bonus compensation
arrangement with Mr. Besier under which Mr. Besier will, upon achievement of
certain goals (to be mutually agreed upon by the Company and Mr. Besier), be
entitled to bonus compensation. Mr. Besier's bonus targets are $400,000 for
1996, $1,000,000 for 1997 and $2,500,000 for 1998.
2. The Company grants incentive stock options and non-qualified options to
its employees and consultants under the Company's 1995 Stock Plan.
3. The Company has entered into a series of related credit facilities with
State Street Bank and Trust Company providing for aggregate borrowings of up to
$5,000,000. The Company has granted State Street Bank and Trust Company a
security interest in substantially all of the Company's assets to secure its
obligations under such credit facilities.
4. The Company has agreed to issue securities of the Company to certain
persons and entities identified on Schedule III hereto.
5. The Company has granted Hewlett-Packard Company a right of first offer
with respect to any proposed sale by the Company of its equity securities to any
company engaged in the manufacture of computer hardware.
6. The Company leases its offices at One Arsenal Marketplace, Watertown,
Massachusetts under a 5-year lease expiring in 2001. The Company expects to
lease office furniture from a commercial office supply company.
7. The Company has acquired intellectual property rights from the following
sources:
(a) InterGroup Technologies, Inc. (VisualWare)
(b) Mentor Communications Ltd. (Logical Data Integrator)
(c) Mystic River Software Inc. (Softbridge Basic Language)
(d) Open Environment Corporation (Toolkit)
(e) VZ Corp. (object-oriented development platform)
The Company has transferred intellectual property to the following
entities:
(a) Open Environment Corporation (SAP customization software)
(b) Cambridge Executive Programme Ltd. (VZ development platform)
8. The Company has agreed to extend to SSB Investments, Inc. piggyback
registration rights with respect to the shares of the Company's Common Stock
issuable upon exercise of the warrant the Company has agreed to issue to SSB
Investments, Inc.
<PAGE>
9. The Company is a party to the following additional agreements involving
more than $250,000 or continuing over a period of more than two years:
(a) The Weber Group public relations project
(b) Siemans Nixdorf master partnership
(c) Shell Oil business management project
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
BUSINESS@WEB, INC.
Business@Web, Inc. (the "Corporation"), originally incorporated under the
name Object Power, Incorporated by original Certificate of Incorporation filed
with the office of the Secretary of State of the State of Delaware on January
19, 1994, as amended, and currently organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify
that the Board of Directors of the Corporation, by unanimous written consent in
lieu of a meeting, has duly adopted a resolution, pursuant to Sections 141 and
242 of the General Corporation Law of the State of Delaware, setting forth an
amended and restated Certificate of Incorporation of the Corporation and
declaring said amendment and restatement to be advisable. The stockholders of
the Corporation have duly approved said amendment and restatement by the
required vote of such stockholders, adopted by a written action in lieu of a
meeting of such stockholders, all in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware, and written notice of
the taking of such action was given promptly to those stockholders who have not
consented in writing, as required by Section 228 of the General Corporation Law
of the State of Delaware. The Certificate of Incorporation of the Corporation,
as amended and restated in its entirety, is as follows:
FIRST: The name of the Corporation is Business@Web, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of the
Corporation's registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is thirty-three million
(33,000,000) shares, thirty million (30,000,000) of which shall be Common Stock,
par value $.001 per share ("Common Stock"), and three million (3,000,000) of
which shall be Preferred Stock, par value $1.00 per share ("Preferred Stock").
Of the authorized Preferred Stock, one million four hundred thirty-one thousand
four hundred twelve (1,431,412) shares shall be designated Series B Convertible
Preferred Stock and one million five hundred sixty-eight thousand five hundred
eighty-eight (1,568,588) shares shall be undesignated. All shares of the series
of Preferred
<PAGE>
Stock designated Series A Preferred Stock issued and outstanding prior to the
filing of this Restated Certificate of Incorporation have been surrendered for
conversion into Common Stock and retired, and the series of Preferred Stock
designated as Series A Preferred Stock is hereby cancelled and eliminated from
the shares which the Corporation is authorized to issue. Descriptions of the
undesignated Preferred Stock, the Series B Convertible Preferred Stock and the
Common Stock are as follows:
I. PREFERRED STOCK
Description of Undesignated Preferred Stock.
- -------------------------------------------
1. Issuance of Preferred Stock in Classes or Series. The undesignated
------------------------------------------------
Preferred Stock of the Corporation may be issued in one or more classes or
series at such time or times and for such consideration as the Board of
Directors of the Corporation may determine. Each class or series shall be so
designated as to distinguish the shares thereof from the shares of all other
classes and series. Except as to the relative preferences, powers, dividends,
qualifications, rights and privileges referred to in the next paragraph below,
in respect of any or all of which there may be variations between different
classes or series of Preferred Stock, all shares of Preferred Stock shall be
identical. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes
unless otherwise specifically set forth herein.
2. Authority to Establish Variations Between Classes or Series of
--------------------------------------------------------------
Preferred Stock. The Board of Directors of the Corporation is expressly
- ---------------
authorized, by a vote of a majority of the members of the Board of Directors
then in office, subject to the limitations prescribed by law and the provisions
of this Certificate of Incorporation, to provide by adopting a vote or votes, a
Certificate of Designation of which shall be filed in accordance with the
General Corporation Law of the State of Delaware, for the issue of the
undesignated Preferred Stock in one or more classes or series, each with such
designations, preferences, voting powers, dividends, qualifications, special or
relative rights and privileges as shall be stated in the Certificate of
Designation and the resolutions of the Board of Directors creating such class or
series.
Description of Series B Convertible Preferred Stock.
- ---------------------------------------------------
1. Liquidation Rights.
------------------
(a) Treatment at Liquidation, Dissolution or Winding Up.
---------------------------------------------------
(i) Except as otherwise provided in Section 1(b) below, in the
event of any liquidation, dissolution or winding up of the affairs of the
corporation, whether voluntary or involuntary, the holders of Series B
Convertible Preferred Stock shall be entitled
<PAGE>
to be paid first out of the assets of the corporation available for distribution
to holders of the corporation's capital stock of all classes, before payment or
distribution of any of such assets to the holders of any other class or series
of the corporation's capital stock designated to be junior to the Series B
Convertible Preferred Stock, an amount equal to $5.54 per share of Series B
Convertible Preferred Stock (which amount shall be subject to equitable
adjustment whenever there shall occur a stock dividend, distribution,
combination of shares, reclassification or other similar event with respect to
Series B Convertible Preferred Stock and, as so adjusted from time to time, is
hereinafter referred to as the "Base Liquidation Price") plus all dividends
thereon accrued but unpaid, to and including the date full payment shall be
tendered to the holders of Series B Convertible Preferred Stock with respect to
such liquidation, dissolution or winding up.
(ii) Following payment in full to the holders of Series B
Convertible Preferred Stock of all amounts distributable to them under
Section 1(a)(i) hereof, the remaining assets of the corporation available for
distribution to holders of the corporation's capital stock shall be distributed
among the holders of the Common Stock and the holders of the Series B
Convertible Preferred Stock on a share for share basis, with each holder of a
share of Series B Convertible Preferred Stock receiving the amount that would
have been payable to the holder of such share had all shares of Series B
Convertible Preferred Stock been converted to Common Stock pursuant to
Section 2(a) hereof immediately following payment in full to the holders of
Series B Convertible Preferred Stock of all amounts distributable to them under
Section 1(a)(i) hereof.
(iii) If the assets of the corporation shall be insufficient to
permit the payment in full to the holders of Series B Convertible Preferred
Stock of all amounts distributable to them under Section 1(a)(i) hereof, then
the entire assets of the corporation available for such distribution shall be
distributed ratably among the holders of Series B Convertible Preferred Stock.
(b) Treatment of Reorganizations, Consolidations, Mergers and Sales of
------------------------------------------------------------------
Assets. A consolidation or merger of the corporation, or a sale of all or
- ------
substantially all of the assets of the corporation (other than a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in a transaction in which the shareholders of the corporation
immediately prior to the transaction possess more than 50% of the voting
securities of the surviving entity (or parent, if any) immediately after the
transaction) shall be regarded as a liquidation, dissolution or winding up of
the affairs of the corporation within the meaning of this Section 1.
(c) Distributions Other than Cash. Whenever the distribution provided
-----------------------------
for in this Section 1 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the corporation.
<PAGE>
2. Conversion. The holders of Series B Convertible Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series B
----------------------------------
Convertible Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series B Convertible Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $5.54 by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. The Conversion Price
for purposes of calculating the number of shares of Common Stock deliverable
upon conversion without the payment of any additional consideration by the
holder of Series B Convertible Preferred Stock (the "Conversion Price") shall
initially be $5.54. Such initial Conversion Price shall be subject to
adjustment, in order to adjust the number of shares of Common Stock into which
Series B Convertible Preferred Stock is convertible, as hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series B
-----------------------
Convertible Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Series B Convertible Preferred Stock, and shall give
written notice to the corporation at such office that such holder elects to
convert the same and shall state therein the name of such holder or the name or
names of the nominees of such holder in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued. No fractional shares
of Common Stock shall be issued upon conversion of any shares of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock
to which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series B Convertible Preferred Stock, or to such
holder's nominee or nominees, a-certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(c) Automatic Conversion.
--------------------
(i) Each share of Series B Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (subject to adjustment as provided in Section 2(c)(iii)) upon:
<PAGE>
(A) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock to the public
at an initial public offering price per share of not less than $8.25
(adjusted proportionately to give effect to any stock dividend, stock
distribution or subdivision or any combination or consolidation of Common
Stock) and with gross proceeds of not less than $15,000,000 (a "Qualified
IPO") or
(B) the written election of the holders of not less than a
majority of the then outstanding shares of Series B Convertible Preferred
Stock to require such mandatory conversion.
(ii) Upon the occurrence of an event specified in Section 2(c)(i)
hereof, all shares of Series B Convertible Preferred Stock shall be converted
automatically without any further action by any holder of such shares and
whether or not the certificate or certificates representing such shares are
surrendered to the corporation or the transfer agent for the Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be obligated to issue a certificate or certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificate or
certificates evidencing such shares of Series B Convertible Preferred Stock
being converted are either delivered to the corporation or the transfer agent of
the Series B Convertible Preferred Stock, or the holder notifies the corporation
or such transfer agent that such certificate or certificates have been lost,
stolen, or destroyed and executes an agreement satisfactory to the corporation
to indemnify the corporation from any loss incurred by it in connection
therewith and, if the corporation so elects, provides an appropriate indemnity
bond. Upon the automatic conversion of Series B Convertible Preferred Stock,
each holder of Series B Convertible Preferred Stock shall surrender the
certificate or certificates representing such holder's shares of Series B
Convertible Preferred Stock at the office of the corporation or of the transfer
agent for the Series B Convertible Preferred Stock. Thereupon, there shall be
issued and delivered to such holder, promptly at such office and in such
holder's name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Series B Convertible Preferred Stock surrendered were convertible
on the date on which such automatic conversion occurred. No fractional shares
of Common Stock shall be issued upon the automatic conversion of Series B
Convertible Preferred Stock. In lieu of any fractional shares of Common Stock
to which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price.
(iii) In the event of the automatic conversion of shares of
Series B Convertible Preferred Stock into shares of Common Stock, pursuant to
Section 2(c)(i)(A), upon the occurrence of a Qualified IPO in which the initial
offering price per share of Common Stock is less than $10.25 (the "Adjustment
Trigger Price"), the Conversion Price in effect immediately prior to the closing
of the Qualified IPO shall be adjusted automatically to the greater of (A) the
price determined by dividing (i) the initial offering price per share of
<PAGE>
Common Stock in the Qualified IPO by (ii) 1.85 (the "IPO Adjusted Conversion
Price") or (B) $4.46 (the "Adjustment Floor Price"); provided, however, that
there shall be no adjustment of the Conversion Price pursuant to the foregoing
clause if the Conversion Price resulting from adjustment would be higher than
the Conversion Price in effect immediately prior to the closing of the Qualified
IPO. If, prior to the Qualified IPO, the Conversion Price shall have been
adjusted pursuant to Section 2(d)(vi)(A) in the event of a stock dividend, stock
distribution or subdivision or pursuant to Section 2(d)(vi)(B) in the event of a
combination or consolidation of Common Stock, the Adjustment Trigger Price, the
Adjustment Floor Price and the IPO Adjusted Conversion Price shall be decreased
or increased proportionately to give effect to such stock dividend, stock
distribution or subdivision or such combination or consolidation.
(d) Adjustments to Conversion Price for Diluting Issues.
-------------------------------------------- ------
(i) Special Definitions. For purposes of this Section 2(d), the
-------------------
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
--------
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(B) "Original Issue Date" shall mean the date on which a
---------------------
share of Series B Convertible Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
------------------------
indebtedness, shares (other than Common Stock and Series B Convertible
Preferred Stock) or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
----------------------------------
shares of Common Stock issued (or, pursuant to Section 2(d)(iii), deemed to
be issued) by the corporation after the Original Issue Date, other than the
following (collectively, "Excluded Shares"):
(I) shares of Common Stock issued or issuable upon
conversion of shares of Series B Convertible Preferred Stock; or
(II) shares of Common Stock issued or issuable upon
exercise or conversion of Options or Convertible Securities
outstanding on the Original Issue Date; or
(III) shares of Common Stock issued or issuable to
officers, employees or directors of, or consultants to, the
corporation pursuant to a stock purchase or option plan or other
employee stock bonus arrangement (collectively, the "Plans") approved
by the Board of Directors; provided,
<PAGE>
however, that shares of Common Stock issued or deemed issued to a
director of the corporation pursuant to options or other purchase
rights granted after the Original Issue Date shall be Excluded Shares
only if granted at the time of, or in connection with, such director's
initial election to the Board of Directors; or
(IV) shares of Common Stock issued or issuable
pursuant to warrants issued in connection with the establishment of
credit facilities for the corporation (including, without limitation,
in connection with equipment leasing arrangements); or
(V) shares of Common Stock or Convertible Securities
issued with the written consent of the holders of not less than a
majority of the outstanding shares of Series B Convertible Preferred
Stock.
(ii) No Adjustment of Conversion Price. No adjustment in the number
---------------------------------
of shares of Common Stock into which a share of Series B Convertible Preferred
Stock is convertible shall be made, by adjustment in the Conversion Price in
respect of the issuance of Additional Shares of Common Stock or otherwise: (i)
unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the corporation is less than the Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock or, (ii) if prior to such issuance, the
corporation receives written notice from the holders of a majority of the then
outstanding shares of Series B Convertible Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
---------------------------------------------------------------
Stock.
- -----
(A) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 2(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record date, as
the case may be, and
<PAGE>
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(I) no further adjustment in the Conversion Price shall be
made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(II) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase
or decrease in the consideration payable to the corporation, or any
increase or decrease in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(III) upon the expiration of any such options or any rights
of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options for
Common Stock the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the
consideration actually received by the corporation upon such
exercise, or for the issue of all such Convertible Securities
which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the corporation upon
such conversion or exchange; and
(b) in the case of Options for Convertible Securities only
the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such
Options, and the consideration received by the corporation for
the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the corporation
for the issue of all such Options, whether or not
<PAGE>
exercised, plus the consideration deemed to have been received by
the corporation (determined pursuant to Section 2(d)(v)) upon the
issue of the Convertible Securities with respect to which such
Options were actually exercised;
(IV) no readjustment pursuant to clause (II) or (III) above
shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (a) the Conversion Price on the original
adjustment date, or (b) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(V) in the case of any Options which expire by their terms
not more than 30 days after the date of issue thereof, no adjustment
of the Conversion Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (III) above; and
(VI) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which
became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this Section 2(d)(iii) as of the
actual date of their issuance.
(B) Stock Dividends, Stock Distributions and Subdivisions. In
-----------------------------------------------------
the event the corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock), then and in
any such event, Additional Shares of Common Stock shall be deemed to have
been issued:
(I) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend or distribution, or
(II) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which
corporate action becomes effective.
If such record date shall have been fixed and no part of such dividend
shall have been paid on the date fixed therefor, the adjustment
previously made for
<PAGE>
the Conversion price which became effective on such record date shall
be cancelled as of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted pursuant to this
Section 2(d)(iii) as of the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares
-----------------------------------------------------------------
of Common Stock.
- ----------------
(A) In the event the corporation shall issue Additional Shares of
Common Stock (including, without limitation, Additional Shares of Common
Stock deemed to be issued pursuant to Section 2(d)(iii) but excluding
Additional Shares of Common Stock deemed to be issued pursuant to Section
2(d)(iii)(B), which event is dealt with in Section 2(d)(vi) hereof),
without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and immediately prior
to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be (I) the number of shares of
Common Stock outstanding immediately prior to such issue plus (II) the
number of shares of Common Stock which the aggregate consideration received
or deemed to have been received by the corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such
Conversion Price, and the denominator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to such issue plus
(II) the number of Additional Shares of Common Stock so issued or deemed to
be issued.
(B) For the purposes of Section 2(d)(iv)(A) hereof, (i) all
shares of Common Stock issuable upon conversion of shares of Series B
Convertible Preferred Stock, and upon exercise of options or conversion or
exchange of Convertible Securities which are part of the Excluded Shares,
outstanding immediately prior to any issue of Additional Shares of Common
Stock, or any event with respect to which Additional Shares of Common Stock
shall be deemed to be issued, shall be deemed to be outstanding; and (ii)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 2(d)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(C) Notwithstanding anything to the contrary contained herein,
the applicable Conversion Price in effect at the time Additional Shares of
Common Stock are issued or deemed to be issued shall not be reduced
pursuant to Section 2(d)(iv)(A) hereof at such time if the amount of such
reduction would be an amount less than $0.01, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall aggregate $0.01 or
more.
<PAGE>
(v) Determination of Consideration. For purposes of this Section
------------------------------
2(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue,
as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I)
and (II) above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
----------------------------------
share received by the corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 2(d)(iii)(A), relating to
Options and Convertible Securities, shall be determined by dividing (I) the
total amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (II) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock.
- ----------------------------------------------
(A) Stock Dividends, Distributions or Subdivisions. In the event
----------------------------------------------
the corporation shall issue Additional Shares of Common Stock pursuant to
Section 2(d)(iii)(B) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect immediately prior to such stock
dividend, stock distribution or subdivision
<PAGE>
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
(B) Combinations or Consolidations. In the event the outstanding
------------------------------
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior to such combination
or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series B
Convertible Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series B Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any affected holder of Series B Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of each share of Series B Convertible Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Series B Convertible Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all convertible Series B Convertible Preferred Stock.
<PAGE>
(i) Certain Taxes.. The corporation shall pay any issue or transfer
--------------
taxes payable in connection with the conversion of any shares of Series B
Convertible Preferred Stock; provided, however, that the corporation shall not
be required to pay any tax which may be payable in respect of any transfer to a
name other than that of the holder of such Series B Convertible Preferred Stock.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series B Convertible Preferred Stock,
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series B Convertible Preferred Stock, in any manner which interferes
with the timely conversion or transfer of such Series B Convertible Preferred
Stock.
3. Voting Rights.
-------------
Except as otherwise provided herein or required by law or by the
provisions establishing any other series of Preferred Stock, the holders of
Common Stock and the holders of Series B Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting and shall vote as one class upon
any matter submitted to the stockholders for a vote, on the following basis:
(i) Holders of Common Stock shall have one vote per share of
Common Stock held by them; and
(ii) Holders of Series B Convertible Preferred Stock shall have
that number of votes per share of Series B Convertible Preferred Stock as is
equal to the number of shares of Common Stock into which each such share of
Series B Convertible Preferred Stock held by such holder could be converted on
the date for determination of stockholders entitled to vote at the meeting.
4. Dividend Rights.
---------------
(a) From and after the Original Issue Date, dividends shall accrue on
each share of the Series B Convertible Preferred Stock, whether or not funds are
legally available therefor and whether or not declared by the Board of
Directors, in the amount per annum of $0.3324 per share of Series B Convertible
Preferred Stock (the "Series B Dividends"). From time to time the Board of
Directors of the corporation may declare and pay dividends or distributions on
shares of the Common Stock or on any other class or series of capital stock of
the corporation, but only if all accrued Series B Dividends shall have been paid
in full prior to the date of any such declaration, payment or distribution.
(b) In the event the Board of Directors of the corporation shall
declare a dividend payable upon the then outstanding shares of the Common Stock
(other than a dividend payable entirely in shares of the Common Stock of the
corporation), the Board of Directors shall declare at the same time a dividend
upon the then outstanding shares of the
<PAGE>
Series B Convertible Preferred Stock, payable at the same time as the dividend
paid on the Common Stock, in an amount equal to the amount of dividends per
share of Series B Convertible Preferred Stock, as would have been payable on the
largest number of whole shares of Common Stock into which each share of Series B
Convertible Preferred Stock held by each holder thereof if such Series B
Convertible Preferred Stock had been converted to Common Stock pursuant to the
provisions of Section 2 hereof as of the record date for the determination of
holders of Common Stock entitled to receive such dividends; and
(c) In the event the Board of Directors of the corporation shall
declare a dividend payable upon any class or series of capital stock of the
corporation other than Common Stock, the Board of Directors shall declare at the
same time a dividend upon the then outstanding shares of Series B Convertible
Preferred Stock, payable at the same time as such dividend on such other class
or series of capital stock in an amount equal to (i) in the case of any series
or class convertible into Common Stock, that dividend per share of Series B
Convertible Preferred Stock, as would equal the dividend payable on such other
class or series determined as if all such shares of such class or series had
been converted to Common Stock and all shares of Series B Convertible Preferred
Stock have been converted to Common Stock on the record date for the
determination of holders entitled to receive such dividend or (ii) if such class
or series of Capital Stock is not convertible into Common Stock, at a rate per
share of Series B Convertible Preferred Stock determined by dividing the amount
of the dividend payable on each share of such class or series of capital stock
by the original issuance price of such class or series of capital stock and
multiplying such fraction by the Base Liquidation Price then in effect.
5. Redemption.
----------
(a) At the written request, made on or after December 31, 2002, of
the holders of a majority of the then-outstanding shares of Series B Convertible
Preferred Stock, the corporation shall on March 31 in each of the three (3)
years immediately following the date of such request (each, a "Redemption
Date"), call for redemption in accordance with Section 5(b) hereof and shall
redeem for the applicable Redemption Amount (as hereinafter defined) from each
holder of Series B Convertible Preferred Stock such number of shares of Series B
Convertible Preferred Stock as shall be equal to thirty-three and one third
percent (33 1/3%) of all of the shares of Series B Convertible Preferred Stock
held by such holder on the Redemption Date. For the purposes of this Section 5,
the term "Redemption Amount" means, for each share of Series B Convertible
Preferred Stock to be redeemed, the sum of (i) the Base Liquidation Price plus
(ii) an amount equal to any dividends accrued and unpaid thereon at the time of
such redemption.
(b) Call for redemption shall be made by the corporation by notice
sent by first class mail, postage prepaid, to each holder of record of Series B
Convertible Preferred Stock to be redeemed, not less than thirty (30) days nor
more than sixty (60) days prior to the Redemption Date set forth therein, at
such holder's address as it appears on the books of the corporation. Such
notice shall set forth (i) the Redemption Date and the place of
<PAGE>
redemption, (ii) the number of shares to be redeemed (in accordance with Section
5(a) hereof) and (iii) the Redemption Amount per share and the aggregate
Redemption Amount to be paid with respect to the shares to be redeemed. The
corporation shall be obligated to redeem shares of Series B Convertible
Preferred Stock in accordance with Section 5(a) hereof whether or not any notice
of redemption is given as required herein. If, before the close of business on
the relevant Redemption Date, any holder of record of Series B Convertible
Preferred Stock shall have surrendered any shares of Series B Convertible
Preferred Stock for conversion pursuant to Section 2(a) hereof, the corporation
shall credit against the number of shares of Series B Convertible Preferred
Stock otherwise required to be redeemed from such holder, and shall not redeem
the number of shares of Series B Convertible Preferred Stock which had been
converted by such holder on or before such Redemption Date and which had not
previously been credited against any redemption.
(c) If, on or before any Redemption Date, the funds necessary for
such redemption shall have been set aside by the corporation and deposited with
a bank or trust company in trust for the pro rata benefit of the holders of
Series B Convertible Preferred Stock to be redeemed pursuant to Section 5(a)
hereof, then, notwithstanding that any certificates for such shares of Series B
Convertible Preferred Stock to be redeemed shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding from and after the Redemption Date, and all rights of holders of
such shares shall forthwith, after the Redemption Date, cease and terminate,
excepting only the right to receive the full redemption funds therefor to which
they are entitled. Any interest accrued on funds so deposited and unclaimed by
stockholders entitled thereto shall be paid to such stockholders at the time
their respective shares are redeemed or to the corporation at the time unclaimed
amounts are paid to it. In case the holders of Series B Convertible Preferred
Stock to be redeemed pursuant to Section 5(a) hereof shall not, within five (5)
years after the Redemption Date, claim the amounts so deposited with respect to
the redemption thereof, any such bank or trust company shall, upon demand, pay
over to the corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof to such
holder and such holder shall look only to the corporation for the payment
thereof. Any funds so deposited with a bank or trust company which shall not be
required for such redemption by reason of the exercise subsequent to the date of
such deposit, of the right of conversion of any shares, or otherwise, shall be
returned to the corporation forthwith.
(d) If the funds of the corporation legally available for redemption
of shares of Series B Convertible Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series B Convertible
Preferred Stock required to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of whole
shares of Series B Convertible Preferred Stock pro rata from among all holders
of Series B Convertible Preferred Stock on the basis of the aggregate number of
shares of Series B Convertible Preferred Stock held by each such holder on the
Redemption Date. The shares of Series B Convertible Preferred Stock not
redeemed shall remain outstanding and entitled to all rights and preferences
provided herein. At any time
<PAGE>
thereafter when additional funds of the corporation are legally available for
the redemption of such shares of Series B Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available.
(e) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
corporation may not incur any indebtedness for money borrowed (unless the
proceeds of such incurrence of indebtedness are used to make all overdue
redemptions) or borrow or reborrow any amounts under any lines of credit which
it may then have outstanding without the prior written consent of the holders of
not less than a majority of the then outstanding shares of Series B Convertible
Preferred Stock; provided, however, that the corporation may incur indebtedness
for money borrowed or borrow or reborrow any amounts under any outstanding lines
of credit without the aforesaid approval if (i) the proceeds of such borrowing
are intended to be, and are in fact, used to pay obligations of the corporation
arising in the ordinary course of business as they become due and payable or
otherwise to maintain the operations of the corporation at the then current
level and not to expand the operations of the corporation in any respect,
whether through expansion or enhancement of, or addition to, the corporation's
then current product line, facilities, equipment, other capital assets or
workforce, or otherwise, (ii) the corporation provides prior written notice of
such borrowing to all holders of Series B Convertible Preferred Stock, which
notice shall include a statement of the intended use of the proceeds of such
borrowing and (iii) promptly upon request therefor, the corporation shall
provide to any holder of Series B Convertible Preferred Stock a certificate
signed by the President and Chief Financial Officer of the corporation
certifying as to the allocation and use of the proceeds of any such borrowing;
and
(f) If the corporation for any reason fails to redeem any shares of
Series B Convertible Preferred Stock in accordance with Section 5(a) hereof on
or prior to the Redemption Date specified therein, then from and after such
Redemption Date until such time as the Redemption Amount for such shares of
Series B Convertible Preferred Stock has been paid in full, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
holders of Series B Convertible Preferred Stock, voting as a separate class and
not with the holders of Common Stock, shall be entitled to elect to the Board of
Directors the smallest number of directors which shall constitute a majority of
the authorized number of directors, and the holders of Common Stock, voting as a
separate class, shall be entitled to elect the remaining members of the Board of
Directors. Whenever under the provisions of the preceding sentence the right
shall have accrued to the holders of Series B Convertible Preferred Stock as a
class to elect directors of the corporation, the Board of Directors shall
promptly call (and in the event the Board of Directors fails to call, the
holders of at least twenty percent (20%) in voting power of the outstanding
shares of Series B Convertible Preferred Stock may call) a special meeting of
stockholders for the election of
<PAGE>
directors. Upon the election by the holders of the Series B Convertible
Preferred Stock of the directors they are entitled to elect as provided in this
Section 5(f), the terms of office of all persons who were previously members of
the Board of Directors shall immediately terminate, whether or not the holders
of Common Stock shall have elected the remaining members of the Board of
Directors. In the case of any vacancy of office occurring among the directors
elected by the holders of Series B Convertible Preferred Stock, the remaining
directors elected by the holders of Series B Convertible Preferred Stock, by
affirmative vote of a majority thereof, may elect a successor to hold office for
the unexpired term of the director whose place shall be vacant; in the case of
any vacancy of office occurring among the directors elected by the holders of
Common Stock, the remaining directors elected by the holders of Common Stock, by
affirmative vote of a majority thereof, may elect a successor to hold office for
the unexpired term of the director whose place shall be vacant. Any director
who shall have been elected by the holders of Series B Convertible Preferred
Stock (or by directors elected by the holders of Series B Convertible Preferred
Stock) may be removed during his term of office by, and only by, the affirmative
vote of the holders of the then outstanding shares of Series B Convertible
Preferred Stock; any director who shall have been elected by the holders of
Common Stock (or by directors elected by the holders of Common Stock) may be
removed during his term of office by, and only by, the affirmative vote of the
holders of the then outstanding shares of Common Stock. If and when the
delinquent Redemption Amount shall have been paid in full, the holders of Series
B Convertible Preferred Stock shall be immediately divested of the special
voting rights set forth in this Section 5(f), but always subject to the
reinstatement of such voting rights in case of similar future delinquency; upon
the termination of such voting rights, the Board of Directors shall call (and
in the event the Board of Directors fails to call, the holders of at least
twenty percent (20%) in voting power of the outstanding shares of Common Stock
may call) a special meeting of stockholders at which all directors shall be
elected in accordance with Section 3, above, and the terms of office of all
persons who are then directors of the corporation shall terminate immediately
upon the election of their successors.
6. Covenants
---------
(a) So long as at least twenty-five percent (25%) of the number of
shares of Series B Convertible Preferred Stock outstanding on the Original Issue
Date shall be outstanding, the corporation shall not, without first having
provided the written notice of such proposed action to each holder of
outstanding shares of Series B Convertible Preferred Stock required by Section
6(b) hereof and having obtained the affirmative vote or written consent of the
holders of a majority of such outstanding shares of Series B Convertible
Preferred Stock:
(i) amend, alter or repeal any provision of, or add any
provision to, the corporation's Certificate of Incorporation or by-laws, if such
action would alter or change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the Series B Convertible
Preferred Stock;
<PAGE>
(ii) reclassify any Common Stock or Preferred Stock into shares
having any preference or priority as to assets superior to or on a parity with
any such preference or priority of the Series B Convertible Preferred Stock;
(iii) create, authorize or issue any additional shares of Series
B Convertible Preferred Stock or any other class or classes of stock or series
of Common Stock or Preferred Stock or any security convertible into or
evidencing the right to purchase shares of any class or series of Common Stock
or Preferred Stock or any capital stock of the corporation senior to or on a
parity with the Series B Convertible Preferred Stock; or
(iv) apply any of its assets to the redemption, retirement,
purchase or other acquisition, directly or indirectly, through subsidiaries or
otherwise, of any shares of Common Stock except at their original purchase price
of shares of Common Stock from officers, employees or directors of, or
consultants to, the corporation upon termination of their status as such
pursuant to agreements containing vesting and/or repurchase provisions approved
by the Board of Directors of the corporation.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the corporation's by-laws to the contrary, notice of any action
specified in Section 6(a) hereof shall be given by the corporation to each
holder of shares of Series B Convertible Preferred Stock by first class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown by the records of the corporation, at least thirty (30) days before the
date on which the books of the corporation shall close or a record shall be
taken with respect to such proposed action, or, if there shall be no such date,
at least thirty (30) days before the date when such proposed action is scheduled
to take place. Any holder of outstanding shares of Series B Convertible
Preferred Stock may waive any notice required by this Section 6(b) by a written
document indicating such waiver.
7. No Reissuance of Series B Convertible Preferred Stock. No share or
----------------------------------------------- -----
shares of Series B Convertible Preferred Stock acquired by the corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and eliminated from the shares which
the corporation shall be authorized to issue.
8. Residual Rights. All rights accruing to the outstanding shares of the
---------------
corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.
II. COMMON STOCK
Description of Common Stock
- ---------------------------
1. Voting Rights. Each holder of record of Common Stock shall be
-------------
entitled to one vote for each share of Common Stock standing in such holder's
name on the books of the
<PAGE>
Corporation. Except as otherwise required by law or this Article FOURTH of this
Restated Certificate of Incorporation, the holders of Common Stock and the
holders of Preferred Stock shall vote together as a single class on all matters
submitted to stockholders for a vote (including any action by written consent).
2. Dividends. Subject to provisions of law and this Article FOURTH of
---------
this Restated Certificate of Incorporation, the holders of Common Stock shall be
entitled to receive dividends out of funds legally available therefor at such
times and in such amounts as the Board of Directors may determine in their sole
discretion.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, after the payment or provisions
for payment of all debts and liabilities of the Corporation and all preferential
amounts to which the holders of the Preferred Stock are entitled with respect to
the distribution of assets in liquidation, the holders of Common Stock shall be
entitled to share ratably in the remaining assets of the Corporation available
for distribution.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation.
B. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation,
<PAGE>
as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except (to the extent provided by applicable law) for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the General Corporation Law of the State of
Delaware or any amendment or successor provisions thereto, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
General Corporation Law of Delaware is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended. Any repeal or modification of this provision shall not adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
NINTH. The Corporation shall indemnify each person who at any time is, or
shall have been, a director or officer of the Corporation, and is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is, or was, a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the maximum extent permitted by the General
Corporation Law of Delaware. The foregoing right of indemnification shall in no
way be exclusive of any other rights of indemnification to which any such
director or officer may be entitled, under any by-law, agreement, vote of
directors or stockholders or otherwise.
TENTH: The Corporation reserves the right to amend or repeal any
provision of this Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the President and Secretary,
respectively, of Business@Web, Inc., declaring and certifying, under penalties
of perjury, that this is the act and deed of the Corporation and that the facts
stated herein are true, have hereunto set their hands as their free act and deed
this 6th day of March, 1996.
_________________________________________
James G. Nondorf, President
__________________________________
William E. Kelly, Secretary
<PAGE>
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
---------------------------------------------
This confidentiality and non-competition agreement is made as of the ____
day of __________ 1996 by and between Business@Web, Inc., a Delaware corporation
("Company"), and _______________________________ ("Employee").
WHEREAS, the Company has developed, and the Company and/or Employee may
continue to develop during the period Employee is retained by the Company,
certain Proprietary Information, Inventions and Intellectual Property (as those
terms are hereinafter defined), that the Company wishes to protect and maintain
as confidential;
WHEREAS, the Company from time to time has received, and may continue to
receive during the period Employee is so retained by the Company, the
Proprietary Information of others, and the Company wishes, and is (in certain
circumstances) contractually obligated, to maintain the confidentiality of such
Proprietary Information; and
WHEREAS, the Company has developed, and will continue to develop during the
period Employee is so retained by the Company, goodwill by, among other things,
substantial expenditure of money and effort;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and undertakings contained in this agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, IT
IS AGREED:
1. Definitions. As used in this Agreement, the following terms shall have
-----------
the following meanings:
(a) Agreement means this confidentiality and non-competition agreement,
---------
including all exhibits, schedules and annexations, as all may be amended from
time to time in the manner provided in this Agreement.
(b) Employment means the current or anticipated or subsequent retention
----------
of Employee by the Company as a full-time employee, a part-time employee, a
consultant or otherwise, or any other period during which Employee receives
compensation from the company in any capacity.
(c) Intellectual Property means any Invention, writing, trade name,
---------------------
trademark, service mark or any other material registered or otherwise protected
or protectible under state, federal, or foreign patent, trademark, copyright, or
similar laws.
(d) Inventions includes ideas, discoveries, inventions, developments
----------
and improvements, whether or not reduced to practice and whether or not
patentable or otherwise within the definition of Intellectual Property.
(e) Proprietary Information includes any scientific, technical, trade
-----------------------
or business secrets of the Company and any scientific, technical, trade or
business materials that the Company treats, or is obligated to treat, as
confidential or proprietary, including, but not limited to, Inventions belonging
to the Company and confidential information obtained by or given to the
<PAGE>
Company about or belonging to its suppliers, licensors, licensees, partners,
affiliates, customers, potential customers or others.
The definition of "Proprietary Information" herein shall not include
Proprietary Information which (i) was known by Employee prior to its disclosure
by the Company; (ii) is publicly known through publication or otherwise through
no wrongful act of Employee; (iii) is received from a third party who rightfully
discloses it to Employee without restriction on its subsequent disclosure; or
(iv) is disclosed pursuant to the lawful requirement of a governmental agency or
by order of court of competent jurisdiction.
2. Employee Acknowledgments. The Company has developed and will develop
------------------------
its Proprietary Information and Intellectual Property over a substantial period
of time and at a substantial expense, and its Proprietary Information and
Intellectual Property are integral to the goodwill of the Company. During the
course of employment to the Company, Employee may develop or become aware of
Proprietary Information and/or Intellectual Property. Protection of the
Proprietary Information and Intellectual Property is necessary to the conduct of
the Company's business, and the Company is and shall at all times remain the
sole owner of the Company's Proprietary Information and Intellectual Property.
3. Confidentiality. Employee shall at all times, both during and after
---------------
any termination of Employee's employment by the Company by either the Company or
Employee, maintain in confidence and not utilize the Proprietary Information or
the Intellectual Property of the Company, and/or technology or proprietary
information of others under confidential evaluation by the Company except in
performing services for the Company pursuant to his or her employment.
Maintaining such Proprietary Information and Intellectual Property in confidence
shall include refraining from disclosing such Proprietary Information or
Intellectual Property to any third party (except when duly and specifically
authorized in writing to do so for purpose of furthering the business of the
Company), and refraining from using such Proprietary Information or Intellectual
Property for the account of Employee or for any other person or business entity.
Employee will not file patents based on the Company's technology or confidential
information, nor seek to make improvements thereon, without the Company's
written approval. Employee agrees not to make any copies of the Proprietary
Information or Intellectual Property of the Company (except when appropriate for
the furtherance of the business of the Company or duly and specifically
authorized to do so) and promptly upon request, whether during or after the
period of employment by the Company, to return to the Company any and all
documentary, machine-readable or other elements of evidence of such Proprietary
Information, Intellectual Property, and any copies of either that may be in
Employee's possession or under Employee's control.
4. Rights to Inventions and Intellectual Property. In connection with
----------------------------------------------
Employee's employment by the Company, or by use of the resources of the Company,
whether or not Employee is then retained by the Company, Employee may produce,
develop, create, invent, conceive or reduce to practice Inventions and
Intellectual Property related to the business of the Company. Employee shall
maintain and furnish to the Company complete and current records of all such
Inventions and Intellectual Property. Employee agrees that all such Inventions
and Intellectual Property are and shall be the exclusive property of the
Company, and that the Company may sue or pursue them without restriction or
additional compensation. Employee: (i) hereby assigns, sets over and transfers
to the Company all of his right, title and interest in and to such Inventions
and Intellectual Property; (ii) agrees that Employee and his agents shall,
during and after the period Employee is retained by the Company, cooperate fully
in obtaining patent,
<PAGE>
trademark, service mark, copyright or other proprietary protection for such
Inventions and Intellectual Property, all in the name of the Company (but only
at Company expense), and, without limitation, shall execute all requested
applications, assignments and other documents in furtherance of obtaining such
protection or registration and confirming full ownership by the Company of such
Inventions and Intellectual property; and (iii) shall, upon leaving the Company,
provide to the Company in writing a full, signed statement of all Inventions and
Intellectual property in which Employee participated prior to termination of
Employee's employment by the Company. Employee hereby designates the Company as
its agent, and grants to the Company a power of attorney with full substitution,
which power of attorney shall be deemed coupled with an interest, for the
purposes of effecting the foregoing assignments from the Employee to the
Company.
5. Non-Solicitation. Employee shall not during the term of his or her
----------------
employment or at any time during the five (5) years following termination of the
term of his or her employment solicit any person who is employed by or a
consultant to the Company or any affiliate or subsidiary of the Company either
during Employee's period or employment or during such five (5) year period, to
terminate such person's employment by or consultancy to the Company, such
affiliate or subsidiary. As used herein the term "solicit" shall include,
without limitation, requesting, encouraging, assisting or causing, directly or
indirectly, any such employee or consultant to terminate such person's
employment by or consultancy to the Company, affiliate or subsidiary.
6. Prohibited Competition. Employee recognizes and acknowledges the
----------------------
competitive and proprietary nature of the Company's business operations.
Employee acknowledges and agrees that a business will be deemed competitive
with the Company if it engages in a line of business in which it performs any of
the services, researches, develops or manufactures or sells any products
provided or offered by the Company or under development by the Company, or any
similar products or products fulfilling the same function, whether or not
similar (the Company's "Field of Interest") (such business to be referred to as
a "competitive business").
Employee further acknowledges and agrees that during the course of
performing services for the Company, the Company will furnish, disclose or make
available to Employee confidential and proprietary information related to the
Company's business and that the Company may provide Employee with unique and
specialized training. Employee also acknowledges that such confidential
information and the training to be provided by the Company have been developed
and will be developed by the Company through the expenditure by the Company of
substantial time, effort and money and that all such confidential information
and training could be used by Employee to compete with the Company.
Accordingly, Employee hereby agrees in consideration of the Company's
agreement to hire Employee and Employee's compensation for services rendered to
the Company and in view of the confidential position to be held by Employee, the
unique and specialized training which the Company may provide Employee and the
confidential nature and proprietary value of the information which the Company
may share with Employee, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, as follows:
<PAGE>
During the period during which Employee performs services for or at the
request of the Company (the "Term") and for a period of eighteen months
following the expiration or termination of the Term (the "Restricted Term"),
whether such termination is voluntary or involuntary, Employee shall not,
without the prior written consent of the Company:
(i) For Employee or on behalf of any other, directly or indirectly,
either as principal, agent, stockholder, employee, consultant,
representative or in any other capacity, own, manage, operate or control,
or be concerned, connected or employed by, or otherwise associate in any
manner with, engage in or have a financial interest in any business whose
primary line of business is in the Field of Interest, or in any other
business in which Employee has any direct operating or scientific
responsibility in the Field of Interest anywhere in the world (the
"Restricted Territory"), except that nothing contained herein shall
preclude Employee from purchasing or owning stock in any such competitive
business if such stock is publicly traded, and provided that Employee's
holdings do not exceed one percent (1%) of the issued and outstanding
capital stock of such business.
(ii) Either individually or on behalf of or through any third party,
solicit, divert or appropriate or attempt to solicit, divert or
appropriate, for the purpose of competing in the Field of Interest with the
Company or any present or future parent, subsidiary or other affiliate of
the Company which is engaged in the Field of Interest, any joint venture or
collaborative research partners, customers or patrons of the Company, or
any prospective customers or patrons with respect to which the Company has
developed or made a presentation for the use or exploitation of products or
processes in the Field of Interest (or similar offering of services),
located within the Restricted Territory.
Employee further recognizes and acknowledges that (i) the types of
employment which are prohibited by this paragraph are narrow and reasonable in
relation to the skills which represent Employee's principal salable asset both
to the company and to Employee's other prospective employers, and (ii) the
specified but broad geographical scope of the provisions of this paragraph is
reasonable, legitimate and fair to Employee in light of the Company's need to
perform its research and to develop and market its services and to develop and
sell its products in a large geographic area in order to have a sufficient
customer base to make the Company's business profitable and in light of the
limited restrictions on the type of employment prohibited herein compared to the
types of employment for which Employee is qualified to earn his or her
livelihood.
If any part of this section should be determined by a court of competent
jurisdiction to be unreasonable in duration, geographic area, or scope, then
this section is intended to and shall extend only for such period of time, in
such area and with respect to such activity as is determined to be reasonable.
7. Continued Obligations. Employee's obligations under this Agreement
---------------------
shall not be affected: (i) by any termination of Employee's employment,
including termination upon the Company's initiative; nor (ii) by any change in
Employee's position, title or function with the Company; nor (iii) by any
interruption in employment during which Employee leaves and then rejoins the
Company for any period within a period of one year and for any reason. Nothing
herein shall be construed as constituting an employment agreement or an
undertaking by the Company to retain Employee's services for any stated period
of time.
<PAGE>
8. No Conflicting Agreements. Employee represents and warrants that
-------------------------
execution and performance of this Agreement does not and will not violate,
conflict with, or constitute a default under any contract, commitment,
agreement, understanding, arrangements, or restriction, or any adjudication,
order, injunction or finding of any kind by any court or agency to which
Employee may be a party or by which Employee may be bound.
9. Remedies. In the event of any breach by Employee of any of the
--------
provisions of this Agreement, the Company shall be entitled, in addition to
monetary damages and to any other remedies available to the Company under this
Agreement and at law, to equitable relief, including injunctive relief, and to
payment by Employee of all costs incurred by the Company in enforcement against
Employee of the provisions of this Agreement, including reasonable attorneys'
fees.
10. General Provisions.
------------------
(a) No Waiver. Waiver of any provision of this Agreement, in whole or
---------
in part, in any one instance shall not constitute a waiver of any other
provision in the same instance, nor any waiver of the same provision in another
instance, but each provision shall continue in full force and effect with
respect to any other then-existing or subsequent breach.
(b) Notice. For purposes of this Agreement, notices and all other
------
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered personally or by overnight courier with a
receipt obtained therefor or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed, if to the
Company, to its chief executive officer at the Company's principal office, and
if to the Employee, at his residence address as shown on the Company's
employment records, or to such other address as either party may furnish to the
other in writing in accordance with this Section, except that notices of changes
of address shall be effective upon receipt.
(c) Severability. If any provision of this Agreement shall be found
------------
to be invalid, inoperative or unenforceable in law or equity, such finding shall
not affect the validity of any other provisions of this Agreement, which shall
be construed, reformed and enforced to effect the purposes of this Agreement to
the fullest extent permitted by law.
(d) Miscellaneous. This Agreement: (i) may be executed in any number
-------------
of counterparts, each of which, when executed by both parties to the Agreement
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument; (ii) shall be governed by and construed
under the law of the Commonwealth of Massachusetts, without application of
principles of conflicts of laws; (iii) shall constitute the entire agreement of
the parties with respect to the subject matter hereof, superseding all prior
oral and written communications, proposals, negotiations, representations,
understandings, courses of dealing, agreements, contracts, and the like between
the parties in such respect; (iv) may be amended, modified, or terminated, and
any right under this Agreement may be waived in whole or in part, only by a
writing signed by both parties; (v) contains headings only for convenience,
which headings do not form part, and shall not be used in construction, of this
Agreement; (vi) shall bind and inure to the benefit of the parties and their
respective legal representatives, successors and assigns, except that no party
may delegate any of its or his obligations under this Agreement, or assign this
Agreement, without the prior written consent of the other party, except the
Company may assign this Agreement in connection with the merger, consolidation,
or sale of all
<PAGE>
or substantially all assets of the Company; and (vii) be enforced only in courts
located within the Commonwealth of Massachusetts and the parties hereby agree
that such courts shall have venue and exclusive subject matter and personal
jurisdiction, and consent to service of process by registered mail, return
receipt requested, or by any other manner provided by law.
Executed under seal as of the date first above written.
BUSINESS@WEB, INC.
By:
--------------------------------
-----------------------------------
Employee
<PAGE>
Peabody & Arnold Draft
February 23, 1996
________________, 1996
To the Purchasers listed on Schedule I
to the Purchase Agreement
hereinafter described
Ladies and Gentlemen:
We have acted as counsel for Business@Web, Inc., a Delaware
corporation (the "Company") in connection with the issuance and sale of
shares of the Company's Series B Convertible Preferred Stock, par value $1.00
per share (the "Preferred Shares"), to the purchasers (the "Purchasers")
identified on Schedule I to the Series B Convertible Preferred Stock Purchase
Agreement dated _______, 1996 (the "Purchase Agreement") among the Company and
Purchasers pursuant to the terms contained in the Purchase Agreement. Terms
used in this opinion, unless otherwise defined, shall have the meanings assigned
thereto in the Purchase Agreement. This opinion is furnished to you pursuant to
Section 4.01 of the Purchase Agreement.
For purposes of the opinions expressed below, we have examined
original, faxed or photocopies of executed counterparts of:
a. the Purchase Agreement;
b. the Registration Rights Agreement;
c. the Co-Sale Rights Agreement; and
d. the Voting Agreement.
The Purchase Agreement, the Registration Rights Agreement, the Co-Sale
Rights Agreement, and the Voting Agreement are together referred to herein as
the "Transaction Documents".
In addition, we have examined the originals or copies of such records,
agreements and instruments of the Company, certificates of public officials and
of officers of the Company and such other documents and records and such matters
of law as we have deemed appropriate as a basis for the opinions hereinafter
expressed. In making such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the
<PAGE>
To the Purchasers
______________, 1996
Page 2
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies, which facts we have
not independently verified. As to various facts material to the opinions set
forth herein, we have relied without independent verification upon factual
representations made by the Company and the Purchasers in the Transaction
Documents, upon certificates of public officials and upon facts certified to us
by officers of the Company. With respect to the opinions expressed in paragraph
number 8 below, we draw your attention to the fact that we have not made any
investigation of the records of any court or other governmental agency or body.
Statements herein as to the truth of certain matters "to our
knowledge", "known to us", or as to which we have "knowledge" refer to the
knowledge consciously held by the individual lawyers in our firm who
participated in the negotiation and drafting of the Transaction Documents
without independent investigation.
For purposes of the opinions expressed herein, we have assumed that at
all relevant times the Purchasers had all requisite power and authority and had
taken all necessary action to enter into and perform all of its obligations
under the Transaction Documents and that each such Transaction Document was and
will continue to be the valid, binding and enforceable obligation of each of the
Purchasers. You have not asked us to express, and we do not express, any
opinion concerning the application of any federal, state or local statute, law,
rule or regulation to the authority of any of the Purchasers to enter into and
to carry out its obligations, and to exercise its rights, under the Transaction
Documents.
This opinion is limited to the laws of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware (the
"DGCL"), and the federal laws of the United States of America, and we express no
opinions with respect to the law of any other jurisdiction.
Based upon and subject to the foregoing and subject also to the
general qualifications stated following paragraph number 9 below, we hereby
advise you that, in our opinion, as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business as a foreign corporation in the Commonwealth of
Massachusetts.
2. The Company has the corporate power and authority to own and hold
its properties and to carry on its business as now conducted and as proposed to
be conducted, to execute, deliver and perform the Transaction Documents to which
it is a party, and to issue, sell and deliver the Preferred Shares and, upon
conversion of the Preferred Shares in accordance with their terms, the
Conversion Shares.
<PAGE>
To the Purchasers
______________, 1996
Page 3
3. The execution and delivery by the Company of the Purchase
Agreement and the Registration Rights Agreement, the performance by the Company
of its obligations thereunder, and the issuance of the Preferred Shares and,
upon conversion of the Preferred Shares in accordance with their terms, the
Conversion Shares have been duly authorized by all requisite corporate action
and will not violate any provision of any law applicable to the Company, any
order of any court or other agency of government applicable to the Company of
which we have knowledge, the Certificate of Incorporation of the Company, as
amended, or the By-laws of the Company, as amended, or violate or conflict with,
result in or constitute (with due notice or lapse of time or both) a default
under or result in the creation or imposition of any material lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company pursuant to any indenture, agreement, or
other instrument of which we have knowledge and to which the Company or any of
its properties or assets is bound.
4. The Preferred Shares and the Conversion Shares have been duly
authorized and, when issued in accordance with the Purchase Agreement (in the
case of the Preferred Shares) or upon conversion of the Preferred Shares in
accordance with their terms (in the case of the Conversion Shares), will be
validly issued, fully paid and nonassessable shares, with no personal liability
attaching to the ownership thereof, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances created by or through the
Company. The issuance, sale and delivery of the Preferred Shares and the
Conversion Shares will not subject to any preemptive right of stockholders of
the Company arising pursuant to the DGCL, the Certificate of Incorporation or
the Bylaws of the Company or, to our knowledge, otherwise existing or, to our
knowledge, to any right of first refusal or other right in favor of any person.
5. The Purchase Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company, enforceable in accordance with their
terms.
6. The Co-Sale Rights Agreement and the Voting Agreement have been
duly authorized, executed and delivered by each of the Principal Shareholders
who is a party thereto and constitute the legal, valid and binding obligations
of such Principal Shareholders, enforceable in accordance with their terms.
7. The authorized capital stock of the Company consists solely of
30,000,000 shares of Common Stock and 3,000,000 shares of Preferred Stock
(1,750,000 of which have been designated Series B Convertible Preferred Stock
and 1,250,000 of which remain undesignated). Immediately prior to the Closing,
16,204,545 shares of Common Stock were validly issued and outstanding, and no
other shares of Common Stock or Preferred Stock were outstanding.
<PAGE>
To the Purchasers
______________, 1996
Page 4
8. To our knowledge, there is no (i) action, suit, claim, proceeding
or investigation pending against the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise, or (iii) governmental inquiry pending against the
Company. To our knowledge, the Company is not in default with respect to any
order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company
pending or threatened against others.
9. Assuming the accuracy of the representations and warranties of the
Purchasers made in Article III of the Purchase Agreement, the offering, issuance
and sale of the Preferred Shares and the Conversion Shares is exempt from the
registration provisions of the Securities Act of 1933, as amended.
Our opinions set forth above are subject to the following general
qualifications:
a. The validity and enforceability of any obligation and the exercise
of rights and remedies may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement generally of the rights and remedies of creditors
or the obligations of debts, and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding at
law or in equity), including, without limitation, the discretion of any
court of competent jurisdiction in granting specific performance or
injunctive or other equitable relief.
b. The enforcement of any rights or remedies is or may be subject to
an implied duty on the part of the party seeking to enforce such rights to
take action and made determinations on a reasonable basis and in good
faith.
c. The enforceability of the Transaction Documents may be limited by
general principals of contract law which include (i) the unenforceability
of provisions to the effect that provisions therein may only be amended or
waived in writing to the extent that an oral agreement modifying such
provisions has been entered into, and (ii) the general rule that, where
less than all of an agreement is enforceable, the balance is enforceable
only when the unenforceable portion is not an essential part of the agreed
exchange.
d. The indemnification and contribution provisions set forth in
Section 7 of the Registration Rights Agreement may not be enforceable to
the extent that they should be found contrary to public policy.
<PAGE>
To the Purchasers
______________, 1996
Page 5
e. We express no opinion with respect to the choice of law provisions
contained in the Transaction Documents.
This opinion is furnished to you solely for your benefit in connection with
the consummation of the Closing under the Purchase Agreement and may not be
relied upon by any other person or entity or for any other purpose without our
express, prior written consent. All of the opinions set forth herein are
rendered as of the date hereof, and we assume no obligation to update such
opinions to reflect any facts or circumstances which may hereafter come to our
attention or any changes in the law which may hereafter occur.
Very truly yours,
Peabody & Arnold
<PAGE>
REGISTRATION RIGHTS AGREEMENT
March 6, 1996
To the Investors named on Schedule I hereto
Ladies and Gentlemen:
In connection with the agreement by Hewlett-Packard Company ("HP") on the
date hereof to purchase shares of Series B Convertible Preferred Stock, $1.00
par value ("Preferred Stock"), of Business@Web, Inc., a Delaware corporation
(the "Company"), pursuant to the Series B Convertible Preferred Stock Purchase
Agreement dated as of February 27, 1996 (the "HP Agreement") between the Company
and HP, and in connection with the agreement by the other Investors named on
Schedule I hereto (with HP, the "Investors") on the date hereof to purchase
shares of Preferred Stock of the Company, pursuant to the Series B Convertible
Preferred Stock Purchase Agreement dated as of March 6, 1996 (with the HP
Agreement, the "Purchase Agreements") among the Company and such Investors and
as an inducement to the Investors to consummate the transactions contemplated by
the Purchase Agreements, the Company covenants and agrees with the Investors as
follows:
1. Certain Definitions As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Shares" shall mean all shares of the Company's Preferred
----------------
Stock issued to the Investors.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 8.
<PAGE>
"Restricted Stock" shall mean the Conversion Shares, but excluding
----------------
shares of Common Stock which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them or (b) publicly sold
pursuant to Rule 144 under the Securities Act, provided, however, that the term
-------- -------
"Restricted Stock" shall be deemed to include the number of shares of Restricted
Stock that would be issuable to a holder of Preferred Shares upon conversion of
all Preferred Shares held by such holder at such time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares or
------------------
Conversion Shares shall, except as otherwise provided in Section 3, be stamped
or otherwise imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
SUCH SHARES UNDER THAT ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM REGISTRATION
THEREUNDER IS AVAILABLE.
3. Required Registration.
---------------------
(a) At any time after March 31, 1998, the holders of Restricted
Stock constituting at least 40% of the total shares of Restricted Stock then
owned beneficially or of record by Investors and Investor Transferees (as such
term is hereinafter defined) may request the Company to register under the
Securities Act all or any portion of the shares of Restricted Stock held by such
requesting holder or holders for sale in the manner specified in such notice,
provided that the reasonably anticipated aggregate price to the public of such
public offering would exceed $10,000,000.
Notwithstanding the foregoing, the only securities that the Company shall
be required to register pursuant hereto shall be shares of Common Stock,
provided, however, that in any underwritten public offering contemplated by this
- -------- -------
Agreement, the holders of Preferred Shares shall be entitled to sell such
Preferred Shares to the underwriters for conversion and sale of the shares of
Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3 within
180 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering of securities of
the Company under the Securities Act.
<PAGE>
(b) Following receipt of any notice under this Section 3, the
Company shall immediately notify all Investors and Investor Transferees from
whom notice has not been received and shall use it best efforts to register
under the Securities Act, for public sale in accordance with the method of
disposition specified in such notice from requesting holders, the number of
shares of Restricted Stock specified in such notice (and in all notices
received by the Company from other holders within 30 days after the giving of
such notice by the Company). If such method of disposition shall be an
underwritten public offering, the holders of a majority of the shares of
Restricted Stock to be sold in such offering may designate the managing
underwriter of such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The Company shall be
obligated to register restricted Stock pursuant to this Section 3 on two
occasions only, provided, however, that such obligation shall be deemed
-------- -------
satisfied only when a registration statement covering all shares of Restricted
Stock specified in notices received as aforesaid, for sale in accordance with
the method of disposition specified by the requesting holders, shall have
become effective and, if such method of disposition is a firm commitment
underwritten public offering, all such shares shall have been sold pursuant
thereto.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 3, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account and for the account of other selling
stockholders, except as and to the extent that, in the reasonable opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would materially adversely affect the marketing
of the Restricted Stock to be sold. Except for registration statements on
Form S-4, S-8 or any successor thereto, the Company will not file with the
Commission any other registration statement with respect to its Common Stock,
whether for its own account or that of other stockholders, from the date of
receipt of a notice from requesting holders pursuant to this Section 3 until
the completion of the period of distribution of the shares of Restricted Stock
registered thereby.
4. Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to Section 3 or Section 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do and of the proposed method of distribution of such
securities. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of its Restricted Stock, the Company will use its best efforts to
cause the Restricted Stock as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent and under the
conditions such registration is permitted under the Securities Act. In the
event that any registration pursuant to this Section 4 shall be, in whole or
in part, an underwritten public offering of Common Stock, the number of shares
of
<PAGE>
Restricted Stock to be included in such an underwriting may be reduced (pro rata
among the requesting holders based upon the number of shares of Restricted Stock
owned by such holders) if and to the extent that the managing underwriter shall
be of the opinion that the inclusion of some or all of the Restricted Stock
would adversely affect the marketing of the securities to be sold by the
Company therein, provided, however, that such number of shares of Restricted
-------- -------
Stock (if reduced) shall not be reduced to a number which is less than 35% of
the total number of shares are to be include in such underwriting for the
account of persons other than the Company or requesting holders of Restricted
Stock. Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 4 without thereby incurring
any liability to the holders of Restricted Stock.
5. Registration on form S-3. If at any time (i) a holder or holders of
------------------------
Preferred Shares or Restricted Stock holding, in the aggregate, in excess of ten
percent (10%) of the then-outstanding Common Stock and Conversion Shares
request that the Company file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of the shares of
Restricted Stock held by such requesting holder or holders, the reasonably
anticipated aggregate price (net of underwriting discounts and commissions) of
which would exceed $1,000,000 and (ii) the Company is a registrant entitled to
use Form S-3 or any successor thereto to register such shares, the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Stock
specified in such notice. Whenever the Company is required by this Section 5
to use its best efforts to effect the registration of Restricted Stock, each
of the procedures and requirements of Section 3 (including but not limited to
the requirement that the Company notify all holders of Restricted Stock from
whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration.
6. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 3, 4 or 5 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 3,
shall be on Form S-1 or other forms of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 6(a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with
<PAGE>
the sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
- -------- -------
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The Sellers of
Restricted Stock agree upon receipt of such notice forthwith to cease making
offers and sales of Restricted Stock pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose until the
Company has prepared and furnished such amendment or supplement to the
prospectus as may be necessary so that, as thereafter delivered to purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to
<PAGE>
form in all material respects with the requirements of the Securities Act
(except that such counsel need not express any opinion as to financial
statements and the notes thereto and the schedules and other financial and
statistical data contained therein) and (C) to such other effects as reasonably
may be requested by counsel for the underwriters or by such seller or its
counsel and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request; and
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 6(a) and 6(b) and of Section 3(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock shall (a) provide such information and execute such documents
as may reasonably be required in connection with such registration, (b) agree to
sell Restricted Stock on the basis provided in any underwriting arrangements
and (c) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements, which arrangements shall not be
inconsistent herewith.
In connection with each registration pursuant to Sections 3, 4 or 5
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
<PAGE>
7. Expenses. All expenses incurred by the Company in complying with
--------
Sections 3, 4 and 5, including, without limitations, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue Sky" laws,
fees of the National Association of Securities Dealers, Inc. transfer taxes,
fees of transfer agents and registrars, and fees and disbursements of one
counsel for the sellers of Restricted Stock, but excluding any Selling Expenses,
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Restricted Stock are called "Selling
Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 3, 4 or 5. All Selling Expenses in
connection with each registration statement under Sections 3, 4 or 5 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
8. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder,
each underwriter of such Restricted Stock thereunder and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims,damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will pay the legal
fees and other expenses of each such seller, each such underwriter and each such
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage, or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by any such
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus, and, provided
--------
further, however, that the Company will not be liable to any such seller, any
- ------- -------
such underwriter or any such controlling person in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue or alleged untrue statement or omission or an alleged omission
made in any preliminary prospectus or final prospectus delivered by such seller,
underwriter or controlling person in connection with
<PAGE>
the sale of the Restricted Stock if (1) the final prospectus or prospectus
supplement corrected such untrue statement or omission and (2) the Company
advised such seller, underwriter or controlling person that such correction had
been made and (3) such seller, underwriter or controlling person failed to send
or deliver a copy of the final prospectus or prospectus supplement with or
prior to the delivery of written confirmation of the sale of the Restricted
Stock.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will pay the
legal fees and other expenses of the Company and each such officer, director,
underwriter and controlling person incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
- -------- -------
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
-------- ------- -------
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense that is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Restricted Stock covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party other than under this Section 8 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is prejudiced by such
omission. in case any
<PAGE>
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in and, to the extent it shall wish, to assume
and undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 8 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof; provided however, that, if the defendants in any such
-------- -------
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded (based on the advice of
counsel) that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interest of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel as required by the local rules of such
jurisdiction) at any time for all such indemnified parties.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 8
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such selling holder or any
such controlling person in circumstances for which indemnification is provided
under this Section 8; then, and in each such case, the Company and such holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so that
such holder is responsible for the portion represented by the percentage that
the public offering price of its Restricted Stock offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided however, that, in any such case, (A) no such holder will be
-------- -------
require to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 12(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
<PAGE>
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
8. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted shall continue with respect to the Common Stock or the
Preferred Stock as so changed.
9. Rule 144 Reporting and Rule 144A Information. With a view to making
--------------------------------------------
available the benefits of certain rules and regulations of the Commission that
may at any time permit the resale of the Restricted Stock without registration,
the Company will:
(a) at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such holder may
reasonably request in available itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration; and
(b) at any time, at the request of any holder of Preferred Shares or
shares of Restricted Stock, make available to such holder and to any prospective
transferee of such Preferred Shares of Restricted Stock the information
concerning the Company described in Rule 144A(d)(4) under the Securities Act.
11. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Investors as follows:
<PAGE>
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
cause a material violation of any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
12. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not; provided, however, that registration rights conferred herein
-------- -------
on Investor shall only inure to the benefit of a transferee of Preferred Shares
or Restricted Stock if there is transferred to such transferee at least 60,000
shares of Restricted Stock (the transferee in any such case being referred to as
an "Investor Transferee").
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
(a) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 03172
Attn: Chief Financial Officer
<PAGE>
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(b) if to any Investor, at such Investor's address as set forth on
Schedule I hereto
(c) if to any of Investor's Transferees, at such address as may have been
furnished to the Company in writing by it;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this Section
12(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of a majority of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In proving this Agreement it shall not be
necessary to produce or account for more than one such counterpart executed by
the party against whom enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period following the
effective date of the registration statement relating to such offering to be
reasonably determined by the underwriters.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
<PAGE>
(h) This Agreement and the rights granted herein shall terminate on the
date all of the Restricted Stock may be sold pursuant to Rule 144 under the
Securities Act without regard to the volume limitations contained in Rule
144(e), except that the indemnification provisions set forth in Section 8 shall
survive indefinitely.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
BUSINESS@WEB, INC.
By:______________________
AGREED TO AND ACCEPT as of
the date first above written.
HEWLETT-PACKARD COMPANY
By:_____________________________
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By:_____________________________
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By:_____________________________
<PAGE>
PANTIO HOLDING LTD.
By:_____________________
JUILLIARD INVESTMENTS, INC.
By:_____________________
________________________
Jan Baan
________________________
J.G. Paul Baan
________________________
Lorenzo Cue
________________________
Tom C. Tinsley
<PAGE>
CO-SALE RIGHTS AGREEMENT
This CO-SALE RIGHTS AGREEMENT, made as of the 6th day of March 1996
by and among those investors listed on Schedule A hereto (the "Investors") and
the holders of shares of the Common Stock, $0.001 par value (the "Common Stock")
of the Company and options to purchase the Company's Common Stock listed on
Schedule B hereto (the "Principal Shareholders").
WHEREAS, Hewlett-Packard Company ("HP") is purchasing shares of Series
B Convertible Preferred Stock, $1.00 par value ("Preferred Stock"), of
Business@Web, Inc., a Delaware corporation (the "Company"), pursuant to the
Series B Convertible Preferred Stock Purchase Agreement dated February 27, 1996
(the "HP Agreement") between the Company and HP, and the other Investors are
purchasing shares of Preferred Stock of the Company pursuant to the Series B
Convertible Preferred Stock Purchase Agreement dated March 6, 1996 (with the HP
Agreement, the "Purchase Agreements") among the Company and such Investors; and
WHEREAS, in order to induce the Investors to consummate the
transactions contemplated by the Purchase Agreements, the Principal Shareholders
have agreed to grant certain rights of first offer to the Company and the
Investors and certain co-sale rights to the Investors on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. As used herein, the term "Shares" shall refer to shares of
Preferred Stock and to shares of Common Stock, and the term "fully diluted
Shares" shall mean the maximum number of Common Shares into which the subject
Shares of Preferred Stock could then be converted.
2. In the event any Principal Shareholder (a "Transferring
Shareholder") proposes to sell, transfer, assign or otherwise dispose of (a
"Transfer") any Shares held by such Transferring Shareholder (except as
otherwise provided below), such Transferring Shareholder shall deliver a written
notice (the "Offer Notice") to the Company and to each Investor. The Offer
Notice will disclose in reasonable detail the proposed number of Shares to be
transferred and the proposed terms and conditions of the Transfer. First, the
Company may elect to purchase some or all of the Shares specified in the Offer
Notice at the price and on the terms and conditions specified therein by
delivering written notice of such election to the Transferring Shareholder and
the Investors as soon as practicable but in any event within ten days after the
receipt of the Offer Notice. If the Company has not elected to purchase all of
the Shares within such 10-day period, each Investor may elect to purchase all
(but not less than all) of such Investor's Pro Rata Share (as defined below) of
the remaining available Shares specified in the Offer Notice at the price and on
the terms and conditions specified therein by delivering written notice of such
election to the Transferring Shareholder as soon as practicable but in any event
within 30 days after delivery of the Offer Notice. Any Shares
<PAGE>
not elected to be purchased by the end of such 30-day period will be reoffered
for period of ten days on a pro rata basis to the other Investors who have
elected to purchase their full respective Pro Rata Shares. If the Company or
any Investors have elected to purchase all of the Shares specified in the Offer
Notice from the Transferring Shareholder, the transfer of such Shares will be
consummated as soon as practicable after the delivery of the election notices,
but in any event within 60 days after the date of the Offer Notice. In the
event that the Company and the other Investors have not elected to purchase all
of the Shares specified in the Offer Notice, the Transferring Shareholder may,
within 120 days after the expiration of the 30-day offer period, and subject to
the provisions of Paragraph 3 below, Transfer such Shares to one or more
transferees at a price no less than the price per Share specified in the Offer
Notice and on other terms and conditions no more favorable to the transferee(s)
than offered to the Company and the other Investors in the Offer Notice. Each
Investor's "Pro Rata Share" shall be the percentage that the number of fully
diluted Shares held by such Investor represents of the aggregate of all fully
diluted Shares held by all Investors.
3. Prior to effecting any Transfer of Shares, the Transferring
Shareholder shall deliver a written notice (the "Sale Notice") to each Investor,
specifying in reasonable detail the identity of the proposed transferee(s) and
the terms and conditions of the Transfer. Any Investor may elect to participate
in the contemplated Transfer by delivering written notice to the Transferring
Shareholder within 30 days after receipt by such Investor of the Sale Notice.
If any Investor elects to participate in such Transfer, such Investor will be
entitled to sell in the contemplated Transfer, at a price, proportionate to the
price per fully diluted Share, and otherwise on the same terms and conditions as
the Transferring Shareholder, a number of Shares determined by multiplying (i)
the number of fully diluted Shares to be sold in the contemplated Transfer by
(ii) the quotient determined by dividing (A) the number of fully diluted Shares
held by such Investor, by (B) the sum of (1) the number of fully diluted Shares
held by the Investors electing to participate in such sale and (2) the number of
fully diluted Shares held by the Transferring Shareholder.
4. Each Transferring Shareholder shall use such Principal
Shareholder's best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Investors who chose to participate in
the Transfer in any contemplated Transfer, to the extent the Investors elect to
participate in the manner set forth above, and no Transferring Shareholder shall
Transfer any of its Shares to the prospective transferee(s) if the prospective
transferee(s) declines to allow such participation of such Investors (except to
the extent provided below).
5. The restrictions on Transfer and the right of co-sale set forth
herein shall not apply to any Transfer (i) in the case of an individual, to or
among such Principal Shareholder's Family Group (as defined below) or by will or
the laws of descent and distribution to such Principal Shareholder's Family
Group, (ii) in the case of an entity, to or among its Affiliates (as defined
below), or (iii) by way of or pursuant to the pledge of a Principal
Shareholder's Shares as collateral security for a loan made to such Principal
Shareholder or to an Affiliate or a member of the Family Group of such Principal
Shareholder
<PAGE>
by a bank or other financial institution (the persons to whom Transfers are
permitted pursuant to clauses (i), (ii), and (iii) being collectively referred
to herein as "Permitted Transferees"); provided, that the restrictions contained
herein shall continue to be applicable to the Transferred Shares after any such
Transfer; and provided further that the transferees of such Shares shall have
agreed in writing to be bound by the provisions of this Agreement with respect
to the Shares so transferred. "Family Group" means an individual's spouse and
lineal descendants and any trust or other fiduciary solely for the benefit of
such individual and/or such individual's spouse and/or lineal descendants.
"Affiliate" of a person means (i) any other person controlling, controlled by or
under common control with such person and (ii) any partner of any such person
which is a partnership.
6. The restrictions on Transfer and the right of co-sale set forth
herein shall not apply to any Transfer by a Principal Shareholder until the
aggregate number of Shares Transferred by such Principal Shareholder from and
after the date hereof (other than Transfers permitted under Paragraph 5 above)
exceed 15% of the number of Shares held by such Principal Shareholder on the
date hereof, as set forth on the attached Schedule of Principal Shareholders.
7. The restrictions on the Transfer and the right of co-sale set
forth herein shall not apply to the sale of Shares in a public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act") and shall terminate with respect to all Shares
upon the closing of a firm commitment underwritten public offering pursuant to
an effective registration statement under the Securities Act covering the offer
and sale to of Common Stock to the public at an initial public offering price of
not less than $8.25 per share and with gross proceeds of not less than
$15,000,000.
8. No Principal Shareholder shall permit any Transfer of any equity
interest in such Principal Shareholder without the written consent of Investors
holding at least a majority of the fully-diluted Shares held by Investors;
provided, however, any holder of an equity interest in a Principal Shareholder
- -------- -------
may Transfer all or any portion of such equity interest without the consent of
the Investors (i) in the case of an individual, to or among such individual's
Family Group or by will or the laws of descent and distribution to such
individual's Family Group, (ii) in the case of an entity, to or among its
Affiliates, or (iii) by way of or pursuant to the pledge of an equity interest
in such Principal Shareholder as collateral security for a loan made to the
holder of such equity interest or to an Affiliate or a member of the Family
Group of the holder of such equity interest by a bank or other financial
institution.
9. All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares), whether so expressed or not;
provided, however, that the rights of co-sale conferred herein on Investor shall
- --------- -------
only inure to the benefit of a transferee of Preferred Shares at least 50,000
shares of Preferred Shares are transferred to such transferee .
<PAGE>
10. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
if to any Investor, at the address of such Investor set forth on
Schedule A hereto;
if to any Principal Shareholder, at the address of such Principal
Shareholder set forth on Schedule B hereto;
or, in any case, at such other address or addresses as shall have been furnished
in writing to Investor (in the case of a Principal Shareholder) or to the
Principal Shareholders (in the case of Investor) in accordance with the
provisions of this Paragraph 10.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
12. This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of both (i) Principal
Shareholders holding at least a majority of the Shares held by Principal
Shareholders and (ii) Investors holding at least a majority of the fully-diluted
Shares held by Investors.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as an instrument under seal by its officer thereunto duly
authorized as of the date first above written.
INVESTORS:
HEWLETT-PACKARD COMPANY
By:____________________________
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By:___________________________
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By:____________________________
PANTIO HOLDING LTD.
By:____________________________
JUILLIARD INVESTMENTS, INC.
By:____________________________
<PAGE>
_______________________________
Jan Baan
_______________________________
J.G. Paul Baan
_______________________________
Lorenzo Cue
_______________________________
Tom C. Tinsley
PRINCIPAL SHAREHOLDERS:
J&S LIMITED PARTNERSHIP
By: Controller Corp., Inc.,
General Partner
By:____________________________
President
LEGACY INVESTMENT PARTNERSHIP
By:____________________________
Managing Partner
<PAGE>
HARRINGTON TRUST LIMITED as Trustee of
The Appleby Trust
By:____________________________
Director
_______________________________
Sundar Subramaniam
<PAGE>
VOTING AGREEMENT
This VOTING AGREEMENT, made as of the 6th day of March, 1996 by and
among those investors listed on Schedule A hereto (the "Investors") and the
holders of shares of the Common Stock, $0.001 par value (the "Common Stock") of
Business@Web, Inc., a Delaware corporation (the "Company") listed on Schedule B
hereto (the "Principal Shareholders").
WHEREAS, the Investors are purchasing shares of Series B Convertible
Preferred Stock, $1.00 par value ("Preferred Stock"), of the Company pursuant
to that certain Series B Convertible Preferred Stock Purchase Agreement dated
March 6, 1996 (the "Purchase Agreement") among the Company and the Investors;
and
WHEREAS, in order to induce the Investors to consummate the
transactions contemplated by the Purchase Agreement, the Shareholders have
agreed to vote the voting securities of the Company held by them as set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:
1. Election of the Investor Director. In any and all elections of
---------------------------------
directors of the Company (whether at a meeting or by written consent in lieu of
a meeting), each Principal Shareholder and each Investor shall vote or cause to
be voted the Shares owned by such Principal Shareholder or Investor, as the case
may be, or over which such Principal Shareholder or Investor has voting control,
and otherwise use his, her or its best efforts, so as to elect as a director of
the Company one person designated by written notice from the holders of a
majority of the shares of Preferred Stock or Common Stock issued upon conversion
of Preferred Stock held by all Investors. The person to be elected as a
director of the Company at the designation of the Investors (the "Investor
Director") shall initially be Ofer Nemirovsky. As used herein, the term "Shares"
shall refer to shares of Preferred Stock, Common Stock, and all other voting
securities of the Company.
2. Removal of the Investor Director. No Principal Shareholder
--------------------------------
(either as a shareholder or as a director of the Company) shall vote to remove
any Investor Director, except (i) for bad faith or willful misconduct or
(ii) with or without cause at the written direction of the holders of a majority
of the shares of Preferred Stock or Common Stock issued upon conversion of
Preferred Stock held by all Investors. At the written direction of the holders
of a majority of the shares of Preferred Stock or Common Stock issued upon
conversion of Preferred Stock held by all Investors, each Principal Shareholder
shall take any necessary action to cause any Investor Director previously
elected at the designation of the Investors to be removed from office. In the
event any Investor Director is so removed, or if a vacancy is created by the
death, resignation or removal of any Investor Director, the vacancy so created
shall be filled in accordance with Section 1 hereof by a designee selected by
the Investors.
<PAGE>
3. Voting on Other Matters. Except as provided in Sections 1 and 2,
-----------------------
above, each Principal Shareholder and the Investor may vote the Shares held by
him, her or it on any and all matters presented to the stockholders of the
Company (including, without limitation, the election of directors of the
Company) as he, she or it may, in his, her or its sole discretion, determine.
Nothing herein shall be deemed to create any ownership interest on the part of
any Investor in any Shares held by the Principal Shareholders.
4. Termination; Suspension Upon Redemption Default. This Agreement
-----------------------------------------------
shall terminate upon the earlier to occur of (i) December 31, 2005 or (ii) the
consummation of a firm commitment underwritten public offering of Common Stock
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock to the public at an initial public
offering price of not less than $8.25 per shares and with gross proceeds of not
less than $15,000,000. The obligations of the Principal Shareholders under this
Agreement shall be suspended in the event and for so long as, following a
default in redemption of the Preferred Stock pursuant to the terms of the
Company's Certificate of Incorporation, as amended, the holders of the Preferred
Stock are entitled to elect a majority of the members of the Company's Board of
Directors.
5. Specific Performance. In addition to any and all other remedies
--------------------
that may be available at law in the event of any breach of this Agreement, the
Investors shall be entitled to specific performance of the agreements and
obligations of the Principal Shareholders hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
6. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed delivered
(i) when delivered in person or (ii) one business day after being mailed by
certified or registered mail, return receipt requested, or sent by a recognized
overnight courier service, addressed as follows:
if to any Investor, at the address of such Investor set forth on Exhibit A
hereto;
if to any Principal Shareholder, at the address of such Principal
Shareholder set forth on Exhibit B hereto;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Investors (in the case of a Principal Shareholder) or to the
Principal Shareholders (in the case of an Investor) in accordance with the
provisions of this Paragraph 6.
<PAGE>
7. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
8. Amendment; Modification; Waiver. This Agreement may not be amended or
---------------------------------
modified, and no provision hereof may be waived, without the written consent of
both (i) Principal Shareholders holding at least a majority of the Shares held
by Principal Shareholders and (ii) Investors holding at least a majority of the
Shares held by Investors.
9. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10. Illegality, etc. If any provision of this Agreement shall be held to
---------------
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as an instrument under seal by its officer thereunto duly
authorized as of the date first above written.
INVESTORS:
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By:
---------------------------
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By:
----------------------------
PANTIO HOLDING LTD.
<PAGE>
By:
----------------------------
JUILLIARD INVESTMENTS, INC.
By:
----------------------------
-------------------------------
Jan Baan
-------------------------------
J.G. Paul Baan
-------------------------------
Lorenzo Cue
-------------------------------
Tom C. Tinsley
PRINCIPAL SHAREHOLDERS:
J&S LIMITED PARTNERSHIP
By: Controller Corp., Inc.,
General Partner
<PAGE>
By:
-------------------------
President
LEGACY INVESTMENT PARTNERSHIP
By:
-------------------------
Managing Partner
HARRINGTON TRUST LIMITED as Trustee of
The Appleby Trust
By:
-------------------------
Director
---------------------------
Sundar Subramaniam
----------------------------
Klaus Besier
<PAGE>
EXHIBIT 10.19
REGISTRATION RIGHTS AGREEMENT
March 6, 1996
To the Investors named on Schedule I hereto
Ladies and Gentlemen:
In connection with the agreement by Hewlett-Packard Company ("HP") on the
date hereof to purchase shares of Series B Convertible Preferred Stock, $1.00
par value ("Preferred Stock"), of Business@Web, Inc., a Delaware corporation
(the "Company"), pursuant to the Series B Convertible Preferred Stock Purchase
Agreement dated as of February 27, 1996 (the "HP Agreement") between the Company
and HP, and in connection with the agreement by the other Investors named on
Schedule I hereto (with HP, the "Investors") on the date hereof to purchase
shares of Preferred Stock of the Company, pursuant to the Series B Convertible
Preferred Stock Purchase Agreement dated as of March 6, 1996 (with the HP
Agreement, the "Purchase Agreements") among the Company and such Investors and
as an inducement to the Investors to consummate the transactions contemplated by
the Purchase Agreements, the Company covenants and agrees with the Investors as
follows:
1. Certain Definitions As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Shares" shall mean all shares of the Company's Preferred
----------------
Stock issued to the Investors.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 8.
"Restricted Stock" shall mean the Conversion Shares, but excluding
----------------
shares of Common Stock which have been (a) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the
1
<PAGE>
registration statement covering them or (b) publicly sold pursuant to Rule
144 under the Securities Act, provided, however, that the term "Restricted
-------- -------
Stock" shall be deemed to include the number of shares of Restricted Stock
that would be issuable to a holder of Preferred Shares upon conversion of
all Preferred Shares held by such holder at such time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares or
------------------
Conversion Shares shall, except as otherwise provided in Section 3, be stamped
or otherwise imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SHARES UNDER THAT ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.
3. Required Registration.
---------------------
(a) At any time after March 31, 1998, the holders of Restricted Stock
constituting at least 40% of the total shares of Restricted Stock then owned
beneficially or of record by Investors and Investor Transferees (as such term is
hereinafter defined) may request the Company to register under the Securities
Act all or any portion of the shares of Restricted Stock held by such requesting
holder or holders for sale in the manner specified in such notice, provided that
the reasonably anticipated aggregate price to the public of such public offering
would exceed $10,000,000.
Notwithstanding the foregoing, the only securities that the Company shall
be required to register pursuant hereto shall be shares of Common Stock,
provided, however, that in any underwritten public offering contemplated by
- -------- --------
this Agreement, the holders of Preferred Shares shall be entitled to sell such
Preferred Shares to the underwriters for conversion and sale of the shares of
Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 3 within
180 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering of securities of
the Company under the Securities Act.
(b) Following receipt of any notice under this Section 3, the Company
shall immediately notify all Investors and Investor Transferees from whom notice
has not been received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Restricted Stock specified in such notice (and in all notices received
2
<PAGE>
by the Company from other holders within 30 days after the giving of such notice
by the Company). If such method of disposition shall be an underwritten public
offering, the holders of a majority of the shares of Restricted Stock to be sold
in such offering may designate the managing underwriter of such offering,
subject to the approval of the Company, which approval shall not be unreasonably
withheld or delayed. The Company shall be obligated to register Restricted
Stock pursuant to this Section 3 on two occasions only, provided, however, that
-------- -------
such obligation shall be deemed satisfied only when a registration statement
covering all shares of Restricted Stock specified in notices received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 3, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account and for the account of other selling
stockholders, except as and to the extent that, in the reasonable opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would materially adversely affect the marketing
of the Restricted Stock to be sold. Except for registration statements on Form
S-4, S-8 or any successor thereto, the Company will not file with the Commission
any other registration statement with respect to its Common Stock, whether for
its own account or that of other stockholders, from the date of receipt of a
notice from requesting holders pursuant to this Section 3 until the completion
of the period of distribution of the shares of Restricted Stock registered
thereby.
4. Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to Section 3 or Section 5) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do and of the proposed method of distribution of such
securities. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of its Restricted Stock, the Company will use its best efforts to
cause the Restricted Stock as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent and under the conditions
such registration is permitted under the Securities Act. In the event that any
registration pursuant to this Section 4 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of Restricted
Stock to be included in such an underwriting may be reduced (pro rata among the
requesting holders based upon the number of shares of Restricted Stock owned by
such holders) if and to the extent that the managing underwriter shall be of the
opinion that the inclusion of some or all of the Restricted Stock would
adversely affect the marketing of the securities to be sold by the Company
therein, provided, however, that such number of shares of Restricted Stock (if
-------- -------
reduced) shall not be reduced to a number which is less than 35% of the total
number of shares are to be included in such underwriting for the account of
persons other than the Company or requesting holders of Restricted Stock.
Notwithstanding the
3
<PAGE>
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 4 without thereby incurring any liability to the
holders of Restricted Stock.
5. Registration on Form S-3. If at any time (i) a holder or holders of
------------------------
Preferred Shares or Restricted Stock holding, in the aggregate, in excess of ten
percent (10%) of the then-outstanding Common Stock and Conversion Shares request
that the Company file a registration statement on Form S-3 or any successor
thereto for a public offering of all or any portion of the shares of Restricted
Stock held by such requesting holder or holders, the reasonably anticipated
aggregate price to the public (net of underwriting discounts and commissions) of
which would exceed $1,000,000, and (ii) the Company is a registrant entitled to
use Form S-3 or any successor thereto to register such shares, then the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Stock
specified in such notice. Whenever the Company is required by this Section 5 to
use its best efforts to effect the registration of Restricted Stock, each of the
procedures and requirements of Section 3 (including but not limited to the
requirement that the Company notify all holders of Restricted Stock from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration.
6. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 3, 4 or 5 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 3,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 6(a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing
4
<PAGE>
underwriter reasonably shall request, provided, however, that the Company shall
-------- -------
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The Sellers of
Restricted Stock agree upon receipt of such notice forthwith to cease making
offers and sales of Restricted Stock pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose until the Company
has prepared and furnished such amendment or supplement to the prospectus as may
be necessary so that, as thereafter delivered to purchasers of such Restricted
Stock, such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements and the notes thereto and the schedules
and other financial and statistical data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
5
<PAGE>
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 6(a) and 6(b) and of Section 3(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock shall (a) provide such information and execute such documents
as may reasonably be required in connection with such registration, (b) agree to
sell Restricted Stock on the basis provided in any underwriting arrangements and
(c) complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements, which arrangements shall not be inconsistent
herewith.
In connection with each registration pursuant to Sections 3, 4 or 5
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
7. Expenses. All expenses incurred by the Company in complying with
--------
Sections 3, 4 and 5, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc. transfer taxes,
fees of transfer agents and registrars, and fees and disbursements of one
counsel for the sellers of Restricted Stock, but excluding any Selling Expenses,
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Restricted Stock are called "Selling
Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 3, 4 or 5. All Selling Expenses in
connection with each registration statement under Sections 3, 4 or 5 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
6
<PAGE>
8. Idemnification and Contribution
-------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder,
each underwriter of such Restricted Stock thereunder and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will pay the legal
fees and other expenses of each such seller, each such underwriter and each such
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by any such
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus, and, provided
--------
further, however, that the Company will not be liable to any such seller, any
- ------- -------
such underwriter or any such controlling person in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue or alleged untrue statement or omission or an alleged omission
made in any preliminary prospectus or final prospectus delivered by such seller,
underwriter or controlling person in connection with the sale of the Restricted
Stock if (1) the final prospectus or prospectus supplement corrected such
untrue statement or omission and (2) the Company advised such seller,
underwriter or controlling person that such correction had been made and (3)
such seller, underwriter or controlling person failed to send or deliver a copy
of the final prospectus or prospectus supplement with or prior to the delivery
of written confirmation of the sale of the Restricted Stock.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 3, 4 or 5, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 3, 4 or 5, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a
7
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will pay the legal fees and other expenses of the
Company and each such officer, director, underwriter and controlling person
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that such seller will be
-------- -------
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall
- -------- ------- -------
be limited to the proportion of any such loss, claim, damage, liability or
expense that is equal to the proportion that the public offering price of the
shares sold by such seller under such registration statement bears to the total
public offering price of all securities sold thereunder, but not in any event to
exceed the proceeds received by such seller from the sale of Restricted Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party other than under this Section 8 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided, however,
-------- -------
that, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded (based on the advice of counsel) that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel as
required by the local rules of such jurisdiction) at any time for all such
indemnified parties.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock
8
<PAGE>
exercising rights under this Agreement, or any controlling person of any such
holder, makes a claim for indemnification pursuant to this Section 8 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any such selling holder or any such controlling person in circumstances
for which indemnification is provided under this Section 8; then, and in each
such case, the Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such holder is responsible for the
portion represented by the percentage that the public offering price of its
Restricted Stock offered by the registration statement bears to the public
offering price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however, that, in
-------- -------
any such case, (A) no such holder will be require to contribute any amount in
excess of the public offering price of all such Restricted Stock offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
8. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
9. Rule 144 Reporting and Rule 144A Information. With a view to making
--------------------------------------------
available the benefits of certain rules and regulations of the Commission that
may at any time permit the resale of the Restricted Stock without registration,
the Company will:
(a) at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
9
<PAGE>
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration; and
(b) at any time, at the request of any holder of Preferred Shares or
shares of Restricted Stock, make available to such holder and to any prospective
transferee of such Preferred Shares or shares of Restricted Stock the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act.
11. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Investor as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
cause a material violation of any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
12. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not; provided, however, that registration rights conferred herein
--------- -------
on Investor shall only inure to the benefit of a transferee of Preferred Shares
or Restricted Stock if there is transferred to such transferee at least 60,000
shares of Restricted Stock (the transferee in any such case being referred to as
an "Investor Transferee").
10
<PAGE>
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
(a) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
11
<PAGE>
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(b) if to any Investor, at such Investor's address as set forth on
Schedule I hereto
(c) if to any of Investor's Transferees, at such address as may have been
furnished to the Company in writing by it;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this Section
12(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the
holders of a majority of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In proving this Agreement it shall not be
necessary to produce or account for more than one such counterpart executed by
the party against whom enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period following the
effective date of the registration statement relating to such offering to be
reasonably determined by the underwriters.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(h) This Agreement and the rights granted herein shall terminate on
the date all of the Restricted Stock may be sold pursuant to Rule 144 under the
Securities Act without regard to the volume limitations contained in Rule
144(e), except that the indemnification provisions set forth in Section 8 shall
survive indefinitely.
12
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
BUSINESS@WEB, INC.
By: /s/ James G. Nondorf
--------------------------------
AGREED TO AND ACCEPTED as of
the date first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
--------------------------------
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ Robert Wadsworth
--------------------------------
authorized officer
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ Robert Wadsworth
--------------------------------
PANTIO HOLDING LTD.
By: /s/ Marlene Boesch-Weber
--------------------------------
Marlene Boesch-Weber, Secretary
13
<PAGE>
JUILLIARD INVESTMENTS, INC.
By: /s/ Javier Baz
--------------------------------
Javier Baz
/s/ Jan Baan
-----------------------------------
Jan Baan
/s/ J.G. Paul Baan
-----------------------------------
J.G. Paul Baan
/s/ Lorenzo Cue
-----------------------------------
Lorenzo Cue
/s/ Tom C. Tinsley
-----------------------------------
Tom C. Tinsley
14
<PAGE>
SCHEDULE I
INVESTORS
<TABLE>
<CAPTION>
Name and Address Number of Shares Held
- ---------------- ---------------------
<S> <C> <C>
Hancock Venture Partners 685,921 IV-
Direct Fund L.P.
One Financial Center
Boston, MA 02111
Falcon Ventures II L. P. 36,101
One Financial Center
Boston, MA 02111
Hewlett-Packard Company. 180,506
3000 Hanover Street
Palo Alto, CA 94304
Pantio Holding Ltd. 180,506
Omar Hodge Building
Wyckam's Cay
Road Town, Tortolla
British Virgin Islands
copy to:
CISSA
13, avenue de Bude
1202 Geneva
Switzerland
Lorenzo Cue 36,101
1451 Montgomery Street
San Francisco, CA 94133
Juilliard Investments, Inc. 27,076
Palm Bay Towers
26 S. 720 NE 69th Street
Miami, FL 33138
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Jan Baan 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
J.G. Paul Baan 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
Tom C. Tinsley 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
</TABLE>
16
<PAGE>
EXHIBIT 10.20
CO-SALE RIGHTS AGREEMENT
This CO-SALE RIGHTS AGREEMENT, made as of the 6th day of March 1996 by and
among those investors listed on Schedule A hereto (the "Investors") and the
holders of shares of the Common Stock, $0.001 par value (the "Common Stock") of
the Company and options to purchase the Company's Common Stock listed on
Schedule B hereto (the "Principal Shareholders").
WHEREAS, Hewlett-Packard Company ("HP") is purchasing shares of Series B
Convertible Preferred Stock, $1.00 par value ("Preferred Stock"), of
Business@Web, Inc., a Delaware corporation (the "Company"), pursuant to the
Series B Convertible Preferred Stock Purchase Agreement dated February 27, 1996
(the "HP Agreement") between the Company and HP, and the other Investors are
purchasing shares of Preferred Stock of the Company pursuant to the Series B
Convertible Preferred Stock Purchase Agreement dated March 6, 1996 (with the HP
Agreement, the "Purchase Agreements") among the Company and such Investors; and
WHEREAS, in order to induce the Investors to consummate the transactions
contemplated by the Purchase Agreements, the Principal Shareholders have agreed
to grant certain rights of first offer to the Company and the Investors and
certain co-sale rights to the Investors on the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
as follows:
1. As used herein, the term "Shares" shall refer to shares of Preferred
Stock and to shares of Common Stock, and the term "fully diluted Shares" shall
mean the maximum number of Common Shares into which the subject Shares of
Preferred Stock could then be converted.
2. In the event any Principal Shareholder (a "Transferring Shareholder")
proposes to sell, transfer, assign or otherwise dispose of (a "Transfer") any
Shares held by such Transferring Shareholder (except as otherwise provided
below), such Transferring Shareholder shall deliver a written notice (the "Offer
Notice") to the Company and to each Investor. The Offer Notice will disclose in
reasonable detail the proposed number of Shares to be transferred and the
proposed terms and conditions of the Transfer. First, the Company may elect to
purchase some or all of the Shares specified in the Offer Notice at the price
and on the terms and conditions specified therein by delivering written notice
of such election to the Transferring Shareholder and the Investors as soon as
practicable but in any event within ten days after the receipt of the Offer
Notice. If the Company has not elected to purchase all of the Shares within
such 10-day period, each Investor may elect to purchase all (but not less than
all) of such Investor's Pro Rata Share (as defined below) of the remaining
available Shares specified in the Offer Notice at the price and on the terms and
conditions specified therein by delivering written notice of such election to
the Transferring Shareholder as soon as practicable but in any event within 30
days after delivery of the Offer Notice. Any Shares not elected to be purchased
by the end of such 30-day period will be reoffered for period of
<PAGE>
ten days on a pro rata basis to the other Investors who have elected to purchase
their full respective Pro Rata Shares. If the Company or any Investors have
elected to purchase all of the Shares specified in the Offer Notice from the
Transferring Shareholder, the transfer of such Shares will be consummated as
soon as practicable after the delivery of the election notices, but in any event
within 60 days after the date of the Offer Notice. In the event that the
Company and the other Investors have not elected to purchase all of the Shares
specified in the Offer Notice, the Transferring Shareholder may, within 120 days
after the expiration of the 30-day offer period, and subject to the provisions
of Paragraph 3 below, Transfer such Shares to one or more transferees at a price
no less than the price per Share specified in the Offer Notice and on other
terms and conditions no more favorable to the transferee(s) than offered to the
Company and the other Investors in the Offer Notice. Each Investor's "Pro Rata
Share" shall be the percentage that the number of fully diluted Shares held by
such Investor represents of the aggregate of all fully diluted Shares held by
all Investors.
3. Prior to effecting any Transfer of Shares, the Transferring
Shareholder shall deliver a written notice (the "Sale Notice") to each Investor,
specifying in reasonable detail the identity of the proposed transferee(s) and
the terms and conditions of the Transfer. Any Investor may elect to participate
in the contemplated Transfer by delivering written notice to the Transferring
Shareholder within 30 days after receipt by such Investor of the Sale Notice.
If any Investor elects to participate in such Transfer, such Investor will be
entitled to sell in the contemplated Transfer, at a price, proportionate to the
price per fully diluted Share, and otherwise on the same terms and conditions as
the Transferring Shareholder, a number of Shares determined by multiplying (i)
the number of fully diluted Shares to be sold in the contemplated Transfer by
(ii) the quotient determined by dividing (A) the number of fully diluted Shares
held by such Investor, by (B) the sum of (1) the number of fully diluted Shares
held by the Investors electing to participate in such sale and (2) the number of
fully diluted Shares held by the Transferring Shareholder.
4. Each Transferring Shareholder shall use such Principal Shareholder's
best efforts to obtain the agreement of the prospective transferee(s) to the
participation of the Investors who chose to participate in the Transfer in any
contemplated Transfer, to the extent the Investors elect to participate in the
manner set forth above, and no Transferring Shareholder shall Transfer any of
its Shares to the prospective transferee(s) if the prospective transferee(s)
declines to allow such participation of such Investors (except to the extent
provided below).
5. The restrictions on Transfer and the right of co-sale set forth herein
shall not apply to any Transfer (i) in the case of an individual, to or among
such Principal Shareholder's Family Group (as defined below) or by will or the
laws of descent and distribution to such Principal Shareholder's Family Group,
(ii) in the case of an entity, to or among its Affiliates (as defined below), or
(iii) by way of or pursuant to the pledge of a Principal Shareholder's Shares as
collateral security for a loan made to such Principal Shareholder or to an
Affiliate or a member of the Family Group of such Principal Shareholder by a
bank or other financial institution (the persons to whom Transfers are permitted
pursuant to clauses (i), (ii), and (iii) being collectively referred to herein
as "Permitted Transferees"); provided, that the restrictions contained herein
shall continue to be applicable to the Transferred Shares after any such
Transfer; and provided further that the transferees of such
2
<PAGE>
Shares shall have agreed in writing to be bound by the provisions of this
Agreement with respect to the Shares so transferred. "Family Group" means an
individual's spouse and lineal descendants and any trust or other fiduciary
solely for the benefit of such individual and/or such individual's spouse and/or
lineal descendants. "Affiliate" of a person means (i) any other person
controlling, controlled by or under common control with such person and (ii) any
partner of any such person which is a partnership.
6. The restrictions on Transfer and the right of co-sale set forth herein
shall not apply to any Transfer by a Principal Shareholder until the aggregate
number of Shares Transferred by such Principal Shareholder from and after the
date hereof (other than Transfers permitted under Paragraph 5 above) exceed 15%
of the number of Shares held by such Principal Shareholder on the date hereof,
as set forth on the attached Schedule of Principal Shareholders.
7. The restrictions on the Transfer and the right of co-sale set forth
herein shall not apply to the sale of Shares in a public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act") and shall terminate with respect to all Shares upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offer and
sale to of Common Stock to the public at an initial public offering price of not
less than $8.25 per share and with gross proceeds of not less than $15,000,000.
8. No Principal Shareholder shall permit any Transfer of any equity
interest in such Principal Shareholder without the written consent of Investors
holding at least a majority of the fully-diluted Shares held by Investors;
provided, however, any holder of an equity interest in a Principal Shareholder
- -------- -------
may Transfer all or any portion of such equity interest without the consent of
the Investors (i) in the case of an individual, to or among such individual's
Family Group or by will or the laws of descent and distribution to such
individual's Family Group, (ii) in the case of an entity, to or among its
Affiliates, or (iii) by way of or pursuant to the pledge of an equity interest
in such Principal Shareholder as collateral security for a loan made to the
holder of such equity interest or to an Affiliate or a member of the Family
Group of the holder of such equity interest by a bank or other financial
institution.
9. All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares), whether so expressed or not;
provided, however, that the rights of co-sale conferred herein on Investor shall
- --------- -------
only inure to the benefit of a transferee of Preferred Shares at least 50,000
shares of Preferred Shares are transferred to such transferee.
10. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed delivered (i) when delivered in person
or (ii) one business day after being mailed by certified or registered mail,
return receipt requested, or sent by a recognized overnight courier service,
addressed as follows:
3
<PAGE>
if to any Investor, at the address of such Investor set forth on Schedule A
hereto;
if to any Principal Shareholder, at the address of such Principal
Shareholder set forth on Schedule B hereto;
or, in any case, at such other address or addresses as shall have been furnished
in writing to Investor (in the case of a Principal Shareholder) or to the
Principal Shareholders (in the case of Investor) in accordance with the
provisions of this Paragraph 10.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
12. This Agreement may not be amended or modified, and no provision hereof
may be waived, without the written consent of both (i) Principal Shareholders
holding at least a majority of the Shares held by Principal Shareholders and
(ii) Investors holding at least a majority of the fully-diluted Shares held by
Investors.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as an instrument under seal by its officer thereunto duly
authorized as of the date first above written.
INVESTORS:
HEWLETT-PACKARD COMPANY
/s/ Ann O. Baskins
By:____________________________
FALCON VENTURES II, L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
/s/ Robert Wadsworth
By:___________________________
authorized officer
HANCOCK VENTURE PARTNERS
IV-DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
/s/ Robert Wadsworth
By:____________________________
PANTIO HOLDING LTD.
/s/ Marlene Boesch - Weber
By:____________________________
Marlene Boesch - Weber, Secretary
JUILLIARD INVESTMENTS, INC.
/s/ Javier Baz
By:____________________________
Javier Baz
5
<PAGE>
/s/ Jan Baan
________________________________
Jan Baan
/s/ J.G. Paul Baan
________________________________
J.G. Paul Baan
/s/ Lorenzo Cue
________________________________
Lorenzo Cue
/s/ Tom C. Tinsley
________________________________
Tom C. Tinsley
PRINCIPAL SHAREHOLDERS:
J&S LIMITED PARTNERSHIP
By: Controller Corp., Inc.,
General Partner
/s/ John J. Donovan
By:_____________________________
President
LEGACY INVESTMENT PARTNERSHIP
/s/ John J. Donovan, Jr.
By:_____________________________
Managing Partner
6
<PAGE>
HARRINGTON TRUST LIMITED as Trustee of
The Appleby Trust
By: /s/ John Campbell
------------------------------
Director
/s/ Sundar Subramaniam
---------------------------------
Sundar Subramaniam
7
<PAGE>
SCHEDULE A
INVESTORS
<TABLE>
<CAPTION>
Name and Address Number of Shares Held
- ---------------- ---------------------
<S> <C> <C>
Hancock Venture Partners 685,921 IV-
Direct Fund L.P.
One Financial Center
Boston, MA 02111
Falcon Ventures II L.P. 36,101
One Financial Center
Boston, MA 02111
Hewlett-Packard Company. 180,506
3000 Hanover Street
Palo Alto, CA 94304
Pantio Holding Ltd. 180,506
Omar Hodge Building
Wyckam's Cay
Road Town, Tortolla
British Virgin Islands
copy to:
CISSA
13, avenue de Bude
1202 Geneva
Switzerland
Lorenzo Cue 36,101
1451 Montgomery Street
San Francisco, CA 94133
Juilliard Investments, Inc. 27,076
Palm Bay Towers
26 S. 720 NE 69th Street
Miami, FL 33138
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Jan Baan 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
J.G. Paul Baan 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
Tom C. Tinsley 60,169
Baan Company N.V.
Zonneoordlaan 17
6718 GK Ede
Netherlands
</TABLE>
<PAGE>
SCHEDULE B
PRINCIPAL SHAREHOLDERS
<TABLE>
<CAPTION>
Name and Address Number of Shares Held 15% Excluded Shares
- ---------------- --------------------- -------------------
<S> <C> <C>
J&S Limited Partnership 2,000,000 300,000
219 Vassar Street
Cambridge, Massachusetts 02139
Legacy Investment Partnership 2,000,000 300,000
219 Vassar Street
Cambridge, Massachusetts 02139
Harrington Trust Limited as Trustee 4,864,545 729,682
of The Appleby Trust
Cedar House
41 Cedar Avenue
Hamilton HM 12, Bermuda
Sundar Subramaniam 4,998,000 749,700
333 Commonwealth Avenue
Boston, Massachusetts 02116
</TABLE>
<PAGE>
EXHIBIT 10.22
BUSINESS@WEB, INC.
SERIES C CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
AS OF MARCH 29, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I - THE SHARES 1
Section 1.01 - Issuance, Sale and Delivery of the Shares 1
Section 1.02 - Closing 1
Section 1.03 - Payment of Purchase Price 1
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY 2
Section 2.01 - Organization, Qualification and
Corporate Power 2
Section 2.02 - Authorization of Agreements, etc. 2
Section 2.03 - Validity 3
Section 2.04 - Authorized Capital Stock 3
Section 2.05 - Financial Statements; Corporate Minutes 4
Section 2.06 - Certain Events 4
Section 2.07 - Litigation, Compliance with Law 5
Section 2.08 - Proprietary Information of Third Parties 5
Section 2.09 - Title to Properties 6
Section 2.10 - Leasehold Interests 6
Section 2.11 - Taxes 6
Section 2.12 - Intellectual Property 6
Section 2.13 - Material Contracts 7
Section 2.14 - Compliance with Governing Documents
and Material Contracts 8
Section 2.15 - Loans and Advances 9
Section 2.16 - Assumptions and Guaranties of
Indebtedness of Other Persons 9
Section 2.17 - Significant Customers and Suppliers 9
Section 2.18 - Employees 9
Section 2.19 - Transactions with Affiliates 9
Section 2.20 - Governmental Approvals 10
Section 2.21 - Disclosure 10
Section 2.22 - Offering of the Shares 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
THE PURCHASERS 11
ARTICLE IV - CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS 12
Section 4.01 - Opinion of Company's Counsel 12
Section 4.02 - Representations and Warranties to be
True and Correct 12
Section 4.03 - Performance 12
Section 4.04 - Conduct of Business 12
Section 4.05 - Certificate of Designations 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.06 - Confidentiality Agreements 13
Section 4.07 - Registration Rights Agreement 13
Section 4.08 - Preemptive Rights 13
Section 4.09 - All Proceedings to be Satisfactory 13
ARTICLE V - COVENANTS OF THE COMPANY 13
Section 5.01 - Financial Statements, Reports, etc. 13
Section 5.02 - Reserve for Conversion of Shares 13
Section 5.03 - Corporate Existence 14
Section 5.04 - Properties, Business, Insurance 14
Section 5.05 - Visitation, Consultation and Advice 14
Section 5.06 - Notice of Extraordinary Corporate Actions 15
Section 5.07 - Transactions with Affiliates 15
Section 5.08 - Key Man Insurance 15
ARTICLE VI - MISCELLANEOUS 16
Section 6.01 - Expenses 16
Section 6.02 - Brokerage 16
Section 6.03 - Parties in Interest 16
Section 6.04 - Notices 16
Section 6.05 - Governing Law 17
Section 6.06 - Entire Agreement 17
Section 6.07 - Counterparts 17
Section 6.08 - Amendments and Waivers 17
Section 6.09 - Severability 17
Section 6.10 - Titles and Subtitles 17
Section 6.11 - Certain Defined Terms 17
Section 6.12 - No Waiver; Cumulative Remedies 17
Section 6.13 - Confidentiality 18
Section 6.14 - Further Assurances 18
</TABLE>
ii
<PAGE>
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of March
29, 1996, among Business@Web, Inc., a Delaware corporation (the "Company") and
the purchasers listed on Schedule I hereto (individually, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of one million two hundred thousand (1,200,000) shares (the "Shares")
of the authorized but unissued Series C Convertible Preferred Stock, $1.00 par
value, of the Company (the "Series C Stock"); and
WHEREAS, the Purchasers wish to purchase the Shares on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
THE SHARES
Section 1.01 Issuance, Sale and Delivery of the Shares. Subject to the
-----------------------------------------
terms and conditions hereinafter set forth, the Company hereby agrees to issue
and sell the Shares to the Purchasers, and each Purchaser, severally and not
jointly, hereby agrees to purchase from the Company the number of Shares set
forth under the heading "Shares Purchased" opposite such Purchaser's name on
Schedule I hereto, at the purchase price of $5.00 per share.
Section 1.02 Closing. The closing of the transactions contemplated hereby
-------
shall take place at the offices of Peabody & Arnold, 50 Rowes Wharf, Boston,
Massachusetts 02110, at 10:00 a.m., Boston time, on April 15, 1996, or at such
other location, date and time as may be agreed upon between the Purchasers and
the Company (such closing being called the "Closing" and such date and time
being called the "Closing Date"). At the Closing, the Company shall issue and
deliver to each Purchaser a stock certificate or certificates in definitive
form, registered in the name of such Purchaser, representing the Shares being
purchased by it.
Section 1.03 Payment of Purchase Price. As payment in full for the Shares
-------------------------
being purchased by it at the Closing, and against delivery of the stock
certificate or certificates therefor as aforesaid, on the Closing Date each
Purchaser shall deliver to the Company the amount set forth under the heading
"Purchase Price" opposite such Purchaser's name on Schedule I hereto (the
"Purchase Price"). Payment of the Purchase Price shall be made by check or
checks payable to the order of the Company, by transfer to the account of the
Company by wire transfer, by surrender for cancellation of promissory notes or
other obligations of the Company, or by any combination thereof.
1
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers that, except
as set forth in the Disclosure Schedule attached hereto as Schedule II:
-----------
Section 2.01 Organization, Qualification and Corporate Power.
-----------------------------------------------
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business in all jurisdictions in which
the nature of the business transacted by the Company or the character of the
properties owned or leased by the Company requires that the Company qualify to
do business as a foreign corporation, except where the failure to be so licensed
or qualified would not have a material adverse effect on the business,
operations or financial condition of the Company. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, to execute, deliver and
perform this Agreement and the Registration Rights Agreement (as such term is
hereinafter defined), and to issue, sell and deliver the Shares and to issue and
deliver the shares of Common Stock, $.001 par value, of the Company ("Common
Stock") issuable upon conversion of the Shares (the "Conversion Shares").
(b) The Company has no subsidiaries. The Company does not own of
record or beneficially, directly or indirectly, (i) any shares of capital stock
or securities convertible into capital stock of any other corporation or (ii)
any participating interest in any partnership, joint venture or other
non-corporate business enterprise and does not control, directly or indirectly,
any other entity.
Section 2.02 Authorization of Agreements, etc.
--------------------------------
(a) The execution and delivery by the Company of this Agreement,
the performance by the Company of its obligations hereunder, and the issuance,
sale and delivery of the Shares have been duly authorized by all requisite
corporate action and will not violate any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Restated Certificate of Incorporation of the Company (the
"Charter"), or the By-laws of the Company, as amended, or any provision of any
indenture, agreement or other instrument to which the Company or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) The Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series C Stock with no personal liability attaching to
the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances. The Conversion Shares have
2
<PAGE>
been duly reserved for issuance upon conversion of the Shares and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions, claims
and encumbrances. Neither the issuance, sale or delivery of the Shares nor the
issuance or delivery of the Conversion Shares is subject to any preemptive right
of stockholders of the Company or to any right of first refusal or other right
in favor of any person which has not been effectively waived.
Section 2.03 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to laws of
general application from time to time in effect affecting creditors' rights and
the exercise of judicial discretion in accordance with general equitable
principles. The Registration Rights Agreement when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligation of the Company and of the other parties thereto, enforceable in
accordance with its terms, subject to laws of general application from time to
time in effect affecting creditors' rights and the exercise of judicial
discretion in accordance with general equitable principles.
Section 2.04 Authorized Capital Stock. The authorized capital stock of
------------------------
the Company will, immediately prior to the Closing, consist of (i) 3,000,000
shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), of which
1,332,127 shares have been designated Series B Convertible Preferred Stock,
1,220,000 shares have been designated Series C Convertible Preferred Stock, and
447,873 shares remain undesignated and (ii) 30,000,000 shares of Common Stock.
Immediately prior to the Closing, 16,204,545 shares of Common Stock and
1,332,127 shares of Series B Convertible Preferred Stock will be validly issued
and outstanding, and no other shares of Common Stock or Preferred Stock will be
outstanding. All shares of the series of Preferred Stock designated Series A
Convertible Preferred Stock which had been issued prior to the date hereof have
been surrendered for conversion into Common Stock and retired, and the series of
Preferred Stock designated Series A Convertible Preferred Stock has been
cancelled and eliminated from the shares which the Company is authorized to
issue. The stockholders of record and holders of subscriptions, warrants,
options, convertible securities, and other rights (contingent or other) to
purchase or otherwise acquire from the Company any equity securities of the
Company, and the number of shares of Common Stock or Preferred Stock and the
number of such subscriptions, warrants, options, convertible securities, and
other such rights held by each, are as set forth in the attached Schedule III.
------------
The designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Charter or, with respect to the Series C
Stock, the Amendment to the Restated Certificate of Incorporation, a copy of
which is attached as Exhibit A (the "Certificate of Designations"). Except as
---------
set forth in the attached Schedule III, (i) no person owns of record or is known
------------
to the Company to own beneficially any share of Common Stock or Preferred Stock,
(ii) no subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire from the Company any
equity securities of the Company is authorized or outstanding and (iii) there is
no commitment by the Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to holders of any
of its equity securities any evidence of indebtedness or asset. Except as
provided for in the Charter or as set forth in the attached Schedule III, the
------------
3
<PAGE>
Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
Section 2.05 Financial Statements; Corporate Minutes. The Company has
---------------------------------------
furnished to the Purchasers the unaudited balance sheet of the Company as of
December 31, 1995 and the related statement of operations, shareholders' equity
and cash flows for the fiscal year then ended (the "Financial Statements"). The
Financial Statements are (a) complete and correct in all material respects, (b)
in accordance with the Company's books and records, (c) present fairly the
Company's financial position for the period and as of the date indicated and (d)
have been prepared in conformity with generally accepted accounting principles
consistently applied, subject to (i) adjustments which will not, in the
aggregate, be material and (ii) the absence of footnotes. The Company has
furnished to the Purchaser copies of the minutes of meetings and written
consents in lieu of meetings of the Company's shareholders and Board of
Directors from the date of the Company's incorporation through the date of this
Agreement (the "Corporate Minutes"). The Corporate Minutes accurately reflect
all actions taken by the Company's shareholders and Board of Directors.
Section 2.06 Certain Events. Except as set forth in this Agreement and
--------------
the Schedules hereto, and the documents referred to therein, the Company has
not, since the date of the Financial Statements, (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities incurred in the ordinary course of business, (iv) declared
or made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other security, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens of
current real property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or cancelled any debt or claim, (vii) sold, assigned, transferred or
granted any exclusive license with respect to any patent, trademark, trade name,
service mark, copyright, trade secret or other intangible asset, (viii) suffered
any loss of property or waived any right of substantial value whether or not in
the ordinary course of business, (ix) made any change in officer compensation
except in the ordinary course of business and consistent with past practice, (x)
made any material change in the manner of business or operations of the Company,
(xi) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (xii) entered into any commitment
(contingent or otherwise) to do any of the foregoing.
Section 2.07 Litigation, Compliance with Law. There is no (i) action,
-------------------------------
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (in-
4
<PAGE>
cluding without limitation any inquiry as to the qualification of the Company to
hold or receive any governmental license or permit), and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. The Company is
not in default with respect to any order, writ, injunction or decree known to or
served upon the Company of any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company
pending or threatened against others. To the best of the Company's knowledge,
the Company has complied in all material respects with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, and the Company has all necessary governmental
permits, licenses and other authorizations required to conduct its business as
conducted and as proposed to be conducted. There is no existing law, rule,
regulation or order, and the Company is not aware of any proposed law, rule,
regulation or order, whether federal or state, which would prohibit or restrict
the Company from, or otherwise materially adversely affect the Company in
conducting its business in any jurisdiction in which it is now conducting
business or in which it proposes to conduct business.
Section 2.08 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or nondisclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company's
knowledge, no person employed by the Company has utilized or proposes to utilize
any trade secret or any information or documentation proprietary to any third
party, and to the best of the Company's knowledge, no person employed by the
Company has violated any confidential relationship which such person may have
had with any third party, in connection with the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such utilization or violation.
Section 2.09 Title to Properties. The Company has good and marketable
-------------------
title to its properties and assets reflected in the Financial Statements and all
such properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances, except
for liens for current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company and its subsidiaries.
Section 2.10 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default
5
<PAGE>
or event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
Section 2.11 Taxes. The Company has filed all tax returns, federal,
-----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. The
federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any federal, state, county or local-taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed (a) an election pursuant
to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
that the Company be taxed as an S corporation or (b) consent pursuant to Section
341(f) of the Code, relating to collapsible corporations.
Section 2.12 Intellectual Property. The Company possesses adequate
---------------------
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how
(collectively, "Intellectual Property") which are necessary or desirable to the
conduct of the Company's business as conducted and as proposed to be conducted
or the lack of which would materially adversely affect the Company or its
business. No claim is pending or, to the best of the Company's knowledge,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the best of the Company's knowledge, there is no basis for any
such claim (whether or not pending or threatened). No claim is pending or
threatened to the effect that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company, and to the best of the Company's knowledge
there is no basis for any such claim (whether or not pending or threatened). To
the best of the Company's knowledge, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any right
to manufacture, have manufactured, assemble or sell the products or proposed
products or to provide the services or proposed services of the Company.
Section 2.13 Material Contracts. Except for the agreements identified in
------------------
the Schedule of Material Contracts attached hereto as Schedule IV (the "Material
-----------
Contracts"), the Company is not a party to or otherwise bound by any written or
oral contract or instrument or other restriction which individually or in the
aggregate could materially adversely affect the
6
<PAGE>
business, prospects, financial condition, operations, property or affairs of the
Company, including any written or oral:
(a) contract or agreement which is not terminable on less than
ninety (90) days' notice without cost or other liability to the Company
(except for contracts which, in the aggregate, are not material to the
business of the Company);
(b) contract which entitles any customer to a rebate or right of
set-off, or which varies in any material respect from the Company's
standard form contracts;
(c) contract with any labor union;
(d) contract or other commitment with any supplier of goods or
services containing any provision permitting any party other than the
Company to renegotiate the price or other terms, or containing any pay-back
or other similar provision, upon the occurrence of a failure by the Company
to meet its obligations under the contract when due or the occurrence of
any other event;
(e) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of the
Company's normal operating requirements;
(f) contract for the employment of any officer, employee or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not terminable
on notice without cost or other liability to the Company, except normal
severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, contract or
understanding pursuant to which benefits are provided to any employee of
the Company (other than group insurance plans applicable to employees
generally);
(h) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company has advanced or
agreed to advance money or has agreed to lease any property as lessee or
lessor;.
7
<PAGE>
(1) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity
securities;
(m) assignment, license or other agreement with respect to any
form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Registration Rights Agreement (as such
term is hereinafter defined);
(o) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(p) other contract or group of related contracts with the same
party involving more than $1,000,000 or continuing over a period of more
than two (2) years from the date or dates thereof (including renewals or
extensions optional with another party), which contract or group of
contracts is not terminable by the Company without penalty upon notice of
thirty (30) days or less.
Section 2.14 Compliance with Governing Documents and Material Contracts.
----------------------------------------------------------
The Company and, to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date under each of the Material Contracts and have
received no notice of default and are not in default (with due notice or lapse
of time or both) under any Material Contract. The Company has no present
expectation or intention of not fully performing all its obligations under each
Material Contract, and the Company has no knowledge of any breach or anticipated
breach by the other party to any Material Contract. The Company is in full
compliance with all of the terms and provisions of its Charter and By-laws.
Section 2.15 Loans and Advances. The Company does not have any
------------------
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company.
Section 2.16 Assumptions and Guaranties of Indebtedness of Other Persons.
-----------------------------------------------------------
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
Section 2.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which is significant to the Company has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision of
products or services to the Company, as the case may be.
8
<PAGE>
Section 2.18 Employees. Each of the officers of the Company and each
---------
other person now employed by the Company who has access to confidential
information of the Company has executed an Employee Agreement substantially in
the form of Exhibit B (collectively, the "Confidentiality Agreements"), and such
---------
agreements are in full force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company. To the best of the Company's knowledge,
the Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee-Retirement Income Security Act
of 1974, as amended.
Section 2.19 Transactions with Affiliates. No director, officer, employee
----------------------------
or stockholder of the Company, or, to the Company's knowledge, any member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or, to the Company's knowledge, any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock or other ownership interest thereof, (i) is a party to any transaction
with the Company, including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from, transfer of any asset (including any Intellectual
Property) from or to, or otherwise requiring payments to any such person or firm
or (ii) to the Company's knowledge, is an officer, director, trustee, partner or
holder of more than 5% of the outstanding capital stock or other ownership
interest in any entity engaged directly or indirectly in competition with the
Company.
Section 2.20 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the issuance, sale and delivery of the Shares, other than (i)
the filing of the Certificate of Designations with the Secretary of State of the
State of Delaware and (ii) the filing of notice subsequent to the Closing that
may be required pursuant to federal and state securities laws in connection with
the sale of the Shares.
Section 2.21 Disclosure. Neither the Company's representations and
----------
warranties in this Agreement and in the Schedules and Exhibits to this Agreement
nor any statement made by the Company in the Confidential Private Placement
Memorandum dated February 1996 (a copy of which the Company has been provided to
each of the Purchasers) contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no fact relating particularly to the Company or its
proposed operations which the Company has not disclosed to the Purchasers and
their counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company
or any of its subsidiaries.
9
<PAGE>
Section 2.22 Offering of the Shares. Neither the Company nor any person
----------------------
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Shares or any security of the
Company similar to the Shares has offered the Shares or any such similar
security for sale to, or solicited any offer to buy the Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with Shares
under the Securities Act of 1933, as amended (the "Securities Act") or the rules
and regulations of the Securities and Exchange Commission (the "Commission")
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the Securities Act or of any
applicable state securities (Blue Sky) laws or regulations.
10
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers, severally and not jointly, represents and warrants
to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act and was not organized for the
specific purpose of acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks
thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Shares being purchased by it are being acquired for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and if such Purchaser is a
resident of Pennsylvania, it intends to hold the Shares being purchased by
it (or the Conversion Shares issuable upon conversion of such Shares) for a
period of twelve following the Closing Date;
(e) it understands that (i) the Shares have not been registered under
the Securities Act by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act, (ii)
the Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration, (iii) the Shares will bear a legend to such effect, and (iv)
the Company will make a notation on its transfer books to such effect;
(f) it has no present need for liquidity in connection with its
purchase of the Shares;
(g) the purchase of the Shares is consistent with the general
investment objectives of such Purchaser, and that it understands that the
purchase of the Shares involves a high degree of risk in view of the fact
that, among other things, the Company is a start-up enterprise, and there
may never be an established market for the Company's capital stock; and
(h) the individual executing this Agreement on its behalf has been
duly authorized to execute and deliver this Agreement; the signature of
such individual is binding upon the Purchaser; such Purchaser is duly
organized, validly existing and in good standing in its jurisdiction of
incorporation of organization and has all requisite power and authority to
execute and deliver this Agreement; and the execution and
11
<PAGE>
delivery of this Agreement and the purchase of the Shares hereunder will
not result in the violation of, constitute a breach of default under, or
conflict with, any term or provision of the charter, bylaws, or other
governing document of the Purchaser or, to its knowledge, material breach
of default under any material agreement, judgment, decree, order, statute
or regulation by which it is bound or applicable to it.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS
The obligation of the Purchaser to purchase and pay for the Shares to be
purchased by it on the Closing Date is, at its option, subject to the
satisfaction, on or before the Closing Date, of the following conditions:
Section 4.01 Opinion of Company's Counsel. The Purchaser shall have
----------------------------
received from Peabody & Arnold, counsel for the Company, an opinion dated the
Closing Date, substantially in the form attached to this Agreement as Exhibit C.
---------
Section 4.02 Representations and Warranties to be True and Correct. The
------------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President and Treasurer of the Company shall have certified
to such effect to the Purchasers in writing on behalf of the Company.
Section 4.03 Performance. The Company shall have performed and complied
-----------
in all material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
President and Treasurer of the Company shall have certified to the Purchasers in
writing to such effect on behalf of the Company.
Section 4.04 Conduct of Business. From the date of this Agreement through
-------------------
the Closing Date, the Company shall have conducted its business in the ordinary
course, shall have complied in all material respects with all applicable laws,
rules regulations and orders, noncompliance with which could materially
adversely affect the Company's business or financial condition, and shall not
have made any material change in the nature of its business.
Section 4.05 Certicate of Designations. The Certificate of Designations
-------------------------
shall have been duly filed with the Office of the Secretary of State of Delaware
and shall read in its entirety as set forth in Exhibit A.
---------
Section 4.06 Confidentiality Ageements. All officers of the Company and
-------------------------
all employees of the Company who have access to confidential information of the
Company shall have signed Confidentiality Agreements and all such
Confidentiality Agreements shall be in full force and effect.
12
<PAGE>
Section 4.07 Registration Rights Agreement. The Company shall have
-----------------------------
executed and delivered the Registration Rights Agreement in the form attached
hereto as Exhibit D (the "Registration Rights Agreement").
---------
Section 4.08 Preemptive Rights. All stockholders, if any, of the Company
-----------------
having any preemptive, first refusal or other rights with respect to the
issuance of the Shares or the Conversion Shares shall have irrevocably waived
the same in writing.
Section 4.09 All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers as follows:
Section 5.01 Financial Statements, Reports, etc. The Company shall
----------------------------------
furnish to the Purchaser, so long as the Purchaser owns at least 50,000 Shares
or Conversion Shares:
(a) within one hundred twenty (120) after the end of each fiscal year
of the Company, a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with generally accepted accounting
principles and audited by a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the
Company; and
(b) within sixty (60) days after the end of each fiscal quarter in
each fiscal year (other than the last fiscal quarter in each fiscal year),
a consolidated balance sheet of the Company and its subsidiaries and the
related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted
accounting principles and accompanied by a statement of the Chief Financial
Officer or other senior executive officer of the Company to the effect that
such financial statements have been prepared in accordance with generally
accepted accounting principals, subject to normal year-end adjustments and
the omission of notes, such consolidated balance sheet to be as of the end
of such fiscal quarter and such consolidated statements of income,
stockholders' equity and cash flows to be for such fiscal quarter and for
the period from the beginning of the fiscal year to the end of such fiscal
quarter.
13
<PAGE>
The obligations of the Company to furnish financial information to the Purchaser
pursuant to this Section 5.01 shall terminate at such time as the Company
becomes subject to the reporting requirements of the Securities Exchange Act of
1934.
Section 5.02 Reserve for Conversion of Shares. The Company shall at all
--------------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
Section 5.03 Corporate Existence. So long as any Preferred Shares are
-------------------
outstanding, the Company shall maintain and cause each of its subsidiaries to
maintain their respective corporate existence, rights and franchises in full
force and effect.
Section 5.04 Properties, Business, Insurance. So long as any Preferred
-------------------------------
Shares are outstanding, the Company shall maintain and cause each of its
subsidiaries to maintain as to their respective properties and business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is approved by its Board
of Directors.
Section 5.05 Visitation, Consultation and Advice. So long as a Purchaser
-----------------------------------
holds at least 50,000 Shares or Conversion Shares, the Company shall permit and
cause each of its subsidiaries to permit such Purchaser and such persons as it
may designate, at such Purchaser's expense, upon reasonable notice, reasonable
access during normal business hours to visit the Company and its subsidiaries,
discuss the affairs of the Company and its subsidiaries with their officers, and
consult with and advise the management of the Company and its subsidiaries;
provided, however, the (i) the Company may require such Purchaser and any person
conducting such a visit or discussion to execute an agreement not to use or
disclose any information discovered during such visit or discussion and (ii) the
Company may withhold from such Purchaser and its designees any documents or
information relating to the following matters (hereinafter referred to as
"Confidential Matters"): (a) the Company's relationships or contemplated
relationships with any business competitor of such Purchaser or (b) the
Company's business relationships or contemplated business relationships (as
opposed to shareholder relationships) with such Purchaser or any affiliate of
such Purchaser.
Section 5.06 Notice of Extraordinary Corporate Actions. So long as a
-----------------------------------------
Purchaser holds at least 50,000 Shares or Conversion Shares, the Company shall,
at least 20 days prior to the earlier of effecting or entering into any binding
agreement to effect (i) any sale, lease,
14
<PAGE>
assignment, transfer or other conveyance (other than the grant of a mortgage or
security interest) of all or substantially all the assets of the Company, (ii)
any liquidation, dissolution or winding up of the affairs of the Company, (iii)
any consolidation or merger of the Company with or into another corporation
(other than a transaction in which the holders of the Company's equity
securities outstanding immediately prior to the effectiveness of such
transaction hold, in the aggregate, at least 51% of the equity securities of the
surviving entity immediately following the effectiveness of such transaction),
or (iv) any recapitalization of the Company (in each case, an "Extraordinary
Corporate Action"), give such Purchaser written notice of the proposed
Extraordinary Corporate Action.
Section 5.07 Transactions with Affiliates. Neither the Company nor any
----------------------------
of its subsidiaries or entities under its control shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or other ownership interest in the Company, or with any of member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person or member of the family of any such person, is a
director, officer, trustee, partner or holder of more than 5% of the outstanding
capital stock or other ownership interest thereof, except for transactions on
terms no less favorable to the Company or its subsidiary or such controlled
entity than it would obtain in a transaction between unrelated parties.
Section 5.08 Key Man Insurance. The Company shall use its best efforts to
-----------------
obtain, promptly after the Closing, and to maintain in force a key man insurance
policy in the amount of at least $2,000,000 on the life of Klaus Besier, the
Company's Chairman and Chief Executive Officer.
15
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.01 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby whether or not the Closing
occurs.
Section 6.02 Brokerage. Each party hereto will indemnify and hold
---------
harmless the other against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 6.03 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not; provided, however,
that the rights of the Purchasers under Section 5.01, 5.05 and 5.06 may not be
assigned without the prior written consent of the Company.
Section 6.04 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed delivered (i)
when delivered in person or (ii) one business day after being mailed by
certified or registered mail, return receipt requested, or sent by a recognized
overnight courier service, addressed as follows:
(a) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(b) if to any of the Purchasers, at the address set forth below such
Purchaser's name on Schedule I hereto;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 6.05 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware.
16
<PAGE>
Section 6.06 Entire Agreement. This Agreement, including the Schedules
----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 6.07 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.08 Amendments and Waivers. This Agreement may be amended or
----------------------
modified, and provisions hereof may be waived, only with the written consent of
the Company and of Purchasers holding at least a majority of the Shares.
Section 6.09 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 6.10 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
Section 6.11 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency
or any agency or political subdivision thereof, or other entity.
(b) "subsidiary" shall mean, as to the Company, any corporation of
which more than 50% of the outstanding stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly
owned by the Company, or by one or more of its subsidiaries, or by the
Company and one or more of its subsidiaries.
Section 6.12 No Waiver; Cumulative Remedies. No failure or delay on the
------------------------------
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall nay single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 6.13 Confidentiality. Each of the Purchasers agrees that it will
---------------
maintain with the same degree of care it uses with respect to its own
confidential information all confidential, proprietary or secret information
which such Purchaser may obtain from the
17
<PAGE>
Company pursuant to financial statements, reports and other materials submitted
by the Company to such Purchaser pursuant to this Agreement, or pursuant to
visitation or inspection rights granted hereunder, unless such information is
known, or until such information becomes known through no fault of such
Purchaser, to the public; provided, however, that such Purchaser may disclosure
-------- -------
such information (i) on a confidential basis to its attorneys, accountants,
consultants any other professionals to the extent necessary to obtain their
services in connection with its investment in the Company, (ii) to any affiliate
of such Purchaser on a "need to know basis", (iii) with respect to financial
information, in summary fashion as part of general financial reports by such
Purchaser to its partners and affiliates, and (iv) as required by applicable
law. If such Purchaser is required in any legal or administrative or other
governmental proceeding to disclose any of such information, such Purchaser
shall give the Company timely notice of the pending requirement and use its best
efforts to provide the Company an opportunity to obtain protective provisions
against further disclosure.
Section 6.14 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchasers or the Company, the Company and
the Purchasers shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Shares.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
BUSINESS@WEB, INC.
By:/s/ James Nondorf
----------------------------
President
[Corporate Seal]
Attest:
/s/ William E. Kelly
- ---------------------
Secretary
18
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
MARITIME CAPITAL PARTNERS, L.P.
By Maritime Capital Management, L.P., its General Partners
Date: 4-4 96 By: Maryanne Miller
---------- -------------------------------------------------------
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
ALEX BROWN LEASING SERVICES COMPANY
Date: March 18, 1996 By: /s/ Beverly L. White
----------------- --------------------------------------
Beverly L. White
Treasurer
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
DAVID A. DUFFIELD TRUST DATED 7/14/88
Date: 3-14-96 By: /s/ David A. Duffield
--------------- --------------------------------------
David A. Duffield
Trustee
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: By: /s/ Margaret L. Taylor
---------------- --------------------------------
Margaret L. Taylor
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: 3/14/96 By: /s/ John F. McKenna
--------------- --------------------------------
John McKenna
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: 3/14/96 By: /s/ Juergen Sattler
--------------- --------------------------------
Juergen Sattler
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: 3/14/96 By: /s/ Randa Pehl
--------------- --------------------------------
Randa Pehl
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: 3/15/96 By: /s/ Ulrich Schell
--------------- --------------------------------
Ulrich Schell
P.S.: Should there be any questions please call +49-6202-64243!
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: 4/5/96 By: /s/ Stephen Levy
--------------- --------------------------------
Stephen Levy
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: By: /s/ Les Hayman
---------------- --------------------------------
Les Hayman
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
ONELUX, INC.
Date: By: /s/ Paul Appleby
---------------- --------------------------------------
Paul Appleby
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
Date: By: /s/ Anthony Harris
-------------- --------------------------------------
Anthony Harris
<PAGE>
<PAGE>
PURCHASERS SIGNATURE PAGE
The undersigned hereby executes the Series C Preferred Stock Purchase
Agreement of Business@Web, Inc. and authorizes the attachment of this Signature
Page to such Purchase Agreement, understanding and intending thereby that he
shall become party, as a Purchaser, to such Purchase Agreement.
INFORMIX CORPORATION
Date: April 5, 1996 By: /s/ David H. Stanley
---------------- --------------------------------------
David H. Stanley
Vice President-Legal and General Counsel
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Purchaser Shares Purchased Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
Maritime Capital Partners, L.P. 200,000 $1,000,000
15302 25th Drive S.E.
Mill Creek, WA 98012
Alex. Brown Leasing 100,000 $500,000
Services Company
135 E. Baltimore Street
Baltimore, MD 21202
David A. Duffield Trust 200,000 $1,000,000
dated 7/14/88
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
Margaret L. Taylor 40,000 $200,000
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
John McKenna 20,000 $100,000
525 North Old Middletown Road
Media, PA 19063
Juergen Sattler 40,000 $200,000
306 Joseph's Way
Media, PA 19063
Randa Pehl 20,000 $100,000
920 Drovers Lane
Chester Springs, PA 19425
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Ulrich Schell 20,000 $100,000
Bruchhauser Strasse 39
68723 Schwetzingen
Germany
Stephen R. Levy 50,000 $250,000
300 Boylston Street #1204
Boston, MA 02116
Les Hayman 20,000 $100,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
Onelux, Inc. 50,000 $250,000
P.O. Box 438 Road Town
Tortola
British Virgin Islands
Anthony Harris 40,000 $200,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
NEC Corporation 200,000 $1,000,000
7-1 Shiba 5-chome
Minato-ku Tokyo
108-01 Japan
Informix Software Inc. 200,000 $1,000,000
4100 Bohannan Drive
Menlo Park, CA 94025
NEC Corporation 200,000 $1,000,000
7-1 Shiba 5-chome
Minato-ku Tokyo
108-01 Japan
Informix Software Inc. 200,000 $1,000,000
4100 Bohannan Drive
Menlo Park, CA 94025
</TABLE>
Exhibits to Series C
Preferred Stock Purchase
Agreement
<PAGE>
Exhibits to Series C Preferred
Stock Purchase Agreement
SCHEDULE I
Purchaser Shares Purchased Purchase Price
- --------- ---------------- --------------
Maritime Capital Partners, L.P. 200,000 $1,000,000
15302 25th Drive S.E.
Mill Creek, WA 98012
Alex. Brown Leasing 100,000 $500,000
Services Company
135 E. Baltimore Street
Baltimore, MD 21202
David A. Duffield Trust 200,000 $1,000,000
dated 7/14/88
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
Margaret L. Taylor 40,000 $200,000
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
John McKenna 20,000 $100,000
525 North Old Middletown Road
Media, PA 19063
Juergen Sattler 40,000 $200,000
306 Joseph's Way
Media, PA 19063
Randa Pehl 20,000 $100,000
920 Drovers Lane
Chester Springs, PA 19425
<PAGE>
Ulrich Schell 20,000 $100,000
Bruchhauser Strasse 39
68723 Schwetzingen
Germany
Stephen R. Levy 50,000 $250,000
300 Boylston Street #1204
Boston, MA 02116
Les Hayman 20,000 $100,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
Onelux, Inc. 50,000 $250,000
P.O. Box 438 Road Town
Tortola
British Virgin Islands
Anthony Harris 40,000 $200,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
NEC Corporation 200,000 $1,000,000
7-1 Shiba 5-chome
Minato-ku Tokyo
108-01 Japan
Informix Software Inc. 200,000 $1,000,000
4100 Bohannan Drive
Menlo Park, CA 94025
<PAGE>
SCHEDULE II
Exceptions to the representations and warranties of the Company set forth in
Article II.
Section 2.06: Since December 31, 1995, the following events have occurred:
------------
a. The Company has entered into the following credit facilities
with State Street Bank and Trust Company, and has granted
State Street Bank and Trust Company a security interest in
substantially all of the Company's assets as security
therefor:
$2,500,000 revolving line of credit,
$500,000 equipment line of credit,
$2,000,000 term loan due September 30, 1996.
b. Klaus Besier has been appointed chief executive officer of
the Company, at a base salary of $300,000 per annum. The
Company expects to enter into a performance bonus plan with
Mr. Besier under which Mr. Besier's bonus targets would be
$400,000 for 1996, $1,000,000 for 1997 and $2,500,000 for
1998.
c. The Company and Hewlett-Packard Company entered into a
Series B Preferred Stock Purchase Agreement on February 27,
1996, pursuant to which the Company agreed to sell to
Hewlett-Packard Company 180,506 shares of Series B
Convertible Preferred Stock.
d. The Company entered into a Marketing Agreement with Hewlett-
Packard Company on February 27, 1996.
e. On March __, 1996, the Company entered into a 5-year lease
of premises at One Arsenal Marketplace, Watertown,
Massachusetts to be used as the Company's principal offices.
Section 2.09: State Street Bank and Trust Company holds a security
------------
interest in substantially all assets of the Company to secure the credit
facilities identified above.
Section 2.12: InterGroup Technologies, Inc. has communicated with the
------------
Company regarding alleged use of InterGroup's VisualWare software product by the
Company in violation of the Software License Agreement between InterGroup and
the Company. The Company believes that there is no basis for InterGroup's
allegations and has been engaged in friendly discussions with InterGroup in an
effort to resolve this issue.
Section 2.19:
------------
a. The Company is an authorized distributor and reseller of OEC
software.
<PAGE>
b. The Company has purchased technology (Toolkit source code) from
OEC for $2.2 million dollars, with payment due on March 15, 1996.
The Company intends to pay this amount from the proceeds of this
offering.
c. The Company sold technology (SAP Make tools) to OEC for $500,000.
d. Klaus Besier and James Nondorf are employees of the Company.
e. The Company has a strategic partnership relationship with I-Cube,
pursuant to which the Company and I-Cube make joint proposals and
the Company subcontracts services to I-Cube. The Company and I-
Cube are not parties to a formal agreement.
f. The Company has a strategic partnership relationship with
Cambridge Technology Group, pursuant to which CTG promotes the
products and services of the Company through CTG's executive
education programs. The Company and CTG are not parties to a
formal agreement.
g. Cambridge Technology Group, Professor John Donovan and John J.
Donovan, Jr. have guaranteed the Company's obligations to State
Street Bank and Trust Company.
h. The Company has licensed software (Logical Data Integrator) from
Mentor Communications Ltd., of which Len Hafetz (a shareholder of
the Company) is president.
i. The Company is a party to a Marketing Agreement with Hewlett-
Packard Company.
<PAGE>
SCHEDULE III
I. 16,204,545 Common Shares are issued and outstanding:
Sundar Subramaniam 4,998,000 Common Shares
Len Hafetz 400,000 Common Shares*
James Nondorf 100,000 Common Shares*
Legacy Investment Partnership 2,000,000 Common Shares
J&S Limited Partnership 2,000,000 Common Shares**
Enamullah Khan 2,000 Common Shares
Isao Okawa 200,000 Common Shares
CSK Corporation 200,000 Common Shares
Klaus Besier 1,440,000 Common Shares
Harrington Trust Limited 4,864,545 Common Shares**
as Trustee of The Appleby Trust
- -------------
* These shares will be retired and cancelled upon issuance of the Series C
Convertible Preferred Shares
** 360,000 of the shares held by each of J&S Limited Partnership and Harrington
Trust will be retired and cancelled upon issuance of the Series C Convertible
Preferred Shares.
II. There are no Series A Preferred Shares authorized, issued or outstanding
(all previously outstanding Series A Preferred Shares were surrendered in 1995
for conversion into Common Shares).
III. 1,332,127 Series B Convertible Preferred Shares are issued and
outstanding:
Hancock Venture Partners 685,921 Preferred Shares
IV-Direct Fund L.P.
Falcon Ventures II, L.P. 36,101 Preferred Shares
Pantio Holding Ltd. 180,506 Preferred Shares
Hewlett-Packard Company 180,506 Preferred Shares
Lorenzo Cue 36,101 Preferred Shares
John C. Howe 5,415 Preferred Shares
Juilliard Investments, Inc. 27,076 Preferred Shares
Jan Baan 60,169 Preferred Shares
J.G. Paul Baan 60,169 Preferred Shares
Tom C. Tinsley 60,169 Preferred Shares
<PAGE>
SCHEDULE IV
The Company is a party to the following Material Contracts:
1. The Company has an understanding with Klaus Besier, who was recently
appointed chief executive officer of the Company, pursuant to which it has
committed to develop, within three months, a performance bonus compensation
arrangement with Mr. Besier under which Mr. Besier will, upon achievement of
certain goals (to be mutually agreed upon by the Company and Mr. Besier), be
entitled to bonus compensation. Mr. Besier's bonus targets are $400,000 for
1996, $1,000,000 for 1997 and $2,500,000 for 1998.
2. The Company grants incentive stock options and non-qualified options to
its employees and consultants under the Company's 1995 Stock Plan.
3. The Company has entered into a series of related credit facilities with
State Street Bank and Trust Company providing for aggregate borrowings of up to
$5,000,000. The Company has granted State Street Bank and Trust Company a
security interest in substantially all of the Company's assets to secure its
obligations under such credit facilities.
4. The Company has agreed to issue securities of the Company to certain
persons and entities identified on Schedule III hereto.
5. The Company has granted Hewlett-Packard Company a right of first offer
with respect to any proposed sale by the Company of its equity securities to any
company engaged in the manufacture of computer hardware.
6. The Company leases its offices at One Arsenal Marketplace, Watertown,
Massachusetts under a 5-year lease expiring in 2001. The Company expects to
lease office furniture from a commercial office supply company.
7. The Company has acquired intellectual property rights from the following
sources:
(a) InterGroup Technologies, Inc. (VisualWare)
(b) Mentor Communications Ltd. (Logical Data Integrator)
(c) Mystic River Software Inc. (Softbridge Basic Language)
(d) Open Environment Corporation (Toolkit)
(e) VZ Corp. (object-oriented development platform)
The Company has transferred intellectual property to the following
entities:
(a) Open Environment Corporation (SAP customization software)
(b) Cambridge Executive Programme Ltd. (VZ development platform)
8. The Company has agreed to extend to SSB Investments, Inc. piggyback
registration rights with respect to the shares of the Company's Common Stock
issuable upon exercise of the warrant the Company has agreed to issue to SSB
Investments, Inc.
<PAGE>
9. The Company is a party to the following additional agreements involving
more than $250,000 or continuing over a period of more than two years:
(a) The Weber Group public relations project
(b) Siemans Nixdorf master partnership
(c) Shell Oil business management project
(d) Marketing Agreement with Hewlett-Packard
10. The Company is a party to the following agreements in connection with the
issuance and sale of Series B Convertible Preferred Stock:
(a) Preferred Stock Purchase Agreements
(b) Registration Rights Agreement
11. The holders of the Company's Series B Convertible Preferred Stock and
certain holders of the Company's Common Stock are parties to a Voting Agreement
(pursuant to which one person designated by holders of the Series B Convertible
Preferred Stock is elected a director of the Company) and a Co-Sale Rights
Agreement (pursuant to which the holders of the Series B Convertible Preferred
Stock have certain rights with respect to proposed sales secondary sales of
Common Stock buy the holders thereof who are parties to the agreement).
<PAGE>
Exhibit A
Description of Series C Convertible Preferred Stock
- ---------------------------------------------------
Section 1. Liquidation Rights.
------------------
(a) Treatment at Liquidation, Dissolution or Winding Up.
---------------------------------------------------
(i) In the event of any liquidation, dissolution or winding up of
the affairs of the corporation, whether voluntary or involuntary, after payment
in full of all amounts payable to the holders of the corporation's Series B
Convertible Preferred Stock in accordance with Section 1(a)(i) of the terms of
the Series B Convertible Preferred Stock set forth in Article IV of the Restated
Certificate of Incorporation of the corporation, and before any payment is made
to the holders of any other class or series of the corporation's capital stock
designated to be junior to the Series C Convertible Preferred Stock, including
the corporation's Common Stock, the holders of Series C Convertible Preferred
Stock shall be entitled to be paid from the assets of the corporation available
for distribution to holders of the Series C Convertible Preferred Stock and the
holders of the Common Stock pursuant to Section 1(a)(ii) of the terms of the
Series B Convertible Preferred Stock, pari passu with the payments required to
be made to the holders of the Series B Convertible Preferred Stock in accordance
with said Section 1(a)(ii), but allocating all payments otherwise required by
the terms of said Section 1(a)(ii) to be made to the holders of the Common Stock
to the holders of the Series C Preferred Stock, an amount equal to $5.00 per
share of Series C Convertible Preferred Stock (which amount shall be subject to
equitable adjustment whenever there shall occur a stock dividend, distribution,
combination of shares, reclassification or other similar event with respect to
Series C Convertible Preferred Stock and, as so adjusted from time to time, is
hereinafter referred to as the "Base Liquidation Price") plus all dividends
thereon accrued but unpaid, to and including the date full payment shall be
tendered to the holders of Series C Convertible Preferred Stock with respect to
such liquidation, dissolution or winding up.
(ii) Following payment in full to the holders of Series C
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof, the remaining assets of the corporation shall be distributed
among the holders of the Common Stock and the holders of the Series C
Convertible Preferred Stock on a share for share basis, with each holder of a
share of Series C Convertible Preferred Stock receiving the amount that would
have been payable to the holder of such share had all shares of Series C
Convertible Preferred Stock been converted to Common Stock pursuant to Section
2(a) hereof immediately following payment in full to the holders of Series C
Convertible Preferred Stock of all amounts distributable to them under Section
1(a)(i) hereof.
(iii) If the assets of the corporation shall be insufficient to
permit the payment in full to the holders of Series C Convertible Preferred
Stock of all amounts distributable to them under Section 1(a)(i) hereof, then
the entire assets of the corporation
<PAGE>
available for such distribution shall be distributed ratably among the holders
of Series C Convertible Preferred Stock.
(iv) In no event shall any payment be made with respect to any
liquidation, dissolution or winding up to the holders of the Series C
Convertible Preferred Stock or the holders of any other class or series of the
corporation's capital stock designated to be junior to the Series C Convertible
Preferred Stock, including the corporation's Common Stock, if and to the extent
that, as a result of such payment, the amount available for distribution to the
holders of the Series B Convertible Preferred Stock would be reduced to an
amount less than the amount that would have been payable to the holders of the
Series B Convertible Preferred Stock pursuant to Section 1 of the terms of the
Series B Convertible Preferred Stock had all shares of the Series C Convertible
Preferred Stock been converted into shares of Common Stock in accordance with
Section 2 hereof immediately prior to such liquidation, dissolution or winding
up.
(b) Treatment of Reorganizations, Consolidations, Mergers and Sales of
------------------------------------------------------------------
Assets. A consolidation or merger of the corporation, or a sale of all or
- ------
substantially all of the assets of the corporation (other than a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in a transaction in which the shareholders of the corporation
immediately prior to the transaction possess more than 50% of the voting
securities of the surviving entity (or parent, if any) immediately after the
transaction) shall be regarded as a liquidation, dissolution or winding up of
the affairs of the corporation within the meaning of this Section 1.
(c) Distributions Other than Cash. Whenever the distribution provided
-----------------------------
for in this Section 1 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the corporation.
Section 2. Conversion. The holders of Series C Convertible Preferred Stock
----------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series C
----------------------------------
Convertible Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series C Convertible Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $5.00 by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. The Conversion Price
for purposes of calculating the number of shares of Common Stock deliverable
upon conversion without the payment of any additional consideration by the
holder of Series C Convertible Preferred Stock (the "Conversion Price") shall
initially be $5.00. Such initial Conversion Price shall be
<PAGE>
subject to adjustment, in order to adjust the number of shares of Common Stock
into which Series C Convertible Preferred Stock is convertible, as hereinafter
provided.
(b) Mechanics of Conversion. Before any holder of Series C Convertible
-----------------------
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the corporation or of any transfer agent for the
Series C Convertible Preferred Stock, and shall give written notice to the
corporation at such office that such holder elects to convert the same and shall
state therein the name of such holder or the name or names of the nominees of
such holder in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. No fractional shares of Common Stock shall
be issued upon conversion of any shares of Series C Convertible Preferred Stock.
In lieu of any fractional shares of Common Stock to which the holder would
otherwise be entitled, the corporation shall pay cash equal to such fraction
multiplied by the then effective Conversion Price. The corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series C Convertible Preferred Stock, or to such holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid, together with cash in lieu
of any fraction of a share. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series C Convertible Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(c) Automatic Conversion.
--------------------
(i) Each share of Series C Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price (subject to adjustment as provided in Section 2(c)(iii)) upon;
(A) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock to the public
at an initial public offering price per share of not less than $8.25
(adjusted proportionately to give effect to any stock dividend, stock
distribution or subdivision or any combination or consolidation of Common
Stock) and with gross proceeds of not less than $15,000,000 (a "Qualified
IPO") or
(B) the written election of the holders of not less than a
majority of the then outstanding shares of Series C Convertible Preferred
Stock to require such mandatory conversion.
(ii) Upon the occurrence of an event specified in Section 2(c)(i)
hereof, all shares of Series C Convertible Preferred Stock shall be converted
automatically
<PAGE>
without any further action by any holder of such shares and whether or not the
certificate or certificates representing such shares are surrendered to the
corporation or the transfer agent for the Series C Convertible Preferred Stock;
provided, however, that the corporation shall not be obligated to issue a
certificate or certificates evidencing the shares of Common Stock issuable upon
such conversion unless the certificate or certificates evidencing such shares of
Series C Convertible Preferred Stock being converted are either delivered to the
corporation or the transfer agent of the Series C Convertible Preferred Stock,
or the holder notifies the corporation or such transfer agent that such
certificate or certificates have been lost, stolen, or destroyed and executes an
agreement satisfactory to the corporation to indemnify the corporation from any
loss incurred by it in connection therewith and, if the corporation so elects,
provides an appropriate indemnity bond. Upon the automatic conversion of Series
C Convertible Preferred Stock, each holder of Series C Convertible Preferred
Stock shall surrender the certificate or certificates representing such holder's
shares of Series C Convertible Preferred Stock at the office of the corporation
or of the transfer agent for the Series C Convertible Preferred Stock.
Thereupon, there shall be issued and delivered to such holder, promptly at such
office and in such holder's name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series C Convertible Preferred Stock surrendered
were convertible on the date on which such automatic conversion occurred. No
fractional shares of Common Stock shall be issued upon the automatic conversion
of Series C Convertible Preferred Stock. In lieu of any fractional shares of
Common Stock to which the holder would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the then effective
Conversion Price.
(d) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Section 2(d), the
-------------------
following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
--------
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(B) "Original Issue Date" shall mean the date on which a
---------------------
share of Series C Convertible Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
------------------------
indebtedness, shares (other than Common Stock and Series C Convertible
Preferred Stock) or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
-----------------------------------
shares of Common Stock issued (or, pursuant to Section 2(d)(iii), deemed to
be issued) by the corporation after the Original Issue Date, other than the
following (collectively, "Excluded Shares"):
<PAGE>
(I) shares of Common Stock issued or issuable upon
conversion of shares of Series C Convertible Preferred Stock; or
(II) shares of Common Stock issued or issuable upon
exercise or conversion of Options or Convertible Securities
outstanding on the Original Issue Date; or
(III) shares of Common Stock issued or issuable to
officers, employees or directors of, or consultants to, the
corporation pursuant to a stock purchase or option plan or other
employee stock bonus arrangement (collectively, the "Plans")
approved by the Board of Directors; provided, however, that shares
of Common Stock issued or deemed issued to a director of the
corporation pursuant to options or other purchase rights granted
after the Original Issue Date shall be Excluded Shares only if
granted at the time of, or in connection with, such director's
initial election to the Board of Directors; or
(IV) shares of Common Stock issued or issuable pursuant
to warrants issued in connection with the establishment of credit
facilities for the corporation (including, without limitation, in
connection with equipment leasing arrangements); or
(V) shares of Common Stock or Convertible Securities
issued with the unanimous consent of the Board of Directors of the
corporation.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
number of shares of Common Stock into which a share of Series C Convertible
Preferred Stock is convertible shall be made, by adjustment in the Conversion
Price in respect of the issuance of Additional Shares of Common Stock or
otherwise; (i) unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the corporation is less than the
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares of Common Stock or, (ii) if prior to such issuance,
the corporation receives written notice from the holders of a majority of the
then outstanding shares of Series C Convertible Preferred Stock agreeing that no
such adjustment shall be made as the result of the issuance of Additional Shares
of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
--------------------------------------------------------
Common Stock.
- ------------
(A) Options and Convertible Securities. In the event the
----------------------------------
corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of
such
<PAGE>
number) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section 2(d)(v)
hereof) of such Additional Shares of Common Stock would be less than the
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(I) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities
or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(II) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any
increase or decrease in the consideration payable to the
corporation, or any increase or decrease in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(III) upon the expiration of any such options or any
rights of conversion or exchange under such Convertible Securities
which shall not have been exercised, the Conversion Price computed
upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options
for Common Stock the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by
the corporation for the issue of all such Options, whether or
not exercised, plus the consideration actually received by
the corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or
<PAGE>
exchanged, plus the additional consideration, if any,
actually received by the corporation upon such conversion
or exchange; and
(b) in the case of Options for Convertible Securities
only the Convertible Securities, if any, actually issued upon
the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the corporation
for the Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by the
corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the corporation (determined pursuant to Section
2(d)(v)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(IV) no readjustment pursuant to clause (II) or (III)
above shall have the effect of increasing the Conversion Price to
an amount which exceeds the lower of (a) the Conversion Price on
the original adjustment date, or (b) the Conversion Price that
would have resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and such
readjustment date;
(V) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(III) above; and
(VI) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price
which became effective on such record date shall be cancelled as
of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this Section
2(d)(iii) as of the actual date of their issuance.
(B) Stock Dividends, Stock Distributions and Subdivisions.
-----------------------------------------------------
In the event the corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock or effect a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock), then and in
any such event, Additional Shares of Common Stock shall be deemed to have
been issued:
(I) in the case of any such dividend or distribution,
immediately after the close of business on the record date for
the determination
<PAGE>
of holders of any class of securities entitled to receive such
dividend or distribution, or
(II) in the case of any such subdivision, at the close
of business on the date immediately prior to the date upon which
corporate action becomes effective.
If such record date shall have been fixed and no part of such
dividend shall have been paid on the date fixed therefor, the
adjustment previously made for the Conversion price which became
effective on such record date shall be cancelled as of the close
of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this Section 2(d)(iii) as of
the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock.
- ----------------------
(A) In the event the corporation shall issue Additional
Shares of Common Stock (including, without limitation, Additional
Shares of Common Stock deemed to be issued pursuant to Section
2(d)(iii) but excluding Additional Shares of Common Stock deemed
to be issued pursuant to Section 2(d)(iii)(B), which event is
dealt with in Section 2(d)(vi) hereof), without consideration or
for a consideration per share less than the applicable Conversion
Price in effect on the date of and immediately prior to such
issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to such issue
plus (II) the number of shares of Common Stock which the aggregate
consideration received or deemed to have been received by the
corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price, and the
denominator of which shall be (I) the number of shares of Common
Stock outstanding immediately prior to such issue plus (II) the
number of Additional Shares of Common Stock so issued or deemed to
be issued.
(B) For the purposes of Section 2(d)(iv)(A) hereof, (i) all
shares of Common Stock issuable upon conversion of shares of
Series C Convertible Preferred Stock, and upon exercise of options
or conversion or exchange of Convertible Securities which are part
of the Excluded Shares, outstanding immediately prior to any issue
of Additional Shares of Common Stock, or any event with respect to
which Additional Shares of Common Stock shall be deemed to be
issued, shall be deemed to be outstanding; and (ii) immediately
after any Additional Shares of Common Stock are deemed issued
pursuant to Section 2(d)(iii), such Additional Shares of Common
Stock shall be deemed to be outstanding.
<PAGE>
(C) Notwithstanding anything to the contrary contained herein,
the applicable Conversion Price in effect at the time Additional Shares of
Common Stock are issued or deemed to be issued shall not be reduced pursuant
to Section 2(d)(iv)(A) hereof at such time if the amount of such reduction
would be an amount less than $0.01, but any such amount shall be carried
forward and reduction with respect thereto made at the time of and together
with any subsequent reduction which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or more.
(v) Determination of Consideration. For purposes of this Section 2(d),
------------------------------
the consideration received by the corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
-----------------
(I) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (I) and
(II) above, as determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
share received by the corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 2(d)(iii)(A), relating to
Options and Convertible Securities, shall be determined by dividing (I) the
total amount, if any, received or receivable by the corporation as
consideration for the issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by (II) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
<PAGE>
(vi) Adjustment for Dividends, Distributions, Subdivisions,
------------------------------------------------------
Combinations or Consolidations of Common Stock
- ----------------------------------------------
(A) Stock Dividends, Distributions or Subdivisions. In the
----------------------------------------------
event the corporation shall issue Additional Shares of Common Stock pursuant to
Section 2(d)(iii)(B) in a stock dividend, stock distribution or subdivision, the
Conversion Price in effect immediately prior to such stock dividend, stock
distribution or subdivision shall, concurrently with the effectiveness of such
stock dividend, stock distribution or subdivision, be proportionately decreased.
(B) Combinations or Consolidations. In the event the
------------------------------
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(e) No Impairment. The corporation shall not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series C
Convertible Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series C Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any affected holder of Series C Convertible Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
conversion of each share of Series C Convertible Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
----------------------
corporation of a record of the holders of any class or securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Series C Convertible Preferred Stock at least ten (10) days prior to
such record date a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution.
<PAGE>
(h) Common Stock Reserved. The corporation shall reserve and keep
---------------------
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all convertible Series C Convertible Preferred Stock.
(i) Certain Taxes. The corporation shall pay any issue or
-------------
transfer taxes payable in connection with the conversion of any shares of Series
C Convertible Preferred Stock; provided, however, that the corporation shall not
be required to pay any tax which may be payable in respect of any transfer to a
name other than that of the holder of such Series C Convertible Preferred Stock.
(j) Closing of Books. The corporation shall at no time close its
----------------
transfer books against the transfer of any Series C Convertible Preferred Stock,
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series C Convertible Preferred Stock, in any manner which interferes
with the timely conversion or transfer of such Series C Convertible Preferred
Stock.
Section 3. Voting Rights.
-------------
Except as otherwise provided herein or required by law or by the
provisions establishing any other series of Preferred Stock, the holders of
Common Stock and the holders of Series C Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting and shall vote, together with
the holders of Common Stock and the holders of any other series of Preferred
Stock, as one class upon any matter submitted to the stockholders for a vote.
Holders of Series C Convertible Preferred Stock shall have that number of votes
per share of Series C Convertible Preferred Stock as is equal to the number of
shares of Common Stock into which each such share of Series C Convertible
Preferred Stock held by such holder could be converted on the date for
determination of stockholders entitled to vote at the meeting.
Section 4. Covenants
---------
(a) So long as at least twenty-five percent (25%) of the number of
shares of Series C Convertible Preferred Stock outstanding on the Original Issue
Date shall be outstanding, the corporation shall not, without first having
provided the written notice of such proposed action to each holder of
outstanding shares of Series C Convertible Preferred Stock required by Section
4(b) hereof and having obtained the affirmative vote or written consent of the
holders of a majority of such outstanding shares of Series C Convertible
Preferred Stock, amend, alter or repeal any provision of, or add any provision
to, the corporation's Certificate of Incorporation or by-laws, if such action
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series C Convertible Preferred
Stock.
<PAGE>
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the corporation's by-laws to the contrary, notice of any action
specified in Section 4(a) hereof shall be given by the corporation to each
holder of shares of Series C Convertible Preferred Stock by first class mail,
postage prepaid, addressed to such holder at the last address of such holder as
shown by the records of the corporation, at least thirty (30) days before the
date on which the books of the corporation shall close or a record shall be
taken with respect to such proposed action, or, if there shall be no such date,
at least thirty (30) days before the date when such proposed action is scheduled
to take place. Any holder of outstanding shares of Series C Convertible
Preferred Stock may waive any notice required by this Section 4(b) by a written
document indicating such waiver.
Section 5. No Reissuance of Series C Convertible Preferred Stock. No share
-----------------------------------------------------
or shares of Series C Convertible Preferred Stock acquired by the corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and eliminated from the shares which
the corporation shall be authorized to issue.
Section 6. Residual Rights. All rights accruing to the outstanding shares
---------------
of the corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
PABOS:WEK:246344_1
<PAGE>
IV. 1,837,750 Common Shares are reserved for issuance upon exercise of
outstanding option grants to employees and consultants under the 1995 Stock Plan
at an average exercise price of $2.15 per share; these options are subject to
vesting (and the majority remain unvested).
V. Commitments to issue options for an aggregate of 100,000 Common Shares have
been made to persons who have accepted employment offers.
VI. An employment offer has been extended to a candidate for the position of
Vice President of Marketing; this candidate has been offered options for a total
of 350,000 Common Shares
VII. An employment offer has been extended to a candidate for the position of
Vice President of Sales; this candidate has been offered options for a total of
500,000 Common Shares.
VIII. In connection with the establishment of a credit facility with State
Street Bank and Trust Company, the Company has agreed to issue to SSB
Investments, Inc., an affiliate of such bank, a warrant for the purchase of
35,000 Common Shares on or before February 15, 2003 at an exercise price of
$5.54 per share, and to extend, with respect to such shares, piggy-back
registration rights in connection with any Company registration of its
securities (other than in its initial public offering).
IX. The Company intends to use the proceeds from the issuance and sale of the
Series C Convertible Preferred Shares to repurchase and retire, at a repurchase
price of $5.00 per share, shares of Common Stock as indicated in Item 1 above.
X. Pursuant to the terms of the Series B Convertible Preferred Stock, the
Company is obligated, at the request of the holders of the Series B Convertible
Preferred Stock made on or after December 31, 2002, to redeem (in three equal
annual installments) the Series B Convertible Preferred Stock.
<PAGE>
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
This confidentiality and non-competition agreement is made as of the ___ day
of ________ 1996 by and between Business@Web, Inc., a Delaware corporation
("Company"), and _________________________ ("Employee").
WHEREAS, the Company has developed, and the Company and/or Employee may
continue to develop during the period Employee is retained by the Company,
certain Proprietary Information, Inventions and Intellectual Property (as those
terms are hereinafter defined), that the Company wishes to protect and maintain
as confidential;
WHEREAS, the Company from time to time has received, and may continue to
receive during the period Employee is as retained by the Company, the
Proprietary Information of others, and the Company wishes, and is (in certain
circumstances) contractually obligated, to maintain the confidentiality of such
Proprietary Information; and
WHEREAS, the Company has developed, and will continue to develop during the
period Employee is so retained by the Company, goodwill by, among other things,
substantial expenditure of money and effort;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and undertakings contained in this agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, IT
IS AGREED:
1. Definitions. As used in this Agreement, the following terms shall have
-----------
the following meanings:
(a) Agreement means this confidentiality and non-competition
---------
agreement, including all exhibits, schedules and annexations, as all may be
amended from time to time in the manner provided in this Agreement.
(b) Employment means the current or anticipated or subsequent
----------
retention of Employee by the Company as a full-time employee, a part-time
employee, a consultant or otherwise, or any other period during which Employee
receives compensation from the company in any capacity.
(c) Intellectual Property means any Invention, writing, trade name,
---------------------
trademark, service mark or any other material registered or otherwise protected
or protectible under state, federal, or foreign patent, trademark, copyright, or
similar laws.
(d) Inventions includes ideas, discoveries, inventions, developments
----------
and improvements, whether or not reduced to practice and whether or not
patentable or otherwise within the definition of Intellectual Property.
(e) Proprietary Information includes any scientific, technical, trade
or business secrets of the Company and any scientific, technical, trade or
business materials that the Company treats, or is obligated to treat, as
confidential or proprietary, including, but not limited to, Inventions belonging
to the Company and confidential information obtained by or given to the
<PAGE>
Company about or belonging to its suppliers, licensors, licensees, partners,
affiliates, customers, potential customers or others.
The definition of "Proprietary Information" herein shall not include
Proprietary Information which (i) was known by Employee prior to its disclosure
by the Company; (ii) is publicly known through publication or otherwise through
no wrongful act of Employee; (iii) is received from a third party who rightfully
discloses it to Employee without restriction on its subsequent disclosure; or
(iv) is disclosed pursuant to the lawful requirement of a governmental agency or
by order of court of competent jurisdiction.
2. Employee Acknowledgments. The Company has developed and will develop
------------------------
its Proprietary Information and Intellectual Property over a substantial period
of time and at a substantial expense, and its Proprietary Information and
Intellectual Property are integral to the goodwill of the Company. During the
course of employment to the Company, Employee may develop or become aware of
Proprietary Information and/or Intellectual Property. Protection of the
Proprietary Information and Intellectual Property is necessary to the conduct of
the Company's business, and the Company is and shall at all times remain the
sole owner of the Company's Proprietary Information and Intellectual Property.
3. Confidentiality. Employee shall at all times, both during and after
---------------
any termination of Employee's employment by the Company by either the Company or
Employee, maintain in confidence and not utilize the Proprietary Information or
the Intellectual Property of the Company, and/or technology or proprietary
information of others under confidential evaluation by the Company except in
performing services for the Company pursuant to his or her employment.
Maintaining such Proprietary Information and Intellectual Property in confidence
shall include refraining from disclosing such Proprietary Information or
Intellectual Property to any third party (except when duly and specifically
authorized in writing to do so for purpose of furthering the business of the
Company), and refraining from using such Proprietary Information or Intellectual
Property for the account of Employee or for any other person or business entity.
Employee will not file patents based on the Company's technology or confidential
information, nor seek to make improvements thereon, without the Company's
written approval. Employee agrees not to make any copies of the Proprietary
Information or Intellectual Property of the Company (except when appropriate for
the furtherance of the business of the Company or duly and specifically
authorized to do so) and promptly upon request, whether during or after the
period of employment by the Company, to return to the Company any and all
documentary, machine-readable or other elements of evidence of such Proprietary
Information, Intellectual Property, and any copies of either that may be in
Employee's possession or under Employee's control.
4. Rights to Inventions and Intellectual Property. In connection with
----------------------------------------------
Employee's employment by the Company, or by use of the resources of the Company,
whether or not Employee is then retained by the Company, Employee may produce,
develop, create, invent, conceive or reduce to practice Inventions and
Intellectual Property related to the business of the Company. Employee shall
maintain and furnish to the Company complete and current records of all such
Inventions and Intellectual Property. Employee agrees that all such Inventions
and Intellectual Property are and shall be the exclusive property of the
Company, and that the Company may sue or pursue them without restriction or
additional compensation. Employee: (i) hereby assigns, sets over and transfers
to the Company all of his right, title and interest in and to such Inventions
and Intellectual Property; (ii) agrees that Employee and his agents shall,
during and after the period Employee is retained by the Company, cooperate fully
in obtaining patent,
<PAGE>
trademark, service mark, copyright or other proprietary protection for such
Inventions and Intellectual Property, all in the name of the Company (but only
at Company expense), and, without limitation, shall execute all requested
applications, assignments and other documents in furtherance of obtaining such
protection or registration and confirming full ownership by the Company of such
Inventions and Intellectual property; and (iii) shall, upon leaving the Company,
provide to the Company in writing a full, signed statement of all Inventions and
Intellectual property in which Employee participated prior to termination of
Employee's employment by the Company. Employee hereby designates the Company as
its agent, and grants to the Company a power of attorney with full substitution,
which power of attorney shall be deemed coupled with an interest, for the
purposes of effecting the foregoing assignments from the Employee to the
Company.
5. Non-Solicitation. Employee shall not during the term of his or her
----------------
employment or at any time during the five (5) years following termination of the
term of his or her employment solicit any person who is employed by or a
consultant to the Company or any affiliate or subsidiary of the Company either
during Employee's period or employment or during such five (5) year period, to
terminate such person's employment by or consultancy to the Company, such
affiliate or subsidiary. As used herein the term "solicit" shall include,
without limitation, requesting, encouraging, assisting or causing, directly or
indirectly, any such employee or consultant to terminate such person's
employment by or consultancy to the Company, affiliate or subsidiary.
6. Prohibited Competition. Employee recognizes and acknowledges the
----------------------
competitive and proprietary nature of the Company's business operations.
Employee acknowledges and agrees that a business will be deemed competitive
with the Company if it engages in a line of business in which it performs any of
the services, researches, develops or manufactures or sells any products
provided or offered by the Company or under development by the Company, or any
similar products or products fulfilling the same function, whether or not
similar (the Company's "Field of Interest") (such business to be referred to as
a "competitive business").
Employee further acknowledges and agrees that during the course of
performing services for the Company, the Company will furnish, disclose or make
available to Employee confidential and proprietary information related to the
Company's business and that the Company may provide Employee with unique and
specialized training. Employee also acknowledges that such confidential
information and the training to be provided by the Company have been developed
and will be developed by the Company through the expenditure by the Company of
substantial time, effort and money and that all such confidential information
and training could be used by Employee to compete with the Company.
Accordingly, Employee hereby agrees in consideration of the Company's
agreement to hire Employee and Employee's compensation for services rendered to
the Company and in view of the confidential position to be held by Employee, the
unique and specialized training which the Company may provide Employee and the
confidential nature and proprietary value of the information which the Company
may share with Employee, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, as follows:
<PAGE>
During the period during which Employee performs services for or at the
request of the Company (the "Term") and for a period of eighteen months
following the expiration or termination of the Term (the "Restricted Term"),
whether such termination is voluntary or involuntary, Employee shall not,
without the prior written consent of the Company:
(i) For Employee or on behalf of any other, directly or
indirectly, either as principal, agent, stockholder, employee, consultant,
representative or in any other capacity, own, manage, operate or control,
or be concerned, connected or employed by, or otherwise associate in any
manner with, engage in or have a financial interest in any business whose
primary line of business is in the Field of Interest, or in any other
business in which Employee has any direct operating or scientific
responsibility in the Field of Interest anywhere in the world (the
"Restricted Territory"), except that nothing contained herein shall
preclude Employee from purchasing or owning stock in any such competitive
business if such stock is publicly traded, and provided that Employee's
holdings do not exceed one percent (1%) of the issued and outstanding
capital stock of such business.
(ii) Either individually or on behalf of or through any third
party, solicit, divert or appropriate or attempt to solicit, divert or
appropriate, for the purpose of competing in the Field of Interest with the
Company or any present or future parent, subsidiary or other affiliate of
the Company which is engaged in the Field of Interest, any joint venture or
collaborative research partners, customers or patrons of the Company, or
any prospective customers or patrons with respect to which the Company as
developed or made a presentation for the use of exploitation of products or
processes in the Field of Interest (or similar offering of services),
located within the Restricted Territory.
Employee further recognizes and acknowledges that (i) the types of
employment which are prohibited by this paragraph are narrow and reasonable in
relation to the skills which represent Employee's principal salable asset both
to the company and to Employee's other prospective employers, and (ii) the
specified but broad geographical scope of the provisions of this paragraph is
reasonable, legitimate and fair to Employee in light of the Company's need to
perform its research and to develop and market its services and to develop and
sell its products in a large geographic area in order to have a sufficient
customer base to make the Company's business profitable and in light of the
limited restrictions on the type of employment prohibited herein compared to the
types of employment for which Employee is qualified to earn his or her
livelihood.
If any part of this section should be determined by a court of competent
jurisdiction to be unreasonable in duration, geographic area, or scope, then
this section is intended to and shall extend only for such period of time, in
such area and with respect to such activity as is determined to be reasonable.
7. Continued Obligations. Employee's obligations under this Agreement
---------------------
shall not be affected: (i) by any termination of Employee's employment,
including termination upon the Company's initiative; nor (ii) by any change in
Employee's position, title or function with the Company; nor (iii) by any
interruption in employment during which Employee leaves and then rejoins the
Company for any period within a period of one year and for any reason. Nothing
herein shall be construed as constituting an employment agreement or an
undertaking by the Company to retain Employee's services for any stated period
of time.
<PAGE>
8. No Conflicting Agreements. Employee represents and warrants that
-------------------------
execution and performance of this Agreement does not and will not violate,
conflict with, or constitute a default under any contract, commitment,
agreement, understanding, arrangements, or restriction, or any adjudication,
order, injunction or finding of any kind by any court or agency to which
Employee may be a party or by which Employee may be bound.
9. Remedies. In the event of any breach by Employee of any of the
--------
provisions of this Agreement, the Company shall be entitled, in addition to
monetary damages and to any other remedies available to the Company under this
Agreement and at law, to equitable relief, including injunctive relief, and to
payment by Employee of all costs incurred by the Company in enforcement against
Employee of the provisions of this Agreement, including reasonable attorneys'
fees.
10. General Provisions.
------------------
(a) No Waiver. Waiver of any provision of this Agreement, in whole or
---------
in part, in any one instance shall not constitute a waiver of any other
provision in the same instance, nor any waiver of the same provision in another
instance, but each provision shall continue in full force and effect with
respect to any other than-existing or subsequent breach.
(b) Notice. For purposes of this Agreement, notices and all other
------
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered personally or by overnight courier with a
receipt obtained therefor or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed, if to the
Company, to its chief executive officer at the Company's principal office, and
if to the Employee, at his residence address as shown on the Company's
employment records, or to such other address as either party may furnish to the
other in writing in accordance with this Section, except that notices of changes
of address shall be effective upon receipt.
(c) Severability. If any provision of this Agreement shall be found
------------
to be invalid, inoperative or unenforceable in law or equity, such finding shall
not affect the validity of any other provisions of this Agreement, which shall
be construed, reformed and enforced to effect the purposes of this Agreement to
the fullest extent permitted by law.
(d) Miscellaneous. This Agreement: (i) may be executed in any number
-------------
of counterparts, each of which, when executed by both parties to the Agreement
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument; (ii) shall be governed by and construed
under the law of the Commonwealth of Massachusetts, without application of
principles of conflicts of laws; (iii) shall constitute the entire agreement of
the parties with respect to the subject matter hereof, superseding all prior
oral and written communications, proposals, negotiations, representations,
understandings, courses of dealing, agreements, contracts, and the like between
the parties in such respect; (iv) may be amended, modified, or terminated, and
any right under this Agreement may be waived in whole or in part, only by a
writing signed by both parties; (v) contains headings only for convenience,
which headings do not form part, and shall not be used in construction, of this
Agreement; (vi) shall bind and inure to the benefit of the parties and their
respective legal representatives, successors and assigns, except that no party
may delegate any of its or his obligations under this Agreement, or assign this
Agreement, without the prior written consent of the other party, except the
Company may assign this Agreement in connection with the merger, consolidation,
or sale of all
<PAGE>
or substantially all assets of the Company; and (vii) be enforced only in courts
located within the Commonwealth of Massachusetts and the parties hereby agree
that such courts shall have venue and exclusive subject matter and personal
jurisdiction, and consent to service of process by registered mail, return
receipt requested, or by any other manner provided by law.
Executed under seal as of the date first above written.
BUSINESS@WEB, INC.
By:
--------------------------------
--------------------------------
Employee
<PAGE>
Exhibit C
DRAFT
April ___, 1996
To the Purchasers listed on Schedule I
to the Purchase Agreement
hereinafter described
Ladies and Gentlemen:
We have acted as counsel for Business@Web, Inc., a Delaware
corporation (the "Company") in connection with the issuance and sale of
1,220,000 shares of the Company's Series C Convertible Preferred Stock, par
value $1.00 per share (the "Preferred Shares"), to the purchasers (the
"Purchasers") identified on Schedule I to the Series C Convertible Preferred
Stock Purchase Agreement dated April __, 1996 (the "Purchase Agreement") among
the Company and Purchasers pursuant to the terms contained in the Purchase
Agreement. Terms used in this opinion, unless otherwise defined, shall have the
meanings assigned thereto in the Purchase Agreement. This opinion is furnished
to you pursuant to Section 4.01 of the Purchase Agreement.
For purposes of the opinions expressed below, we have examined
original, faxed or photocopies of executed counterparts of:
a. the Purchase Agreement; and
b. the Registration Rights Agreement.
The Purchase Agreement and the Registration Rights Agreement are
together referred to herein as the "Transaction Documents".
In addition, we have examined the originals or copies of such records,
agreements and instruments of the Company, certificates of public officials and
of officers of the Company and such other documents and records and such matters
of law as we have deemed appropriate as a basis for the opinions hereinafter
expressed. In making such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
all documents submitted to us as copies, which facts we have not independently
verified. As to various facts material to the opinions set forth herein, we
have relied without independent verification upon factual representations made
by the Company and the Purchasers in the Transaction Documents, upon
certificates of public officials and upon facts certified to us by officers of
the Company. With respect to the opinions expressed in
<PAGE>
To The Purchasers
April , 1996
----
Page 2
paragraph number 7 below, we draw your attention to the fact that we have not
made any investigation of the records of any court or other governmental agency
or body.
Statements herein as to the truth of certain matters "to our
knowledge", "known to us", or as to which we have "knowledge" refer to the
knowledge consciously held by the individual lawyers in our firm who
participated in the negotiation and drafting of the Transaction Documents
without independent investigation.
For purposes of the opinions expressed herein, we have assumed that at
all relevant times the Purchasers had all requisite power and authority and had
taken all necessary action to enter into and perform all of its obligations
under the Transaction Documents and that each such Transaction Document was and
will continue to be the valid, binding and enforceable obligation of each of the
Purchasers. You have not asked us to express, and we do not express, any
opinion concerning the application of any federal, state or local statute, law,
rule or regulation to the authority of any of the Purchasers to enter into and
to carry out its obligations, and to exercise its rights, under the Transaction
Documents.
This opinion is limited to the laws of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware (the
"DGCL"), and the federal laws of the United States of America, and we express no
opinions with respect to the law of any other jurisdiction.
Based upon and subject to the foregoing and subject also to the
general qualifications stated following paragraph number 8 below, we hereby
advise you that, in our opinion, as of the date hereof:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business as a foreign corporation in the Commonwealth of
Massachusetts.
2. The Company has the corporate power and authority to own and hold
its properties and to carry on its business as now conducted and as proposed to
be conducted, to execute, deliver and perform the Transaction Documents to which
it is a party, and to issue, sell and deliver the Preferred Shares and, upon
conversion of the Preferred Shares in accordance with their terms, the
Conversion Shares.
3. The execution and delivery by the Company of the Purchase
Agreement and the Registration Rights Agreement, the performance by the Company
of its obligations thereunder, and the issuance of the Preferred Shares and,
upon conversion of the Preferred Shares in accordance with their terms, the
Conversion Shares have been duly authorized by all requisite corporate action
and will not violate any provision of any law applicable to the
<PAGE>
To The Purchasers
April , 1996
----
Page 3
Company, any order of any court or other agency of government applicable to the
Company of which we have knowledge, the Restated Certificate of Incorporation
of the Company, as amended, or the By-laws of the Company, as amended, or
violate or conflict with, result in or constitute (with due notice or lapse of
time or both) a default under or result in the creation or imposition of any
material lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company pursuant to any
indenture, agreement, or other instrument of which we have knowledge and to
which the Company or any of its properties or assets is bound.
4. The Preferred Shares and the Conversion Shares have been duly
authorized and, when issued in accordance with the Purchase Agreement (in the
case of the Preferred Shares) or upon conversion of the Preferred Shares in
accordance with their terms (in the case of the Conversion Shares), will be
validly issued, fully paid and nonassessable shares, with no personal liability
attaching to the ownership thereof, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances created by or through the
Company. The issuance, sale and delivery of the Preferred Shares and the
Conversion Shares will not subject to any preemptive right of stockholders of
the Company arising pursuant to the DGCL, the Restated Certificate of
Incorporation or the Bylaws of the Company or, to our knowledge, otherwise
existing or, to our knowledge, to any right of first refusal or other right in
favor of any person.
5. The Transaction Documents have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their terms.
6. The authorized capital stock of the Company consists solely of
30,000,000 shares of Common Stock and 3,000,000 shares of Preferred Stock
(1,332,127 of which have been designated Series B Convertible Preferred Stock,
1,220,000 of which have been designated Series C Convertible Preferred Stock,
and 447,8733 of which remain undesignated). Immediately prior to the Closing,
16,204,545 shares of Common Stock and 1,332,127 shares of Series B Convertible
Preferred Stock were validly issued and outstanding, and no other shares of
Common Stock or Preferred Stock were outstanding.
7. To our knowledge, there is no (i) action, suit, claim, proceeding
or investigation pending against the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise, or (iii) governmental inquiry pending against the
Company. To our knowledge, the Company is not in default with respect to any
order, writ, injunction or decree of any court or of any federal, state,
municipal or other
<PAGE>
To The Purchasers
April , 1996
----
Page 4
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company pending or
threatened against others.
8. Assuming the accuracy of the representations and warranties of the
Purchasers made in Article III of the Purchase Agreement, the offering, issuance
and sale of the Preferred Shares and the Conversion Shares is exempt from the
registration provisions of the Securities Act of 1933, as amended.
Our opinions set forth above are subject to the following general
qualifications:
a. The validity and enforceability of any obligation and the
exercise of rights and remedies may be limited by (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws affecting the enforcement generally of the rights and
remedies of creditors or the obligations of debts, and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity), including, without
limitation, the discretion of any court of competent jurisdiction in
granting specific performance or injunctive or other equitable relief.
b. The enforcement of any rights or remedies is or may be subject
to an implied duty on the part of the party seeking to enforce such
rights to take action and made determinations on a reasonable basis
and in good faith.
c. The enforceability of the Transaction Documents may be limited
by general principals of contract law which include (i) the
unenforceability of provisions to the effect that provisions therein
may only be amended or waived in writing to the extent that an oral
agreement modifying such provisions has been entered into, and (ii)
the general rule that, where less than all of an agreement is
enforceable, the balance is enforceable only when the unenforceable
portion is not an essential part of the agreed exchange.
d. The indemnification and contribution provisions set forth in
Section 6 of the Registration Rights Agreement may not be enforceable
to the extent that they should be found contrary to public policy .
e. We express no opinion with respect to the choice of law
provisions contained in the Transaction Documents .
This opinion is furnished to you solely for your benefit in connection
with the consummation of the Closing under the Purchase Agreement and may not be
relied upon by any other person or entity or for any other purpose without our
express, prior written consent.
<PAGE>
To the Purchasers
April , 1996
----
Page 5
All of the opinions set forth herein are rendered as of the date hereof, and we
assume no obligation to update such opinions to reflect any facts or
circumstances which may hereafter come to our attention or any changes in the
law which may hereafter occur.
Very truly yours,
Peabody & Arnold
<PAGE>
REGISTRATION RIGHTS AGREEMENT
As of March 29, 1996
To the Investors named on Schedule I hereto
Ladies and Gentlemen:
In connection with the agreement by the Investors named on Schedule I
hereto (the "Investors") on the date hereof to purchase shares of Series C
Convertible Preferred Stock, $1.00 par value (the "Series C Preferred Stock") of
the Company, pursuant to the Series C Convertible Preferred Stock Purchase
Agreement dated as of March 29, 1996 (the "Purchase Agreement") among the
Company and such Investors and as an inducement to the Investors to consummate
the transactions contemplated by the Purchase Agreement, the Company covenants
and agrees with the Investors as follows:
1. Certain Definitions As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of shares of Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statue, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Stock" shall mean all shares of the Company's Series C
---------------
Preferred Stock, as constituted on the date of this Agreement.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 5.
"Restricted Stock" shall mean the Conversion Shares, but excluding
------------------
shares of Common Stock which have been (a) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act, provided,
--------
however, that the term "Restricted Stock" shall be
-------
<PAGE>
deemed to include the number of shares of Restricted Stock that would be
issuable to a holder of Preferred Shares upon conversion of all Preferred
Shares held by such holder at such time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 5.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares or
------------------
Conversion Shares shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SHARES UNDER THAT ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM REGISTRATION
THEREUNDER IS AVAILABLE.
3. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or another
form not available for registering the Restricted Stock for sale to the
public), each such time it will give written notice to all holders of
outstanding Restricted Stock of its intention to do and of the proposed method
of distribution of such securities. Upon the written request of any such holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of its Restricted Stock, the Company will use its
best efforts to cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
and under the conditions such registration is permitted under the Securities
Act. In the event that any registration pursuant to this Section 3 shall be, in
whole or in part, an underwritten public offering of Common Stock, the number of
shares of Restricted Stock to be included in such an underwriting may be
reduced (pro rata among the requesting holders based upon the number of shares
of Restricted Stock owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that the inclusion of some or all
of the Restricted Stock would adversely affect the marketing of the securities
to be sold by the Company therein, provided however, that such number of shares
-------- -------
of Restricted Stock (if reduced) shall not be reduced to a number which is less
than 15% of the total number of shares are to be included in such underwriting
for the account of persons other than the Company or requesting holders of
Restricted Stock. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this Section 3 without
thereby incurring any liability to the holders of Restricted Stock.
<PAGE>
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Section 3 to use its best efforts to effect the registration
of any shares of Restricted Stock under the Securities Act, the Company will,
as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering shall be on Form S-1 or
other form of general applicability satisfactory to the managing underwriter
selected as therein provided) with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 4(a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided however, that the Company shall not for any such purpose be required to
- -------- -------
qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The sellers of
Restricted Stock agree upon receipt of such notice forthwith to cease making
offers and sales of Restricted Stock pursuant to such
<PAGE>
registration statement or deliveries of the prospectus contained therein for
any purpose until the Company has prepared and furnished such amendment or
supplement to the prospectus as may be necessary so that, as thereafter
delivered to purchasers of such Restricted Stock, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller of
Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements and the notes thereto and the schedules
and other financial and statistical data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposed of Section 4(a) and 4(b), the period of distribution of
Restricted Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Restricted Stock
in any other registration shall be deemed to extend until the
<PAGE>
earlier of sale of all Restricted Stock covered thereby and 120 days after the
effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock shall (a) provide such information and execute such documents
as may reasonably be required in connection with such registration, (b) agree to
sell Restricted Stock on the basis provided in any, underwriting arrangements
and (c) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements, which arrangements shall not be
inconsistent herewith.
In connection with each registration pursuant to Section 3 covering an
underwritten public offering, the Company and each seller agree to enter into a
written agreement with the managing, underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
5. Expenses. All expenses incurred by the Company in complying with
--------
Section 3, including without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc. transfer taxes, fees of
transfer agents and registrars, and fees and disbursements of one counsel for
the fees of transfer agents and registrars, and fees and disbursements of one
counsel for the sellers of Restricted Stock (who shall also serve as counsel
for, and be acceptable to, any other selling stockholders for whom the Company
is obligated to bear Registration Expenses), but excluding any Selling Expenses,
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Restricted Stock are called "Selling
Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Section 3. All Selling Expenses in connection with
each registration statement under Section 3 shall be borne by the participating
seller in proportion to the number of shares sold by each, or by such
participating seller other than the Company (except to the extent the Company
shall be a seller) as they may agree.
6. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 3, the Company will indemnify and
hold harmless each seller of such Restricted Stock thereunder, each underwriter
of such Restricted Stock thereunder and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue
<PAGE>
statement of any material fact contained in any registration statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Section 3, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will pay the legal fees and other expenses of each such seller, each such
underwriter and each such controlling person incurred by them in connection with
investigation or defending any such loss, claim, damage, liability or action,
provided, however that the Company will not be liable in any such case if and to
- -------- -------
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in reliance upon and in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus, and provided further, however, that the Company will not be liable
-------- ------- -------
to any such seller, any such underwriter or any such controlling person in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue or alleged untrue statement or omission
or an alleged omission made in any preliminary prospectus or final prospectus
delivered by such seller, underwriter or controlling person in connection with
the sale of the Restricted Stock if (1) the final prospectus or prospectus
supplement corrected such untrue statement or omission and (2) the Company
advised such seller, underwriter or controlling person that such correction had
been made and (3) such seller, underwriter or controlling person failed to send
or deliver a copy of the final prospectus or prospectus supplement with or prior
to the delivery of written confirmation of the sale of the Restricted Stock.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 3, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 3, any preliminary prospectus of
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will pay the legal fees and other
expenses of the Company and each such officer, director, underwriter and
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or
<PAGE>
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall
- -------- ------- -------
be limited to the proportion of any such loss, claim, damage, liability or
expense that is equal to the proportion that the public offering price of the
shares sold by such seller under such registration statement bears to the total
public offering price of all securities sold thereunder, but not in any event to
exceed the proceeds received by such seller from the sale of Restricted Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party other than under this Section 6 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section 6 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided, however,
-------- -------
that, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded (based on the advice of counsel) that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel as
required by the local rules of such jurisdiction) at any time for all such
indemnified parties.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of final judgment or
decree by a court of competent jurisdiction and the expiration of
<PAGE>
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 6 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 6; then, and in each such case, the Company and such
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such holder is responsible for the portion represented by the percentage
that the public offering price of its Restricted Stock offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; provided however, that, in any such case, (A) no such holder
-------- -------
will be required to contribute any amount in excess of the public offering price
of all such Restricted Stock offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
8. Rule 144 Reporting and Rule 144A Information. With a view to making
--------------------------------------------
available the benefits of certain rules and regulations of the Commission that
may at any time permit the resale of the Restricted Stock without registration,
the Company will:
(a) at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
<PAGE>
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration; and
(b) at any time, at the request of any holder of Preferred Shares of
shares of Restricted Stock, make available to such holder and to any prospective
transferee of such Preferred Shares or shares of Restricted Stock the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act.
9. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Investor as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
cause a material violation of any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any of its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
10. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not; provided, however, that registration rights conferred herein
-------- -------
on Investor shall only inure to the benefit of a transferee of Preferred Shares
or Restricted Stock if there is transferred to such transferee at least 50,000
<PAGE>
shares of Restricted Stock (the transferee in any such case being referred to as
an "Investor Transferee").
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
(i) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(ii) if to any Investor, at such Investor's address as set
forth on Schedule I hereto
(iii) if to any of Investor's Transferees, at such address as
may have been furnished to the Company in writing by it;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this Section
10(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of a majority of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same
<PAGE>
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart executed by the party against whom
enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period following the
effective date of the registration statement relating to such offering to be
reasonably determined by the underwriters.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(h) This Agreement and the rights granted herein shall terminate on
the date all of the Restricted Stock may be sold pursuant to Rule 144 under the
Securities Act without regard to the volume limitations contained in Rule
144(e), except that the indemnification provisions set forth in Section 6 shall
survive indefinitely.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
BUSINESS@WEB, INC.
By:________________________
<PAGE>
EXHIBIT 10.23
REGISTRATION RIGHTS AGREEMENT
As of March 29, 1996
To the Investors named on Schedule I hereto
Ladies and Gentlemen:
In connection with the agreement by the Investors named on Schedule I
hereto (the "Investors") on the date hereof to purchase shares of Series C
Convertible Preferred Stock, $1.00 par value (the "Series C Preferred Stock") of
the Company, pursuant to the Series C Convertible Preferred Stock Purchase
Agreement dated as of March 29, 1996 (the "Purchase Agreement") among the
Company and such Investors and as an inducement to the Investors to consummate
the transactions contemplated by the Purchase Agreement, the Company covenants
and agrees with the Investors as follows:
1. Certain Definitions As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
------------
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of shares of Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Preferred Stock" shall mean all shares of the Company's Series C
---------------
Preferred Stock, as constituted on the date of this Agreement.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 5.
"Restricted Stock" shall mean the Conversion Shares, but excluding
----------------
shares of Common Stock which have been (a) registered under the Securities
Act pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act, provided,
--------
however, that the term "Restricted Stock" shall be deemed to include the
-------
number of shares of Restricted Stock that would be issuable to
<PAGE>
a holder of Preferred Shares upon conversion of all Preferred Shares held
by such holder at such time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 5.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares or
------------------
Conversion Shares shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SHARES UNDER THAT ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.
3. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or another
form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to all holders of outstanding
Restricted Stock of its intention so to do and of the proposed method of
distribution of such securities. Upon the written request of any such holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of its Restricted Stock, the Company will use its
best efforts to cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
and under the conditions such registration is permitted under the Securities
Act. In the event that any registration pursuant to this Section 3 shall be, in
whole or in part, an underwritten public offering of Common Stock, the number of
shares of Restricted Stock to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares of
Restricted Stock owned by such holders) if and to the extent that the managing
underwriter shall be of the opinion that the inclusion of some or all of the
Restricted Stock would adversely affect the marketing of the securities to be
sold by the Company therein, provided, however, that such number of shares of
-------- -------
Restricted Stock (if reduced) shall not be reduced to a number which is less
than 15% of the total number of shares are to be included in such underwriting
for the account of persons other than the Company or requesting holders of
Restricted Stock. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this Section 3 without
thereby incurring any liability to the holders of Restricted Stock.
4. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Section 3 to use its best efforts to effect the registration
of any shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
2
<PAGE>
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering shall be on Form S-1 or
other form of general applicability satisfactory to the managing underwriter
selected as therein provided) with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 4(a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
- -------- -------
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The sellers of
Restricted Stock agree upon receipt of such notice forthwith to cease making
offers and sales of Restricted Stock pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose until the Company
has prepared and furnished such amendment or supplement to the prospectus as may
be necessary so that, as thereafter delivered to purchasers of such Restricted
Stock, such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;
3
<PAGE>
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements and the notes thereto and the schedules
and other financial and statistical data contained therein) and (C) to such
other effects as reasonably may be requested by counsel for the underwriters or
by such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
For purposes of Section 4(a) and 4(b), the period of distribution of
Restricted Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Restricted Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Restricted Stock covered thereby and 120 days after the effective
date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock shall (a) provide such information and execute such documents
as may reasonably be required in connection with such registration, (b) agree to
sell Restricted Stock on the basis provided in any underwriting arrangements and
(c) complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements, which arrangements shall not be inconsistent
herewith.
4
<PAGE>
In connection with each registration pursuant to Section 3 covering an
underwritten public offering, the Company and each seller agree to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
5. Expenses. All expenses incurred by the Company in complying with
--------
Section 3, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc. transfer taxes, fees of
transfer agents and registrars, and fees and disbursements of one counsel for
the sellers of Restricted Stock (who shall also serve as counsel for, and be
acceptable to, any other selling stockholders for whom the Company is obligated
to bear Registration Expenses), but excluding any Selling Expenses, are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Section 3. All Selling Expenses in connection with
each registration statement under Section 3 shall be borne by the participating
sellers in proportion to the number of shares sold by each, or by such
participating sellers other than the Company (except to the extent the Company
shall be a seller) as they may agree.
6. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 3, the Company will indemnify and
hold harmless each seller of such Restricted Stock thereunder, each underwriter
of such Restricted Stock thereunder and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Section 3, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will pay the legal fees and other expenses of each such seller, each such
underwriter and each such controlling person incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Company will not be liable in any such case if and
- -------- -------
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in reliance upon and in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus,
5
<PAGE>
and, provided further, however, that the Company will not be liable to any such
-------- ------- -------
seller, any such underwriter or any such controlling person in any such case to
the extent that any such loss, claim, damage, liability or action arises out of
or is based upon an untrue or alleged untrue statement or omission or an alleged
omission made in any preliminary prospectus or final prospectus delivered by
such seller, underwriter or controlling person in connection with the sale of
the Restricted Stock if (1) the final prospectus or prospectus supplement
corrected such untrue statement or omission and (2) the Company advised such
seller, underwriter or controlling person that such correction had been made and
(3) such seller, underwriter or controlling person failed to send or deliver a
copy of the final prospectus or prospectus supplement with or prior to the
delivery of written confirmation of the sale of the Restricted Stock.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 3, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 3, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will pay the legal fees and other
expenses of the Company and each such officer, director, underwriter and
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
-------- -------
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished in
writing to the Company by such seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability of
-------- ------- -------
each seller hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense that is equal to the proportion that the
public offering price of the shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the proceeds received by such seller
from the sale of Restricted Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party other than under this Section 6 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section
6
<PAGE>
6 if and to the extent the indemnifying party is prejudiced by such omission.
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided, however,
-------- -------
that, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded (based on the advice of counsel) that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel as
required by the local rules of such jurisdiction) at any time for all such
indemnified parties.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
require to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 12(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or
7
<PAGE>
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding.
7. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
8. Rule 144 Reporting and Rule 144A Information. With a view to making
--------------------------------------------
available the benefits of certain rules and regulations of the Commission that
may at any time permit the resale of the Restricted Stock without registration,
the Company will:
(a) at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration; and
(b) at any time, at the request of any holder of Preferred Shares or
shares of Restricted Stock, make available to such holder and to any prospective
transferee of such Preferred Shares or shares of Restricted Stock the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act.
9. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Investor as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
cause a material violation of any provision of any law applicable to the
Company, any order of any court or other agency of government applicable to the
Company, the Charter or By-laws of
8
<PAGE>
the Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
10. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not; provided, however, that registration rights conferred herein
-------- -------
on Investor shall only inure to the benefit of a transferee of Preferred Shares
or Restricted Stock if there is transferred to such transferee at least 50,000
shares of Restricted Stock (the transferee in any such case being referred to as
an "Investor Transferee").
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed delivered (i) when delivered
in person or (ii) one business day after being mailed by certified or registered
mail, return receipt requested, or sent by a recognized overnight courier
service, addressed as follows:
(i) if to the Company, at
Business@Web, Inc.
One Arsenal Marketplace
Watertown, Massachusetts 02172
Attn: Chief Financial Officer
with a copy to
William E. Kelly, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
(ii) if to any Investor, at such Investor's address as set
forth on Schedule I hereto
9
<PAGE>
(iii) if to any of Investor's Transferees, at such
address as may have been furnished to the
Company in writing by it;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this Section
10(b).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the
holders of a majority of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In proving this Agreement it shall not be
necessary to produce or account for more than one such counterpart executed by
the party against whom enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period following the
effective date of the registration statement relating to such offering to be
reasonably determined by the underwriters.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(h) This Agreement and the rights granted herein shall terminate on
the date all of the Restricted Stock may be sold pursuant to Rule 144 under the
Securities Act without regard to the volume limitations contained in Rule
144(e), except that the indemnification provisions set forth in Section 6 shall
survive indefinitely.
10
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
BUSINESS@WEB, INC.
/s/ James Nondorf
By:__________________________
11
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March 29, 1996 relating to shares of the
Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes the
attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
MARITIME CAPITAL PARTNERS, L.P.
By Maritime Capital Management, L.P., its General Partner
By: /s/ Maryanne Miller
------------------------------------------------
Date: 4-4-96
--------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March ___, 1996 relating to shares of
the Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes
the attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
ALEX BROWN LEASING SERVICES COMPANY
By: /s/ Beverly L. Wright
----------------------------------
Date: March 18, 1996 Beverly L. Wright
-------------------- Treasurer
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March ___, 1996 relating to shares of
the Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes
the attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
DAVID A. DUFFIELD TRUST DATED 7/14/88
By: /s/ David A. Duffield
-----------------------------------
Date: 3-14-96 David A. Duffield
-------------- Trustee
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March __, 1996 relating to shares of the
Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes the
attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
By: /s/ Margaret L. Taylor
-----------------------------
Date: Margaret L. Taylor
-----------------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March 29, 1996 relating to shares of the
Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes the
attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
By: /s/ Stephen Levy
-------------------------------------
Date: 4/5/96 Stephen Levy
----------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March ___, 1996 relating to shares of
the Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes
the attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
By: /s/ Les Hayman
------------------------------------
Date: Les Hayman
----------------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March ___, 1996 relating to shares of
the Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes
the attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
ONELUX, INC.
By: /s/ Paul Appleby
------------------------------------
Date: Paul Appleby
-------------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March ___, 1996 relating to shares of
the Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes
the attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
By: /s/ Anthony Harris
-------------------------------------
Date: Anthony Harris
---------------
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March 29, 1996 relating to shares of the
Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes the
attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
INFORMIX CORPORATION
By: /s/ David H. Stanley
-------------------------------------
Date: April 5, 1996 David H. Stanley
----------------- Vice President-Legal and General Counsel
<PAGE>
INVESTOR'S SIGNATURE PAGE
The undersigned hereby accepts and agrees to the terms and conditions of
the Registration Rights Agreement dated March 29, 1996 relating to shares of the
Series C Convertible Preferred Stock of Business@Web, Inc. and authorizes the
attachment of this Signature Page to such Registration Rights Agreement,
understanding and intending thereby that it shall become a party, as an
Investor, to such Registration Rights Agreement.
INFORMIX CORPORATION
By: /s/ David H. Stanley
-------------------------------------
Date: April 5, 1996 David H. Stanley
----------------- Vice President-Legal and General Counsel
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Purchaser Shares Purchased Purchase Price
- --------- ---------------- --------------
<S> <C> <C>
Maritime Capital Partners, L.P. 200,000 $1,000,000
15302 25th Drive S.E.
Mill Creek, WA 98012
Alex. Brown Leasing 100,000 $500,000
Services Company
135 E. Baltimore Street
Baltimore, MD 21202
David A. Duffield Trust 200,000 $1,000,000
dated 7/14/88
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
Margaret L. Taylor 40,000 $200,000
c/o PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
John McKenna 20,000 $100,000
525 North Old Middletown Road
Media, PA 19063
Juergen Sattler 40,000 $200,000
306 Joseph's Way
Media, PA 19063
Randa Pehl 20,000 $100,000
920 Drovers Lane
Chester Springs, PA 19425
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Ulrich Schell 20,000 $100,000
Bruchhauser Strasse 39
68723 Schwetzingen
Germany
Stephen R. Levy 50,000 $250,000
300 Boylston Street #1204
Boston, MA 02116
Les Hayman 20,000 $100,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
Onelux, Inc. 50,000 $250,000
P.O. Box 438 Road Town
Tortola
British Virgin Islands
Anthony Harris 40,000 $200,000
SAP Australia
Level 1 Northside Garden
168 Walker Street
North Sydney, N.S.W. 2060
Australia
NEC Corporation 200,000 $1,000,000
7-1 Shiba 5-chome
Minato-ku Tokyo
108-01 Japan
Informix Software Inc. 200,000 $1,000,000
4100 Bohannan Drive
Menlo Park, CA 94025
</TABLE>
<PAGE>
Exhibit 10.24
STOCK PURCHASE AGREEMENT
AGREEMENT, made as of the 22nd day of February 1996, between John J.
Donovan (the "Buyer") and Len Hafetz (the "Seller").
WHEREAS, the Seller is the registered owner of Four Hundred Thousand
(400,000) shares (the "Shares") of the common stock of Business@Web, Inc., a
Delaware corporation (the "Company"); and
WHEREAS, the Seller and the Buyer have reached an understanding with
respect to the sale by the Seller and the purchase by the Buyer of the Shares;
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Sale of Capital Stock. The Seller hereby agrees to sell to the Buyer,
---------------------
and the Buyer hereby agrees to purchase from the Seller, all of the Shares, at a
purchase price of Five Dollars ($5.00) per share, for an aggregate purchase
price of Two Million Dollars ($2,0000,000) (the "Purchase Price"). The purchase
and sale of the Shares contemplated hereunder shall take place at a closing to
be held on March 31, 1996 (or such earlier date as the Buyer may determine) at
which closing the Seller shall deliver to the Buyer, against payment by the
Buyer of the full Purchase Price for the Shares, the certificate representing
the Shares, together with stock powers executed in blank in form sufficient to
permit transfer of the Shares to the Buyer on the books of the Company .
2. Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Buyer as follows:
(a) Ownership of the Shares. The Seller is the lawful owner of the
-----------------------
Shares, and the Seller has the full power and authority to sell such Shares,
free and clear of any liens or encumbrances whatsoever. All of the Shares have
been, to the best knowledge of the Seller, validly issued and are fully paid and
nonassessable; and no person has any present or future right (conditional,
preemptive or otherwise) to acquire any of the Shares.
(b) No Breach or Conflict. The sale of the Shares contemplated by this
---------------------
Agreement does not conflict with, or result in a breach of, or a default under,
or give rise to a right of acceleration under, any agreement or instrument to
which the Seller is a party or by which the Shares are bound.
(c) Familiarity with Company Equity Offering Objectives. The Seller is
---------------------------------------------------
aware that the Company is engaged in a private placement of shares of the
Company's Preferred Stock based on a Company valuation of $100,000,000. The
Seller also understands that it is the objective of the Company, at some time in
the future, to offer shares of its Common Stock to the public pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") and that additional shares of Common Stock may be included
therein to be sold for the account of individual shareholders of the Company.
The
<PAGE>
Seller acknowledges that, in the event such public offering is consummated, the
shares sold by the Company and by selling shareholders may be offered at a price
in excess of the Purchase Price to be paid by the Buyer for purchase of the
Shares hereunder and that the Shares may be included among the shares to be
registered for sale in such offering.
(d) Truth and Completeness of Representations and Warranties. None of the
--------------------------------------------------------
information contained in the representations and warranties of the Seller set
forth in this Agreement contains any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
-------------------------------------------
warrants to the Seller as follows:
(a) Investment Intent. The Buyer is purchasing the Shares for
-----------------
investment and has no present intent of engaging in a distribution (as such
term is defined in the Securities Act) of such Shares.
(b) Knowledge and Experience. The Buyer is knowledgeable and in
------------------------
businesses of the sort conducted by the Company and the Buyer acknowledges
that he has had the opportunity to make inquiry of officers and management
employees of the Company concerning the business and financial condition of the
Company and has received answers to its inquiries that he considers fully
responsive and satisfactory.
(c) Investment Risk. The Buyer understands that there is no public
---------------
market for the Shares and that the Buyer may be required to hold the Shares
indefinitely. The Buyer is capable of evaluating the merits and risks involved
in the acquisition of the Shares and is capable of bearing the economic risk of
such investment.
4. Conditions to the Buyer's Obligations. The obligations of the Buyer
-------------------------------------
hereunder shall be subject to the satisfaction, as of the date of closing, of
the following conditions:
(a) Truth and Accuracy of Seller's Representations The
----------------------------------------------
representations and warranties of the Seller made herein shall have been true
and correct when made and shall be true and correct in all material respects
on and as of the closing date.
(b) Absence of Material Adverse Change. There shall not have occurred
----------------------------------
any event which, in the reasonable judgment of the Buyer, has resulted or is
likely to result in a material adverse change in the Company or the Company's
business, financial condition or prospects.
(c) Litigation. There shall not be pending or threatened any
----------
litigation, investigation or proceeding challenging the transactions
contemplated hereby.
<PAGE>
5. Brokers. The Seller and the Buyer each represents and warrants to the
-------
other that he has not engaged any broker or other person who would be entitled
to any brokerage fee or commission with respect to the execution of this
Agreement or the consummation of the transactions contemplated hereby. The
Seller and the Buyer each agrees to indemnify and hold harmless the other
against and in respect of any and all liabilities or expenses which may be
incurred by the other as a result of claims asserted against the indemnified
party or the Company by any broker or other person claiming brokerage
commissions or finder's fees on behalf of the indemnifying party in connection
with this Agreement or the transactions contemplated hereby.
6. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the undersigned parties and their respective successors
and assigns. The rights and obligations of the Buyer hereunder may be assigned
by him, in whole or in part, to any person or entity; provided, however, that
such assignment shall not relieve the Buyer of his obligation hereunder to
purchase the Shares in the event the assignee or assignees breach such
obligation.
7. Entire Agreement and Amendments. This documents represents the entire
-------------------------------
agreement of the parties, and no other prior written or oral representation or
understanding of the parties shall have any further force or effect. The Buyer
and the Seller each represents and warrants to the other that, in entering this
Agreement, he has relied on no statements, representations, inducements or
promises made by such other party except as are expressly set forth in this
Agreement. This Agreement may be modified only by a subsequent writing signed
by both parties to this Agreement. Any provision hereof may be waived in any
case by the written action of the party for whose benefit such provision was
intended.
8. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE BUYER: THE SELLER:
/s/ John J. Donovan /s/ Len Hafetz
_____________________________ _____________________________________
John J. Donovan Len Hafetz
PABOS:WEK:236786_1
-3-
<PAGE>
Exhibit 10.25
ASSIGNMENT AND ASSUMPTION AGREEMENT
Agreement made as of March 15, 1996 by and between John J. Donovan
("Assignor") and Business@Web, Inc., a Delaware corporation ("Assignee").
WHEREAS, pursuant to a certain Stock Purchase Agreement made as of
February 22, 1996 (the "Purchase Agreement") by and between Assignor and Len
Hafetz ("Hafetz"), Assignor has agreed to purchase from Hafetz, and Hafetz has
agreed to sell to Assignor, 400,000 shares (the "Shares") of the Common Stock of
Assignee for an aggregate purchase price of $2,000,000; and
WHEREAS, pursuant to Section 6 of the Purchase Agreement, Assignor has the
right to assign his rights, duties and obligations under the Purchase Agreement
to any person or entity; and
WHEREAS, Assignor desires to assign to Assignee all of his rights and
interest in the Purchase Agreement and Assignee desires to assume all of
Assignor's covenants and obligations under the Purchase Agreement, and thereby
to purchase, and retire, the Shares.
NOW, THEREFORE, it is agreed to between the parties as follows:
1. Assignment. For and in consideration of the sum of One Dollar ($1.00) and
-----------
other good and valuable consideration, including the agreement of the
Assignee hereinafter set forth, the Assignor hereby irrevocably assigns and
transfers to Assignee and its successors and assigns, all of Assignor's
right, title and interest in and to the Purchase Agreement.
2. Assumption. Assignee hereby agrees and does accept the assignment set
-----------
forth in Section 1 and expressly assumes and agrees to keep, perform, and
fulfill all of the terms, covenants, conditions and obligations required to
be kept by Assignor under the Purchase Agreement.
3. No Discharge or Release. This Assignment does not discharge or release
------------------------
Assignor from any of its obligations under the Purchase Agreement.
4. Binding on Successors. This Agreement shall be binding upon and inure to
----------------------
the benefit of the parties hereto, and their respective successors and
assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the Agreement the
date and year aforesaid.
ASSIGNOR: /s/ John J. Donovan
------------------------------------------
John J. Donovan
ASSIGNEE:
BUSINESS@WEB, INC.
By: /s/ James G. Nondorf
--------------------------------------
PABOS:WEK:258429_1
-2-
<PAGE>
Exhibit 10.26
BUSINESS@WEB, INC.
STOCK REPURCHASE AGREEMENT
AGREEMENT, made as of the 4th day of April 1996, between Business@Web,
Inc., a Delaware corporation (the "Company") and James G. Nondorf (the
"Seller").
WHEREAS, the Seller is willing to sell to the Company, and the Company
desires to repurchase from the Seller and retire, One Hundred Thousand
(100,000) shares (the "Shares") of the common stock of the Company currently
held by the Seller;
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Sale of Capital Stock. The Seller hereby agrees to sell to the
---------------------
Company, and the Company hereby agrees to repurchase from the Seller, all of the
Shares. The Company hereby acknowledges that the Shares do not represent the
entire equity interest of the Seller in the Company and agrees that the
transactions contemplated by this Agreement will not affect the Seller's
interest in any other security of the Company held by the Seller.
2. Purchase Price. The repurchase price for the Shares is Five Dollars
--------------
($5.00) per share, for an aggregate purchase price of Five Hundred Thousand
Dollars ($500,000) (the "Purchase Price"). The Purchase Price shall be paid in
full, against delivery by the Seller to the Buyer of a certificate or
certificates representing the Shares, accompanied by stock powers in form
sufficient to permit transfer and/or cancellation of the Shares.
3. Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Company as follows:
(a) Capital Stock. The Seller is the lawful owner of the Shares, and
-------------
the Seller has the full power and authority to sell such Shares, free and
clear of any liens or encumbrances whatsoever. All of the Shares have been,
to the best knowledge of the Seller, validly issued and are fully paid and
nonassessable; and no person has any present or future right (conditional,
preemptive or otherwise) to acquire any of the Shares.
(b) No Breach or Conflict. The sale of the Shares contemplated by this
---------------------
Agreement does not conflict with, or result in a breach of, or a default under,
or give rise to a right of acceleration under, any agreement or instrument to
which the Seller is a party.
(c) Truth and Completeness of Representations and Warranties. None of
--------------------------------------------------------
the information contained in the representations and warranties of the Seller
set forth in this Agreement contains any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
<PAGE>
4. Representations, Warranties and Agreements of the Company. The Company
---------------------------------------------------------
represents and warrants to the Seller, and agrees with the Seller, as follows:
(a) Authorization of Repurchase. The repurchase of the Shares
---------------------------
pursuant to this Agreement has been authorized by all necessary consents of the
Board of Directors and shareholders of the Company. The consummation of the
transactions contemplated hereby will not constitute a breach of, or give rise
to any liability of the Company under, the Company's Restated Certificate of
Incorporation or By-Laws or any agreement to which the Company is a party or by
which the Company or any of its assets is bound.
(b) Waiver. The Company acknowledges that the Seller holds, or has the
------
right to acquire pursuant to a certain Stock Option Agreement, 100,000 shares of
the Company's Common Stock and the Company understands that the Seller proposes
to sell such shares in a private transaction to Klaus Besier. The Company
hereby consents to such sale and waives its rights of first refusal with respect
to such proposed sale.
5. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the undersigned parties and their respective heirs,
personal representatives, successors and assigns.
6. Entire Agreement and Amendments. This documents represents the entire
-------------------------------
agreement of the parties with respect to the subject matter hereof, and no other
agreement with respect thereto, including any prior written or oral
representation or understanding of the parties, shall have any further force or
effect. The Company and the Seller each represents and warrants to the other
that, in entering this Agreement,it or he has relied on no statements,
representations, inducements or promises made by such other party except as are
expressly set forth in this Agreement. This Agreement may be modified only by a
subsequent writing signed by both parties to this Agreement.
7. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE COMPANY:
BUSINESS@WEB, INC.
By: /s/ Klaus Besier
---------------------------------
THE SELLER:
/s/ James G. Nondorf
_________________________________
James G. Nondorf
PABOS:WEK:248604_1
-3-
<PAGE>
Exhibit 10.27
BUSINESS@WEB, INC.
STOCK REPURCHASE AGREEMENT
AGREEMENT, made as of the 15th day of April 1996, between Business@Web,
Inc., a Delaware corporation (the "Company") and J&S Limited Partnership, a
Massachusetts limited partnership (the "Seller").
WHEREAS, the Seller is willing to sell to the Company, and the Company
desires to repurchase from the Seller and retire, Three Hundred Fifty Thousand
(350,000) shares (the "Shares") of the common stock of the Company currently
held by the Seller;
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Sale of Capital Stock. The Seller hereby agrees to sell to the
---------------------
Company, and the Company hereby agrees to repurchase from the Seller, all of the
Shares. The Company hereby acknowledges that the Shares do not represent the
entire equity interest of the Seller in the Company and agrees that the
transactions contemplated by this Agreement will not affect the Seller's
interest in any other security of the Company held by the Seller.
2. Purchase Price. The repurchase price for the Shares is Five Dollars
--------------
($5.00) per share, for an aggregate purchase price of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) (the "Purchase Price"). The Purchase Price
shall be paid in full, against delivery by the Seller to the Company of a
certificate or certificates representing the Shares, accompanied by stock powers
in form sufficient to permit transfer and/or cancellation of the Shares.
3. Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Company as follows:
(a) Ownership of Shares. The Seller is the lawful owner of the
-------------------
Shares, and the Seller has the full power and authority to sell such Shares,
free and clear of any liens or encumbrances whatsoever. All of the Shares have
been, to the best knowledge of the Seller, validly issued and are fully paid and
nonassessable; and no person has any present or future right (conditional,
preemptive or otherwise) to acquire any of the Shares.
(b) No Breach or Conflict. The sale of the Shares contemplated by this
---------------------
Agreement does not conflict with, or result in a breach of, or a default under,
or give rise to a right of acceleration under, any agreement or instrument to
which the Seller is a party or by which the Seller or the Shares are bound.
(c) Truth and Completeness of Representations and Warranties. None
--------------------------------------------------------
of the information contained in the representations and warranties of the Seller
set forth in this Agreement contains any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
<PAGE>
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Seller that the repurchase of the Shares pursuant to this
Agreement has been authorized by all necessary consents of the Board of
Directors and shareholders of the Company. The consummation of the transactions
contemplated hereby will not constitute a breach of, or give rise to any
liability of the Company under, the Company's Restated Certificate of
Incorporation or By-Laws or any agreement to which the Company is a party or by
which the Company or any of its assets is bound.
5. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the undersigned parties and their respective successors
and assigns.
6. Entire Agreement and Amendments. This document represents the entire
-------------------------------
agreement of the parties with respect to the subject matter hereof, and no other
agreement with respect thereto, including any prior written or oral
representation or understanding of the parties, shall have any further force or
effect. Each of the Company and the Seller represents and warrants to the
other that, in entering this Agreement, it has relied on no statements,
representations, inducements or promises made by such other party except as are
expressly set forth in this Agreement. This Agreement may be modified only by a
subsequent writing signed by both parties to this Agreement.
7. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE SELLER: THE COMPANY:
J&S LIMITED PARTNERSHIP BUSINESS@WEB, INC.
By CONTROLLER CORP.,INC.,
its general partner
By: /s/ Klaus Besier
----------------------------
By: /s/ John J. Donovan
--------------------------
PABOS:WEK:255088_1
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<PAGE>
Exhibit 10.28
BUSINESS@WEB, INC.
STOCK REPURCHASE AGREEMENT
AGREEMENT, made as of the 15th day of April 1996, between Business@Web,
Inc., a Delaware corporation (the "Company") and Harrington Trust Limited as
Trustee of the Appleby Trust, a Bermuda trust (the "Seller").
WHEREAS, the Seller is willing to sell to the Company, and the Company
desires to repurchase from the Seller and retire, Three Hundred Fifty Thousand
(350,000) shares (the "Shares") of the common stock of the Company currently
held by the Seller;
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Sale of Capital Stock. The Seller hereby agrees to sell to the
---------------------
Company, and the Company hereby agrees to repurchase from the Seller, all of the
Shares. The Company hereby acknowledges that the Shares do not represent the
entire equity interest of the Seller in the Company and agrees that the
transactions contemplated by this Agreement will not affect the Seller's
interest in any other security of the Company held by the Seller.
2. Purchase Price. The repurchase price for the Shares is Five Dollars
--------------
($5.00) per share, for an aggregate purchase price of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) (the "Purchase Price"). The Purchase Price
shall be paid in full, against delivery by the Seller to the Company of a
certificate or certificates representing the Shares, accompanied by stock powers
in form sufficient to permit transfer and/or cancellation of the Shares.
3. Representations and Warranties of the Seller. The Seller represents
--------------------------------------------
and warrants to the Company as follows:
(a) Ownership of Shares. The Seller is the lawful owner of the
-------------------
Shares, and the Seller has the full power and authority to sell such Shares,
free and clear of any liens or encumbrances whatsoever. All of the Shares have
been, to the best knowledge of the Seller, validly issued and are fully paid and
nonassessable; and no person has any present or future right (conditional,
preemptive or otherwise) to acquire any of the Shares.
(b) No Breach or Conflict. The sale of the Shares contemplated by this
---------------------
Agreement does not conflict with, or result in a breach of, or a default under,
or give rise to a right of acceleration under, the Agreement of Limited
Partnership or the Limited partnership Certificate of the Seller or any other
agreement or instrument to which the Seller is a party or by which the Seller or
the Shares are bound.
(c) Truth and Completeness of Representations and Warranties. None of
--------------------------------------------------------
the information contained in the representations and warranties of the Seller
set forth in this Agreement contains any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
<PAGE>
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Seller that the repurchase of the Shares pursuant to this
Agreement has been authorized by all necessary consents of the Board of
Directors and shareholders of the Company. The consummation of the transactions
contemplated hereby will not constitute a breach of, or give rise to any
liability of the Company under, the Company's Restated Certificate of
Incorporation or By-Laws or any agreement to which the Company is a party or by
which the Company or any of its assets is bound.
5. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the undersigned parties and their respective successors
and assigns.
6. Entire Agreement and Amendments. This document represents the entire
-------------------------------
agreement of the parties with respect to the subject matter hereof, and no other
agreement with respect thereto, including any prior written or oral
representation or understanding of the parties, shall have any further force or
effect. Each of the Company and the Seller represents and warrants to the
other that, in entering this Agreement, it has relied on no statements,
representations, inducements or promises made by such other party except as are
expressly set forth in this Agreement. This Agreement may be modified only by a
subsequent writing signed by both parties to this Agreement.
7. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE SELLER: THE COMPANY:
HARRINGTON TRUST LIMITED BUSINESS@WEB, INC.
as Trustee of The Appleby Trust
By: /s/ James G. Nondorf
------------------------------
By: /s/ John Campbell Director
--------------------------
By: /s/ Michael Pelgrin Asst. Secry
--------------------------
PABOS:WEK:255088_1
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<PAGE>
EXHIBIT 10.29
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.
OBJECT POWER, INCORPORATED
Five-Year 9% Subordinated Note
------------------------------
$750,000.00 Cambridge, Massachusetts
December 29, 1995
Object Power, Incorporated, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to Harrington Trust Limited as Trustee of
The Appleby Trust, or registered assigns, the principal sum of Seven Hundred
Fifty Thousand Dollars ($750,000.00) on December 31, 2000, together with
interest (computed on the basis of a 360-day year) from the date hereof on the
unpaid balance of such principal amount from time to time outstanding at the
rate of nine percent (9%) per annum.
1. Subordination
-------------
(a) Subordination to Senior Indebtedness. The indebtedness evidenced by
------------------------------------
this Note, and the payment of the principal hereof, and any interest hereon, is
wholly subordinated, junior and subject in right of payment, to the extent and
in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on all
indebtedness of the Company, to banks, trust companies, insurance companies and
other financial institutions, including commercial paper and accounts
receivable sold or assigned by the Company to such institutions, any and all
deferrals, renewals, extensions and refundings of any such indebtedness or
obligations, and any other indebtedness of the Company which the Company and the
holder of this Note may hereafter from time to time expressly and specifically
agree in writing shall constitute Senior Indebtedness.
(b) No Payment if Default in Senior Indebtedness. No payment on account of
--------------------------------------------
principal of or interest on this Note shall be made, and this Note shall not be
redeemed or purchased directly or indirectly by the Company (or any of its
subsidiaries), if at the time of such payment or purchase or immediately after
giving effect thereto, (i) there shall exist a default in any payment with
respect to any Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of amounts due thereon) with
respect any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall
not have ceased to exist.
(c) Payment upon Dissolution, Etc. Upon payment or distribution of assets
-----------------------------
of the Company of any kind or character, whether in cash property or securities,
to creditors upon any dissolution
<PAGE>
or winding-up or total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
other proceedings, all principal and interest due upon any Senior Indebtedness
shall first be paid in full, or payment thereof in full duly provided for,
before the holder of this Note shall be entitled to receive or, if received, to
retain any payment or distribution on account of this Note; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holder of this Note would be entitled
except for the provisions of this Section 1 shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holder of this Note who shall
have received such payment or distribution, directly to the holders of the
Senior Indebtedness (pro rata to each such holder on the basis of the respective
--- ----
amounts of such Senior Indebtedness held by such holder) or their
representatives to the extent necessary to pay all such Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holder of this Note. In the event of any such dissolution, winding-up,
liquidation or reorganization of the Company, the holder of this Note shall be
entitled to be paid one hundred percent (100%) of the principal amount thereof
and accrued interest thereon before any distribution of assets shall be made
among the holders of any class of shares of the capital stock of the Company in
their capacities as holders of such shares.
For purposes of this paragraph (c), the words "assets" and "cash, property
or securities" shall not be deemed to include shares of Common Stock of the
Company as reorganized or readjusted, or securities of the Company or any other
person provided for by a plan of reorganization or readjustment, the payment of
which is subordinated at least to the extent provided in this Section 1 with
respect to this Note to the payment of all Senior Indebtedness which may at the
time be outstanding; provided that (i) the Senior Indebtedness is assumed by the
--------
new person, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment.
(d) Subrogation. Subject to payment in full of all Senior Indebtedness,
-----------
the holder of this Note shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on the
Senior Indebtedness shall be paid in full; and for purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holder of this Note would be entitled except
for the subordination provisions of this Section 1 shall, as between the holder
of this Note and the Company and/or its creditors other than the holders of the
Senior Indebtedness, be deemed to be a payment on account of the Senior
Indebtedness.
(e) Rights of Holder Unimpaired. The provisions of this Section 1 are, and
---------------------------
are intended, solely for the purposes of defining the relative rights of the
holder of this Note (solely in its capacity as holder of this Note) and the
holders of Senior Indebtedness and nothing in this Section 1 shall impair, as
between the Company and the holder of this Note, the obligation of the Company,
which is unconditional and absolute, to pay to the holder of this Note the
principal thereof and interest thereon, in accordance with the terms hereof, nor
shall anything herein prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon default,
subject to the rights set forth above of holders of Senior Indebtedness to
receive cash, property, or securities otherwise payable or deliverable to the
holder of this Note. Furthermore, no provision
2
<PAGE>
hereof shall prevent the holder of this Note from exercising any rights it may
have against the Company or against any holder of Senior Indebtedness in any
capacity other than as holder of this Note.
(f) Holders of Senior Indebtedness. These provisions regarding
------------------------------
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named therein, and they or any of them may
proceed to enforce such subordination. The holder of this Note shall execute
and deliver to any holder of Senior Indebtedness (i) any such instrument as such
holder of Senior Indebtedness may request in order to confirm the subordination
of this Note to such Senior Indebtedness upon the terms set forth in this Note,
and (ii) any powers of attorney specifically confirming the rights of holders of
Senior Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of this Note.
(g) Payments on Subordinated Note. Subject to paragraph (c), the Company
-----------------------------
may make payments of the principal of, and any interest or premium on, this
Note, if at the time of payment, and immediately after giving effect thereto,
(i) there exists no default in any payment with respect to any Senior
Indebtedness and (ii) there shall not have occurred an event of default (other
than a default in the payment of amounts due thereon) with respect to any Senior
Indebtedness, as defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof, other than an
event of default which shall have been cured or waived or shall have ceased to
exist.
2. Redemption
----------
(a) Subject to the subordination provisions of Section 1, this Note may, at
the option of the Company, be called for redemption, in whole or in part at any
time, at one hundred percent (100%) of the principal amount so redeemed, plus
accrued and unpaid interest on such redeemed principal amount to the date fixed
for redemption. The Company shall give at least thirty (30) days prior written
notice of redemption to the registered holder at its address as shown in the
Note Register (as defined below), and the notice of redemption shall specify the
date and place designated for redemption.
(b) On or after the redemption date fixed in the notice of redemption, no
further interest shall accrue on the principal amount so redeemed. Payment of
the redemption price shall be made to the registered holder of this Note upon
presentation and surrender of this Note accompanied by a duly executed
instrument of transfer in blank, at the principal executive office of the
Company. In the event of a partial redemption, this Note shall be presented to
the Company for endorsement of the amount of payment and date paid as a
condition precedent to such payment.
3. No Prepayment of Principal
--------------------------
Except as otherwise provided in Section 2, the principal indebtedness
represented by this Note may not be prepaid in whole or in part, without the
prior written consent of the holder of this Note.
3
<PAGE>
4. Default
-------
The entire unpaid principal of this Note and the interest then accrued on
this Note shall become and be immediately due and payable upon written demand of
the holder of this Note, without any other notice or demand of any kind or any
presentment or protest, if any one of the following events (an "Event of
Default") shall occur and be continuing at the time of such demand, whether
voluntarily or involuntarily, or, without limitation, occurring or brought about
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any governmental body:
(a) If default shall be made in the payment of any installment of principal
or interest on this Note, and such default shall remain unremedied for ten (10)
days; or
(b) If the Company (i) makes a general assignment for the benefit of
creditors, (ii) applies for, consents to, acquiesces in, files a petition or an
answer seeking, or admits (by answer, default or otherwise) the material
allegations of a petition filed against it seeking the appointment of a trustee,
receiver, liquidator or assignee in bankruptcy or insolvency of itself or of all
or a substantial portion of its assets, or a reorganization, arrangement with
creditors or other remedy, relief or adjudication available to or against a
bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law
relating to relief of debtors, or (iii) admits in writing its inability to pay
its debts generally as they become due; or
(c) If a decree, order or judgment shall have been entered adjudging the
Company a bankrupt or insolvent, or appointing a receiver, liquidator, trustee
or assignee in bankruptcy or insolvency for it or for all or a substantial
portion of its assets, or approving a petition seeking a reorganization,
arrangement, or the winding-up or liquidation of its affairs on the grounds of
insolvency or nonpayment of debts, and such decree, order or judgment shall
remain undischarged and unstayed for a period of sixty (60) days; or if any
substantial part of the property of the Company is sequestered or attached and
shall not be returned to the possession of the Company or such subsidiary or
released from such attachment within sixty (60) days.
5. Note Register
-------------
(a) The Company shall keep at its principal executive office a register
(herein sometimes referred to as the "Note Register"), in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company shall provide for the registration and
transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal executive
office of the Company for transfer or exchange, accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company duly
executed by the holder hereof or his attorney duly authorized in writing, the
Company shall execute and deliver in exchange therefor a new Note or Notes, as
may be requested by such holder, in the same aggregate unpaid principal amount
and payable on the same date as the principal amount of the Note or Notes so
surrendered; each such new Note shall be dated as of the date to which interest
has been paid on the unpaid principal amount of the Note or Notes so surrendered
and shall be in such principal amount and registered in such name or names as
such holder may designate in writing.
4
<PAGE>
(c) Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Note and of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note (in case of mutilation) the Company will make and deliver in lieu of
this Note a new Note of like tenor and unpaid principal amount and dated as of
the date to which interest has been paid on the unpaid principal amount of this
Note in lieu of which such new Note is made and delivered.
6. General
-------
(a) Successors and Assigns. This Note, and the obligations and rights of
----------------------
the Company hereunder, shall be binding upon and inure to the benefit of the
Company, the holder of this Note, and their respective heirs, successors and
assigns.
(b) Recourse. Recourse under this Note shall be to the general unsecured
--------
assets of the Company only and in no event to the officers, directors of
stockholders of the Company.
(c) Changes. Changes in or additions to this Note may be made or
-------
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), only upon written consent of the
Company and the holder of this Note.
(d) Currency. All payments shall be made in such coin or currency of the
--------
United States of America as at the time of payment shall be legal tender therein
for the payment of public and private debts.
(e) Notices. All notices, requests, consents and demands shall be made in
-------
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the holder hereof at their respective addresses set forth below or
to such other address as may be furnished in writing to the other party hereto:
If to the holder:
Harrington Trust Limited
Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
If to the Company:
Object Power, Incorporated
219 Vassar Street
Cambridge, Massachusetts 02139
(f) Saturdays, Sundays, Holidays. If any date that may at any time be
----------------------------
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in the
City of Boston shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
5
<PAGE>
(g) Costs of Collection. In the event of any default under this Note, the
-------------------
Company shall pay any costs of collection incurred by the holder (including
reasonable attorneys' fees).
(h) Governing Law. This Note shall be construed and enforced in accordance
-------------
with, and the rights of the parties shall be governed by the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized President of
the Company.
OBJECT POWER, INCORPORATED
By:/s/ James G. Nondorf
------------------------------
President
(Corporate Seal)
ATTEST:/s/ William E. Kelly
-----------------------------
Secretary
6
<PAGE>
EXHIBIT 10.30
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.
OBJECT POWER, INCORPORATED
Five-Year 6% Convertible Subordinated Note
------------------------------------------
$750,000.00 Cambridge, Massachusetts
May 3, 1995
Object Power, Incorporated, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to Harrington Trust Limited as Trustee of
The Appleby Trust, or registered assigns, the principal sum of Seven Hundred
Fifty Thousand Dollars ($750,000.00) on April 30, 2000, together with interest
(computed on the basis of a 360-day year) from the date hereof on the unpaid
balance of such principal amount from time to time outstanding at the rate of
six percent (6%) per annum.
1. Subordination
-------------
(a) Subordination to Senior Indebtedness. The indebtedness evidenced by
------------------------------------
this Note, and the payment of the principal hereof, and any interest hereon, is
wholly subordinated, junior and subject in right of payment, to the extent and
in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on all
indebtedness of the Company, to banks, trust companies, insurance companies and
other financial institutions, including commercial paper and accounts receivable
sold or assigned by the Company to such institutions, any and all deferrals,
renewals, extensions and refundings of any such indebtedness or obligations, and
any other indebtedness of the Company which the Company and the holder of this
Note may hereafter from time to time expressly and specifically agree in writing
shall constitute Senior Indebtedness.
(b) No Payment if Default in Senior Indebtedness. No payment on account of
--------------------------------------------
principal of or interest on this Note shall be made, and this Note shall not be
redeemed or purchased directly or indirectly by the Company (or any of its
subsidiaries), if at the time of such payment or purchase or immediately after
giving effect thereto, (i) there shall exist a default in any payment with
respect to any Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of amounts due thereon) with
respect any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall
not have ceased to exist.
(c) Payment upon Dissolution, Etc. Upon payment or distribution of assets
-----------------------------
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution
<PAGE>
or winding-up or total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
other proceedings, all principal and interest due upon any Senior Indebtedness
shall first be paid in full, or payment thereof in full duly provided for,
before the holder of this Note shall be entitled to receive or, if received, to
retain any payment or distribution on account of this Note; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holder of this Note would be entitled
except for the provisions of this Section 1 shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holder of this Note who shall
have received such payment or distribution, directly to the holders of the
Senior Indebtedness (pro rata to each such holder on the basis of the respective
--- ----
amounts of such Senior Indebtedness held by such holder) or their
representatives to the extent necessary to pay all such Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holder of this Note. In the event of any such dissolution, winding-up,
liquidation or reorganization of the Company, the holder of this Note shall be
entitled to be paid one hundred percent (100%) of the principal amount thereof
and accrued interest thereon before any distribution of assets shall be made
among the holders of any class of shares of the capital stock of the Company in
their capacities as holders of such shares.
For purposes of this paragraph (c), the words "assets" and "cash, property
or securities" shall not be deemed to include shares of Common Stock of the
Company as reorganized or readjusted, or securities of the Company or any other
person provided for by a plan of reorganization or readjustment, the payment of
which is subordinated at least to the extent provided in this Section 1 with
respect to this Note to the payment of all Senior Indebtedness which may at the
time be outstanding; provided that (i) the Senior Indebtedness is assumed by the
--------
new person, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment.
(d) Subrogation. Subject to payment in full of all Senior Indebtedness,
-----------
the holder of this Note shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on the
Senior Indebtedness shall be paid in full; and for purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holder of this Note would be entitled except
for the subordination provisions of this Section 1 shall, as between the holder
of this Note and the Company and/or its creditors other than the holders of the
Senior Indebtedness, be deemed to be a payment on account of the Senior
Indebtedness.
(e) Rights of Holder Unimpaired. The provisions of this Section 1 are, and
---------------------------
are intended, solely for the purposes of defining the relative rights of the
holder of this Note (solely in its capacity as holder of this Note) and the
holders of Senior Indebtedness and nothing in this Section 1 shall impair, as
between the Company and the holder of this Note, the obligation of the Company,
which is unconditional and absolute, to pay to the holder of this Note the
principal thereof and interest thereon, in accordance with the terms hereof, nor
shall anything herein prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon default,
subject to the rights set forth above of holders of Senior Indebtedness to
receive cash, property, or securities otherwise payable or deliverable to the
holder of this Note. Furthermore, no provision
2
<PAGE>
hereof shall prevent the holder of this Note from exercising any rights it may
have against the Company or against any holder of Senior Indebtedness in any
capacity other than as holder of this Note.
(f) Holders of Senior Indebtedness. These provisions regarding
------------------------------
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named therein, and they or any of them may
proceed to enforce such subordination. The holder of this Note shall execute
and deliver to any holder of Senior Indebtedness (i) any such instrument as such
holder of Senior Indebtedness may request in order to confirm the subordination
of this Note to such Senior Indebtedness upon the terms set forth in this Note,
and (ii) any powers of attorney specifically confirming the rights of holders of
Senior Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of this Note.
(g) Payments on Subordinated Note. Subject to paragraph (c), the Company
-----------------------------
may make payments of the principal of, and any interest or premium on, this
Note, if at the time of payment, and immediately after giving effect thereto,
(i) there exists no default in any payment with respect to any Senior
Indebtedness and (ii) there shall not have occurred an event of default (other
than a default in the payment of amounts due thereon) with respect to any Senior
Indebtedness, as defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof, other than an
event of default which shall have been cured or waived or shall have ceased to
exist.
2. Optional Conversion
-------------------
(a) Conversion. The holder of this Note has the right, at its option, at
----------
any time prior to the close of business on April 14, 2000, to convert the
outstanding principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company ("Common Stock"), at the rate of one share
of Common Stock for each $0.44 of the principal amount hereof surrendered for
conversion, subject to adjustment as set forth herein.
(b) Exercise of Conversion Privilege.
--------------------------------
(i) In order to exercise the conversion privilege, the holder of this
Note shall surrender this Note to the Company during usual business hours at the
Company's principal executive office, accompanied by written notice in form
satisfactory to the Company that the holder elects to convert the principal
amount of this Note or a portion hereof specified in such notice. Such notice
shall also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued. The Note surrendered for conversion shall, unless
the shares issuable on conversion are to be issued in the same name as the name
in which the Note is then registered, be duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
(ii) As promptly as practicable after the surrender of this Note for
conversion and the
3
<PAGE>
receipt of the notice, as required above, the Company shall deliver or cause to
be delivered at its principal executive office to the holder, or on the holder's
written order, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of this Note, or portion hereof, in
accordance with the provisions hereof. Such conversion shall be deemed to have
been made out the time this Note shall have been surrendered for conversion and
the notice required above shall have been received by the Company at its
principal executive office (the "Conversion Date"), and the holder in whose name
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become on the Conversion Date the
holder of record of the shares represented thereby. If less than the entire
outstanding principal amount of this Note is being converted, a new Note shall
promptly be delivered to the holder for the unconverted principal balance and
shall be of like tenor as to all terms as the Note surrendered.
(c) Adjustment of Conversion Rate.
-----------------------------
(i) In case the Company shall:
(A) declare a stock dividend on its Common Stock,
(B) subdivide outstanding Common Stock into a larger number of
shares of Common Stock by reclassification or otherwise,
(C) combine outstanding Common Stock into a smaller number of
shares of Common Stock by reclassification or otherwise, or
(D) cancel its class of Common Stock and convert all of the
outstanding shares of Common Stock into another class of securities of
the Company,
the number of shares of Common Stock issuable upon conversion of this Note
immediately prior to any such event shall be adjusted proportionately so that
thereafter the holder of this Note shall be entitled to receive upon conversion
of this Note the securities which such holder would have owned after the
happening of any of the events described above had this Note been converted
immediately prior to the happening of such event, provided that the conversion
price shall in no event be reduced to less than the par value of the shares
issuable upon conversion. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(ii) If, prior to maturity of this Note, the Company shall at any time
consolidate or merge with another corporation (other than a merger or
consolidation in which the Company is the surviving corporation), the registered
holder hereof will thereafter be entitled to receive, upon the conversion
hereof, the securities or property to which a holder of the number of shares of
Common Stock then deliverable upon the conversion hereof would have been
entitled upon such consolidation or merger, and the Company shall take such
steps in connection with such consolidation or merger as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the conversion of this Note.
(d) Notice. In case the Company proposes to take any action referred to in
------
paragraph
4
<PAGE>
(c) above, or to effect the liquidation, dissolution or winding up of the
Company, then the Company shall cause notice thereof to be mailed to the
registered holder of this Note, at such holder's address appearing in the Note
Register (as defined below), at least twenty (20) days prior to the date on
which the transfer books of the Company shall close or a record be taken for
such stock dividend or the date when such reclassification, liquidation,
dissolution or winding up shall be effective, as the case may be.
(e) Statement of Adjustment. Whenever the conversion rate shall be
-----------------------
adjusted as provided above, the Company shall forthwith deliver to the holder of
this Note, at said holder's address appearing in the Note Register, a statement,
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer or Secretary of the Company, showing in reasonable detail the facts
requiring such adjustment and the conversion rate that will be effective after
such adjustment. Where appropriate, such notice may be given in advance and may
be included as part of a notice required to be mailed under the provisions of
paragraph (d) hereof.
(f) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issuable upon conversion of this Note, but an adjustment in cash will be made in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of this Note, or portion hereof, for conversion.
(g) Accrued Interest. Upon the conversion of this Note, the Company shall
----------------
not be required to pay any accrued but unpaid interest on the amount so
converted up to the Conversion Date.
(h) Termination. The conversion privilege of this Note will become wholly
-----------
void and of no effect and the rights evidenced hereby will terminate unless
exercised in accordance with the terms and provisions hereof prior to the
payment in full of the unpaid principal balance of, and all accrued interest on,
this Note.
(i) Securities Act of 1933. Upon conversion of this Note, the registered
----------------------
holder may be required to execute and deliver to the Company an instrument, in
form satisfactory to the Company, representing that the shares issuable upon
conversion hereof are being acquired for investment and not with a view to
distribution within the meaning of the Securities Act of 1933, as amended.
3. Redemption
----------
(a) Subject to the subordination provisions of Section 1, this Note may, at
the option of the Company, be called for redemption, in whole or in part at any
time after January 1, 1996, at one hundred percent (100%) of the principal
amount so redeemed, plus accrued and unpaid interest on such redeemed principal
amount to the date fixed for redemption. The Company shall give at least thirty
(30) days prior written notice of redemption to the registered holder at its
address as shown in the Note Register (as defined below), and the notice of
redemption shall specify the date and place designated for redemption.
(b) On or after the redemption date fixed in the notice of redemption, no
further interest shall accrue on the principal amount so redeemed, and this Note
(to the extent so redeemed) shall cease to be convertible as set forth in
Section 2. Payment of the redemption price shall be made to the registered
holder of this Note upon presentation and surrender of this Note accompanied by
a duly
5
<PAGE>
executed instrument of transfer in blank, at the principal executive office of
the Company. In the event of a partial redemption, this Note shall be presented
to the Company for endorsement of the amount of payment and date paid as a
condition precedent to such payment.
4. No Prepayment of Principal
--------------------------
Except as otherwise provided in Section 3, the principal indebtedness
represented by this Note may not be prepaid in whole or in part, without the
prior written consent of the holder of this Note.
5. Default
-------
The entire unpaid principal of this Note and the interest then accrued on
this Note shall become and be immediately due and payable upon written demand of
the holder of this Note, without any other notice or demand of any kind or any
presentment or protest, if any one of the following events (an "Event of
Default") shall occur and be continuing at the time of such demand, whether
voluntarily or involuntarily, or, without limitation, occurring or brought about
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any governmental body:
(a) If default shall be made in the payment of any installment of principal
or interest on this Note, and such default shall remain unremedied for ten (10)
days; or
(b) If the Company (i) makes a general assignment for the benefit of
creditors, (ii) applies for, consents to, acquiesces in, files a petition or an
answer seeking, or admits (by answer, default or otherwise) the material
allegations of a petition filed against it seeking the appointment of a trustee,
receiver, liquidator or assignee in bankruptcy or insolvency of itself or of all
or a substantial portion of its assets, or a reorganization, arrangement with
creditors or other remedy, relief or adjudication available to or against a
bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law
relating to relief of debtors, or (iii) admits in writing its inability to pay
its debts generally as they become due; or
(c) If a decree, order or judgment shall have been entered adjudging the
Company a bankrupt or insolvent, or appointing a receiver, liquidator, trustee
or assignee in bankruptcy or insolvency for it or for all or a substantial
portion of its assets, or approving a petition seeking a reorganization,
arrangement, or the winding-up or liquidation of its affairs on the grounds of
insolvency or nonpayment of debts, and such decree, order or judgment shall
remain undischarged and unstayed for a period of sixty (60) days; or if any
substantial part of the property of the Company is sequestered or attached and
shall not be returned to the possession of the Company or such subsidiary or
released from such attachment within sixty (60) days.
6. Note Register
-------------
(a) The Company shall keep at its principal executive office a register
(herein sometimes referred to as the "Note Register"), in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company shall provide for the registration and
transfer of this Note.
6
<PAGE>
(b) Whenever this Note shall be surrendered at the principal executive
office of the Company for transfer or exchange, accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company duly
executed by the holder hereof or his attorney duly authorized in writing, the
Company shall execute and deliver in exchange therefor a new Note or Notes, as
may be requested by such holder, in the same aggregate unpaid principal amount
and payable on the same date as the principal amount of the Note or Notes so
surrendered; each such new Note shall be dated as of the date to which interest
has been paid on the unpaid principal amount of the Note or Notes so surrendered
and shall be in such principal amount and registered in such name or names as
such holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Note and of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note (in case of mutilation) the Company will make and deliver in lieu of
this Note a new Note of like tenor and unpaid principal amount and dated as of
the date to which interest has been paid on the unpaid principal amount of this
Note in lieu of which such new Note is made and delivered.
7. General
-------
(a) Successors and Assigns. This Note, and the obligations and rights of
----------------------
the Company hereunder, shall be binding upon and inure to the benefit of the
Company, the holder of this Note, and their respective heirs, successors and
assigns.
(b) Recourse. Recourse under this Note shall be to the general unsecured
--------
assets of the Company only and in no event to the officers, directors of
stockholders of the Company.
(c) Changes. Changes in or additions to this Note may be made or
-------
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), only upon written consent of the
Company and the holder of this Note.
(d) Currency. All payments shall be made in such coin or currency of the
--------
United States of America as at the time of payment shall be legal tender therein
for the payment of public and private debts.
(e) Notices. All notices, requests, consents and demands shall be made in
-------
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the holder hereof at their respective addresses set forth below or
to such other address as may be furnished in writing to the other party hereto:
If to the holder:
Harrington Trust Limited
Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
7
<PAGE>
If to the Company:
Object Power, Incorporated
219 Vassar Street
Cambridge, Massachusetts 02139
(f) Saturdays, Sundays, Holidays. If any date that may at any time be
----------------------------
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in the
City of Boston shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(g) Costs of Collection. In the event of any default under this Note, the
-------------------
Company shall pay any costs of collection incurred by the holder (including
reasonable attorneys' fees).
(h) Governing Law. This Note shall be construed and enforced in accordance
-------------
with, and the rights of the parties shall be governed by the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized President of
the Company.
OBJECT POWER, INCORPORATED
By: /s/ John J. Donovan
------------------------------------------------
President
(Corporate Seal)
ATTEST:/s/ William E. Kelly
--------------------------------------
Secretary
8
<PAGE>
EXHIBIT 10.31
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.
OBJECT POWER, INCORPORATED
Five-Year 6% Convertible Subordinated Note
------------------------------------------
$250,000.00 Cambridge, Massachusetts
May 3, 1995
Object Power, Incorporated, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to J&S Limited Partnership, or registered
assigns, the principal sum of Two Hundred Fifty Thousand Dollars ($250,000.00)
on April 30, 2000, together with interest (computed on the basis of a 360-day
year) from the date hereof on the unpaid balance of such principal amount from
time to time outstanding at the rate of six percent (6%) per annum.
1. Subordination
-------------
(a) Subordination to Senior Indebtedness. The indebtedness evidenced by
------------------------------------
this Note, and the payment of the principal hereof, and any interest hereon, is
wholly subordinated, junior and subject in right of payment, to the extent and
in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on all
indebtedness of the Company, to banks, trust companies, insurance companies and
other financial institutions, including commercial paper and accounts receivable
sold or assigned by the Company to such institutions, any and all deferrals,
renewals, extensions and refundings of any such indebtedness or obligations, and
any other indebtedness of the Company which the Company and the holder of this
Note may hereafter from time to time expressly and specifically agree in writing
shall constitute Senior Indebtedness.
(b) No Payment if Default in Senior Indebtedness. No payment on account of
--------------------------------------------
principal of or interest on this Note shall be made, and this Note shall not be
redeemed or purchased directly or indirectly by the Company (or any of its
subsidiaries), if at the time of such payment or purchase or immediately after
giving effect thereto, (i) there shall exist a default in any payment with
respect to any Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of amounts due thereon) with
respect any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall
not have ceased to exist.
(c) Payment upon Dissolution, Etc. Upon payment or distribution of assets
-----------------------------
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company, whether voluntary or
<PAGE>
involuntary, in bankruptcy, insolvency, receivership or other proceedings, all
principal and interest due upon any Senior Indebtedness shall first be paid in
full, or payment thereof in full duly provided for, before the holder of this
Note shall be entitled to receive or, if received, to retain any payment or
distribution on account of this Note; and upon any such dissolution or winding-
up or liquidation or reorganization, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the holder of this Note would be entitled except for the provisions of
this Section 1 shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holder of this Note who shall have received such payment
or distribution, directly to the holders of the Senior Indebtedness (pro rata to
--- ----
each such holder on the basis of the respective amounts of such Senior
Indebtedness held by such holder) or their representatives to the extent
necessary to pay all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the holder of this
Note. In the event of any such dissolution, winding-up, liquidation or
reorganization of the Company, the holder of this Note shall be entitled to be
paid one hundred percent (100%) of the principal amount thereof and accrued
interest thereon before any distribution of assets shall be made among the
holders of any class of shares of the capital stock of the Company in their
capacities as holders of such shares.
For purposes of this paragraph (c), the words "assets" and "cash, property
or securities" shall not be deemed to include shares of Common Stock of the
Company as reorganized or readjusted, or securities of the Company or any other
person provided for by a plan of reorganization or readjustment, the payment of
which is subordinated at least to the extent provided in this Section 1 with
respect to this Note to the payment of all Senior Indebtedness which may at the
time be outstanding; provided that (i) the Senior Indebtedness is assumed by the
--------
new person, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment.
(d) Subrogation. Subject to payment in full of all Senior Indebtedness,
-----------
the holder of this Note shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on the
Senior Indebtedness shall be paid in full; and for purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holder of this Note would be entitled except
for the subordination provisions of this Section 1 shall, as between the holder
of this Note and the Company and/or its creditors other than the holders of the
Senior Indebtedness, be deemed to be a payment on account of the Senior
Indebtedness.
(e) Rights of Holder Unimpaired. The provisions of this Section 1 are, and
---------------------------
are intended, solely for the purposes of defining the relative rights of the
holder of this Note (solely in its capacity as holder of this Note) and the
holders of Senior Indebtedness and nothing in this Section 1 shall impair, as
between the Company and the holder of this Note, the obligation of the Company,
which is unconditional and absolute, to pay to the holder of this Note the
principal thereof and interest thereon, in accordance with the terms hereof, nor
shall anything herein prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon default,
subject to the rights set forth above of holders of Senior Indebtedness to
receive cash, property, or securities otherwise payable or deliverable to the
holder of this Note. Furthermore, no provision hereof shall prevent the holder
of this Note from exercising any rights it may have against the
2
<PAGE>
Company or against any holder of Senior Indebtedness in any capacity other than
as holder of this Note.
(f) Holders of Senior Indebtedness. These provisions regarding
------------------------------
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness; such provisions are made for the benefit of the holders of Senior
Indebtedness, and such holders are hereby made obligees under such provisions to
the same extent as if they were named therein, and they or any of them may
proceed to enforce such subordination. The holder of this Note shall execute
and deliver to any holder of Senior Indebtedness (i) any such instrument as such
holder of Senior Indebtedness may request in order to confirm the subordination
of this Note to such Senior Indebtedness upon the terms set forth in this Note,
and (ii) any powers of attorney specifically confirming the rights of holders of
Senior Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of this Note.
(g) Payments on Subordinated Note. Subject to paragraph (c), the Company
-----------------------------
may make payments of the principal of, and any interest or premium on, this
Note, if at the time of payment, and immediately after giving effect thereto,
(i) there exists no default in any payment with respect to any Senior
Indebtedness and (ii) there shall not have occurred an event of default (other
than a default in the payment of amounts due thereon) with respect to any Senior
Indebtedness, as defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof, other than an
event of default which shall have been cured or waived or shall have ceased to
exist.
2. Optional Conversion
-------------------
(a) Conversion. The holder of this Note has the right, at its option, at
----------
any time prior to the close of business on April 14, 2000, to convert the
outstanding principal amount of this Note into fully paid and non-assessable
shares of Common Stock of the Company ("Common Stock"), at the rate of one share
of Common Stock for each $0.44 of the principal amount hereof surrendered for
conversion, subject to adjustment as set forth herein.
(b) Exercise of Conversion Privilege.
--------------------------------
(i) In order to exercise the conversion privilege, the holder of this
Note shall surrender this Note to the Company during usual business hours at the
Company's principal executive office, accompanied by written notice in form
satisfactory to the Company that the holder elects to convert the principal
amount of this Note or a portion hereof specified in such notice. Such notice
shall also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued. The Note surrendered for conversion shall, unless
the shares issuable on conversion are to be issued in the same name as the name
in which the Note is then registered, be duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
(ii) As promptly as practicable after the surrender of this Note for
conversion and the receipt of the notice, as required above, the Company shall
deliver or cause to be delivered at its
3
<PAGE>
principal executive office to the holder, or on the holder's written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of this Note, or portion hereof, in accordance with
the provisions hereof. Such conversion shall be deemed to have been made out
the time this Note shall have been surrendered for conversion and the notice
required above shall have been received by the Company at its principal
executive office (the "Conversion Date"), and the holder in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on the Conversion Date the holder
of record of the shares represented thereby. If less than the entire
outstanding principal amount of this Note is being converted, a new Note shall
promptly be delivered to the holder for the unconverted principal balance and
shall be of like tenor as to all terms as the Note surrendered.
(c) Adjustment of Conversion Rate.
-----------------------------
(i) In case the Company shall:
(A) declare a stock dividend on its Common Stock,
(B) subdivide outstanding Common Stock into a larger number of
shares of Common Stock by reclassification or otherwise,
(C) combine outstanding Common Stock into a smaller number of
shares of Common Stock by reclassification or otherwise, or
(D) cancel its class of Common Stock and convert all of the
outstanding shares of Common Stock into another class of securities of
the Company,
the number of shares of Common Stock issuable upon conversion of this Note
immediately prior to any such event shall be adjusted proportionately so that
thereafter the holder of this Note shall be entitled to receive upon conversion
of this Note the securities which such holder would have owned after the
happening of any of the events described above had this Note been converted
immediately prior to the happening of such event, provided that the conversion
price shall in no event be reduced to less than the par value of the shares
issuable upon conversion. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(ii) If, prior to maturity of this Note, the Company shall at any time
consolidate or merge with another corporation (other than a merger or
consolidation in which the Company is the surviving corporation), the registered
holder hereof will thereafter be entitled to receive, upon the conversion
hereof, the securities or property to which a holder of the number of shares of
Common Stock then deliverable upon the conversion hereof would have been
entitled upon such consolidation or merger, and the Company shall take such
steps in connection with such consolidation or merger as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the conversion of this Note.
(d) Notice. In case the Company proposes to take any action referred to in
------
paragraph (c) above, or to effect the liquidation, dissolution or winding up of
the Company, then the Company
4
<PAGE>
shall cause notice thereof to be mailed to the registered holder of this Note,
at such holder's address appearing in the Note Register (as defined below), at
least twenty (20) days prior to the date on which the transfer books of the
Company shall close or a record be taken for such stock dividend or the date
when such reclassification, liquidation, dissolution or winding up shall be
effective, as the case may be.
(e) Statement of Adjustment. Whenever the conversion rate shall be
-----------------------
adjusted as provided above, the Company shall forthwith deliver to the holder of
this Note, at said holder's address appearing in the Note Register, a statement,
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer or Secretary of the Company, showing in reasonable detail the facts
requiring such adjustment and the conversion rate that will be effective after
such adjustment. Where appropriate, such notice may be given in advance and may
be included as part of a notice required to be mailed under the provisions of
paragraph (d) hereof.
(f) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issuable upon conversion of this Note, but an adjustment in cash will be made in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of this Note, or portion hereof, for conversion.
(g) Accrued Interest. Upon the conversion of this Note, the Company shall
----------------
not be required to pay any accrued but unpaid interest on the amount so
converted up to the Conversion Date.
(h) Termination. The conversion privilege of this Note will become wholly
-----------
void and of no effect and the rights evidenced hereby will terminate unless
exercised in accordance with the terms and provisions hereof prior to the
payment in full of the unpaid principal balance of, and all accrued interest on,
this Note.
(i) Securities Act of 1933. Upon conversion of this Note, the registered
----------------------
holder may be required to execute and deliver to the Company an instrument, in
form satisfactory to the Company, representing that the shares issuable upon
conversion hereof are being acquired for investment and not with a view to
distribution within the meaning of the Securities Act of 1933, as amended.
3. Redemption
----------
(a) Subject to the subordination provisions of Section 1, this Note may, at
the option of the Company, be called for redemption, in whole or in part at any
time after January 1, 1996, at one hundred percent (100%) of the principal
amount so redeemed, plus accrued and unpaid interest on such redeemed principal
amount to the date fixed for redemption. The Company shall give at least thirty
(30) days prior written notice of redemption to the registered holder at its
address as shown in the Note Register (as defined below), and the notice of
redemption shall specify the date and place designated for redemption.
(b) On or after the redemption date fixed in the notice of redemption, no
further interest shall accrue on the principal amount so redeemed, and this Note
(to the extent so redeemed) shall cease to be convertible as set forth in
Section 2. Payment of the redemption price shall be made to the registered
holder of this Note upon presentation and surrender of this Note accompanied by
a duly executed instrument of transfer in blank, at the principal executive
office of the Company. In the
5
<PAGE>
event of a partial redemption, this Note shall be presented to the Company for
endorsement of the amount of payment and date paid as a condition precedent to
such payment.
4. No Prepayment of Principal
--------------------------
Except as otherwise provided in Section 3, the principal indebtedness
represented by this Note may not be prepaid in whole or in part, without the
prior written consent of the holder of this Note.
5. Default
-------
The entire unpaid principal of this Note and the interest then accrued on
this Note shall become and be immediately due and payable upon written demand of
the holder of this Note, without any other notice or demand of any kind or any
presentment or protest, if any one of the following events (an "Event of
Default") shall occur and be continuing at the time of such demand, whether
voluntarily or involuntarily, or, without limitation, occurring or brought about
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any governmental body:
(a) If default shall be made in the payment of any installment of principal
or interest on this Note, and such default shall remain unremedied for ten (10)
days; or
(b) If the Company (i) makes a general assignment for the benefit of
creditors, (ii) applies for, consents to, acquiesces in, files a petition or an
answer seeking, or admits (by answer, default or otherwise) the material
allegations of a petition filed against it seeking the appointment of a trustee,
receiver, liquidator or assignee in bankruptcy or insolvency of itself or of all
or a substantial portion of its assets, or a reorganization, arrangement with
creditors or other remedy, relief or adjudication available to or against a
bankrupt, insolvent or debtor under any bankruptcy or insolvency law or any law
relating to relief of debtors, or (iii) admits in writing its inability to pay
its debts generally as they become due; or
(c) If a decree, order or judgment shall have been entered adjudging the
Company a bankrupt or insolvent, or appointing a receiver, liquidator, trustee
or assignee in bankruptcy or insolvency for it or for all or a substantial
portion of its assets, or approving a petition seeking a reorganization,
arrangement, or the winding-up or liquidation of its affairs on the grounds of
insolvency or nonpayment of debts, and such decree, order or judgment shall
remain undischarged and unstayed for a period of sixty (60) days; or if any
substantial part of the property of the Company is sequestered or attached and
shall not be returned to the possession of the Company or such subsidiary or
released from such attachment within sixty (60) days.
6. Note Register
-------------
(a) The Company shall keep at its principal executive office a register
(herein sometimes referred to as the "Note Register"), in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company shall provide for the registration and
transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal executive
office of the Company
6
<PAGE>
for transfer or exchange, accompanied by a written instrument of transfer in
form reasonably satisfactory to the Company duly executed by the holder hereof
or his attorney duly authorized in writing, the Company shall execute and
deliver in exchange therefor a new Note or Notes, as may be requested by such
holder, in the same aggregate unpaid principal amount and payable on the same
date as the principal amount of the Note or Notes so surrendered; each such new
Note shall be dated as of the date to which interest has been paid on the unpaid
principal amount of the Note or Notes so surrendered and shall be in such
principal amount and registered in such name or names as such holder may
designate in writing.
(c) Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Note and of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note (in case of mutilation) the Company will make and deliver in lieu of
this Note a new Note of like tenor and unpaid principal amount and dated as of
the date to which interest has been paid on the unpaid principal amount of this
Note in lieu of which such new Note is made and delivered.
7. General
-------
(a) Successors and Assigns. This Note, and the obligations and rights of
----------------------
the Company hereunder, shall be binding upon and inure to the benefit of the
Company, the holder of this Note, and their respective heirs, successors and
assigns.
(b) Recourse. Recourse under this Note shall be to the general unsecured
--------
assets of the Company only and in no event to the officers, directors or
stockholders of the Company.
(c) Changes. Changes in or additions to this Note may be made or
-------
compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively), only upon written consent of the
Company and the holder of this Note.
(d) Currency. All payments shall be made in such coin or currency of the
--------
United States of America as at the time of payment shall be legal tender therein
for the payment of public and private debts.
(e) Notices. All notices, requests, consents and demands shall be made in
-------
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the holder hereof at their respective addresses set forth below or
to such other address as may be furnished in writing to the other party hereto:
If to the holder:
Controller Corp., Inc., General Partner
J&S Limited Partnership
219 Vassar Street
Cambridge, Massachusetts 02139
7
<PAGE>
If to the Company:
Object Power, Incorporated
219 Vassar Street
Cambridge, Massachusetts 02139
(f) Saturdays, Sundays, Holidays. If any date that may at any time be
----------------------------
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in the
City of Boston shall be a legal holiday, then the date for the making of that
payment shall be the next subsequent day which is not a Saturday, Sunday or
legal holiday.
(g) Costs of Collection. In the event of any default under this Note, the
-------------------
Company shall pay any costs of collection incurred by the holder (including
reasonable attorneys' fees).
(h) Governing Law. This Note shall be construed and enforced in accordance
-------------
with, and the rights of the parties shall be governed by the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized President of
the Company.
OBJECT POWER, INCORPORATED
By: /s/ JOHN J. DONOVAN
------------------------
President
(Corporate Seal)
ATTEST: /s/ WILLIAM E. KELLY
------------------------
Secretary
8
<PAGE>
EXHIBIT 11
BUSINESS@WEB, INC.
STATEMENT OF EARNINGS PER SHARE(1)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
<S> <C> <C>
Net Loss............................................. $(2,698,448) $(8,514,840)
=========== ===========
Weighted Average Common Shares Outstanding........... 9,491,957 9,761,364
Dilutive Effect of Common Stock and Common Stock
Options and Warrants issued after March 31,
1995(2)............................................. 2,404,403 2,404,403
Common Stock issuable upon Conversion of Series B
Preferred Stock..................................... 975,200 975,200
Common Stock issuable upon Conversion of Series C
Preferred Stock..................................... 799,994 799,994
Repurchase and Retirement of Common Stock............ (800,000) (800,000)
----------- -----------
Pro Forma Weighted Average Number of Common and Com-
mon
equivalent shares outstanding....................... 12,871,554 13,140,961
=========== ===========
Pro Forma Net Loss Per Common and Common Equivalent
Share............................................... (0.21) (0.65)
=========== ===========
</TABLE>
- --------
(1) Primary and fully diluted net loss per share has not been separately
presented, as the amounts would not be meaningful.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, stock, stock options and stock warrants issued at prices below the
initial public offering price per share (cheap stock) during the 12-month
period immediately preceding the initial filing date of the Company's
Registration Statement of its initial public offering have been included
as outstanding for all periods presented. The dilutive effect of the
common stock equivalents was computed in accordance with the treasury
stock method.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Business@Web, Inc.:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
Arthur Andersen LLP
Boston, Massachusetts
May 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BUSINESS@WEB INC.'S REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 104,622 4,822,127
<SECURITIES> 0 0
<RECEIVABLES> 2,008,541 1,925,199
<ALLOWANCES> 100,000 150,000
<INVENTORY> 292,000 227,000
<CURRENT-ASSETS> 2,462,496 7,566,448
<PP&E> 226,550 1,487,566
<DEPRECIATION> 63,118 115,483
<TOTAL-ASSETS> 2,625,928 8,938,531
<CURRENT-LIABILITIES> 4,429,846 8,491,191
<BONDS> 1,000,000 0
0 7,379,984
0 0
<COMMON> 10,803 10,803
<OTHER-SE> (2,814,721) (6,943,447)
<TOTAL-LIABILITY-AND-EQUITY> 2,625,928 8,938,531
<SALES> 0 0
<TOTAL-REVENUES> 6,069,662 2,380,701
<CGS> 0 0
<TOTAL-COSTS> 3,400,608 1,263,224
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 143,000 69,700
<INTEREST-EXPENSE> 77,574 17,529
<INCOME-PRETAX> (2,698,448) (8,514,840)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,698,448) (8,514,840)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,698,448) (8,514,840)
<EPS-PRIMARY> (.21) (.65)
<EPS-DILUTED> 0 0
</TABLE>
